Devices & Diagnostics

Business model update: How medical device firms can attract more innovators

For years the standard operating procedure for the medical device world has been: Bring good […]

For years the standard operating procedure for the medical device world has been: Bring good tech to patients and be rewarded by the market. Healthcare reform and particularly the consolidation of doctor practices is making this model obsolete. Now the challenge is more along the lines of “Justify your existence.”

Device companies have to revamp the traditional business model to show how their products save money and help patients in the long term.

Doug Mowen, the global and North American leader for Accenture’s medical technology practice, explained the results of a new analysis from Accenture, “The MedTech Disconnect: Realigning Innovation to Succeed.”

“The industry for decades has been excellent at creating clinical value and differentiation, and there is a strong infrastructure in place to do that: R&D groups, M&A groups,” Mowen said. “In the last few years, there has been an emerging awareness of the need to pull the other lever: the economic value lever, to demonstrate the impact of your product on the healthcare system.”

This is fundamentally a different type of information and value, and institutions are using these new criteria to make business decisions.

“Companies know they need to justify the product and they want to be paid for outcomes, but they don’t have any comprehensive and accepted manner to do that,” he said.

Mowen said Accenture’s research has identified three crucial building blocks for this emerging digital operating model that will require different business relationships with pharmacists, retailers and other major healthcare institutions. The keys are:

  1. Connected therapies that allow companies and providers to measure outcomes
  2. Patient services that allow partnerships designed to track outcomes
  3. Population health analytics to help decision making and to determine the value of a product in the system

Mowen predicts that leading companies will adopt this infrastructure, which will in turn attract innovators.

“Innovators need to pull both levers,” he said.

Device companies will have to engage directly in the marketplace and analyze the economic impact of products. Unsurprisingly, data will be important to this transformation.

“In the future a lot of R&D will be performed using connected devices and collecting information directly,” he said. “The key to this tactic is not going to be clinical trials, but interacting with the patient and collecting data over the long term.” Companies that master that data game will be the ones that win in the market place.”

Mowen said that the best way to start this process while still maintaining current products is to pick a key product for a key market and then find a way for innovators to go to market supported with a rich data stream.

The second big challenge for device companies is to quantify the cost-savings of a particular solution.

“We’ve known for 5 to 6 years, that buyers are buying on economic impact, but how do I show what my impact is?” he said. “I can show it in the small, but do I have sufficient data that I can show it in the large?”

Mowen said that Medtronic is the best example of how to transition from a product company to a hybrid health systems company, illustrated by a three-part strategy:

  1. Product innovation
  2. New hospital solutions and patient services businesses
  3. A serious approach to entering the international growth market

Scale is not enough any more. Companies have to provide integrated solutions to survive in the 21st century and attract creative people.

“If you have the ability to manage patient populations, if you have the infrastructure in place to capture and guide and demonstrate the economic outcomes, if major institutions can partner with you on outcomes and other measures, then you’re the company of choice for innovators.”

[Image from Accenture report “The MedTech Disconnect: Realigning Innovation to Succeed.”]

Veronica Combs

Veronica is an independent journalist and communications strategist. For more than 10 years, she has covered health and healthcare with a focus on innovation and patient engagement. Most recently she managed strategic partnerships and communications for AIR Louisville, a digital health project focused on asthma. The team recruited 7 employer partners, enrolled 1,100 participants and collected more than 250,000 data points about rescue inhaler use. Veronica has worked for startups for almost 20 years doing everything from launching blogs, newsletters and patient communities to recruiting speakers, moderating panel conversations and developing new products. You can reach her on Twitter @vmcombs.

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