Price fight is looming over stents

Johnson & Johnson is picking a price fight over drug-coated stents. Does Boston Scientific Corp. need to respond?

That question will be on the minds of investors tomorrow as Boston Scientific hosts an investor conference where it plans to lay out its goals and financial outlook for 2005.

Lately the Natick medical-devices company has been talking about diversifying itself, by moving aggressively into fields like defibrillators and hearing aids. But for now Boston Scientific's core strength is the sale of drug-coated cardiac stents used to prop open arteries after they have been cleared of blockages through a procedure known as angioplasty. The new coatings reduce the buildup of scar tissue that can require repeat procedures.

Boston Scientific captured two-thirds of this market from Johnson & Johnson last year after introducing its Taxus stent, and lately the New Jersey medical-products company has been trying to catch up.

Johnson & Johnson's latest gambit looks like price cuts.

On Jan. 25 the company told stock analysts that its drug-coated Cypher stent sold for an average of $2,350 in the fourth quarter of last year. The company wouldn't provide historic figures, but the fall figure would be a 19 percent drop from the $2,900 at which the devices sold in the first quarter of 2004, according to figures from Millennium Research Group's Marketrack service, in Toronto. (Millennium puts Johnson & Johnson's fourth-quarter price at $2,450, perhaps because it excluded some discounts.)

In contrast, Boston Scientific was selling its Taxus drug-coated stent for $2,575 on average in the fourth quarter, according to Millennium's surveys of US hospitals. That's down just 4 percent from the $2,675 average price at which they were introduced in the United States last March.

Marketrack shows Boston Scientific with a market share of 60 to 65 percent, roughly where it's been since the fall, with the remainder going to Johnson & Johnson's Cordis unit, which sells the Cypher stent.

Few doctors choose their stents on the basis of price alone, and it's not unusual for device prices to decline over time. But prices can also reflect how customers view a company's service and performance, said Millennium manager Tim Wohlgemut. ''Thus far, Boston Scientific's ability to maintain market share despite swapping positions with Cordis as the premium-priced company signals strength in those core areas," he said.

Asked whether Boston Scientific plans to reduce Taxus prices in response, the company's chief operating officer, Paul A. LaViolette, responded by e-mail: ''We determine our prices based on a number of factors, but as a market leader, following the competition is not one of them. We will continue to price fairly, with our customers and their patients foremost in mind."

On the Jan. 25 call with analysts, Johnson & Johnson put fourth-quarter US Cypher sales at $307 million, or 38 percent of the total US market.

A Johnson & Johnson spokeswoman, Terri Mueller, declined to go into more detail but said: ''We're priced competitively with the Taxus stent, and do provide our customers with flexible pricing options depending on volume." She added: ''We're aggressive where we need to be. We're not dropping prices by a dramatic amount."

The price cuts are the latest competitive move by Johnson & Johnson, whose stent operation has struggled with manufacturing and supply problems.

Now the question is how doctors will react. Joe Kozina, a cardiologist at Mercy General Hospital in Sacramento, said he's been offered the lower prices by Johnson & Johnson salespeople. But he hasn't stopped using mostly Taxus stents, saying they are easier to place in blood vessels. ''Pricing makes no difference if I can't get the stent into the patient," Kozina said.

Other physicians who see fewer clinical differences in the products said the lower prices might make a difference, however. ''These days, it's a piece of the pie," said Carey Kimmelstiel, director of interventional cardiology at Tufts-New England Medical Center, who uses mostly Taxus stents. He expects Boston Scientific will have to respond. ''They'll always follow the market," Kimmelstiel said.

Ross Kerber can be reached at kerber@globe.com.