MDDI_Medical Device & Diagnostic Industry

MDDI, July 2016

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MD + DI MEDICAL DEVICE AND DIAGNOSTIC INDUSTRY JULY 2016 | 19 Align Offerings, Value Arguments with Targets As greater emphasis is placed on the eco- nomic and clinical value of products, device companies must more precisely identify tar- get beneficiaries and craft supporting value arguments that resonate with hospitals and payers alike. The days when the most ad- vanced design is the only one offered in a one-size-fits-all scenario are rapidly fading. Going forward, providers will look to manufacturers to right-size the therapeutic value of a product for a particular popu- lation. In short, the 62-year-old grandfa- ther doesn't need the same implant as the 37-year-old marathon runner, especially at the same price. This actually creates op- portunities to extend the life cycle of older product lines, as long as the functionality of the older model is sufficient for targeted pa- tient segments. Some companies have begun to offer a line of more basic implant systems for hos- pitals that want to lower the cost of care by more closely matching implant functional- ity to the needs of their patients. Offer Products, Services that Cut Costs, Improve Outcomes Hospitals, as the party responsible for the cost of a CJR episode, are struggling with the challenges of coordinating care across mul- tiple settings. Medical device companies can offer differentiated value by offering prod- ucts and services that help hospitals reduce the overall cost. These offerings can range from assistance with the development of standardized care pathways to Internet-delivered patient vid- eos for preoperative and postoperative edu- cation and compliance. Manufacturers that hope to enhance their competitive position by adding products or services outside their core capability set may need to consider partnerships and acquisitions. Consider Risk-Sharing Agreements with Providers As providers are increasingly pushed to bear financial risk for the cost and quality of their services, they will turn to their suppliers to do the same. Prudent manufacturers should begin preparing now for when their custom- ers insist that they back up their marketing claims with their checkbooks. Contracts are already beginning to reflect the risk of product defects. For example, St. Jude Medical covers 45% of the net price for cardiac resynchronization therapy if a lead revision is required within a year of im- plantation. Manufacturers with a compelling value story need to back up claims with action. As is often the case, market fear and un- certainty breed opportunity. This is the case for device manufacturers that can get out in front by making the necessary changes to their product development and com- mercialization models and capabilities. The better medical device companies under- stand the impact of CJR and other bundled payment models on their customer base, the better prepared they will be to develop and communicate differentiated value propositions in the years ahead. Michael Abrams is managing partner and Gordon Phillips is a consultant at Numerof & Associates Inc. They can be reached at info@ nai-consulting.com. 2 RING AND SPRING SIZES NOW* DOWN TO 0.165" (4 MM) FOR NEW POSSIBILITIES IN MEDICAL DESIGN. Using materials ranging from surgical 316 Stainless Steel to implantable Titanium, Smalley engineers create wave springs and retaining rings below 0.2". Challenge us with your next design. Visit smalley.com/ medical for 316 stainless samples to test in your next application. * Consult Smalley on all small part manufacturing applications. Ask Smalley. Our engineers are always on call with free design consultation, downloadable CAD models and no-charge samples for evaluation and prototyping.

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