THE NEW NORMAL
According to the American College of Healthcare Executives, “financial challenges” continue to be top of mind for the fifth year in a row. Beyond economic softness, healthcare reform will have a significant impact on the medical device industry, both in taxes and decreased reimbursement. Companies are presently evaluating different scenarios in order to position themselves for success. The key marketing strategy determinant: product mix.
STRATEGIC PORTFOLIO MANAGEMENT
The legislative changes are forcing companies to seriously consider their strategic options. Marketers are shifting their product/investment matrixes to decide which products to prioritize.
Products that serve the anticipated influx of 35 million younger and healthier patients and are less impacted by reimbursement will be prioritized. Companies will increase advertising, distribution, and product development budgets for these products. Traditional commercial marketing will be key to driving expansion and differentiation. Those products that are negatively impacted by reimbursement will be defocused. Long gone are the “replacement” strategies that had become a common business practice. Services for this type of equipment will grow. What companies will also need to evaluate are gaps in product portfolio and adjacent markets.
A FOCUS ON PARTNERSHIPS
Last year’s economic downtown has inflated corporate cash reserves. Look for companies to use this cash prudently by acquiring products or companies that will immediately improve their competitive position in the new market scenario. However, this is not a heavy spending market, look to CFOs to continue expanding their influence and make investments ever more wisely.
Business development will not be all about M&A, partnerships will be the primary strategy as a way to mitigate risks and prove out business cases. Creative partnerships that increase customer value propositions should flourish and perhaps lead to M&A, but not necessarily. It’s a new game and bigger is not better.
Article to be published in June’s PM360 monthly, for more information click here.