Winner or loser? EU medical devices industry at a crossroads

The overall outlook for the European medtech industry for 2014 is a bit more optimism than in previous years, although significant commercial challenges persist. Under strain from increasing price pressure across the sectors, the need to address budgetary constraints on the customer side is the biggest burden facing medtech businesses. Moreover, the rising importance of non-clinical stakeholders adds a new challenge for commercial success and puts the industry under further pressure. These are the key findings of the Medtech Barometer 2014*, conducted each year by global strategy and marketing consultancy Simon-Kucher & Partners and presented yesterday at the company’s annual European Medtech Strategy Forum in Zurich. The pricing experts asked European top-level decision makers from leading medical technology companies in all key sub-sectors about their business outlook for 2014, their major commercial challenges and current industry trends. This year’s special focus concerned effective non-clinical stakeholder engagement. “Professional buying centers are emerging and non-clinical stakeholders are increasingly setting the rules for market access, investment and procurement decisions. But what we see in practice is that the industry is not sufficiently prepared for these developments,” states study author Joerg Kruetten, Executive Vice President and Head of Simon-Kucher’s Global Life Sciences Practice. “It’s high time for  the industry to rethink traditional clinician-centered marketing and sales strategies.”

Business outlook 2014: Difficult European markets

In terms of growth expectations, industry decision makers forecast modest single-digit sales and profitability growth on average. Since business in the European home markets is in many cases consolidating, expanding business into emerging markets remains an important, albeit increasingly challenging business opportunity and future growth driver. In terms of prices, industry managers expect the pressure across sectors and categories to continue to rise in Europe – just as in previous years. As major market price drivers, they first name funding constraints on the customer side with expected reimbursement cuts over the next few months, followed by fierce competition and procurement centralization.  

Strong competition

A closer look at the current competitive dynamics reveals that medtech firms are continuously worried about aggressive price competition in the quest for pure market share gain vs. a more holistic focus on generating true clinical and health economic value on the customer side. In the current competitive environment, professional and effective price management is considered a key success factor, followed by enhancing sales effectiveness. “Medtech companies need to start competing more intelligently and more focused on the long-term,” states Dr. Carlos Meca, Director at Simon-Kucher and co-author of the study. “Among others, this includes fighting for the right and not for all opportunities in the market and more effectively managing increasingly complex buying centers on the customer side.”

Effective non-clinical stakeholder management

As the study shows, non-clinical stakeholders influence already up to half of the final supplier selection and procurement decisions across all product categories. Pharmacists, procurement managers and hospital boards have emerged as key decision-makers. This development puts medical technology companies under pressure to rethink traditional clinician-centered marketing and sales strategies. Currently industry managers are not very confident in their ability to interact effectively with these important stakeholder groups. Non-clinical stakeholders have to become an integral part of shaping marketing and sales strategies and activities, according to the study authors. Effectively addressing non-clinical stakeholders is primarily a function of three things: One, building successful engagement models to ensure pro-active interaction with these stakeholder groups. Two, deploying effective and fact-based clinical and particularly health-economic value messaging among these target groups and, three, exploring new contracting models combined with building non-clinical selling and negotiation skills in the sales organization. As the survey responses show, the industry is not yet fully prepared to successfully tackle these tasks. Who will be future winner or loser? The answer will greatly depend on how well medtech firms manage to generate offers with true clinical and/or health-economic value for payers and providers and how well they are able to convince all relevant stakeholder groups on the customer side. In other words, they must escape the “discount for market share trap”.

The management summary is available upon request.

*About the Medtech Barometer
The Medtech Barometer is an annual study conducted by Simon-Kucher & Partners among C-level executives, regional and BU heads, and senior functional executives representing all key sub-sectors of the medtech industry including consumables, devices, equipment, diagnostics and dental. With approximately 50 top-level respondents in 2014, the study reveals current commercial trends and challenges in the medical technology industry and shows how players are addressing specific burning topics.

Study authors
Joerg Kruetten is Executive Vice President of Simon-Kucher & Partners and Head of the Global Life Sciences Practice. Dr. Carlos Meca is a Director in Simon-Kucher & Partners’ medtech team.

Simon-Kucher & Partners, Strategy & Marketing Consultants:
Simon-Kucher & Partners is a global consulting firm with 700 professionals in 27 offices worldwide focusing on Smart Profit GrowthSM. Founded in 1985, the company has almost 30 years of experience providing strategy and marketing consulting, and is regarded as the world’s leading pricing advisor.


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