J & J: hospital deal will hurt medical device sales

Jul 15 2009

The CFO for Johnson & Johnson's said President Obama's deal with hospitals to cut Medicare costs will reduce the sales of medical devices, Bloomberg reports: "Hospitals buy medical devices, including J&J’s artificial hips and stents to prop open clogged arteries, directly from the manufacturer, (Johnson and Johnson CFO Dominic) Caruso said today in an interview with Bloomberg News.

The hospitals are reimbursed by government-run health plans for the cost of a procedure regardless of the price of the equipment, pressuring hospitals to cut purchases of the latest technologies, he said. … 'The deal that the hospital industry struck will obviously have an impact on the medical-device business,' Caruso said. 'Medicare reimburses the hospital for a basket of costs related to a procedure, of which medical devices are included'" (Randall, 7/14).

Caruso's comments come on the day Johnson & Johnson revealed that its 2nd quarter profits fell 3.5 percent, The Associated Press reports in a separate story. "Still, the company beat Wall Street's expectations, as the firm reduced spending on sales, administration and research by about 13 percent and production costs by 6 percent." The company blamed generic competition, the global recession and a stronger dollar on its showing (Johnson, 7/14).