The global medical devices market is projected to grow at 4.4% CAGR until 2025. But large medical devices with high initial procurement costs are experiencing growing pains. Customers are now scrutinizing prices as transparency of the procurement process increases and hospital consolidation weakens manufacturers’ negotiating positions. Facing these challenges, manufacturers have offered financing options to allow customers to spread the cost over multiple years. Yet, it is becoming harder for device makers to justify price premiums. It is even more challenging to convince customers who already own a large medical device to switch and upgrade if there are no cost saving benefits from doing so.
The challenge of selling large innovative medical devices
In recent years, buyers are more carefully examining their annual budgets and cost of devices, leaving it largely to manufacturers to help buyers secure sources of funding. Manufacturers of large devices need to ensure that procedures that use a new device are reimbursed adequately and to justify to buyers why the expected use of a device is worth the up-front investment. It is possible for them to defend price premiums, but generally only if a device lowers the other costs incurred by the buyer per patient, per use. More importantly, buyers, including hospitals, are often motivated to acquire a new device if they anticipate a high expected rate of use. The speed at which a device will help its buyer recoup procurement costs and start generating profits will depend on the frequency of use and reimbursement level for associated procedures. A high reimbursement rate will ensure that procedures will help cover the cost of procurement and device maintenance on top of the costs incurred to perform the procedures. As device manufacturers work to address any challenges in selling their large, high-cost products, there are three innovative business models that are emerging to attract buyer interest.