Medtronic defends payments to physicians

At the annual shareholder meeting of Medtronic Inc. Thursday, CEO Bill Hawkins defended the company's longstanding practice of collaborating with physicians, although he acknowledged these paid relationships could pose a conflict of interest.

Working with doctors to improve devices and commercialize inventions is crucial to advancing medical technology, Hawkins said before a crowd of about 400 people at the company's Fridley headquarters.

Yet these relationships have triggered inquiries by Congress and the Department of Justice, prompting a pointed question from one shareholder who said he was shocked at the amount of money paid to Medtronic's doctor consultants.

Recent reports have focused on the consulting relationship between Medtronic and Dr. David Polly, the head of spine surgery at the University of Minnesota. Between 2003 and 2007, Medtronic paid Polly $1.2 million for consulting, expenses and honoraria.

Hawkins said the bulk of the money Medtronic pays to doctors is for royalties related to their inventions. But he said "service arrangements" are necessary with doctors who offer advice on improving devices or help train other doctors. "We are in a technique-intensive business," he said.

Hawkins said Medtronic monitors these relationships closely to avoid potential conflicts of interest. "Medtronic, as the industry leader, has played a strong, ongoing role in working to create new standards for financial transparency and conflict-of-interest disclosure -- and we will continue to do so," he said.

The company supports federal legislation that would publicly disclose consulting relationships between doctors and drug and medical device companies, and has also stated it will post details of its consulting agreements on its website in 2010.

Hawkins mostly spoke about Medtronic's strategy, past and present.

"The global economic crisis, looming health care reform, public and government demands for greater transparency, and increasing regulatory hurdles have all contributed to the uncertainty that will continue well into 2010," he said.

In light of the pending health care overhaul in Washington, Hawkins emphasized the way medical technology provides value to patients suffering from chronic disease, batting down the notion that medical devices merely add to overall health care costs.

"We are an important part of the solution to today's health care challenges," he said. "We enable people to return to work sooner. We reduce unnecessary hospitalizations. We prolong life and we restore people to fuller, more productive lives."

Medtronic, he said, leads the way in evidence-based research, minimally invasive technologies and remote patient management systems that curb the need for expensive doctor and hospital visits. He noted that the medical device industry makes up only about 6 percent of all health care expenditures, and said its prices have increased less than half the consumer price index in the past five to 10 years.

"These facts are critical to keep in mind as reform is being considered," he said.

Janet Moore • 612-673-7752