By Glenn Snyder, Deloitte.com | September 23, 2019
I’ve been hearing the term “coop-etition” quite a bit recently as medical technology executives consider the impact outside organizations are beginning to have on their industry. There is an acknowledgement among many traditional device manufacturers that they might need to cooperate with consumer-centric/tech-savvy organizations as their world becomes more digital and increasingly consumer-focused. But there also is an understanding that a collaborator today could become tomorrow’s competition.
On Tuesday, September 24, I’ll be at the AdvaMed annual conference in Boston where I’ll be leading a session on transformational innovation with a panel of CEOs from three medical technology companies. During this session, we’ll examine how innovation is changing thanks to the value-based marketplace and the evolution of digitally-enabled devices. We will also discuss how start-ups and companies from outside of the medtech space are driving rapid changes in the market in ways that leverage their strength rather than traditional medtech strengths.
The definition of a medical technology is exceptionally broad and can include everything from bandages and thermometers, to implantable devices and highly sophisticated imaging equipment…and everything in between. It’s fair to say that this transformation in innovation is happening differently across the product portfolio.
Partnerships could be vital for the future of medtech
Many medtech companies are well-positioned to help define the future of health, but most of them won’t be able to do it alone. This new world of medtech is requiring capabilities—specifically customer focus and digital enablement—that haven’t historically been medtech strengths. While medical device companies have traditionally focused on developing hardware, some medical technology companies have deep experience with software and digital technology (think imaging technology, or even lab technology). Software—along with data collection and analysis—is quickly becoming an essential component of the medtech value proposition.
Nearly 80 percent of medical technology companies say the ability to integrate data from new technologies is a key challenge, according to a survey conducted by AdvaMed and the Deloitte Center for Health Solutions. Partnering with an outside technology vendor, or even a tech-savvy medtech company, could help some device manufacturers overcome that challenge. More than 80 percent of survey respondents said they intend to consider such collaborations.
AI, robotics could help transform care quality
We recently conducted a crowdsourcing simulation with 38 experts (from digital health startups, medtech companies, technology companies, health plans, health systems, and researchers). Nearly 80 percent of these participants agreed that artificial intelligence (AI) was the technology most likely to transform the quality of health care. That was followed by robotics (53 percent) and nanotechnology (47 percent). Some manufacturers of diagnostic devices already appear to be out in front when it comes to incorporating these emerging technologies into their devices, according to our research.
Our participants also suggested that access to consumer-generated data (i.e., non-health data that leads to health insights), a significant research and development budget, efficient distribution channels, and an embedded culture of innovation could give companies from outside the sector an advantage over established medtech companies. Moreover, many of these non-traditional players don’t face the same regulatory restraints that have historically bound medtech organizations. In addition, technology firms often have access to large customer databases, which could be a valuable source of real-world data that can be used to improve existing devices or to develop new innovations. And unlike most medical device companies, technology companies often have experience selling directly to consumers.
Competitor, partner… or both?
Medical device manufacturers might be good at developing innovative devices, but many of them have limited experience in building sensors that gather data, or in developing the analytics needed to interpret the information. But some medtech executives are leery when it comes to the idea of collaborating with a technology company. A medtech company that cooperates with a technology company from outside the health sector could gain access to new markets and useful data. However, such a relationship could lower the barrier to entry if the outsider decides to become a competitor. Some executives are concerned that such a relationship could give an outside company access to intellectual property (IP) that could be leveraged to build its own devices.
While medtech companies should absolutely put protections in place to protect IP, this fear should not keep them from exploring possible collaborations or partnerships. The non-traditional players that enter the medtech space are more likely to compete for control of data rather than developing their own devices. For example, a technology or consumer-focused company probably wouldn’t try to develop an implantable device like a pacemaker. But that company might develop a way to gather data from such a device. As a result, that non-traditional company could wind up controlling data generated by pacemakers and determining how the information is presented to clinician and patients.
Twenty years from now, we expect that most medical hardware will be largely commoditized. Data collected from medical devices could become more valuable than the devices themselves. But that doesn’t mean outside companies will control that data. Medtech companies have an incredible depth of knowledge when it comes to disease, treatment, and therapeutic areas. That could give them a competitive advantage over technology companies when it comes to understanding and analyzing data.
Before entering into any sort of partnership, companies on both sides should try to determine what each participant has to gain from the relationship. The medtech company should also try to anticipate how the relationship is likely to progress and develop contingency plans in case those predictions are wrong. There also should be a defensive strategy in place if a competitive threat emerges from the relationship. (Some high-tech companies are so secretive that even internal divisions don’t know what the others are doing.)
Medtech companies that opt to form partnerships with outside organizations should consider testing the waters by collaborating on one or two specific use cases. Then they can examine the bounds of the relationship as pilots succeed or fail. If leading medtech companies do not tap into this partnership model, their key competitors most likely will. Perhaps a less intimidating option might be to partner with a fellow medtech company that is further down the road when it comes to software and AI development, or building consumer relationships.
While there are potential dangers when forming partnerships with other organizations, we believe medtech companies can successfully cooperate with technology firms or tech-savvy medtech companies—at least in the near term—without going down an irreversible path. The transformation to a digitally-enabled, consumer-oriented world appears to be inevitable, but that journey could be filled with new opportunities for our medtech industry.
Glenn Snyder leads Deloitte LLP’s Medical Technology practice with 25+ years of experience in medical technology, biotech, and specialty pharmaceuticals. He helps clients grow through organic and inorganic means by entering new geographic markets, and expanding into new product/service areas. Glenn also helps clients improve brand/commercial effectiveness by articulating product economic value, applying innovative pricing, updating the commercial model, and rationalizing distribution networks.