The Impact of the Pandemic on HealthTech
Executive Summary
The HealthTech industry has been at the heart of the UK’s response to the pandemic. The industry has played a vital role in manufacturing and supplying products for the NHS and social care system, including ventilators, Personal Protective Equipment, and testing. There is no doubt that some companies have done very well as demand for certain products has increased exponentially, but this a relatively small number, around 20%. Overall, 63% of companies reported a negative impact on their business, and as many as 200 in the sector could be at serious risk. Not only has this had a significant economic impact on the industry, it could also impact on the ability of the NHS to restart and restore services to pre-COVID levels.
The Survey
We have recently completed a survey of companies across the HealthTech sector to assess the impact of the pandemic on their businesses. In order to capture the breadth of the industry, a questionnaire was sent to ABHI members and to companies via the UK MedTech Forum (a coalition of industry associations, including AHPMA, AXREM, Barema, BDIA, BHTA, BIVDA, Medilinks, SDMA, UTA), the Academic Health Science Networks, the Medical Devices and Clinical Consumables team in the Department of Health and Social Care, ABHI’s four city region partners (Birmingham, Manchester, Cambridge and Leeds) and the Office for Life Sciences. The results, whilst confirming much of what was already assumed to be true, were nonetheless alarming.
The full survey report can be found here.
Overall, 63% of companies reported a negative impact on their business, and as many as 200 in the sector could be at serious risk. The main pressure is on those who focus on elective procedures and other activity that has been interrupted by the NHS response to the pandemic. For example, upwards of 80% of companies operating in the orthopaedic and ophthalmic space, representing some 14,000 employees and with a turnover of close to £3bn, have been adversely affected.
At its worst, the pandemic saw 81% of elective focused companies being negatively impacted. In May, 36% of all companies were seeing orders down between 50 and 99%, with 6% having no orders at all. This improved slightly over the summer, peaking in September, but we now anticipate a significant fall-off as subsequent waves of the virus and winter pressures thwart the ability of the NHS to perform routine, elective procedures.
Two thirds of companies have furloughed staff, which could represent over 50,000 jobs, and with the recovery of NHS activity slow and patchy, there is concern about the extent to which companies can continue to absorb large downturns in their revenue streams. It is often not fully appreciated that HealthTech companies have only one customer in the UK, the NHS, and if, as seems likely, we are in a situation where some activity will be switched on and off repeatedly for the foreseeable future, the implications are serious for both the sector and the NHS itself. Of other support measures, only 50% of companies surveyed have accessed government backed schemes, many citing that they were simply not suitable.
63% of companies saw an increase in their cost base, related to raw materials and components, freight, local logistics and administration. Most see that there is no scope to recover this from the customer. This has resulted in cashflow being a significant concern for many companies, particularly the SMEs. Although the ability to source raw materials is perhaps consistently the biggest challenge for the sector, especially for suppliers of in vitro diagnostics.
For those companies whose products are not used in the direct management of COVID, many saw significant deterioration in system processes, with SMEs reporting the greatest negative impact. Specific issues related to regulatory approval processes, value assessment, purchasing decisions, communication between different parts of the supply chain, clarity of volume requirements and the adoption of innovative technologies.
Looking ahead to the challenges over the next 12 months, medical device companies report overwhelmingly that system restart is the biggest, whilst IVD companies have greater concerns about the new and emerging regulatory framework which they will face.
