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Hospitals are taking on a surgical robot monopoly

Several hospitals have mounted a legal battle against the company that makes the da Vinci surgical robot, alleging its monopoly position forces hospitals to buy its maintenance services and replacement parts at inflated prices even though cheaper options exist.

Driving the news: In one allegation, a hospital says Intuitive Surgical remotely shut down a hospital's surgical robot "in the middle of a procedure" which forced the surgeon "to convert the procedure to open surgery with the patient on the operating table," after the hospital said it was considering a service contract with a third party.

The big picture: Intuitive Surgical makes the da Vinci surgical robot, and sells them to hospitals for anywhere from $500,000 to $2.5 million each.

  • But a majority of Intuitive Surgical's $4 billion of annual revenue comes from instruments, accessories, and service contracts that are needed to keep the robots operating.

Where things stand: Franciscan Health headquartered in Indiana, Valley Medical Center in Washington and Kaleida Health in New York filed class-action lawsuits. They claim Intuitive Surgical has a monopoly on minimally invasive surgical robots, which gives the company a "near-stranglehold" on the market for all the parts and services the robots need after hospitals buy them.

  • One lawsuit alleges hospitals cannot have their da Vinci robots serviced by third parties because Intuitive Surgical forces hospitals to sign "multi-year, exclusive servicing agreements" at rates that are much higher than other vendors'.
  • Hospitals also allege Intuitive Surgical forces them to buy new, costly instruments and attachments for their robots (called EndoWrists) after 10 uses, even if the parts are in good working condition. Intuitive Surgical launched a program last year that now allows 12-18 uses for some of its instruments.
  • Engineers at Intuitive Surgical have threatened hospitals they will turn the machines into "paperweights" if hospitals turn to outside vendors for repairs or new parts, the lawsuit alleges.
  • Intuitive Surgical has faced antitrust lawsuits from third-party repair and service companies since 2019, but these hospital class-action lawsuits are new.

A spokesperson said Intuitive Surgical will not comment on the lawsuits.

By the numbers: Intuitive Surgical has a market cap of $113 billion — higher than companies like CVS Health or Lockheed Martin — and its executives are among the highest-paid in health care.

  • Wall Street has loved Intuitive Surgical for years because of the company's competitive moat and the high profit margins that result.
  • Last year, while discussing a possible surgical robot competitor from Johnson & Johnson that remains years away from federal approval, bankers at SVB Leerink told investors this market "has essentially been a monopoly for da Vinci over the past two decades."

Zoom out: It's worth remembering there is no evidence robotic-assisted surgeries lead to better outcomes than traditional minimally invasive surgeries.

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