In medtech's new normal, companies will need to rethink what they sell, how they sell and even how they develop those offerings in the first place.
Success in the medtech industry has always hinged on the ability to innovate. However, the industry faces new risks from an increasingly diverse range of sources. Learn more.
The new normal: Innovation at risk
It is now becoming increasingly clear that medtech, like other parts of life sciences, is facing a new normal. This is an environment where companies face a confluence of risks and challenges: heightened regulatory scrutiny and payer pressure, a fundamentally different funding climate and a rapidly changing customer base.
The rich get richer?
Large companies' share of total capital raised has grown dramatically
Source: EY, Capital IQ, Dow Jones VentureSource and Windhover
Chart shows capital raised by US and European companies. “Commercial leaders” are defined as companies with revenues in excess of US$1 billion.
Distribution of US and European venture investment by round, 2005-H1 2011
Source: EY, Dow Jones VentureSource
The next new normal: demonstrating health outcomes
The medtech industry is challenged by the lack of sustainability of the global health care system. This has led policymakers, payers and regulators to rein in costs and realign incentives around improvements in health outcomes.
As a result, a company's success or failure in the medtech industry of the future will not be based simply on how many products they sell but on their ability to demonstrate how they are improving health outcomes.
Companies need to adapt to a fundamental shift taking place in health care whereby previously passive patients will become engaged and empowered "superconsumers" to whom companies will increasingly need to target their offerings rather than simply focusing to physicians.
The path forward: business model innovation
An outcomes-focused ecosystem will require medtech companies to fundamentally reinvent core parts of their business model, including what they sell, how they sell it, and how they develop these new offerings.
Key challenges and opportunities as part of this business model reinvention highlighted in the report include:
- The offer. Given the increasing payer demands in the new ecosystem, companies will need to capitalize on new revenue sources beyond just their products.
- Sales and marketing. As sales decisions increasingly shift to hospitals and patients, companies will need to revamp the sales and marketing end of their business model.
- R&D. Innovation in medtech has historically taken place at the bedside, with physicians providing feedback on how to improve the next generation of products. With new sunshine laws that could potentially curtail this process, companies will need to better capitalize on opportunities to mine new product ideas from more widely distributed information networks that will be part of the health care ecosystem of tomorrow.
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