Study: The business model for the medical device industry is unsustainable

The business model of the medical device industry is unsustainable, according to report released Tuesday by a leading strategy consulting firm.

As purchasing decisions shift from clinicians at individual hospitals to “value analysis committees” at larger hospital systems and integrated health care organizations, medical device companies will have to reinvent their go-to-market strategy, said the report from the Boston Consulting Group.

“Every industry goes through times when they have to change dramatically,” said Colm G. Foley, the Chicago-based medical technology team leader for the consulting firm. “For the medical device industry, this is one of those times.”

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Boston Consulting Group issued its report at AdvaMed 2012, the annual convention of the Advanced Medical Technology Association, which drew more than 2,000 people to the Boston Convention and Exhibition Center.

Foley, in a press briefing, said many medical gear companies are saddled with an outdated sales approach geared to doctors who are willing to pay more for products with incremental improvements. Under the “accountable care organizations” being pushed by federal and state government as well as commercial payers, he said, doctors will serve with financial and procurement executives on purchasing committees and will be given incentives to buy products that meet not only clinical standards but also budget requirements.

With more uninsured patients joining the health insurance rolls under the US health care overhaul and strong growth in the developing countries, the successful model in the future will be selling a higher volume of medical devices to fewer but larger buyers—and stressing value rather than slight improvements—Foley said.

“People will be saying all these products are pretty darn good,” he said. “So they’re going to make an economic decision.”