Medical device innovators are adapting to new realities. Specialty distributors must do the same.
Providers have three big things on their mind:
- Cutting costs
- Improving patient outcomes
- Preventing disease
Specialty distributors must take their cue accordingly.
That was the message from Charlie Whelan, director of consulting, healthcare and life sciences, Frost & Sullivan, speaking at the recent 2015 IMDA Annual Conference and Manufacturers Forum in St. Louis, Mo. IMDA is the association for specialty distributors.
“The market is changing significantly,” said Whelan in his presentation, “What does the future hold for medical technology innovation?” Innovators must be prepared. And that innovation extends beyond offering new products; it also calls for adopting new approaches to one’s business and the market. Here’s why:
A recent Frost & Sullivan survey of hospital executives showed:
- Sixty-nine percent believe that within the next five years, the economic health of hospitals will hinge, more than ever before, on delivering improved clinical and financial outcomes.
- Forty-nine percent said they have to deliver better outcomes than they currently offer. “Nearly all hospitals are thinking, the status quo isn’t good enough,” said Whelan. “That’s great for innovators; you want to work with people who aren’t satisfied with the status quo.”
- Eighty-two percent believe that reimbursement for healthcare services is moving toward a capitated, bundled approach rather than fee-for-service. “When IMDA members evaluate new technology, think about that economic story. ‘How will it be paid for?’ ‘What is its economic value to the provider community?’”
Disappearing act
Technology is doing a “disappearing act,” said Whelan. That is to say, technology is “disappearing” in terms of its:
- In some cases, devices are being replaced by other modalities, such as biologics.
- Reimbursement pressures are increasing customers’ demands for lower prices from their suppliers.
- Hospitals are striving to be more efficient in labor and time. Devices that once were standalone (e.g., pulse oximeters) are now integrated with others.
- Business model. Some manufacturers are offering equipment to the user free of charge, in order to gain recurring sales of consumables or services.
- Today’s IDNs encompass not just the acute-care hospital, but primary care, subacute care, long-term care, etc. “You’re dealing with fewer, but more powerful, organizations,” Whelan said.
- Administrators are casting a skeptical eye on vendors’ claims about the uniqueness of their technologies. The challenge for IMDA members is to partner with manufacturers of devices that offer truly unique operational and/or clinical advantages.
New realities
The flip side of these challenges is opportunity, at least for medical device innovators who are willing to adapt to new realities, said Whelan. Examples:
- Today, suppliers and providers are concerned about how their technologies can help caregivers perform procedures safer and better. In the future, the key question might be, “How can our technology prevent or mitigate illness altogether?” “It’s a prevention-driven approach, with more of a focus on primary care.”
- In the past, providers and suppliers have paid much attention to technologies that can extend But more and more, the emphasis will be on improving the quality of life, he said. That means paying more attention to pain management, minimally invasive procedures, etc.
- Standalone devices have changed medical care, but in the future, more technologies will be geared toward integrated platforms. Devices that can interact with other devices, or, increasingly, with consumer technologies, such as smartphones and even automobiles, will be in demand.
- In the past, imaging devices were king. Today, cardiovascular, orthopedic and surgical tools are on top. But in the near future, technologies that support chronic disease management – including decision support tools, workflow optimization tools, information management tools, etc. – will reign.
Time for a new career?
Specialty distributors, such as those in IMDA, are well-positioned to succeed in tomorrow’s market, but they have to read the market dynamics and change accordingly, Whelan said. Opportunities include:
- Respiratory products, for patients suffering from asthma, obesity and sleep apnea or COPD.
- Products for the ED and pre-hospital market, as more medications, technologies and skills are being pushed into the field. There is also discussion about EMS playing a bigger role in primary care, including performing house calls.
- NICU products, as that market moves toward minimally invasive care models.
- New markets. Medical device manufacturers are targeting the home and subacute markets, and others are bringing new solutions or platforms into the hospital, such as connected solutions, and those targeting medication errors and infection prevention. IMDA members must ask themselves, “How can we make sure we are the ones representing these new products and services?” said Whelan.
“Don’t think innovation occurs only in an R&D lab or manufacturing facility,” he said. Business models are changing. “Moving forward, healthcare will be a services industry,” he said. IMDA members who adapt will thrive.
The downside…and the up
Specialty distributors planning for the future should recognize the downside of the market as well as the upside, said Charlie Whelan, director of consulting, healthcare and life sciences, Frost & Sullivan, at the 2015 IMDA Annual Conference and Manufacturers Forum.
Downside:
- Price will matter more than ever. Creative contracting and negotiation will be key. Explore fee-for-value, leasing and other innovative business models.
- Commoditization of devices in many markets means less need for support.
- Providers are consolidating and increasingly locking out reps.
- Industry consolidation could mean bigger bags but fewer accounts.
- OEMs are under pressure to retain more margin and likely to increasingly favor direct sales. They will negotiate harder for more margin, more commitments and more support.
- Less decision-making is occurring at the clinician and departmental level for new purchases and evaluation. Specialty distributors must be able to sell to administrators with an economic
Upside:
- Healthcare is a service industry, not a technology industry. Customers want solutions and your skills, not just products. Technical and clinical expertise matter. Expand your value proposition, just as your OEM partners are doing.
- Education and training continue to matter for lower-skilled, high-turnover users in complex markets (nurses, technicians, allied health professionals, etc.).
- Costs and labor-savings are driving motivators, but quality will pay.
- Find ways to monetize services and knowledge given away for free today – consulting, servicing, training, secondary sales, etc.
- Expand relationships and networks beyond hospitals. Follow the patients and follow the money – subacute, primary and home care.
- Partnerships and co-promotion will matter more than ever in an increasingly competitive market.