Report: Three Trends That Will Redefine the Medtech Industry

As new technologies push society on the inexorable path forwards, the medical device market continues to evolve. However, the market has entered a transitional period, according to a report from Frost & Sullivan. In particular, a period of market growth that has lasted since the 1990s may have reached its zenith.

For the most part, historical growth for the device sector occurred in Japan, Western Europe and the United States. Since a significant part of this growth was tied to government services, the healthcare market in these regions has experienced a very significant bubble. In part, higher costs of care coupled with higher demand led to a saturation point in the market, causing U.S. reimbursement caps and European austerity measures.

While the past has been troubled, 2013 appears to be a turning point in a price-sensitive market. In the past, the strength of the medtech market has been tied to the release of new, innovative medical devices that provided significant advantages for patients. While there are still opportunities for these types of one-off stories, several factors could dampen healthcare expenditures on products that provide limited innovative value. Since the market is still price sensitive, profitability will remain contingent on companies' abilities to leverage their product offerings in a way that provides additional value for budget-oriented consumers.

In particular, three different things are likely to stand out in the medtech market over the next decade.

1. An environment focused on cost containment is likely to increase the number of measures that companies must take. Reimbursement cuts from groups like the United States Medicare and Medicaid system can have a wide impact on the market; since many private insurance groups use Medicare reimbursement prices as a starting point for price negotiations, lower reimbursements from Medicare will put more pressure on companies to deliver value-oriented products.

2. With the widespread adoption of the Internet and other communication technologies, patient choice will play an increasingly-large role in healthcare decisions. Armed with the ability to research and review medical devices, patients are likely to make decisions based on consumer and physician perception. In addition, value-oriented health insurance plans place a higher financial burden on patients, forcing them to be more picky when choosing expenditures. In addition, the 2.3% medical device tax in the United States has placed a burden of medtech companies.

3. Emerging market forces will also play a significant role over the next decade. Brazil, Russia, India and China (BRIC) stand out as strong contenders on both the buy and sell side of the market. However, Western companies may face significant challenges when working in these areas. China's state capitalism and regulatory nuances could make life difficult for companies that compete with state-owned enterprises. Other countries like India may place significant pricing pressures on outsiders, forcing companies to accept lower reimbursements.