Given the increasing toll that COVID-19 lockdowns are imposing on economies, many markets that have seen their peaks are beginning preparations to reopen. As the first market impacted by COVID-19 and the first to institute a gradual reopening since March, China is two months ahead of all other major markets in their recovery journey. We spoke to several medtech executives across different spaces to get a glimpse of what the future may look like in China, as well what it may mean for other markets.
Like other major markets, China implemented aggressive lockdown measures to contain the spread of COVID-19. As a result, hospital patient visits in February 2020 were 45% lower than that of 2019. The impact on procedures has been even more significant as several executives we spoke to mentioned that during the peak of the pandemic, hospital procedures were at 20 to 30% of typical volume due to restrictions on the movement of people, tightly controlling the flow of patients into hospitals and reserving hospital capacity in the event of a potential surge in patients.
The impact has been felt across the board. An executive at a manufacturer of surgical devices told us: “Hospitals have been turning down a lot of elective cases and focusing on emergency cases. Particularly for hip and knee replacements, this has been catastrophic.”
Even in offline diagnostics, the impact has been surprisingly large. According to a regional sales manager at a multinational IVD device company, “There has been a large impact on our reagent sales because people are staying home and not congregating, which has significantly reduced the incidence of influenza and other infectious diseases.” Exceptions to this appear to be those directly related to the diagnosis and treatment of coronavirus, such as ventilators, personal protective equipment and CT scanners. However, even in those cases a large proportion of the surge in volume can be attributed to donations.
COVID-19 has also limited sales rep access due to a general aversion to face-to-face meetings as most hospitals began requiring reps to make appointments. Face-to-face meetings have become phone calls and virtual meetings. “Unless it is a critical professional service, most sales reps have a difficult time visiting customers as hospitals in large cities all require appointments. Online meetings have replaced regular visits up to 90%,” said one executive.
In China, as the pandemic passed its peak in March and restrictions began to be ease, hospital visits began to recover. In Shanghai, surgical procedure volumes have recovered to 48% of historical levels by the end of March. According to the executives we spoke to, April procedures have on average recovered to 50 to 70% of normal levels. If there is no relapse in cases, many in the industry expect procedures to slowly return to normal levels by around September.
However, the recovery has been uneven across the country. One executive we spoke to said, “National procedure volumes have recovered to around 60 to 70% of historical levels. In some areas it is as high as 70 to 80%. But in areas such as Shanghai, because a large proportion of surgeries come from outside the city and many choose to receive treatment locally, this has caused the recovery outside of the largest cities to be higher. County hospital recovery has also been better than larger city hospitals.”
Those we spoke to in general believe that digital engagement has seen significant adoption—and that digital engagement is here to stay. “Customers, particularly KOLs, have been very receptive to online engagements. They believe it is a more efficient and flexible way to interact.”
For meetings, the feedback has also been positive. National speakers can now speak at multiple meetings in the same day. They can give a lecture for one company now and the very next hour support a meeting sponsored by another company. “I believe online meetings will be a regular channel in the future. In the past you were invited to a meeting and might have to travel to listen to the content; now at night you can listen to experts at home with high quality. There is no need to travel to meetings anymore.”
The impact on companies has been significant. “In the past, a 200-person meeting was considered a huge meeting. Now our online meetings can easily top 2,000 attendees. Over the course of a month, we doubled our registered users. Before, there were only 75,000 registered users; now it has increased to 150,000, and these are all HCPs.”
Experts also agree that despite the increasing adoption of digital channels, they will not replace face-to-face interactions: “While it may be easy to engage with a customer you know well digitally, it becomes difficult when you are trying to identify and engage with a new customer.”
While face-to-face encounters are expected to recover and remain the norm, the nature of those engagements will evolve. “The biggest thing is that customers will be less willing [to meet] face-to-face still unless you are providing a specific service that they need. Pure social visits and cold calls are less welcome now and lowered to a minimum.”
While experts we spoke with do not believe there will be changes to the medtech market that have not already been put into motion, the majority believed that COVID-19 will accelerate their implementation. For example, measures designed to build referral networks and reduce the pressure of the largest hospitals such as hierarchical medical systems and regional healthcare groups are expected to become more important.
There was also a strong consensus that cost control measures and the shift towards locally made products in commoditized categories will continue at a faster pace. According to an executive at a large medical device logistics provider: “Because of the pressure that COVID-19 has placed on the insurance pool, there will be an accelerated pace of cost cutting through sunshine procurement and volume-based procurement. I don’t think there is much of a chance for low-end consumables from foreign companies. There is a large probability they will be replaced.”
Lower prices and the shift away from relationship-based selling will see the de-emphasis of the traditional sales rep and distributors. In the top end of the market, this would mean more services and product differentiation provided by manufacturers such as clinical education teams, medical liaisons or key account managers.
Smaller hospitals and cities continue to outpace growth in the broader market. As one executive said, “We may see more collaboration with distributors to increase their capabilities and develop systems, using their larger bag of products to provide more efficient coverage that supports a large sales force.”