Discount vs. Refund

Discount vs. Refund

When it comes to the mountain of regulations a medical device company must comply with it’s no wonder these companies employ an army of lawyers. As one seasoned executive once noted these regulations are not clear cut and open to wide interpretation. Still this does not explain the growing displeasure with Medtronic (NYSE: MDT) and the $299 “discount”.

Just so we are perfectly clear this is NOT a discount – when a patient places an order for the 670G and that product ships they are charged $299. If the patient then completes a series of tasks within a 120 day period the entire $299 is supposed to be refunded. If the patient does not complete all the tasks or fails to do so in the 120-day time frame Medtronic retains the funds, whatever amount is not refunded.

By way of comparison a discount is when something originally cost $100, a discount of 20% would mean they pay only $80. We know this is a simple concept, simple unless you work at Medtronic and think that charging a customer then refunding them is a discount.

Listen we have no problem with Medtronic complying with regulations and we have no problem with them charging patients a $299 fee to upgrade. What we have a major problem with, what patients are having a major problem with is how this has been communicated. While we would not go so far and state this is a bait and switch marketing tactic as some patients have claimed. Nor do we believe that Medtronic did anything nefarious or illegal.

However, this situation illustrates several important points regarding Medtronic’s control of the insulin pump market and the impact this monopoly has on patients. The harsh truth here is that when you control 80% of a market, you can get away these “miscommunications.”

Let’s be honest many patients are anxious to get on the 670G and while upset they will likely bite the bullet. This is what happens when you have the only FDA approved closed loop system and the competition continues to collapse. We understand why these patients are upset as they believe Medtronic lied to them. They were told one thing and got another. They were told they would not have to pay anything to get the 670G, that they would essentially be getting two pumps for the price of one. That if they upgraded to the 630 they would receive the 670 for FREE when it became available.

Imagine the shock, surprise the horror when these people were told they had to PAY $299 to get the 670. That this FREE upgrade wasn’t FREE at all. Yes, they could get all of the $299 back after completing several tasks but they were still being CHARGED $299 upfront and would have to wait for refunds to be issued.

It’s equally true because of market dynamics Medtronic will not suffer financially from this situation they themselves created. Patients, physicians and CDE’s know that Tandem is on its last legs, they know that Animas is twisting in the wind and that Insulet (NASDAQ: PODD) isn’t close to having a closed loop system.

As we have noted in the past many patients, physicians and CDE’s see Medtronic as the evil empire and this latest “miscommunication” hasn’t helped the company dispel this feeling. Yet, these people also know they would rather have an empire that’s around than to deal with the rebels who may not be here tomorrow. We’ve said it before and we’ll say it again insulin pumps are life sustaining devices and patient support is critical. Think of how Tandem patients are going to feel when they find out that the company that supports their life sustaining device won’t be around to support it.

There is no question that Medtronic customers would like nothing better than to take the company out to the woodshed for a good whipping. These patients are tired of “miscommunications”, they are tired of being told one thing and then getting another. They don’t like waiting an hour to speak with customer service. They don’t like being told they will be called back and a call back never comes. They don’t like web sites that don’t work and charges that are pawned off as “discounts”.

This customer dissatisfaction is wide spread and very real no matter what the company believes. Now to be fair we do understand that this was a massive undertaking however we don’t understand is why this process was rushed. What’s the hurry here? Why open the floodgates when the system isn’t ready to handle the increased demand? This is what we have never understood. Medtronic owns this market. They have the latest whiz bang way cool toy. Their competition is in complete disarray.

Why the rush? Why wasn’t this thought all the way through?

Just so we are very clear here we understand that this was and is a Herculean undertaking. As we stated many times we did not expect this to be a smooth launch even if Medtronic did everything 100% correct. We also noted that insulin pump patients are the most demanding and can at time be difficult to deal with. Additionally, we feel for Medtronic employees who must deal with a mess they did not create. As so often happens in our wacky world the employees on the front lines those who deal with patients directly are left to deal with this situation they did not create. Yet it is these people who must take the heat from disgruntled and very upset patients.

Still at the end of the day what choice does the patient have? Sure, they could go elsewhere provided they are willing to pay thousands of dollars out of their own pocket. But even if they can afford the switch financially can they afford it physically, will their new company be around when they need them? The simple fact is Medtronic knows this, they know they can have these “miscommunications” and not be hurt where it counts, the bottom line. So, what if people view them as the evil empire, as long as that empire continues to make money.

This situation reminds us of when Momma Kliff used to give us medicine when we were kids stating emphatically “You’re going to take this medicine and I don’t care how bad it tastes.”

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