In recent years, global medtech markets have been dominated by some key overarching drivers: growing efforts to reduce healthcare costs, an increasing interest in value-based care - reflected by heightened emphasis on patient safety and efficacious treatment approaches - and expanded opposition to barriers to entry, whether from technical trade barriers or a lack of regulatory harmonization.
In 2020 and beyond, the impacts of these drivers will be saliently evident, whether through the implementation of the MDR in Europe, the expected ratification of the USMCA in North America, the continued execution of Ayushman Bharat Yojana in India, and China’s efforts to reduce healthcare costs and bolster local manufacturing in the face of demographic challenges and economic stagnation.
Due to these drivers - namely, the rapid pace of technological advancement, growing pressure to reduce healthcare expenditure, and the drive to improve clinical outcomes, experiences, and safety - the future of how medtech companies engage with and compete in global markets will be shaped by five macrotrends:
- Evolving innovation models,
- Increased demand for and access to innovative therapies,
- Evolution of healthcare delivery and payment models,
- Technology enabled care and stakeholder engagement,
- Data enabled engagement and information.
Below, we identify and explain these macrotrends to outline the constantly evolving nature of medtech markets and to help companies remain cognizant of potentially disruptive changes in their business and industry, subsequently allowing for the development of future-looking and successful portfolios, products, services, and relationships.
Macrotrend 1: Evolving Innovation Models
Outsourced and Networked Innovation Models
In much of the medtech space, innovation that improves healthcare delivery and patient livelihood has long represented the driving force behind commercial success; more recently, however, leading medtech firms have been changing the way they approach innovation and the types of solutions they are focused on.
In particular, many players are increasingly relying on M&A deals to enable outsourced and networked models for device development. Under such models, companies are reducing the proportion of their investments that is dedicated to in-house R&D, instead favoring mergers and acquisitions, joint ventures, co-development partnerships, capital-only funding investments, or innovation hub sponsorships to incorporate novel products into their portfolios.
Relative to in-house R&D, networked innovation models can be more cost-effective, lower-risk, and can lead to more effective and relevant product developments due to the collaboration of various industry stakeholders. In addition, these models are increasingly involving non-traditional industry partners such as technology companies, which have been enthusiastically working with medical device companies to bring innovations to the fields of health app development, telemedicine, AI, robotics, 3-D printing, and other cutting-edge healthcare technologies.
Globally Evolving Evidence Thresholds
For both medical device approval and market access, evidence thresholds are evolving globally, driven by regulatory changes designed to improve patient safety and device effectiveness and to enable healthcare systems to better cope with cost constraints and the advent of new technologies.
More specifically, this means that being able to prove safety relative to an equivalent offering will no longer represent a sufficient threshold for market access; regulations are gradually evolving to require comparative studies, longer-term data, and evidence packages that include demonstrations of economic and clinical benefit.
It is also important to note that providers are increasingly analyzing the value that a new medical device will offer based on a broader set of questions than in the past. So, in addition to evaluating treatment effectiveness and cost when making purchasing decisions, providers will also consider factors such as readmission reduction, operational efficiencies, discharge compliance, and various other aspects of patient satisfaction.
Macrotrend 2: Increased Demand for and Access to Innovative Therapies
New Treatment Paradigms and Expedited Market Access Initiatives
As companies continue to develop innovative and disruptive technologies, treatment paradigms are shifting, and patients and providers alike are increasingly calling for improved access to such products; many regulatory bodies are thus introducing initiatives to expedite the availability of new technologies on the market.
One example of this is the FDA’s Breakthrough Device Designation Program, which prioritizes submissions of medical devices and combination products that have the potential to improve treatment for life-threatening and other debilitating conditions. Since its introduction, this program has helped increase the number of innovative medical devices approved annually in the US.
In Europe, on the other hand, the upcoming implementation of the MDR, which includes stricter safety and effectiveness provisions than its predecessor, may hinder access to innovative products in the short term. However, the improved safety and effectiveness requirements of these new regulations are expected to ultimately support confidence in the products that are available on the market and subsequently support the uptake of innovative devices and products.
The challenges faced by the EU in introducing these regulations over recent years illustrate the difficulty of balancing patient safety with providing access to innovative therapies, which remains one of the central challenges in regulating medtech innovation worldwide. Nonetheless, innovative therapies continue to be developed at a faster rate than ever before, and regulatory bodies will therefore continue to seek out methods of providing patients with access to the most effective treatments while maintaining patient safety and satisfaction. Companies that are well prepared to cope with treatment paradigm shifts, particularly those that are the forefront of innovation efforts, will be well positioned for future success in this space.
Evolving Patient Role
Potentially the most pivotal aspect of this macrotrend is that patients are gradually playing a larger role in treatment decision making and design, driving increased consumer responsibility and engagement. This is partly due to the increased cost-sharing burden that patients have assumed, as well as improved access to information that allows patients to be more involved in care decisions, such as sources from regulatory bodies, patient-directed websites, and patient forums.
In addition, patients are also becoming more involved in regulatory processes; the FDA’s CDRH, for instance, oversees a patient engagement advisory committee and now considers patient preference and patient-report outcomes in regulatory decision making. Other regulatory bodies, such as those in Australia, are gradually moving in this direction as well.
Companies are also increasingly relying on patients to improve product design; for example, GE Healthcare redesigned its mammography machines with the help of patients, resulting in a remote control that allows patients to control the amount and speed of breast compression, which has been shown to enable increased compression, thereby improving imaging and diagnostic capabilities.
Macrotrend 3: Evolution of Delivery and Payment Models
Consolidation and Vertical Integration
Spurred by cost constraints and an ongoing shift toward value-based care, consolidation and vertical integration are being increasingly used in order to increase efficiency and purchasing power and to share risk and align incentives across the value chain. This is best exemplified by independent hospitals that continue to join health systems, even outside of metropolitan centers.
Moreover, acquisitions are increasingly featuring outpatient facilities, such as community-based physician practices and ambulatory surgical centers. This is driven primarily by the growth of outpatient treatment volumes, which has in recent years surpassed that of hospital treatment volumes due to the increased availability of minimally invasive treatments that can be performed in non-hospital settings, as well as generally heightened patient convenience and improved cost effectiveness in outpatient settings. As a result, a number of providers - including HCA healthcare, the largest health system in the US - have been working to bolster their focus on ASC and physician practice acquisitions.
Payers are also consolidating into larger national systems in order to increase scale, efficiency, and leverage on costs. Additionally, payers are routing patients to their preferred IDNs, particularly those that align with them on costs and outcomes. This has increased the willingness of providers to assume risk and work with payers as partners.
Furthermore, there is also a movement toward vertical integration in the healthcare industry, which has supported new partnerships and acquisitions across different types of stakeholders along the healthcare value chain. This is mainly due to the potential for greater cost savings, outcomes improvements, more effective risk sharing, and more coordinated care afforded by the combination of various stakeholders into large, overarching entities. Vertical integration has been mostly driven by payers, such as UnitedHealth Group, which owns Optum—a company that includes providers, pharmacy benefit management, and a data and analytics branch.
Shifting Payment Models
Market evolution and changing decision-maker influence is leading to new payment and delivery frameworks that focus on value. While significant variability continues to exist between providers, an increasing percentage of system encounters are now tied to quality or value - as opposed to volume - through alternative payment models, and commercial payers have increasingly opted to follow the government’s lead in value-based payment models; in fact, in a survey conducted by the Health Care Payment Learning & Action Network, 90% of payers indicated that they believed value-focused payment activity would continue to increase in the future.
As a result, while payment options will continue to include fee-for-service models in some cases, payers are increasingly shifting toward bundled or episode-based models, payment-by-condition models, and ultimately population health payment models. In this way, governments and commercial payers are forcing providers to take on more risk and work as partners beyond singular treatment episodes.
Such continued payment model reform is also driving the rise of value-based contracting (VBC) in the healthcare space; as providers agree to share more risk with payers, vendors such as pharmaceutical and medical device companies will face increasing pressure to share risk with providers.
The main three reasons that are supporting the uptake of VBC are as follows:
1) Companies are increasingly looking for ways to engage effectively with non-clinical stakeholders; these stakeholders care about a different set of parameters than the historical customer, which was the physician, and are constantly looking for agreements around cost and outcomes.
2) Risk distribution is gradually changing to include manufacturers, which are increasingly sharing risk with hospitals and health systems. This allows manufacturers to place specific guarantees surrounding the outcomes that their devices provide, and bolsters accountability for various nontraditional stakeholders, thereby improving quality of care.
3) The healthcare ecosystem is increasingly focused on cost management, presenting an incentive for various players to align their efforts in order to provide high-quality care at the lowest possible cost.
The definition of a “customer” has and will continue to evolve to incorporate the roles of multiple stakeholders; physicians - which are the traditional medtech key customers - will retain influence, but will gradually cede control to administrative stakeholders. In addition, multi-stakeholder committees, increasingly from more centralized positions within larger hospital systems or networks, have become mainly responsible for authorizing brand selection decisions.
Because hospitals typically operate at very low margins, non-clinical stakeholders have helped control costs to a greater extent that when physicians represented the main customers by limiting the number of available brands, increasing purchasing power, and bolstering focus on product rationalization and outcomes-based pricing.
Macrotrend 4: Technology-Enabled Care and Stakeholder Engagement
Convergence and Partnerships
Technology-enabled care and stakeholder engagement is creating new possibilities for healthcare delivery and changing the way various stakeholders interact and receive information; this trend is being realized through efforts such as drug-device-digital convergence and new partnership models between OEMs, physicians, and patients.
One example of such convergence is the ABILIFY MYCITE pill, which consists of a sensor from Proteus Digital Health and anti-psychotic medication from Otsuka and can be connected to a mobile app. The overall product is purported to help reduce compliance and dosing issues that are common with anti-psychotic drugs because it enables patients to monitor their drug intake, record how they are feeling, and share that information with their caregivers through a web-based portal if they choose to.
Other examples of convergence include several partnerships between diabetes management device manufacturers and technology companies aimed at improving glucose level management. The Medtronic-IBM partnership, for instance, resulted in the Sugar.IQ app, which combines the former’s CGM technology with the latter’s AI capabilities; similar partnerships have been observed between Sanofi and Verily, Roche and mySugr, and Dexcom and Fitbit.
Digital healthcare is increasingly embedded in provider EHR workflows, as evidenced by the increased availability of products such as Suki, a clinical voice assistant that can help with clinical notetaking. In addition, digital and social channels have become the primary means for health education patient engagement - there is no longer a single point of contact for this information. Patients can now be reached through health apps, patient portals and forums, EHRs and manufacturer websites, and wearable technologies, which is spurring manufacturers and other stakeholders to embrace new types of engagement opportunities.
Macrotrend 5: Data-Enabled Engagement and Information
Increased Data Availability
In addition to the increased availability of data from sources such as healthcare claims, EHRs, social listening, and facility purchasing data, government and consumer initiatives have also made huge volumes of data available in recent years, leading to increased patient engagement in healthcare decisions.
Examples of such initiatives include the Health and Human Service Data Liberation Initiative, the ACA and HITECH act in the US, and the Joint Action on Health Information in Europe; such programs can improve healthcare reporting policies, bolster data infrastructure, enhance data security, and lead to the creation of new tools that can further impact data and evidence generation.
For instance, OTC genetic tests, which are approved as medical devices, are enabling self-diagnosis and earlier treatment; patients can also opt in to allow their genetic profiles to be use in clinical studies, providing new avenues for data collection and analysis. Other examples include the increasing utilization of wearable-generated data in healthcare decisions.
As the available data expand, data privacy and security will represent an increasingly significant concern for patients and physicians alike. In fact, this has already been observed to a certain degree in some markets, such as that for insulin pumps, where the potential for hacking internet-connected devices has raised fears surrounding patient safety and privacy; in response, regulatory bodies have been developing guidance to target device cybersecurity. This trend is expected to intensify over the coming few years.
What to Expect
- Hospital consolidation will continue and a number of big-power mega systems will emerge,
- Payment models designed to reward value will dominate in the future market landscape,
- Provider desire to share risk will increase the prevalence of value-based contracts,
- Payers will be an increasingly important stakeholder, due to their impact on patient routing,
- Physician will retain influence but will cede control to administrative stakeholders,
- Business model experimentation will continue as manufacturers change their strategies to succeed.
How to Prepare
A successful customer engagement model will do the following going forward:
- Prioritize focus on organized customer groups and strategic accounts and develop a robust and local ecosystem-specific strategy to win business; this must include a successful approach to engaging with strategic enterprise accounts,
- Enhance customer-facing teams to address converging customer interests of clinical and economic value,
- Increase coordination and collaboration between medical/HEOR and commercial teams; most companies do this through separate groups, but these expertise and messaging will increasingly need to be developed and delivered together,
- Expand capabilities to support ongoing clinical and economic evidence development; in particular, it is crucial to have a life-cycle management strategy that includes planning iterations and data-generation efforts to show economic value,
- Engender a greater understanding and enablement of patient journey, which will help stakeholders better understand how they can contribute and partner across the spectrum of care.
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