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Medical device companies tapping COVID as an opportunity to reinvent business models

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Aryaman Tandon, Practice Leader – Healthcare, Praxis Global Alliance and Prabal Chakraborty, Domain Leader – Medical Devices, Praxis Global Alliance analyse the disruptions to the medical device supply chain, the ways companies are fixing it and demonstrate how agility, digitisation, and innovation are key elements of the next-gen, future-ready business model of medical device industry

 Today, we all are amidst an unprecedented pandemic that has an unfavourable impact on the country’s economy and its healthcare system. Due to the surge in demand for COVID-19 kits, ventilators, etc., there is a sudden increase in the load on healthcare infrastructure/workforce of the country. This has generated a need and created an opportunity for innovation in medical and diagnostic production. The entire value chain from R&D to sales/marketing has been impacted in one way or the other.

  1. Research and development – Due to several severe budget rationalisation and re-prioritisation to minimise cashflows, few organisations have delayed ongoing research. Moreover, there has been an impact on the productivity of scientists and researchers due to remote operations and inefficient collaboration.
  2. Manufacturing – Uncertainty around COVID-19 trajectory has impacted demand forecast which has affected production schedule. There is a severe unavailability of labour and imported raw materials. The demand is shot up for COVID-19 kits including PPE, masks, etc. which has induced uncertainty in the demands for other products.
  3. Distribution – Due to multiple lockdowns, the distribution of devices was impacted initially because of ambiguity in regulatory policies of medical devices followed by different states.
  4. Sales and marketing – Due to reduced mobility, salespersons of these medical devices are not able to sell effectively.

As this pandemic has impacted the healthcare industry on various fronts, it will lead to changes across the value chain and will certainly digitise the supply chain. Thus, firms should take advantage of this crisis and transform their conventional business model and supply chain.

Research and Development

Budget prioritisation should happen towards building new products driven by latest technologies like 5G, IOT, AI/ML, etc. which would help in improving overall customer experience. Further, new-age analytical methods would help in improving the R&D team’s overall productivity and getting products to market faster.

Manufacturing

Currently, domestic manufacturers largely produce low-cost products and 70-75 per cent of the devices used in India are imported. With increased focus on domestic manufacturing (due to Production Linked Scheme) and flexibility to adjust their product portfolio as per demand, companies should consider manufacturing indigenously.

Distribution

Companies will start focusing on other modes of distribution apart from offline wholesalers. Due to rapid digitisation, eCommerce and digital dealerships should be the new focus areas of distribution and this will assist the companies in expanding their reach.

Sales and marketing

Existing sales tech should be revamped for effective customer engagement in the virtual environment through tele sales, virtual rep in an operating room, etc. Online traffic should be improved by search engine optimisation and running campaigns on social media platforms.

Thus, digitisation is the need of the hour and the industry will revamp its supply chain by adopting digital enablers at each node of the chain. Moreover, it is equally important to mobilise the resources of different health systems most efficiently and effectively.

Apart from supply chain specific improvements, companies are planning to take advantage of this crisis to improve their overall business model and adopt a more customer-centric approach. For instance:

  1. Remote monitoring and diagnosis – Telemedicine is the future of medical device industry. It aims to bring care closer to patients with increased adoption of remote patient monitoring systems. Thus, innovation in R&D space is needed to make devices compatible with remote monitoring and diagnosis. Apart from the devices, medical devices manufacturers might have to provide technology and a complete package of services that are compatible with their devices.
  2. Changes in geographic spread – Global and domestic players should increase their focus on Tier 2 and Tier 3 cities from where the next wave of growth would come, and healthcare infrastructural improvement would happen. Furthermore, ‘Ayushman Bharat’ will help increase healthcare spending in T2/T3 cities by the Government into healthcare delivery, diagnostics, and other critical areas.
  3. Shift towards overall healthcare ecosystem management –
  4. To enhance the customer NPS and LTV, companies may serve as a whole health service provider against only equipment providers to fulfil customer experience holistically. For instance, along with providing lab equipment, a company can provide lab financing solutions, lab information systems, re-agents procurement platforms, mobile healthcare applications, among others. New technology in medical devices like 5G, IOT, AI/ML, etc. would further improve product design, equipment connectivity and overall customer experience.
  5. Further, medical device companies are building capabilities and designing devices for innovative solutions – ambulatory surgery centers, portable point-of-care centers (not present in the diagnostic laboratories), and drive-through clinics. These outpatient centers are expected to grow as patients migrate away from hospitals. Thus, medical device manufacturers are investing in designing devices that are compact and release results quickly. Companies are also investing in data-enabled devices (with embedded GPS technologies) to enable real-time updates of location.
  6. Thus, companies should provide a continuum of care from diagnostic to treatment to post-treatment wellness treatment. This holistic medical care experience to patients by serving as a one-stop-shop will help in increasing NPS for companies.
  7. Digital medical education – With increasing awareness about healthcare services, people seek out relevant and curated health-related information on digital platforms. Hence companies should start focusing on digital education and should take first-mover advantage in this space by tapping the customers early in the process.

Further to promote medical devices segment, the Government has allowed 100% FDI through automatic route for both greenfield and brownfield manufacturing. Thus, domestic manufacturers should leverage Government support to improvise their business model.

However, defining the roadmap and strategising is not sufficient. It is equally important to develop an implementation plan that executes the desired objectives of digitising supply chain and revamping the business model. A thorough plan should be developed to deploy the right resources and manpower in the right direction.

CXOs will play a key role in ensuring that an organisation has the required business-building capabilities to support multiple new initiatives at the same time. This will provide multi-dimensional growth and help an organisation to hedge their risk against uncertain pandemics. Thus, agility, digitisation, and innovation are key elements of the next-gen, future-ready business model of medical device industry.

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