Intuitive Surgical, a medical device company, has profited handsomely from the sale of its surgical robots to lots of hospitals. Still, most of the enormous revenue it generates comes from its super expensive maintenance services and replacement parts. Hospitals are now suing the company for using its monopoly power to price gouge.
Franciscan Health, based in Indiana, and Kaleida Health, based in New York, are two hospital systems that have brought class action lawsuits claiming that they have no choice but to buy maintenance services and replacement parts from Intuitive Surgical for their surgical robots. Intuitive Surgical requires them to do so. The hospitals claim that if they could take advantage of other options, they would spend far less.
Much like the pharmaceutical industry, the medical device industry has enormous price-setting power. Too much! As a result, Americans pay a lot more for healthcare than people in other wealthy countries .
What’s worse is that, in this technological era, the medical device companies can often control the devices that they have sold. They can literally keep their surgical robots from working if they choose to. And, sometimes they do.
Axios reports on one alleged instance in which Intuitive Surgical shut down its surgical robot “in the middle of a procedure.” The surgeon then had to quickly regroup to undertake the surgery directly. Intuitive was responding to a threat by the hospital to secure maintenance services for the robot from another company.
Intuitive Surgical is one of those healthcare companies you likely have never heard of that is enormous. It generates $4 billion a year in revenue and has a market cap of $113 billion, more than CVS Health. Its surgical robot does not come cheap. It can cost between half a million and two and a half million dollars.
The lawsuit alleges that Intuitive Surgical requires hospitals to sign high-priced multi-year services agreements with it when they buy the equipment. The company also requires that hospitals buy new instruments and other accessories after a fixed number of uses, even if they still work well. These requirements generate more revenue for the company than it derives from the equipment itself.
This hospital systems’ lawsuit against Intuitive Surgical follows antitrust suits brought against the company in the last couple of years from service companies.
All this said, do we need surgical robots? There is evidence to suggest that they deliver no better outcomes than surgeons themselves.
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- US and European patients at risk without medical device registry
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