Expanding the Market: Four Key Takeaways from Medical Device Summit
In June, Arent Fox LLP convened a summit for medical technology executives to focus on challenges and opportunities when selling innovative medical technologies in the emerging US and global health care marketplace. During the two-day Med Tech Market Access conference, participants discussed the “new normal” for the global market, where financial constraints increasingly impact both treatment and purchasing decision making. As a result, companies develop products that demonstrate improved clinical outcomes and continue to provide services that raise the quality and efficiency of health care delivery in an increasingly resource-constrained environment.
During the meetings, device industry executives examined key sales strategies and critical pressure points in the global health care marketplace. As part of the talks, four key themes emerged that medical technology company executives should be aware of and that are outlined below:
- A Holistic Approach: When deciding to purchase new medical technologies, hospitals increasingly will make decisions on a macro-level that are geared toward treating the broader population — not individual patients. Hospitals used to make purchasing decisions based almost exclusively on surgeon preference for specific patients. But now a more complex analysis is conducted to determine how a new technology will fit into treatment pathways for that patient population, what the demonstrated clinical value will be, and how the product will affect the cost of care.
- The Reimbursement Squeeze: Reimbursement for hospital products and services is expected to continue to decline over the next five years. To survive, hospital executives are working to sustain managing with payment from all payers at a lower Medicare rate. As a result, costs are being cut at a time when the expense for treatment is increasing and the number of patients is expanding.
Compounding matters further: hospitals generally lose money when they treat Medicare patients, but they can make up for it through higher reimbursement from commercial health insurance plans. But over the next five years, it is expected that commercial payer reimbursement will decline even further. It is imperative for hospitals to develop profitable business models based on Medicare revenue levels.
- A Longer Sales Cycle: Because customer budget constraints are lengthening the sales cycle, medtech manufacturers must work to develop a “value partnership.” Historically, there has been something of an adversarial relationship between manufacturers and provider customers. To bridge the gap, manufacturers are working to communicate more effectively and persuasively the value of their products and services. So far, the most successful strategy is built on collaboration between customers and manufacturers, where both parties see a value. For example, a manufacturer can develop a productive sales relationship that also meets the customer’s needs. This could include, for example, offering data from the manufacturer, discounted sales agreements based on the volume and longevity of the relationship, and cost savings for services.
- Standardizing Innovation: While it may appear counterintuitive, standardizing innovation can accelerate market adoption. Manufacturers and their customers must work together to develop and standardize a process for evaluating new technologies. That process will make it easier and faster to examine features and benefits of new products, including the clinical utility, economic impact, and goodness of fit. The goal should be for the new technology to fit more seamlessly with existing treatment options already in use.
Arent Fox regularly advises clients on the development of reimbursement policy and provides counsel on strategies to ensure that their customers receive appropriate, value-based payment for their products and services.
If you have any questions about issues raised in the article, please get in touch with Edward J. Dougherty.