The NHS has the challenge to deliver £22 billion in savings by the end of the financial year 2020/2021 including £700m from improving procurement. The growing demand for products that are “fit for purpose” and economically priced has forced medical equipment suppliers to devise and develop initiatives to attract and retain these customers.

MEDICAL DEVICE AND CONSUMABLE INDUSTRY

The medical device and consumable industry have a challenging time ahead. As the NHS implement measures and initiatives to reduce costs and make savings, NHS organisation’s are operating on budgets that are tighter than ever. These measures are cascading a transformation of the NHS purchasing process that will change the way that medical devices and consumables are procured.

These measures are cascading a transformation of the NHS purchasing process that will change the way that medical devices and consumables are procured and in turn, valued by those organisations.

Traditionally purchasing decisions sat with the end user or clinician. But now a multi-disciplinary group often contribute to purchasing decisions. This wider group of influencers often comes with varying objectives.

OVERCROWDED MARKET

Meanwhile, the medical device and consumables industry has become more competitive than ever. Established categories such as infection prevention, surgical consumables and wound care are becoming overcrowded. As new innovations and products in these categories slow down, smaller companies are gaining market share by offering very low prices coupled with a ‘value’ business model. The pricing war has also been enabled by the growing use of e-tenders and blind auctions, which are aiding the rise of these low-cost players.

These factors, are influencing a greater demand for products that are “fit for purpose” whilst being cost effective. There has seen a sharp increase, particularly in those customers within the NHS, who are attracted towards products that are ‘fit for purpose’ and competitively priced.

VALUE

Unlike customers who prefer high-end products and services, ‘fit for purpose’customers may exchange certain elements of quality and service as a trade-off for lower prices. Whilst ‘fit for purpose’ customers are cost focused, they also have strict criteria for quality, efficacy and safety. They are generally hesitant to pay for extra features or services once their general criteria for a product have been met. Many tenders and auctions within the NHS now have weightings toward these criteria e.g. 95% weighting on price. As cost pressures continue to rise, so will the ‘fit for purpose’ customer but mainly in limited categories.

New innovative products will likely fall under the high-end product category and will demand increased prices as manufacturers re-coup research and development costs initially. Once competitors enter with ‘me-too’ products at lower prices, customers will start viewing them as a commodity product. In categories with numerous products and few differentiating features, customers may choose based on price alone.

PRODUCT CATEGORIES

There are generally four groups of product categories offered by medical equipment suppliers:

1) ‘High-End differentiated’. These products tend to be different in terms of patient outcomes, benefits and efficacy. They are usually highly innovative so can afford the higher-level service package that comes with it.

2) ‘High-End undifferentiated’. These products may once have been innovative but have suffered by me too’ products entering the market. Generally, in this category, companies rely on brand recognition and customer relationships alone to survive.

3) ‘Fit for Purpose’. This category group offer services which are designed to meet expectations. They generally sell at a lower cost and have minimal associated support.

4)' Basic'. This product group generally offer minimal service. They compete only on price and are often used when just a basic service is required.

Take some time to reflect on your medical device business. Which category do your products and services fit into? How do you see yourself providing something different to your competitors?

Contact us to arrange a free 30- minute consultation to discuss developing value-added services that will make you stand out from the overcrowded market.

About the author:

Josie Winter BSc(Hons) MSc: Clinical Director Advanced Clinical Solutions Ltd. www. advancedclinicalsolution.co.uk