By Bob Marshall, Chief Editor, Med Device Online
Every once in a while, a meeting or phone call with an interviewee really “clicks.” The two of you are communicating at a very high level, rapidly exchanging large amounts of meaningful information, and the whole thing is effortless and enjoyable. There also are times when you send questions to gather input from an industry leader or expert, and they respond with such thoughtful, thorough, and eloquent answers that you cannot wait to share them with your audience.
I recently assembled a forward-looking article for Life Science Leader magazine, blending feedback from seven medical device industry leaders, who discussed industry trends for 2018. Below, I share the full set of responses from Maureen L. Mulvihill, co-founder, owner, and CEO at Actuated Medical, Inc. Mulvihill did a great job responding to my questions and was featured in an earlier Med Device Online editorial, Diners, Devices, and Dives.
Med Device Online: What will the funding climate look like for the medical device industry in 2018?
Maureen L. Mulvihill: As you know, there has been a decline in venture capital (VC) investment over the past several years, resulting in a very challenging environment for early stage medical device companies to raise sufficient capital to bring their innovations to market. While we have seen improvement in the regulatory environment, increased reimbursement requirements for clinical adoption — born out of the shift to value-based health-care — [are] a key factor contributing to the decline in investment in medical technologies.
I participated in a research study — conducted by AdvaMed and Deloitte — on innovation and investment in medical technology. [It] identified the challenges to investing in our industry and proposed several solutions to fix the capital problem and reduce reimbursement and commercialization risk. These included tax reform to stimulate greater investment in innovation (i.e., device tax repeal and angel investor tax credits), as well as large medtech companies playing a more active role as strategic partners by engaging in co-development, co-marketing, and contingent M&A deals.
As medtech entrepreneurs, we must work to reduce reimbursement and commercialization risk by developing a more comprehensive value proposition for clinical and cost effectiveness, which are significant hurdles for a small company to clear. To this end, entrepreneurs also are engaging in partnerships with customers focused on population health, such as integrated delivery networks, and exploring new contracting approaches adapted for value-based healthcare. With these investment headwinds, most early stage medical device companies will need to leverage alternative funding sources, such as family offices, accelerators, and federal and state grant programs.
MDO: What device segment will be getting all of the attention in 2018? Why?
MLM: I’d say digital medtech is going to continue to be big news next year. This is such an exciting and dynamic area in healthcare right now. We’ve seen an explosion of wearables that provide individuals personalized healthcare information, and researchers across the world work to harness Big Data to find healthcare solutions for entire patient populations. Digital health is transforming how we think about and deliver health care every day.
While this new area of care promises to provide incredible benefits for patients, as well as efficiencies for healthcare systems, we need to make sure we have public policy in place that promotes these innovations. Of course, we want to do so while making sure patient safety is not affected. But the regulatory and reimbursement rules for these new technologies are still being written, so we need to make sure we get that balance right.
MDO: Will medical device M&A activity increase, decrease, or stay the same in 2018? Why?
MLM: I expect M&A activity to increase slightly in 2018. We are seeing evidence of truly innovative products (i.e., via the PMA and de novo pathways) generating greater up-front multiples and quicker times to exit than the more iterative traditional devices (i.e., 510(k) path). Large companies also are opening up to more, earlier-stage strategic partnerships that could drive greater M&A activity. However, continued consolidation in the industry and the overall environment for medtech investing are limiting factors.
MDO: What changes might we expect from the FDA in 2018? Will the agency become more or less responsive, more or less conservative?
MLM: We have seen great strides at FDA in recent years in terms of improvements in the timeliness, predictability, and transparency of its review processes. CDRH Director Jeff Shuren deserves a lot of credit for really engaging with the industry and promoting policies that promote innovation while maintaining the highest standards for patient safety and effectiveness. I think that progress is going to continue. The 21st Century Cures Act from last year, and this year’s legislation reauthorizing the Medical Device User Fee Act, both include additional pro-innovation reforms that are good for FDA, good for industry and good for patients.
And, even though he’s still in the early stages of his tenure as FDA Commissioner, I’ve been impressed with Dr. Scott Gottleib’s leadership at the agency. He’s demonstrated he understands the importance of medical technology innovation in addressing our nation’s healthcare challenges. And, the Digital Health Innovation Action Plan he recently released shows he recognizes the need to adapt regulatory policy so that it is effective in addressing some of the really cutting-edge technologies being developed today.
MDO: What changes might we expect related to clinical trials for medical devices? Are “Real-World Data” and “Real-World Evidence” for real?
MLM: The proliferation and sophistication of data collection is going to be a trend to watch. As part of the new user fee agreement recently signed into law [MDUFA IV], the medtech industry committed to funding several premarket pilot projects for the agency’s National Evaluation System for health Technology (NEST), to explore whether use of real-world evidence could help FDA determine whether a device could be eligible for expanded indications, [as well as] other premarket activities. There could be some very exciting opportunities regarding the use of real-world evidence, and the industry looks forward to working with FDA and the NEST Coordinating Center to implement and evaluate these pilots as efficiently as possible. FDA also has released final guidance on the use of real-world evidence, which should provide helpful information on the potential benefits of real-world evidence for premarket uses, such as reducing premarket burdens and supporting expanded indications of use.
MDO: What will our U.S. healthcare system look like in 2018, and how will that affect medical device reimbursement?
MLM: Downward cost pressures and patient demand for more (and better) care are going to continue to be the primary drivers of the U.S. healthcare system. You’re going to continue to see movement away from a fee-for-service model, toward a system that rewards providers for increased quality and efficiency.
That puts medical technology companies in an interesting position. We know our devices and diagnostics can provide the value all stakeholders — patients, providers, payers, innovators, etc. — are looking for. The challenge is that there is no consensus among these groups on how to determine value for medical technology. Without that consensus, there is the danger that a really worthwhile device or diagnostic will not be adequately reimbursed, or even covered at all. That could have a chilling impact on future innovation.
AdvaMed has attempted to address this challenge through the development of what they are calling Value Frameworks. These frameworks — one for medical devices and one for diagnostics — are designed to provide stakeholders across the healthcare spectrum with an approach to objectively determine the value of a medical technology or diagnostic test, and the evidence needed to support its use. These frameworks have the potential to be game-changers in how we address the value of medical technology.
MDO: Will medical device companies outsource more or less in 2018? Why?
MLM: FDA has increased levels of scrutiny and rigor the past several years. As such, outsourcing of medical device components and assembly to countries with low levels of compliance will likely decrease. Wage increases in countries like China further lower their competitive advantage over U.S. manufacturing. However, there is an opportunity for low labor cost markets as end-product cost competition continues to intensify — if compliance can be improved. Companies will continue to balance capital investment and development costs against per-item costs and speed to market in the make/buy decision.
MDO: What innovations will we see in manufacturing, packaging, or sterilization in 2018?
MLM: With the release of the new guidance document from the FDA regarding sterilization in 2016, new and innovative methodologies for sterilization will become more universal. Pre-validated or ready-to-use packaging and sterilization solutions are of great value. There also is a continued push for ‘green’ alternatives to traditional packaging, and finding companies to provide these materials will be required. The integration of risk-management processes directly into manufacturing process development, rather than as a separate or adjunct process, also will be critical.
MDO: Will the medical device industry be able to find the talent it needs to grow, from a staffing perspective?
MLM: The medtech industry will always be able to find the talent it needs to grow because it offers two attributes that most other industries cannot: greater purpose and industry stability. What could be better than creating a device that improves the health of your friend’s daughter, your grandfather, or a soldier? Millennials now are the largest generation in the workforce, and they are driven by greater purpose: they seek to make an impact in the world. To attract the best and brightest, medtech executives need to develop innovative ways to showcase how the company vision makes human lives better.