July 14 (Bloomberg) -- The $155 billion health-care overhaul deal reached by hospitals and the Obama administration will reduce sales of medical-device makers, Johnson & Johnson’s Chief Financial Officer Dominic Caruso said in an interview.

Hospitals buy medical devices, including J&J’s artificial hips and stents to prop open clogged arteries, directly from the manufacturer, Caruso said today in an interview with Bloomberg News. The hospitals are reimbursed by government-run health plans for the cost of a procedure regardless of the price of the equipment, pressuring hospitals to cut purchases of the latest technologies, he said.

The accord was the second in less than a month where a medical industry agreed to cut into its revenue as Congress and the administration seek to contain the cost of a proposed U.S. health-care overhaul. The drug industry reached an $80 billion agreement last month. Caruso said he didn’t know whether there would be similar concessions from device makers.

“The deal that the hospital industry struck will obviously have an impact on the medical-device business,” Caruso said. “Medicare reimburses the hospital for a basket of costs related to a procedure, of which medical devices are included.”

J&J today reported profit that fell less than analysts estimated as sales of Listerine mouthwash and Neutrogena skin cleaners helped offset the loss of drug revenue to generic competition.

Bright Skin

J&J increased U.S. sales of consumer products by 0.8 percent, led by its skin care business, Caruso said.

“People are switching to cheaper store brands instead of the brand-name products, and the market over all for consumer products has slowed down,” Caruso said. “Skin care has done really well -- innovations that consumers like will continue to be appreciated.”

J&J, the world’s largest maker of health-care products, is cutting payroll, developing new drugs and buying companies to help reverse declining revenue after cheaper copies of the migraine treatment Topamax and the mood-stabilizer Risperdal entered the market.

J&J agreed to buy Cougar Biotechnology Inc. in May and a stake in Elan Corp. in July for about $1 billion each to add potential new drugs to treat prostate cancer and Alzheimer’s disease. J&J finished the quarter with $14.7 billion in cash and investments and $13.6 billion in debt, Caruso said today on a conference call.

“Just because we’ve done these two recently doesn’t slow us down at all,” Caruso said. “We’re still interested, and we’re always looking for areas that will add to our growth and shareholder value.”

J&J shares rose 51 cents, or 0.9 percent, to $58.23 at 4 p.m. in New York Stock Exchange composite trading. The stock has fallen 12 percent in the last year.

To contact the reporter on this story: Tom Randall in New York trandall6@bloomberg.net.

Last Updated: July 14, 2009 16:11 EDT