Medical Devices Breathe New Life into Healthcare
The COVID-19 pandemic prompted the medical device industry to adopt a broader perspective and explore novel ways to mitigate risk, increase efficiency, and speed up production. Such advancements translate to bottom-line growth — medical device innovators increase sales 24% faster than competitors.1
What is the future of the medical device industry?
The U.S. medical device industry is the largest in the world and is poised for steady growth. It is expected to reach $208 billion by 2026.2 There are several contributors to growth, including a well-developed healthcare infrastructure, rapid adoption of advanced medical technologies, the presence of industry-leading companies, and increased prevalence of chronic diseases.
From adopting smart production technologies to brokering unique partnerships, medical device companies are leaning into lessons learned to ensure they're prepared for future market crises and positioned to be competitive in the post-pandemic market.
Lesson 1: Eliminate weaknesses in the supply chain.
The global nature of the pandemic meant that devices couldn't simply be shifted from an unaffected market to an affected one. Communities around the world were trying to access the same equipment at the same time. This spike in demand exposed critical weaknesses in the medical device supply chain, which continue to plague the industry.
Supply chain disruption can have particularly negative effects on heavily regulated industries like healthcare. A medical device manufacturer can't simply go out and source a different supplier to deliver a component it needs for production without first clearing certain regulatory hurdles.
Lawmakers and governmental agencies are now focusing on ways to shore up the medical device supply chain to mitigate similar industry conditions in the future, but medical technology companies should also develop their own strategies to ensure they maintain an agile supply chain in the face of external disruptions. This includes adopting logistics and infrastructure partnerships, supply chain management software, and other smart technology. Of course, maintaining cash flow to stock up ahead of anticipated shortages is essential, as well.
Lesson 2: Support new healthcare delivery models.
The pandemic opened the door to the rise of at-home and remote medical care. Patients and providers are now more comfortable with virtual care — 66% of patients are more willing to use a remote monitoring device than they were before the pandemic.3 And hospitals are keen on these devices because they help alleviate stress from a strained healthcare system. But medical professionals need the right tools to facilitate patient interaction and maintain appropriate levels of care and patient outcomes.
Medical technology companies are investing and innovating to deliver tools that facilitate care outside the traditional, clinical setting. This includes portable or remote diagnostic tools, monitoring devices and therapeutic equipment. These devices have the potential to facilitate direct patient care and improved patient engagement. The data collected could also help optimize treatment protocols and inform the R&D process so new devices can get to market faster, especially when combined with artificial intelligence and machine learning technology.
As medical devices get smarter, remote digital tools provide healthcare access to more people and allow patients to take a more active role in their care. But they also provide more access points for cybercriminals to steal the data these devices gather. This presents an opportunity for the industry to work with regulators to ensure the technology is secure and used appropriately.
Lesson 3: Take advantage of regulatory opportunities.
Medical device manufacturers must follow extensive government regulations which, while critical to maintaining safety and efficacy, can be costly and inhibit speed to market of life-saving tools. Since the pandemic began, standard device approval processes have further slowed, with pre-market approvals and 501(k) clearances down significantly last year.4
There is both optimism and opportunity, however. During the pandemic, the government showed flexibility in facilitating a remote care framework and quickly approved new products. This opens the door for the industry to lobby for legislation and medical device regulations that support the at-home healthcare delivery model to make faster launches a permanent reality. The result will be that providers and patients can access the equipment they need sooner.5
Lesson 4: Be prepared to adopt a new business model.
These technologies carry enormous potential for both the medical device industry and for healthcare in general, but they also require heavy financial investment. This all translates to higher cost of ownership for patients, particularly as insurance companies and Medicare adopt lower reimbursement policies. Record-breaking inflation further compounds the financial implications.
As reimbursements, hospital budgets, and consumer buying power shrinks, so do device manufacturers’ profit margins. They also face increased competition in the form of new players from other industries entering the medical device marketplace. Under these market conditions, traditional medical device companies risk being reduced to commodity status in the middle of the healthcare value chain — a precarious position, indeed.
To avoid this, medical technology companies will have to re-think their business models and reposition themselves within to demonstrate real value, beyond traditional R&D and innovation to one that outlines a clear, sustainable contribution to the healthcare value chain. Medical device manufacturers will need to identify ways to use technology to not only advance care and access, but to help address the elephant in the room: rising healthcare costs. They will need to show how they improve quality of care and lower costs.
The potential for this lies largely in the value of data and analytics. Information captured by medical devices provides valuable, real-world data. As technology evolves, so does the potential for companies to integrate their services and data intelligence and play a larger role in the healthcare value chain, particularly as big tech enters the industry. Those who do will benefit from new revenue streams and gain closer access to customers, patients, and consumers.
Lesson 5: Ensure access to necessary capital.
With emerging markets, technologies, and opportunities on the horizon, medical device manufacturers need to be financially agile to keep pace with the quickly changing industry landscape. This means they must have the necessary funding to finance new ventures and position themselves for success.
Medical technology startup funding is active and growing, raising almost $6 billion in the fourth quarter of 2021.6 Angel investor networks, venture capital funds, special purpose acquisition companies, and corporate venture capitalists are potential sources for funding medical device projects, as are research and charitable grants.
Banks are the traditional funding source, especially for companies beyond the startup phase. These financial institutions not only provide loans but also resources like credit products and treasury management services for a holistic and coordinated solution that supports a company's growth and finances.
Although the medical device industry faces uncertainties, there is abundant opportunity for those with the flexibility and imagination to meet emerging healthcare needs. Those who do so will secure a prominent role in the healthcare value chain.
Contact a Synovus Commercial Banker or your Relationship Manager for more information.
What You Should Know About Employee Theft
Companies of all sizes experience fraud. But it’s not always an external attack.
Automated Payroll Benefits
Managing payroll can be time-consuming and full of inefficiencies. Here’s why automation makes sense.