3 Techniques MedTech Companies Use To Fight Market Stagnation
Many factors contribute towards price erosion, but chief among them is increased competition. Price wars may be great for the consumer, but they are a justified source of concern for the manufacturer and, as the term suggests, price erosion causes, not only stagnation, but also price drops.
Take cardiac rhythm management devices for example. The market for this type of device is predicted to remain flat right through until 2026, in part due to price erosion (with flat generator unit sales and rising ICM procedure volumes being two other contributing factors). The predictions made regarding this type of device can easily be extrapolated to other medical technology products, painting a bleak picture of the state of play for almost a decade into the future.
“This is a mature market that has been in decline for many years as a result of market-wide factors, such as lack of innovation, consistent price erosion and increased competition,” writes Simon Trinh and Jeffrey Wong for Diagnostic and Interventional Cardiology. “In recent years, the interventional cardiology market has been experiencing a period of consolidation, whereby large competitors are entering new market segments organically or through strategic mergers and acquisitions. This has resulted in tremendous downward pricing pressure, as consolidated companies have more power to bundle various devices at a discount in order to win tenders and contract offers with hospitals and labs.”
However, there are some methods MedTech companies can use to mitigate the impact of price erosion.
#1 Unique Products
One great way to mitigate price erosion is to move the focus away from generic devices which are easily replicated and face stiff competition and offer more premium priced products which offer additional functionality and convenience beyond that which is offered by standard models. For example, adoption of next generation devices such as MRI-conditional devices, leadless pacemakers, and S-ICDs.
The additional revenue generated by these premium alternatives has the potential to offset the price erosion on generic devices due to the relatively smaller amount of competition in the marketplace.
#2 Technical Support
Another factor contributing towards price erosion is the lessening need for support from the manufacturer and ongoing technical assistance. As these devices have become more ubiquitous, healthcare providers have become more competent in their use and need less troubleshooting assistance from technical support.
Medical device vendors can offer added value with technical support. Many medical device manufacturers offer complete field service maintenance contracts alongside their devices, paving the way for additional, and erosion offsetting, revenue, and building stronger relationships between manufacturers and healthcare practitioners, which helps keep business channels open far into the future.
#3 Price Wars
Arguably, the most effective way to combat price erosion is avoid becoming embroiled in a price war with competitors. While the temptation will undoubtedly be strong to focus on price, these wars quickly devolve into a race to the bottom with value giving way to cheapness.
However, price wars are often the last resort of manufacturers who find themselves unable to compete in terms of quality or performance. Allowing yourself to be drawn into wars with these lower quality products reduces the perceived value of your own devices, and creates a narrative where price is king, and no other factors being considered.
Businesses are willing to pay a premium for high quality products, so you should not be fearful of focusing on value. Instead of being drawn into price wars, make sure your marketing departments are effectively communicating why your products are worth paying a premium for.
Final Thoughts
Price erosion is a challenge for the MedTech industry and there is no simple one size fits all fix to combat it. However, by offering unique premium products, rethinking the way technical support is bundled with purchases, and focusing on value rather than price, your business lessen its effects.
Price erosion in the medical device industry is set to be a hot topic at MedForce 2019, taking place in June at the nHow Hotel Berlin.
Please download the agenda today for more information and insights.