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Medtech in 2014 and beyond

TAGS: Medical

It has been a tumultuous year for the medical technology industry, as it struggles to adapt to a changing business landscape while continuing to advance innovation within strict regulatory guidelines. That dynamic will continue in 2014 and beyond. Here is an admittedly ad hoc selection of areas of interest for the medtech sector. This list is by no means exhaustive or authoritative--feel free to add your comments and perspectives on the year ahead.  

The 3D printing revolution

The pace of change in the medical device industry has been called glacial, so it is somewhat surprising to see how fast 3D printing, also called additive manufacturing, has made its mark. Part of the reason is the sheer immensity of what the technology can accomplish, from printing a functioning ear (watch the video) to fabricating a windpipe (and saving an infant's life in the process), all of which happened in 2013. Its potential is only limited by the regulatory strictures that seek to ensure the safety of devices and, yes, can delay innovation. 

In spite of institutional speed bumps, the global 3D printing market for medical applications is expected to grow at a CAGR of 15.4% from 2013 to 2019, according to a report from Transparency Market Research. By the end of that forecast period, medical-related 3D printing is expected to reach a market value of $965.5 million. 

The primary opportunities for 3D printing are in the orthopedics and dental sectors, where customization coupled with rapid manufacturing represent significant value to the patient. Thanks to government funding and favorable reimbursement rates, among other factors, the growth rate in Europe for medical 3D printing is expected to outpace the United States, according to the market intelligence firm. 

Making sense of BPA

Sometimes, science wins. That's the hope, and, indeed, conviction, of Len Czuba, president of product development firm Czuba Enterprises Inc. "You can't argue with the facts," says Czuba. "Research from FDA and a European study that will be published soon show that polycarbonate (PC) is safe and that levels of residual bisphenol A (BPA) are too minute to affect human health." This particular brouhaha should not be likened to the natural rubber latex issue, he adds, where allergic reactions were documented and industry responded.

There will be less noise about BPA in 2014, but it will still be part of the conversation at the Medical Device Polymer and Plastics Conference at PLASTEC West 2014 in Anaheim, CA, on Feb. 11 to 13.  

A study sponsored by Ethicon, a unit of J&J, made public in May 2013 found that levels of residual BPA in devices molded from medical-grade PC are significantly below levels that represent a human health threat. 

"I recently spoke with someone from J&J about the BPA controversy, who noted that alternative materials are available and that they are close in price," says Czuba. But PC has a distinct advantage: it can be used across several product lines and is compatible with current sterilization methods. "Replacing PC with alternative materials would require sourcing different polymers for the various product lines," says Czuba. "Why do that when PC is perfectly safe?" That question will become even more rhetorical in 2014. 

Prognosis for outsourcing and re-shoring

The re-shoring of manufacturing jobs may fall short of the hype, but there have been some instances of it in the medical sector. We reported on one supplier of extruded medical tubing in December 2013 who shuttered a plant in China after just two years and plans to increase manufacturing capacity at its New York facility. As the cost of labor continues to rise in China, some smaller companies that bought into the China gold rush may well decide that the difficulties of conducting business in China are not worth the diminished cost savings. That said, emerging economies and China, in particular, will continue to attract manufacturers seeking to serve the domestic markets. China's middle class is larger than the population of the United States, and improving the healthcare infrastructure is a key goal of the government. 

Outsourcing in the medical industry, however, will continue to forge ahead. The medtech sector, historically, has lagged behind other sectors in adopting outsourcing strategies, but it has been making up for lost time over the last few years. Expect that to continue. Analysts at Infiniti Research Ltd. forecast medical outsourcing to grow at a CAGR of 11.86% from 2014 to 2018. 

Frugal engineering is rich with potential

Frugal engineering—the practice of designing products that serve the needs of emerging technologies rather than stripping down products from western economies to make them affordable in the developing world—will continue to gain converts in 2014. As healthcare budgets in mature markets come under pressure to bend down the spending curve, frugal engineering will be one means to that end. When I spoke about the concept with Gunjan Bagla, founder and CEO of global innovation consultancy Amritt Inc. a few months ago, he cited a neonatal bed with an overhead heater that was "conceived and manufactured to respond to conditions in India. But the device has turned out to be quite popular in modern European hospitals," says Bagla. 

Who moved my business model?

Not too long ago, the medtech sector's predictable steady growth and comfortable profit margins were the envy of other industries. Those days are gone. Increasingly, medical device manufacturers need to adapt to a radically different business environment where "companies must shift from a technology and product focus to concentrating on delivering solutions that truly address customer and patient needs and have proven clinical and economic value," write the authors of a report on the medtech model in Europe, sponsored by the Boston Consulting Group and industry association MedTech Europe. 

While the prognosis specifically targets EU companies, it is equally relevant to US companies, which, admittedly, are a bit more ahead of the curve than their counterparts across the pond. Adapting to this new business model requires a multipronged approach, from shaping a marketing strategy that will connect with cost-conscious purchasing groups to vertical integration into medical services that align with the products they manufacture. Medtronic partnering with hospitals to establish on-site catheterization laboratories is one high-profile example of this approach. 

On a more general level, we are seeing the commoditization of medical device hardware and the demand on medical device manufacturers to shift their value proposition to be more data centric, according to Chris Miles, vice president of consulting services at Foliage (Burlington, MA). In advance of his presentation at the MD&M West conference in Anaheim, CA, in February, he told Qmed that the value companies add is "shifting from hardware to how they provide and manage data across the spectrum of what has become a complex healthcare ecosystem." 

Medical device manufacturers are facing new challenges regarding their value proposition and how they can differentiate themselves in the marketplace, added Miles. The answer "has been to provide, at a cost, new services that are data centric and that help patients to more effectively access and manage their data as well as use this data to satisfy payer demands stemming from . . . new reimbursement models." This dynamic will accelerate in 2014 and beyond. 

Consumerization will change everything 

Smartphone apps that monitor everything from sleep patterns to blood pressure and diagnose skin conditions are just the beginning of a fundamental shift in healthcare delivery. An aging population conjugated with aspects of the Affordable Care Act, which is moving hospitals and doctors away from a fee-for-service mindset, will contribute to a surge in consumer medical devices, notes an article on forbes.com. 

A report from IHS predicts that this subset of the medical device industry will grow between 5 and 9% annually and reach $10.6 billion by 2017. We will continue to hear a lot about this in 2014, as the Affordable Care Act reshapes the healthcare landscape, current technology snafus notwithstanding. 

Whether it's the worried well and quantified self crowd or a patient who requires health monitoring, there will be no escape from the consumerization of healthcare. A sure sign of this is the market for mobile health sensors, which is projected to grow at 69% CAGR over the next five years. Valued at $407 million in 2012, it will be worth $5.6 billion by 2017, according to Research2Guidance. 

With all of that data, industry will need to refine its debate on storage, interoperability, and privacy. Progress has been made on some of those fronts, but providing caregivers with easy, coordinated access to data while reassuring patients on confidentiality concerns will continue to be hot-button issues in 2014. 

As medical devices continue to enter the consumer world, more attention needs to paid to user-friendly designs. Speaking on cloud technology applied to healthcare data on mddionline.com, Don Jones, VP of global strategy and market development at Qualcomm Life, encouraged developers to "ask yourself, would my mom use this?" Too often until now, the answer has been no. In 2014 and beyond, look to companies such as Qualcomm Life, which has developed a platform to support medical device connectivity and data management, to answer that question in the affirmative.

Norbert Sparrow

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