Senate committee grills Medtronic on GPO walkouts

by Brendon Nafziger, DOTmed News Associate Editor | May 03, 2011
Max Baucus has
13 questions for Medtronic.
The Senate finance committee chairman Max Baucus said Monday he would investigate Medtronic Inc.'s canceling of a reported $2 billion worth contracts with the group purchasing organization Novation LLC. over concerns it could raise costs for Medicare.

Baucus, a Democrat from Montana, said reports that Medtronic was moved to kill the contracts in an attempt to reduce price transparency and increase costs were "troubling."

"Medtronic canceling these contracts could considerably undermine our efforts to reduce health care costs and increase transparency for consumers and taxpayers," he said in a statement.

In a letter to the Minneapolis-based medical device giant's CEO William Hawkins, Baucus demanded to know how the move would affect the price of devices sold to hospitals and whether the company was in touch with competitors about changing their business practices with the hospital buying groups.

In February, Medtronic walked out on five contracts with Novation for cardiovascular and orthopedic devices. It also scuttled a contract for spine products with another GPO, Premier.

Bypassing the Novation contracts could save Medtronic $40 to $60 million a year, according to analysts. But it also elicited a howl of protest from some hospitals and GPO groups, worried that it could drive up prices.

Among the 13 questions listed in the letter, Baucus asked Medtronic to share internal studies on how the move would affect device pricing; to reveal if Medtronic promised any hospitals it would change fees paid to the hospitals; and to say whether Novation's reported refusal to provide confidentiality clauses on prices and willingness to share pricing data with member hospitals helped convince the medical company to scotch the contracts.

Baucus also wanted to know what was behind Hawkins' remarks at a March 2 Citi Global Healthcare Conference, where he reportedly said he would be "shocked" if rival device companies didn't follow Medtronic's lead in ending some contracts with GPOs.

"Did you or any agents of Medtronic engage in any direct or indirect communication with any competitors with regard to business practices concerning GPOs?" Baucus asked in the letter. "If so, please provide copies of emails, phone logs, transcripts or any other documentation of communication with these companies."

Baucus asked for Medtronic to send the evidence no later than June 6.

A finance committee staff report, released in December, found Medicare Part A alone paid $108.9 billion for 6.9 million medical device-related procedures from fiscal 2004 to 2009, according to a statement from the committee.

Medtronic said it would respond in a "timely manner" to Baucus' letter, according to the Minnesota Post.

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