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As originally asked by Gunter Wessels,Ph.D.,M.B.A.

We have observed that the medical device and technology innovation race has not slowed, but gaining provider’s adoption of recent advances is definitely more difficult these days. Why? Certainly there are cost pressures, but there is a fundamental change in the innovation-adoption model: A shift from suppliers driving medical innovation to provider care delivery innovation (and supplier capitulation) is evident. Examples that indicate this shift include the rise of Accountable Care Organizations, the melting of physician preference influence on device selection, and the increasing price-value analysis in supply chain management. How do you remain relevant when what made you successful in the past isn’t working as well now?

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Todd Staples, MBA
Account Representative, GYN at Medtronic
In the roughly 40 page Ernst & Young annual report titled “Pulse of the Industry – Medical Technology Report 2012” they do a careful breakdown of industry trends and document the way innovation is changing and empowering consumers and patients to a much larger extent than ever before. It is hard for our industry sometimes to see the bigger picture of healthcare delivery. The part of the report that really impacted me was detailing how device innovators are now recognizing that Payors, Providers, and Patient/Consumers are ALL essential components of healthcare delivery and each needs to have a stake in adopting new technology and standards of care. This statement is a marked deviation from the past where device makers and providers (doctors usually) had all of the influence around technology. The net result is that there is a whole new wave of entrepreneurial ventures that are emerging in 2013 that target patients and strive to reduce costs of healthcare delivery by allowing patients to be more involved and engaged in their own health, in some cases actually capturing, recording, and sharing data without ever leaving home.

My only point is that the big influencers and drivers of innovation (demand) are the Payors, Providers, and Patients – it is the device industry and others role to see that the demand is met and satisfied, and to some extent nurtured in new directions.

I would encourage our group members to read the report in it’s entirety – there is great insight in this report for all regardless of your job function.

[http://www.ey.com/Publication/vwLUAssets/Pulse_medical_technology_report_2012/$FILE/Pulse_medical_technology_report_2012.pdf|leo://plh/http%3A*3*3www%2Eey%2Ecom*3Publication*3vwLUAssets*3Pulse_medical_technology_report_2012*3%24FILE*3Pulse_medical_technology_report_2012%2Epdf/Wkg0?_t=tracking_disc]

Sherman Eagles
Partner at SoftwareCPR
I don’t think it is innovation taking a back seat. It is that the innovation is in a different area. A new rule is that integration is key, and those who figure out how to innovate in partnering with their customers, and being interoperable with other devices will do better than those who come up with new clinical solutions. Anyone who has struggled with cybersecurity and hospitals’ needs to protect their networks can see where we are going. Innovate to solve that problem and you will be ahead of your competition. The FDA has been pouring resources into interoperability. Shuren wants a standard and UL/AAMI plan to give him one – or more. Device companies need to realize that they can’t stop at the point of sale anymore, They have to innovate to help their customers with the problems they face in integrating and operating the networks that almost all devices will soon depend on.

Eduardo Alvarez
Technical Sales Manager – Lighting Division at PLASKOLITE
At the MassDevice Big 100 East KHJ presented a thesis where innovation was taking a back seat to other factors as it has stopped being a differentiator. A link to the ideas:
[http://www.khj.com/rocktherules/rules.html|leo://plh/http%3A*3*3www%2Ekhj%2Ecom*3rocktherules*3rules%2Ehtml/0SBK?_t=tracking_disc]
In connection to this I have seen articles describing this as a consequence of the shifting balance of power in healthcare, from physicians to administrators.

Todd Staples, MBA
Account Representative, GYN at Medtronic
Gunter I think I understand where you are coming from with your question – the way I read this is how do medical device companies remain an essential partner in the healthcare delivery model in the US particularly, as these fundamental changes are taking place?

I think the only way device companies can remain relevant in this “New Normal” is to continually seek to engage with their customers on areas that providers are being challenged to improve. A good example of this was a few years ago when CMS made several key changes to hospital reimbursements refusing to pay for Hospital Acquired Infections (HAI) and patient treatments that were a result of negligent care such as falls, surgical errors that resulted in additional surgeries, and pressure ulcers. These were areas that hospitals had been getting reimbursed on in the past, so the only motivation for a provider to reduce these incidences was patient care, which is many times a subjective thing to measure in the real world. As soon as CMS put the spotlight on this issue every hospital immediately was scrambling to reduce incidences of these now very important expenses.

Out of this particular example, many device companies rushed to shift product strategic focus, and M&A activity adjusted as well to meet this demand from the market. Only by having a two way conversation with providers and understanding their pains, can manufacturers stay ahead of these trends and remain relevant to the delivery of care. Once a segment of the market becomes commoditized, it is common practice for manufacturers to take a step back and look for the next expanding need, which is exactly what they should be doing.

Bill Bakopanos
Business Development Manager Asia pacific & Latin America at Rontis AG
Gunter raises some valid points. Yes how do you remain relevant? CME and training programs are the flavor of the times and seems to gain the doctors’ interest and allegiance. I guess it’s another play on the “value-adding” theme. However the medical devices industry has always been bed-to-bench driven. History is supposedly meant to teach us many valuable lessons. In the case of medical services we only need look back at how and where PTCA started only to quickly realize that after 30 years things have not changed and that product development continues to be driven by direct input and feedback from the cath lab. We – being the industry – have various forums and trade groups through which we can meet and discuss a multitude of issues pertinent to our respective commercial needs and interests but when all is said and done, we go our own way, pursue our respective interests and continue to search for novel ways to interact more-and-more with the end-user ie., the interventionist. This is vital to our very survival as innovators if we aspire to developing further innovations. Only through consistent clinical insight can we achieve our commercial goals. It is well recognized that large medical device companies have bridged this gap. They are known to directly employ physicians/clinicians at senior levels in order to fast-track their R&D programs. It’s a smart strategy that aims to keep them at the forefront of their respective fields. Call it an Innovation-Adoption Model. Call it an R&D Model. The reality remains. Medical devices have always been driven by the medical professionals and we the industry have reciprocated by producing and/or refining technologies suited to their clinical needs. In conclusion, yes history does teach us many lessons but human nature being what it is, we quickly forget history’s valuable lessons. Dare I remind people of a company from yesteryear called Schneider who worked closely with Gruenzig in the early days. Bed-to-bench from the get-go. Nothing has fundamentally changed. Just the terminology by which we define the process.

Najim Mostamand, CFA
Director at Liolios
A company is made relevant when the product it offers is seen as being needed among the target audiences it seeks to attract. There will always be a need for innovation in the medical devices industry, particularly spurred by the companies themselves, simply because without the most efficient and proper equipment, a physician can’t practice. However, the need (that is, a physician requiring innovation as it relates to an equipment) is not within said physician’s control, regardless of what medical structure he or she practices under (i.e. ACO). This is because underlying every venture, business or profession is the principles of cost management and profit optimization. If we treat the medical devices industry as no different than any other commercial industry, we can take Porter’s Five Forces and apply it in this instance. If two companies offer an equal product at different prices, a provider or person responsible for purchasing the devices will select the cheapest one, therefore affirming that the supplier has no bargaining power (one of the five forces). In summation, while innovation is a critical component in appealing to future physicians, its implementation into a product is moot, unless it has any sort of economic merit.

Gunter Wessels,Ph.D.,M.B.A.
Practice General Manager at LiquidSMARTS
We are members of the device group, I.e. device companies.

Gunter Wessels

Joe Hage
🔥 Find me at MedicalDevicesGroup.net 🔥
Gunter, define “we” in this case. How are “who” relevant?

And why do you wonder “we” might be irrelevant?