Traditional medtech innovation is getting harder. Previously, companies could just rely on making better devices, with better efficacy and clinical outcomes. Now, however, we’ve reached a point where (a) existing devices are already pretty good and (b) there is a growing focus on cost-effectiveness. This means that a slightly fancier, more expensive device with very slightly better outcomes doesn’t really cut it anymore.
Markets like heart valves, which is undergoing a complete overhaul as physicians adopt transcatheter instead of surgical devices, are few and far between. Instead, most medtech markets feature incremental improvements. Slightly smaller, slightly more ergonomic, slightly better capabilities. Convincing physicians and payers that these new products are worth adopting for a higher price is an uphill battle. Take the stent market, for example. Absorbable stents were meant to be the next big thing in this space, but in reality, it’s tough to make a case to adopt them because existing options are already pretty good. Why bother?
In the capital equipment market, the push for the fanciest technology is particularly obvious. Many companies continue to improve features, which admittedly, has a high “cool” factor. Everything from surgical robots, to cameras and surgical monitors that can show “4K Ultra HD” pictures (whatever that means), to fancier MRI machines, are being developed. But it’s hard to get hospitals to actually fork over the extra cash for these extremely expensive products. It’s a bit easier in the US, where fancy devices in large hospitals can attract patients and physicians, and cost constraints are not so great. It’s a different story in Europe, which is still struggling to untangle itself from its debt crisis, as well as emerging markets like China, India, or Brazil.
Instead, companies are finding that it’s beneficial to offer lower-cost, simpler products aimed at smaller facilities or more budget-conscious facilities. You’ve probably heard of “frugal innovation” before, which refers to developing simple products aimed at the needs of emerging markets. Companies also need to start thinking about this type of innovation at home. The reality is that a small hospital in a rural part of the US or Europe just isn’t going to buy the fanciest MRI machine that exists when more simple, less expensive options are perfectly capable of meeting their needs. These facilities want portable ultrasound systems, integration systems that can connect a basic OR, and improved visualization without having to buy the fanciest surgical camera.
And this is true outside of the capital equipment space too. In the dental implant market, “value” implants are increasingly challenging the traditional, more expensive products. In some cases, companies from China are making inroads in Europe or even the US with their less expensive products.
For big, organic growth, medtech companies are going to have to keep innovating their approach to innovation. The old models just won’t get companies the results that they’re looking for.
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