Medical Device Trends: Increased Regulation Healthcare Provider Consolidation Aging Population Emerging Markets
Medical Device Trends: Increased Regulation Healthcare Provider Consolidation Aging Population Emerging Markets
Medical Device Trends: Increased Regulation Healthcare Provider Consolidation Aging Population Emerging Markets
In todays rapidly changing business climate, understanding the regulatory and demographic environment of the medical device industry is only part of the challenge. The real struggle for medical device companies is defining the right strategy, developing an appropriate business plan, and then efficiently executing against them. Firms that are able to adapt quickly, taking advantage of the transformative nature of the industry, will become inherent market leaders. We will highlight four trends shaping the medical device industry, providing guidance on how medical device leaders can successfully navigate each.
Increased Regulation
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Aging Population
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Emerging Markets
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Increased Regulation
With the increased involvement of industry stakeholders and consumer advocacy groups, along with widely publicized safety concerns and product recalls, regulatory agencies are being forced to act. Beginning with the Patient Protection and Affordable Care Act, the governments goal is to shift the focus of US healthcare from quantity to quality. This tenet carries over into the modication of the 510(k) process, the end result of which will more effectively protect patients and promote
1 the health of the public. The recent
that the FDA develop a regulatory framework that provides a reasonable assurance of safety and effectiveness throughout the device life cycle. 2 Involving industry stakeholders in the change process, the FDA is considering a range of policy options, including risk management, design controls, and risk-based stratification.
UDI legislation furthers this protection, ensuring that devices are identiable and secure at all points within the supply chain.
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Telemedicine
Telemedicine has gained traction by dramatically improving access to clinical care and reducing Emergency Department (ED) visits for some the worlds most vulnerable populations. Increasingly, similar technologies are being developed and used to manage chronic diseases and disorders in the elderly, along with tracking vital signs, sleep patterns, or medication use. Telemonitoring can potentially reduce the cost (and hassle) associated with face-to-face appointments, and by tracking patients progress in real time, it may help them direct their own care. Companies that focus on advancing the integration, analysis, and security of this patient information, and developing easy-touse, interactive devices, can establish an advantage.
Government-Subsidized Healthcare
Due to government-subsidized healthcare for the elderly, a larger portion of medical device spending will come from the government and at lower margins. Justification of health outcomes is the only way that companies will be able to protect their margins while continuing to make crucial investments in research and new product development. Companies that achieve operational efficiency will be able to operate at lower margins, and will gain market share in return. In parallel, as noted with the healthcare provider consolidation trend, it is imperative to have clear, concise models that demonstrate positive health outcomes. Without this, increased scrutiny will drive all discussions to price, especially as physicians have less and less influence in purchasing decisions.
ulations will continue to drive demand for medical devices. However, this increase is not likely to result in the standard diversication of the purchasing population, which is normally seen in consumer products.
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Emerging Markets
Many medical device companies are turning to emerging markets like China, Brazil, and Mexico, to create consistent, single-digit revenue growth. With Chinas 2020 goal for universal healthcare, the market in China has grown substantially. In close proximity, Mexico offers another promising trading partner for U.S. medical device companies because of North American Free Trade Agreement (NAFTA) regulations and medical tourism. As the demand for medical devices grows in these emerging markets, U.S. companies can leverage their brand position, but must be wary of varying regulations and business procedures.
China
China is the third largest market for medical devices in the world, and is expected to rise to the second largest in the next few years, importing the largest portion (31 percent) of medical devices from the United States.5 Although local medical device companies have joined the competitive landscape, consumers in China are willing to pay a premium for western brands, as they view them as higher quality, more dependable devices. When seeking to enter the Chinese market, however, companies should be aware of the business landscape, which can present a range of regulatory hurdles and preference towards state-owned enterprises (SOE).
Mexico
As the Mexican economy grows, local hospitals and clinics are increasing their demand for quality products. Additionally, due to lower pricing, more people are crossing the border into Mexico to have medical procedures completed. Since Mexico does not enforce high tariffs or importation licenses requirements for every shipment, like Brazil, the country continues to attract U.S. medical device companies. U.S. medical device companies also have a competitive advantage because their brands signify high quality, positive after sales service, and reasonable price points compared to products of similar quality from other countries.6
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Increased Regulation
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References
2 Institute of Medicine. Medical Devices and the Publics Health: The FDA 510(k) Clearance Process at 35 Years. July 29, 2011. 3 Department of Health and Human Services, Administration on Aging. A Profile of Older Americans: 2012. 2013. 4 United Nations, Department of Economic and Social Affairs, Population Division. World Population Prospects: The 2012 Revision. 2013. 5 The American Chamber of Commerce in Shanghai. Healthcare in China: Diagnosing the Challenges and Opportunities in the China Market. 2011. 6 International Trade Administration. Medical Devices. 2012.
Emerging Markets
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For more information, contact Mark Ginestro: 919-484-4516 / mginestro@clarkstonconsulting.com Access Marks blog here.
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