Devices & Diagnostics

VCs cannot alone fund expensive medical device innovations

The medtech industry prides itself on helping improve patients’ lives, but it’s actually kind of selfish compared with other industries, medtech CEOs said at AdvaMed in Minneapolis.

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The medtech industry prides itself on helping improve patients’ lives, but it’s actually kind of selfish compared with other industries, according to a panel of CEOs at the recently concluded AdvaMed conference in Minneapolis.

Medtech continues to enjoy higher profit margins than other industries, yet companies still expect to research certain innovations and venture capitalists to finance them. Medtech doesn’t even share data across companies like other industries do, the executives said.

The healthcare industry has to balance advancement with cost because the government and payers have run out of ways to fund it, said John Carlson, president of Flex Medical Solutions. Carlson joined Flex last April after 15 years at Johnson & Johnson. Most recently, he served as vice president of J&J’s innovation portfolio, including pharmaceutical, medical devices, and consumer health segments.

Medtech can learn a lot by leveraging technologies from other industries, Carlson added. Medical device companies should consider how to partner with consumer companies and how to bring the rigor of a clinical trial to consumer products, he said.

Furthermore, the medtech industry’s focus on selling products rather than on patient outcomes limits its opportunities to help people and become more efficient, said Medtronic CEO Omar Ishrak. Those opportunities are vast, and include bringing equity and access to healthcare across populations and localities, which would be a sea change for the industry, he added.

Eliminating the inefficiencies in the healthcare ecosystem while focusing on outcomes would unleash tremendous amounts of money for R&D and innovation, Ishrak continued. Every program Medtronic has done in the last five years has been evaluated against a screen of economic value and healthcare goals, he said. In cardiovascular, this method yielded the Micra leadless pacemaker. In neurostimulation, it’s understanding how the nervous system works to move away from drugs toward “electroceuticals” to cure or manage diseases. The industry is on the ground floor if not in the basement of that area, he added.

There will be more advancements in robotics, navigation, automated procedures and patient monitoring that will lead to improving outcomes in a continuous cycle, Ishrak concluded.

But the medtech industry continues to look to venture capital to finance its startups and expansions. Not many venture capital companies can invest the $150 million it takes to land premarket approval from FDA, noted panelist Jon Salveson, chairman of the  healthcare investment banking group at Piper Jaffray.

“The venture capital community can’t carry the load,” Salveson said. “There’s going to have to be different models of investing in innovation in the private sector” such as those that the pharmaceutical industry has used for years.

He agreed with Ishrak that achieving efficiencies is the way to go.

“Efficiencies are going to drive investment,” Salveson said. “I really think we’re on the forefront of that. We’re going to have to figure out how to capture it.”

Photo: Flickr user Tax Credits

 

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