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June 05, 2014
Is Innovation Out in MedTech? (1 of 2)
By: Doug Mowen

For much of the past 20 years, innovation and profitability have been two constants at medical device, diagnostics and equipment companies. These organizations’ strong development engines, broad technology expertise, smart merger and acquisition decisions, and clear focus on clinical outcomes have paid off in spades.

The research is telling
Accenture’s High Performance Business analysis has noted an increasingly frequent disconnect. MedTech companies’ commitments to broadly defined, clinically-oriented missions are becoming less likely to equal financial success.

Consider these findings:

  • Only four of the 19 “pure play” MedTech companies we analyzed (those with more than 75 percent of their revenue derived from MedTech products) were deemed high performers.

  • Some companies traditionally thought of as top innovators rated poorly on our consolidated scale of financial performance.

  • The disconnect between technology and product innovation and financial performance seems to be widening. MedTech’s R&D spending has been increasing faster than revenue, which in turn, has been increasing faster than earnings. And what about innovation output? Well, it has been declining as a result.

An evolving industry
So, what’s causing the disconnect? A changing buyer/customer with different priorities, ongoing cost pressures, increasing regulatory scrutiny and changing patient populations are all contributing to the shift. These challenges are requiring MedTech companies to revise their strategies and operations. For instance, with regulatory scrutiny levels rising rapidly and demands for evidence tightening, MedTech companies should consider devoting rigorous attention to improving R&D, supply chain and back-office operations. Essentially, additional regulatory burdens must be offset by increased operational efficiency.

To ensure profitability and remain competitive, we have three recommendations for MedTech companies of all types. Join me next week when I delve into these three areas in more detail.

In the meantime, to learn more:

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