Medtech's Business Model Is Broken, But There's Hope: PwC Report

Posted in Medical Device Business by Qmed Staff on October 10, 2013
A recent report from PricewaterhouseCoopers (PwC) reports that the business model that sustained it for decades is outmoded. The incentives for developing traditionally innovative medical devices are becoming less attractive. The report stresses the importance of innovation—in new guises to sustain the industry into the future. The value of medical devices formerly was in the product itself. Going forward, benchmarks such as cost effectiveness, improving hospital performance, remote patient monitoring, and more accurate diagnostics are poised to grow in importance. Medtech companies that can help their customers accomplish those objectives have the best outlook.

Innovation in medtech
Image from PwC Medtech Innovation Survey 2013.
More frequently, companies new to the healthcare market are working to introduce technologies that could further disrupt the market. Overall, the medical device industry has lagged behind other sectors in the adoption of mobile, Big Data, cloud technologies, and social media. According to PwC, 12% of medtech companies are using such technologies "aggressively to create new business models that center on clinical and consumer dynamics."

In the past, PwC has pointed out that a growing number of medical technology companies seek to be global players, as emerging markets such as China and Brazil are gowing significantly faster than the U.S. market. The trend of medical device companies going outside of the United States is growing, as device developers look abroad to clear products, obtain clinical data, and find first revenue. Such logic makes good financial sense as the CAGR in the developing world is strong. The Middle Eastern, African, and Latin American market is expected to grow 10% from now to 2018.

U.S. patients may ultimately be among the last in the world to benefit from new medical technology. At present, many patients in Europe have access to medical devices before patients do in the United States. Often, devices are introduced in Europe several years before they make it to the market in the United States. By 2020, PwC predicts, new medical technologies will be widely available in emerging markets before they are in the United States, making this country one of the last to have access to new medical devices.

The full PwC report is titled "Medtech companies prepare for an innovation makeover."