Medtech companies that can transform and operate in new ways in the 2020s stand to experience growth and profits beyond typical norms, according to a new report by PwC. The report offers three business models companies can follow or blend as guidance.
The advisory firm in its headline – “Define new markets before they define you” suggests that avoiding change and evolution may not be an option in today’s medtech industry.
“I think there’s a number of factors that over the last several years have sort of coalesced,” to create this dynamic environment of opportunity in medtech, James Woods, PwC principal, Deals, told MD+DI.
Among those factors is the “continuing evolution and importance of technology in our society,” including how it now impacts how healthcare can be delivered and the relationship between patients and healthcare providers, Woods said.
Another factor driving change in medtech is “increasing consumerism in healthcare, which accelerated during Covid,” Woods said, explaining that while the nursing shortage had “been a factor in healthcare for decades, the shortage was “certainly accelerated during Covid.”
By consumerism in healthcare, Woods says he is referring to the way patients interact with providers, creating a need and pathway to new digital technologies.
A third factor determining change is the rise of ambulatory healthcare centers, “as well as the emerging and continuing cost pressures across the healthcare ecosystem, which have sort of spiraled,” thereby spurring change across the ecosystems,“ Woods said.
New players, whether that means healthcare players, tech players, or retail players, it is clear that “healthcare is obviously a significant source of spending in our economy,” which also makes it a “significant source of opportunity,” Woods said, allowing for the opportunity to “create capabilities that are non-traditional.”
Other new capabilities can be embedded within medtech players, while others can be developed or acquired, he said.
The current medtech environment will force companies to meet the “requirements of evolution and adapting capabilities relative to what [their] value proposition is,” Woods said.
Three Possible Growth Strategies
The first strategy suggested by PwC is to “master product and care settings.” The goal should be to understand, predict, and address the needs of customers “faster and better” than competitors.
“It means you must go beyond the traditional incremental medtech approach to product innovation and delivery products that improve the care setting and the care experience while also providing value-chain improvements and efficiencies,” according to the report.
While many companies are doing this now, PwC suggests there is room to improve.
“To master the care setting, companies are combining their expertise, experience, and product portfolios in ways that generate increased value, better outcomes, and brand loyalty for surgeons and patients,” according to PwC.
Other companies are going beyond that to “create fully-digital operating suites “where all the tools are connected within the care setting,” the report states.
“This could help drive value in four areas: operational excellence, data-enhanced workflows, analytics and insights, and data enrichment,” according to the report.
The second strategy suggested by PwC is to create product-enabled services.
“This shift to a customer success mindset, a concept first developed in the technology industry by software-as-a service vendors, can position medtech companies for success,” the report states, while pointing out that “the margin and investments profile of services differs substantially from products.”
But there are also advantages to this strategy, “including faster development cycles and more rapid implementation of new capabilities that expand the value to customers,” according to the report.
The third strategy suggestion is to “build or participate in an ecosystem,” with the report noting that “there are relatively few medtech ecosystems today” and that this business model is “in its infancy.”
“The early adopters of ecosystems are catering to specific patient populations based on disease states and demographics, care settings . . . or breakthrough products and technologies,” according to PwC.
Also, this third model offers potential to “bring greater collaboration to solve an increasingly complex set of issues for providers, patients and payers.”