Contracting Restrictions

Contracting Restrictions

THE ISSUE:

Most medical device companies and sales reps earn an income by selling new devices to hospitals.  AMDR member reprocessors are aligned with healthcare partners by seeking to extend the value of existing medical device assets, not pursuing one-sided profit goals.  Some OEMs seek to limit hospitals’ ability to optimize the value of device assets by contractually limiting the hospital’s ability to reprocess.  At AMDR we have seen evidence of:

  • “Free” capital equipment in exchange for an exclusive agreement to provide disposables, i.e., “free” pumps if a hospital exclusively purchases single-use sleeves from the vendor;
  • Discounts on new devices in exchange for an agreement to not reprocess; and
  • Contracts that pre-specify how many new devices need to be purchased, versus reprocessed, to get favorable pricing.

By agreeing to use fewer reprocessed SUDs (not reprocess), hospitals may voluntarily be reducing the number of competitive firms seeking their business, which decreases competition and could result in higher costs over time.  In the long run:

  • Are those “free” generators really free, or are hospitals paying for them through minimum purchase agreements, exclusivity or other long-term commitments to the OEM vendor?
  • Does the vendor account for the lost medical waste reduction or waste reduction costs associated with reprocessing?

SUCCESSFUL WORK AROUNDS:

AMDR members have successfully supported hospitals battling this tactic by demanding more transparency from the original device manufacturer:

  • AMDR urges hospitals to understand the overall clinical and economic impact of signing contracts that stop or reduce reprocessing. Work with your reprocessing partner and their analytics team to estimate the lost savings and economic impact across the duration of the proposed agreement period;
  • Consider if there’s a “bundled impact” – not just the line item cost of singular devices; and
  • AMDR recommends hospitals counter manufacturers who insist on engaging in these tactics, and if necessary, remind them there are alternative suppliers willing to support a successful reprocessing program.
By | 2018-06-11T11:50:26+00:00 June 11th, 2018|Protect Reprocessing Resource|0 Comments