The US Medical Device Industry: How to devise a Market Entry Strategy
With an enormous market size of $156 billion, the medical device industry in the United States remains the largest in the world. Companies in the medical device industry consist of articles, instruments, apparatuses, or machines that are used in the prevention, diagnosis or treatment of illness or disease, or for detecting, measuring, restoring, correcting, or modifying […]
With an enormous market size of $156 billion, the medical device industry in the United States remains the largest in the world. Companies in the medical device industry consist of articles, instruments, apparatuses, or machines that are used in the prevention, diagnosis or treatment of illness or disease, or for detecting, measuring, restoring, correcting, or modifying the structure or function of the body for some health-related purpose. Although patients are the end-users of medical devices, manufacturers ideally focus their efforts towards selling their products to healthcare providers who in turn use them to serve the needs of patients.
Majority of the companies in the US medical device industry are concentrated in regions known for other high-technology industries, such as microelectronics and biotechnology. The states with the highest number of companies in the medical device industry include New York, California, Florida, Michigan, Pennsylvania, Massachusetts, Minnesota, Illinois, and Georgia. Compared to several other industries including telecommunications, automotive, and defense, the medical device industry invests a higher percentage of their yearly revenues into product innovation, reflecting the competitive nature of the industry and constant innovation and improvement requirements of existing technologies.
Several companies in the medical device industry are still struggling to formulate the accurate market entry strategy and gain a stronger foothold in the US medical device industry. If you are one of them, get in touch to know about our solutions for companies in the medical device industry.
Major market entry hurdles in the US medical device industry
Medical devices have historically been viewed an industry having faster and lower-cost paths to market when compared to their pharmacological counterparts. In fact, the average cost to develop high-risk, novel medical devices is estimated to be less than a $100 million. Furthermore, device engineers can leverage lower-cost animal models further into development than their pharmaceutical colleagues. This is because human clinical trials necessitate FDA approval, and, in some cases, expenses can be defrayed by revenue generated outside the United States in markets with faster regulatory pathways.
Yet, through its premarket approval, the FDA approved only 39 novel devices last year. Why is there so much difficulty in bringing a medical device to the US market? Infiniti Research has identified three major challenges:
Evolving business models
The traditional business model for companies in the US medical device industry is growing more difficult than ever. Both private and public insurance providers are no longer relying solely on the opinions of medical experts or clinical trial data to make coverage decisions. They are now increasingly looking at cost-effectiveness as one of the major factors for payment. This shift has introduced yet another hurdle for companies in the medical device industry in fields including cardiovascular medicine and orthopedic surgery, where reimbursement from insurance providers is the lifeblood of their business.
Difficulty in attracting investments
Factors such as longer timelines and additional payment hurdles have made it more difficult for early-stage medical device companies to attract investment. Another reason for the drop in early-stage investment in devices may also be due to a lesser number of opportunities for investors to cash in on. When healthcare investors combine the increasing challenges to device payment with limited access to public markets, naturally that capital allocation is skewed toward biopharmaceuticals.
Consolidation of large medical device companies
Many entrepreneurs in the medical device industry are acquainted with trepidation as the larger device companies have consolidated. These large companies play several roles in the device ecosystem. Many of them have investment arms that provide startups with capital. They can also accelerate the growth of a mid-stage company through strategic partnerships. These companies can also engage in acquiring later-stage companies, providing yet another means for early investors to cash out. More number of these large companies can result in a healthier ecosystem.
Despite these challenges, all is not doom and gloom in the medical device industry. Some of these pressures have fueled companies to take innovative themselves and undertake consumer-facing approaches that prioritize self-pay models over reimbursement.
With over 15 years of working for companies in healthcare and medical device industry, Infiniti Research has built strong expertise and recognized know-how on the medical device industry and helping new entrants create a powerful market entry strategy supported by clear-cut facts and figures. Request a proposal now!
Overcoming market entry challenges for medical devices
Formulating an accurate market entry strategy for the medical device industry in the US can clearly prove to be a tricky task. Here are systematic steps that companies the US medical device industry must undertake to ensure a smooth market entry process in this region:
- Choose a region – The U.S. is large in terms of population and geography. Most distributors cover one particular geographic region. Begin by selecting a distributor by narrowing your geographic focus.
- Narrow by specialty – Majority of distributors are highly specialized in both geographic region and device type. Companies in the medical device industry must identify specialized distributors to market their products in new markets.
- Prepare sales pitch – Once distributors are identified by region and specialty and their portfolio is researched, then prepare a sales pitch for an initial email or phone contact. Contact the distributor to outline the business goals, the benefits of your device, and request time to discuss plans in further detail. It is vital to follow up.
- Meet the distributor – Once the meeting with the distributor is fixed, it is essential to ask questions relating to the types of devices they currently sell, how long they’ve been in the market, what percentage of sales comes from the target market, and the sales methods used.
- Begin contract preparations and set goals – Once the discussion has been carried out with the distributor, a contract can be written. It is also necessary to set performance goals for the distributor.
- Provide continuous support – In most cases distributors will not handle sales and marketing independently. Provide updated marketing material and information relating to how your product feeds into the healthcare ecosystem. This includes details on how it impacts workflow, competition, and how major hurdles can be overcome.
Save time in your market entry strategy by relying on our years of experience in helping companies in both pharmaceutical and medical device industry. Get in touch