This year has been a whirlwind for the medtech market, and through it all, the thought leaders at Decision Resources Group were here to provide their deep knowledge and expertise as our readers navigated the murky industry waters.
To commemorate the year, our analysts teamed up to bring you the top 10 events/trends that defined the last 12 months. We began with a lengthy list of events, then rated them based on three dimensions: the event’s importance on the overall medtech market (market impact), the dollar size of the impacted medical device market (market importance), and the number of stakeholders affected (industry interest).
The following is our final list with their “impact score”, and each summarized by our team of dedicated experts.
1. Mergers and acquisitions of cardiovascular giants
2. Price controls in India: A shot in the arm or a shot in the foot?
3. Medtronic launches the MiniMed 670G “artificial pancreas”
4. CMS scales back mandatory bundled payment models
5. The year of milestones for robotic surgery
6. M&A in the aesthetics market: Building a comprehensive product portfolio
7. The uncertain future of BVS as Abbott’s Absorb disappears from global markets
8. Establishment of the European Medical Devices Regulation
9. Cybersecurity threats take over news headlines
10. Dental companies access emerging markets through value brand acquisitions
Ashish Bhupal, Team Lead, Cardiovascular
Mergers and acquisitions have been a prominent strategy for companies looking to expand their product offerings, and the wave of deals that have happened in the cardiovascular medtech market alone this year exemplifies this spectacularly. While big deals like Becton Dickinson (BD) and C. R. Bard (Bard) raised eyebrows (see below), let’s not forget smaller transactions like Edwards Lifesciences buying Valtech Cardio in January for its Cardioband transcatheter mitral valve repair device, Terumo acquiring Bolton Medical in April, and CryoLife buying JOTEC in October for its endovascular stent grafts. However, the biggest acquisition of them all was Abbott Laboratories’ $25 billion acquisition of St. Jude Medical in January, enabling Abbott to expand into multiple cardiovascular segments. The deal created a billion-dollar ripple effect, as Terumo purchased St Jude’s successful vascular closure business for $1.1 billion to satisfy antitrust concerns raised by the U.S. FTC on the Abbott/St. Jude deal. This deal will help Terumo expand its share significantly in the $650 million U.S. vascular closure device market and overtake Cardinal Health, setting itself up to become the market leader. This acquisition—along with the sale of its medical optics division to Johnson & Johnson for $4.3 billion in 2016—shows Abbott’s clear intent on focusing its growth in the cardiovascular arena.
Another acquisition that rivaled Abbott’s in size was BD’s acquisition of Bard for $24 billion in April 2017, which helps BD expand into several cardiovascular device segments. Specifically, BD is the leader in the short peripheral intravenous catheters (PIVC) market, whereas Bard held a majority of the market share for peripherally inserted central catheter (PICC), dialysis catheters, midline catheters, implantable ports, and huber needles. As a result, BD's share in the $1.6 billion U.S. vascular access market will significantly expand going forward, overtaking Smiths Medical, Teleflex Medical, AngioDynamics, B. Braun, and Medtronic.
For more perspectives on the BD x Bard deal, check out our blog from May 2017.
Mohith Unny, Senior Analyst, Orthopedics
This year, India’s National Pharmaceutical Pricing Authority (NPPA) slashed the price of its cardiac stents and knee implants by almost 85% and 70% respectively, intent on improving access to these essential devices and curbing exorbitant profiteering by distributors and hospitals—in some instances, as high as 650% for stents and 450% for knee implants. Subsequently, companies in the cardiovascular device market such as Abbott withdrew their premium-priced devices (e.g., its Xience Alpine drug-eluting stent), while Boston Scientific and Medtronic filed for withdrawal of their top-of-the-line stents, citing that the price ceilings make it unsustainable for them to sell their flagship products in India. The NPPA price cap has severely impacted the revenues of multinational companies, with Johnson & Johnson reporting a Q3 YoY loss of around $10 million in their international knee implant sales, which was largely incurred by its India business. Furthermore, the price cap will hinder revenue expansion in the approximately $500 million Indian coronary stent and $150 million knee implant markets because multinational companies will be deterred from further launching new devices in the world’s second-most populous country.
Abbott’s recent announcement that it would not launch its Xience Sierra stent in India may only be the tip of the iceberg. Going forward, and until the government revises device prices to more acceptable levels, similar announcements will likely continue, depriving India’s patients access to the most advanced products and lifesaving treatments, and illustrating that good intentions do not always result in effective policies.
Other analysts have weighed in on price capping in India. Read about it in our blog from April 2017.
Paul Desormeaux, Senior Analyst, Endoscopy
In early 2017, Medtronic launched the MiniMed 670G, which combines two diabetes technologies—the insulin pump and the continuous glucose monitoring device—into one device, creating the first closed-loop “artificial pancreas” system commercially available in the U.S. Prior to this innovation, patients interpreted their own glucose levels and manually injected insulin based on their interpretation. This is a significant step forward in the $25 billion U.S. diabetes market, as this is the first device of its kind to read a patient’s glucose levels and automatically altering insulin levels without patient input. The MiniMed 670G therefore offers the added benefits of reducing patient error and simplifying the lives of diabetes patients.
Companies that offer insulin pumps or continuous glucose monitors, such as Insulet, Tandem Diabetes Care, and Dexcom, will be briefly impacted by the entrance of Medtronic’s device and experience a decline in their sales, but moving forward, all of these companies will work in various partnerships to develop their own closed-loop systems in order to compete with Medtronic. However, Medtronic will enjoy a first-mover advantage in 2018, on top of already offering the most well-established insulin pump even prior to the MiniMed 670G.
Learn more about the diabetes market in this DRG x Bloomberg co-sponsored webinar, recorded in October 2017.
Xi Chen, Team Lead, Orthopedics
In November 2017, the Centers for Medicare & Medicaid Services (CMS) finalized the cancellation of several mandatory cardiac and orthopedic bundled payment programs scheduled to go into effect in 2018, and reduce mandatory participation in the Comprehensive Care for Joint Replacement Model (CJR). These changes will provide CMS more time and flexibility to assess the effects of the CJR before expanding bundled payment programs to other hospitals and therapy areas.
In its current state, CJR still has some limitations. For example, by benchmarking each hospital’s expenditures against a regional average without accounting for hospital case-mix, the model unduly punishes hospitals treating more high-risk patients. This limitation will be further illuminated in 2018, as total knee replacements—which represent over 50% of the procedures under CJR—will begin to receive outpatient reimbursement. This reimbursement change will encourage more low-risk patients to be treated as outpatients, compromising the risk profile of hospital patients under CJR.
The CMS’s proposed scale back of bundled payment models will dampen healthcare providers’ efforts to develop new bundles, or shift their focus toward commercial bundles. Nevertheless, bundling is likely here to stay. Healthcare providers already committed to the program are unlikely to back out, and major reconstructive implant companies such as Zimmer Biomet, Stryker, DePuy Synthes, and Smith & Nephew, are already invested in helping providers adapt in a CJR world by introducing data-driven risk-sharing and cost-saving solutions. Through collaboration between providers and industry stakeholders, data supporting the efficacy of bundled payments will emerge over time, which will give CMS a renewed impetus to push for bundling programs.
Read about the impact of CJR across orthopedics in our April 2017 column on Med Device Online.
Xi Chen, Team Lead, Orthopedics
2017 was a milestone year for the robotic surgery market. In general surgery, TransEnterix became the first player to break Intuitive Surgical’s long-reigning monopoly with the FDA approval of Senhance and its first U.S. system sale. Intuitive made headlines as well, when it received FDA approval and CE mark earlier this year for its lower-cost and smaller form factor Da Vinci X system. Meanwhile, in orthopedics, with the commoditization of orthopedic implants and increased market share of smaller competitors, many implant manufacturers now explore the use of robotics as a differentiation strategy and form partnerships with robotic systems manufacturers. For example, Medtronic furthered its collaboration with Mazor this year by becoming the exclusive distributor of Mazor’s spinal robotic system. Perhaps the most important developments were the launch of robotic total knee replacements by Stryker and Smith & Nephew. In light of Stryker’s historical success in transforming niche partial knee replacements into a relatively popular outpatient procedure with its robotic system, its entrance into the much larger $8 billion global total knee replacement market will certainly be disruptive and game-changing. According to our estimates, robotic total knee procedures in the U.S. will exceed 10,000 by the end of 2017, and is forecasted to grow at a compound annual growth rate (CAGR) of over 50% in the next five years. Moving forward, rival robotic systems will continue to emerge for both general and orthopedic surgery. In particular, Johnson & Johnson, a leading competitor in both markets, has already prototyped the robotic solution it has developed in collaboration with Google. Ultimately, though, the long-term commercial viability and success of robotic systems will hinge on the demonstration of clinical efficacy in order to justify their high costs. 2017 might have been a milestone year, but this market is only getting started!
For more information, download Xi’s executive briefing on the robotic surgery market.
Benazir Premji, Senior Analyst, Endoscopy
Besides consolidation in the cardiovascular market, M&A continues to be a key strategy used by competitors in the aesthetics market, primarily to build and expand product offerings. Combination treatments, which provide longer-lasting and more effective results, are surging in popularity, so it has become increasingly important for companies to offer products spanning various treatments.
Two notable acquisitions that happened this year include the acquisition of Zeltiq by Allergan for $2.4 billion, and Cynosure by Hologic for $1.65 billion in February. Allergan, already a leader in the aesthetic injectable markets, has expanded its offerings to include energy-based devices for body contouring with its CoolSculpting system. Allergan’s established presence in the aesthetics market, together with its expansive aesthetics offerings of facial injectables, breast augmentation and reconstruction devices (from its $2.9 billion acquisition of LifeCell in February), and body contouring devices, will make it a force to be reckoned with.
Meanwhile, acquiring the leading aesthetic energy device manufacturer Cynosure will make Hologic a powerful new entrant into the aesthetics market. As a company that is well known in the domain of women’s health, Hologic can leverage its large customer base of gynecologists to increase sales of its acquired aesthetics portfolio, especially taking advantage of the high-growth opportunities in the vaginal rejuvenation market. The success of both Allergan’s and Hologic’s acquisitions will be dependent on their ability to assimilate into a new market structure, and continually innovate their technologies to remain competitive and up-to-date.
To learn more, also check out Benazir’s white paper on the aesthetics market.
Exactly how fast is the vaginal rejuvenation market growing? Find out in our reports on Aesthetic Injectables.
Michael Tian, Analyst, Cardiovascular
In September 2017, Abbott Laboratories pulled its Absorb GT1 Bioresorbable Vascular Scaffold (BVS) from global markets due to “low commercial sales”. Similarly, Boston Scientific had previously discontinued the development of its Renuvia, citing concerns over poor clinical trial results for the Absorb GT1 BVS. The withdrawal of these two BVS products—with Abbott and Boston Scientific being two of the largest competitors in the global coronary stent market, which our research values at approximately $6 billion—has shaken confidence in BVS technology, and will strongly hinder adoption of next-generation devices as clinicians and institutions wait for positive long-term clinical data before incorporating BVS into standard treatment pathways.
Despite these initial hurdles, the medical community remains optimistic about BVS’s long-term benefits. Competitors currently developing next-generation bioresorbable devices, such as BIOTRONIK, Elixir Medical, REVA Medical, and Amaranth Medical, will temporarily benefit from Abbott’s vulnerability in this market. Meanwhile, Abbott remains committed to developing their second-generation BVS and overcoming the many technical challenges of the Absorb. As we head into 2018, all eyes will be on the updates to ongoing clinical trials and the development of next-generation devices to see whether the limitations of first-generation devices have been addressed. Positive results in these trials will strongly bolster the acceptance of BVS into common clinical practice.
See how the global perspective on BVS had been changing prior to Absorb’s withdrawal in our June 2017 column on Med Device Online.
Veronica Ross, Principal Analyst
After years of proposals and discussion, the European Medical Devices Regulation (MDR) and In-Vitro Diagnostic Medical Devices Regulation (IVDR) were established in May 2017. However, companies are still able to seek device approval under their predecessor, the Medical Device Directives (MDD), up until 2020.
The new regulations were designed with an emphasis on increased safety, accountability, transparency, and consistency, which were significant shortcomings under the MDD. For safety, the MDR requires Notified Bodies to operate under stricter guidelines, and the clinical and documentation requirements will be heightened, particularly for high-risk devices. Notably, equivalence data submitted in support of new device approvals will be more closely scrutinized, and more post-approval surveillance and clinical data collection will be required. For transparency, device data will also need to be documented and tracked through the publicly accessible European Database on Medical Devices (EUDAMED), as well as through unique device identifiers.
Although the MDR’s device classification structure remains similar to the MDD, some devices may be reclassified, including those that previously were not considered medical devices (e.g., medical software or products for device sterilization). Lastly, the MDR will also facilitate greater regulatory consistency across Europe because it supersedes national laws and provides less ambiguity than the MDD.
Ultimately, while beneficial to patient safety, the introduction of the MDR and IVDR will make device approvals more difficult because the costs associated with trial development will rise, disproportionately impacting smaller companies that do not have the financial resources of larger competitors, and negatively impacting companies that lack strong quality assurance programs. With these heightened requirements, Europe may become a less-attractive first point-of-entry for novel and high-risk medtech devices in the future.
Christian Gualtieri, Analyst, Healthcare IT
In May 2017, the WannaCry ransomware attack illustrated how vulnerable healthcare IT systems can be by crippling at least 81 NHS trusts in the United Kingdom. Partially due to increasing global adoption of electronic health record (EHR) systems and rising interconnectedness across devices and hospital networks, the enterprise solution and radiology picture archiving and communication system (PACS) markets—valued at approximately $1.6 billion combined in the U.S.—are increasingly becoming targets for cybercrime.
A significant factor that plays into this threat is the use of obsolete healthcare IT systems that are unable to defend against today’s cybercriminals. Consequently, the industry will see more partnerships between healthcare IT vendors and non-traditional healthcare technology companies, as well as a growing number of large tech giants—such as Microsoft, Google, and Amazon—entering this space as hospitals begin to prioritize their transition to cloud-based technology and the need for better cybersecurity expertise.
Healthcare companies that fail to prioritize their cybersecurity software products will also lose their competitive edge with the transformative changes expected from the introduction of AI platforms. The same AI algorithms developed to improve patient care could potentially be exploited for ransom by criminal organizations, exacerbating the threat, unless these algorithms are properly secured. Therefore, the call for more robust solutions has never been more paramount with the increasing integration of technology in healthcare that lies ahead.
Durugshan Wijayakumar, Analyst, Orthopedics
Rula Altoumah, Analyst, Orthopedics
With slowing dental device sales growth in the developed markets of North America and Europe, premium brand manufacturers are increasingly using acquisitions and partnerships as a way to access high-growth developing markets. 2017 saw a continuation of this trend; for example, in November, Straumann received approval to acquire a controlling 70% stake in Batigroup, a dental distribution company in Turkey, which is a country with a highly underpenetrated dental market. The move is only the latest in a series of deals that has positioned Straumann well in emerging markets. In the past few years, Straumann acquired Neodent and Equinox, and formed partnerships with Anthogyr and T-Plus—just to name a few—in order to better penetrate markets in Latin America, India, China, and Taiwan.
But Straumann’s competitors have not remained complacent and have also followed a similar playbook. For example, Dentsply Sirona acquired MIS Implants in June to improve their position within the fast-growing, $320 million Latin American dental implant market. This has shown to be a winning strategy as both Straumann and Dentsply Sirona’s share of revenues has increased significantly as a result, and competitors will look to follow suit in a rapidly changing dental implant market.
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