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PWC on Medical Devices

By August 26, 2016Commentary

PriceWaterhouseCooper’s Health Research Institute issues a report on how some medical device manufacturers are changing the nature of their business.  (PWC Report)  Historically, medical device makers had a product-focus; they developed high (hopefully) quality products and sold them for as high a price as they could.  They built strong relationships with physicians to induce them to use and prescribe the use of their products.  Concerns about health spending and the high cost of many medical devices are driving changes in the strategy of many device companies.  They now have to be prepared to justify the cost of their products by showing improved overall cost and quality outcomes.  As physicians’ influence on device purchasing wanes, that of hospitals, health systems and even health plans, has increased, so that device firms need to focus more on those relationships.  And as both health plans and providers assess their financial responsibility for a patient, medical device makers need to consider whether they can become more patient than product focussed, even to the point of taking risk for the care of a patient or at least a particular disease that a patient has that the device maker’s product treats.  This is not an insignificant change, requiring skills not currently present in most of these companies, as the report points out.

An early form of the change has been the addition to many devices of software allowing collection of information regarding the patient and regarding the device’s performance; information which often can be transmitted wirelessly.  This data often has significant value to providers and health plans.  These capabilities also fit with the increasing use of medical devices and equipment in the home, which increasingly is viewed as the cheapest setting for care.  The ability to monitor patients and devices is critical when they are used at home.  Some device manufacturers, Stryker is noted in the report as one, have begun providing software, analytics, and service offerings unrelated to a specific product, as a way to enhance their value to providers.  For medical device companies, the past has been pretty lucrative.  The future can be as well, if they adapt to new needs of their customers.

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