Senate Finance probes Medtronic contract cancellations

On concerns that health costs could rise for hospitals and patients, Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, said Monday he was starting an investigation over Medtronic's action to cancel contracts with Novation, one of the country's largest group purchasing organizations (GPOs).

In a May 2 letter to the Minneapolis-based device manufacturer's chief executive officer, Baucus said that canceling the contracts--which are used to obtain bulk-rate discounts for hospitals--"could considerably undermine our efforts to reduce healthcare costs and increase transparency for consumers and taxpayers."

Earlier media reports of Medtronic canceling contracts with Novation and other GPOs as "an attempt to discourage transparency and increase costs are troubling," Baucus added. "Medicare spends billions each year on medical devices for patients, and we need to make sure these patients...are getting the highest-quality products at the best price."

In his letter, Baucus is requesting information on the effect the termination of the GPO contracts is expected to have on the pricing of medical devices at the hospitals that are represented by Novation--and the cost to Medicare and Medicaid. The inquiry also is looking for information on how Medtronic intends to negotiate prices with providers in the future for the products impacted by contract cancellations.

The company will be responding to Baucus "in a timely manner," reports Bloomberg.

For more information:
- see the Senate release and Baucus letter to Medtronic
- read this Bloomberg article