Global Pricing Study 2019 - Focus Medtech: High Price Pressure, Limited Use of Digital Solutions

December 20, 2019

Medical technologies

How did 2019 play out for medtech companies when it comes to pricing and digital solutions? What were their pricing and digitalization strategies, and how successfully were they executed? Our Global Pricing Study looks at these questions in detail. Read about this year’s results.

To find out how companies are performing, particularly within the context of pricing and digitalization, we conduct our Global Pricing Study (GPS) at regular intervals. In doing so, we have the opportunity to speak to the top management of companies from a wide range of industries worldwide, including medtech firms. In our article, we take a closer look at the results from the medtech industry, which highlight ongoing challenges as well as promising opportunities.

Pricing: High pressure results in war
Among many other issues, medtech companies have to deal with price pressure, which is also seen as one of the major challenges in several other industries. Of the companies surveyed, almost 70 percent have been exposed to significant price pressure in the last two years. This is slightly above the cross-industry average of 65 percent. Price pressure has decreased slightly compared to the previous GPS in 2017, when 75 percent said they had been experiencing higher price pressure over the previous two years.

As a result of this high, ongoing price pressure, price wars are clearly inevitable in the medtech sector, which is supported by our study. An astonishing 72 percent of medtech firms believe they are currently caught up in a price war. This is significantly more than in other industries, with a cross-industry average of 57 percent. The good news is that companies are starting to realize that it’s their own fault – an important step toward stopping price wars. Of the 72 percent, 44 percent admit to intentionally starting price wars, and another 31 percent to starting them by accident. Only one quarter stated that their ongoing price wars were caused by a competitor.

Growth potential despite only slight increases
Even though pricing is a troubling subject for medtech companies, they still acknowledge the potential of pricing. When asked about the most important drivers of profitable growth, 27 percent of the surveyed companies see price increases as the most important profit driver. Across all industries, only 12 percent consider price the biggest profit driver – this shows us that knowledge about the power of pricing is much more common in medtech than in the other industries.

Still, price increase ambitions in the medtech industry are modest; 82 percent of companies plan to execute very limited price increases during the year ahead (at or even below inflation). Only 18 percent are planning to increase prices above inflation. This is also due to previous attempts to increase prices not being particularly successful. After all, more than 70 percent of study participants indicated that they had achieved less than 60 percent of their budgeted price increases last year.

Digitalization for cost reductions only
To counteract the negative effects of price pressure and price wars, companies in the medtech sector are continuing to digitalize their offerings. Three out of four respondents said they have invested in digitalizing their services and products in the past three years. However, a large share of these digitalization efforts (44 percent) focuses on cost reduction; only 25 percent aim to drive revenue and profit growth. This is even more surprising considering that 56 percent of medtech companies surveyed state that digitalization has had a positive impact on their revenue performance, which is above the cross-industry average (49 percent) and much higher than two years ago (21 percent).

Online shops not well established yet
When it comes to one major digital profit driver, eCommerce, medtech companies aren’t tapping their full potential. Our numbers show that 23 percent don’t use digital sales platforms at all. What’s even more striking is that only one in ten companies achieved more than 50 percent of their sales through online channels. This situation definitely has to change; the industry needs to step up its efforts, since many customer segments can only be addressed effectively through holistic strategies involving multiple channels.

Want to learn more about the future of medtech and discuss with industry experts? Register for our Annual European MedTech Strategy Forum in February 2020 in Zurich!