In yet another indication of the increasing governmental scrutiny of the medtech industry, the U.S. Senate earlier this month set its sights on direct-to-consumer (DTC) advertising of medical devices. The hearings, dubbed “Marketing or Medicine: Are Direct-to-Consumer Medical Device Ads Playing Doctor?,” were part of an ongoing 15-month investigational series conducted by the Senate Special Committee on Aging.
In his opening remarks, committee chairman Senator Herb Kohl (D–WI) said, “Unlike direct-to-consumer advertising of drugs, DTC advertising of medical devices has not yet been highly scrutinized . . . as the medical device industry is just beginning to get into the game.” Kohl noted that device industry spending on DTC ads is still only a fraction of pharmaceutical industry outlays, but that “the medical device industry’s stake in this marketing practice is growing.” [More]
Will Medtech Remain a Safe Port in the Current Financial Storm?
Medtech has generally benefited from the widely held perception that the industry is relatively recession resistant. In times of previous economic downturn, investors have often fled to the safety of the medtech sector with the realization that as people grow older, get sick, and have accidents, they continue to seek medical care and continue to generate demand for medical devices, supplies, and equipment—regardless of the current state of the economy.
But can the current financial morass be considered part of the normal business cycle, or are we dealing with more profound and structural changes to the underlying economy that will affect all industries—including medtech?
Simpson |
"For emerging companies with a near-term need for capital—the current situation in the credit markets can be a significant issue and a huge obstacle,” says Gregory Simpson, principal and medtech analyst with Stifel, Nicolaus & Co., Inc. (St. Louis). “The interesting thing to watch will be how long the current situation persists, and whether the large-cap, well-funded companies move to take advantage of this situation by buying or providing capital to these emerging companies. These large-cap companies have been lacking in aggressiveness in recent years, but the current environment could provide them with a golden opportunity.” [More]
Opinion: Proposed Preemption Legislation Brings Possible Turmoil
Novelli |
In the era following the Supreme Court’s landmark decision in Riegel v. Medtronic, the principle of federal preemption over state laws is driving a debate in Washington, DC, about whether injured parties should be permitted to file liability suits involving PMA devices in state courts. In this issue, Thomas C. Novelli, director of federal affairs for the Medical Device Manufacturers Association (Washington, DC), looks at the controversies that have given rise to the proposed Medical Device Safety Act of 2008 (HR 6381; S 3398), which would eliminate federal preemption of state tort laws for PMA devices.
“Navigating the rigorous FDA requirements for premarket approval (PMA) can take years and tens of millions of dollars,” says Novelli. “Yet some on Capitol Hill are challenging the robustness of the current PMA review process. They would rather have a medical product’s safety and efficacy be determined by a layperson in a jury than by FDA engineers and scientists who have spent years reviewing clinical data about the device. If this change were to occur, it would undermine the current regulatory process and stifle innovation." [More]
Zimmer Acquires Abbott Spine
Dvorak |
This month, the spine market saw one of the world’s leading medtech companies abandon its position in the hotly contested sector, where it was, at best, a bit player. Deciding that it did not want to invest any additional resources in attempting to grow its small share of the market, Abbott Spine, a division of Abbott (Abbott Park, IL) agreed to be acquired by Zimmer Holdings Inc. (Warsaw, IN). The $360 million all-cash deal was announced by Zimmer earlier this month, with no official comment from Abbott.
Commenting on the transaction, Zimmer president and CEO David Dvorak said, “This acquisition is another significant step in executing our strategies to position Zimmer for sustained growth in the future. We are excited to be adding a number of innovative products that round out the Zimmer Spine portfolio and help us build toward critical mass in this important business segment. In addition to bringing great products and a promising pipeline, the Abbott Spine acquisition will add to our research and development capabilities in the spinal category and will strengthen our sales coverage.” [More]
Among Life Sciences Companies, Quota-Based Compensation Rules
A recent survey has found that an increasing number of companies in pharmaceutical, biotech, medical products, and high-technology industries favor quota-based compensation plans over ranking plans. The results were developed as part of the third annual incentive practices research study conducted by ZS Associates (Evanston, IL), a global sales and marketing consulting firm. The survey revealed slight differences among companies in different industries, but affirmed that quota-based plans were favored in all of the industries surveyed.
Redden |
Stephen Redden, principal and leader of the incentive compensation practice at ZS Associates, advises executives to deploy ranking plans cautiously, as they can promote unproductive competition between salespeople. “Knowing your sales compensation cost with certainty is an important objective, but using ranking plans to achieve this objective is not recommended,” says Redden. “There are ways to structure quota-based plans—and model the costs—that can provide accurate compensation cost estimates without increasing the internal competition in the field.”
Chad Albrecht, an associate principal at ZS and the lead on the incentive practices survey, says that incentive management teams must first identify the most appropriate metrics, and then use those measures to set quotas that account for the different earning opportunities that occur across varied territories.
“In our experience, we have found that very few companies take the time to determine the true market potential for their products. They also infrequently research and purchase the data on the many variables that can affect sales,” says Albrecht. “As our study shows, quota-based plans are gaining in usage. As sales leaders implement them, they should remember that, while measuring disparities between territories when setting quotas is often a daunting process, it is well worth the effort.
[More]
