Maximizing Profit Capture For Medical Device Manufacturers

Facing unprecedented changes from government health care reform, device approval regulations, changes to sales relationships, and shifts in buying power, medical device manufacturers are under extraordinary profit pressure. This paper explores the implications of these challenges and the four essential strategies required to gain control over pricing processes, define product value, and increase profit visibility. Armed with these strategies, the astute manufacturer will be in a position to defend price levels, manage inevitable pricing variations, and raise the bar of price accountability. Embracing a strategic pricing journey can yield sizable returns and above-market growth during a time of great industry upheaval.

Medical device manufacturers are facing unprecedented pricing and profit pressure in today’s market. Several factors are shifting power toward the buyer including government health care reform; changes in the physician, vendor and economic buyer relationship; and third-party purchasing consultants, while regulatory changes point to the distinct possibility of negatively affecting profit margins.

Government Health Care Reform
The federal government pays nearly 50 percent of all medical outlays in the US. With dark cost clouds and record budget deficits approaching, the government is desperate to find ways to cut medical costs. The most visible attempt is the passage of the U.S. Patient Protection and Affordable Care Act (PPACA) in 2010. Beginning in 2013, medical device companies will have to pay a 2.3 percent excise tax on gross revenues; in return, the government is trying to reassure manufacturers that the increase in insured patients will more than offset the new cost. However, for most device makers, it will require volume growth in excess of 20 percent to fully offset the tax and remain profit neutral....

To download the complete white paper, click the "Access Content" button below.

For more innovation and product development content for medical device companies, visit Viewpoints on Innovation from Kalypso.