Medical Device Daily
Let's hold an auction!
That clearly is what Guidant is doing as it weighs the ever-ballooning bids from Johnson & Johnson and Boston Scientific.
And which of the companies should win this bidding war?
We have an opinion on this but won't share it since our view is unlikely to weigh much or determine the outcome.
But we do have some thoughts concerning what shareholders probably have been mulling over these past weeks and months as they attempt to determine the ultimate outcome of this auction for their portfolios.
• J&J, being a much bigger company, offers more resources, especially of the economic sort, when litigants consider which company has the deeper pocket into which to dip. Thus, the impact of the rising tide of litigation vs. Guidant might have less impact with a J&J purchase.
• Then again, Boston Scientific's bid is significantly higher than J&J's, a fact that can't help bring a smile to the faces of shareholders. And the fact that J&J has so far refused to top Boston Scientific's bid suggests it may not be all that interested or committed to consummating the deal. (And some might have thought that Boston Sci's bid came as a relief to J&J, since it could avoid taking on a litigant-heavy partner. But J&J has remained in the bidding, so that theory probably doesn't fly.)
• But while Boston Scientific's bid is higher, that may mean only an initial large payout. More important may be the longer-term prospect. Boston Scientific will be taking on a much larger burden of debt and may not be able to handle it as easily, or quickly, as J&J, so that with J&J as parent, Guidant might become the stronger company.
• Then again, Boston Scientific may be a better fit for Guidant technologically, since they are both primarily device-focused, with that focus primarily in the cardiovascular sector. Thus, their “synergies“ to use the most popular term when companies merge may work better in new product development and marketing to the cardio segment. Guidant could get lost in J&J's broad product mix.
• But J&J has those broader financial and marketing resources. No, it's not primarily a cardio-focused organization, but it has considerable business elements in that area over a broad range of products, and its breadth of technologies might provide an even more dynamic range for future R&D.
• However, Boston Scientific's particular drill-down emphasis interventional and minimally invasive strategies, and its success in the drug-eluting stent sector may trump J&J's breadth of offerings, and focused marketing may be all-important.
• Then there's corporate integrity. Boston Scientific's record isn't exactly pristine the most obvious example being its dealings with former Israeli stent partner, Medinol, and its establishment of a “shadow“ stent manufacturing site in Ireland. The result: a $745 million payout to Medinol as settlement.
We offer these as a sampling of the thoughts investors might be having as they consider the possibilities.
Now here's the thought that we have.
In none of the speculation, dialogue and debate on this consolidation have we heard anything about patients about which of these proposed deals will benefit those with heart disease. About which will produce the better, more effective, less-costly products.
That's a shame, and we take it as an indicator of America's current practice of healthcare that it is something to be sold to the highest bidder, and that if you don't have the necessary resources, you have little chance of acquiring the healthcare you need.
This rather unpleasant fact made us laugh recently ruefully, to be sure, expressing a perspective rather jaded when we passed along for publication the recent announcement concerning nearly $57 million in grants from the Department of Health and Human Services for investigation of various “disparities“ in the provision of healthcare (Medical Device Daily, Jan. 11, 2006).
The grants, HHS said, are intended to support research that will help to explain why these disparities exist and how to eliminate them.
Oh, please, we thought, please stop wasting this money.
The heavy bidding for Guidant only reflects the profit motivation currently pervading the U.S. healthcare system, and it is the most obvious model that can be applied to explain these disparities.
When the spirit of profit invades/pervades anything, what you get is purchasing disparities.
Besides producing a lifestyle that encourages greater ingestion of more calories, other types of over-consumption, less physical activity at work and at home, and thus produces the increasing occurrences of expensive-to-treat diseases, the high-technology/high-profit motive will push healthcare to those who can buy and withhold it from those who can't.
Yes, the profit motive continues to produce the most technologically sophisticated healthcare system in the world, but one built on an essentially flawed foundation a system of delivery geared to “maximizing shareholder value“ and thus intrinsically unable to satisfy the needs of those who cannot pay, or push up, the price.