|Learn how to navigate the biggest industry trends of 2015.|
by Lisa WeeksMarketing Communications, MasterControl
More connected and consumer-driven than ever before, the medical device industry is in the middle of a truly transformative year. Three-dimensional printing, mobile health apps, and other disruptive technologies are changing the way providers deliver care and prompting regulators to re-examine their roles. Consumers are demanding more transparency and convenience but are also concerned about the security of their medical information. Investors and stakeholders are paying closer attention to reimbursement policy, which could limit innovation and access to life-saving products. In the midst of it all, regulatory frameworks in Europe and the U.S. are undergoing massive changes. Here are five trends worth watching this year.
This post is an excerpt from the white paper
"Five Trends Transforming the Medical Device Industry in 2015."
"Five Trends Transforming the Medical Device Industry in 2015."
Trend #1: Three-Dimensional (3-D) PrintingImagine a time when a clinician can modify and manufacture an implant sized for a particular patient in a health care facility—or print a human organ as easily as a paper document. As futuristic as it sounds, that time is not far off, according to scientists who continue to find new and truly mind-blowing ways to apply three-dimensional (3-D) printing techniques to the medical field.
Device makers are using the technology, which is also known as additive manufacturing, to fabricate custom-made implants, prosthetics, fixtures and surgical tools on-demand. These customized devices can significantly reduce the time required for surgery, as well as patient recovery time and follow-up care. This in turn reduces health care costs. Three-dimensional printing is transforming the way medical care is practiced and delivered, shifting from a reactive, population-based model to a customized one, typically referred to as personalized medicine. However, the technology is not without drawbacks.
IP and Regulatory ChallengesToday’s 3-D printers can copy almost anything, making products highly vulnerable to intellectual property (IP) pirates and counterfeiters. There are regulatory challenges to confront, too, acknowledged Steven Pollack, the director of FDA’s Office of Science and Engineering Laboratories. For example, in a traditional manufacturing setting, design controls are in place that may be lacking in a 3-D setting. Devices manufactured using 3-D printers may also require additional or different testing than what is performed on products produced using traditional manufacturing techniques. Although 3-D printing techniques have different technical considerations than standard manufacturing, devices constructed using additive manufacturing techniques are subject to the same regulatory review standards as traditionally manufactured devices.1
On October 8-9, 2014, the FDA held a 3-D printing workshop for industry stakeholders, including OEMs, device manufacturers, testing labs, hospitals, and government agencies. The majority of participants agreed that paying close attention to quality control and process validation would be essential to their future success. The fact that the FDA is addressing 3-D printing at this early stage of its adoption in devices should convince manufacturers to pay close attention to it in 2015.
Trend #2: Mobile Health ApplicationsMobile health, or mHealth, has gained significant momentum over the past couple of years, and it will continue to influence product development in 2015. According to industry estimates, more than half a billion smartphone users are expected to be using mobile health applications this year; that number is projected to climb to more than 1.7 billion by 2018. According to the PwC Health Research Institute, nearly 90 percent of U.S. clinicians think mobile apps will become essential to patient health management over the next five years.2
New Lines of Revenue
Mobile app development is particularly attractive to start-ups, the current market dominators, because apps typically take less time to bring to market and require less, or different, regulatory scrutiny. This is particularly true for apps positioned as wellness devices rather than medical devices. Wellness apps are not regulated, so they allow device makers to expand their product offerings and generate new lines of revenue quickly. However, it can be difficult to determine if a mobile app falls inside or outside the realm of FDA authority, i.e., whether it meets the definition of a medical device under section 201(h) of the Federal Food, Drug, and Cosmetic Act (FD&C Act). In September 2013, the FDA issued a guidance document explaining how it intended to regulate the rapid proliferation of mobile health apps. The final guidance, titled “Mobile Medical Applications: Guidance for Food and Drug Administration Staff,” was issued on February 9, 2015.
An Overcrowded App MarketSome experts suggest that the mobile health app market may be reaching a tipping point in terms of saturation. They emphasize the need to provide real value, not just novelty or convenience. “Mobile health apps are a hot trend at the moment, but the market is highly saturated, with very few avenues to distribute them,” said Joe Hage, administrator of LinkedIn’s Medical Devices Group, which has more than 275,000 members. “Apps that are simply designed to make life easier aren’t going to get funded. Investors are taking due diligence very seriously. App developers must be able to demonstrate real value.”
With more than 50,000 free and nearly-free app products available, and smartphone real estate relatively sparse, the competition is stiff. Wellness and other nonregulated apps will enter the market faster and at a lower price point, but they may get lost in the endless stream of new software that floods the App Store daily. Apps that add real value are those that provide diagnostic and treatment capabilities, features that will require regulatory approval. Although these apps will take longer to bring to market, they may offer their developers a competitive advantage. Studies indicate that both consumers and physicians consider FDA approval to be a determining factor when deciding whether to purchase or prescribe an mHealth app.3 Device and software manufacturers should bear this in mind in 2015.
Trend #3: Reimbursement ChallengesReimbursement will be a driving factor in securing venture funding for medical devices across the board in 2015. “Reimbursement is the number one issue on investors’ minds, and one of the first things companies think about when developing products,” said Robert Packard, a regulatory consultant and trainer with two decades of experience in the medical device industry. “Ten years ago, investors didn’t know—or probably care—what CPT [current procedural terminology] codes were, but today they are far more savvy. In some ways, it’s stifling innovation, and it’s definitely increasing the cost of product development by forcing more companies to conduct clinical trials.”
The Shift Toward Value-based ReimbursementIt’s no longer sufficient to demonstrate medical need or marginal product benefits for new product launches. Even having a superior product or pioneering a new technology will not guarantee reimbursement success. Health care reform efforts such as The Affordable Care Act (ACA) are transitioning the industry from a volume-based to value-based care model, which links reimbursement to quality, better care and cost containment. As part of this transition, medical device companies will be required to provide evidence of real-world value and positive outcomes. Products that fail to provide such evidence will struggle to generate investor support or attain reimbursement.
Too often, reimbursement questions such as “who will pay for this new device?” and “how much?” are considered too late in the development process. To prevent reimbursement issues from impacting financing goals or stalling innovation, device makers must develop a well-planned reimbursement strategy in parallel with their regulatory and clinical strategies. This may prove difficult for device makers that have become so accustomed to focusing on achieving 501k clearance as the ultimate goal. However, in the current risk-averse investor climate, reimbursement approval will become just as important as regulatory approval as a business goal.
Trend #4: Heightened Cybersecurity FearsThe recent security breach of health insurer Anthem Inc. should be a wake-up call to the health care industry—one that is long overdue, according to security experts. On February 5, 2015, hackers stole the social security numbers and personal information of 80 million Anthem members and employees, leaving them vulnerable to identity theft and blackmail.4 Anthem is providing two years of free credit monitoring and identity theft protection services to victims of the hack, which security experts predict will cost the insurer millions, if not billions, of dollars. According to CNET, the company has only $100 million in cyber security insurance, although a spokeperson for Anthem has denied that CNET would have any knowledge of their policy.
While Anthem may be one of the biggest health care companies to suffer a breach, it certainly isn’t the first. In October 2014, the Department of Homeland Security investigated more than 20 suspected cases of cyberthreat in hospital equipment and medical devices, bringing some well-known health care giants under scrutiny.5 That same month, the FDA published a cybersecurity guidance for medical device makers, outlining the security measures developers should build into their products when seeking approval for a new device.
“Devices are becoming more interconnected and interoperable, which is great for patients and providers in so many ways,” said Hage. “However, it’s important to remember that increased connectivity leads to increased vulnerability and risk. There’s no getting around it.”
Updated Software Lowers the Risk of CybercrimeContributing to the risk is the fact that hospitals and other providers do not upgrade their software as often as they should in fear of falling out of FDA compliance. This means that important “everyday” medical devices, such as health and blood pressure monitors, can be manipulated to display incorrect vital signs and cause doctors to provide incorrect medical care. Frightening, yes, but most cybersecurity experts agree that hackers are more interested in stealing records that reprogramming pacemakers.
Jay Radcliffe, a security researcher who hacks into medical devices for a living, estimates that medical-identity information is worth 10 times more than credit-card information—about $5 to $10 per record—on the black market. Credit-card information is worth only 50 cents per account.6 Stolen medical information can be used to apply for credit, fake insurance claims, or to buy and resell drugs and medical equipment for profit.
The Future of Medical Device SecurityThe proliferation of electronic medical records (EMR), networked devices, mHealth applications, and cloud-based technologies has added to the complexity of information management. In this new digitized health economy, balancing convenience, safety and privacy will be an ongoing challenge. Device companies that take a proactive approach to cybersecurity, by budgeting for it and building it into their design process, will be able to use it as a competitive differentiator. Those that don’t may end up in the news—and eventually out of business.
Trend #5: The Push for Global Transparency Will Continue to IncreaseIn February 2013, the U.S. Centers for Medicare & Medicaid Services (CMS) released final regulations to implement the Physicians Payments Sunshine Act (now called Open Payments), which requires all manufacturers that obtain reimbursement for their products through Medicare to report how much they spend annually on physician and continuing education activities. However, the transparency movement, advocates argue, is not just about uncovering financial conflicts of interest in medical and clinical practice. True transparency, they say, will result in better clinical trials, happier patients, improved outcomes and lower costs of care.
Current Open Data InitiativesAs of April 2015, more than 550 government regulatory bodies, clinicians and organizations, including GlaxoSmithKline, had signed the AllTrials petition, which calls for all past and present clinical trials to be registered and their full methods and summary results to be reported. Failure to do so, according to the AllTrials website, violates the principles of the Declaration of Helsinki, which states that every investigator conducting a clinical trial should register the trial and report its result.
Large medical device and pharmaceutical manufacturers are contributing clinical trial data sets to Project Data Sphere, the Yale University Open Data Access (YODA) Project, and other programs. As of February 13, 2015, YODA had 112 trials available from the pharmaceutical, medical device, and diagnostics businesses of Johnson & Johnson, as well as Medtronic, Inc.6
Regulators are on board, too. The European Medicines Agency (EMA) will commence publishing clinical trial data used to support the approval and authorization of new drugs in Europe in 2015. Moreover, the EMA has announced plans to release anonymized patient data in the future. The OpenFDA Initiative, launched last year, provides a public database for analyzing drug and medical device adverse events, recalls and labeling information. In the past, this information was “difficult for industry to access and to use,” acknowledged Taha A. Kass-Hout, M.D., the FDA’s chief health informatics officer and director of its Office of Informatics and Technology Innovation.7
Self-regulation in Europe, Australia and JapanThe pharmaceutical industry in Europe has taken an active role in developing a self-regulatory system of transparency. In June 2013, the European Federation of Pharmaceutical Industries and Associations (EFPIA), comprised of 33 national European member associations and forty pharmaceutical companies, adopted the EFPIA Disclosure Code, which requires members to publicly disclose, in 2016, many of their 2015 financial interactions with health care professionals (HCPs) and health care organizations (HCOs).8
The medical device industry seems to be lagging behind the pharmaceutical industry when it comes to self-regulation. Although Eucomed, AdvaMed’s European counterpart, “strongly supports transparency as a broad principle,” its members are not, at this time, subject to EFPIA-like reporting requirements.
Implications for Device MakersThe ever-expanding movement toward greater transparency with respect to pricing and financial interactions between industry and providers continues to pick up steam. Life sciences companies around the world have been forced to confront both government-imposed and self-imposed reporting obligations, and further enforcement is anticipated. Data sharing and reporting across companies and continents is quickly becoming a reality. Medical device companies would be wise to invest in data sharing and analytics software that will help them gain a competitive edge.
Succeeding in 2015Patients are becoming the industry’s new customer. The number of approved portable medical devices on patients’ smartphones is facilitating diagnosis and treatment but complicating product design (developers must learn to design for consumers, not physicians) and making products more vulnerable to cybercrime. These new products must demonstrate not only clinical efficacy, but also real value in order to secure reimbursement and attract investors. Regulators are struggling to ensure device safety and efficacy—without hindering innovation. New transparency initiatives targeting clinical trial data sets are increasing, and device makers must learn to deal with the paradigm shift. These matters and others will be important as 2015 unfolds.
The medical device industry is facing unprecedented challenges in 2015, but many opportunities as well. What other trends do you expect to see? What do you consider to be your biggest challenges this year, and how are you planning to address them? Leave your comments below.
Lisa Weeks, a marketing communications specialist at MasterControl, writes extensively about technology, the life sciences, and other regulated environments. Her two decades of marketing and advertising experience include work with McNeil Pharmaceuticals, SAP AG, SCA Mölnlycke Health Care, Crozer-Keystone Health Systems, and NovaCare Rehabilitation/Select Med.
(1) Sparrow, Norbert, “An FDA Perspective on the Use of 3D Printing in Medical Applications,” Plastics Today, January 5, 2015. (http://www.plasticstoday.com/articles/FDA-perspective-on-use-3D-printing-medical-applications-150105)
(2) PWC Health Research Institute, “Clinician Survey,” 2014.
(3) PWC Health Research Institute, “Top Issues Consumer Survey,” 2014.
(4) “Anthem Begins Offering Post-breach Credit Monitoring,” February 13, 2015, USA Today, http://www.usatoday.com/story/tech/2015/02/13/anthem-breach-credit-monitoring/23378961/
(5) Appleby, Julie and Hernandez, Daniela, “Can Hackers Get Into Your Pacemaker?” The Atlantic, November 20, 2014. (http://www.theatlantic.com/health/archive/2014/11/can-hackers-get-into-your-pacemaker/382893/) Accessed April 2, 2014.
(6) Kass-Hout, Taha A.,“OpenFDA: Innovative Initiative Opens Door to Wealth of FDA’s Publicly Available Data,” FDA Voice, June 2, 2014. (http://blogs.fda.gov/fdavoice/index.php/2014/06/openfda-innovative-initiative-opens-door-to-wealth-of-fdas-publicly-available-data/)
(7) Peart, Karen N., “Yale YODA Project Announces First Availability of Medical Device Trial Data,” Yale News, January 14, 2015. (http://news.yale.edu/2015/01/14/yale-yoda-project-announces-first-availability-medical-device-trial-data)
(8) Campbell, D. Jeffrey and Sharkey, Brian P.,“Do Start Believin’: The Life Sciences Industry’s Journey to Global Transparency,” August 2014. (http://www.pbnlaw.com/media/510344/Do-Start-Believin-White-Paper.pdf)