EMERGE and Cardinal Health Sign Generics Deal

Cardinal Health, the Fortune 500, $103 billion health care services company providing medical and surgical products to 60, 000 locations each day, announced a strategic partnership with Emerge Medical Inc. on July 18.

Emerge will provide trauma products, including cannulated screws, drill bits and guide wires, to be purchased and distributed through Cardinal Health. These standard trauma products will be available at a 30% to 50% savings over other currently available products, according to a Cardinal Health press release.

Fight Over Generics

In late March we reported that Emerge Medical had signed a deal to distribute the company’s generic medical devices through Premier, Inc., the nation’s second largest healthcare group purchasing organization (GPO). The deal makes Emerge’s orthopedic devices available to the GPO’s 2, 500 hospital members at specially negotiated pricing and terms.

We also reported that EMERGE and one of its founders, John Marotta, a former Synthes, Inc. sales rep and manager, were involved in a lawsuit with Synthes over non-compete agreements, attempting to steal business, and alleged illegal use of proprietary information by EMERGE.

This announcement by Cardinal Health is another signal that health services companies are increasingly looking towards “generic” device manufacturers to control costs.

Cardinal Health Ortho Program

In addition to the announcement of the EMERGE agreement, Cardinal Health also announced the launch of its new “Orthopedic Solutions” offering. The program, says the company, will allow hospitals and surgery centers to “access high quality, fair priced orthopedic products through the company’s medical distribution platform.”

The company said while orthopedics continues to be one of the largest specialties in health care, hospitals and providers “continue to face cost pressures as product pricing has increased at an average rate of 5% to15% annually without simultaneous increases in reimbursement.”

“Based upon our market and customer research, we believe that U.S. healthcare providers are ready to support a simpler, more transparent, fair priced orthopedic business model, ” said Lisa Ashby, president, category management at Cardinal Health. “Cardinal Health is committed to bringing innovative product and service solutions to our customers, and we believe our unique blend of product and distribution expertise positions us well to help our orthopedic customers drive cost-effectiveness and efficiency.”

Lack of Transparency in Pricing

Orthopedic pricing to hospitals has been anything but transparent, as device manufacturers require hospitals to sign agreements saying they will not divulge the prices they paid for the devices. Some device companies argue that non disclosed pricing helps keep prices lower.

Cardinal Health’s ortho program, according to the company, comprises three key components: fair priced products; supporting supply chain services; and data analytics. In prime vendor relationships, the model allows Cardinal Health customers to buy medical devices through Cardinal Health, enabling customers to reduce both their ordering costs and their on-hand inventory. Data analytics tools that will allow hospitals and surgery centers to have better visibility to their total orthopedic procedural spend are also included.