Frost: Cost-control Tactics Curb Progress in Euro Medical Device Market
March 23, 2006
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As the result of increasing cost pressures and diminishing healthcare budgets, today's European medical devices industry is focusing on cost-containment and the rationalization of medical resources, according to Frost & Sullivan.
The healthcare industry's drive to implement stringent cost-containment measures has given rise to diagnostic-related groups (DRGs).
These groups introduced new reimbursement regulations by classifying the hospital stay based on the patient's medical condition.
Under this system, each DRG is given a fixed level of reimbursement, ensuring that hospitals rationalize patient treatment and confine all related costs within that level.
"The rationalization of medical resources and the implementation of new reimbursement regulations such as the DRGs are likely to drive the market for specialist high-value medical devices," said Frost & Sullivan research analyst Eleni Grammenou.
On the other hand, the new reimbursement system could adversely affect the procurement of novel and innovative technologies, as overall funds allocated for each DRG may not be sufficient when faced with actual healthcare demands, analysts said.
This is a strong threat to European medical devices manufacturers since innovation is "absolutely critical" to keep pace with the competition, as well as to ensure the continuous evolution of patient care.
"The ongoing financial reductions in the procurement of new technologies will have a negative impact on the development and innovation of the medical device industry," said Grammenou. "More importantly, it will compromise the quality of healthcare provision for patients."
Lack of innovation can also have an adverse impact on the demand for conventional medical devices in an industry where novel products, as well as techniques, are being rapidly introduced and adopted.
For instance, while the introduction of minimally invasive surgery and the growing uptake of stenting revolutionized the international cardiology industry, there is no doubt that these developments have led to a decline in the demand for traditional medical devices used during open-heart surgeries, analysts said.
The increasing trend toward bulk purchasing poses another challenge to device manufacturers. Due to rising cost pressures, hospitals are merging to form purchasing groups in order to benefit from the economies of scale offered by bulk buying. According to Frost & Sullivan, this sort of large-scale buying exerts immense price pressure on device manufacturers and greatly intensifies the levels of competition in the industry.
"To sustain market leadership or dominate the industry, manufacturers need to differentiate their product offerings, as well as maintain a large product portfolio," said Grammenou. "They need to constantly strive to develop new and state-of-the-art products to ensure they stay ahead of their competitors and satisfy all their customers' needs."
Developing products for the ambulatory or homecare settings is a strategy manufacturers can consider to gain competitive edge. Healthcare provision in an out-of-hospital environment is gaining importance across Europe and provides an excellent opportunity for manufacturers to develop devices that enable patients to administer the medication themselves.
Source: Frost & Sullivan.