Medtech Medtech insight

Engineering Solutions: Sustainable Models for Driving Value in an Outcomes-Based Healthcare Ecosystem

Over 13,000 medical technology patents were filed through the European Patent Office (EPO) in 2017, an increase of 6.2% over 2016, underscoring that Europe is fast becoming a major hub for medtech development.

Medical technology is no longer product-oriented but is positioned more and more as a solution with an integral role to play in delivering value across the care continuum. That’s why medical device original equipment manufacturers (OEMs) have a constant need to innovate to stay relevant in a highly competitive market.

This is particularly the case in Europe, where roughly 27,000 suppliers face an average technology lifecycle of 18-24 months before enhanced features are made available in the revised version of a given product, according to figures from MedTech Europe.

As a result, medical device OEMs have to find ways to generate value over and above the typical R&D-based innovation that requires higher lead times to bring a product to market. In this scenario, product value engineering (PVE) gives OEMs a cost-effective and efficient route to bring incremental innovation to its solutions and provide ways of offering value to customers in terms of product improvement, efficient manufacturing and customer satisfaction.

The Rise of Product Value Engineering

Most of the healthcare challenges for which medical OEMs provide solutions are complex and systemic, often traversing clinical, economic, workflow and supply chain issues faced by hospitals.

In spite of all the benefits that these solutions bring to customers today, OEMs continuously face pressures to reduce product pricing while protecting business margins. In this context, specialised engineering solution providers offer competitive differentiation and cost savings to OEMs, especially when such innovation leads to better and improved versions of the solution, where enhanced features help to generate superior value for the customer.

It is all the more important with healthcare reform and reimbursement cuts affecting the profitability of medical technology companies. Not to mention, the added pressure from healthcare providers, payers and regulators demanding that OEMs demonstrate proven outcomes for their products.

To that end, PVE offers medtech OEMs a new lease of life as its activities revolve around providing more with less — more features, more benefits, and higher quality— for the same cost or lower. PVE ensures that solutions are optimised continuously during their lifecycle with respect to the needs of customers and market demand. The focus on PVE has led to the emergence of flexible business models in medical technology development and manufacturing, where the emphasis is on designing for value.

Outsourcing Medical Device Development and Manufacturing for Long-term Sustainability

The major customer segments of medical device OEMs — namely hospitals, imaging centres, laboratory groups, private medical centres and general practices — are facing the brunt of budget cuts and increasingly moving away from a capital expenditure model to one that’s focused on operational expenditure where possible.

Large-scale one-time procurement processes will eventually move to pay-per-procedure models. This situation is coupled with the reality that these customers have less money at their disposal to invest in cutting-edge medical technologies and have to make some quick and rational decisions when it comes to picking the appropriate technology, given the rate of change in terms of specs and features.

The eventuality is that medical device OEMs have to provide more for less in terms of features and ultimate value, and often do not have the in-house capabilities to transform their design, R&D and manufacturing capabilities. Medical device outsourcing (MDO) offers several advantages to OEMs looking to expand their capabilities, whether it is in terms of new technology development or market expansion. This helps OEMs to focus on their core competences, while adding new revenue streams and achieving cost efficiencies during product development. MDO enables OEMs to bring newer products to market in 30-50% less time compared to in-house development efforts, and at 10-30% savings levels when it comes to product development costs.

Summary

To conclude, medical technology companies recognise that delivering maximum value is a strategic sweet spot between superior functional performance and outcomes as provided by the solution and optimised costs in achieving it. To translate this value to its customers, OEMs will have to invest in sustainable and scalable models, with partnership and stakeholder collaboration playing an increasing large role to drive the engineering of solutions for the end customer.

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