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Articles from 2013 In November


Taking Industrial Automation to the Next Level

Think human relations can be tricky? Try human and robot relations.

But that has not stopped European researchers from starting an initiative to take such collaboration even further in manufacturing settings--upping the automation game in the process.

Launched in September, the LIAA involves a European consortium led by Fraunhofer IPA that is seeking to combine the cognitive abilities of humans with the strength and repeatability of robots.

The LIAA has identified five industrial pilot cases.

The results if successful would benefit medical device assembly and many other fields through increased productivity, as well as reduced costs for automation solutions.

Over the past few years, researchers have been developing new systems that allow for smart collaboration between industrial robots and their human peers.

Last year, a novel robotic system made headlines for its ability to work side-by-side with people.

Employees with minimal experience are able to train the robot named Baxter. In addition, the system features a screen-based digital face that allows workers to see where the robot's "attention" is focused. As of now, the system is in use at a variety of industrial sites around the world.

To create optimal collaboration between humans and robots, intelligent algorithms transform an assembly process into a series of steps, according to a recent Nanowerk report.

Based on workload and task suitability, these processes are assigned to humans or machines. 

How Does Your Salary Compare with Others in MedTech?

How Does Your Salary Compare with Others in MedTech?

Have you ever wondered how your salary compares with your medtech peers' but were too afraid to ask? MD+DI has taken away the guess work by breaking our MedTech Salary Survey results down by job description.

Does your employer go above and beyond to make your company a better place to work through a demonstrated committment to its employees? If so, nominate them for Employer of the Year through the 2014 Golden Mousetrap Awards. The deadline to submit is December 11, 2013.

Click on the links below to see how your compensation matches up with the median in general and corporate management, research and development, regulatory and legal affiars, quality assurance and quality control, production and manufacturing, and product design engineering.

(click images to enlarge)

General and Corporate Management

  

Product Design Engineering



 

Production and Manufacturing



Quality Assurance and Quality Control

  

Regulatory and Legal Affairs



Research and Development

 

Does your employer go above and beyond to make your company a better place to work through a demonstrated committment to its employees? If so, nominate them for Employer of the Year through the 2014 Golden Mousetrap Awards. The deadline to submit is December 11, 2013.

MD+DI's November Must-Reads: Stories to be Thankful for

MD+DI's November Must-Reads: Stories to be Thankful for

The industry has seen its fair share of ups and downs in 2013. Here are six top MD+DI stories from November to keep a positive spin on things:

 
Venture capital may be fleeing the medtech industry, but there are other sources of capital for device companies, particularly medtech startups.
 
 
Nicholas Donoghue, associate principal at business advisory firm McKinsey & Co., offers some positive predictions on the impact of the Affordable Care Act on hospitals.
 
 
Patents should still play a key role in companies' business plans.
  
 
Looking for ways to improve your products? The answer lies in mining risk management files, postmarket data, and input and output.
 
 
Emerging China Capital is looking to partner with companies that want to enter the Chinese market.
 
 
 

 Zamzee is a company using gamification to engage patients and improve outcomes. And device makers can do the same.


 
-Chris Wiltz, Associate Editor, MD+DI
Christopher.Wiltz@ubm.com

The Global Medical Device Regulatory Environment

The Global Medical Device Regulatory Environment

By Stewart Eisenhart

Characterized by equal parts progress and setbacks, the global medical device regulatory environment in 2013 can perhaps best be summarized as a mixed bag.

Among the most positive developments for the global medical device industry this year were significant moves toward more harmonized regulatory systems in both top-tier and emerging markets, particularly in the Americas and Southeast Asia. Yet despite such progress, lagging economic conditions in Europe and an ongoing lack of transparency in major developing regions such as China, Russia, and Brazil have persisted and will likely continue to challenge manufacturers in 2014.

Stay up to date on global regulations by attending the FDA and Global Regulations in Practice conference track at MD&M West in Anaheim, CA, February 10–13, 2014.

Europe: Changes (Still) Ahead

Proposed changes to Europe’s Medical Device Directives, while not expected to become law until 2017 at the earliest, have nonetheless commanded the attention of medical device manufacturers, as well as their notified body and European authorized representative partners, throughout 2013. Although new medical device legislation has been voted through the European Parliament, it now must be approved by 28 EU member states—not a small (nor speedy) feat.

Industry is already preparing, however, for some regulatory changes coming in the near term. Chief among such changes are EU Commission recommendations for unannounced quality system audits of medical device manufacturers and their suppliers by notified bodies. The notified body role in the European CE Marking process for medical devices has come under more intense regulatory scrutiny following the high-profile Poly Implant Prothèse (PIP) breast implant scandal that caused an uproar in multiple member states. As a result, medical device companies must be prepared to demonstrate their ISO 13485 compliance—as well as that of any third-party outsourcers or suppliers they use—at a moment’s notice.

Brazil: New BGMP Requirements

Brazilian medical device market regulator ANVISA announced changes to the country’s Brazilian Good Manufacturing Practice (BGMP) quality management system requirements in 2013. The impact of those changes in terms of BGMP certification and market authorization processes for medical device manufacturers remain to be seen, however.

In August, ANVISA issued RDC 39/2013. This resolution covers administrative processes for BGMP certification, including requiring BGMP compliance for each product line in instances where manufacturers produce more than one device in a single facility or establishment. If a company manufactures a medical device and an in vitro diagnostic (IVD) device in the same facility, for example, the company now has to pay two BGMP certification fees to cover each product.

A separate presidential decree, Decree No. 8077/2013, suggests that in the future, ANVISA may take a more selective approach in determining which medical devices require BGMP certification and which—if any—do not. Such a move could result in a faster path to market for lower-risk devices. But at this point, regulators have not provided enough details to clearly determine how Brazilian registrations would be affected. In the meantime, standard BGMP certification requirements remain in force.

Russia: Chaos and Reorganization

The Russian medical device market regulatory situation at the beginning of 2013 confounded more than a few industry observers and participants, owing to a rather chaotic rollout of reforms at the country’s market regulator, Roszdravnadzor.

Unresolved questions regarding new authorized representative requirements, “expertise centers” deciding whether clinical trials in Russia are necessary, and registration certificate renewals, followed by the sudden replacement of top Roszdravnadzor staff by Russian Federation officials last spring, all contributed to a backlog of new device approvals.

Following Roszdravnadzor’s abrupt reorganization, however, deadlines for reauthorizations of device registration certificates have been extended to January 2014 to January 2017, and regulators have begun work on a new electronic registration submission system. In addition, Roszdravnadzor is reportedly considering easing market authorizations for Class I low-risk devices and has proposed new guidelines for evaluation of IVD devices.

To be sure, Russia remains one of the most opaque and complicated medical device markets in the world. But developments in the latter half of 2013 are promising signs of greater transparency and predictability in the future.

China: New Clinical Trial, Adverse Event Reporting on the Horizon

The Chinese medical device regulatory system remains a highly complex one. During 2013, however, China Food and Drug Administration (CFDA) officials took some significant steps toward increasing transparency in terms of electronic validation, new approval pathways for innovative devices, and exemptions from China Compulsory Certification (CCC) Mark requirements.

CCC Mark certification, required for a broad range of products, including automotive, wireless products, and other consumer devices, had previously applied to some medical devices prior to 2013. In mid-2013, however, the CFDA eliminated CCC Mark certification for eight medical device categories. By the end of this year, the agency will have removed CCC Mark requirements for all medical devices.

The CFDA has also set up a new online system through which medical device registrants can request regulatory validation of their product classifications. Such requests previously had to be made in writing and often delayed the market authorization process as applicants had to wait for written replies.

Chief among the regulatory developments in the region, however, was Chinese regulators' newly proposed special approval pathway for innovative medical devices. Under this new approval pathway, qualifying medical device products would be given priority review status by CFDA. Qualifying medical devices must be manufactured in China as well as be the first of their kind to be registered in the country.

While China’s medical device registration system still presents challenges to foreign manufacturers, CFDA regulators seem to be making good-faith efforts to make the approval process more efficient. Hopefully, those efforts continue in 2014.

South Korea: Loosened KGMP Rules

Until 2013, registration of most medical devices with the South Korean Ministry of Food and Drug Safety (MFDS) required compliance with Korea Good Manufacturing Practice (KGMP). Over the course of the past year, however, the MFDS took a number of steps to simplify KGMP compliance for some manufacturers—and exempt some firms altogether from such requirements. As quality system compliance often proves among the most time-consuming and complex components of medical device registration, South Korean regulators’ moves to streamline KGMP compliance will no doubt boost manufacturers’ interest in the region.

For Class II and Class III medical devices, Korean regulators have allowed manufacturers to make greater use of third-party auditors to verify KGMP compliance in some instances. This change streamlines the auditing process for industry while freeing up resources at the MFDS to more effectively monitor devices with high-risk profiles.

For low-risk, Class I medical devices, the MFDS has waived KGMP requirements altogether. As of September 2013, Class I medical device manufacturers and their Korean license holders need only to electronically submit premarket notifications to the MFDS to begin commercialization in South Korea.

Looking Ahead: Harmonization to the Rescue?

Conditions in individual medical device markets will obviously vary in 2014, but international developments getting underway now stand a good chance of boosting greater harmonization of regulations in the Americas and Southeast Asia. Two initiatives intended to harmonize regulations across multiple markets warrant attention from companies seeking new commercialization opportunities.

First, 10 Southeast Asian governments—including Indonesia, Malaysia, and Singapore—are working under the Association of Southeast Asian Nations (ASEAN) economic bloc to launch a single, harmonized market authorization system for medical devices by 2015. Applying consistent medical device regulatory requirements across a market with a population of more than 600 million and more than $2 trillion in GDP will no doubt heavily boost interest from foreign manufacturers in Southeast Asia as the ASEAN Medical Device Directive comes into force.

Second, medical device regulators in the United States, Canada, Brazil, and Australia will launch a three-year pilot of the Medical Device Single Audit Program (MDSAP) in January 2014. Spurred by the International Medical Device Regulators Forum (IMDRF), the MDSAP is designed to enable market regulators to recognize quality management system (QMS) audits performed by other regulators participating in the program. Thus, once the pilot begins, the results of a manufacturer’s quality system audit in the United States will be recognized and accepted by Brazil’s ANVISA, the Australian Therapeutic Goods Administration, and Health Canada, obviating the need to undergo separate QMS audits in each of these markets. Quality system compliance is one of the most time-consuming and labor-intensive aspects of medical device registration; if the MDSAP pilot is successful and the program is adopted by other IMDRF member countries, manufacturers will ultimately face less onerous paths to market.

Stay up to date on global regulations by attending the FDA and Global Regulations in Practice conference track aMD&M West in Anaheim, CA, February 10–13, 2014.

Stewart Eisenhart is senior regulatory analyst at Emergo Group, a medical device regulatory consultancy in Austin, TX. 

[stock image courtesy of NOKHOOG_BUCHACHON/FREEDIGITALPHOTOS.NET]

 

AdvaMed: No FDA Authority for Masked Safety, Efficacy Data

AdvaMed: No FDA Authority for Masked Safety, Efficacy Data

By Jim Dickinson

AdvaMed says FDA does not have legal authority to proceed with its proposal to make available masked and deidentified nonsummary safety and efficacy data relating to medical devices.

Stay up to date on the goings-on at FDA by attending the FDA and Global Regulations in Practice conference track at MD&M West in Anaheim, CA, February 10–13, 2014.

The trade association says in a recent comment on the proposal that Congress instructed the agency in the FDA Safety and Innovation Act of 2012 to develop a strategy and plan for FDA to create more efficient, consistent, predictable, and science-based regulatory decision-making. “Nowhere in this provision does it direct the agency to use its limited resources to make available to the public masked and/or deidentified sponsor data,” it asserts. AdvaMed also notes that companies may make such data available voluntarily, and some are doing so under limited and controlled circumstances.

“Given the successful voluntary sponsor data-sharing initiatives that already exist, AdvaMed encourages FDA to reach out to device manufacturers in those instances when FDA has identified a specific public health need where voluntary sponsor data-sharing would be valuable,” the letter continues. “If FDA wants to share masked and/or deidentified sponsor data more broadly, we believe FDA must seek explicit congressional authority to do so.”

The letter also raises a number of other challenges to the proposal and says it is difficult to respond to specific questions on which FDA is seeking comment “given the vague and poorly defined nature of FDA’s proposal to share masked and/or de-identified sponsor data. The proposal fails to adequately and fully describe the situations when FDA would seek to share masked and/or deidentified sponsor data, who FDA will share sponsor data with, what will be done with the data, and what restrictions or controls (other than masking or deidentifying the proprietary data) will be placed upon those who receive the sponsor data.”

Stay up to date on the goings-on at FDA by attending the FDA and Global Regulations in Practice conference track at MD&M West in Anaheim, CA, February 10–13, 2014.

Jim Dickinson is a contributing editor to MD+DI. 

[image courtesy of KIBSRI/FREEDIGITALPHOTOS.NET]

Frustration Marks the Tone In Which FDA Issues Warning Letter to 23andMe

Frustration Marks the Tone In Which FDA Issues Warning Letter to 23andMe

In a warning letter, that expressed frustration as the overwhelming emotion more than anything else, the FDA asked 23andMe, the much-talked about genomics testing company, to immediately stop selling its Personal Genomics Service (PGS) and Saliva Collection Kit.

The letter, dated Nov. 22, narrates the length of time FDA officials have tried to work with the company to bring what the agency deems as diagnostic services under the law.

It acknowledges that 23andMe filed 510(k) applications for the tests but has failed to demonstrate adequately that the tests conform to come predicate device. Aside from that, the firm has also not made additional submissions as the tests have expanded for other indications.

The letter underscores FDA's biggest fear - that inaccurate results such as false positives may lead patients to choose unnecessary procedures while false negatives will lead to inaction on the patients' part.

Some of the uses for which PGS is intended are particularly concerning, such as assessments for BRCA-related genetic risk and drug responses (e.g., warfarin sensitivity, clopidogrel response, and 5-fluorouracil toxicity) because of the potential health consequences that could result from false positive or false negative assessments for high-risk indications such as these. For instance, if the BRCA-related risk assessment for breast or ovarian cancer reports a false positive, it could lead a patient to undergo prophylactic surgery, chemoprevention, intensive screening, or other morbidity-inducing actions, while a false negative could result in a failure to recognize an actual risk that may exist.

It goes on to say:

Since July of 2009, we have been diligently working to help you comply with regulatory requirements regarding safety and effectiveness and obtain marketing authorization for your PGS device. FDA has spent significant time evaluating the intended uses of the PGS to determine whether certain uses might be appropriately classified into class II, thus requiring only 510(k) clearance or de novo classification and not PMA approval, and we have proposed modifications to the device’s labeling that could mitigate risks and render certain intended uses appropriate for de novo classification. Further, we provided ample detailed feedback to 23andMe regarding the types of data it needs to submit for the intended uses of the PGS. As part of our interactions with you, including more than 14 face-to-face and teleconference meetings, hundreds of email exchanges, and dozens of written communications, we provided you with specific feedback on study protocols and clinical and analytical validation requirements, discussed potential classifications and regulatory pathways (including reasonable submission timelines), provided statistical advice, and discussed potential risk mitigation strategies. As discussed above, FDA is concerned about the public health consequences of inaccurate results from the PGS device; the main purpose of compliance with FDA’s regulatory requirements is to ensure that the tests work.

However, even after these many interactions with 23andMe, we still do not have any assurance that the firm has analytically or clinically validated the PGS for its intended uses, which have expanded from the uses that the firm identified in its submissions.

In your letter dated January 9, 2013, you stated that the firm is “completing the additional analytical and clinical validations for the tests that have been submitted” and is “planning extensive labeling studies that will take several months to complete.” Thus, months after you submitted your 510(k)s and more than 5 years after you began marketing, you still had not completed some of the studies and had not even started other studies necessary to support a marketing submission for the PGS. It is now eleven months later, and you have yet to provide FDA with any new information about these tests. You have not worked with us toward de novo classification, did not provide the additional information we requested necessary to complete review of your 510(k)s, and FDA has not received any communication from 23andMe since May. Instead, we have become aware that you have initiated new marketing campaigns, including television commercials that, together with an increasing list of indications, show that you plan to expand the PGS’s uses and consumer base without obtaining marketing authorization from FDA.

In response to the warning letter, 23andMe, the company backed by Google, issued this statement without challenging any of the agency's conclusions:

We have received the warning letter from the Food and Drug Administration. We recognize that we have not met the FDA’s expectations regarding timeline and communication regarding our submission. Our relationship with the FDA is extremely important to us and we are committed to fully engaging with them to address their concerns.

This is a classic example of technological innovation that appears to have gotten ahead of regulatory concerns. It also shows how FDA officials are trying to balance the need to allow new innovations reaching the market and the requirement to maintain public health. 

Earlier this year, FDA slapped a warning letter to another novel diagnostic tool - the uCheck urine analyzer, a smartphone app, but the letter was much shorter, more clipped. In that case, however, the company concerned - Biosense Technologies Private Ltd. - had not even applied for regulatory clearance of any kind. 

 -- By Arundhati Parmar, Senior Editor, MD+DI
arundhati.parmar@ubm.com

Pixium Retinal Implant Technology Wins Investment

Investors apparently see promise in retinal implant systems and their potential to make the blind see again. 

Pixium Vision--a 2-year-old French company developing such technology--announced Monday that it has won EUR15 million, the equivalent of more than $20 million, in a Series A extension financing round led by Sofinnova Partners, which becomes the largest investor. The round also included support from Bpifrance, through the InnoBio fund, and existing series A investors Omnes Capital and Abingworth LLP. 

Money will advance the development of Pixium's IRIS retinal implant systems for patients. 

Here's how Paris-based Pixium describes the IRIS system:

"The IRIS system involves an intraocular implant that is surgically placed into the eye and attached to the surface of the retina. The patient wears a pair of spectacles containing an integrated mini-camera and wireless transmitter. The spectacles are connected to a pocket computer, which processes the image captured by the camera into a signal that is transferred back through the spectacles and projected onto the retinal implant to stimulate the optic nerve and generate images."
Pixium Vision IRIS1

A Pixium llustration shows how its IRIS1 creates visual perception in people who have lost their sight.

The company mentions even grander goals on its website, with plans to "harness the rapid advances being made in neural processing, micro-electronics and computing to develop retinal implant systems that for blind people could ultimately provide vision approaching that of a normal healthy eye."

Pixium is not the only company active in this area.

Next month, the Argus II Retinal Prothesis System by Second Sight is slated to go on sale in the United States. The "bionic eye" allow patients to perceive patterns of light.

Designing the Condoms of the Future

Engineers concerned about global health think there's room for improvement when it comes to condoms. They want to create condoms that more people will want to use--preventing the spread of sexually transmitted diseases in the process, according to a recent NPR report.

In March of this year, the Gates Foundation issued a challenge to inventors and researchers around the world to go beyond the latex condoms that are presently out there, and design condoms that are just as effective but feel better when used.

Last week. the Gates Foundation announced 11 winning proposals out of more than 800 entries through its Grand Challenges in Global Health.

Richard Chartoff of the University of Oregon is among those turning to better polymers, polyurethane elastic polymers in the case of his proposal. Others sought to design better condom applicators.

Some even turned to nanomaterials: Aravind Vijayaraghavan and a team from the University of Manchester in the United Kingdom propose to develop new elastic composite materials for condoms that contain  nanomaterials such as graphene.

Another of the winners was developed by Mark McGlothin, a chemical engineer at Apex Medical Technologies in San Diego, CA. His novel condom is made of collagen, the same protein found in animal ligaments and tendons.

"We take raw collagen from beef tendons or fish scraps, and gingerly separate out the fibers," McGlothin tells NPR. "We form it into a condom ... and when it dries down, it looks like sausage casing."

3-D Printing Revolution Expands to Batteries

The 3-D printing process has more potential than ever to transform medical device manufacturing, now that researchers have figured out how to 3-D print miniature batteries.

Researchers based at Harvard University and the University of Illinois at Urbana-Champaign have created and tested materials, or "inks," able to function as electrochemically active materials. The materials also had to harden into layers in just the right way so they could be stacked up in layers during the 3-D printing--creating working anodes and cathodes.

3-D printing microbattery

Researchers used 3-D printing to create an interlaced stack of electrodes layer by layer, producing the working anode and cathode of a microbattery. (Image courtesy of Harvard University, Jennifer Lewis)

The recipe included ink for the anode with nanoparticles of one lithium metal oxide compound, and an ink for the cathode from "nanoparticles of another." The printer laid the ink onto the teeth of two gold combs to create tightly interlaced stack of anodes and cathodes. The whole setup gets packaged into a tiny container and filled it with an electrolyte solution to complete the battery.

"Not only did we demonstrate for the first time that we can 3D-print a battery; we demonstrated it in the most rigorous way," Harvard engineering professor Jennifer Lewis says in a news article produced by the university. Lewis is senior author of a study on the batteries published online in the journal Advanced Materials.

The researchers say their tiny batteries have electrochemical performance is comparable to commercial batteries in terms of charge and discharge rate.

Also called additive manufacturing, 3-D printing has already gained plenty of attention in the medical device industry for its use in producing partial prosthetic faces and an FDA-approved cranial device that was used to replace 75% of one patient's skull. It is even showing potential for helping fabricate human tissue.

Tiny batteries, however, are just as revolutionary, if not more game-changing, because this is about producing the electronic guts of what goes into a device.

At trade group LifeScienceAlley's recent conference in Minneapolis, 3-D printing company Stratasys's marketing executive Jon Cobb explained that many engineers are already designing plastic and other parts with 3-D printing in mind, versus traditional manufacturing.

The MIT Technology Review explains the potential when batteries and circuitry are added to the mix:

"Think of self-powered biomedical sensors, affixed to the skin, that would continuously transmit vital signs to a smartphone. Or existing products could be made more simply and efficiently. For example, the plastic shell of a hearing aid is already 3-D printed for a custom fit inside a wearer's ear. But the electronics are manufactured separately, and the batteries are often the type that must be replaced frequently. If the electronics and a rechargeable battery were printed together, the final product could be made more rapidly and seamlessly."

Chris Newmarker is senior editor of MPMN and Qmed. Follow him on Twitter at @newmarker.

Patient-Consumer Expectations: Redefining Medtech Innovation

Patient-Consumer Expectations: Redefining Medtech Innovation

I know medical devices. And I had opinions about which device might be best for my daughter when her sports injury required a surgical pin. But the choice of pin had little to do with what I hoped and expeced for my child—to be able to play volleyball again, to dance, to live a normal life. And it had nothing to do with what really mattered for most of my daughter’s surgery - the months of physical therapy and lack of mobility.  I was shut out of the decision process  I was a consumer who was ignored – treated as though my opinions in a highly personal matter simply didn’t have any value.

Under the old healthcare model, there was nothing wrong with that experience. My daughter, as a patient, received quality care. The device performed as the doctor expected. My daughter did, and continues to do, just fine. 
 
But that’s no longer good enough in today’s healthcare economy. Driven initially by changes in reimbursement policies under Medicare, and enshrined by the Affordable Care Act (ACA), the traditional money flows in healthcare have changed. It’s been said there’s a new healthcare motto, “No outcome, no income’.” Outcomes are becoming key to reimbursement and are increasingly   measured on the basis of the experience and satisfaction of people who are no longer just patients, but also healthcare consumers. All of this is happening at the same time that payers and care providers are driving manufacturers to reduce costs. 
 
Today, the value of a medical device is ultimately linked to patient satisfaction and no longer simply dependent on the successful sale into hospital inventory.
 
This situation has created a quandary for established medtech companies. Until now, their old, incremental improvement business model has been a good one. Healthy gross margins have meant that medtech shareholders and investors have enjoyed happy returns. They’ve built their expectations around the healthy cash flow growth that was thrown off by device makers’ historical ability to keep raising prices, linked to the addition of new features and slightly improved device models. 
But the old order is changing, and fast. The new health economy is introducing new funding flows. Who pays for the device is quite different now; it creates multiple threats to the comfortable margins and business model that the device manufacturers have enjoyed. 
 
It’s an axiom of business that fat margins attract competition. For medtech, competition itself was not a disruptive issue so long as everyone competed on the basis of the same incremental improvement business model. But today, the vast size of the market opportunity in devices and diagnostics, -estimated to approach $350 billion globally -, is attracting new entrants. Meanwhile, advances in technology, especially social, mobile, and wireless, are creating whole new categories of health-related products at price points that appeal directly to consumers. Reminiscent of comparisons between the computing power of today’s tablet devices and the computers onboard a space shuttle,the shrinking gap between the information value generated by a $150 exercise-monitoring wristband and a $5000 hospital room monitor is a caution flag for medtech. In our smartphone and Bluetooth-enabled age, the pace and magnitude of medtech innovation is being relentlessly driven toward the business models of the consumer electronics manufacturers.
 
At PwC, we’ve tracked 18 companies including five U.S. Fortune 100 companies and four Global Fortune 100 companies that have entered the medtech space – notably from telecommunications and consumer electronics. This groundswell is one sign of a market that has outrun its incremental innovation model. The door is opening to disruptive innovation.  
The approaches these new entrants take toward innovation are mirrored in what Andrew Atwell, senior manager at the Samsung Open Innovation Center, told us for PwC’s recent Health Research Institute report,  “We go to a health organization and say, ‘If you had a clean sheet of paper and you were going to design a device that was going to remotely manage a patient’s chronic illness from their home, what would that look like, what would you wish it would do, and what kind of features do you wish it had?’ They are caught off-guard and say they have never been given carte blanche to design that themselves.”
 
What’s a medtech company to do?  Value is no longer simply in the device itself. How do you make an implantable device deliver a better customer experience when being FDA compliant isn’t enough anymore?
 
Simply put, the meaning of the word “innovation” has to change for medtech companies. It’s a different way of thinking about success.  Medtech innovation has to become faster and  reflect the kind of step-change innovation employed by disruptive innovators.
 

Doing Business in the New Healthcare Economy

Savvy device makers are shifting their approach toward innovation in the new economy. At PwC, we’ve codified this new mindset in three recommendations:

1. Be ambidextrous by creating an innovation operating model that separates breakthrough and radical innovation from the incremental innovation necessary to support the core business. 

2. Collaborate to get closer to the patient by integrating into the broader patient experience, the larger health ecosystem, and new payment models. 

3. Measure innovation in new ways by using forward-looking metrics and connecting the dots for shareholders, who need help understanding the changing role and nature of innovation.

The solution for medtech involves overcoming the traditional fear of failure. The established industrial company mindset that improved efficiency, won by wringing failure out of the manufacturing process, is the key to margin improvement. Instead, medtech innovators need to embrace the attitudes of lean startups and pursue fast, frequent, frugal failure as an innovation model. It’s a way of thinking that was summed up by new medtech entrant Qualcomm Life, whose senior director of business development Clint McClellan told PwC’s Health Research Institute, “I think innovation is when you find something that is disruptive—ten times the value or the efficiency at one-tenth of the cost…to me, that’s innovation.”
The paradox is that medtech needs to create a whole new value proposition, while at the same time continuing to meet high shareholder expectations.  The good news is that the industry as a whole is aware of this growing need. While 64% of executives surveyed by PwC’s Health Research Institute (HRI) view innovation as a competitive necessity today, 81% believe it will be in five years. 
 
If this sounds like a call for a completely different way of developing new products and services, it is. But practicality needs to prevail as well. Simply put, companies need to keep flying the plane while they build the new engine.  They can’t afford to shut off or disrupt the revenue streams generated by the current business.  And many believe they can’t risk upending their enterprise by forcing a culture shift through the entire organization at once.  One proven technique is to ring-fence a new operating model to let it mature before integrating that model into the rest of the business, to implement innovation incubators inside a mature organization.
 
Such solutions have been adopted by several companies finding their way forward in this brave new world. Medtronic took the incubator approach at its European operations after concluding that meeting customer needs and adding value to hospitals and patients involved a greater focus on innovation and a higher tolerance for risk and failure. The company realized it needed to expand its role in the care continuum by integrating information and services for diagnosis, treatment, and disease management. Medtronic studied how it could improve the efficiency of technology delivered at the point of care, and it established a new business unit called Hospital Solutions. Soon the unit launched the catheterization laboratory (cath lab) management program in which Medtronic and hospital systems build in risk sharing for efficiency, savings—guaranteed and underwritten—and clinical outcomes. The contract for the partnership outlines benefits and cost savings for both parties, and hospitals pay per procedure. “Our Hospital Solutions group is clearly a business model innovation incubator that is now growing to become a business unit delivering these services,” said Rob ten Hoedt, senior vice president and president, Europe, the Middle East, Africa, and Canada.
 
The innovation challenge for the medtech industry is to convert the one-off successes of a handful of players like Medtronic into a new industry business model. The industry needs to embrace the healthcare customer and deliver on patient expectations while also rewarding shareholders. 
 
It won’t be easy, especially for established players. But as I look back at my daughter’s surgery, I see my family’s experience as a cautionary tale of how the healthcare industry, including device makers, needs to adapt to a new health consumer and an outcomes-focused economic reality.
 

Ed Yu is principal of PricewaterhouseCooper’s Health Industries Innovation & Growth. 

Interested in learning more about trends in medical device development? BIOMEDevice San Jose will be hosting seminars on designing with a focus on quality control, safety, and effectiveness, Dec. 4-5, 2013.