Becton Dickinson & Company: VACUTAINER Systems Division

Nina Cowley

Zach Evans

Sean Zemek

The Beginning

• Maxwell W. Becton and Fairleigh S. Dickinson met on a sales trip in 1897. Months later, they decided to go into business together, sealing their partnership with a handshake. They named their medical device import company Becton, Dickinson and Company.

Product Breakdown• Becton Dickinson (BD) manufactured:

– Medical– Diagnostic– Industrial safety products

• For:– Health care professionals– Medical research institutions– Medical industry– General public

Business Segments

L a b ora to ry In d u stria l S a fe ty M e d ica l P rod u c ts

B e c ton D ick in sonB u s ine ss S e g m e n ts

Medical Products Division

N e e d le s , syrin g es a ndd ia be tic p ro du c ts

P h a rm a ceu tica lsys te m s

V A C U T A IN E R b lo odco lle c tio n sys te m s

B e c ton D ick in sonM e d ica l P ro d uc ts S e g m e nt

Becton Dickinson VACUTAINER Systems (BDVS)

• Formed as a business unit in 1980• Consisted of three main products

– Venous blood collection tubes and needles sold under the VACUTAINER name (70% of sales)

– Capillary blood collection tubes and lancets sold under the MICROTAINER name

– Microbiology tubes and specimen collector systems

BDVS Segment Facts

• 1984 sales were $90 million

• Each product group accounted for 33% of operating income

• Pioneer in converting market to evacuated tubes

• Estimated 80% market share in U.S.

Market Trends• 7,000 hospitals performed 70% of all blood tests in

1985• 700 commercial labs performed 25% of all blood

tests• 5% of all blood tests performed in non-hospital

health care centers• Market had seen a decline in hospital blood testing

between 1983 & 1985• Projected that by 1990, 40% of blood testing would

be done in commercial labs and physician offices

Market Trends (cont.)

• Shifting purchasing patterns– Chief lab technician historically asked for

certain brands– Professional purchasing agents are now

making decisions– VERY price sensitive

Market Trends (cont.)

• Cost-containment pressures in health care markets have forced:– Reduction in use of hospitals for blood

testing– Continued cost shaving within facilities by

often choosing lowest-cost supplier– Reduction in employment within healthcare

industries

BDVS & APG• BDVS is main supplier of blood

collection products to APG-member hospitals

• APG has announced beginning of single-supplier purchasing for blood collection products

• APG is negotiating with BDVS as well as competitors

BDVS & APG (cont.)

• Major issues are:– Pricing and terms for BDVS’ major

products– Use of distributors– APG’s request for BDVS to manufacture

private-label products

What is the problem?

• What is the best price and distribution strategy for BDVS in a market that is experiencing such dramatic changes?

What are the alternatives?• Target the growing physician market

that includes surgicenters, emergency centers, diagnostic centers, and physician's offices

• Accelerate new product development and quality standards while maintaining the current distribution model

• Reject APG’s private label, pricing and distributor affiliation requirements

• Partner (or merge) with APG

Target Growing Markets

Pros

• Untapped market, high growth potential

• Potential for new product introductions

Cons• Lower

prices/margins, compete on price

• Currently only 5% of entire market

• Different type of sales approach

Product Development/QualityPros• Market/product

innovator• Maintain good

distributor relationships

• Premium pricing for higher quality

Cons

• High R&D costs

• Increased risk associated with new products

Reject APG’s Requirements

Pros

• Maintain brand identity/awareness

• Maintain good distributor relationships

• Maintain control

Cons• Loss of significant

market share & revenues

• “Inflexible” image to other purchasing groups

Partner with APGPros• Maintain significant

source of market share & revenues

• Economies of scale through higher volume

• “Flexible” image• Potential for

inclusion of additional products

Cons• Low price/margins• Loss of control• Strained distributor

relationships• Same concessions

demanded by other purchasing groups

Becton Dickinson Today• 2002 Revenue: $4,033,069,000• 2002 Net Income: $479,982,000• Generates close to 50 percent of

revenue outside of the U.S.• Marketed in the U.S. through

distributors and directly to end users• Marketed in the internationally through

distributors, sales reps and, in some markets, directly to end users

Becton Dickinson Today (cont.)• BD manufactures and sells:

– Medical supplies– Devices– Laboratory equipment– Diagnostic products.

• BD serves:– Healthcare institutions– Life science researchers– Clinical laboratories– Industry– General public

Becton Dickinson Today (cont.)

• Company is broken down into three main business segments:– BD Biosciences– BD Diagnostics (the VACUTAINER line is a

part of this segment)– BD Medical

VACUTAINER Systems Today

• VACUTAINER product line broken into five subcategories:– Venous Collection– Capillary Collection– Urine Collection– Critical Care Collection– Molecular Diagnostics

The end.