Quarterly Numbers & Bulk Purchases

Well, 1st quarter results will be posted soon (for BSX & STJ). I will delve into them as they come out. Unfortunately, Medtronic reports on its own year - they end the fiscal year on April 30th. This makes it difficult to do apples-to-apples comparisons. However, it does make for some interesting events. I bet the push for bulks is in full force at Medtronic. Got to make those EOY numbers.

In my experiences, I've noticed that Medtronic makes a big push to do bulk purchases in April (EOY) and October. I know your asking yourself - Why October? Well, STJ & BSX end their fiscal years on December 31st. These companies try to get large bulks done in December. Medtronic likes to "block the shelf" by bulking large amounts in October to prevent BSX & STJ from bulking.

Speaking of bulking, I hate it (so do most reps). Bulking truly does nothing for the customer. What I would like to see is hospitals going to matrix or "pay to play" pricing and eliminate bulks. Bulks are great for companies because they get to book revenue in the current quarter - even though some of the equipment might not et used until the 3rd month of the next quarter. Bulks put reps, "in the hole." Reps have this huge bulk inventory sitting on their laps, and they can't earn commissions until the stuff is implanted. Of course, management can use bulks as a motivational tool - well, Rep X, what are you doing to get that bulk moving?

Here's an example (imaginary - of course). What if you bulk in a huge amount at the end of a quarter, and then issue a series of recalls in the following quarter? What happens to the stuff on the shelf? Well, it sits there. Usage drops dramatically because customers/patients are hesitant to use the product. The purchasing manager doesn't look so smart anymore when there is $750,000 of product on a shelf collecting dust, while other companies are billing out cases.

That brings me to another topic - contracting. I'll get into it more later, but these market share agreements only help the companies, not the customer. What good does it do a hospital to force its physicians to use only 1 or 2 customers? It helps the company by solidifying barriers to entry, but thats about it. I'll get into why market share agreements are bad for reps in another post.

Have a great weekend.