Admittedly, the biotech boom of the past few years has left some of us in med tech feeling a bit inferior, maybe even jealous. Those huge funding rounds, heady IPOs and rich pre-revenue M&A deals can be hard to swallow, especially when investors keep asking you why you can’t be more biotech-y. Even though the Turing Pharmaceuticals debacle tarnished all healthcare stocks a bit, it's hard not to feel a little Schadenfreude for the high-flying biotech sector. Maybe now cooler heads will prevail and med tech won’t look so dismal by comparison.
In mulling the actual substance of the Turing debacle, though, it would be unwise for med tech to believe itself immune to pharma's recent pricing struggles. The Turing CEO made a very logical business move based on supply and demand for a niche drug - a decision any of us might have made given the apparent facts on the ground. What Shkreli greatly misjudged was the power of the consumer and, in this situation, the energized AIDS advocates that represent them. In retrospect, this response should have been foreseen by Shkreli, given that these same activists have pressured big Pharma before and won. Which raises the question - how well do any of us in med tech really know the end-consumer of our devices and understand their points of pain, financial or otherwise? We spend so much time, effort and money courting doctors, hospitals and payers that we, too, may have major blind spots for our patient customers and what we might do to send them grabbing for torches and pitchforks.
This elevated position of healthcare consumers should come as no surprise; the myriad micro changes to US healthcare financing have given rise to a macro trend of healthcare consumers asserting their influence in purchase decisions. Patients are being asked to pay more out of pocket for all but a handful of preventative services, and the many earnest efforts to induce consumer rationality are resulting in unprecedented public availability of data about the cost, quality and benefits of prescribed care. Add viral media to the mix, and you've got all the basic ingredients for a consumer flash mob in the face of perceived price gouging.
This populist force, now an official “thing” thanks to copays, deductibles, data, and Shkreli, could well be unleashed on the med tech industry, but may take a different form. The pressure is largely hitting our hospital and physician intermediaries, who are under increasing scrutiny for over-charging and over-providing care to the detriment of patients' pocketbooks. Websites such as New Choice Health and Castlight Health are arming consumers to comparison shop procedures and save on out-of-pocket expenses, and consumers advocates are advising their constituents to question the need for certain healthcare services (check out AARP’s advice on “10 Medical Tests to Avoid”). You can bet that these trends are driving tougher price negotiations between hospital purchasing and med tech companies.
Increasing consumer engagement in healthcare purchase decisions also creates new opportunities for medical devices that perform comparable functions at a lower price. AliveCor has gained traction with its smartphone ECG device by pricing it to compete with the cost of copays for traditional ambulatory cardiac monitoring. Companies like NovaSom have transitioned sleep apnea testing to the home, saving payers money and sparing consumers large copays and a night in a strange bed. Telemedicine and apps have the potential to displace expensive skilled providers and office visits by enabling patient self-directed care in areas such physical therapy and mental health counseling.
It is within the device industry's power to be part of the solution for cash-strapped healthcare consumers, and in our own long-term interest to do so. A successful, consumer-oriented strategy requires that we know our customers, collaborate with our intermediaries to encourage good business practices, and pursue new technologies that enable lower cost care alternatives. In the short term there may be disruption, but the white-hot spotlight of public shaming is pretty disruptive, too.