At last stent prices are showing signs of cracking.
In recent years cardiologists from coast to coast have latched onto stents, tiny metal scaffolds used to prop open clogged coronary arteries, as the best way to treat nearly every angioplasty patient who comes their way.
At least two-thirds and perhaps as many as 80% of patients who have their arteries cleared with balloon catheters also get stents, according to some reports. That is easily double the rate of just a few years ago.
But stents are nearly as pricey as they are popular. Stents typically cost upward of $1,600, though the tab varies by size, manufacturer and region. It is no surprise then that the tiny metal sleeves have muscled their way to the top of the supply budgets at almost every hospital with an active cardiology department.
Until recently, stent prices have been almost immovable. Johnson & Johnson, New Brunswick, N.J., enjoyed a virtual monopoly starting in 1994, when its first stents were approved by the Food and Drug Administration. Johnson & Johnson established a price floor that went unbroken, even after the entry of competitors Guidant Corp., Indianapolis, in 1997; Arterial Vascular Engineering, now part of Medtronic, Minneapolis, later that same year; and Boston Scientific Corp., Natick, Mass., in 1998.
But some materials managers say prices are starting to change. A bevy of new products and simmering competition among stent makers has created an opportunity for discounts.
A few hospitals have played hardball with stent vendors and won. Price concessions are surfacing on the metal sheaths themselves or on related products made by the same companies, such as balloon catheters, bundled in package deals.
"There are some deep discounts available for commitment," says Patrick Carroll, a consultant in Cypress, Calif., who has helped several hospitals craft better stent deals.
To pull off better prices, hospitals must have large patient volumes and get their hotshot doctors to agree to a short-list of preferred stents, possibly even shunning the newest stent available, near anathema to notoriously gadget-happy doctors.
"Herding cardiologists isn't particularly easy," says Carroll, in what most materials managers would recognize as an understatement.
Interventional cardiologists, characterized by some as an entire profession of "early adopters," seem to always want the latest, slickest and often most-expensive gizmo for their toolboxes. And to be fair, the marketplace for stents has been changing almost by the month as new products roll out. Because the technology is still young, there is no consensus on which products are best; therefore, the doctors argue, they need freedom of choice.
All that said, some hospitals have found that they can enlist doctors into the cost-containment cause by building brand loyalty on price as well as clinical sales pitches.
Christiana Care Health System, Wilmington, Del., used nearly 2,900 stents in almost 1,800 patients for the year ended June 30, a 26% rise over the previous year. Meanwhile, stent spending neared $5 million and was $1 million over budget. In response, clinicians joined administration to tackle the cost problem, eventually agreeing to give 70% of their business to Boston Scientific, dethroning Guidant, which had enjoyed that share before the switch.
Stent pricing under the arrangement fell below $1,400 and, significantly, was the same for all stents regardless of size. Before the deal, which was fought "tooth and nail" by all the vendors, according to Hank Ffrench, Christiana Care purchasing director, the average price of stents at the system was about $1,650.
Ray Seigfried, a senior vice president at Christiana Care, says his company broke the market by showing clinicians the financial stakes and preserving their role as ultimate decisionmakers on which products to use.
In a nod to the shifting stent marketplace, the agreement has only a 90-day term, effective July 1.
Happily, the second-tier vendors dropped their prices, too, in an effort to land the remaining 30% of the cardiologists' business and to position themselves for a shot at prime vendor when the deal is revisited in September.
Already the financial results have been dramatic. During an informal phase-in from April through June, Christiana Care boosted Boston Scientific's market share to 55% and saved more than $260,000. During the first two weeks of July, Boston Scientific's share of stents hit 73%, with total savings on target to hit $1 million for the year.
The vendors "are amazed that we pulled this off," says Hank Siegfried, manager of the system's cardiac laboratory. While Christiana homed in on stents, other systems take a different tack, seeking cuts on a broader product line rather than a single category.
"We look at bundling as a very open option," explains one Midwest hospital materials manager.
He says that because his hospital uses high volumes of angioplasty products made by a leading stent vendor, he can use that "leverage to go after stent prices. We'll use it, and we have."
Vendors are loath to lower their prices on stents, he says, but shifting the discounts to related products appears to be more palatable. One reason, says consultant Carroll, is that a breakthrough price on a stent with one customer could force the vendors to offer the same deals to others whose contracts contain so-called most-favored-customer clauses.
"They've got to hide it," says the materials manager in the Midwest, "and that's what they're doing."