Medtronic faces a Senate investigation after canceling contracts with one of the largest group purchasing organizations. Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, initiated the investigation Monday over the Minneapolis-based devicemaker's cancellation of contracts with Novation, which uses such agreements to obtain bulk rate discounts.

“Medtronic canceling these contracts could considerably undermine our efforts to reduce healthcare costs and increase transparency for consumers and taxpayers,” Baucus said in a written statement (PDF). “Medicare spends billions each year on medical devices for patients and we need to make sure these patients, and the taxpayers, are getting the highest-quality products at the best price.”

Baucus launched the investigation by requesting information from Medtronic about the effect of the of the contract termination, potentially, on Medicare and Medicaid.

Medtronic contends it canceled the contracts to allow the company to better meet customers' needs and lower costs, according to a written statement at the time.

The devicemaker canceled five contracts that covered roughly $2 billion in purchases for spinal implants, neurosurgery tools, bone graft products and cardiac devices, according to a statement from Novation, owned by VHA and the University HealthSystem Consortium. The consortium was joined by the Health Industry Group Purchasing Association in March in publicly denouncing (PDF) the canceled contracts and arguing that the move could unnecessarily increase healthcare spending.

Medtronic also ended a spinal contract with GPO Premier this year. See a video of Premier President and CEO Susan DeVore discussing the impact of the cancellation.