Smith & Nephew's new sales model to lower costs: Is it sustainable?

Smith & Nephew announced a new sales model, called Syncera, geared toward hospitals to lower prices on hip and knee implants, according to a Health Point Capital report.

Syncera includes two Smith & Nephew primary hip and knee implants and hospitals that decide to bite will sign a multiyear contract with discount rates of around one-third the initial price. The implants included in the deal are the Genesis II Knee and the Synergy hip stem and reflection cap.

According to the report, these two products could be used in 80 percent of all hip and knee procedures performed in the country. But these price cuts don't mean there won't be any operating room service; the program still includes operating room technical support and supplemental technology to streamline supply chain. Syncera will result in dilution for Smith & Nephew to begin, but the company expects to maintain margins current margins in the long run.

Time will tell whether the Syncera model prospers or flounders squished between bare-bones implant companies employing a "rep-less" model for cost-savings nipping at their heels and larger companies able to adapt and diversify offerings without changing their sales models.

If all goes well, the company projects Syncera could generate 40 percent to 50 percent overall cost savings for customers. This is an alternative option for hospitals who are unable to afford the implants at their current, full-service offering.

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