The now-completed merger of medical device giants Abbott Laboratories and St. Jude Medical will help hospitals streamline their procurement efforts, but vendor consolidation could also lead to higher supply costs.
Suburban Chicago-based Abbott's $25 billion purchase of St. Jude, based in St. Paul Minn., closed last week. It merged two of the industry's largest devicemakers. It also gave Abbott the key to nearly every area of the $30 billion cardiovascular device market.
The deal follows other recent mergers aimed at giving providers a one-stop shop for their medical-device needs, including the mergers of Medtronic and Covidien; Zimmer and Biomet; and Becton, Dickinson & Co. and CareFusion.
While providers defer to contracts negotiated by their group purchasing organizations for most drugs and medical supplies, most GPOs don't have extensive contracts for devices such as stents and artificial joints, so the majority of providers negotiate directly with manufacturers. Under constant pressure to reduce supply chain-related costs, providers have made it clear that they value being able to negotiate with a single vendor for a wide array of products.