Downward pricing: How low can it go?

Tuesday, January 31, 2006

YARMOUTH, Maine - Jack Evans has followed pricing trends at mass retailers for years, and he's startled by the latest lowering of the limbo bar with regard to rollators. Others wonder what products will absorb a similar hit.
The president of Global Media Marketing in Malibu, Calif., found that the Hugo rollator, which sold for $149 at Wal-Mart when it was introduced, now sells for $95. Nova Ortho-Med's Cruiser Deluxe product dropped to a sale price of $179 and then to $149, while Medline's rival slid to below $100. Typically, mass retailers don't offer much selection. Wal-Mart sells a few brands, not many, but that isn't bothering shoppers.
"I always believed retailers needed to display selection such as good/better/best, but now location is outselling this selection," said Evans.
Rollators are one thing. Concentrators and CPAP are something else. But the implications of the Congressional desire to cap concentrators suggest that legislators believe a concentrator is a concentrator is a concentrator. That scares suppliers who wonder where the buck stops--if it stops.
At $300 per wheelchair or $200 for a rollator, consumers might mull the features, but at $150 for a chair or $95 for a rollator, it's much more a matter of cash-and-carry. So where does the buck stop?
"Their business model has to be built on those products where they have the greater value added," said Invacare's Lou Slangen, senior vice president of worldwide market development. "Where there's a clinical component in respiratory and rehab, where there's a clear value added with the service, that's where they have a clear advantage and can distinguish themselves. A mass retailer can't do that."
HMEs might argue that they add value by helping pick out the most appropriate rollator. But they may not get to make that argument--not in the face of a $95 rollator.
"Placement is beating out selection," said Evans.
Just ask the guy whose DME was pushing a low-end CPAP for $1,250. He checked on-line and found the same unit for sale at $330.
"Something is happening here," he wrote in a recent letter to the editor, "either the insurance companies are lazy or they don't care about the price, and the cost is just passed along to the premium payer."
This kind of price-as-bottom-line frustrates industry providers. While they see themselves as healthcare providers, consumers see them peddlers of product. The same could be said of certain members of Congress.
"We need to move away from the perceived value of HMEs towards something that is much higher in terms of patient care -- standards -- and bench marking to prove outcomes that make economic sense," said Ron Richard, senior vice president of strategic marketing initiatives at ResMed.
The price wars don't surprise Richard. The industry's maturing. Vendors are competing ruthlessly. This is what happens. That's evolution.
Still, he doesn't believe oxygen or CPAP or nebulizers can be relegated to the cash-and-carry status that now plagues rollators. But that's what's happening. And it may be, say some, that only a major PR campaign to boost the HME supplier's image can turn it around.