Price agreements have their place…sometimes. The Supreme Court in late June overturned a 97-year-old ruling and said that it’s not necessarily illegal for manufacturers to dictate to distributors the minimum price at which the latter may sell their products. ‘Go-to’ guys. IMDA members find that in-house sales specialists can be a win all the way around. Global Medical Marketing ties manufacturers and distributors together. William Hope’s life has taken some interesting turns. Today, his company – Global Medical Marketing – is one of IMDA’s newest members. Exhibitor at Forum joins as allied member. IMDA newest allied member is Precision Medical, an exhibitor at the 2007 Manufacturers Forum. Archway Medical joins IMDA. Based in suburban St. Louis, the company services Illinois, Missouri, Iowa and Kansas.
The Supreme Court in late June overturned a 97-year-old ruling and said that it’s not necessarily illegal for manufacturers to dictate to distributors the minimum price at which the latter may sell their products. In a 5-4 decision, the Court said that such resale price agreements can in some cases actually enhance competition, not reduce it. The June 28 decision involving a leather-goods manufacturer and one of its retailers highlights issues that have dogged the retail industry for decades, and the med/surg industry for a somewhat shorter period of time. On the retail side, it brings into focus the friction between no-frills discounters and high-service, high-priced boutique or specialty stores. On the medical side, it carries echoes of the heated discussions of the early 2000s, when distributors -- with feet on the street --feared loss of market share (and margins) to Internet-based retailers. And it offers a new perspective on an old question: How free are manufacturers who use distributors to control their approach to the market? Leegin vs. Kay’s Kloset Leegin Creative Leather Products Inc., City of Industry, Calif., makes leather goods and accessories, including belts, which it sells under the brand name “Brighton.” The company’s strategy has been to sell them through small boutiques and specialty stores. According to the Supreme Court, “Leegin asserts that, at least for its products, small retailers treat customers better, provide customers more services, and make their shopping experience more satisfactory than do larger, often impersonal retailers.” In introducing its “Brighton Retail Pricing and Promotion Policy” in 1997, Leegin told its retailers that it wanted them to hold the line on prices, so that distributors could have sufficient margins to provide high levels of service to their customers. “It also expressed concern that discounting harmed Brighton’s brand image and reputation,” according to the Supreme Court. In December 2002, Leegin discovered that Kay’s Kloset in Lewisville, Texas, had been marking down Brighton’s entire line by 20 percent. The retailer said it had done so in order to compete with nearby retailers, who also were undercutting Leegin’s suggested prices. Leegin requested that Kay’s Kloset cease discounting. When the retailer refused to do so, Leegin cut it off. Precedent After Leegin cut it off, Kay’s Kloset argued that the manufacturer’s actions violated antitrust laws. In fact, since 1911, by virtue of a case referred to as Dr. Miles Medical Co. v John D. Park & Sons Co., it has been a per se violation of the antitrust laws for manufacturers and distributors to enter into resale price agreements. In other words, since 1911, such agreements were always considered anticompetitive and hence, illegal. Kay’s Kloset’s stance was upheld by the District Court and affirmed by the Appeals Court. But the Supreme Court overturned it, along with the Dr. Miles ruling. So-called “vertical price restraints” are not per se violations of the antitrust laws, said the Court. Rather, situations such as the Leegin-Kay’s Kloset affair have to be judged by what the Court refers to as the “rule of reason.” In other words, such agreements must be considered on a case-by-case basis. If they are found not to impede competition, they are OK. How drastic a landscape change? Observers agree that the decision could affect the med/surg industry. But just how much it could do so remains to be seen. IMDA legal counsel Mitchell Kramer, Esq., predicts the agreement will have little effect on many products geared to the acute-care market, where much pricing is affected by group purchasing organizations, third-party payers or through negotiations between hospitals and vendors. Nor will it have much of an effect on the sale of commodities, says Kramer, of Kramer and Kramer, Rydal, Pa. “If the manufacturer has products that others make and sell, it can’t really direct what the price should be, because [distributors] will buy them elsewhere.” But the recent ruling has interesting implications for the marketing and sale of non-commodity products, he says. Yet even in those cases, there are potential limits to its significance. “If it’s a state-of-the-art product bringing real therapeutic benefits as well as cost-savings, it is logical that the distributor will sell it at list price,” he says. “In those situations, the ruling may be more theoretical than anything else.” IMDA members readers can read the entire 55-page decision at http://www.supremecourtus.gov/opinions/06pdf/06-480.pdf.
√ On a scale of 1 to 10, are you somewhere south of 5 when it comes to reporting sales trends to your manufacturers?
√ Would you like your sales manager to spend more time managing salespeople instead of products? √ Do your manufacturers get frustrated when they look to you for street-level information on their products, but fail to get clear answers? √ Do your field reps get antsy if they have difficulty tracking down a manufacturer when one of their customers asks a product-related question? √ Would you like to “test drive” your reps in a management role, before you actually promote them to one? If you answered “yes” to any of these questions, you might consider test-driving an idea that several IMDA members have already implemented – the sales specialist. A sales specialist is a field rep who is appointed to take the lead with a product or product line, serving as de facto trainer, product champion and general “go-to guy” for the other reps. In some larger companies, that is, those that handle multiple specialties, the sales specialist may take charge of an entire specialty – e.g., anesthesia or cardiovascular medicine. In smaller companies, he or she probably handles just one product line or manufacturer. In either case, the concept works best when the sales specialist is compensated for his or her time and effort, according to the IMDA members who have implemented the concept. After all, specialists must answer phone calls and e-mails from their colleagues. Some ride along with reps as they make their calls and provide inservice training during sales meetings. And it’s not uncommon for manufacturers to call the sales specialist directly to get immediate feedback on how the product is doing in the market. The payoff?
By specialty CVC Inc. has employed the sales-specialist concept for 10 years or so, when the company was strong in cardiovascular, anesthesia and respiratory care. “We had huge footprints then,” says President Richard Manley. Simply put, there were too many products and too many specialties for any one person to master. So Manley created three full-time sales-specialist positions, one for each specialty. The idea worked well. Today, Arlington, Texas-based CVC no longer needs full-time specialists. So, like other IMDA members, the company has selected several of its sales reps to act as sales specialists for particular product lines. Not every rep has the experience, inclination or proclivity to be a sales specialist, says Manley. “All those things have to match up together, and that won’t include everybody.” In order to step into the role, the rep must be willing to assume a leadership role vis-à-vis the other reps. He or she must be willing to ramrod leads with the other reps. In addition, the sales specialist must act as a “second-wave trainer,” in that she must follow up the manufacturer’s training with some of her own. And she is expected to ride along with other reps several days a month.
The approach is good for the reps, the sales specialists, CVC and its manufacturers, says Manley. For CVC, the sales specialist can bring in more sales. And by creating the sales specialist position, CVC demonstrates to its manufacturers a new level of commitment to their products. The sales specialist himself or herself enjoys increased opportunities for advancement, as well as some financial incentives. “And there’s value to the other sales reps in that they can speak to someone else – candidly – in a way they might not feel comfortable doing with the vendor rep,” he says. Manley also likes the flexibility of the concept. “After two years, we might not need the same kind of impetus, so we can back [the sales specialist] out of this role, and he can either move into another specialist position, or simply go back full-time to his territory.” Banter encouraged Nightingale-Alan Medical is just three or four months into its experiment with sales specialists. But President Paul Meyer hopes the concept will help the Cincinnati, Ohio-based company accomplish three things:
“Reps can fall in love with what they find easy to sell,” says Meyer, who together with Vice President Rick Almasy launched the program. “But we’re telling them, ‘We can’t become a one-dimensional company.’ We just want to make sure we keep everybody [all manufacturers] happy. If you fall in love with one product and that goes away, you’re in deep [trouble].” Meyer instituted a quarterly incentive program, whereby the sales specialist receives a bonus if the company as a whole meets certain sales targets. “This has gotten e-mails going back and forth,” he says. The sales specialists remind their colleagues that if all the sales reps devote more time and/or effort to their products, the sales specialist will get a bonus at the end of the quarter. “What we’re trying to do is get that banter going between the salespeople,” he says. Banter generates enthusiasm. Nightingale-Alan uses a document management and sharing system called DeskNow (by Ventia Pty Limited) to promote information exchange and product education among its reps. Potential questions and important facts about the various product lines are posted on the system. Before calling on a customer, the reps can consult DeskNow and phone the appropriate sales specialist with further questions. “What we’re trying to do is make our manufacturers happy and keep our people’s skills up,” says Meyer. Leadership, not management At Medical Specialties, New Orleans, each sales rep has responsibility for a manufacturer, and serves as the “reporter” back to that manufacturer, says President and Owner Duke Johns. By assigning individual reps to be the “go-to guys” for certain products, “we get to slide some management and pride downstream. It makes them take responsibility for themselves, their friends and the manufacturer. It establishes cross talk and best-practices performance.” At the moment, Johns is still fine-tuning the program, defining the duties of the sales specialist. Despite the work yet to be done, he is confident the program will work well at his company. “I have no sales manager,” he says. “I have long-tenured reps, who are all self-motivated.” By his own admission, Johns is not the typical manager. “I don’t like the paperwork, the computerese.” What’s more, he can’t respond adequately to the phone calls from manufacturers regarding sales of their products. That’s where the sales specialist can help. “The manufacturer can deal directly with someone at the street level. That’s where the truth is. “The reps are saying it’s a good idea, but the details have to be worked out,” he adds. He does know that in order to work, it has to be a formal program, with 100 percent compliance. Manufacturer’s perspective As a master distributor in the United States, Toronto, Ont.-based Vitaid plays the role of manufacturer to many U.S.-based specialty distributors. That means making calls to find out how products such as the Boussignac CPAP system are doing in the local market. Trying to track down owners and get street-level information is no easy task, says Chief Operating Officer Jeff Syrydiuk. But several IMDA members who carry the Vitaid lines have implemented sales specialists. “Among those who have done it on our products, we have noticed a fairly significant improvement on response time,” he says. In addition, because the sales specialist can handle questions and training internally, the manufacturer (or master distributor) doesn’t have to attend every sales meeting of all its distributors – which most can’t do anyway. “The other nice thing is this,” Syrydiuk continues. “If the sales specialist really knows what’s going on, your salespeople might be a little more candid, and [the sales specialist] can take their [comments] to the manufacturer. Sometimes, you come in as a manufacturer, but the reps don’t say anything. They may feel they don’t know enough about the product, or they’re afraid the manufacturer will find out they haven’t been working the line hard enough. But if it’s an internal person, that can lead to a more candid discussion. “It’s not a bad idea.”
William Hope’s life has taken some interesting turns. For example, there was the time he attended U.S. Army Officer
Candidate School and received his commission as a medical service officer – only to be appointed a Field Artillery Officer. And although he was born in Pennsylvania, he spent almost no time there, and has lived in 14 or 15 states since. Today, Hope heads up IMDA’s newest member -- Global Medical Marketing, Las Vegas, Nev. The company helps manufacturers – many of them small, upstart companies – build sales and marketing distribution channels. In addition, it provides distributors a variety of sales and marketing solutions. Consistent themes The second is his interest in medicine, particularly emergency medicine. At age 15, he became a junior member of a life-saving crew in Marion, Va. “That meant we cleaned the equipment,” he says. He was a field medic in the National Guard and later became a firefighter/EMT (emergency medical technician). The third is his interest in sales. “I have always been a sales guy,” he says, having sold in the tobacco, candy and confectionary, publishing and, of course, medical industries. In fact, in the early 1990s, he was able to bring together his interest in emergency medicine with his love of sales as a sales rep for Southeastern Emergency Equipment in Wake Forest, N.C., for whom he sold medical products and equipments to fire departments, rescue squads, etc. The fourth constant is an extremely strong work ethic. For years, he belonged to the National Guard, served as a volunteer firefighter/paramedic and was a full-time salesman – all at the same time. He also found time to start a parking-lot-striping company in the 1980s, which he sold after about a year. Specialty distribution connection Although Global Medical Marketing has primarily been a consulting firm, the company has found itself turning to distribution as well. “I started strictly consulting,” says Hope. “But as things progressed, I started getting asked, ‘Could you do more? Could you do some distribution?’ So we’re in that area now.” Although the company doesn’t sell directly to hospitals or providers, it does help manufacturers set up distribution networks. Hope isn’t sure how far down this path the company will proceed. At press time, he was speaking with some potential partners who could drive this portion of the business. “My goal is to be the best consultant I can,” he says. “If that means providing additional distribution services, then I will.” “IMDA is a networking opportunity,” he says. “I also enjoy the learning opportunities. I really had a good time at the [Coeur d’Alene] conference. I'm excited about some of the items discussed, such as the insurance program. And I always learn something for sales training classes.” Welcome William Hope to IMDA by calling him at (509) 230-8600 or e-mailing him at whope@globalmedicalmarketing.com.
IMDA’s newest allied member is Precision Medical. The company exhibited at this year’s Manufacturers Forum in Coeur d’Alene, Idaho, and specializes in respiratory and secondary gas equipment, according to Suzanne Moyer, director of hospital sales. The company has a full line of oxygen and air flowmeters, vacuum regulators, oxygen/air blenders, oxygen monitors, oxygen sensors, aspirators, compressors, oxygen regulators, medical fitting quick-connects, couplers, pipe fittings and custom hose assemblies. “Precision Medical has always distributed [its] products through specialty distributors, many of which are currently IMDA members,” says Moyer. “Specialty distributors have quality representatives who know their territories and products, and give the best service to their customers.” Moyer said the company made the decision to join IMDA as an allied member in order to maintain its relationships with its current distributors and to find additional representation in its weak areas. Welcome Precision Medical to IMDA by calling Suzanne Moyer at 610-262-6090 or e-mailing her at smoyer@precisionmedical.com.
Archway Medical, Columbia, Ill., is one of IMDA’s newest members. The company was founded four years ago by Jim O’Day, who has 17 years of medical sales and management experience. Located in suburban St. Louis, Archway covers the states of Illinois, Missouri, Iowa and Kansas. Its specialties are biologies, general surgery, gynecology, laparoscopy, orthopedic surgery, plastic/reconstruction, podiatry, trauma and urology. The company acts as a manufacturer’s rep for 65 percent of its product sales and as a distributor for 30 percent. Welcome Jim O’Day to IMDA by calling him at (618) 281-5272 or e-mailing him at jimoday@archwaymedical.com.
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