Fridley-based Medtronic was ranked as America's 50th-best corporate citizen this week by Corporate Responsibility magazine. But just last year, the company settled a case with the United States government over allegations that doctors were paid kickbacks for using Medtronic devices.
Medtronic CEO Omar Ishrak took over company in June 2011. He spoke with Tom Crann of All Things Considered on Wednesday about business ethics, patient safety and the company's plans to expand internationally.
An edited transcript of that discussion is below.
Omar Ishrak: It's always difficult to draw a direct link between something like [the ranking] and what the investors are looking at in a day-to-day basis. But I can tell you that a company with good policies, with high integrity, with employees that are satisfied, there's a very high correlation between a company like that and good financial results. And to that degree, I think investors should be pleased to see a ranking like that.
Tom Crann: The medical device industry and Medtronic want a faster European-style approval process... on devices. When you look to Europe, they tend to get things to market quicker, but the FDA says European regulators have approved some unsafe or ineffective devices that wouldn't meet U.S... standards or FDA Standards. Does the FDA have a point?
Ishrak: I think if the FDA points to concrete examples, I'm sure they have their case. But the real point I'd like to make is that the most important thing Medtronic is focused on, above everything else, is patient safety. We've got to make sure that whatever therapies we release, in whatever time it takes, it's going to be safe and effective to the best of our knowledge.
Having said that, we'd like to work with the regulators to make the process as efficient as possible without ever compromising safety. And using collaboration and transparency of data, we think we can make significant improvements.
Crann: What do you think is a reasonable expectation for people, for patients, to expect when it comes to device safety?
Ishrak: I think the patients should expect it to be perfectly safe. And it should be the expectation and the goal of the company, which in almost all cases it is, to provide products which are completely safe. Now, having said that, there will be instances when unforeseen circumstances can lead to results where recalls are necessary. In a situation like that, there are a number of things that one has to do, first transparency with the customer base as to what's going on, as soon as you know it with any degree of reliability. And second, responsiveness, so without thinking about any other consideration, address the problem as quickly as you can in front of the patients and the customer. And the third thing that one must do is to make sure that one drills down enough to find out what was the root cause, and put policies in place, procedures in place, so that these issues do not resurface in future products.
Crann: You came into the company when it's... been a tough few years for the medical device industry: device problems, infighting, kickbacks to doctors. With all of that as the background, how do you begin to restore the trust for patients and physicians?
Ishrak: In that area, one has to be very clear, and we have been, making a clear statement about integrity, internally, externally. And living by it, integrity, honesty, transparency. I think those are fundamental values. And if you look at all your issues in that light, then the decision tree you follow to make certain calls is pretty straightforward and pretty rapid to tell you the truth.
Crann: Last year Medtronic and the federal government reached a settlement concerning accusations the company paid doctors, we're talking about kickbacks for implanting pacemakers defibrillators, other devices. Medtronic admitted to no wrongdoing. But once something like that happens it's one thing to say integrity, but what do you put in place to make sure that it doesn't happen again.
Ishrak: You put in place internal policies, which we then monitor, we monitor internally through business review. And then you monitor as well through having auditing groups in the company that go around and make sure that different business units in different parts of the company actually adhere to the policies. The other thing you've got to do is that you've just got to be very clear that any violation of a policy like that, there simply is no second chance.
Crann: You have three goals for the company that I've read about, and one of them is [to] accelerate globalization. And I'm wondering what your vision is for Medtronic to accelerate that growth globally and here in the U.S. too? And how important is that to the company?
Ishrak: I think it's pretty critical because if you look at markets across the world, there are huge opportunities. There are vastly more people outside the U.S. than in the U.S. To accelerate globalization we've done a number of things. First, we've segmented the task into three categories of populations. First, around the world are people who can actually afford our care and they're not getting our care. There are vast differences in certain countries, some kind of therapy may only be used five percent of the time when someone needs it and can afford it, while the same therapy in a developed market is probably used 80 or 90 percent of the time.
Fixing those issues by creating awareness in those markets, by developing infrastructure and proactively training doctors is one of our first priorities. Having done that, we then move into the second tier of the affordable population there, which will come over time. And we've got a cost reduction program in place where we'll tier our products and make our products more affordable to that level of population. And finally of the bottom of the period, which probably is 50 percent of the emerging markets, where access is critical, but one can probably not extend the conventional model. But new disruptive technologies as well as disruptive delivery models have to be created, with shifts in who delivers the care and how it's delivered, building equal systems around these, all have to be undertaken by us, as well as several partners.
But I think there's plenty of growth available just by addressing the segment that can afford the treatment and is simply not getting it. In fact, that opportunity alone is several billion dollars. If we systematically approach that, we can, I think quite confidently, structure a path to 20 percent-plus growth on a year-over-year basis in most of these emerging markets.
Crann: WIth this focus on accelerated globalization. Is there any reason for people in Minnesota to worry that Medtronic will be less of a factor, less of a presence here in Minnesota when it comes to jobs and innovation and all the things you do here versus doing it in other parts of the world where it may be cheaper and there may be more market advantage for you?
Ishrak: This is all about growth. And if you grow the company, it helps everyone. In fact, if we sell more products in different parts of the world, then Minnesota where the largest base of population is, will benefit from that. In addition, I think there's a fundamental skill set that's available in the United States and in Minnesota around engineering excellence. That's a leadership position that we have here and we intend to keep that. In my view, our focus on globalization will lead us to becoming a more successful, bigger company, which grows in a more reliable fashion. And that can only be better for our home, and that's in Minnesota.
Interview transcribed and edited by Jon Collins, MPR reporter.