The Hospital That Buys by TenderNarrow moat

Johnson & Johnson (JNJ) — moat facet

Hospital buyers negotiate J&J's device prices down by about 19% in rebates, and Chinese tenders turn sales into auctions.

MedTech sells to a different customer: the hospital, and in many countries the government that funds it. These buyers negotiate prices, consolidate their purchasing and, in China, award volume by tender. MedTech accrued $6,446 million of rebates in 2025 against $5,955 million in 20241, about 19% of segment sales2.

MedTech rebate accruals and share of sales5,9552024 accruals ($M)6,4462025 accruals ($M)About 18.7% and 19.1% of segment sales; J&J Form 10-K FY2025
Rebates rising a little faster than device sales.

The tender is the sharpest version. The 2025 filing says volume-based procurement in China hurt advanced surgery across all platforms and negatively affected orthopaedics3. A tender turns a relationship sale into an auction in which the lowest qualifying bid wins the volume.

Consolidation is the slower version. The filing lists continued consolidation among healthcare providers among its pricing pressures4. A hospital system that buys for dozens of sites negotiates harder than a single hospital.

The advantage J&J holds is breadth. A hospital buying sutures, staplers, heart catheters, cataract lenses and orthopaedic implants can buy many of them from one company, and J&J's sales representatives are present in the operating room. That does not stop the price negotiation, but it makes J&J hard to remove entirely.

The customers are also consolidating their own purchasing through systems and group arrangements, which is why J&J's MedTech rebates rose 8.2% in 202556 while segment sales rose 6.1%7. A hospital system that negotiates for many sites can extract more than a single hospital, and it can switch suppliers across all of them at once.

MedTech's customers have more bargaining power than the medicines business's physicians, which is part of why MedTech earns 12.2% before tax against 36.9%8. MedTech rebates as a share of segment sales are the gauge; rising above 20% would mean hospital buyers are taking a larger share.

Moat trajectory: Holding steady

The rebate ratio edged up; China tendering continues.

The number that tests this moat
Reported
MedTech rebate accruals, 2025
$6,446M, about 19% of segment sales

Hospital buyers' share; above 20% would mean they are taking more.

Source: Johnson & Johnson Form 10-K, FY2025 ↗
References
  1. ReportedMedTech accrued $6,446 million of rebates in 2025 against $5,955 million in 2024, about 19% of segment sales.
    Johnson & Johnson Form 10-K for fiscal 2025 (year ended 28 December 2025) - Item 7 MD&A: rebate accrual tables, research and development, cost of products sold, debt and liquidity. — FY2025 · publ. 11 February 2026 · source ↗
  2. Moat Explorer calcMedTech accrued $6,446 million of rebates in 2025 against $5,955 million in 2024, about 19% of segment sales.
    Moat Explorer calculation from Johnson & Johnson's reported figures ($ millions unless stated). Darzalex royalty: 2,400 / 14,351 = 16.7%. Stelara 2023-2025: 10,858 - 6,078 = 4,780 lost; Tremfya 5,155 - 3,147 = 2,008 gained, 2,008 / 4,780 = 42%. Growth 2023-2025: Darzalex 14,351 - 9,744 = 4,607; Carvykti 1,887 - 500 = 1,387; Erleada 3,574 - 2,387 = 1,187; Spravato 1,696 - 689 = 1,007; five products 4,607 + 2,008 + 1,387 + 1,187 + 1,007 = 10,196. Myeloma medicines Q2 2026: 4,207 + 657 + 260 + 174 = 5,298; 5,298 / 25,310 = 20.9%. Simponi and Opsumit 2025: 2,668 + 2,325 = 4,993. Abiomed: 3,700 / 1,751 = 2.1 times; 1,751 x 1.171^5 = 3,850 by 2030. Shockwave: 12,600 / 1,146 = 11.0 times. Caplyta: 361 x 4 = 1,444 a year; 14,500 / 1,444 = 10.0 times. Acquisitions: 15,146 + 17,541 = 32,687. Goodwill and intangibles: 48,772 + 50,403 = 99,175; 99,175 / 199,210 = 49.8%. Free cash flow 2025: 24,530 - 4,832 = 19,698. Cash uses 2025: 12,381 + 5,953 + 17,541 = 35,875. Capex 4,832 / 94,193 = 5.1%. Surgery: 10,137 / 10,037 - 1 = 1.0%. Electrophysiology: 5,634 / 33,792 = 16.7%. MedTech share of sales: 33,792 / 94,193 = 35.9%; Innovative Medicine 60,401 / 94,193 = 64.1%. Segment income 2025: 22,266 + 4,113 = 26,379; Innovative Medicine 22,266 / 26,379 = 84.4%; MedTech 4,113 / 26,379 = 15.6%. Gross margin 63,937 / 94,193 = 67.9%. MedTech rebates: 6,446 / 33,792 = 19.1%; 5,955 / 31,857 = 18.7%. Return on identifiable assets: Innovative Medicine 22,266 / 78,057 = 28.5%; MedTech 4,113 / 86,482 = 4.8%. Cost of products sold / segment sales 2025: Innovative Medicine 15,646 / 60,401 = 25.9%; MedTech 14,549 / 33,792 = 43.1%. Q2 2026 segment margins: Innovative Medicine 6,249 / 16,384 = 38.1%; MedTech 1,177 / 8,926 = 13.2%. Growth 2023-2025: sales 94,193 / 85,159 - 1 = 10.6%; operating cash flow 24,530 / 22,791 - 1 = 7.6%; dividends 12,381 / 11,770 - 1 = 5.2%. Dividends per share 5.14 / 2.95 - 1 = 74%. Payout 2025: 12,381 / 26,804 = 46%; 12,381 / 26,215 = 47%; 12,381 / 19,698 = 63%. Diluted shares 2,429.4 / 2,812.9 - 1 = -13.6%; Kenvue exchange 190.96 / 2,674.0 = 7.1%. Firefly and Sail initial payments: 1,000 + 785 = 1,785. Consumer sales 2015-2022: (14,953 / 13,507)^(1/7) - 1 = 1.5% a year. Wholesalers: 21.8 + 15.5 + 11.1 = 48.4 (2025); 20.5 + 15.6 + 12.3 = 48.4 (2024); 18.2 + 15.1 + 14.2 = 47.5 (2023); largest 21.8 - 18.2 = 3.6 points. Innovative Medicine rebates: 56,819 / 60,401 = 94.1% (2025); 47,523 / 54,759 = 86.8% (2023); 56,819 / 47,523 - 1 = 19.6%; net sales 60,401 / 54,759 - 1 = 10.3%. Top three products: 15.0 + 6.5 + 5.5 = 27.0% of revenue. United States share: 53,752 / 94,193 = 57.1% (2025); 14,533 / 25,310 = 57.4% (Q2 2026). MedTech excluding orthopaedics: (33,792 - 9,258) / (31,857 - 9,158) - 1 = 8.1%. Talc: 5,500 / 76,000 claims = about $72,000 per claim; 5.5 - 3.7 = 1.8 billion. Valuation: 348.19 / 24.242 = 14.4 times (end-2024 market value over 2024 adjusted net earnings); 652.05 / 348.19 - 1 = 87%; 270.57 / 11.04 = 24.5 times; 11.04 / 10.79 - 1 = 2.3%; 277.91 / 270.57 - 1 = 2.7%. Innovative Medicine history: (60,401 / 31,430)^(1/10) - 1 = 6.8% a year; Pharmaceutical pre-tax margins 11,734 / 31,430 = 37.3% (2015), 12,827 / 33,464 = 38.3% (2016), 8,816 / 42,198 = 20.9% (2019); restated growth 52,563 / 51,680 - 1 = 1.7% (2022), 54,759 / 52,563 - 1 = 4.2% (2023), 56,964 / 54,759 - 1 = 4.0% (2024). Additional: 2015 mix 31,430 / 70,074 = 45%; dividend 5.36 / 11.04 = 49%; buybacks 4,253 / 5,953 = 71%; vision 5,468 / 33,792 = 16%; Innovative Medicine international 60,401 - 36,344 = 24,057 against 54,759 - 31,169 = 23,590 (2.0%); United States 36,344 / 31,169 - 1 = 16.6%; myeloma four-product growth 2023-2025 4,607 + 1,387 + (670 - 395) + (463 - 63) = 6,669 of oncology growth 25,380 - 17,661 = 7,719, 86%; Darzalex international 1,772 / 4,207 = 42%; equity gap 99,175 - 81,544 = 17,631; Abiomed 440 x 4 = 1,760; amortisation MedTech 0.5 / 1.3 = 38%; MedTech H1 2026 segment income 2,416 / 2,625 - 1 = -8.0%, SM&A 5,975 / 5,518 - 1 = 8.3%, R&D 1,492 / 1,324 - 1 = 12.7%, cost of products sold 7,438 / 6,964 - 1 = 6.8%, margins 2,416 / 17,562 = 13.8% and 2,625 / 16,561 = 15.9%; Innovative Medicine H1 2026 11,566 / 10,762 - 1 = 7.5%, 11,566 / 31,810 = 36.4%; dividends / operating cash flow 12,381 / 24,530 = 50%; receivables 17,178 - 14,842 = 2,336, inventories 14,191 - 12,444 = 1,747; Q2 2026 dividend 3,227 x 4 = 12,908, one cent x 4 x 2,408M shares = $96M; diluted shares 2,663.9 / 2,812.9 - 1 = -5.3%; MedTech United States 17,408 / 33,792 = 52%; international sales 94,193 - 53,752 = 40,441; oncology share of Innovative Medicine 25,380 / 60,401 = 42.0%; Darzalex sales increase 14,351 - 11,670 = 2,681, royalty increase 2,400 - 2,000 = 400, 400 / 2,681 = 15%; newer myeloma medicines Q2 2026 657 + 260 + 174 = 1,091, 1,091 / 4,207 = 26%; Shockwave international 67 / 335 = 20%; amortisation 2,492 x 2 = 4,984 a year, 4,984 / 26,215 = 19%; US long-lived assets 89,392 - 70,670 = 18,722; surgery international Q2 2026 1,559 / 2,653 = 59%; net interest 1,056 - 971 = 85; dividends per share 5.14 / 4.70 - 1 = 9.4%; MedTech rebates 6,446 / 5,955 - 1 = 8.2%; trailing sales 94,193 - 45,636 + 49,372 = 97,929; net earnings 26,804 - 16,536 + 10,769 = 21,037. MedTech history: (33,792 / 25,137)^(1/10) - 1 = 3.0% a year; Medical Devices 6,826 / 25,137 = 27.2% (2015), 5,392 / 26,592 = 20.3% (2017); restated 4,208 / 27,060 = 15.6% (2021), 4,447 / 27,427 = 16.2% (2022); growth 27,427 / 27,060 - 1 = 1.4% (2022), 30,400 / 27,427 - 1 = 10.8% (2023), 31,857 / 30,400 - 1 = 4.8% (2024) - segment margins, rebates, concentration and geography. — 2015-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in J&J's Forms 10-K, 10-Q, results releases and market data; operands shown in the source line.
  3. ReportedThe 2025 filing says volume-based procurement in China hurt advanced surgery across all platforms and negatively affected orthopaedics.
    Johnson & Johnson Form 10-K for fiscal 2025 (year ended 28 December 2025) - Item 7 MD&A: MedTech segment and franchise sales analysis. — FY2025 · publ. 11 February 2026 · source ↗
  4. ReportedThe filing lists continued consolidation among healthcare providers among its pricing pressures.
    Johnson & Johnson Form 10-K for fiscal 2025 (year ended 28 December 2025) - Item 7 MD&A: consolidated sales, volume and price, geography, the three wholesalers, rebate accruals, costs, R&D and liquidity. — FY2025 · publ. 11 February 2026 · source ↗
  5. ReportedThe customers are also consolidating their own purchasing through systems and group arrangements, which is why J&J's MedTech rebates rose 8.2% in 2025 while segment sales rose 6.1%.
    Johnson & Johnson Form 10-K for fiscal 2025 (year ended 28 December 2025) - Item 7 MD&A: rebate accrual tables, research and development, cost of products sold, debt and liquidity. — FY2025 · publ. 11 February 2026 · source ↗
  6. Moat Explorer calcThe customers are also consolidating their own purchasing through systems and group arrangements, which is why J&J's MedTech rebates rose 8.2% in 2025 while segment sales rose 6.1%.
    Moat Explorer calculation from Johnson & Johnson's reported figures ($ millions unless stated). Darzalex royalty: 2,400 / 14,351 = 16.7%. Stelara 2023-2025: 10,858 - 6,078 = 4,780 lost; Tremfya 5,155 - 3,147 = 2,008 gained, 2,008 / 4,780 = 42%. Growth 2023-2025: Darzalex 14,351 - 9,744 = 4,607; Carvykti 1,887 - 500 = 1,387; Erleada 3,574 - 2,387 = 1,187; Spravato 1,696 - 689 = 1,007; five products 4,607 + 2,008 + 1,387 + 1,187 + 1,007 = 10,196. Myeloma medicines Q2 2026: 4,207 + 657 + 260 + 174 = 5,298; 5,298 / 25,310 = 20.9%. Simponi and Opsumit 2025: 2,668 + 2,325 = 4,993. Abiomed: 3,700 / 1,751 = 2.1 times; 1,751 x 1.171^5 = 3,850 by 2030. Shockwave: 12,600 / 1,146 = 11.0 times. Caplyta: 361 x 4 = 1,444 a year; 14,500 / 1,444 = 10.0 times. Acquisitions: 15,146 + 17,541 = 32,687. Goodwill and intangibles: 48,772 + 50,403 = 99,175; 99,175 / 199,210 = 49.8%. Free cash flow 2025: 24,530 - 4,832 = 19,698. Cash uses 2025: 12,381 + 5,953 + 17,541 = 35,875. Capex 4,832 / 94,193 = 5.1%. Surgery: 10,137 / 10,037 - 1 = 1.0%. Electrophysiology: 5,634 / 33,792 = 16.7%. MedTech share of sales: 33,792 / 94,193 = 35.9%; Innovative Medicine 60,401 / 94,193 = 64.1%. Segment income 2025: 22,266 + 4,113 = 26,379; Innovative Medicine 22,266 / 26,379 = 84.4%; MedTech 4,113 / 26,379 = 15.6%. Gross margin 63,937 / 94,193 = 67.9%. MedTech rebates: 6,446 / 33,792 = 19.1%; 5,955 / 31,857 = 18.7%. Return on identifiable assets: Innovative Medicine 22,266 / 78,057 = 28.5%; MedTech 4,113 / 86,482 = 4.8%. Cost of products sold / segment sales 2025: Innovative Medicine 15,646 / 60,401 = 25.9%; MedTech 14,549 / 33,792 = 43.1%. Q2 2026 segment margins: Innovative Medicine 6,249 / 16,384 = 38.1%; MedTech 1,177 / 8,926 = 13.2%. Growth 2023-2025: sales 94,193 / 85,159 - 1 = 10.6%; operating cash flow 24,530 / 22,791 - 1 = 7.6%; dividends 12,381 / 11,770 - 1 = 5.2%. Dividends per share 5.14 / 2.95 - 1 = 74%. Payout 2025: 12,381 / 26,804 = 46%; 12,381 / 26,215 = 47%; 12,381 / 19,698 = 63%. Diluted shares 2,429.4 / 2,812.9 - 1 = -13.6%; Kenvue exchange 190.96 / 2,674.0 = 7.1%. Firefly and Sail initial payments: 1,000 + 785 = 1,785. Consumer sales 2015-2022: (14,953 / 13,507)^(1/7) - 1 = 1.5% a year. Wholesalers: 21.8 + 15.5 + 11.1 = 48.4 (2025); 20.5 + 15.6 + 12.3 = 48.4 (2024); 18.2 + 15.1 + 14.2 = 47.5 (2023); largest 21.8 - 18.2 = 3.6 points. Innovative Medicine rebates: 56,819 / 60,401 = 94.1% (2025); 47,523 / 54,759 = 86.8% (2023); 56,819 / 47,523 - 1 = 19.6%; net sales 60,401 / 54,759 - 1 = 10.3%. Top three products: 15.0 + 6.5 + 5.5 = 27.0% of revenue. United States share: 53,752 / 94,193 = 57.1% (2025); 14,533 / 25,310 = 57.4% (Q2 2026). MedTech excluding orthopaedics: (33,792 - 9,258) / (31,857 - 9,158) - 1 = 8.1%. Talc: 5,500 / 76,000 claims = about $72,000 per claim; 5.5 - 3.7 = 1.8 billion. Valuation: 348.19 / 24.242 = 14.4 times (end-2024 market value over 2024 adjusted net earnings); 652.05 / 348.19 - 1 = 87%; 270.57 / 11.04 = 24.5 times; 11.04 / 10.79 - 1 = 2.3%; 277.91 / 270.57 - 1 = 2.7%. Innovative Medicine history: (60,401 / 31,430)^(1/10) - 1 = 6.8% a year; Pharmaceutical pre-tax margins 11,734 / 31,430 = 37.3% (2015), 12,827 / 33,464 = 38.3% (2016), 8,816 / 42,198 = 20.9% (2019); restated growth 52,563 / 51,680 - 1 = 1.7% (2022), 54,759 / 52,563 - 1 = 4.2% (2023), 56,964 / 54,759 - 1 = 4.0% (2024). Additional: 2015 mix 31,430 / 70,074 = 45%; dividend 5.36 / 11.04 = 49%; buybacks 4,253 / 5,953 = 71%; vision 5,468 / 33,792 = 16%; Innovative Medicine international 60,401 - 36,344 = 24,057 against 54,759 - 31,169 = 23,590 (2.0%); United States 36,344 / 31,169 - 1 = 16.6%; myeloma four-product growth 2023-2025 4,607 + 1,387 + (670 - 395) + (463 - 63) = 6,669 of oncology growth 25,380 - 17,661 = 7,719, 86%; Darzalex international 1,772 / 4,207 = 42%; equity gap 99,175 - 81,544 = 17,631; Abiomed 440 x 4 = 1,760; amortisation MedTech 0.5 / 1.3 = 38%; MedTech H1 2026 segment income 2,416 / 2,625 - 1 = -8.0%, SM&A 5,975 / 5,518 - 1 = 8.3%, R&D 1,492 / 1,324 - 1 = 12.7%, cost of products sold 7,438 / 6,964 - 1 = 6.8%, margins 2,416 / 17,562 = 13.8% and 2,625 / 16,561 = 15.9%; Innovative Medicine H1 2026 11,566 / 10,762 - 1 = 7.5%, 11,566 / 31,810 = 36.4%; dividends / operating cash flow 12,381 / 24,530 = 50%; receivables 17,178 - 14,842 = 2,336, inventories 14,191 - 12,444 = 1,747; Q2 2026 dividend 3,227 x 4 = 12,908, one cent x 4 x 2,408M shares = $96M; diluted shares 2,663.9 / 2,812.9 - 1 = -5.3%; MedTech United States 17,408 / 33,792 = 52%; international sales 94,193 - 53,752 = 40,441; oncology share of Innovative Medicine 25,380 / 60,401 = 42.0%; Darzalex sales increase 14,351 - 11,670 = 2,681, royalty increase 2,400 - 2,000 = 400, 400 / 2,681 = 15%; newer myeloma medicines Q2 2026 657 + 260 + 174 = 1,091, 1,091 / 4,207 = 26%; Shockwave international 67 / 335 = 20%; amortisation 2,492 x 2 = 4,984 a year, 4,984 / 26,215 = 19%; US long-lived assets 89,392 - 70,670 = 18,722; surgery international Q2 2026 1,559 / 2,653 = 59%; net interest 1,056 - 971 = 85; dividends per share 5.14 / 4.70 - 1 = 9.4%; MedTech rebates 6,446 / 5,955 - 1 = 8.2%; trailing sales 94,193 - 45,636 + 49,372 = 97,929; net earnings 26,804 - 16,536 + 10,769 = 21,037. MedTech history: (33,792 / 25,137)^(1/10) - 1 = 3.0% a year; Medical Devices 6,826 / 25,137 = 27.2% (2015), 5,392 / 26,592 = 20.3% (2017); restated 4,208 / 27,060 = 15.6% (2021), 4,447 / 27,427 = 16.2% (2022); growth 27,427 / 27,060 - 1 = 1.4% (2022), 30,400 / 27,427 - 1 = 10.8% (2023), 31,857 / 30,400 - 1 = 4.8% (2024) - segment margins, rebates, concentration and geography. — 2015-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in J&J's Forms 10-K, 10-Q, results releases and market data; operands shown in the source line.
  7. ReportedThe customers are also consolidating their own purchasing through systems and group arrangements, which is why J&J's MedTech rebates rose 8.2% in 2025 while segment sales rose 6.1%.
    Johnson & Johnson Form 10-K for fiscal 2025 (year ended 28 December 2025) - Item 7 MD&A: rebate accrual tables, research and development, cost of products sold, debt and liquidity. — FY2025 · publ. 11 February 2026 · source ↗
  8. ReportedMedTech's customers have more bargaining power than the medicines business's physicians, which is part of why MedTech earns 12.2% before tax against 36.9%.
    Johnson & Johnson Form 10-K for fiscal 2025 (year ended 28 December 2025) - financial statements and notes: income statement, balance sheet, cash flows, equity, segment income, acquisitions and geographic assets. — FY2025 · publ. 11 February 2026 · source ↗
Sources
Generated September 24, 2026