Market dynamics are changing the medical device market in unprecedented ways. Accustomed to rapid innovation in their lives as consumers, patients are expecting data and information being generated across various personal (face-to-face interactions) and non-personal (digital interactions on the web and social channels) to be translated into delivering better healthcare outcomes and their quality of lives. The baseline of quality of delivery of healthcare throughout the ecosystem is shifting to much higher expectations, as a result. The medical devices industry faces this challenge every day.
On the other hand, the pressure to reduce healthcare expenditure, the decrease in rep access to physicians, intensified competition, and consolidation of hospitals and healthcare systems are forcing manufacturers to rethink their existing business models and create a value proposition for customers through innovative products and solutions. This dynamic is a conundrum as there’s a direct implication on cost. Investments are needed across these areas upgrade systems, operating models and increase outreach measures to the healthcare providers and newly emerging channel partners leading to the expectations the policymakers of lowering healthcare cost. Of course, investments made today are for long-term benefits of stakeholders (manufacturer themselves, their shareholders, employees, supply chain partners and of course customers).
It’s now-or-never for the industry as a result!
Over the years, the aging population in developed countries, declining birth rates and higher life expectancy and the rise of chronic diseases around the globe have been major demand drivers for medical devices. Demand is further generated thanks to the ever-expanding market geography, changing roles of patients and decision-makers, technological advancements, and increased data availability. This has translated into a significant shift in their go-to-market strategies and investments. So, to anticipate the market opportunity, as market demands increase, key commercial changes and trends have emerged.
The following are some commercialization trends that are transforming how medical device companies will conduct business in 2019:
- Rapid adoption of digital technology and partnerships
Increasingly, regulatory pressures have led to restricted sales rep access to healthcare providers (HCPs) / surgeons. Digital technology is helping bridge this gap. Company strategists, market access managers, and sales reps are increasingly using the web and social channels (digital) to reach out to HCPs innovatively along with face-to-face interactions or in another parlance, using the multi-channel approach. The multi-channel approach has not only created new means of outreach and message retention with new stakeholders and key accounts but also added low-potential accounts which were earlier too far to reach.
The combined use of digital and personal channels has increased access and helped companies create micro-segmented or personalized communication plans based on the preferences of the purchasing authorities. This ‘omnichannel’ experience use data from all promotional channels, analyses behavior patterns and creates a seamless communication environment. Of course, marketers have been ever vigilant of not stepping on off-boundary promotion measures. Regulators monitor the digital channels and companies are now increasing investments to ensure compliance and stay within the laid down metrics.
At Axtria, we have experienced an increase in adoption/demand for multi-channel call plans with promising results across several life sciences clients. This is supported by a BCG research where it’s observed that companies can increase their revenues by 2 - 3% annually1 by adopting digital into their promotional strategy.
Use of new age digital technologies such as Augmented Reality (AR) and Virtual Reality (VR) has created new avenues for medical devices manufacturers to create an experience beyond what was available earlier. HCPs can have access to virtual training rooms, significantly reducing ‘live errors’ and resulting litigation and even eventual healthcare cost. These virtual ‘cockpits’ have given rise to immensely deep and humanized data points that can potentially be used to drive product efficiency based on customization of product or services and experience through user behavior patterns. The insights that marketers can gather as a result to create personalized messaging is invaluable to every role in the manufacturer's organization.
- Changing role of customers and decision-makers
Traditionally, physicians/surgeons were the primary customers of medical device companies as they spent their time in selecting the appropriate equipment for their patients. Now, increased centralization of the hospital purchasing process and hospital consolidation has moved the decision-making power into the hands of the hospital authorities. Purchasing decisions have shifted from individual decision-makers like HCPs to integrated delivery networks (IDNs) and hospitals (providers).
There is an increased influence of regulators, hospital administrators or procurement, and non-healthcare professionals that specialize in sourcing and negotiations into the purchasing decision. This has made it imperative for the medical device industry to account for several ‘pricing influencers.’ For example, with the government and insurance providers wanting to control costs, hospitals and IDNs are getting lower reimbursements with tighter budgets. These issues are affecting and changing the way medical devices are valued and priced.
Third-party coverage and reimbursements would also play a role here as the medical device manufacturers ultimately receive payments from insurers.
With the hospital / IDN balancing quality of care with the economics of their purchase, medical devices firms increasingly need to focus both on the decision makers and influencers.
A cluster of segments, therefore now involve a complex matrix of stakeholders that can play various roles – gate-keepers, influencers, decision makers, budget holders, negotiators, and buyers. Overarching product and value messages need to have a unified nature to speak about the product value proposition and differentiators. Data collected from personal and non-personal channels are critical in determining the nature, frequency, channel, and display of the message. Insights on user behavior and buying patterns can create winning situations.
- Specialized and efficient customer-facing models
The technology as mentioned earlier and stakeholder trends, industry growth and margin pressures are forcing medical device companies to rethink their current commercial operations models to achieve sales growth. Industry experts reckon that medical device companies that embrace innovative commercial models can achieve sales growth that is three times2 the industry average.
The future will see more medical device companies moving away from the traditional rep-driven sales models and towards adopting agile go-to-customer models that specialize and deploy the resources based on the nature of requirements or jobs. These new go-to-customer models decrease emphasis on the traditional field reps and include increased focus on the following roles:
- Key Account Managers: Seasoned ‘account’ managers who can innovate and get more value at large accounts in complex stakeholder ecosystems. Comfort in relationship management and consultative selling with medium to long-term selling cycles will be key skills that will determine the success of incumbents.
- IT Sales Reps: with technology penetration at enterprise and unit level, to cross-sell connected devices and help HCPs / hospitals leverage data analytics and point-of-care healthcare delivery and real-time decision support will drive the role. Deep understanding of various cloud and technology stack environments will be critical to the role.
- Fields Sales: the next-gen, evolved healthcare system has channel partners, managed care system, provider networks, and Integrated Delivery Networks (IDNs) as critical decision sets. Field sales roles will involve creating and reaching out to each of these as touchpoints and organizations will need to enable them by improving field communication using “Next Best Actions” to help reach the accounts at the right time and increase efficiency.
- Coverage Sales Reps: A vital cog in the expanded healthcare ecosystem for medical devices will be to expand field coverage and serve smaller accounts. Clinics, independently operating patient advocacy groups and individuals will be a part of the relationship network.
Also, the commercial teams will continue to become more specialized, segregating them based on contract, service, sales, education, product support, product reimbursement/access, customer onboarding, and distribution. While this will make the commercial planning process more complex, it will place more focus on delivering better customer service and customer experience.
Alternately, commercial teams are being designed based on hospital care settings to better align with total patient care (i.e., teams divided into acute, emergency, surgery suites, ambulatory, outpatient, office-based departments, long term care, nursing homes, and clinics).
To create focussed high performance innovative go-to-market team models involving two or more of the above options with and technology-enabled commercial infrastructure will be key to creating a competitive edge.
- Focus on talent acquisition and retention
The medical device industry is highly dependent on a high-skilled workforce. The growing industry size and newer investments in the commercial organizations are pushing the demand for talents, but a limited supply of highly-skilled sales reps is forcing companies to offer higher base salaries and improved incentive structure. As the millennials become a significant portion of the workforce, they are increasingly seeking enhanced benefits. Companies must deal with the challenge of increased attrition among high performers and come up with innovative employer-employee engagement strategy, better incentive plans etc.
Wholistic learning environments, through constant engagement with incremental innovation, within and outside the sphere of the vast medical devices market will be a part of the cost of acquisition and retention strategy. With organizations getting increased pressure on cost and go-to-market being a significant contributor to spends, they will need to include acquisition and retention of this high-skill talent a part of their capex – human capex. This human capital asset will have an equal measure of success contribution as compared to any technology or infrastructure investment.
The inevitable radical change in the medical device industry is redefining the traditional way of doing business. Change is unavoidable for companies going forward, and only those that embrace and align their business strategy according to these trends will sustain and remain profitable. To align better with the target segments, medical device companies must adopt innovative commercial model designs, multi-channel call plans, role-based targeting, and dynamic incentive structure. Partnering with industry experts and domain specialists to channelize their commercial strategy is the best next step forward.
1. Götz Gerecke, Andrea Miotto and Mills Schenck’s Moving Beyond the “Milkman” Model in Medtech, published online 28 February 2017. Available at https://www.bcg.com/en-in/publications/2017/medical-devices-technology-marketing-sales-moving-beyond-milkman-model-medtech.aspx.
2. The MedTech Conference’s Medical Device Study Findings: Top Medical Technology Trends to Accelerate Revenue Growth in 2019, published online on 25 August 2018. Available at http://blog.themedtechconference.com/top-medtech-trends.