The Way Ahead for Outsourcing R&D

The overwhelming consensus of the medtech community is that innovation is the lifeblood of the industry. Without it, company revenues stagnate, healthcare quality and efficiency plateaus, and new challenges go unmet. It is vital for medical device companies to continue to improve upon current technologies, whether by the slower-paced incremental innovation commonly seen with legacy products or by leaps and bounds such as the inventions often developed by smaller startup firms.

Other regions of the world recognize this need and have established a type of community to support it, typically made up of industry, academia, and government. All three contribute to the effort. Look to Ireland and Singapore for exciting working examples of these types of symbiotic relationships. Unfortunately, here in the U.S., the government thinks it wise to assess a 2.3 percent excise tax on medical device sales to help pay for healthcare (back next year if something isn’t done in the next few months). But I digress.

At the same time, we’re experiencing a skills gap between those who are leaving medtech (as well as the manufacturing industries that support it) through retirement (i.e., the graying of the industry) and those coming in to fill their positions. Those going through the exit door are outnumbering those coming in and it’s an issue that desperately needs to be addressed. (Side note, at this year’s MPO Summit in San Diego, we’ll be discussing that topic in a panel session with five participants who are each involved in some way with addressing this very issue. See www.mposummit.com for details.)

There may be a potential solution to both challenges that’s already in place to a lesser degree. While researching the MPO Top 30 company reports published in the last issue, when reviewing R&D expenditures, every company stated that part of these costs included money provided to academic institutions. In some cases, these are for grants or donations for research. In other cases, it could be in support of an innovation competition (such as the one managing editor Michael Barbella writes about in this issue; click here to view that article). There are also the situations where this money is going toward an effort to establish a more formal partnership between the medical device OEM and a university. It is from these examples, I believe, that both the industry and academia stand to gain significant value.

In 2015, Philips announced that it was establishing a $25 million alliance with MIT and moving its R&D headquarters to Cambridge. The agreement was specifically made to have the school support the company’s core areas in healthcare and lighting technologies. Philips solicited research proposals and met with representatives from the labs on campus. The partnership provides the company with a new source of potential medical device innovations while MIT enjoys an avenue for projects to move out of the realm of simply being fodder for a published paper. Further, MIT expects to gain insights into how their developments are utilized in real-world environments.

“One of the things I’m really looking forward to, since they [Philips] are actually making stuff that gets used in hospitals around the world, is that they will develop some of these ideas,” said Peter Szolovits, a professor of computer science and engineering and of health science and technology at MIT. “That, in turn, would allow MIT students and faculty to do follow-up studies on ‘how well these things work in the real world.’”

[Learn more about this arrangement here.]

More recently, Wake Forest Innovations, the commercial arm of the Wake Forest Baptist Medical Center, teamed with Ethicon, a division of Johnson & Johnson, on comparing the OEM’s Echelon Flex 35 Powered Vascular Stapler to a manual stapler to determine potential differences in tissue tension. Both entities viewed the arrangement as a trial to determine if a more robust R&D partnership could be established between them.

“We can maintain specialists in very narrow areas of expertise, like gene-based therapies, biomedical engineering, and others,” explained Heather Ramsay, associate director of alliance management for the Center for Industry Research Collaboration at Wake Forest Innovations. “Companies can’t support that kind of specialization in-house, so they want to work with people in academia who have specific knowledge and skills.”

[Learn more about this arrangement here.]

Indeed, greater, more established relationships between academic organizations and medical device OEMs offer great benefits to both sides. Further, once the students graduate, those who are already intimately familiar with the company’s technologies instantly become perfect candidates to fill in the skills gap, able to hit the ground running on the project they’ve already been working on for years during their time in college.

It’s a rare example of a true win-win scenario.