Silicon Valley recognizes the power and potential of the healthcare markets, and is coming to play. The medical device industry must quickly adapt to the new digital paradigm, or some of its biggest players like General Electric and Medtronic could get squashed by the likes of IBM, Apple and Samsung – or so said a panel of venture capitalists at this week’s Advamed 2015 conference in San Diego.
“This is not your father’s healthcare company competition,” said Leslie Bottorff, managing director of the healthcare arm of GE Ventures. “The barbarians are at the gates. You don’t want to show up with a knife to a gun fight. The big companies and the small companies need to say, ‘What do we have to do to compete with these guys?'”
Indeed, with the advent of Apple’s HealthKit, Google’s life sciences division and IBM Watson’s sharpened focus on healthcare, the traditional medical device industry is shooting towards a serious state of flux. The economics are really different in terms of the sheer amount of money companies like Google and Apple can throw at a healthcare product – and the medical device industry must be prepared for that, Bottorff said. Tech companies are flush with cash, whereas medical devices are challenged to drum up capital – particularly in the early stages.
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And tech companies are taking a much more holistic view of healthcare than medtech – viewing it as an asset that consumers will be engaged with 100 percent of the time,said Rick Anderson, managing director of PTV Healthcare Capital.
At present, the medtech industry focuses on a smaller sliver of the healthcare market – maybe five percent – or when patients are extremely ill. This disparity of approaches to health and wellness between tech and medtech could help big Silicon Valley tech dominate the medical device industry.
“Every telecommunications player in the world is looking at their own infrastructure and figuring out ways to drive access and adherence to healthcare,” said Nick Manusos, global head of business development at Baxter International.
But here’s what’s key, Bottorff said: The medical device industry is the fortress. It has the trust of the big providers, the regulators and the insurers. But the question remains how the medical device industry will incorporate its assets to fit in with the digital revolution.
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“How can we mine this data we have – after all, we’re the ones with all the data – to move quickly?” Bottorff said.
This opens up a sea of possibilities for the medical device startup entrepreneurs, she said – in which the big companies are going to be highly willing to partner out.
“This doesn’t mean everyone in the medical device industry needs to partner with Google and IBM,” Manusos said. “Small companies offer the same abilities.”
And the good news, Bottorff said, is that there’s money in the market to support the smaller players – if they’re working in tandem with digital health.
“In a future world, we’re looking at the democratization of the delivery of care,” Anderson said. “The question of us is whether we in the device industry will be part of the problem or part of the solution.”
In line with Sheryl Sandberg‘s credo, Anderson tasked medical device entrepreneurs to lean in – because historically, the industry’s been full of slow adopters.
“If we make smart devices, versus dumb devices, that communicate and feed the big data machine – that’ll be game-changing for our industry,” Anderson said.
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