Modified Image Original Image©NEC Corporation of America via flicker.com
My colleague Kirk Jackisch and I attended the 2nd Annual Medical Device Strategic Pricing Conference in Atlanta this past week. There were over 100 attendees from various medical device, product and technology companies. Most attendees seemed to wear multiple hats within their respective companies: pricing (of course), contracting, sales operations, analytics and marketing.
A first-time attendee, I found the conference very interesting and informative. The industry professionals that presented, did a terrific job outlining many factors that are contributing to a significant evolution in the way med-tech companies interact with their customers. From the White House down, the industry is focused on increasing the access & the quality of healthcare and decreasing overall costs.
What Did We Learn?
The above 3 objectives resulted in discussion around the following industry trends/concerns.
- Regulatory changes, regarding how healthcare providers are reimbursed for their services
- Greater industry consolidation between healthcare providers and insurers
- Growth in provider networks, alliances and group purchasing organizations
- Increase in the economic stakeholder’s influence and a decrease in the clinical stakeholder’s influence in the med-tech product selection, purchase and use
- Rapid sophistication in the customer’s procurement strategies and practices
These industry trends and the fact that per capita healthcare costs in the U.S. are more than 2 times the cost of healthcare in any other place in the world, have created enormous pressure on the med-tech commercial teams that are accountable for pricing.
The Challenges Facing Today’s Pricing Teams
- Managing prices has gotten much harder and way more complex
- The need for a pricing strategy that is aligned with the company’s business strategy is required but missing
- We need to do better at articulating and quantifying our product’s value
- Pricing needs to be part of the product development process
- The power has shifted entirely to the buyers
- I am glad to hear other companies are facing the same challenges we are, we thought we were the only ones!
I also heard lots of interesting and innovative solutions to these challenges.
Pricing metrics and structures that are unique and focused on outcomes seem like good opportunities for many of the med-tech companies to work towards. Development of economic value calculators that are good selling tools to help support the product’s value proposition seem innovative for the industry. Further internal development of the pricing function, organization and skills is a must – and a work in progress.
Article written by Greg Thomas, Vice President Pricing Research & Analytics, Pricing Solutions Ltd. Pricing Solutions is an international pricing strategy consultancy dedicated to helping clients achieve world class pricing competency.