2013 Medtech Outlook

The 2013 Medtech Industry — Some General Predictions

In 2012, much has been made of the Affordable Care Act or, more precisely, the 2.3% excise tax on medical devices used to fund the addition of 30 million new patients to the U.S. healthcare system. Despite a chorus of voices for a repeal of the tax, with repeal arguments that range from credible to absurd, the tax is likely to stay in place.  With the influx of new patients in 2013 and beyond, the cost versus benefit will become clear, but we forecast that the debate on the excise tax will linger well into the new year.

The U.S. and global economy have been recovering with growing momentum following several stagnant years.  Just as a rising tide floats all boats, the stronger economy in 2013 will help drive medtech though more available capital leading to increased spending by healthcare systems for increased inventories and investment in new technologies.

Investment in medtech will likely show modest increase as money that has been previously stored in the “safe harbor” of medtech investment will shift back to non-medtech investment targets that have now been made more attractive by the stronger economy. In the recessionary economy of post 2008, medtech investment has favored later stage (i.e., “less risky”) technologies — those already in or about to enter the market.  Now, with hunger for larger returns in the stronger economy, the money that will flow into medtech in 2013 will be more inclined to fund earlier stage products and companies.

Physicians and companies will not part ways, but in 2013 they will not be so cozy, given the Sunshine Act’s intention to reveal how cozy they actually are in order to eliminate financial bias in physician endorsement of new technology. Even before the Sunshine Act, the writing has been on the wall that the links between physicians and companies have been too close. Greater scrutiny of these links will create challenges for medtech to ensure that clinical validation of new technologies will be unbiased.

Trends associated with the FDA include steady progress in reducing review times, closer scrutiny of off-label uses, more stringent attention to false or misleading claims and, in general, an uptick in enforcement. We forecast that the regulation of medical devices will become increasingly complex as the FDA seeks to address deficiencies in the 510(k) process and, in general, complete reviews more efficiently to satisfy the needs of industry and needy patients without compromising device safety.

The regulatory process will also become further challenged as it faces new definitions (or lack thereof) for “medical devices”, since the marriage of drugs and devices (i.e., hybrids), the growth of resorbable implants and other innovation trends blur the previously distinct boundaries between drug, device, biotech and other products.

2013 will also see the emergence and/or expansion of multiple medtech markets.

  • Expect a growing number of developments in neurology-focused therapeutics such as neuromodulation, the expanded use of hybrid devices in cardiology (including bioresorbable stents).
  • The press for minimal invasiveness and the capacity of medtech to respond through innovation will drive development and adoption of new technologies paradigms such as NOTES (natural orifice transluminal endoscopic surgery) technologies; transcatheter technologies and other medical/surgical technologies that dramatically reduce the need for surgical incisions or other invasiveness; non-invasive diagnostics such as glucose meters in diabetes
  • Surgical and interventional procedures are increasingly being integrated with more sophisticated pre-operative and intraoperative (“real time”) imaging systems that enhance the physician’s ability to direct therapy more effectively at pathologies with less collateral damage, reducing complications, accelerating recovery and otherwise improving patient outcomes.  Some of these systems, such as intraoperative MRI, are very sophisticated and accordingly expensive, so benefit/cost may limit adoption but for the most at risk caseload.
  • The blessing in disguise that was the Bush administration’s ban on federal funding of embryonic stem cell research led to a burst of research in adult stem cells that bypassed the embryonic stem-cell ethical dilemma. With the Obama administration’s subsequent lifting of the federal ban, both embryonic and adult stem cell research is proceeding at breakneck pace.  2013 is therefore likely to see an equally powerful burst of advances leading to practical therapies based on stem (or pluripotent) cell technology.
  • Driven by research indicating important, patient-specific differences in physiology that impact the effectiveness of medical devices and other medtech, 2013 will show an increase in customized or personalized medicine.  The diagnostic component will include genetics-driven predictors of disease while the therapeutic will include a wide range of product types, from the development of autologously cultured tissues or stem cell-derived tissues, and custom-fitted implants in cardiology, orthopedics, general surgery and other specialties.
  • 3D printing is being applied to medtech in both prototype development and in such seemingly far-fetched ideas as organ printing, which is actually in active development.
  • Biomaterials, or materials technology in general, increasingly expand the number of possibilities of what can be achieved with medical devices and other medtech products. Drug-coated devices, drug-delivery devices, extracellular matrices, bioresorbable implants, nanotechnology-based and other coatings and a wide range of other materials technologies are enabling medtech products to be more disease-specific, less toxic, less prone to biocompatibility issues, less likely to be associated with procedure-specific collateral damage and otherwise more effective in achieving high quality outcomes at lower overall cost.

There will also be secondary forces impacting medical technologies. By this, we mean forces in the innovation of non-medical technologies or other forces that are changing the use and/or implementation of medical devices. First among these is forces for the integration of information technologies in medical devices encompassing infusion pumps and other “smart” devices, radiofrequency identification systems, wireless telemetry and others.

While we are more focused on medical technologies than on technologies like information systems that affect more of the logistics than the clinical delivery of healthcare, it should not be overlooked that healthcare in 2013 will also be characterized by steady growth in the application of information technology.  At its simplest level, information technology in healthcare is the management of healthcare information — electronic medical records, healthcare information systems, picture archiving and retrieval, etc. But to a much greater degree, information technology is impacting healthcare through several key areas:

  • Computer aided design and prototype development. Conventional use of computer aided design in the development of medical devices is already common, but increasingly sophisticated programs and systems are being developed to optimize device design to reflect a more comprehensive understanding of the forces, dynamics and anatomy of patients, as well as the more thorough understanding of pathology. With the use of CAD and 3D printing, prototypes can be quickly produced that, if not functional, can facilitate the development of ideas toward functional prototypes. In cardiology, flow dynamics have been recognized as a critical aspect effectively applied through computer aided design of vascular stents, catheters, embolic protection, aneurysm repair and many others. In orthopedics, the use of CAD is facilitating customized implants.
  • Systems biology and the demand for multivariate analysis. One of the most significant long term objectives of medical device (or medtech) development is the innovation of products that more comprehensively address disease states (or wellness) by integrating understanding of anatomy, physiology, chemistry, genetics, physics and all other possible disciplines having potential impact on the long term efficacy of a medical product.  While there is fundamental science to be learned to achieve such a multivariate understanding/solution, and this is a long-term goal well beyond 2013, the increasing recognition of diverse factors impacting product efficacy is incrementally improving each new product embodiment — and such work is a part of product development already.  The concurrent interplay of alternative device (or other medtech product) configurations with myriad biological, physical and other forces demands information technologies that are able to predict downstream effects of each possible innovation.

[Please note we are continuing to review new medtech development efforts and analyze their potential impacts so that we may update our 2013 forecast here.]