For the past few years, med tech entrepreneurs have seemed practically apologetic for being in med tech. True, there are many reasons, or maybe excuses, to have had ears down and tail between legs. Venture capital has generally favored biotech and health IT over med tech. The large medical device companies have been more focused on merging, cutting costs and doing accretive deals than growing their pipelines, although in certain hot areas (e.g. mitral valves) some earlier stage deals are happening. Payers and health systems remained stunned by all the changes to their ecosystem and are categorically wary of anything that might cost more. Oh, and the attractive regulatory shortcuts for med tech are either gone or irrelevant as market risk has become what everyone really fears.
But that was so 2015, or more like 2008-2015, which is how med tech has ended up with a “meh” brand in the financial and health care markets. My proposal for 2016 is simple: stop whining, stop attaching biotech to your company names or disguising yourselves as a tech company (how’s that working for you now, Theranos?), and own the med tech title like a badge of honor. Here are some suggestions for infusing a little “sizzle” in the med tech brand:
Med tech solutions are simple, elegant and effective. Med tech innovators are, by and large, very practical problem solvers. Our technologies don’t always involve high science (sometimes they do), but they are usually clever and everyone can get their heads around them. There may be very few true med-tech platforms with $10 billion revenue potential, but there are a lot of great singles and doubles out there to be found. CRISPR sounds great, I think, but will knocking out and replacing genes really work and not kill people or turn them into flesh-eating zombies? Not sure I’m signing up for that clinical trial (I’ve clearly watched too much Walking Dead). With patients and administrators ever more involved in health care purchase decisions, this simplicity can work to our advantage once a product enters the market.
Health care providers need med tech innovation. Yes, the bar is much higher for adoption of new medical technologies, especially if they are associated with a higher direct cost, and the burden of proof on small med tech companies can seem prohibitively costly and long. If you step back, though, you’ll see that the dynamics in the provider market create exciting opportunities for truly innovative and valuable technologies. Silos between inpatient and outpatient costs are breaking down and many hospitals are in effect insuring large populations, opening the door to longer-term cost savings arguments. The increasing availability data is enabling hospitals to be measured on quality of care and patient satisfaction, which can in turn impact their reimbursement and market share. There is an emerging bottom-line argument for new devices that can improve care on these dimensions.
Big med tech needs innovation, too. The large medical device companies are running out of late stage and non-dilutive stuff to buy, need to innovate, and generally can’t get out of their own way to do it efficiently in-house. Behind the scenes, we see a lot of early stage and technology deals happening that don't get announced because they aren’t "material". We also have noted the trend toward deals involving more back-ended pay-outs, co-development, and other ways of de-risking before owning. These types of partnerships aren’t the favorite of traditional venture capital, but are keeping many innovative med tech companies afloat and attracting alternative sources of capital.
The FDA climate for devices is improving. While certain medical devices are getting more regulatory scrutiny now, for example vaginal mesh just got PMA’ed, overall FDA approval times for both 510(k) and PMA devices have been quietly coming down. It also seems that the FDA has finally figured out their own de Novo 510(k) process, designed with the good intent of providing a streamlined pathway for relatively safe devices without clear predicates. The use of the de Novo pathway has been increasing across a range of device categories; while still far from perfect and potentially requiring extensive clinical data, a functional de Novo option can be very helpful to innovators, saving money and time especially if design iterations are necessary (as they often are!).
Med tech is a port in the biotech storm. While the biotech industry has made a big gamble on being able to astronomically price drugs for niche, or even micro-niche, diseases, med tech hasn’t lost its focus on addressing common and chronic conditions. The market may shift between surgical and interventional, inpatient and outpatient, fixed site and wearable, but the demand for our knees, pacemakers, IV pumps and diagnostic tests is not going away, and if anything will grow with the aging of the population. While there is price pressure on devices, these forces aren’t catastrophic and underscore big med tech’s need for continued innovation (see #3).
Making the most of these favorable trends requires med tech innovators to think creatively about how to develop technologies, fund companies, approach and define strategic partners, staff teams, and commercialize new products. We also need our industry organizations to stop fighting last year’s war and start selling some med tech futures. Med tech is the new black! Clearly need to work on the tagline...