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发帖数: 884 | 1 By Paul Steiner
Thursday, July 15, 2010
In the last few months, the medical device community has found itself amidst
a political fallout that threatens any forthcoming economic improvements.
To fund the healthcare reforms set forth by Congress, medical device
manufacturers will soon be charged a 2.3 percent excise tax on the sale of
most medical devices.
The manufacturers that have survived the recession have done so because they
have been able to balance the economic pressures and corporate mandates
with the need to push innovation. They’ve understood that removing
innovation from the equation is not a survival strategy – it’s a death
sentence.
Just as many sectors of industry are improving, like the automotive sector,
many medical device companies are facing a targeted threat on their survival
. With narrow profit margins, many of these manufacturers and their
suppliers will be forced to decrease innovation and/or staff to accommodate
the medical device tax increase.
If the medical device excise tax were applied to the 2009 U.S. revenues of
the largest 10 medical device manufacturers, it would have cost them $1.87
billion had the law gone into effect in last year. While the largest
manufacturers will bear the lion’s share of the tax, the cost impact on mid
-sized and small manufacturers is not to be ignored. This impact will be
heavy against their small profit margins.
The voice of discontent is loud. Executives in the industry have shared
their concerns not only with industry influences but also with the general
public through interviews and op-ed pieces with major broadcast and print
media. Unfortunately, how manufacturers can offset this tax increase has not
been in the discussion. A pushback on the healthcare reforms that have
taken years to pass won’t provide a speedy solution. If manufacturers in
the medical device industry want to neutralize the effects of a tax increase
, they must act today.
The first thing that companies must do is identify areas of wasteful
spending in their operations. Many will claim they’ve already done this –
numerous times – and there’s nothing left to cut. However, they may be
surprised to learn that even the leanest manufacturers overpay their key
vendors billions of dollars every year. This is especially true in the
categories of transportation/logistics, technology, telecommunications and
energy. On average, manufacturers overpay 10-20 percent of their overall
spend with these vendors.
The problem is that even the most sophisticated procurement teams don’t
have access to real-time vendor pricing data. Most IT, logistics and
procurement teams go through a major software or shipping contract
negotiation once every year or two. They have no idea how much their
competitors are paying for the same product or service with the same vendor.
For that reason, vendor pricing can vary as much as 30 percent translating
into mass overspending. Removing the 30 percent worth of overspending can
help fully or partially offset the negative impact of the medical device tax
increase.
Benchmark
Companies should benchmark their annual spend in complex spend categories
like transportation, technology, telecommunications and energy. It’s
impossible to manage spending if you don’t fully understand where your
dollars are going. To ensure you are getting fair market pricing from your
vendors, you must acquire the necessary industry specific data and cost-to-
serve insight to gauge fair market value.
Justify
Vendors widen their profit margins through subtle tactics like annual price
increases which are built into your contract. These include fuel surcharges,
accessorial charges and maintenance rates. Over time, these year over year
increases can become the most significant part of your spend. If your small
parcel carrier implemented a 4.9 percent net rate increase, will you have to
absorb these costs or pass them onto your customer? Is a five percent
increase in maintenance fees from SAP justifiable if your level of service
and solution remains the same? These are just two examples of why vendors
must justify any price increase.
Renegotiate
If you think you have to wait until the terms of your contract expire, think
again. Contracts can be renegotiated any time. In the spirit of partnership
, let your vendor know that you want to keep a positive relationship but
need to come back to the table to negotiate fairer pricing and terms.
Bid
If you feel you’re not receiving the fairest terms and pricing from your
vendor, it’s time to invite other vendors to the table and start over with
the RFP process. Not only will it put your current vendors on high alert,
you will have access to current and competitive pricing, rate structures and
terms. Furthermore, this forces you to re-evaluate the services and
products you actually need. For example, do you really need premium software
support? You may be surprised at the savings to be had since your last RFP
process. What about your incumbent transportation carriers? If you’ve used
an incumbent carrier(s) for a significant period of time, chances are your
relationship and contract are fraught with complacency. It may be time to
bring in a competitor to take a fresh look at your operation and contract
pricing.
The threats to and opportunities for the medical device industry over the
next several years will be equally substantial. Reducing rampant vendor
overspending is one way to tip the scales in favor of manufacturers. By
offsetting the recent tax increase, medical device companies can commit more
spend to R&D, protect jobs and innovate. And it’s faster than waiting for
a political solution.
Paul Steiner is director of logistics for NPI’s transportation division.
NPI is a spend management consultancy serving supply chain organizations
across the globe, including many in the medical device industry. | s*********e
发帖数: 884 | 2 Came across this article online.
It was written in July 2010, don't know if the 2.3% exercise tax
imposed or not? There are so many policy changes at the Federal
level these days. | s**********8
发帖数: 25265 | 3 no clue ah. regulations changes a lot.
【在 s*********e 的大作中提到】
: Came across this article online.
: It was written in July 2010, don't know if the 2.3% exercise tax
: imposed or not? There are so many policy changes at the Federal
: level these days.
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