Dive Brief:
- St. Jude Medical has announced its revenue projections have been lowered for the year after slow sales growth in its overseas sector during Q3 2014. The medical device manufacturer, based in St. Paul, Minn., produces and sells heart and neurological devices and receives about half of its profits from overseas sales.
- The organization’s international sales increased just 2% in the third quarter and revenue from U.S. sales was up 3%. The company netted $1.37 billion in sales, but one-time charges rendered profits of just $238 million, down by 9.1% from last year. St. Jude expects 2014 revenue to land between $5.57 billion and $5.65 billion instead of the $5.64 billion to $5.76 billion it initially projected.
- The company did have some positive news from the Centers for Medicare and Medicaid Services during the third quarter. CMS approved an add-on payment for monitoring technology for heart-failure patients from CardioMEMS, which St. Jude recently acquired.
Dive Insight:
St. Jude’s challenges could be a harbinger of changes to come in the medical device industry. The new era of healthcare—demanding better quality at lower costs—has insurers and healthcare providers demanding that device makers prove the benefits of new technologies more than ever before.
At a recent conference of the Advanced Medical Technology Association in Chicago, providers and insurers voiced concerns about new technologies, such as proton beam therapy and robotic surgery, that do little to improve outcomes or lower costs, according to Modern Healthcare. “We don't want to squelch innovation,” Scott Josephs, national medical officer for Cigna Corp., said at the conference. “But tell me what I'm getting for my healthcare costs. ... show me that these new technologies are superior.” If a costly new device is no more effective than something that's already on the market, he added, “then frankly, it's just adding costs to the system.”
In spite of external pressures, the $110 billion medical device industry is doing well. According to Ernst & Young, the net income for U.S. medical device manufacturers hit $11.4 billion this past year, up 32% from 2012.