What exactly, is the point of a laser or energy based device recertification fee?

What exactly, is the point of a recertification fee? Keep in mind that the device with a $50,000 recertification fee most likely did not cost $50,000 to manufacture, and this fee becomes even more confusing. The goal is to stop the initial owner from selling the device. By charging inequitable recertification fees, manufacturers can prevent the device from being resold into the secondary market.

It gets worse. Often, once the manufacturer gets wind of the potential sale (though a new buyer looking to verify the manufacturer’s recertification advantages), the manufacturer will lower the ASP by offering a “demo device” in order to win the sale.

What new buyers don’t realize is they actually pay the recertification fee through a being forced to a lower resale price when the go to sell or trade.

Ironically, the FDA created a regulation that states that anyone can and should be provided with (at the manufacturer’s cost) instructions for calibrating a laser and any safety procedures necessary for the calibration. (See 1040.10(h)(2)(ii), (h) Informal requirements, 2) Purchasing and servicing information. Manufacturers of laser products shall provide or cause to be provided.) Given this, it makes no sense that a $50,000 fee is passed on to the buyer. Nor is it justified to monolpize parts and service manuals and service education to the 2nd market.

These recertification fees reek of legal issues under antitrust and similar laws, and also under the contracts by which the purchasers thought they were obtaining a complete basket of ownership rights, including the right to re-sell the device without active interference from their own, well-compensated vendor.

Consider the below email from Zeltiq to a customer a pre-owned Zeltiq regarding recertification. I have endless examples this behavior from most of the major energy based device manufacturers. As you read exactly how does the sales rep and trainer recertify the device onsite at customer's location? Do they have all the testing equipment? Tools? Biomedical technician education? Parts? Service Manuals? Calibration procedures? When charging $30,000 then waving the fee in an hour the goal is not “patient safety.” The goal is to stop the initial owner from selling the device. (BTW, Zeltiq is not offering the program stated in the email in all US regions. The reps are making the decision to waive or not to waive. What happened to this being a corporate decision? How is any of this legit?)

From: <@zeltiq.com>

Date: June 23, 2017 at 9:37:28 PM EDT

To:

Cc: C <@zeltiq.com>

Subject: RE: recertification

Here is the most recent recertification agreement. Upon signature, C_____ will need to come onsite as I described in our meeting for approx. 1 hour to do a Preventative Maintenance Check on the system and any applicators you will continue to utilize. Once that is done, and with the below order, you will be under full warranty and be set-up as a CoolSculpting account. We will also send you a W-9 for co-op reimbursement, a Physician Locator form and information to get you set-up with Coolnet our online portal for clinical/business/marketing tools.

From: L <@zeltiq.com>

Sent: Friday, June 23, 2017 9:32 PM

To: '< >

Cc: C <@zeltiq.com>

Subject: recertification

Hello, per our conversations, we will waive the $30K recertification fee upon upgrading to our most recent technology. With the purchase of the below and upon execution of our Recertification Agreement, you will be a recognized CoolSculpting account and have our full support for training, marketing, etc. The following are the specifics: Applicators: · CoolAdvantage Applicator $8750 · CoolAdvantage Plus Applicator $8750 · CoolAdvantage Petite Applicator $8750 Cards: · CoolAdvantage cycle card $3600 · CoolAdvantage Plus cycle card $5200 · CoolAdvantage Petite card $3600 Total: $38,650 + Shipping/Tax I will send you our most recent Recertification Agreement for signature and this will set you up as an account in our systems and then we can process the above. Once both have occurred, C will reach out to you for next steps. Please let me know if you have any questions and we look forward to a very successful partnership with you!

Warm Regards, L Regional Practice Manager, ZELTIQ Aesthetics, Inc., an Allergan Affiliate www.coolsculpting.com <image001.jpg> <image002.jpg>

There Are Better Potential Policies

These manufacturers’ practices make no business sense, and a change would result in endless benefits for both them and their buyers. Their justifications are that it’s always been done this way, and that market fragmentation gives them an advantage over buyers to behave monolithically. Unless the manufacturers change, the future looks bleak for cosmetic clinics using laser, IPL, RF, and other energy-based devices. 

If the behavior of manufacturers of laser, IPL, RF, and other energy-based devices became comparable to other highly regarded brands (like Lexus, for example), the clinician would embrace -- rather than eventually begrudge -- the manufacturer’s brand. Also, the brand benefits driving gross revenues higher should be a far second in consideration to patient safety. Any person who purchased an automobile would want the right to resell it at a later date. And any person in the market to buy an automobile would try to buy something that maintains its value over time. 

The issue here is not only what the purchasers would “want,” it is what they actually bargained for, and are later cheated out of, and that is the right to use and dispose of the that they fairly purchased. Equipment that can be resold in the market will be easier to lease and easier to finance, and at a lower rate of interest. As the market matures and as demand diminishes then some manufacturers will modify their position to make their units more competitive in the market. This is a common trend. 

Whether it's aviation, automobiles, expensive medical imaging equipment, or even laboratory equipment, manufacturers have learned that a robust aftermarket creates sockets that can be filled with new equipment as pre-owned buyers become more successful. Furthermore, a policy allowing customers to resell their assets and buy new equipment rewards loyal customers rather than punishing them.