Moneta Musings -
Interesting observations from outside Wall Street and Washington.
If you like what you read consider a donation
Monday, June 13, 2011
Medtronic not as shocking but still concerning none the less...
As a result of some insight from readers of my prior article I have gone back and refined the search criteria within the Maude database acquiring more refined numbers,providing different results. I scanned the MAUDE database for only defective items that resulted in patient death, granted there may be other ways to classify product problems but this is the most straight forward. Doing it this way removes all the people that may have died as a result of blunt force trauma or some other non device related complication instead of a failure of an implanted device, this still does not guarantee 100% accurate results but it is the data available.
When you are dealing with a field that involves life and death you need to make sure that your defect rate is as low as humanly possible as this is a zero tolerance industry. That is to say if Honda or GM put out cars where they suddenly failed, even if it was only a few per year there would be huge public outcry and I would think those companies might not survive problems like that year after year. One would argue that a moving vehicle could cause harm a lot of people at one time where as the medical device only kills one person. While in many cases that is true but what if a medical device fails when the patient is on the job as a bus driver or even just driving a vehicle on crowded streets. I also understand that Medtronic may be larger in some markets than its competitors but the number of devices made by all manufacturers is still significant and you can see below their numbers as well. So the bottom line is here are the numbers I ran going back to 2005:
Number of deaths as a result of defective device:
1/1/2005 to 05-31/2011 : 0
1/1/2005 – 05/31/2011 :0
1 - Reported device failure related fatality in 2008 none any other year
2 - Device failure related fatalities in 2007 none any other year
Now it is true that these numbers are not as shocking as the original ones in the article(still shocking none the less by comparison), but ask yourself, are these numbers acceptable? Why do the numbers run so high for Medtronic vs other competitors in the segment? Maybe I am comparing apples to oranges because the companies don't all compete head to head in the exact same space..
Something began occurring in 2008 as you can see from the figures. Sure the numbers fell back in 2010 from 2009 levels but they are still way higher than the rest and the current number of 83 extrapolates out to somewhere close to 200 which is again an increase.
Is it a result of the management culture I do not know the answer to that but clearly, Huston we some sort of problem. I am aware that people do die of complications all the time but the numbers indicate a problem to me since these are specifically related to product defects.
If the issues stem from manufacturing or design problems for the failed devices than you could argue that the management culture is at fault for not addressing the issues and allowing them to continue. Moreover, it is not like the management would not be alerted to problems of this nature as I said before it is a life and death industry and if they are not aware than that is a different but unacceptable issue as well. I don’t know the answer as to the high numbers or management knowledge and without being an insider it would be difficult to ascertain.
What I do know that the stock looks like a short to me from a chart perspective and as investors know many times company problems are baked in to share prices ahead of time and reflected in the charts. Maybe it is not this issue a at all that is driving the shares but something else or even just the market not giving a vote of confidence to management.
If it was life or death for you would you be leery of having a Medtronic device implanted in your body? Look I like and have invested in Medtronic in the past but this issue is worrisome and I believe it needs to be addressed before I would go long again in the meantime the charts an market will do the talking.