Medical Device Link.

ACPE Survey Sounds Alarm over Medtech Business Practices

In a recent survey by the American College of Physician Executives (ACPE; Tampa, FL), 79% of respondents said that they were very or moderately concerned about physicians being influenced by medical device companies to perform a certain procedure. That level of alarm was second only to concern over physicians who refuse patients without insurance (80%), and was even greater than respondents’ concern over the influence of pharmaceutical companies (76%).

Release of ACPE’s survey results came hard on the heels of a session at the annual meeting of industry association AdvaMed (Washington, DC), in which speakers cautioned that federal prosecutors have already begun to take a closer look at business practices in the medical device industry. Companies are being investigated for practices that violate federal fraud and abuse statutes, with emphasis on activities that bring sales and marketing personnel in direct contact with healthcare professionals.

McAnaney: Warning industry.

Speaking at the AdvaMed meeting, Washington, DC, attorney Kevin G. McAnaney said that investigators’ interest in medical device companies follows years of similar investigations targeting hospitals, clinical laboratories, and pharmaceutical manufacturers. Now, he warned attendees, device companies have become targets because “they’re the only people left who’ve got any money.”

According to McAnaney, the number of fraud and abuse cases involving medical device companies is increasing largely because whistleblowers have begun to identify suspect company practices. Once prosecutors have identified a particular violation at one company, it is typical for them to investigate other companies for the same violation. “If prosecutors find evidence that a suspect practice is widespread in the industry, they will quickly expand their investigations to other companies,” McAnaney said. “They’ll try to run the table.”
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Masimo Awarded $420 Million in Antitrust Victory over Tyco Nellcor

Following a four-week trial that ended in late March, a federal jury in Los Angeles determined that Tyco Healthcare’s Nellcor division (Pleasanton, CA), a business unit of Tyco International Ltd. (Pembroke, Bermuda), violated antitrust laws related to the sales of its pulse-oximetry technology and awarded $140 million in damages to the plaintiff, Masimo Corp. (Irvine, CA). Under antitrust laws, the award is automatically tripled to $420 million. The Tyco unit must also pay all of Masimo’s legal costs.

Masimo's Kiani: A $420 million message.

Commenting on the verdict, Joe E. Kiani, Masimo’s founder, chairman, and CEO, said his company sought legal relief from Tyco’s practices, which prevented purchasing decisions from being made on the merits of the particular product. “We are gratified that the jury found in our favor. Today, my hope is that this verdict will do more than simply open competition in the pulse-oximetry market, but also send a strong message that medical product sales and purchases should be based on each individual product’s ability to help clinicians improve patient care. We hope this verdict will benefit patients and our nation’s healthcare system by fostering vigorous competition, thereby promoting innovative, cost-effective technologies.”
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J&J–Guidant Merger Clears SEC Hurdle

The planned merger of Johnson & Johnson Inc. (New Brunswick, NJ) and Guidant Corp. (Indianapolis) moved a step closer to reality in late March with the approval of the U.S. Securities and Exchange Commission (SEC; Washington, DC). The SEC declared that the S-4 Registration Statement regarding the merger was “effective,” clearing the way for the prospectus and proxy statement to be sent to Guidant shareholders.
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Siemens to Acquire CTI

Siemens Medical Solutions (Erlangen, Germany), a division of Siemens AG (Munich), has announced its intention to buy CTI Molecular Imaging Inc. (CTI; Knoxville, TN), a manufacturer of positron emission tomography (PET) equipment and related molecular imaging products and systems. In what is described by both companies as a “friendly acquisition,” Siemens will purchase all outstanding CTI shares in a deal valued at around $1 billion.

Reinhardt: A natural progression.

Commenting on the acquisition, Erich Reinhardt, PhD, president and CEO of Siemens Medical Solutions, said “This step is a natural progression in our long-time association with CTI, and reflects Siemens’s overall strategy to transform the delivery of healthcare by developing trendsetting innovations that improve patient care while reducing costs.”
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Drug-Eluting Coronary Stents: An Opening for Cypher?

At this year’s annual meeting of the American College of Cardiology (ACC; Bethesda, MD), the confluence of three major comparative studies of drug-eluting coronary stents led industry observers to dub the event the great American stent shoot-out. Initial reports suggested that no clear-cut winner had emerged from the shoot-out between rivals Boston Scientific Corp. (Natick, MA) and Cordis Corp. (Miami Lakes, FL), a Johnson & Johnson company—the only two companies with FDA approval to market drug-eluting stents on the U.S. market. But later postings on the three studies presented at the recently concluded conference in Orlando, FL, were generally perceived to give one of the stents a definite edge.
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Bailey Leaves AdvaMed

Did attendees at the recent annual meeting of industry association AdvaMed (Washington, DC) know that president Pamela G. Bailey would be leaving the association just days after delivering a major address to the group? Apparently not. Nor, it would seem, did the leadership of the 1300-member medical technology association.

Bailey: CTFA-bound.

Yet, on March 14, the Cosmetic, Toiletry, and Fragrance Association (CTFA; Washington, DC) announced that Bailey would be its new president and CEO, taking over from E. Edward Kavanaugh, who held those titles for the previous 22 years. In making the announcement, Marc Pritchard, chairman of the CTFA board of directors and president for global cosmetics and retail hair color at Procter & Gamble Co. (Cincinnati), said, “Pamela Bailey has the experience and proven track record in leading a large trade association. She understands the importance of doing business on a global basis and how it impacts industry and consumers, giving us the confidence that CTFA will successfully take on the challenges of the future under her leadership.”
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St. Jude Medical Acquires Interventional Cardiology Company

Continuing a buying spree that began last summer, St. Jude Medical Inc. (St. Paul, MN) has announced a definitive agreement to acquire Velocimed LLC (Maple Grove, MN), a manufacturer of interventional cardiology devices. Under the terms of the deal, St. Jude will pay $82.5 million in cash, less $8.5 million at the expected closing of the purchase in the second quarter of this year. Additional payments are tied to future revenue targets and FDA approval of Velocimed’s Premere patent foramen ovale closure system.

In July 2004, St. Jude said it would be splitting its Daig division into two business segments: a cardiology division and an atrial fibrillation division. In the past nine months, the company has spent more than $500 million on young companies, including Epicor Medical Inc., Irvine Biomedical Inc., Endocardial Solutions, and now, Velocimed.
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Cytyc Wraps Up Acquisition of Proxima Therapeutics

Earlier this month, Cytyc Corp. (Marlborough, MA), a leading women’s healthcare company, announced that it had finalized the acquisition of privately held Proxima Therapeutics Inc. (Alpharetta, GA), a manufacturer of site-specific cancer treatment delivery systems. The all-cash deal was first announced in February with a purchase price of $160 million plus additional performance-based incentives.

Cytyc has been steadily building its presence in the women’s health category over the last few years through both acquisitions and organic growth initiatives. The company’s ThinPrep cervical cancer screening system now controls approximately 70% of the U.S. market for Pap smear screening and generated $300 million in sales for 2004. Cytyc also manufactures the NovaSure system, an endometrial ablation device to treat excessive menstrual bleeding, and the FirstCyte test for breast cancer risk assessment.
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Medicis to Buy Inamed for $2.8 Billion

In what some Wall Street wags have dubbed the “extreme makeover” deal, Medicis Pharmaceutical Corp. (Scottsdale, AZ) has announced its intention to acquire Inamed Corp. (Santa Barbara, CA) in a cash and stock deal valued at around $2.8 billion. Medicis is a specialty pharmaceutical company focusing on preparations for the treatment of dermatologic, aesthetic, and podiatric conditions, including acne, eczema, rosacea, and facial wrinkles. Inamed manufactures breast implants for cosmetic augmentation and reconstructive surgery, and surgical devices for the treatment of morbid obesity. It has recently become a distributor for facial aesthetics products, including Botox.

In a joint announcement issued by the companies, the newly formed entity is described as “positioned to take advantage of the fast-growing vanity market.” The company will distribute its products in more than 60 countries worldwide. Jonah Shacknai, chairman and CEO of Medicis, will assume the same titles in the new organization. Nick Teti, Inamed’s chairman, president, and CEO will serve as vice chairman.

Shacknai: A broader array.

Shacknai, citing aging baby-boomers and the growing interest among all age groups in maintaining a healthy appearance, said “We are excited about this strategic business combination, which will create a global platform in the fast-growing aesthetics market. Joining forces with Inamed gives us the ability to offer our primary customers—plastic surgeons, cosmetic surgeons, and dermatologists—a broader array of complementary, highly effective products to meet the needs of their patients.”
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Medtronic Targets 2007 for U.S. Market Entry of Endeavor Stent

While much of the attention at the recently held meeting of the American College of Cardiology (ACC; Bethesda, MD) was on the head-to-head matchup between the Cypher and Taxus drug-eluting coronary stents from Cordis Corp. (Miami Lakes, FL) and Boston Scientific Corp. (Natick, MA), respectively, the Endeavor stent from Medtronic Inc. (Minneapolis) gained new respect from medtech industry analysts as a potential market contender.

Medtronic reported on the results of its Endeavor II trial at the ACC meeting in Orlando, FL. In a company-sponsored study of 1197 patients at 72 facilities in 17 countries, Endeavor successfully met all of its endpoints in a comparison study with its bare-metal stent counterpart, Driver.
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The editors welcome your suggestions for future content in MX: Issues Update. Please feel free to contact us with your comments and ideas. —Steve Halasey, Editor in Chief, MX