Something New, Something Used, Something Sterile: Stryker Embraces Recycled Medical Devices
Stryker has not been shy about shopping for acquisitions of late. Last year, the Kalamazoo, MI-based company bought Boston Scientific’s neurovascular unit for a cool $1.5 billion, its most high profile (and expensive) deal in recent memory.
But I’d argue Stryker’s most significant purchase of late occurred in 2009 when the medical device maker bought Ascent Healthcare Solutions for the relatively small sum of $525 million.
Why? Ascent is one of the nation’s largest recyclers of single-use medical devices and the natural scourge of new medical device makers like…Stryker. In this corner of the medical device business, companies like Ascent and SterilMed take previously used devices like ultrasound catheters and compression sleeves, spruce them up, and sell them back to hospitals. That process, known in the trade as reprocessing, obviously cuts into sales of original device manufacturers. Why buy a new catheter when you can buy an almost-good-as-new-one for half the cost?
A cynic at the time might have theorized Stryker’s purchase of Ascent was a ploy to exterminate a pest from the market. Stryker says its motive was quite the opposite.
“I’m not saying it was ‘if you can’t beat them, then join them,’” says Marci Kaminsky, Stryker’s vice president of communications and public policy. “We saw it as a burgeoning industry that we would like to be a part of.”
In some ways, Stryker’s embrace of a business it has long opposed speaks volumes to not only the growing popularity of reprocessors but also the shifting healthcare landscape bedeviling the broader medical device industry.
By some estimates, reprocessors generate $250 million to $500 million a year in sales, a small, but fast-growing slice of the overall medical device pie. A 2009 report by GlobalData estimates the reprocessing market will generate a 9 percent annual growth rate and hit $1 billion in sales by 2015.
Faced with a weak economy, hospitals are trying to control costs by shunning shiny new devices in favor of less expensive reprocessed products, analysts say.
“The economic recession has played its part in boosting the reprocessing industry,” the GlobalData report says. “Dwindling cash reserves have pushed hospitals and clinics towards tightening hospital spending. In the U.S., it has now become the norm for hospitals to reprocess [devices]- with some level of processing now being undertaken in 70 percent of hospitals nationwide.”
Understandably, medical device makers are not too pleased. Though reprocessed devices are typically … Next Page »