Medical device manufacturers begin risk-based contracts with providers

While medical device marketing fits within a larger healthcare advertising scheme, the fact that manufacturers sell a tangible product has produced a slightly different industry dynamic than those of the pharmaceutical field. However, the transition to pay-for-performance has transformed the way many providers look at medical device manufacturers and their relationships with their products.

Modern Healthcare reported that greater access to data has altered many providers' opinions on the reliability of certain medical devices, which has prompted manufacturers to offer new risk-based contracts for the adoption and implementation of their products. While such a dramatic paradigm shift is difficult to keep up with, marketers need to stay on top of how providers are responding to their products and services.

Manufacturers are starting to split risks over their products with providers.

Divisive devices
According to Modern Healthcare, St. Jude Medical announced that it would pay providers who purchase and use cardiac devices a rebate of up to 45 percent of the net price for cardiac resynchronization therapies if the patient in question requires a follow-up procedure within the next year. While some device marketers will balk at this number, Brandi Greenberg, managing director at the Advisory Board Company, explained that St. Jude's efforts reflect a confluence of needs and demands in the industry.

"[Manufacturers are] aligning risk to the kind of risk that matters to providers," Greenberg told Modern Healthcare. "There is a recognition that it is a much more competitive landscape with financial pressures on both sides. "Suppliers are asking, 'How else can we differentiate ourselves?'"

"The FDA used to take only 90 days to reach an approval decision. Now, it takes 140."

Foraging for finances
As manufacturers begin to feel the pressure from an industry where medical inefficiency is no longer rewarded, the American Action Forum explained that the emergence of risk-based contracts for medical devices coincides with a series of slowing growth rates within the industry. The AAF noted that, in 2005, the U.S. Food and Drug Administration used to take only 90 days to reach a decision on a device's approval. In 2010, that number has increased more than 55 percent to 140 days on average.

In addition, while the medical device industry is projected to grow 6.6 percent annually from 2014 to 2017, progressively longer FDA approval timetables will slow growth from 2016 onward. The Patient Protection and Affordable Care Act will also drain a further $20 billion in excise taxes until 2020.

With all of these pressures in mind, it is easy to see why medical device manufacturers are jumping on board the risk-based bandwagon. If manufacturers either are not willing or do not have the capital to gamble in these contracts, an experienced marketing agency with tried-and-tested advertising solutions may help foster closer relationships between brands and their clinical clients.

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