The rising cost of healthcare is a national topic of conversation, and the medical device industry is a big part of the discussion. As costs increase, insurers (government subsidized or direct-pay) seek ways to cost share for health services. At the same time, patients are more willing to do their own leg work and adopt wellness strategies than ever. This unique and rapidly changing attitude toward patient empowerment presents medical device companies with interesting challenges and opportunities.
What does Consumerization Mean for Healthcare?
The logical extension to a more patient-centric business model is healthcare products repackaged as wellness devices and sold to the general public. This shift from manufacturing and marketing products directly to healthcare providers and hospitals is a major part of the consumerization of healthcare. When you add on opaque billing processes and needlessly complex reimbursement/pricing, you get a recipe that pushes patients into finding direct services with clear costs.
In medical device manufacturing, that often means that consumer products have less functionality, which isn’t a downside. Less functionality means less upfront R&D costs, less time to market and a product that is still good enough for consumers.
Consider the rise of fitness bands that have become a commonplace accessory. While many of these devices include health and wellness products, like sleep and heart rate monitoring, their accuracy does not compare to what is available from a healthcare provider. For consumers, tracking trends, even without exact results, is enough to provide the information they need to make decisions about day-to-day activities. These wellness devices meet the needs of the average consumer at a price point they can afford.
Medical Device Manufacturing Goes Direct to Consumer
As consumers take more ownership of their health and wellness on an individual level, they start to look for tools that empower healthcare decisions. Telehealth services blur the line between traditional care models and more consumer-centric offerings, and dozens of other technologies follow closely behind. Consumerization offers medical device manufacturer’s a unique opportunity to reach global markets with their products, though often at a much-reduced price point.
Volume sales are the solution to shrinking margins, and rapid expansion into emerging markets can provide that volume. Health products have become a major export. Hospital equipment exports have risen by more than 50 percent across dozens of markets. As countries in Latin America, Asia, Africa, Eastern Europe and the Middle East adopt a more Western approach to health services, the need for medical devices grows quickly. However, few countries can afford to support the same level of infrastructure enjoyed in the U.S., so in order to continue to grow, medical device companies need to capture both professional and consumer markets.
Staying Profitable with Lower Margins
Deciding where and how to market a device can be challenging in today’s healthcare marketplace. Consider devices like the Owlet Baby Monitor. This device monitors heart rate and oxygen levels in infants, but it is designed for at-home use. Without FDA approval, it can’t be sold as a medical device for use in a clinical setting, but it has wide applications in the consumer market that allow for profitability while working toward FDA approval.
The ability to sell directly to consumers opens up lots of opportunities. Investors are more comfortable with products that will not face the increased regulatory scrutiny demanded of medical devices. There is less risk of a regulatory delay or denial when developing direct for consumer. This is particularly true with digital health products that require substantially less investment than traditional medical device manufacturing. In some instances, manufacturers only need to develop a platform to pair with existing devices. Fitness bands exemplify this concept where the app that interprets the collected information is the most important part of the product for consumers.
Direct to Consumer Product Development
Developing for B2C starts with the concept that consumer expectations are different. Users want easy interfaces that feel intuitive. This is often more important than functionality and pinpoint accuracy. For hospitals, the complexity of use falls a distant second to the need for accurate clinical data and precise performance.
For B2C products, ease of use is much more important, but that can open the door to significant cost savings. After all, consumers don’t need all-in-one solutions and complex devices, and they couldn’t operate them effectively. By adopting a “good enough” approach to development, manufacturers can keep costs down on consumer goods while continuing to offer the expanded functionality to healthcare organizations.
Creating a Funding Engine
When you can combine medical device manufacturing with mass-market products, you have a formula for increased profits in a time when the future of healthcare is volatile. The medical device industry takes in $155 B annually. Adding to the portfolio B2C products to an existing line of B2B products can create a funding engine that drives additional development and innovation. Lower barriers to entry means that consumer products can be co-developed along with B2B products to expand potential profit margins while minimizing development costs.
Adding digital health services, mobile technologies, DIY products, and stripped down versions of B2B designs can expand streams of future revenue. With regulatory barriers often delaying time to market, wellness products offer an innovative way shorten the development timeline while continuing to stay on the cutting edge of medical device research.
Not all boards and investors have fully embraced the B2C strategy as a way to extend their products to take advantage of the patient empowerment trend.
From a medical device recruiting perspective this is in part driven by the absence of subject matter experts with experience in knowing how to appeal to reach end users.
Though still on the rise, many more companies in the medtech space are adding to their talent roster, senior leaders who bring an understanding of the key challenges and opportunities that a tapping into the patient empowerment trend will yield.
A sound strategy to bring B2C products to market that tap into the “Patient Empowerment” trend could be an answer to establishing a way to fund the long game of high value B2C products that have significantly higher development costs.
