As the Covid-19 pandemic spreads, and the human cost grows, medtech leadership teams racing to respond are also managing critical business issues tied directly to the health crisis. Demand for urgent care equipment and supplies is outstripping production capacity, while elective procedures are declining. With healthcare experts and providers warning of critical shortages of medical equipment to cope with the crisis, manufacturers are preparing to meet a wartime need scenario. In the face of these upheavals, we examine near-term implications and offer an action plan to help companies support their customers and employees, cope with fast-changing demands and prepare for longer-term structural changes to the business.
Implications of Covid-19 for medtech
As healthcare providers expand their capacity to treat coronavirus patients, we expect to see a change in the mix of procedures and a rapid shift of both Covid- and non-Covid-related procedures to alternate sites of care. Recognizing the nature of the crisis, administrators have begun to reduce the number of elective surgeries, weakening demand for some products, such as orthopedics, general surgery equipment and aesthetics. Manufacturers face increased demand for products critical to coping with the pandemic, such as ventilators, respirator masks, gowns, gloves and masks. Government officials may ask some medtech companies to provide flexible capacity to produce urgently needed equipment and supplies. However, after the crisis, it’s highly likely that a large portion of deferred demand will return, creating the potential for shortages of stock and supply-chain disruption. Patients requiring ongoing, clinic-based treatments (such as infusions) who want to avoid hospital treatment may look for home-based options, boosting short term demand for medtech supplies geared to home treatment. That shift could alter long-term patient preferences.
For smaller medtech companies, changes to the traditional flow of business may lead to cash shortfalls and sales rep departures that threaten long-term survival. Over time, that trend could lead to increased consolidation in the industry. Another area likely to face disruption is the work of traditional sales reps. We expect a sharp increase in virtual engagement between reps and customers as hospitals implement longer-term access restrictions to operating rooms, consumers embrace online medtech delivery and the industry turns increasingly to virtual training tools. These shifts have the potential to slow or even reverse the trend of hospitals outsourcing select services such as biomedical engineering, as providers look to limit nonemployees and service companies whose presence in clinical settings may place their own employees at risk.
Business priorities for the short and longer term:
- Reassess near-term salesforce targets and update commission structures. Reps are likely to miss bonus targets for reasons beyond their control.
- Prepare for stock-outs and supply chain disruption. It is highly likely that a large portion of deferred demand will return after the crisis.
- Consider temporary pricing reductions or alternative contracting structures during the crisis as an investment in deepening relationships with customers.
- Plan for longer-term supply chain disruptions (e.g., plant shutdowns). Develop a more stable local supply chain and dual-source more products from different plants and geographies.
- Avoid a massive buildup of inventory now but prepare for a postcrisis demand spike. That may require improved systems to locate and move inventory to where demand is needed.
- Work with sales teams to adjust 2020 and 2021 targets to “share the pain.” Assuming a large portion of demand comes back, leadership teams should amend targets based on the firm’s ability to manage cash flow across quarters and not based on reps’ overall compensation.
- Prepare for a sustained shift of procedure volume from acute care hospitals to ambulatory surgery centers and office-based labs.
- Monitor and respond to increases in at-home care delivery, which will require new and innovative products, user interfaces, commercial models and supply chains.
- Invest in digital platforms, for customer engagement (e.g., telesales, virtual rep in the operating room) as well as for internal training and team collaboration.
- Monitor the risk that disrupters (like Amazon) could create a foothold in select medtech categories (such as personal protective equipment)
- Invest in telemedicine and connected devices, including mobile diagnostics, data monitoring and device support, to virtually support real-time physician consultations.
As it helps to battle the Covid-19 pandemic, the medtech industry is grappling with perhaps its greatest test in modern times. Committing to the right principles in this challenging period can help deepen customer relationships and strengthen businesses for the future.
Tim van Biesen is the leader of Bain & Company’s Global Healthcare practice, and Todd Johnson is a partner with the Healthcare practice. Both are based in New York.
The authors wish to thank Joshua Weisbrod, leader of Bain’s Healthcare practice in the Americas, Loïc Plantevin, leader of Bain’s Healthcare practice in Europe, the Middle East and Africa, and Vikram Kapur, leader of Bain’s Healthcare practice in Asia-Pacific for their contributions to this article.