Just occasionally it’s healthy to sit back and take stock of the dynamic world of medical device technology. We face a barrage of information from interested parties as various as clinicians, investors, hospitals, patients, companies, universities, regulators to name only a few. And the information usually refers to things that are changing or pressures to change something. To pick “regulatory” for instance, we’ve dealt extensively with issues like the PIP scandal, problems with ICD leads, all-metal hips and the like, and for every new situation we encounter there is some sort of knock-on effect in terms of future regulatory requirements.
Then there’s the economic climate, which is, like-it-or-not, a driving influence over technological innovation in the medical industry, and not just in USA where the sales tax levy is but one example of how pressures are increasing in a way that will drive a Darwinian selection process in years to come.
So, will it all look the same in ten years time? What will the key drivers be? Will there still exist the merry-go-round of new companies forming around new developments and then getting acquired by big established companies, and indeed is that a healthy state of affairs in any case?
Without employing a firm of consultants or PhD students to do the job, we wonder whether it might look a bit like this:
- Regulatory barriers will be raised in EU and probably won’t drop much in USA, making it more difficult for early stage companies to see the light at the end of the tunnel. Consequently the investment climate could change, compounded by ongoing economic adversity, to the extent that the investor community will shrink. New technologies may well increasingly come from Government-funded collaborative initiatives aimed at specific target conditions.
- Economic pressure will increase, driving a need for greater evidence, which is expensive to obtain, therefore resulting in fewer disruptive technologies coming through. SMEs will focus on evolutionary products which will have a reduced regulatory burden and more easily supported evidential claims.
- Large companies will consolidate their activities rather than acquire to fill the gaps in their portfolios.
- Sales reps will be more highly qualified yet with larger territories, these so-called super-reps being the most successful interpreters of ever-higher customer needs and as such rendering the lowly door knocker redundant.
- Increased medico-legal pressure will reduce risk taking among clinicians, who will revert to defensive conservatism, further mitigating against the innovative SME.
- The big device-related needs will be addressed, so devices will become more and more specialised as they need to chase the niches. We already see this as companies get all excited about indications they would once have dismissed as being too insignificant to justify investment.
- Environmental pressures will increase (along with the price of natural resources) resulting in a shift back to reusable devices with reduced commercial attractiveness due to the non-single use nature of these devices.
Now, in case you’re suicidal at this point, don’t worry too much, because ten years ago you could have said all of the above and in some shape or form we’re all still here in a vibrant industry that is driving improvements in healthcare provision in the face of difficult times right now. There are still plenty of drivers supporting a healthy future for the innovative SME. For example, product lifecycle theory dictates that the longer something has been around the more competitors it gets and the price and usually with it the gross margin eventually comes under pressure. The best way to run your product portfolio, if you’re big enough to have such a thing, is to have a mixture of established high volume, maybe lower margin (by definition) products alongside newer, breakthrough/disruptive, lower volume, higher margin gizmos. If the innovators stop in their tracks the consequence of the big guys succeeding by having ever lower margin older products is unthinkable, so they’ll continue to scour the world for tomorrow’s next big thing almost regardless of all the pressures we’ve already discussed. So what’ll happen is that development costs will increase in the brave new world, along with the attendant risks, meaning the big cos will jump in earlier and earlier. How many times have you heard it said that the big companies prefer to let the SMEs de-risk their technologies before getting involved? All the time right? So what will happen is that the big cos will get toes in the water with SMEs earlier and earlier, in so doing providing the funding to get through all the ever-rising barriers to entry. Either that or they’ll bring the development entirely in-house, which would be bad for the ankle biters, but won’t happen because big companies are no good at this stuff.
In other words, the fundamentals may well not change, but the timing and nature of the innovation-to-product continuum will.
The final key driver is that healthcare needs will always outstrip technology… there will always be a condition without a current solution.