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With US$131b in "lost" revenues and diminished venture capital, medtech companies need to invest scarce resources creatively in new services
WASHINGTON, Sept. 24, 2013 /PRNewswire/ -- A move to value-based health care, tougher regulations and a lack of resources are challenging medtech companies to be more creative when developing new products and services, and to experiment with new business models. New innovative strategies are now essential if medtech companies are to survive and grow, according to the findings outlined in Pulse of the industry: medical technology report 2013, EY's annual report on the industry's performance, released today at AdvaMed 2013.
Glen Giovannetti, EY's Global Life Sciences Leader comments: "Innovative technology is no longer enough to secure reimbursement; it has to be linked with demonstrable, cost-efficient improvements in health outcomes."
"The good news is that medtech companies are experimenting as never before with new approaches to create and deliver value in creative ways."
Medtech "lost" revenues of US$131 billion in four years
EY highlights that payer and regulatory uncertainty have slowed revenue growth, leading to "lost" revenues of an estimated US$131 billion for medtech commercial leaders between 2008 and 2012. Meanwhile, funding for emerging companies has declined - particularly for early-stage ventures.
Industry performance highlights in 2012:
Building new business models
Continues Glen: "The move to value-based health care is making patients and payers more influential, and medtech companies now find that their business models need to take these new customers into account. However, the need to invest heavily in business model innovation comes at precisely the time when companies' resources are increasingly constrained."
Companies are beginning to experiment with business models that reflect the needs of new customers in three ways:
Building new capabilities
To succeed at business model innovation, companies will need to build new capabilities, including:
Patrick Flochel, EY's Global Pharmaceutical Sector Leader concludes: "The medtech industry faces significant challenges, but for companies that can deliver differentiated health outcomes in cost-efficient ways, there are strong opportunities for growth.
Clearly, firms need new capabilities, but they can also redeploy existing strengths which will be very useful in the new health care environment: customer-centric design, the ability to identify and fill gaps for customers, and medtech's core strength in engineering new solutions for complex challenges. In doing so, they will do much to restore the trust of customers and investors, which will make business model innovation easier in future."
Notes to Editors
How EY's Global Life Sciences Center can help your business
Life sciences companies - from emerging to multinational - are facing challenging times as access to health care takes on new importance. Stakeholder expectations are shifting, the costs and risks of product development are increasing, alternative business models are manifesting, and collaborations are becoming more complex. At the same time, players from other sectors are entering the field, contributing to a new ecosystem for delivering health care. New measures of success are also emerging as the sector begins to focus on improving a patient's "health outcome," and not just on units of a product sold. Our Global Life Sciences Center brings together a worldwide network of more than 7,000 sector-focused assurance, tax, transaction and advisory professionals to anticipate trends, identify implications and develop points of view on how to respond to the critical sector issues. We can help you navigate your way forward and achieve success in the new health ecosystem.
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.
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