Who's afraid of the big bad data?
Who's afraid of the big bad data?
Why medtech needs to rise to the information challenge
Two years ago in our annual report on the medtech sector, Pulse of the industry, we warned that the sector was facing a perfect storm, caused by a general shift toward value-based care, growing regulatory pressure in the US and limited resources as a result of a global downturn. Those events came to pass, with the added complication of tougher new regulatory issues in Europe. It was time, we felt, in this year’s report to see how the sector is weathering the storm.
The answer, in many respects, is that the going is tough. Revenues are growing, but barely. Innovation capital is at an all-time low. And the sector now has a new set of customers to deal with – the cosy partnership with physicians which helped to make medtech a success is now far less relevant than the more demanding new relationships the sector finds itself having to form with payers, patients and purchasing consortia.
The importance of those new relationships means that medtech has had to dramatically rethink its value proposition. “Value” to a physician meant producing products that were incremental improvements on previous versions, based on ease of use and compatibility. But what does value mean to a payer, or a patient? Payers want hard evidence of improved outcomes and cost savings before they will reimburse a technology. Patients want portability and better ways to manage their conditions. Hospital groups want cost efficiency – and help with offering services beyond simply point of care.
How can medtech companies begin to address these different demands for value, as well as meet the demands caused by tougher regulations, and put themselves in a position to regain a bigger proportion of health care spending? It will take exploring new business models that move beyond the product, beyond the treatment and beyond the hospital. In our latest Pulse of the industry report, we identify six new capabilities that medtechs will need to build in order to succeed at business model innovation:
- Make more efficient use of existing capital (vary fixed costs, conduct R&D more efficiently)
- Take a broader view of the changing health care landscape by understanding health economics, government requirements and market segmentation
- Build a collaborative culture to take advantage of a wider range of assets and skills that cannot be built in-house
- Become open data enterprises, teaming up with payers and patients to collectively gather and understand insights
- Develop a comprehensive understanding of the entire cycle of care for relevant diseases, identifying “value leakages” and offering services to plug them
- Develop scalable processes – large proof-of-concept experiments to test promising ideas before scaling up trials
One essential undercurrent running through all of these strategies is that if they are to be implemented successfully, medtech companies will have to get a lot better at managing data. And not just commercial leaders: already, venture capitalists are warning emerging companies – traditionally the hotbed of disruptive innovation in medtech – that they are no longer willing or able to invest in technology for its own sake, no matter how cool it looks. They will insist that the technology is backed up by evidence that it “offers a significant increase in the health economics of social insurance,” as one VC told us.
The good news is that many companies in medtech – large and small – are already demonstrating that they have an appetite for the challenge. “Medtech does create value,” a company CEO argued when we launched the 2013 Pulse of the industry at the recent AdvaMed conference in Washington, DC. “We just haven’t done a good enough job at pooling our data and proving our points. We’re not doing enough to be transparent.” Many companies are now embarking on initiatives that are designed not simply to sell technology, but capture patient data, learn from it and share those findings with health care systems. There is a sense among medtechs – unsurprisingly, given their past ability to engineer technological solutions – that harnessing big data will allow the industry to play a positively disruptive role.
One industry insider recently pointed out that to us that for him, the expression “perfect storm” reminded him of the movie in which Mark Wahlberg goes out to catch some fish and doesn’t come back. On the evidence we are seeing of medtech companies’ ability to innovate in this tough environment, we feel that many will be weathering the storm and coming back with plenty of fish.
We test these ideas in more detail at Eucomed’s upcoming 2013 European MedTech Forum in Brussels, when we will discuss with workshop attendees ways in which medtech companies can derive benefit from being good with data. The workshop will take place at noon on Thursday, 10 October 2013.
EMEIA Life Sciences Leader and Global Pharmaceutical Leader
Lead Analyst, Global Life Sciences Center