Pulse of the industry - medical technology report 2012

Power to the patients: point of view

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An entirely new class of products is emerging that has the potential to reinvent health care – and disrupt much of the traditional medical technology industry in the process. They encompass a wide spectrum of technologies and platforms --including smartphone apps, social media platforms, sensor-embedded smart devices and more.

A range of patient-empowering, information-leveraging technologies (PI technologies) are blurring the lines between medical devices/diagnostics and health IT.

  • An ingestible sensor that, when incorporated into a pill, allows users to track data on drug adherence and other health indicators over time.
  • An iPhone app that uses the phone’s front-facing camera to calculate a user’s heart rate.
  • A wearable device that researchers hope can track a person’s movement patterns and look for significant changes in their gait and posture so as to be able to predict when they may be at risk of a fall

These are the products that are blurring the lines between medical devices/diagnostics and health IT. Despite their variety, however, these new devices and technologies are distinguished from traditional health IT and MD&D by two essential characteristics: they are patient-empowering and information-leveraging.  In recognition of these defining attributes, we refer to them as PI technologies.

Outcomes and behavior: a changing business

PI technologies have widespread revolutionary potential for the simple reason that they could provide answers to some of the biggest challenges facing health care and the medtech industry, from restrictive capital markets to sweeping changes in the US provider care market, evolving regulatory guidelines and  pressure on margins. But many of these developments are merely indicators of a much larger transformation — the need to make health care costs sustainable and the concomitant move to an outcomes-based health ecosystem.

The move to an outcomes-focused ecosystem will involve understanding and serving a much more diverse set of customers. For many medtech companies the primary customer has been the physician but now payers will become more important while providers become more complex. And, with outcomes ultimately dependent on patients and patient behavior, companies will need to succeed in the business of behavioral change to ultimately succeed in the outcomes business.

But decades of educational programs have made little progress in getting people to change behaviors and adopt healthier lifestyles.  There is hope, though, because the field of behavioral economics is now providing valuable insights about the key behavioral biases behind our suboptimal decisions. In health care, such biases lead to two key behavioral gaps — and the good news is that PI technologies can play a key role in filling both of them by processing information and helping change lifestyles.

The transformative potential of PI technologies 

More generally, what makes PI technologies game-changing is the realization that combining the P and the I — empowering patients with relevant information and analysis — creates two huge breakthroughs.

  1. Real-time insights
    PI technologies aren’t just creating and analyzing data — more and more, they are doing so in real time. This has several advantages from more timely, actionable information to identifiable correlations between health outcomes and changes in medication regimes, diet, exercise and more.
  2. Efficiencies
    PI technologies can drive huge cost efficiencies because they are a low-cost menas of achieving huge efficiencies in the delivery of health care. Also, an just as important, they can also establish radically cheaper alternatives to existing technologies. PI technologies are textbook examples of what Clayton Christensen calls disruptive technologies.  

Medical technology companies are responding to the need to make health care costs sustainable and to realign incentives around health outcomes but achieving the potential will involve systematic changes.

Achieving the potential and charting the shift

The accompanying chart shows several existing technologies clustered along two dimensions: products that do not leverage information and are controlled by providers. But change is underway. While many categories of products will likely always remain in hospitals or under the control of physicians, we are likely to see more and more products empowering patients and leveraging information.

The shift to patent-empowering, information-leveraging technologies

And, while not all segments of medtech will be impacted equally, the rise of PI technologies is a transformative force that will likely disrupt the existing business model – i.e., the way it creates value, delivers value and captures value -- in many product categories.

But if there are business-model opportunities in the move to PI technologies, there are also grounds for caution. The reality is that it is remarkably difficult for mature incumbent firms to disrupt their own business models. Over the last century or so, we have seen numerous examples of such disruptive technologies, from personal computers (which disrupted mainframes and minicomputers) to integrated video cameras in smartphones (which disrupted stand-alone camcorders).

PI technologies are already carving out niches for themselves. While the quality of their imaging or the accuracy of their measurements may not match those of more established technologies, these capabilities could rapidly improve and soon overtake their established rivals. The disruptive power of PI technologies would truly be unleashed: medtech companies that choose to ignore these technologies do so at their own peril.

Our fifth annual report on the state of the medical technology industry takes a closer look at these developments.

You can explore more of our findings at www.ey.com/MedTechData. For the first time you can access all of our data online, and a smaller selection of charts in the print publication.

How med tech companies can navigate these changes

Here are five guiding principles for navigating the exciting new world of PI technologies:

  1. You may not be immune: Look for opportunities. How could your offerings empower patients or leverage information?
  2. Be patient-centric and payer-savvy: Your customer base is expanding. How are you empowering patients and engaging with payers?
  3. Experiment with business models: Innovation is moving beyond the product. How are you investing in new business models?
  4. Show me the value — not the money: Focus on the right question. How are you creating value?
  5. Be strategic — not defensive: One way or another, PI technologies are coming. Will you play defense or take the lead?