As health costs rise, 'generic' devicemakers see opportunity

Cardinal Health ($CAH) is looking to increase its offerings of low-cost orthopedic devices, and the development is part of a trend of smaller firms undercutting giants with cheaper techs, The Philadelphia Inquirer reports.

Cardinal has said it can offer some devices at 30% to 50% lower cost than brand-name devicemakers like Johnson & Johnson ($JNJ), and the company believes it can lure payers and doctors away from costlier techs with the promise of lower healthcare costs.

The increased scrutiny on medical expenses could drive payer groups to pick low-cost techs over brand-name devices, but there are still barriers for so-called generic devicemakers, like Cardinal, according to the Inquirer.

For starters, big-name devices carry patents, and the owners of those patents have armies of attorneys, meaning any firm looking to unseat a heavy-hitter's tech is likely to see a courtroom. Furthermore, the murky nature of group-purchasing companies can make it difficult to get techs into hospitals. The organizations have long been criticized for keeping hospitals at arm's length and keeping devicemakers close at hand.

That being said, with the Government Accountability Office and other watchdogs keeping a close eye on medical costs, there may still be significant opportunity for "generic" devicemakers looking to challenge the industry's big shots with more affordable implants.

- read the Inquirer story