Patient monitoring firms, darling of Medicare, are the next lucrative target for device giants

With inputs from Chanderkanth Gautham

Pharmaceutical sector in general is witnessing multi-billion dollar, blockbuster deals.

In a little corner of this giant pharma world, a deal making of another kind is unfolding. Medical device giants such as St. Jude Medical, Covidien and Medtronic have been buying up companies like CardioMEMS and Cardiocom, which produce patient monitoring products.

Patient monitoring devices help doctors to keep track of patient health outside the settings of a clinic or hospital. This can potentially reduce the healthcare expenses as costs involving inpatient hospital care are avoided.

Owing to lower costs and effective monitoring of patient health, usage of such monitoring devices is preferred by major reimbursement agencies such as Medicare.

In recent months, device giants have invested more than $735 million in as many as 5 deals.

Patient monitoring firms, darling of Medicare, are the next lucrative target for device giants

What has prompted medical device makers to look at buying patient monitoring firms? Medical device firms end up selling expensive products to hospitals and patients at a time when the debate has centered on burgeoning health care spending.  Various parties including Medicare, hospitals and patients are looking for ways to bring down the costs and avoid unnecessary expenses.

In this evolving environment, it makes sense for device firms to transform themselves into full-service healthcare firms instead of just trying to sell only expensive products. And to help make that transformation, it becomes important for medical device makers to find complementary monitoring devices for their products.

The monitoring devices address two major areas of reimbursement: inpatient and office-based visit cost, which taken together accounts for about 54% of overall reimbursement spend.

Any effort to reduce reimbursement expenses will incentivize Medicare as well as hospitals, who in turn will be encouraged to buy those monitoring devices.

Also, the new health-law in the United States penalizes hospitals when their patients return within a month of discharge. Patient monitoring devices can help hospitals avoid such penalties.

In a way, it is a win-win for device makers, hospitals and Medicare.

Until now majority of the acquisitions were aligned towards increasing the device maker's geographical foot print or product offerings.

However, lapping up monitoring device products would not only complement device makers' current product portfolio, but also help reduce reimbursement costs.

Device combo coverage which addresses treatment and monitoring is likely to appeal payers such as Medicare mainly on the account of cost savings that these devices put on table in the long run.

There is a possibility that medical device firms could end up scouting for deals in other therapeutic areas such as orthopedic and peripheral implants.