MedTech Shrinking Margins

The medical technology industry creates and supports nearly two million jobs across the United States. It is one of the few industries in the U.S. that is a net exporter and it continues to flourish. However, in recent years, changes to health care policy, such as the Affordable Care Act (ACA), have altered reimbursement rules and raised taxes. Meanwhile, competition has increased from both developed and emerging nations, and hospitals are demanding solutions that improve patient outcomes. All of these factors have contributed to shrinking margins and increasing pressure on medical device manufacturers to remain innovative.

The Tangled Web of Reimbursement

Reimbursement is one of the most important considerations when medical device manufacturers decide to develop new products. Device reimbursement is always a tangled mess to navigate, as there are different policies around the world, but the U.S. private/public system is one of the messiest. The ACA has allowed health plan providers to push medical device manufacturers to prove themselves worthy of reimbursement.

Medical coverage decision-makers now want to see data that shows how new treatments and devices will work. New technologies are expected to improve the standard of care more efficiently than existing technologies. They want to know what the new device will replace, associated risks and whether it is more cost-effective than current devices or treatments. Simply fulfilling a medical need is no longer enough to justify reimbursement. Decision makers want to see outcomes.

MedTech Outcomes

Showing outcomes comes at a cost. To prove themselves, medical device makers have to spend hundreds of thousands of additional dollars on clinical trials at the best possible institutions with the most highly skilled practitioners. This raises the cost of developing new and innovative solutions and eating away at margins.

What Can Medical Device Manufacturers Do?

It cannot be said with certainty whether the ACA will be repealed. Consequently, MedTech companies can’t wait around for policy to change. The best strategy is to take initiative to become a more efficient operation. Luckily QAD is here to help medical device manufacturers become more Effective Enterprises. To learn more, download this white paper.