Hospital supply-chain experts were lukewarm about picking sides in the increasingly hot bidding war to purchase cardiac-device maker Guidant Corp.
The prevailing viewpoints were that no matter who wins-Johnson & Johnson or Boston Scientific Corp.-the consolidation could give the vendors more negotiating leverage over hospitals, but the infusion of resources would lead to greater innovation reaching the market more quickly.
Both J&J and Boston Scientific were increasing their bids last week. Boston Scientific, which made a definitive offer for the first time last week, added about $330 million to its original $25 billion offer. J&J raised its bid to $23.2 billion from $21.5 billion.
Regardless of who wins the fight, the consolidation of any vendors means less competition and that makes it more difficult for hospitals to get lower prices, said Lee Perlman, president of the Greater New York Hospital Association's for-profit subsidiary, GNYHA Ventures.
But industry analysts said the merger would have little immediate effect on the cost of the kind of devices sold by Guidant. John Strong, president and chief executive officer of group purchasing organization Consorta, said there likely won't be much difference in pricing regardless of whether Boston Scientific or J&J wins.
And despite competition concerns, there still will be three main vendors-St. Jude Medical, Medtronic and Guidant's new owner-in cardiac rhythm management, said Dan Sweeney, vice president of contract services with GPO Novation. Guidant's interventional cardiology devices-stents and balloons-will likely be spun off because of antitrust concerns, which would foster competition, Sweeney said.
Abbott Laboratories also is making some moves and is likely to become a larger player in the vascular arena. In November 2005, Abbott announced that it entered a patent licensing agreement with J&J regarding Guidant's catheter delivery system-which includes a drug-eluting stent under development-if the J&J deal closed. Last week, Abbott announced that it would pay Boston Scientific $4.3 billion to acquire Guidant's entire vascular line if Boston Scientific wins in the bidding war.
Novation's Sweeney said the biggest benefit for hospitals could be that cardiology products may reach the market faster. Moreover, combining J&J's Cypher or Boston Scientific's Taxus drug-eluting stents with Guidant's coronary delivery technology will likely lead to more "innovation and growth" in the fast-growing market for treating heart failure, said Reynolds Delgado, a cardiologist at the Texas Heart Institute, Houston.
The greater resources for research and development could be coming at a good time for Guidant in light of its recent defibrillator recalls, said Bob Johnson, executive director of the Central Minnesota Health Center at 425-bed St. Cloud (Minn.) Hospital. Despite the recalls, Johnson doesn't think it's wise for hospitals to abandon Guidant products because devicemaker recalls are a part of the business. "Every one of these companies experience ups and downs," he said.