Medtronic has cancelled five contracts with Novation that cover cardiovascular and orthopedic products.
Medtronic‘s unilateral decision to cancel its agreements with Novation will likely increase their costs and impair the efficiency with which they conduct business, the members said.
In response to the complexities associated with contracts for high cost medical devices, especially in light of the Medtronic actions, Novation has taken the initiative to enhance the valuable contracting support services health care providers are receiving at no additional expense.
Novation is owned by VHA and the University HealthSystem Consortium (UHC), whose members represent $2bn in annual purchases for Medtronic in these product categories.
Medtronic stated in a letter to Novation that the company wanted to manage their business relationships with hospitals locally, rather than through a national GPO contract.
Novation sourcing operations senior vice president Pete Allen said this move will likely raise costs for member organizations by eliminating the price protection that members benefit from through Novation’s national agreements.
"In addition, through our contracts members generate cooperative returns, and have more favorable terms and conditions. The contracts also protect members from pricing confidentiality clauses, eliminate freight fees, and mandate that new technology is added to contracts when the technologies are released," Allen said.