In putting the finishing touches on a year that in many ways was not a great one for the medical device industry, I thought it might be appropriate to clean out the notebook on some thoughts on the previous year and – more to the point – the coming year.
We’ve written about 2,500 or so stories this year about the medical device industry and spoken to hundreds of leaders in the space about their thoughts, concerns, annoyances and triumphs. Through that work I’ve gleaned a few things about the industry and I offer my thoughts as an informed observer of the industry – not, to quote Dr. Thomas Fogarty a "combatant in the field." I don’t portend to know all the intricacies of this complex and remarkable industry.
1. Look past current challenges
You won’t get any argument with the assertion that the current environment for medical device companies is difficult at best, with a list of plights that could dim even the rosiest optimism. And 2012 has been bleary, with about 7,000 jobs shed this year alone, representing about 1.5% of the total med tech work force, according to one analysis.
The justifications for those cuts are multi-layered and cannot be placed on any single factor alone, but we know the following facts are pretty much set in stone:
The medical device tax, which takes effect tomorrow, will hurt the most vulnerable companies (firms with less than $100 million in sales) and force the flagship firms in the industry to shed jobs in places like R&D and sales – if they haven’t already.
The environment for reimbursed procedures continues to be a challenge, both domestically and abroad.
Formerly high-flying sectors, such as the CRM market, have experienced a painful slowdown. And we won’t even discuss the funding environment for fear of sending hordes of ambitious entrepreneurs to the bottle.
However, I still believe that there’s value in thinking long term when the short term looks rough. Consider the example of Konosuke Matsushita, the legendary founder of Panasonic who famously had a 250-year business plan for his company. Panasonic began in 1918 as a vendor of lamp sockets and is now one of the most recognized names in electronics, with more than 300,000 employees worldwide.
From my perspective, the long-term future of the medical device industry continues to be positive.
First, the numbers are on the side of medtech. The ballooning number of baby boomers entering retirement age will provide all sides of the industry with customers who are informed and engaged in their healthcare and, for the most part, willing to pay out of their own pockets for procedures they find valuable.
Further, the burgeoning middle class in developing countries such as Brazil, Russia, India and China will help to offset losses in the established markets to some degree in the short term, and the long-term view for these markets remains remarkably robust.
With that in mind, I think there are a couple of things that need to happen to capitalize on this opportunity.
2. Innovate the business model
Recently, I had the privilege of moderating a panel on ACOs and their impact on innovation, during the discussion a member of the medical device industry noted that the industry hasn’t really innovated in the past decade. I’m not sure if that’s entirely accurate but I do think that the next great wave of innovation will come in the form of changing the medtech business model, rather than through product development.
Medical device companies have a golden opportunity in the tremendous amounts of patient data that their technologies collect. Understanding how to transform disparate data sources into meaningful tools to both improve patient care, patient safety, improve security and ultimately profit from it is the next great challenge of the medtech industry.
I point to the Pulse of the Industry Report put out by Ernst & Young this year as evidence of my point. The theme of this year’s report was "Power to the Patient," a nod to what the authors call the next evolution in medical technology. The report raises a lot of fascinating questions about how the device industry must evolve from providing palliative treatments to helping prevent the kinds of chronic diseases their technologies treat. In short, the authors were saying that in order for medtech to survive long term, the industry has to look toward disruptive business models that change the value proposition of medical technology.
In this new reality, device companies form partnerships with mobile carriers and developers to design engagement tools like iPhone apps and games, rather than selling expensive equipment to physicians and hospital systems.
This new reality isn’t so far fetched. As the author’s wrote:
"Medtech is certainly not the 1st industry to be disrupted by customer-empowering information technology. The same forces that are starting to rock medtech have buffeted scores of other industries before, and in each case, they have disrupted existing business models. Incumbents typically had to fundamentally revamp their businesses to survive – and many were unable to hold on despite their best efforts,"
"For instance, when newspapers and magazines were disrupted by the Internet, their value propositions – which had always been based on authoritative information – changed, as increasingly empowered customers began looking for other attributes, such as instant access, tailored content and the "right" to information. The ways in which companies created value changed, as customers moved from passive recipients to co-creators armed with blogs, video journals and more. As other parts of the business model changed, incumbents found that the ways in which they had historically captured value – subscriptions and advertising – were no longer tenable in a world of liberated information and empowered customers. As a result, they are experimenting with a host of approaches to capture value differently, from paywalls to freemium models."
As a recovering newspaper reporter I’m not sure how I feel about the comparison to the newspaper world, but there’s more than a few fascinating things to chew on there. Perhaps the most important thing med tech companies need to consider in the coming year and beyond:
3. Keep focusing on the patient
In order to fully benefit from the data avalanche, medtech companies need to get serious about including the patients as collaborators in their healthcare.
Hoarding patient data over a perceived future value, rather than creating collaborative environments which could find meaning in that data, is simply penny wise and pound foolish. Of course companies should protect their IP, but patients deserve the chance to have a healthcare environment that allows for the creation of things like predictive algorithms and intelligent monitoring.
Some companies are already calling for a more open environment toward making patient data HIPPA compliant, but not enough to create any meaningful progress.
If in 2013 we can take small steps towards creating that collaborative environment that’s focused on creating outcomes for the patient, then the industry will go a long way towards regaining its footing in both the short term and the long term.
Now, it’s your turn tell me your thoughts on how the industry can change in 2013 by emailing me at publisher@massdevice.com or on twitter at @brianmassdevice.
Here’s to a better tomorrow in 2013.