Medtronic Brings E-Commerce to Medical Device Industry

Medtronic, a $4+ billion (US$) provider of medical devices, has announced plans to invest a total of $330 million in two deals that are designed to take its cardiovascular and neurological stimulation devices into the world of e-commerce.

One deal is a partnership with IBM and Microsoft to develop online monitoring systems that will connect patients with chronic cardiovascular disease to “specialty care teams of physicians anywhere in the world, at any time,” according to the company. In the other deal, Medtronic will invest $100 million to become Healtheon/WebMD’s exclusive partner in areas where the company provides diagnostic and therapeutic devices and services.

Online Systems To Monitor Heart Patients

The company said its online monitoring systems are being developed as part of an initiative it calls its “Patient Management Business,” in which it expects to invest $230 million. The company will attempt to bring itself into the e-commerce arena by generating revenues from selling online information and monitoring services and systems.

Presently, the company’s revenues are derived from selling and servicing its stand-alone medical devices.

“We believe we can serve people with chronic disease and their physicians well by connecting them via the Internet to improve the quality of their lives while reducing the costs of their care,” said William W. George, Medtronic’s chairman and chief executive officer. “At the same time, Medtronic.com initiatives will establish new revenue streams from services provided by our management systems over the patients’ lifetimes.”

The company said that the new systems are being developed using Microsoft’s Windows 2000 client and server software, and that IBM will provide hardware design and development for the system.

Promotional Deal with Healtheon/WebMD

Medtronic’s second deal is part of a new trend in which branded companies are paying substantial sums to major e-commerce sites to become their exclusive partners in promoting specific product families.

For instance, Amazon.com announced earlier this week that it is receiving $187.5 million from Drugstore.com and Greenlight.com to have their products promoted exclusively to the giant e-tailer’s 16 million customers.

Medtronic is paying $50 million to Healtheon/WebMD to become the “exclusive medical technology online and offline media sponsor and advertising partner in the following disease categories in which Medtronic provides a wide range of diagnostic and therapeutic devices and services: cardiovascular disease, peripheral vascular disease, neurological and neuro surgical diseases and disorders, chronic pain, ear, nose and throat diseases and disorders, spinal diseases and disorders, and urologic diseases and disorders.”

In addition, Medtronic has also agreed to invest another $50 million in the development of WebMD Europe, a new venture formed between News Corp. and Healtheon.

After the announcement of the alliance with Healtheon/WebMD Corp., Minneapolis, Minnesota-based Medtronic’s stock was up $1.50 to $44.56 , while stock in the Atlanta, Georgia-based Healtheon rose $3.37 to $68.50.