The coronavirus is
scrambling demand. Here are some urgent priorities for the industry.
By Tim van Biesen
and Todd Johnson
Tim van Biesen is
the leader of Bain & Company’s Global Healthcare practice, and
Todd Johnson is a partner with the Healthcare practice. Both are
based in New York.
The authors wish to
thank Joshua Weisbrod, leader of Bain’s Healthcare practice in the
Americas, Loïc Plantevin, leader of Bain’s Healthcare practice in
Europe, the Middle East and Africa, and Vikram Kapur, leader of
Bain’s Healthcare practice in Asia-Pacific for their contributions
to this article.
As the Covid-19
pandemic spreads, and the human cost grows, medtech leadership teams
racing to respond are also managing critical business issues tied
directly to the health crisis. Demand for urgent care equipment and
supplies is outstripping production capacity, while elective
procedures are declining. With healthcare experts and providers
warning of critical shortages of medical equipment to cope with the
crisis, manufacturers are preparing to meet a wartime need scenario.
In the face of these upheavals, we examine near-term implications and
offer an action plan to help companies support their customers and
employees, cope with fast-changing demands and prepare for
longer-term structural changes to the business.
Implications of
Covid-19 for medtech
As healthcare
providers expand their capacity to treat coronavirus patients, we
expect to see a change in the mix of procedures and a rapid shift of
both Covid- and non-Covid-related procedures to alternate sites of
care.
Recognizing the
nature of the crisis, administrators have begun to reduce the number
of elective surgeries, weakening demand for some products, such as
orthopedics, general surgery equipment and aesthetics.
Manufacturers face
increased demand for products critical to coping with the pandemic,
such as ventilators, respirator masks, gowns, gloves and masks.
Government officials may ask some medtech companies to provide
flexible capacity to produce urgently needed equipment and supplies.
However, after the crisis, it’s highly likely that a large portion
of deferred demand will return, creating the potential for shortages
of stock and supply-chain disruption. Patients requiring ongoing,
clinic-based treatments (such as infusions) who want to avoid
hospital treatment may look for home-based options, boosting short
term demand for medtech supplies geared to home treatment. That shift
could alter long- erm patient preferences.
For smaller medtech
companies, changes to the traditional flow of business may lead to
cash shortfalls and sales rep departures that threaten long-term
survival. Over time, that trend could lead to increased consolidation
in the industry. Another area likely to face disruption is the work
of traditional sales reps. We expect a sharp increase in virtual
engagement between reps and customers as hospitals implement longer-
term access restrictions to operating rooms, consumers embrace online
medtech delivery and the industry turns increasingly to virtual
training tools. These shifts have the potential to slow or even
reverse the trend of hospitals outsourcing select services such as
biomedical engineering, as providers look to limit nonemployees and
service companies whose presence in clinical settings may place their
own employees at risk. Business priorities for the short and longer
term:
Near term
Reassess near-term
salesforce targets and update commission structures. Reps are likely
to miss bonus targets for reasons beyond their control. Prepare for
stock-outs and supply chain disruption. It is highly likely that a
large portion of deferred demand will return after the crisis.
Consider temporary pricing reductions or alternative contracting
structures during the crisis as an investment in deepening
relationships with customers.A Covid-19 Action Plan for Medtech
Executives
Longer term
Plan for longer-term
supply chain disruptions (e.g., plant shutdowns). Develop a more
stable local supply chain and dual-source more products from
different plants and geographies.
Avoid a massive
buildup of inventory now but prepare for a postcrisis demand spike.
That may require improved systems to locate and move inventory to
where demand is needed.
Work with sales
teams to adjust 2020 and 2021 targets to “share the pain.”
Assuming a large portion of demand comes back, leadership teams
should amend targets based on the firm’s ability to manage cash
flow across quarters and not based on reps’ overall compensation.
Prepare for a
sustained shift of procedure volume from acute care hospitals to
ambulatory surgery centers and office-based labs.
Monitor and respond
to increases in at-home care delivery, which will require new and
innovative products, user interfaces, commercial models and supply
chains.
Invest in digital
platforms, for customer engagement (e.g., telesales, virtual rep in
the operating room)
as well as for
internal training and team collaboration.
Monitor the risk
that disrupters (like Amazon) could create a foothold in select
medtech categories
(such as personal
protective equipment) Invest in telemedicine and connected devices,
including mobile diagnostics, data monitoring and device support, to
virtually support real-time physician consultations.
As it helps to
battle the Covid-19 pandemic, the medtech industry is grappling with
perhaps its greatest test in modern times. Committing to the right
principles in this challenging period can help deepen customer
relationships and strengthen businesses for the future.For more
information, visit www.bain.com
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