Defining Disruption in Emerging Medtech

In our line of work, we come across many innovative medical technologies appended with the adjective “disruptive”. Some uses of the term require more squinting to imagine than others. The disruptive label is enticing because big ideas are associated with big funding and big exits in the emerging medtech landscape. Alas, there is no objective measure of a device’s potential disruptiveness; like pornography, to paraphrase a former Supreme Court justice, “you know it when you see it.”  Renal nerve denervation for refractory hypertension – now that’s disruptive.  Fully implantable artificial heart – disruptive.  Transcranial magnetic stimulation for depression – disruptive.  RF ablation for severe asthma – disruptive. Of course, to really disrupt the market, these technologies need to be widely adopted, and it so happens none of these have quite reached that stage yet, but at least the potential is there to fundamentally change treatment paradigms.

High “disruptivity” is not essential for new medical technologies to attain success. There are perfectly clever, fundable innovations out there that don’t rock the healthcare world or get published in NEJM. What is important, though, is ensuring a proper balance between the two fundamental dimensions of disruption, namely Care Disruption and Cost Disruption.

Care Disruption can be created by:

  • A new device-based treatment where only drugs (or nothing) existed before
  • Enabling a much broader group of patients to be treated
  • A completely new setting of care, e.g. new home treatment or monitoring

Cost Disruption can be created by:

  • Being significantly cheaper than existing solutions (e.g. 5-10X cheaper)
  • Adding significant costs to the healthcare system
  • Massively shifting costs associated with a certain condition from one category or payer to another

To lay this out visually, if your technology is both a Care and a Cost disrupter, then it is in the “Maximally Disruptive” box on the above classic 2×2 chart. For technologies that significantly change care and also increase or shift costs substantially, the key to market creation is the development of compelling clinical data. The reward for successfully demonstrating value may be keen interest by the big medical device companies looking for entirely new verticals (consider the $800M purchase of Ardian by Medtronic).  Medical technologies that are able to disrupt care at a significantly lower cost, for example by leveraging advances in processing power (Moore’s law), are equally exciting but are just starting to emerge.

On the other end of the spectrum is the “Market Share Battle” quadrant, where incrementally better new products with a comparable or slightly lower price tag fight entrenched competitors for a piece of an existing market. The battlefront here is often in purchasing departments of health systems, and the sales channels are likely through distribution. Exits for products in this category tend to be later stage and based on multiples of revenue; prove you can gain share on the market and there will be interest.

If your technology involves a significant change in care but not necessarily in cost, for example a shift in the site of care or a less invasive, easier procedure, then the focus of the company should be on Market Education. Products in this category, even if money-saving, can encounter referral pattern problems where clinicians who “own” the patients may be disincentivized to offer a less expensive solution, especially if it is provided elsewhere. In this case, direct-to-consumer marketing and advocacy may be required to gain traction and prove demand for the new technology. Companies offering endometrial ablation solutions, as an alternative to hysterectomy, could tell you first hand about the referral pattern problem. Proving cost-neutrality or savings with post-market economic studies may also be required to realize a shift in care patterns.

Where you don’t want to land is in the upper left box, unless your technology is on the cheap end of cost disruption. No entrepreneur will admit that the innovation they’ve nurtured is an incremental improvement at a higher cost. Unfortunately, until the clinical benefits and/or economic savings of more expensive innovations are credibly demonstrated in studies or even better with real-life use, skeptical clinicians, payors, hospitals and patients will likely place it in this box. The trick is moving as quickly and efficiently as you can to a better zip code.