Medtronic’s CEO Made a Ton of Money Last Year

Posted in Medical Device Business by Chris Newmarker on July 27, 2015

Much of Omar Ishrak’s $39.5 million in compensation was related to Medtronic’s $48 billion merger with Covidien.

Medtronic Omar Ishrak
Medtronic CEO Omar Ishrak

Chris Newmarker

Total compensation for Medtronic CEO Omar Ishrak skyrocketed to a whopping $39.5 million for the company’s fiscal year ended April 24, according to Medtronic’s recently filed proxy statement with the SEC.

The $39.5 million amount would make him one of the highest paid CEOs in the medical device industry. About $25.6 million of the compensation, though, was mostly to help Ishrak pay for the special U.S. excise taxes he and other top Medtronic executives personally owed after the January closing of Medtronic’s $48 billion acquisition of Covidien. (Here’s a timeline of the deal.)

Such excise taxes came on top of capital gains taxes that Ishrak and all other existing Medtronic shareholders owed after the deal had them swapping the old Medtronic stock for stock in the new Medtronic plc, said Medtronic spokesman Fernando Vivanco.

“They also have to pay their capital gains tax like every other shareholder does,” Vivanco said of the senior leadership.

The acquisition allowed Medtronic to move its official headquarters from Minnesota to Ireland, saving money on U.S. taxes over the long-term. Many companies involved in such inversion deals have justified tax reimbursements to top executives because the excise taxes would otherwise penalize the executives for pursuing a strategy that financially benefitted the company.

Medtronic says in its proxy statement: “The payments are required to neutralize the effect of the excise tax so that [named executive officers] were neither harmed by, nor benefited from, the transaction.”

That didn’t stop long-time shareholders, including some among the companies’ earliest employees, from giving Ishrak an earful during the company’s annual meeting in August 2014. Ishrak responded that he understood the shareholders’ pain over the capital gains taxes they needed to pay. A shareholder lawsuit was filed in federal court over the compensation plan, but a U.S. District Judge in Minnesota declined to issue an injunction in December, according to the Star Tribune of Minneapolis.

Ishrak’s $39.5 million in total compensation handily exceeded what most other top medtech CEOs received in their company’s most recent fiscal years. That included $25.0 million for Johnson & Johnson CEO Alex Gorsky, $9.1 million for Stryker CEO Kevin Lobo, $10.5 million for Boston Scientific CEO Michael Mahoney, and $10.2 million for St. Jude Medical CEO Daniel Starks.

Total compensation for Ishrak was $9 million for the 2013 fiscal year and $12 million for the 2014 fiscal year.

Ishrak’s salary rose slightly to $1.5 million in 2015. The salary was more in line with Ishrak’s peers such as Gorsky ($1.5 million), Lobo ($1.1 million), Mahoney ($921,302), and Starks ($1.1 million).

For fiscal year 2015, Ishrak also received nearly $3.5 million in stock awards, $3.1 million in option awards, $5.6 million in non-equity incentive plan compensation, and $192,470 in changes to the value of his pension.

Ishrak is often cited as a top CEO in the medical device industry. Qmed readers picked him as best medtech CEO in a survey last month.

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Boston Scientific AngioJet – No Options Besides Manufacturer Service

I received an email from a BMET asking for assistance finding a service manual for a Boston Scientific (formerly Bayer / Medrad) AngioJet Ultra Perhipheral Thromectomy System.  (See the unit HERE.)  I decided to call the company directly to see what they had to say.

According to Tech Support at Boston Scientific, They do not have a service manual for the AngioJet. Upon further discussion, they did admit that they have manuals, but that they are proprietary and are restricted to use by their internal employees.   They maintain that the hospital does have options for service. These options consist of either time and materials or a service contract.

The individual I spoke with tried to tell me that this is very common, and that most medical equipment manufacturers do not provide manuals. Even GE does not provide service manuals for ultrasound machines.   I corrected him.   But he did not sway at all.

I recommend that complete service manuals be made a part of the purchase conditions of every medical equipment purchase, and that the manufacturer’s warranty (both parts and labor) be extended until both service manuals and technical training are provided to hospital-designated staff.

Boston Scientific Technical Division can be reached at 1-800-949-6708.

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Will Hill-Rom Ruin Welch Allyn when they Buy them?

Note from Pat:
I love Welch Allyn and hate to see them on the brink of destruction.  Hill Rom is a dominant bed company.  They have proven to me that they cannot effectively manage companies in the greater healthcare arena.  They ruined MediqPRN.  Their acquisition of WatchChild was an unmitigated disaster.  I firmly believe that they will continue their pattern and make decisions that will cause much of Welch Allyn’s brain-trust to flee and their customer base to jump ship for more stable companies, is spite of the awesome technological releases of late.  My opinion only.   Pat

Hill-Rom to acquire Welch Allyn in $2 billion deal

(Story updated at 10:35 a.m. ET)

Hill-Rom, a Chicago-based medical equipment manufacturer, has announced it will acquire Welch Allyn, a Skaneateles Falls, N.Y.-based manufacturer of diagnostic and patient-monitoring equipment.

The $2.05 billion deal is expected to diversify publicly owned Hill-Rom’s portfolio, expand its international footprint and allow the capital equipment supplier to gain more revenue outside of the capital spending cycle. Welch Allyn, a family-owned company, has a leading presence in physicians’ offices, an area that will be important for Hill-Rom as more care shifts to outpatient settings.

The deal is expected to close before Sept. 30. Hill-Rom CEO John Greisch will serve as president and CEO of the combined company and certain members of Welch Allyn’s senior management will join the new, combined company.

The combined company is expected to be worth about $2.6 billion in revenue and be over 10% accretive to Hill-Rom’s fiscal 2016 adjusted earnings per share, and meaningfully higher thereafter, officials said. The company reaffirmed its guidance for the third quarter and fiscal 2015, expecting revenue growth of 13% to 15% in the quarter and 10% to 11% for the year.

Hill-Rom stock opened Wednesday at roughly $55.09 a share following the news, up $2.71, or 5%, from the closing price on Tuesday.

Annual cost synergies of at least $40 million are expected to come from the deal by fiscal 2018, with additional revenue synergy opportunities, Hill-Rom executives said. The company is expected to have roughly $110 million to $120 million in full-year ongoing capital expenditures.

Much of Hill-Rom’s revenues are tied to hospitals’ long-term capital-spending cycle for products such as beds, patient-handling equipment, furniture and stretchers. The life cycle for Welch Allyn’s products—such as thermometers, blood pressure cuffs and other point-of-care diagnostic equipment—is much shorter and is therefore expected to provide the combined company with a more steady revenue stream.

Welch Allyn will make up about 26% of the company’s pro forma revenue, which, combined with Hill-Rom’s existing surgical equipment and rental revenue streams, should provide the company with steady cash flow, Greisch said during a conference call. Acute-care capital equipment will still account for 31% of the combined company’s revenue.

Geographically, Welch Allyn has presence in Hill-Rom’s strongholds of France and Germany, as well as the U.K., but otherwise has limited international infrastructure, Greisch said. Hill-Rom believes it can accelerate international growth for Welch Allyn’s products; the combined company is expected to earn about 63% of its revenue from North America, 21% from Europe and 16% from emerging markets and other regions.

Adam Rubenfire

Adam Rubenfire covers breaking healthcare news and supply chain for Modern Healthcare. His beat responsibilities include capital equipment, group purchasing organizations, food service and general medical supplies. His work has appeared in the Wall Street Journal, Automotive News and Crain’s Detroit Business. He has a bachelor’s degree in organizational studies from the University of Michigan. He joined Modern Healthcare in 2014.

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Adding a New Category

Last week, I attended the AAMI annual Meeting in Denver Colorado.  While there, I was discussing this website with various people.  The idea came up that in addition to exposing the Dirt in the HTM field, we should highlight the good companies.  So as of today, I am adding a new category – GOLDEN NUGGETS.  This tag will be assigned to any post that highlights a company that exemplifies good policies and practices relative to taking care of their customers.  Please submit your GOLDEN NUGGETS.

Pat

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Which Companies Don’t Want To Share Service Manuals?

By Patrick Lynch

One of my favorite websites is Frank’s Hospital Workshop. It is chocked full of videos and written material that covers the scope of medical equipment. The material ranges from educational offerings, operator’s manuals, service manuals and some do-it-yourself test equipment. But what I want to focus on are the service manuals. Frank has a pretty good selection, but I notice that many of them are not downloadable and bear the message “Download prohibited by name of company.”

I decided to go through Frank’s entire service manual library and record the names of all of the manufacturers who will not share their manuals. What you decide to do with this information is your own business. This is what I found:

tables 1 Patrick Lynch

tables 2 Patrick Lynch

– See more at:

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Siemens Pays $5.9M to Settle Overcharging Claim

Siemens pays $5.9 million to settle claims it overcharged U.S. government for imaging equipment

May 15, 2015
by Lauren Dubinsky , Staff Writer
Siemens Medical Solutions USA, Inc. has agreed to pay a $5.9 million settlement to resolve allegations that it overcharged the U.S. government for medical imaging equipment.Between February 2002 and December 2008, the U.S. Department of Defense (DoD) and the Defense Supply Center of Philadelphia (DSCP) entered into an agreement with Siemens called the DSCP Contract. Through that contract, those organizations — as well as the U.S. Department of Veteran Affairs (VA) — purchased medical imaging equipment and support products.

Our primary focus is International wholesale distribution of Pre-owned Medical Equipment. We specialize in Respiratory Equipment, primarily adult and infant ventilators. All major OEMs supported. Call 703-589-0369.

The government is claiming that Siemens did not provide the DoD with the largest discount for certain purchases under the contract. Instead, it alleges that Siemens gave the biggest discount to a private or commercial customer that purchased a similar product.

The government also states that Siemens withheld information about overcharging. According to a statement from the DoD, when the overcharging was initially revealed, Siemens “issued mass discounts on multiple occasions to address the mis-billing on a prospective basis,” but that only further concealed it from the government.

The VA was also overcharged for certain orders made under the contract that had been converted to a newer model, according to the government’s claim. Some of the orders did not receive the larger discount that pertained to the newer model.

Despite paying the settlement, Siemens “denies any wrongdoing,” says Lance Longwell, director of corporate communications at Siemens. He told DOTmed News in a statement that the company made the payment to prevent further expenses and distractions.

Longwell also stated that Siemens has improved its processes for monitoring government compliance over the years and continues in its unwavering commitment to its customers, “including important government customers, and adherence to all applicable laws and regulations.”

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10 Corporations that are not paying their fair share (includes GE)

Bernie-Sanders-Corporate-Tax-4001

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May 12, 2015 · 2:09 pm