Medtech: Capitalize On These 4 Trends To Thrive In 2025
By Jim Welch and John Babitt, EY
In a year characterized by both unprecedented challenges and groundbreaking advancements, the medtech industry continues to demonstrate its resilience and capacity for innovation. Faced with the aftermath of a global pandemic and economic fluctuations, medtech has shown remarkable agility, pivoting to meet the rapidly changing needs of both healthcare providers and patients alike. Against this backdrop, the EY Pulse of the MedTech Industry Report 2024 delves into the complexities of the current landscape, offering insights into how the industry is not just navigating but actively thriving in an unceasingly complex environment.
1. A Year Of Resiliency Amid Challenges
Amid global supply chain issues, reimbursement challenges, slowing procedure volumes, tighter hospital budgets, evolving health policy, and other headwinds, the industry’s ability to adapt was tested over the last year. As such, medtech’s performance — particularly in the first half of 2024 — highlighted the struggle to build profitability. A marked 12.8% increase in sales, general, and administrative (SG&A) expenses in 2023 further underlines the ongoing challenge of maintaining profitability in this environment.
Despite strong growth stories in recent years, even leading medtechs saw setbacks related to areas such as sales team alignment, integration into hospital workflows, and volume-based procurement models. These issues among some of the industry’s largest players underscore the broader trend of an industry grappling with a higher-cost environment and increased pressures around margin.
At the same time, the medtech industry’s journey has been marked by a steadfast pursuit of growth, despite rising input costs, shifting regulatory environments, and quickly evolving market dynamics. Yet, it has managed to find modest growth, underscoring its resilience, inherent strength, and adaptability. Over the past year, the medtech industry reported a growth rate of 3.8%, with total revenue reaching $587.6 billion, a testament to its enduring vitality.
2. A Record-High Number Of FDA-Approved Innovations, With AI Playing A Key Role
Innovation remains the foundation of the medtech industry, driving its advancement and shaping the future of healthcare. This year had a significant uptick in regulatory activity, with a record number of 510(k) and pre-market approvals signaling a vibrant pipeline of new technologies. Artificial intelligence (AI) also stands out as a transformative force for the industry, with its integration into medical devices opening new frontiers in personalized, efficient patient care.
The surge in AI applications, from diagnostic tools to surgical aids, exemplifies the industry’s commitment to harnessing technology for better health outcomes. In particular, the FDA’s authorization of the highest number of novel devices in its more than 40-year history signifies a milestone in innovation, with AI playing a pivotal role in the industry’s future. This emphasis on AI and technological innovation is not just transforming patient care but is also setting the stage for the next wave of medtech breakthroughs. For instance, the FDA has recently approved an AI-driven algorithm that predicts patient deterioration and another AI-backed tool that enables remote analysis of digital pathology imagery. These advancements showcase the diverse applications of AI that are already enhancing medical diagnostics and patient care.
3. Strategic Dealmaking: Fewer, Bigger, Better
The landscape of medtech dealmaking in 2024 reflects a strategic recalibration toward fewer, but larger and more impactful, transactions. This trend underscores a deliberate focus on acquiring assets that promise significant growth potential and calculated alignment. Our report reveals an 18% increase in deal value, reaching $57.7 billion, highlighting the importance of mergers and acquisitions (M&A) in driving innovation and market expansion. The shift toward strategic, high-value deals is a clear indicator of the industry’s focus on sustainable growth, signifying a mature perspective on fostering long-term innovation and competitiveness.
Despite a 42% drop in deal volume in the last year, the increase we’ve seen in deal value indicates a trend toward more substantial and strategic investments, with large deals such as Johnson & Johnson’s acquisition of Shockwave Medical accounting for a significant portion of annual M&A investment. By approaching M&A with this strategic lens, the medtech industry is making clear that it’s focused not just on growth but on that which is both sustainable and in alignment with long-term objectives. Additionally, the industry’s dealmaking firepower remains robust, with $466 billion available for future transactions, positioning medtech companies to capitalize on strategic opportunities as they arise.
4. Embracing The Consumer Health Opportunity
The proliferation of consumer health technologies across the health ecosystem is reshaping the way we think about healthcare, making it more accessible and personalized. In a rising trend, the medtech industry is increasingly deploying consumer health strategies, driven by growing demand for direct-to-consumer medical devices. For example, products such as continuous glucose monitors, traditionally used in clinical settings, are now finding a broader audience among health-conscious consumers.
This shift represents a significant opportunity for medtech companies to explore new revenue streams and deepen consumer engagement through consumer-centric health solutions. It also highlights the industry’s adaptability and its potential to impact healthcare delivery in profound new ways. The results of our recent EY Future Consumer Index survey demonstrate a willingness among consumers to invest in health and wellness, with a significant portion ready to share private data for personalized health recommendations. These sentiments signal an ongoing shift in consumer behavior that medtech companies can leverage to drive growth. And as the market for consumer health devices expands, companies are securing significant funding to develop innovative health monitoring solutions that cater to the proactive health management needs of many consumers.
Conclusion
As the medtech industry continues to navigate the complexities of the current landscape, its path forward is marked by opportunities for growth, innovation, and strategic evolution. The challenges of today pave the way for the breakthroughs of tomorrow, whether through the integration of cutting-edge technologies, exploration of new market segments, or the cultivation of strategic partnerships. By focusing on strategic investments, cost optimization and consumer engagement, medtech companies can unlock new avenues for growth and continued success in an ever-changing market. Those that embrace adaptability as a core tenet of their operations will be best positioned to thrive in this dynamic environment, leveraging the innovation ecosystem to remain robust and responsive to the evolving demands of healthcare.
Explore our full report, which includes financial performance and dealmaking analysis, perspectives from industry executives, and strategic operational insights.
About The Authors:
Jim Welch is the EY global medtech leader, working directly with EY teams that serve medtech companies in the areas of strategy, growth, operations, technology, risk, transactions and compliance. He also has led the demand side of EY, serving healthcare providers, payers, pharmaceutical manufacturers, and clinical research organizations. In addition, Welch coauthors the annual EY MedTech Pulse of the Industry Report and hosts a panel at The MedTech Conference, hosted by AdvaMed, each year. He has a Bachelor of Science from Miami University (Ohio).
John Babitt is the EY Americas medtech transactions leader, bringing over 30 years of experience in the life sciences, medtech and healthcare industries. He provides deep insights on M&A, supply chain, IT, financial, and accounting matters, as well as tax considerations, and frequently speaks at AdvaMed’s The MedTech Conference and other industry events. Babitt has an MBA from the University of Miami.
The views reflected in this article are the views of the authors and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.