“It was not black and white,” he recounts. “It was all statistics and probabilities—not that we had had [a significant number] of failures. Plus, we had to consider the risk of people whose lives depend upon the device getting concerned and wanting to have it extracted, which could have a higher mortality risk than leaving it in.”
Ultimately, Hawkins, 55, opted to issue the product recall, in the process shrinking the company’s share of the implantable cardiac device market from approximately 53 percent to 47 percent. While Medtronic still hasn’t fully recovered from the move—its stock price languishes close to its 10-year low—he has no regrets. “It’s been tough and it cost the company, but we did the right thing,” says Hawkins.
Even before that setback, Medtronic faced its share of growth challenges. Known as a pioneer in healthcare technology, the company enjoyed leading positions in both cardiac rhythm disease management (pacemakers, implantable defibrillators and related products) and spinal and biologics (medical devices and bone growth substitutes), as well as strongholds in other markets, including cardiovascular, neuromodulation and diabetes. But it had reached a size—$12 billion at the time—and scale where the 15 percent top-line growth it was known for would be tougher to deliver, particularly at a time of slowing economies and pressure on healthcare costs.
“The challenge is what is the next act?” says Hawkins, who goes on to describe a plan for redefining both the company and the markets within which it plays. “Historically, we’ve been viewed as, let’s say, a pacemaker company or stent company. My goal is to be recognized as more than a device company—as a pioneer and innovator in chronic diseases like heart failure, diabetes or degenerative disc disease.”
As an example, Hawkins cites Medtronic’s Paradigm Veo pump, a new insulin pump that continuously monitors and displays a diabetic’s glucose levels so that diabetics can make appropriate adjustments, and will automatically halt insulin delivery when glucose levels are too low. The company now plans a monitoring patch that incorporates a radio capable of transmitting instructions for the pump to increase or decrease insulin delivery. “What’s unique about what we’re doing is the ability to provide people with a combination of tools, technology and information to help them better manage their diseases,” he says, adding that diabetes and neuromodulation are areas with “huge headroom.”
Accounting for $1.434 billion of Medtronic’s $14.599 billion fiscal year 2009 revenue, neuromodulation, or the use of deep brain stimulation to address chronic diseases, is a rapidly expanding field that offers great growth potential. Already, Medtronic’s neurostimulation systems and implantable drug delivery systems are used to treat chronic pain, common movement disorders such as Parkinson’s, and urologic and gastrointestinal disorders. “The next big area is in psychiatric disorders, such as treatment-resistant depression or obsessive compulsive disorder,” explains Hawkins. “We now know where those targets are in the brain and can put our tiny leads in, turn them on and bring the patient back to normal.”
Despite such advancements, a cloud looms on Medtronic’s horizon: the changes healthcare reform will bring. But Hawkins is undaunted. “We have got to go down this road of healthcare reform,” he says. “For 60 years this company has navigated incredible twists and turns. While I can’t suggest we’re not worried about what is happening, ultimately our mission is to make sure that anybody who needs what we do gets access to what we do. As long as we are successful in treating patients, we will be successful as a business.”