After Medtronic Broke Contracts with GPO, Competitors Moved In

 Did Medtronic make a mistake by ditching a group purchasing organization (GPO) in February? 

That's what an article recently published by Dow Jones Newswires is suggesting. Apparently, after the device maker canceled some of its contracts with GPO Novation, competitors like St. Jude moved in. This is surprising because, the reporter notes, many thought that Medtronic would be a trendsetter in moving away from GPOs, which have been a controversial topic for device makers, who grumble about the fees they have to pay for doing business with them. Instead, it looks more like Medtronic has isolated itself.

From the article (emphasis added):

J.P. Morgan analyst Michael Weinstein believes Medtronic lost some implantable defibrillator market share in its recent fiscal quarter due in part to the effects of merging its cardiovascular sales organizations and cancelling with Novation. Medtronic wouldn't comment on recent market share trends ahead of its May 24 fourth-quarter release, citing its quiet period.

Medtronic claims to have made the move purely in the interest of saving money on a contract-by-contract basis, and did not intend to effect an industry-wide shift. Meanwhile, OEMs that want to move away from GPOs will have to deal with the perception that GPOs help lower the costs of healthcare; according to the article, Sen. Max Baucus (D-MT) sent Medtronic a letter asking why the company broke the contracts. Baucus chairs the Senate Finance Committee, which has jurisdiction over CMS. 

What do you think? Should other device makers be following the trail that Medtronic seems to be blazing? Or did Medtronic make a mistake? Are GPOs bad for business?

– Thomas Blair