THE MISTAKES OF JOHNSON AND JOHNSON: THE RISE AND FALL OF THE PALMAZ SCHATZ STENT
Johnson and Johnson created a revolution in the treatment of coronary-artery disease by the introduction of a medical device called a stent. This device is inserted in blocked arteries and prevents them from closing once an operation is over. The premature closing is known as restenosis. The use of a stent almost eliminated restenosis and halved the long term failure rate. The hugely successful product helped J&J gain over 90% of the $ 1 billion stent market in the USA within the first 2 years of its introduction. But even more surprising was the drastic reduction in its market share to a miniscule 8% when Guidant Corp. launched its first competing stent. This happened because of certain internal and external factors which have been discussed below: 1. High price and no discounts: The initial monopolistic market scenario is what might have driven
J&J towards a premium pricing strategy with a price tag of $ 1595. At such a price level, it became a heavy investment factor for a lot of hospitals who purchased in bulk. At the same time, J&J did not offer discounts on bulk orders, which were as large as $ 1 billion a year. This acted as a serious deterrent for the buyers. Even a combined order from 300 hospitals didn’t generate a discount offer. Although, J&J defended its pricing strategy (they cost more in Europe and Japan), the absence of an alternative irked the medical community and they welcomed the first competitor with open arms. 2. High handedness of J&J officials: According to many doctors at various clinics and nursing homes,
J&J dealt with catheterization labs with a sense of arrogance. On being asked for rebates by Cleveland Clinic, they offered to help in making procedures more efficient implying that the patient managing capability is not up to the mark. 3. Lack of innovation and foresight: J&J spent all their time and resources in meeting the...
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