As I read through the Ernst & Young Pulse of the Industry on medtech this year, I saw a lot of familiar themes that we've talked about before: the shift toward a value-based health care system, the growing importance of hospital administrations in purchasing decisions, and how increasing offerings along a disease continuum can be beneficial to growth. Many of these trends were talked about in our Year-in-Preview 2014 presentation. However, the industry keeps undergoing subtle shifts to keep us, and the manufacturers, on our toes. Here are a few interesting tidbits that captured my interest in this year's Pulse of the Industry report, called Differentiating differently.
1. While value-based outcomes will grow in importance, price will remain paramount. In E&Y's survey of hospitals, they found that hospitals anticipate measures like physician preference for specific device and user-friendly design to decline sharply as influencers in purchasing decisions not too surprising considering the declining role of the physician in these decisions. Accordingly, measures like data demonstrating value and beyond the product services are expected to increase. What is interesting though is that the anticipated role of product price remains exactly the same it's the most important factor now, and it still will be in a few years.
2. Iterative innovation might not be enough anymore. The E&Y paper brings up an interesting point on iterative innovation. It points out that massive technological breakthroughs are (as in any industry) rare, and that innovation in this market has historically relied on small improvements to existing technology. Over the long term, these baby steps can result in huge technological improvement. However, with the new health care paradigm, these smaller steps become harder to take because purchasers may not be willing to pay for them anymore; they may be happy to settle for a less expensive good enough product.
3. Über-scope deals, like the Medtronic-Covidien acquisition, might be the way forward. I liked that the paper termed the Medtronic-Covidien deal the über-scope approach. E&Y talks about the Zimmer-Biomet acquisition as an example of creating scope in a single disease area, with both of these companies being orthopedic giants. The Danaher-Nobel Biocare deal falls in a similar category. However, the Medtronic-Covidien deal represents an example of a company creating scope across multiple disease areas, hence, über-scope. The paper does caution though that it's too early to tell whether this type of unprecedented acquisition will have a positive impact on the combined company, but that either way, it's already got the industry talking about the growing role of medtech M&A in this new health care environment.
Overall, a great read. As we close out 2014, it's almost time to think about our top ten trends for 2015, if you can believe it. While a lot of themes will be familiar, there's always new ways to think about old trends and subtle shifts in direction, which will help us all take the industry the next step forward. As with innovation in medtech itself, medtech market research is, after all, an iterative process.