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Big company comes calling
Medtronic and IMDA member ink deal
On the Friday before Christmas 2003, Butch Lawhon of Products for
Surgery received the call every IMDA member dreads. One of his manufacturers
� in this case, Edison, NJ-based ITC � had decided to drop its distributors
and go direct, effective March 1, 2004. This despite the fact that PSI had
carried the company�s line of blood coagulation units for more than 12
years, and had exceeded plan by 50 percent in 2003. Blood coagulation units
are used to check patient�s active clot times.
Then, one and a half months later, Lawhon got another call � this time
from one of ITC�s competitors. Having heard about ITC�s decision, the caller
asked Lawhon if PSI would consider taking on another line of blood
coagulation units. The caller did not represent a small, start-up company,
however. Rather, he represented Minneapolis-based Medtronic Cardiac Surgery,
a business unit of $9 billion Medtronic.
�He told me that the company was taking a look at a new model, and was
going to distributors for certain product lines,� says Lawhon. In the case
of the blood coagulation units, Medtronic was betting that specialty
distributors could penetrate areas of the hospital that the company had not
focused on before.
Big opportunity
For years, IMDA members have spoken among themselves and at Annual
Conferences about the opportunity to distribute selected product lines for
big companies, which often acquire lines that they aren�t equipped or
motivated to sell.
�Our goal for the past 20 years has been to get companies like Medtronic
to know what specialty distribution is,� says Lawhon. Obviously, Medtronic
got the message. According to Lawhon, the company believes that the
specialty distribution market is as large as $4 to $5 billion. It�s an area
that companies such as Medtronic want to tap into, with the right partners,
he says.
Credit Medtronic with working hard to make the new relationship with PSI
a success, adds Lawhon. For example, the company made it clear that it
shared PSI�s desire for a long-term relationship, and signed a contract to
that effect, he says. What�s more, Medtronic worked quickly to get an
agreement into place by June 1. �For a company that size to make the
decision to go where they had not gone before � that is, through specialty
distribution � they moved at warp speed.�
Medtronic did things right through the transition process as well,
beginning with a well-orchestrated transition plan, adds Lawhon. The company
set up multiple conference calls, and Lawhon traveled to Minnesota to meet
the key people in the manufacturer�s customer service, marketing, accounts
and service departments.
�We walked through all the different scenarios we might encounter,� says
Lawhon. �They want to lay a tremendous foundation upon which to build this
relationship. We�ve never had that before � formal meetings with all the
people to go over all the what-ifs.�
Immediately prior to the day of the handoff (June 28), Medtronic sent
letters to its customers, and wrote letters for the PSI reps to give to end
users to inform them of the new arrangement. The company offered to conduct
conference calls with PSI and end users if the situation warranted.
�I�ve never had that much cooperation,� says Lawhon. �The biggest asset
is the foundation that is being laid to make this transition a success.�
�If this goes well, it will be a tremendous boost for my industry, and my
industry is specialty distribution,� he says. �Other specialty distributors
will benefit from business with large manufacturers.�
Copyright � 2004 IMDA
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