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CNBC's Huckman: Stent Battle Escalates

Within the last few hours CNBC's Pharmaceuticals Reporter Mike Huckman broke the news that Boston Scientific has locked up a huge account, but at what price?

Because drug-coated stents are high profit margin devices every little shift in market share between Boston Scientific and Johnson and Johnson can have an impact on their bottom lines...even if they're apparently doing more aggressive bulk-buy discounting.

A source close to the negotiations says that the Cleveland Clinic, with one of the nation's most prominent cardiology centers...has signed a two-year contract to buy only Boston Scientific stents. That's about $18 million worth of business each year.

The source says and I'm quoting this person now ..."This was not a decision based on science...it was financially driven."

This is a major turnaround at the hospital system which only two years ago completely stopped using Boston Scientific's product following a recall over an implantation device issue. Stents are the tiny wire mesh tubes that prop open clogged arteries and have recently come under increased scrutiny over drug-coated ones possibly causing blood clots. This deal I'm told was struck before the blood clot issue came to the fore.

Interventional cardiologists who put in stents like to be able to choose their preferred stent. One analyst likened it to the debate between Mercedes and BMW lovers. Analysts say exclusive contracts for stent brands are more common.

At VA Hospitals for example that are more focused on costs. As the source told me "Doctors at a community hospital have more choice now" than at the Cleveland Clinic. The cath labs where stents are implanted are the profit centers for most hospitals that have them.

Boston Scientific shares closed up yesterday about 3 ½% Shares of Dow component Johnson & Johnson were down a fraction.

A Boston Scientific spokesman said he had no comment keeping with the company's policy of not publicly discussing the terms of individual contracts.


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