Top 5 New Year’s resolutions for the medical device industry for 2013 and beyond

The medical device industry has witnessed the ground shift dramatically under its feet.

Selling to physicians and being paid on the basis of how many widgets sold is so 20th century. The new world order demands evidence of how well a device works and whether it reduces the cost of care. Industry leaders also have to figure out where products fit in a system where wellness is a priority.

This is the year to make operational and cultural changes to stabilize instead of sinking into quicksand. Here are the top 5 New Year Resolutions to help the medical device industry prepare for 2013 and beyond.


  1. Stop whining about comparative effectiveness and embrace it
    It’s all about medical economics, and device companies must show that not only are their new devices safe and clinically effective, they are better than standard methods of care.

    Medical device companies hate comparative effectiveness for obvious reasons: never having been asked to demonstrate economic value, they have asked who is going to pay for it.

    “Comparative effectiveness should be embraced, but unfortunately it’s seen as a medical director issue in most device companies,” said Gunter Wessels, healthcare practice principal at consulting firm TIGI, explaining the current mindset. “Unfortunately, it’s hard for most organizations to be objective. Instead, they want to drive their agenda and get more units sold, rather than looking for fit and focus in the clinical findings.”

    This mindset is doomed to failure.

    “The reality is that in a price constrained environment, they need to establish their position more aggressively and they need to do that with data,”  said Kevin O’Laughlin, partner, with KPMG’s Life Science Advisory Services. “[Medical device companies] need to stop moaning about comparative medical economics and start to build that capability because it will be required for their future success. There’s no question about that.”

    Comparative effectiveness will help device firms define the value they bring to the table. Nowadays device firms are competing with not only other device vendors but also other therapy managers to win reimbursements that are becoming capitated, part of the pay for performance approach replacing the fee-for-service model.

    “If a device firm is in the insulin space, they are going to be reimbursed for the whole procedure from a capitated amount,” O’Laughlin said. “So your competition isn’t just other insulin manufacturers, it’s everybody involved in diabetic treatment category.”

  2. Be more aggressive about international markets
    Historically, medical device companies haven’t done much with international markets. Even marquee firms like Medtronic made its first Chinese acquisition only in 2012.

    In fact, medical device companies are a decade behind their counterparts in pharma in terms of globalizing, both from a market perspective as well as in terms of building up a manufacturing base, O’Laughlin said.

    Savvy device companies need to recognize that there are all kind of opportunities abroad – not just in the usual BRIC countries but all over the world. That includes Japan, the country that is second to the U.S. in terms of medical device consumption.

  3. Innovate for local market
    Medical device companies are slowly recognizing that the products that work in the U.S. markets do not necessarily work in overseas markets.

    “Medical device companies are still struggling with what establishing overseas locations mean for international operations. Should those manufacturing and R&D centers serve just the local market or all of the emerging markets,” O’Laughlin said.

    The biggest challenge is that products meant for the U.S. market are not profitable elsewhere. That means those markets require medical device firms to be innovative about their product mix. The old, tired way of selling older models of current first-world products, will just not do.

    Some companies are already moving in this direction – Medtronic, Covidien are among some companies that have established R&D centers in China.

  4. Hire medical economists
    Currently device firms have no talent within their organizations that can help them understand what is the true value of their products.

    They need to hire medical economists who can crunch the numbers and do a deep dive into outcomes.

    “As the environment changes, you need to understand not only know what it costs for the procedure, but how much time it takes for the patient to recover and how does that factor into additional upstream and downstream costs,” O’Laughline said. “All of this has to be factored into the economics that help you justify  the reimbursement of your product.”

  5. Engage patients to build better products
    Let’s face it. Medical device manufacturers are not good at interacting with patients. Physicians have always been the customer and they get all the attention.

    The savvy medical device company will recognize that ignoring patients may mean building products that fail to take into account the impact on patient lives. This is especially true of companies building heart monitoring equipment, glucose monitors and other daily use, patient-centric devices.

    “A stent may not have a huge amount of customer feedback, but a defibrillator or monitor will,” O’Laughlin said.

    TIGI’s Wessels echoed O’Laughlin’s comments about keeping patients involved.

    “Patient input and human factor design is increasingly important,” Wessels said. “Patient input may be affected by privacy laws, so consumer input would be a good substitute.”

These are just some of the ways that medical device companies can make navigating 2013 a little bit easier as they prepare for the intense changes brought on by Obamacare.

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