Unlocking Growth: Better Contract Management Is Vital for Medtech Success

The personal relationships cultivated between medical device (Medtech) company representatives and individual doctors are what helped build the sector into the multi-billion-dollar industry it is today. 

Medtech representatives have historically developed trusted relationships with enterprising doctors who would champion their products among their colleagues. Eventually, a new standard of care might develop, incorporating these new products. Now, because of increasing consolidation across healthcare, these relationships can have an even broader impact. In some cases, a single medical influencer championing a product can drive adoption across an independent delivery network. On the other hand, the increased influence of assessment committees can remove decision-making power from individual physicians. Competing dynamics make commercialization more complicated than ever. 

Consolidation across the healthcare sector means contracts are now taking on an outsized role in a Medtech company’s success, dictating pricing, access, and partnerships with key stakeholders, including individual clinics, hospitals, health systems, Independent Delivery Networks (IDNs), and Group Purchasing Organizations (GPOs). The increased prevalence of contracts can result in positive outcomes for both small and large companies. For startups, contracts offer a potentially larger share of the market through the adoption of products across large networks, and for larger companies, contracts can help insulate them from up-and-coming competitors who might undercut their market share. 

Yet, despite their value and growing importance, contracts are not being leveraged to their fullest. Many companies don’t know how to or don’t have the right tools to maximize contracts strategically for growth. This outdated mentality must change for Medtech companies to successfully navigate the evolving healthcare landscape. 

In an Increasingly Complex Environment, Contracts are More Important Than Ever

A new MedTech Dive survey, which solicited opinions from more than 150 leaders and professionals from across the Medtech sector, illustrates the value of contracts. 

Two-thirds of respondents reported that their companies earned at least 70% of their annual revenue through contracts, with that percentage expected to grow to 80% by 2027.

And for larger companies, the revenue share from contracts is even higher. As such, 80% of respondents view contracts not just as legal frameworks or agreements, but as critical components to their company’s overall sustainability and growth strategy. Today, contracts shape how products are sold. To be successful in their commercialization efforts, companies of all sizes must effectively negotiate and manage their current and future contracts.

As companies face mounting pressure to increase revenue and adapt to the ever-evolving healthcare landscape, effective contract management is not just a nice thing to do—it’s a competitive advantage that will often mean the difference between success and failure. Yet given the increasingly dynamic healthcare environment and other market conditions, managing contracts effectively is often much easier said than done. 

“The U.S. healthcare system is very stressed with a lot of consolidation, and it’s challenging to keep a pulse on all of the different changes, so you don’t always understand who you are negotiating with any given week,” explains Alex McLachlan, Intellijoint Surgical’s Director of Commercial. Intellijoint develops surgical planning and navigation solutions for total hip and knee joint replacements. “Today, about 80% of our orthopedic surgeons are employed by a hospital. The byproduct of that is decisions are happening at a corporate or administrative level, so you might win over a surgeon, but the final decision maker is someone else.”

Contract Management Needs to Get With the Times, or Companies Risk Falling Behind

Inefficient contract management is a major issue across the sector. Survey respondents cite the increasing complexity of contracts (84%) and increasing consolidation of health systems (73%) as the top two reasons why managing contracts has become more difficult. At the same time, every survey respondent (100%) said that they believe they are leaving revenue on the table because of poor contract management. At a time when getting the most out of contracts is critical for the bottom line, Medtech companies need to make this a top priority. 

One of the major hurdles: ineffective tools and technology. Most companies still rely on manual and ad-hoc processes, using email, or generic and off-the-shelf tools such as spreadsheets, file-sharing tools, and non-specific ERP and CRM systems. While spreadsheets are familiar, they are highly prone to errors and inefficiencies and cannot enable real-time visibility across an enterprise. Contracts often involve complicated terms, varying timelines and pricing structures, as well as multiple stakeholders across different geographies. 

Tracking these variables in a spreadsheet or other manual tool only increases the likelihood of missed opportunities, pricing discrepancies, and compliance issues. Errors in pricing or non-compliance with contract terms can result in significant financial repercussions for both the companies and the healthcare providers. For example, if a sales rep quotes an incorrect price based on outdated contract information, that company may lose revenue or, worse, strain its relationship with the healthcare system. Conversely, if a higher price is mistakenly applied, the provider might request a refund, leading to time-consuming disputes and audits.

The consequences of poor contract management can also go beyond missed revenue opportunities, extending to miscommunication and slow response times that impact long-term relationships. The survey results indicate that on-contract opportunities close months faster than those that are off-contract. However, companies that struggle to track their contracts often find themselves missing these faster-closing opportunities altogether. Delays in responding to contract requests, miscommunications between departments, and an inability to quickly pull contract data can all slow down the sales process, leading to longer sales cycles and missed revenue.

A common response to the challenge of managing contracts is to simply hire more staff. Nearly all (97%) of respondents said that they would add headcount to manage their contracts in the future. While hiring is often used as a stop-gap measure, this de facto reaction can be both costly and, oftentimes, ineffective because it doesn’t solve the root of the problem: trying to manage contracts using outdated tools and processes.   

Now More Than Ever, We Need a Proactive Approach 

To capitalize on the full revenue potential of every contract, Medtech companies must shift from a reactive to a proactive approach. 

Instead of relying on outdated manual processes that leave room for error and delay, companies need to adopt purpose-built solutions that streamline contract management across the organization. Such an approach can help to centralize contract information for improved accessibility and accuracy, as well as create better workflows that reduce the administrative burden and accelerate sales cycles. Technology can also facilitate the real-time visibility of contract details, including pricing, commitment levels, and covered facilities.

Data sharing and transparency empowers sales teams and, among other things, enables them to more easily and quickly identify and prioritize high-value, on-contract opportunities. The survey also indicates that 80% of respondents are considering adopting contract management software to address their current inefficiencies. Such software allows companies to automate contract workflows, track key metrics, and centralize contract data in one location, eliminating the ever-present silos that so often hinder their efforts. By integrating contract management systems with other enterprise tools such as CRMs and ERPs, companies can facilitate a more seamless workflow between sales, legal, and financial teams. Such technology will not only improve efficiency but also help to ensure that everyone across the organization is working with the most up-to-date and accurate information.

“Before we started using modern contract management software, every one of our sales reps used to have to contact the administrator to check if a facility was on-contract. It took too long. And it was not scalable,” explained McLachlan. “Technology has helped us solve two things: first, we are now able to stimulate demand we didn’t know existed, and second, we have accelerated our sales process and are now closing on-contract opportunities 66% faster than off-contract opportunities.”

Contracts Are Not Going Away. Instead, They will Become More Important

As healthcare systems continue to consolidate, contracts will play an increasingly important role in Medtech commercialization. Complexity will continue to grow with more focus on contract performance, compliance, and long-term commitments. 

Ultimately, Medtech companies will maximize contracts to drive both growth and operational efficiency across the industry. Organizations that invest in effective contract management best practices and technologies will be well-equipped to unlock additional revenue, streamline their operations, and build stronger partnerships in today’s complex and competitive environment.

Unpack all the results of the MedTech Dive survey in the full survey report available here.