New report on medtech industry's global performance

EY has released its annual medical technology report for 2014 - 'Pulse of the industry: differentiating differently'.

The global medtech industry’s financial performance held steady at the relatively low levels of growth witnessed in the last several years. However, the industry faces a growing threat of commoditisation, with purchasing decisions becoming increasingly centralised and influence shifting from physicians to hospital administrators and managers. To overcome this, firms will need to demonstrate their contributions to value and outcomes.

EY surveyed US and European healthcare buyers in four major medtech markets - the US, the UK, Germany and Spain - with the results demonstrating both the risk of commoditisation and the need to differentiate products based on value and outcomes:

• Price by far remains the top factor in medical technology decisions, with 77% of respondents selecting it as a top concern today and in the near future.
• Respondents expect simple cost-cutting measures to become relatively less important, while healthcare reform initiatives focused on value and outcomes will become more important. Among six pressure points provided to respondents, these value and outcomes measures saw the largest increase, jumping 13% between today and three years from now.
• Practising physicians are expected to become significantly less influential in purchasing decisions over the next three years, on par with finance and procurement departments. When asked to select the three most important factors in medical device purchasing decisions today compared to three years from now, ‘Physician preference for a specific device’ dropped from 55 to 27% while ‘user-friendly design’ dropped from 32 to 22%.
• Measures that target value and outcomes will become significantly more important influencers of purchasing decisions. ‘Data demonstrating clinical outcomes’ was selected as the top purchasing decision factor by 51% of respondents today and by 62% in three years’ time, while risk sharing agreements jumped from 6 to 25% over the three-year period.

To avoid commoditisation, firms need to be squarely focused on demonstrating the contribution their products make to improving patient outcomes and lowering costs. Strategies for organisations to consider include:

1. Achieve superior outcomes via technological advances

While it has become difficult to improve on existing devices in certain therapeutic areas, there are still greenfield areas where new product R&D can catalyse a new standard of care.

2. Increase scope through services and solutions

Medtech companies need to move their services beyond simple transactions to ones focused on improved patient outcomes. Medtech companies must also be willing to manage and support the service well beyond the life of the individual product while being agnostic about where the technology originated.

3. Increase scope by adding product offerings (within a disease area or across multiple disease areas)

By having a suite of offerings designed to address the continuum of care in a given disease area, medtechs can assist provider groups in meeting care metrics required for reimbursement. They can also help simplify the contracting complexity facing healthcare buyers. Based on the deal activity in 2013-2014, one question to keep in mind is: “Is product depth in one disease area sufficient to change conversations with medtech purchasers - or do companies need scale across multiple disease areas?”

4. Take costs out of the healthcare system

Medtechs can go on the offensive in the face of commoditisation by offering products or technologies that provide better value because they remove costs from the system. Removing costs from the system can be accomplished by reducing the cost of production, such as a) engineering simpler, lower-tech devices or manufacturing products more cheaply, or b) developing products that result in credible cost offsets that reduce the total cost of care.

The full report can be found here.