There is a trope used by motivational speakers that the Chinese word for “crisis” is a combination of the symbols for “danger” and “opportunity.” It probably isn’t translated that way, but no matter what, times of disruption actually can present great opportunities.
Perhaps that’s where the medical device industry is right now. From shifting business models to trouble with cybersecurity to the 2016 election, there has been a lot of uncertainty facing the medical device industry this year. And yet, a host of innovations—from 3-D printing to digital health—that could make medical devices more individualized, more interactive, and hopefully more useful are reaching critical mass.
Here are some of the recent trends we’ve` spotted that spell out both danger and opportunity for the medical device industry.
Moving from Volume to Value
Moving from “volume to value” was heard a lot at the 2016 AdvaMed conference in Minneapolis this past October. Healthcare systems across the world are seeking more efficient and effective management of patient populations and are thus replacing fee-for-service models.
A case in point is Medtronic, with its “smart” insulin pumps. Medtronic was able to become the preferred in-network durable medical equipment provider of insulin pumps at major U.S. health insurer UnitedHealthcare because it was able to use data to prove that its pumps could achieve better outcomes with lower costs than the competition.
As the healthcare system shifts to a valuebased care model, device companies are increasingly finding they have to shoulder the burden with their customers.
“Are you willing to share some risk with your customers? That’s what it comes down to,” Gary Pruden, executive vice president and worldwide chairman of Johnson & Johnson’s medical device business, told MD+DI sister site Qmed. “Do things to improve outcomes. But the real question is going to be: ‘What happens if it doesn’t work? . . . Are you going to take risk with me?’ That’s the difference between a partner and a vendor.”
Johnson & Johnson and other major medical device companies are already engaged in a number of risk-sharing agreements with healthcare providers. Expect more of these types of arrangements to come.
Users and clinicians are increasingly demanding more than just a product from medical device companies, and it’s not just huge device companies such as Medtronic, Stryker, and GE that are transforming as a result.
A recent PwC Health Research Institute report noted that device companies are “reaching across the ecosystem to offer services that engage patients in real-time, improve physician performance, and demonstrate value beyond any one device, diagnostic or technology.” According to the report, half of the 10 largest medtech companies are now selling services beyond their actual devices, and seven are have made a transition toward “services-based offerings.” All of the 10 companies provide customers with education and training.
The Promise and Peril of digital health
Obamacare and reforms in other developed countries have incentivized health providers to be more concerned about how efficiently and effectively they manage patient populations. So digital health is increasingly a big deal—and a venture capital bright spot. In fact, venture capital database CB Insights reported in July that digital health startups were on track to receive recordbreaking funding in 2016.
A major venture capital investment this year involved cancer care software company Flatiron Health. Flatiron pulled in $175 million, with Roche leading the round, according to a recent report by EP Vantage. Two other companies—tech-focused health insurer Oscar and fitness tracker maker Jawbone—also each raised more than $100 million.
Sometimes, though, “smart” medical device technology hits a major stumbling block. One such setback this year involved Proteus Digital Health, which had been working with Otsuka Pharmaceutical to package the antipsychotic drug Abilify with Proteus’s technology for tracking whether patients are taking their meds. FDA sent the companies back to the drawing board in April.
Cybersecurity Gets serious
Whether in the home or in the hospital, medical devices have become increasingly vulnerable to hacking as they’ve become network aware. With hackers today are seeking to monetize healthcare data and even engage in ransomeware attacks, a tremendous need for security has cropped up.
Investors appear to be catching on that cybersecurity is threatening medical device companies’ bottom line. The situation became painfully apparent this past summer when activist investment firm Muddy Waters Capital and cybersecurity outfit MedSec claimed that St. Jude Medical implantable cardio devices have major cybersecurity problems. The accusation sent St. Jude stock down nearly 5% in value on August 25, and the two sides have since been arguing the merits of the claims in public, with Muddy Waters releasing video supposedly showing a St. Jude pacemaker being hacked and the device maker suing the short seller for defamation.
No matter which side prevails, one thing is for certain: Device companies need to start taking cybersecurity seriously.
3-d Printing hits its stride
This year could truly be remembered as the one in which 3-D printing came of age in the medical device industry. Additive manufacturing is already playing an important role when it comes to prototyping and providing anatomical models of patient anatomy to help surgeons prepare.
“Probably the majority of my group’s work is not with the device itself but supporting accessories,” said Dave Broman, senior manager of the rapid prototyping and simulation systems group at St. Jude Medical. “There’s creating anatomical models, creating new manufacturing tools, creating sales demonstrations and simulators . . . 3-D printing is being used all across the development cycle.”
Device companies are also preparing to do much more. Stryker, for example, is creating a 3-D printing plant in Cork, Ireland, after seeing success with 3-D printed ortho implants.
“They’re making an investment in finding alternative solutions for changing the market,” said Shannon Van Deren, president of Layered Manufacturing and Consulting. “. . . Stryker doing something like that, I think, is extraordinary. I know the other marketshare companies probably have a very close eye on that. It could change everybody, because everybody wants to keep up.”
Johnson & Johnson has also forged 3-D printing partnerships with Hewlett Packard and Google-backed 3-D printing firm Carbon, whose high-speed Continuous Liquid Interface Production process can make objects rise out of ultra high-performance urethanes
Still, challenges remain. Reimbursement for the use of 3-D printing in medicine has been an afterthought so far in the U.S., according to experts, and some 3-D printing processes remain stuck in the lab.