The U.S. is quickly losing ground to emerging markets in medical technology innovation, according to a new study from PricewaterhouseCoopers.
"The nature of innovation is changing as developing nations become the leading markets for smaller, faster, more affordable devices that enable delivery of care anywhere and help bend the cost curve downward," PwC wrote in its latest Medical Technology Innovation Scorecard.
The report (registration required) examines data points from 2005 and 2010 in nine different countries: the U.S., the United Kingdom, China, India, Brazil, France, Germany, Israel and Japan.
The consulting firm broke down the data into five different "pillars" relating to medical technology innovation in the U.S. for the past several decades: "Powerful financial incentives, such as reimbursements for adoption of new technologies; resources for innovation, such as academic medical centers; a supportive regulatory system; demanding and price-insensitive patients; and a supportive investment community of venture capitalists and other investors."
Out of those five categories, China and India have made the most significant gains in the last five years. Over the next 10 years, the U.S., which is traditionally strongest in all five areas, will lose ground, while China, India and Brazil will make the largest gains.
"Emerging-market countries such as China, India and Brazil, despite comparatively weak healthcare system infrastructure, are quickly taking the lead in developing lean, frugal and reverse innovation. This type of innovation simplifies devices and processes, retaining essential functions while applying newer technologies that are more mobile, customized to consumers’ needs and less costly. Such innovation will enable these nations to leapfrog developed countries in innovative healthcare delivery," according to the report.
One effect is that cheaper technologies are being developed outside the U.S. and, due to the country’s strict regulatory process administered via the Food & Drug Administration, its healthcare system is missing out.
"Clearly the balance of gravity of is shifting," AdvaMed senior executive vice president David Nexon told MassDevice.
"If you look at the U.S. industry as a whole, we’re still number one. We have tremendous assets, but we’re not going to keep that lead unless we address a whole host issues, of which FDA regulations are key," he told us. "The performance of the FDA has really deteriorated markedly over the last five or six years."
Stiffer regulations in the U.S. also mean smaller companies have a much more difficult time bringing their first devices to market, making it harder to drum up early-stage investors. Emerging markets are syphoning off venture capital funding from the U.S. The predictability of regulatory systems in Europe and countries like Israel has made them more viable locations from which to launch products and for VC firms to see faster returns on investment. VC funding in devices and technology rose 60 percent in Israel between 2000 and 2009, while the U.S. saw a 40 percent increase, according to the report.
"By 2020, consumers and clinicians in Europe, Israel and other countries where the approval process is faster and less complicated increasingly will benefit from technology before those in the U.S. Investors will lend their support where the ecosystem provides the greatest opportunity for innovative products to succeed," according to the report.
The effects of an eroding foundation for innovation are also harmful to large companies. Big device makers have the resources to navigate the regulatory pathways of numerous other countries, but the U.S. is still the largest market for medical technology.
"Whether it’s a U.S. company or some other other company, it’s better to have availability of a fast efficient regulatory system then to not have it any place," Nexon said. "Everyone is disadvantaged by the problems in the U.S.".
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