Both Boston Scientific and J&J are printing money every time they send another drug-eluting stent off the factory floor. In fact neither of them can keep up with the demand. J&J recently had some production quality problems which may limit its ability to meet demand but that hasn’t stopped its Cordis unit which makes the Cypher stent playing a big part in its recent rise in Q1 profits. Yahoo reports:

“Cypher, which revolutionized the stent market when it was launched last April, had first-quarter sales of $562 million and held 57 percent of the entire stent market until Boston Scientific’s Taxus coated stent was approved March 4. That forced J&J’s price down to about $2,675 from an original list price of about $3,200.”

Boston Scientific’s Taxus stent has had a stellar launch, and contributed to its stock price going up like a rocket ship in the last 6 months.

However, there are two sides to this picture, and if you are a hospital the other side is not pleasant. Forget for one moment the data that suggests that stents are not cost-effective compared to other types of heart surgery. Everyone’s ignored that and the use of PCTA (angio) and stents has been increasing for years. Of course, if you’re going to have a stent, why wouldn’t you want the latest and greatest, especially if its going to avoid the restenosis and the need for more procedures that’s plagued their use in the past? Well let me suggest who might not want one or sometimes more $3,000 drug-eluting stents to be used in that angioplasty. I’m referring of course to the hospitals that in general are paid a flat fee for each procedure, and are not being given extra money to cover the new and more expensive stents they are buying.

A new report out from the Society for Cardiovascular Angiography and Interventions makes very sobering reading for hospital executives in light of the demand from doctors and patients for the new drug-eluting stents.

“The authors found that the average hospital loss per initial DES patient was $1,389 when all sources of payment were considered, whereas BMS and CABG procedures generated $285 and $1,283 in profit respectively. As DES adoption increases and/or the average number of stents per procedure increases, hospital profits decrease. Profits may be maintained until the average number of DES (drug-eluting stents) per procedure reaches 1.8 and the conversion from BMS (metal stents) and CABG are over 80% and 15% respectively.”

You read that right. If the new stents become the standard, hospitals are going to find that if only 15% of CABGs and 80% of traditional stents go over to drug-eluting stents, they are going to find one of their major profit-centers turning into a loss-center.

Needles to say, this is not considered good news in the executive suites of the nation’s hospitals. But who are they to say that the latest and greatest technology should be denied to patients? And will the Congress help? Unlikely according to the other story I’m posting today.