Industry Leaders Back At The Wheel Are Driving Health Care Transformation

Smith & Nephew plc best summed up the mood among medtechs with a message that would apply to companies serving COVID-affected health care markets, no matter what branch of industry they work in. Wrapping up the company’s 2020 financial accounts, CEO Roland Diggelmann said: “Our first priority for 2021 is to return to top-line growth and recapture the momentum we were building prior to COVID-19.” For him, improving the financial performance through operating leverage was paramount.

And with good reason. With a non-COVID care portfolio of orthopedic recon, sports medicine and ENT businesses, Smith & Nephew was ill-suited to meeting the pandemic’s emergency health care needs. The low point came fairly quickly, in the second quarter of 2020, when the company’s sales dipped by 30%.

However, throughout the ongoing difficulties, the company kept a focus on developing and launching new products so that it could regain momentum as soon as the markets recovered.

Expanding on this theme during AdvaMed’s 2021 MedTech Conference, Diggelmann said that early on in COVID, he ringfenced investment in R&D. Post-pandemic, the demand would still be there, he stressed, a prediction the entire industry counted on.  

As the pandemic tails out in 2022, health care service delivery transformation will once again become the central focus. Progress towards this goal has in fact been expedited. One of the COVID “dividends” was the changed thinking among health care decision makers, who realized the advantages of expediting the commissioning of faster and more efficient workplace methods and systems.

The pandemic sped up the adoption of digital tools by seven years, said Medtronic plc president and CEO Geoff Martha. Digital, data and artificial intelligence will help industry and providers reach more patients and make health care both more predictive and personal, he believes.

 

The Patient As Consumer

Speaking at the APACMed 2021 meeting in October, Martha said because of capacity constraints, the world was witnessing the consumerism of health care, from both a patient and provider standpoint. People are feeling more empowered, and their expectations are changing.

Minimally invasive approaches to care, which are potentially speedier, safer and mean less patient time in spent in the hospital need to be prioritized in the coming years, he said.

Care models are shifting to focus on the patient as the consumer. Medtechs are now reimagining when, where and how health care is delivered, and this is happening with the aid of novel partnerships that have sprung up as a function of COVID, Martha noted. Such arrangements will be particularly needed in emerging nations, where there is a lack of both health care infrastructure and awareness of therapies among health care professionals.

 

China And The Global View

Partly as a result of this situation, the emerging markets will see higher average medtech growth rates, reaching some 7%, in the coming years, according to
Haemonetics Corp. CEO Chris Simon. Established markets, by contrast, will be restricted to 4% to 6% growth.

Europe and the US will continue to account for two-thirds of the global market, but for Simon, the key geographical question for medtechs to consider is how they can compete in emerging markets.

Nothing yet  ̶  not even China  ̶  can trump the US market, said Teleflex Medical CEO Liam Kelly. He said Brazil and Latin America represented significant long-term market opportunities, and highlighted that Japan had a better reimbursement system than China.

But China’s volume-based procurement had become an important global issue, Kelly claimed during the Medtech Conference in an interview with AdvaMed’s Abby Pratt. He pointed to the pricing chaos unleashed by China’s November 2020 drug-eluting coronary stents tender, issued under the new national centralized tender program that started with biopharmaceuticals. “Jaw-dropping” was how the Boston Healthcare consultancy described the outcome: the tender winner offered a price of around $100 – just 7% of the $1,850 average prices that had been set under previous provincial tenders.

Nevertheless, China is poised to overtake Japan to become the second-largest country market, behind the US. China presented worries, but with a rising middle class it could also represent a “tremendous opportunity,” said Kelly.

 

Chronic Disease Challenge Needs Digital Solutions

Chronic disease kills 41 million people a year, representing some 75% of all deaths globally, and many are preventable or treatable if caught early. Chronic disease took a backseat during the pandemic, yet associated costs are skyrocketing, Martha observed.

Chronic disease patients need better education and optionality, said Rice Powell, CEO and chair of the management board of Fresenius Medical Care North America. That must sit in the center of what industry does, he said, stressing that industry must become digitally fast and use apps and iPads to access health records. “We can’t expect people to live in today’s world, surrounded by consumer technology, while we keep them 20 years in the past,” he said. It is incumbent for industry to continue to push into digitization and meet the needs of patients, just as the modern world meets their needs in the consumer side of their lives.

Kidney disease technology company Fresenius Medical Care is focused on chronic care and building an ecosystem around patients that adds value to their lives. “It takes a team to do that,” said Powell, a team that includes regulators, payers and governments.

Earlier in 2021, Edwards Lifesciences Corp. CEO Mike Mussallem expressed a similar sentiment. The pandemic brought “a great reminder that it takes a village  ̶  industry, providers’ care, the support of regulators and the input of payers  ̶  to actually get treated,” he told the MedTech Forum in April.

The pandemic has made health care into a talking point at the kitchen table. Another of its legacies is that certain trends  ̶   like the acceleration of telehealth, digital care and remote connectivity, and virtual proctoring which can guide surgeons through complex cases while at remote global locations  ̶  will not go away. But nothing can replace person-to-person interaction. Mussallem said Edwards would remain a “high touch” company in that regard.

 

Transformation Of Care

Smith & Nephew wants to be a full player in this transformation of care and the shift to digital and better-connected health care – including in the operating room. Continued spending on major programs, like the company’s new ARIA digital care management platform, meant cutting back on other discretionary spending during COVID, said Diggelmann. The digital rollout is global, he asserted. In the area of robotics and robotic-assisted surgery tools, Smith & Nephew’s new CORI platform is to be launched in Europe and India, which are two important markets for surgical robotics.

Medtronic’s Hugo robot was used in late 2021 at the Apollo Hospitals chain, in India, where the company also opened its 10th global surgical robot training center. The global medtech leader is digitizing the OR by using artificial intelligence to triage stroke patients. It has partnered with Viz.ai Inc., a leader in AI-driven intelligent care coordination, to synchronize stroke care. Viz.ai’s flagship product, the FDA-cleared Viz LVO, uses advanced deep learning to communicate time-sensitive information about stroke patients directly to specialists. In 2020, Viz LVO was granted the first New Technology Add-on Payment (NTAP) for AI software by the US Centers for Medicare & Medicaid Services.

AI is becoming pervasive, while robotics, sensors and virtual reality are improving exponentially, and health data will drive the development of innovative devices. Taken together, they represent the biggest opportunity to propel the digital transformation of health care. But health data is sensitive, and privacy and security must be protected, said Martha. It is a balance, and while a complicated issue, “it is essential we enable use of data for patient benefit,” said Martha.      

For Powell, the key to the future is that patients “trust us and our data.” Industry must demonstrate that it is a good partner, and use data wisely, he said.

Johnson & Johnson’s Ashley McEvoy, executive vice president and worldwide chair of medical devices, stressed on several occasions in 2020-21 how much of a gamechanger digital is. Her expectation is that digital will help reduce variation, keep people out of hospital and improve outcomes. And it will improve the way companies work, how supply chains are organized and how product development takes place.

Another COVID benefit was the widespread realization over the past 18-24 months that health care is an investment, and not an expense. McEvoy was heartened that more of society has now seen clearly that the medtech industry works with customers, payers and regulators to achieve more consistent outcomes at reduced cost.

 

Decentralization Of Care

The coming years will see an acceleration in the shift to decentralized care. In response, Smith & Nephew has been providing Positive Connections ASC solutions programs to US ambulatory surgery centers (ASCs) to aid patient identification and patient connections.

Medicare pays less for procedures performed in ASCs than at hospitals, says the US Ambulatory Surgery Center Association (ASCA). Patient co-pays are also significantly lower in an ASC. US health care would save $2.5bn a year if just 50% of eligible surgical procedures were performed by ASCs, the association claims.

Decentralized care is also seen as providing solutions to capacity and manpower issues, bearing in mind the nurse staffing shortage problems in the US and internationally that do not look likely to improve in the short term.

 

The Top Issues For Global Medtechs

Finding ways to work in China, which is becoming more protective on access to locally generated data and accessing the market with medtech innovations, is, in Kelly’s eyes, one of the top four challenges for medtechs operating a global strategy in 2022. Moreover, China is a market where it is difficult for medtechs to read the pace of change, he observed. But market access skills can be very differentiating for companies there.     

Another top challenge is the continuing shift to value-based care. Rice notes that the health care universe has realized that fee-for-service is no longer the direction industry wants to take. Rather, it should be more about getting paid for outcomes via bundled reimbursement, risk sharing and reducing costs in the health care system. 

The COVID-19 pandemic is Kelly’s third major challenge. And the fourth is supply chain resilience, given that many large companies have faced rising freight costs, raw materials inflation and shortages of electronic parts and other products.

“Value chains are global by design and by default.” – Roland Diggelmann

 

Additionally, there is always the potential for individual incidents   ̶ like the 2021 Suez Canal blockage and closure of China’s Ningbo-Zhoushan port after a worker was infected with COVID-19  ̶  to disrupt the global supply chain. Companies must respond by forecasting, planning, setting up dual supplies and making strategic shifts to not be reliant on single sources.

Building a global supply chain is one way of addressing this issue. Value chains are “global by design and by default,” as the resulting system provides quality, capacity and cost efficiencies. Nearshoring is not the exclusive answer, Diggelmann believes.

The US-China tariff wars and COVID, among other things, have resulted in a hit to international cooperation and trade in recent years, but the Smith & Nephew CEO is clear: “We operate in a global world of transnational agreements that leverage the best of all the regions to make [trade] happen.”    

A long burning issue has been the EU Medical Device Regulation, which came into effect in May 2021. The MDR will be a major challenge for companies in 2022, but the consensus among the industry’s majors is that while most are making good progress on working with the MDR, the burden is high for smaller companies, and there is a fear that some may exit the medical device market entirely.

Haemonetics’ Simon sees the EU as a regulatory story, not just with because of the MDR, but also regarding the revived debate on the use of the plasticizer DEHP (Di(2-ethylhexyl) phthalate) in devices (the Court of Justice declared in October 2021 that the European Commission was justified in granting permission for recyclers to use plastics containing DEHP) and other environmental regulatory changes coming to the fore.

“It’s a dynamic and shifting landscape,” Simon said.

 

Optimizing In The Market

Medtechs must maximize their resources and focus their strategy. Medtronic did just that when it set out to create a new operating model that was implemented in early 2021. The new plan prioritized accelerated decision-making, improved commercial execution and more effective leveraging of scale. (Also see "Medtronic Looks Beyond The World Of Doctors And Devices In New Approach To Markets" - In Vivo, 15 Jul, 2021.)

Smith & Nephew has moved to optimize its manufacturing network with digital technologies and lean manufacturing, adding more warehouse automation and a new orthopedics facility in Malaysia for 2022.  That follows progress the company had already made on commercial optimization. Buying out a number of third-party sellers brought the company closer to individual sales representatives and customers in certain markets, as well as removing a layer of cost.

 

Partnerships Are The Answer

In the challenging health care delivery market, Martha has called on governments to adopt an investment mindset in health, accelerate pro-innovation regulations, and design legal frameworks for data-sharing and protection. For this, a partnership approach is needed between industry and government.

Diggelmann concurs. He believes industry can be more than just a commercial supplier, and also become a key provider of medical education and training. It can supply patient-centered innovative solutions and logistics support where needed. These are the priority macro messages that industry will continue to lobby governments on as health care modernizes and transforms. 

The leading companies assert that the fundamentals of the industry remain very sound, and that medtech will continue to benefit from the global megatrends of a demographic shift and a population that is aging and requiring more health care. The other good cards that medtech holds are increasing access to health care in emerging markets and the continued flow of innovation that provides better clinical outcomes to more people around the world. Regardless of COVID-19.

By editor