Medtech industry will start to change the delivery of its communications in 2012
22 February 2012
By Tristan Jervis, Director at De Facto Communications
The medtech industry, not unlike the pharma industry of 10 years ago, is in the midst of a gradual reform of its modus operandi to accommodate a changing economic model and cultural shift bringing innovation closer to the patient.
Last year saw record numbers of acquisitions in the medtech sector ($60bn in total up from $49bn in 2010) with the three largest being J&J’s acquisition of Synthesis for $21.3bn; Danaher buying Beckman Coulter for $6.8bn; and the $6.3bn purchase of Kinetic by Apax partners.
Other notable acquisitions included Thermo Fisher Scientific’s takeover of Phadia AB ($3.5bn), Novartis acquiring Genoptix for $470million, and Dentsply's purchase of Astra Tech from Astra Zenica for $1.8bn.
These acquisitions have been largely driven by a number of factors, notably that many firms have retained profitability throughout the recession, with strong balance sheets and stored cash available for acquisitions. However, another factor is that increasingly firms are looking to cement their market grip and over the next year this trend will continue as the industry consolidates amongst a few larger players.
For instance, in ultrasound the worldwide market was until recently dominated by GE and Philips, Siemens and Toshiba (65% of revenues). In order to compete with the monopoly these industry behemoths have established we saw four mid-tier firms join forces in 2011, with the acquisition of ALOKA by Hitachi and SonoSite by Fuji.
The new reality emerging from a Western world depression
In the past four years, and unfortunately for the next 10, it is clear that traditional western markets have grown beyond a saturation point and are now largely stagnant in terms of ‘real’ (inflation adjusted) Gross Domestic Product (GDP) growth — with the world economy’s engine having shifted East from the US to China. For better or for worse, this is now the reality all businesses will have to adapt to, and in the medtech industry — with the exception of Asian growth markets — this means tighter regulation, lower prices and greater risk.
These factors, coupled with increasing lifespans, means payers are constantly seeking ways to keep healthcare expenditure sustainable. So from the bottom up, this means R&D spends will be more constrained and increasingly funding will have to be sourced from beyond venture capital.
Furthermore, the focus of innovation will have to move towards the total cost of treatment and the patient. Increasingly, we are seeing a trend to take care out of hospitals and back into the community, and even to the patient’s own home. In practical terms this means that medtech companies will need to justify their innovations in terms of delivering patient outcomes.
In the past innovation, and crucially, the communication of this has solely been targeted towards physicians and GPs. However, with an increased focus on cost and personalised care, communications will switch towards the payer and patient.
This means we must fundamentally alter the way in which medtech companies communicate, not just in terms of messages and language, but also in terms of the delivery vehicles used. Communications are moving away from traditional consultations with physicians and increasingly towards a wider mix, including social media — the medtech companies that thrive most will be engaging for consumers, clinicians, regulators and medical administrators.
However, although there will undoubtedly be overarching themes, messages must be tailored to each audience. So for payers that means evidence-based data and even competitor analysis. In contrast, sales force messages must realign themselves with their changing structures and successful companies will need to better articulate their value proposition across broader product categories.
But most importantly, with the advent of increased consumer awareness via the internet, means providing easily accessible information targeted at the relevant end-users, empowering patients with the information they need to facilitate their care. To this end social media’s influence will grow as it is a tremendous avenue to provide meaningful two-way interactions between patient and manufacturer.
However, with an increasingly aware patient audience comes greater opportunities and threats — medtech providers will shift from being largely faceless (behind the scenes) organizations to ones where consumer reputation will be essential for longer-term growth.
To survive, manufacturers must engender the same trust as physicians have before them. Thus, open and transparent communications of patient monitoring information, service-based offerings and data will be essential in establishing companies as patient rather than product-focused. We may even see some providers give away patient equipment to move towards information-focused services of patient diagnostics and monitoring.