Medtronic, medical devices and health care reform

The New York Times has just moved a story examining the unusual -- one consultant says it can appear "dysfunctional" -- market for medical devices, and how any emerging health care reform package might address their rising costs. The industry has a prominent footprint here in Memphis: London-based Smith & Nephew, for instance, has a Memphis division that makes artificial joints such as hips and knees. Minnesota-based Medtronic bases its spinal device and other units here.

As the population ages, spending on medical devices is rising at a faster rate than even prescription drugs, according to the Times. Medicare is picking up an increasing share of the cost, which is around $76 billion a year. However, the government program does not negotiate costs with device manufacturers. That's between the hospitals and the manufacturers. Then, doctors, not hospitals, determine which devices to use in a procedure. Many doctors have financial ties to device makers and see little reason to shop around. The result of all this is a highly distorted market, observers say.

One doctor compared it to giving a car buyer a blank check and letting him choose between a Maserati or Honda.

"You are going to walk out of a dealership with a really nice car, if you don't have to pay," said William Maisel, a cardiologist at Beth Israel Deaconess Medical Center in Boston.

The story features a photo from Medtronic's spinal facility here in Memphis. Medtronic is the nation's largest device manufacturer, and it -- along with other Minnesota-based firms -- has dug in against efforts by Congress to slow federal spending on the items.

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