Medtech industry proves Obama’s comment about Americans being hardest working people

productivity, labor

After Republican Presidential nominee Mitt Romney made his now infamous, closed-door comment about 47 percent of Americans who do not pay federal income tax, President Obama appeared at a town-hall style interview organized by Univision and provided a counter point.

The “American people are the hardest-working people there are,” Obama declared.

The line may have been part of a political attack, but a new report from PricewaterhouseCoopers that examined the operational performance of the med tech industry from 2005 to 2011, proves that Obama was dead-on, at the least when it comes to medical technology workers.


Consider the facts:

The sector has seen the ground shift beneath its feet as healthcare reform and the emphasis on managing rising costs have raised questions about whether medical technology is overused; there is now a greater emphasis on showing not only clinical efficacy but economic value of new products; the recession has led to fewer medical procedures, while the future looks uncertain at best, especially given the medical devize tax looming in 2013.

Despite these headwinds, between 2005 and 2011, the period of the PwC report, there was an average annual increase of 8 percent in labor productivity, defined as a ratio of annual revenue and total number of employees.

“Hardest working and most efficient” would have been a more accurate portrayal by Obama, given that the report found that over that seven-year period, operating profitability in the medtech sector increased at an annual average rate of 2 percent even as average annual revenue growth rate fell 12 percent.

“This suggests that Medtech companies are working to manage costs and continuing to become more efficient,” the report said.

When it comes to operating performance, the in vitro diagnostics segment  – ther report defines this group as “products used to diagnose or monitor medical conditions via non-imaging technologies – took the top spot ahead of the implantable devices segment, which however, still enjoy high gross margins. The report held up two companies – Illumina, the global IVD company, and Intuitive Surgical, that makes robots to perform minimally invasive surgeries –  as leaders in operational performance.

While IVD segment took the top spot in terms of operational performance, the segment which saw its fortunes slide the most because of the downturn is Medical Equipment, defined as “reusable equipment use for diagnosis, monitoring or treatment of medical conditions” that have low to high regulatory hurdles.

The report also provided four recommendations to improve operational performance:

  • Broaden innovation – Medtech industry has achieved success in the past by catering largely to physicians. Now it has please various stakeholders including healthcare providers, payers and patients. This means innovating around new business models and new products
  • Move up the productivity curve – Medtech industry needs to learn from the consumer electronics and automotive industries who focus on ‘value engineering and strategic sourcing practices” to improve gross margins. They can also increase the supply chain efficiency and implement best practices to boost working capital and inventory management performance.
  • Transform the go-to-market model – Physicians are no longer the sole decision maker as healthcare reform and cost pressures have created a more diverse customer base. Sales and marketing budgets need to be altered to reflect that and gain effectiveness.
  •  Revitalize growth strategies – As the U.S. market matures, medtech firms must look for new areas for growth. Many companies are now shifting dollars from U.S. and other slower markets to emerging markets. Inorganic growth strategies would include mergers and acquisitions but some companies are looking at open innovation, corporate venturing, co-development agreements and licensing approaches.


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