Heraclitus once asserted that “Life is flux”. Nothing stays, and change is the only constant in life. Look at how the COVID-19 pandemic has turned the world upside down. Topics revolving around the pandemic’s impacts on the global industries, markets and businesses are dominating everyone’s attention.
While many industries are struggling to survive, let alone making profits, the medical device industry is thriving. Nevertheless, this pandemic is a borrasca rather than a bonanza for those who take the back seat in the same industry.
The ‘Neglected’ Medical Device Manufacturers
Manufacturers of medical devices such as ventilators, PPE (Personal Protective Equipment) and COVID-19 testing kits are in an all-out race to meet the spiking demands. Despite ramping up the production, incapacity to fill the demand-supply gaps is their major hurdle.
On the other hand, the ‘neglected’ manufacturers of less essential medical devices are having a rather different fate. Yes, they do have gaps to fill as well – a surplus. Ever since the pandemic began to spread at an alarming rate, many patients are cancelling or postponing their appointments to stay away from hospitals due to the fear of contracting the coronavirus.
Likewise, many nations have resorted to elective surgery cancellations by issuing executive orders until further notice. Firstly, this is to protect patients from the in-hospital viral transmission. Secondly, it is for better resource allocation. Nations will preserved and prioritized the PPEs, intensive care unit (ICU) hospital beds, medical teams and supports for the patients with COVID-19 infection.
Elective Surgery Cancellation
The COVIDSurg Collaborative conducted a study which is adopting a global predictive model to estimate the 12-week cancellation rates of adult elective surgery across 190 United Nations member countries. This journal published in May 2020 has revealed the estimated overall cancellation rate to be 72.3 per cent, 81.7 per cent for benign disease surgery, 37.7 per cent for cancer surgery and 25.4 per cent for obstetrics.
All these have in fact exacerbated the existing burden on the manufacturers of less essential medical devices during this period of plummeting demand. Even multinational companies can hardly cope with the stress, not to mention the small and medium enterprises (SMEs) due to cash flow issues and lack of financial strength. Apart from the anticipated hiring freeze, many manufacturers are turning to cost-cutting measures in order to sustain their operations. They start to implement combined shifts, employee furlough, salary deduction, and staff retrenchment. Supply chains are streamlined, and certain facilities are shut down. Outsource professional services are minimized or put on hold for the time being.
One of the most popular approaches to deal with the aftereffects of the pandemic is zero-based budgeting. Companies like General Motors Co (GM) and Signet Jewelers Ltd (SIG) are currently using this strategy to mitigate the effects of the pandemic.
Contrary to incremental budgeting, zero-based budgeting involves budget preparation from the scratch with a fresh evaluation of every single line item. Whatever you want to spend, justify it.
Now that elective surgeries began to resume gradually. The clearing of backlogs might somehow revive the less essential medical device manufacturing industry. Of course, this will certainly take time before everything gets back on track.
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Prepared by: Yin Theng