New product guarantees for U.S. hospitals may put medical device manufacturers at risk of losing profits, as companies may have to pay for follow-up treatments should their products not work as expected, says an analyst with research and consulting firm GlobalData.
According to Wenlu Hu, GlobalData’s Analyst covering Medical Devices, this new marketing strategy will be mutually beneficial in the short term, as it will help manufacturers who are struggling with decreasing demand for their products, while offering quality reassurance and financial risk-sharing of procedures for healthcare providers.
However, in the long term, device manufacturers may see their profits disappear, as they could have to pay for patients’ subsequent treatments.
Hu explains: “Faced with a difficult economic climate and the medical device excise tax, which is unlikely to be repealed, there is an urgent need for device makers to demonstrate the cost-effectiveness of their products and services in order to gain a competitive edge in the marketplace.
“However, offering an extended guarantee will not reduce the likelihood of patient lawsuits over faulty products, which have been on the rise in recent years. Furthermore, hospitals may seek even more robust performance guarantees from device makers when this marketing strategy becomes more common, at which point manufacturers may find themselves in a profit-losing situation.”
While it remains unclear how many hospitals have signed up for the new guarantees, companies such as Medtronic, Johnson & Johnson (J&J), and St. Jude Medical have all become amongst the first to offer such promises. Manufacturers of hip and knee implants have also indicated an interest in providing similar guarantees.
“Overall, this marketing strategy indicates that evidence-based and risk-sharing healthcare is becoming increasingly important, as device makers are practically required to take on additional risks to gain sales and reassure healthcare providers of the quality of their products,” the analyst concludes.
