The broad retreat of financial markets in 2008 caused historic declines in just about every sector of U.S. industry. The Dow Jones Medical Equipment Index was off 37% for the year, a record drop for this index. What effects will these financial losses have on product development and R&D environments? And, as we start a new year, what tack should medical technology companies take in 2009?
It should come as no surprise that two-thirds of senior corporate R&D managers and executives expect to see a reduction in their 2009 budgets, as reported in a recent industry survey. Some of our company’s clients have already taken steps within their operations to counter the effect of the crisis. These steps range from cutting spending, freezing hiring, and increasing employee workloads to delaying new and existing R&D projects. One of our clients—a therapeutic equipment manufacturing company in Orange County—has already set in place a hiring freeze and drastic cost cuts and postponed the start of new projects to offset the pressure on its finances.
Survival in this environment will require companies to heed the basic principles of value-based medical products: reduce costs, increase effective outcomes, and maintain product safety. Companies developing medical devices may wish to consider the following points.
Reimbursement: Discretionary spending will become an important issue for cash-strapped direct consumers. Demand for cosmetic treatments, implants, and aesthetic and elective surgery will decline, thus reducing demand for associated equipment and devices. Products that have a clear reimbursement strategy will fare better than those without one.
Time to Market: Investors will be eager to gain an acceptable internal rate of return quickly. Thus, the need for accelerated product development will increase. Companies must look at the product development cycle from a complete system perspective. Given that most medical devices go through the 510(k) process, it’s imperative that the company’s product development cycle integrate tightly with FDA requirements. Not meeting 510(k) requirements can cause delays in the project timeline. Companies must identify the requirements early on, and then do it once and do it right.
New product planning: As the baby boomer population ages, demand for effective and efficient healthcare will continue to increase. The need for point-of-care devices and instruments will continue to grow. A single-use device strategy is a popular business model, but it must be used in the appropriate applications, as cost containment measures will intensify in the healthcare industry.
The medical device industry is profitable and it will continue to grow as baby boomers age. Moreover, barriers to entry will keep new competitors at bay. Medical device technology companies simply need to implement some basic fundamentals to stay ahead of the game.
Dac Vu, BSME, MBA, is president and founder of DeviceLab Inc., a full-service product design and development firm. He has more than 17 years of experience in the product design and engineering environment. DeviceLab specializes in the commercialization of innovative medical devices. Since 2001, DeviceLab has completed 14 medical carts, 20 tabletops, and 20 handheld projects. For more information about the firm, visit the company’s listing in the online Consultant’s Directory or go to the firm’s Web site at www.devicelab.com.