The Need to Transform the Medtech Model in Europe

It is not the strongest of the species that survives, nor the most intelligent. It is the one that is most adaptable to change.

This quote—which refers to the work of Charles Darwin but is often erroneously attributed to him—underscores the need for all organisms to transform in the face of change. Medical-technology (medtech) companies in Europe will understand the power of that insight in the years ahead. While the industry enjoyed robust top-line growth and healthy margins in the first decade of the twenty-first century, that performance is now threatened. Driving this shift are pricing pressures, the emergence of more sophisticated buyers, intensifying competition, new market-access schemes, and regulatory changes. The critical question is whether medtech companies will respond quickly and effectively enough to the altered landscape.

The Boston Consulting Group—with market insights, data, and input from MedTech Europe, an alliance of medtech industry associations—has taken an in-depth look at how companies must respond to the new European market realities and has assessed where the industry stands in terms of making the necessary changes. This work is a follow-up to the MedTech Europe industry-strategy report  Contract for a Healthy Future and BCG’s  Fixing the Medtech Commercial Model: Are You Still Deploying Milkmen in a Megastore World? (BCG Focus, July 2013).

It is based on extensive research involving interviews with more than 50 senior leaders, including both industry and health care stakeholders, as well as a separate survey of 100 industry leaders and stakeholders.¹ 1 Stakeholder interviewees included selected senior representatives from purchasing groups, patient organizations, government agencies, medtech regulatory authorities, and academic research groups. Notes: 1 Stakeholder interviewees included selected senior representatives from purchasing groups, patient organizations, government agencies, medtech regulatory authorities, and academic research groups.

Our research indicates that companies need to move now to maximize the value of their existing business while embracing new markets and approaches, including reinventing how they innovate and positioning themselves as catalysts of efficiency in the health care system. But our interviews and survey highlight that most companies are only just beginning this journey.

Consequently, the greatest threat facing medtech companies might ultimately be their own complacency. Those businesses that fail to respond effectively to the pressures around them risk the fate of the “boiling frog,” a popular metaphor for the danger of inattentiveness and inaction. Although a frog dropped in hot water will jump out quickly to save itself, a frog dropped in cold water that is slowly and gradually heated won’t notice the change and won’t respond to it—ultimately succumbing to the heat.