Medtech revenues have never been higher, and are forecast to reach $595 billion worldwide by 2024, reflecting a CAGR of 5.6% between 2017 and 2024. Model N counts many medtech manufacturers among its clients, and as this space heats up, we wanted to share some trends they are talking about:
- They’re growing and R&D spending is up. Top medtech companies in 2019 increased R&D spending across the board. While growth has slowed since 2017, spending is still up, and R&D spending by top 20 medtech companies is expected to increase by 4.5% per year through 2024. Increased R&D spend is putting more medtech products into faster approval cycles and leading to more marketed new products.
- Accelerated approvals. The increased medtech R&D spend is paying off in approvals; the number of supplementary PMA/PDP and 510(K) clearances broke records in 2018, with 106 new product approvals. The faster time to market has manufacturers increasing development of devices, with the knock-on effect being more new product introductions and launches. Model N medtech customers are taking advantage of our pricing and contracting tools, to ensure pricing compliance globally and optimize pricing and access for these new products.
- AI-driven design. Artificial intelligence technology is being used to drive the design and creation of medical devices as well as their workflows and data analysis once they are in use. Manufacturers are increasingly focusing on analyzing the large volumes of data coming from devices to help better understand their products’ benefits and risks, to fine tune the identification of patients who will benefit most and understand the use of the device as it relates to patient outcomes. Model N is also exploring using AI and robotic process automation (RPA) to accelerate workflows and create smart processes in its tools.
- Value based pricing and reimbursement is becoming more common. It’s no longer enough to prove a new product is safe and effective, manufacturers also need to demonstrate the outcome justifies the price. Value-based or outcomes-based pricing and reimbursement models that tie prices to value are gaining followers. Under these contracts, reimbursement for the cost of care is based on the value or outcome received by the patient. For example, a medical device company that produces the parts for a knee replacement can have different reimbursement rates based on how quickly the patient is able to walk and the outcome of the replacement. Model N has contracting and contract modeling capabilities that allow medtech manufacturers to determine best approaches and implement value-based pricing.
- Device data is taking center stage. The devices being explored by existing and emerging medtech vendors aren’t just conventional devices and diagnostics, they also include digital medicine technologies enabled by miniature sensors on devices, wearables and ingestibles. Data from these devices is being fed back into healthcare providers who are using it to measure outcomes for the patient as well as safety and efficacy of the device.
- Metered pricing grows. Complex devices and monitoring equipment, such as a smart bed with sensors and integrated monitoring that can help to prevent falls and bedsores in an elderly patient, may be out of reach of capital budgets in small hospitals, even when it would be of great benefit to a patient. Manufacturers are increasingly offering use-based pricing for these high value reusable devices and using Model N to develop and implement contracts. The data from these devices is being further used to justify future pricing and access.
- Health systems are consolidating. Most health systems today operate in multiple care settings and may have multiple operating entities, which could potentially offer multiple contracting options when sourcing medical devices. Medtech manufacturers today are focused on centralizing pricing for these matrixed organizations, leveraging Model N technology to ensure that the price paid for their technologies is the same across the entire system and that the volume used and resulting price is calculated accordingly.
- Pricing and contracting are strategic. Gone are the days when the complexity of contracts and chargebacks led to the need to outsource their management and compliance. Today’s contracting software, like Model N’s, is so flexible and easy to use that even the most complex contracts can be created and managed in house with the tools in place. Keeping pricing and contracting in house means medtech manufacturers control pricing and have access to data when they need it, particularly important for emerging contract types like subscriptions, outcomes- and value-based pricing.
Medtech manufacturers today are enjoying a booming market – with revenues and approvals rising. However, capturing this value depends on bringing products to market with the right pricing and strategies to gain and keep customers. Today’s medtech customers don’t just want a device, they want value and to the ability to demonstrate return on investment to patients and payers. Contracting and pricing compliance has never been more important to ensure that growth translates to revenue and profits without revenue leakage. To learn more about the Model N Revenue Cloud for Medtech, please visit our website.