hospital deals with medical giants

May 10, 2008

Hospital deals with medical giants 'waste millions'

WHEN you battle with giants, expect to cop a beating. And so it was for Sead Rahmanovic when a Melbourne hospital cancelled his hard-won contract.

Having launched the Australian subsidiary of one of Turkey's biggest medical device companies in 1997, Mr Rahmanovic toiled for five years to get his fully approved and heavily discounted screws, pins, plates and artificial joints into Melbourne's hospitals.

In mid-2002, after spending hundreds of thousands of dollars trying to break into a market dominated by American multinationals, Mr Rahmanovic though he had finally got his company, Hipokrat Australia, off the ground.

A big Melbourne hospital, which he asked not be named, awarded Hipokrat Australia a contract to provide trauma implants and artificial hip joints in a deal worth several hundred thousand dollars a year.

But the deal was short-lived. The hospital's senior orthopedic clinical nurse had just ordered a huge amount of supplies from Zimmer, the world's biggest medical device maker.

The Zimmer deal was so big that Mr Rahmanovic's products became surplus to requirements.

Shortly after the senior nurse placed the order with Zimmer, she told staff she had accepted a new job. Within weeks she was working at Zimmer. For Mr Rahmanovic, this episode illustrated the difficulties he faced trying to break the US giants' stranglehold on Melbourne hospitals.

"When clinicians have a relationship with company representatives, then your products are forgotten," said Mr Rahmanovic, who has since given up on establishing Hipokrat in Melbourne.

He believes the entrenched relationship between senior doctors, public hospitals and US suppliers has resulted in higher private health insurance premiums and a greater burden on Medicare.

Mr Rahmanovic said his company's products had been approved by the Therapeutic Goods Administration and were offered to hospitals at prices 50% lower than those of its bigger rivals.

"For ordinary products like hips or screws, Melbourne hospitals could have saved millions of dollars by looking beyond the traditional suppliers," he said.

His experience is an example of the problems that can emerge when doctors and medical implant companies have financial relationships. In general, patients are unaware of such relationships.

Many Australian surgeons are paid as consultants by medical device companies, a relationship doctors and the companies defend as helping ensure better products. Then there are the all-expenses paid overseas and interstate conferences and events run by the companies for doctors.

In the US, authorities recently found that medical device companies had paid $240 million in kickbacks to surgeons in return for the exclusive use of their products. The US Securities and Exchange Commission is investigating payments by these companies to doctors working outside the US. In March, The Age revealed that Stryker and Zimmer, two of the companies under investigation, were among the biggest corporate donors to The Alfred and Royal Melbourne hospitals. Both companies have lucrative consultancy arrangements with several of Melbourne's leading surgeons.

Hospital sources say that doctors' financial arrangements with medical implant companies had led to products receiving preferential use.

But The Alfred and the Royal Melbourne say that individual doctors have no role in the purchase of medical devices, saying such decisions are made through tenders overseen by health purchasing officials.

But documents seen by The Age show senior doctors in charge of public hospital departments have a role in deciding what implants are used. One email, from a head of orthopedics at a Melbourne hospital, states: "As head of department I am responsible for decisions regarding prosthesis and implants."

Having spent $600,000 trying to get established, Mr Rahmanovic is no longer in the medical implant game.