The Lost Year: 2020 Year in Review

It’s been quite a year.

Truthfully, it’s been a defining year, though the delineation is rather subjective. For some folks, 2020 has been soul-crushing; for others, it’s been a non-stop frightfest. The journey has been frustrating, depressing, maddening, and confusing at times. But it’s also been a life-altering one.

Certainly, 2020 has worn many labels (none of them good): the Lost Year, the Year Best Forgotten. The Terrible, Horrible, No Good, Very Bad Year. The Worst Year Ever.

One adjective, however, remains missing from that list—Good. That word has never been associated with 2020, and it probably never will, thanks to the deadly coronavirus. But rather than dwell on the pandemic and its pilfering of normalcy from our lives, perhaps society—led by the medtech industry—should learn from this health crisis and create solutions for the new normal ahead of us. Society should look forward, not back, as Medtronic’s new CEO Geoff S. Martha advises.

“A lot of people keep talking about ‘hey, when are we going to be back to normal?’ I don’t want to go back to normal,” Martha told Boston Consulting Group’s Bob Lavoie during The Virtual Medtech Conference in October. “I’m an optimistic guy, [and] as painful as the pandemic and the social unrest has been—I wouldn’t wish this on anybody. But we’ve learned a lot and I’m convinced ultimately that society will be better for it as well as companies and especially medtech, being in the heart of this healthcare crisis. We should be part of the answer. I don’t want to go back, I want to go forward. I think we should define a new normal in terms of how medtech corporations can contribute to some of society’s other issues. That new normal is exciting to me. As painful as it’s been over the last couple of months, the new normal is very exciting. I would urge everybody to not forget the lessons learned, reflect on the last couple of months, and look forward and push forward.”

No matter what the future holds.

Testing the Testers
It was the assent heard ‘round the world.

Never mind that it seemed to come unbelievably quick (even under extenuating circumstances), or that it emanated from an enigmatic company making out-of-this-world claims.

Flaunting adjectives like “lifesaving” and “game-changer,” Los Angeles-based BODYSPHERE Inc. announced federal consent of its COVID-19 blood test on March 31, boasting the assay was as easily administrable as a glucose diagnostic and equally as accurate (91 percent clinical specificity/99 percent clinical sensitivity). The test reportedly could detect past or present virus loads via blood-borne antibodies in as little as two minutes—an extraordinary turnaround compared to the two- to seven-day average back then.

Indeed, BODYSPHERE’s rapid test results seemed groundbreaking. No other company thus far had developed and received approval for such a fast-working diagnostic.

BODYSPHERE’s test seemed too good to be true. But the company assured the public its test was the real deal, noting the serological assay had already been used in several states undertaking large-scale testing rollouts. The firm also claimed it had contracted cargo planes to deliver millions of test kits nationwide in a matter of weeks.

“It is not the first time we will play a major role in changing the world,” the company proclaimed in a March 30 tweet.

Famous last words.

Within two days of that tweet, BODYSPHERE’s CEO walked back many of the assertions the firm had touted, including the test sanctioning itself. On April 1, a company spokesperson acknowledged the firm had in fact not received U.S. Food and Drug Administration (FDA) Emergency Use Authorization (EUA) for its COVID-19 IgG/IgM Rapid Test Cassette, ascribing the erroneous proclamation to a “misunderstanding.” On the day BODYSPHERE claimed it won the EUA (March 31), the FDA actually awarded authorization only to Yale New Haven Hospital’s SARS-CoV-2 PCR test, a real-time assay that detects nucleic acid from the virus. That diagnostic was the 23rd to gain emergency use authorization; since then, 186 additional COVID-19 assays have won EUAs, 35 of which were developed in laboratories, FDA data show.

BODYSPHERE immediately shifted into damage control mode, with its CEO releasing a statement cautioning against using the blunder to invalidate the test’s authenticity and effectiveness. The chief executive also clarified that his firm was the test distributor rather than the manufacturer.

“In the rush to get the desperately needed test kits to the front lines, BODYSPHERE believed when the manufacturer’s product was listed on the FDA Registry website, that was the Food and Drug Administration’s notification the Emergency Use Authorization was issued,” Founder/CEO Charlton Lui said in a website post that garnered worldwide headlines. “This misunderstanding does not in any way invalidate the test kits authenticity or effectiveness. Under the FDA policy, upon the manufacturer receiving its acknowledgment letter from the FDA, BODYSPHERE being named the distributor of the EUA submission, was authorized to market and distribute test kits to any licensed healthcare practitioner in the United States for diagnostic use while the manufacturer awaits word of a final decision on its FDA EUA application.”

The manufacturer’s identity remains a bit murky, though. Published reports named Hangzhou, China-based Safecare Biotech as the test maker, but the company denied forging a distribution contract with BODYSPHERE. At that time, the Chinese firm was working with Gaithersburg, Md.-based consultancy LSI International Inc. to register its assay in the United States; LSI reportedly submitted EUA paperwork on Safecare’s behalf, but it did not communicate with BODYSPHERE about the test.

More than six months later, the mystery remains unsolved, as BODYSPHERE’s website is password-protected and Safecare’s name is missing from a 209-strong list of COVID-19 diagnostic test EUAs (awarded through Sept. 30).

Though largely self-inflicted, BODYSPHERE’s test authorization gaffe was nonetheless partly induced by shifting regulatory standards during the pandemic’s early days. Case in point: In mid-March, the FDA released an ambiguous guidance update that spawned a spate of mail-order COVID-19 assays from telehealth and home testing providers; within days, however, the agency clarified its opposition to at-home offerings, prompting those diagnostics’ market retreat.

Around the same time, the FDA allowed non-authorized tests to be used clinically.

Although risky, the move was necessary in order to balance “regulatory flexibility” with science, health officials said.

Even with the policy shift, though, COVID-19 testing was still problematic in the United States. At first, the Trump Administration insisted on relying upon flawed CDC assays; then supplies fell short as scientists scrambled to discern the best, most accurate diagnostic methods (nasal swabs? blood cultures? saliva samples?). National testing gradually increased throughout the spring and summer, with monthly test shipments more than doubling between April and August (growing to 37.6 million from 15.8 million), according to AdvaMed. Similarly, daily molecular COVID-19 test shipments doubled between May and September, expanding from 600,000 at the start of May to 1.2 million by Sept. 19, the organization’s data show. By late July, the U.S. diagnostics industry’s monthly serology test manufacturing capacity had swelled to 100 million, and through late September, test makers had shipped more than 180 million coronavirus assays nationwide (130 million commercial products/50 million extraction agents), AdvaMed’s national COVID Testing Supply Registry statistics revealed.

Yet as testing capacity rose, so did testing-related troubles. Surging demand easily surpassed capacity in some areas of the country, sparking supply shortages, processing backlogs, and sluggish turnaround times. Compounding those issues were confusion over testing protocols, conflicting messages from the federal government, and erroneous results. Abbott Laboratories, BD, and Thermo Fisher Scientific spent part of the spring and summer working out the kinks in their tests; Abbott’s diagnostic was perhaps the most troublesome, as it supposedly yielded high “false negative” rates. The company, however, disputed the results, citing flawed research.

Abbott redeemed itself (sort of) in late summer with an EUA for its point-of-care antigen test that gives results in 15 minutes and can be conducted without laboratory equipment. The $5 assay, which features a complementary mobile app for displaying patients’ results, has a 97 percent sensitivity rate and 98.5 percent specificity rate. Although laboratory experts warned of inaccurate results (from improper handling), the federal government agreed in late August to purchase 150 million of Abbott’s antigen tests to expand evidence-based testing in the United States.

“We intentionally designed the BinaxNOW test and NAVICA app so we could offer a comprehensive testing solution to help Americans feel more confident about their health and lives,” Abbott President/CEO Robert B. Ford told the press. “BinaxNOW and the NAVICA app give us an affordable, easy-to-use, scalable test, and a complimentary digital tool to help us have a bit more normalcy in our daily lives.”

And a bit of normalcy is all the world can hope for these days. 

Read more: bit.ly/33CYOul

Outside-the-Box Help From the Outside
Ross Hunter has never really been fond of convention.

As a child, he designed and built his own go-cart using an old bedspread and lawnmower engine he found in a farm workshop. (The vehicle fell apart on its maiden voyage, but hey, at least the steering wheel was cool).

“I just love to solve problems. I love making and inventing—and growing up on a farm gave me the tools to become hands-on and practically minded,” Hunter told the Edinburgh Evening News in mid-May. “I was brought up with an attitude of ‘we can do that.’”

Hunter’s can-do attitude has spawned some rather unique creations over the years, including whiskey barrel photo frames and eco-friendly accommodation pods (comprised of scrap material from an old chapel, a deserted police station, and a neglected tollhouse).

Can-do.

Hunter’s most recent tinker was a bit more ordinary but no less impressive—he built a low-cost mechanical ventilator based on a specialty coffee machine design (another one of his many handiworks). Hunter was still tweaking his coffee machine prototype as the novel coronavirus drained the world’s ventilator and PPE supply; while under lockdown, he learned of efforts to alleviate the shortages and began working on a ventilator design.

Can-do.

“I knew my limitations, and felt that a fully functioning ventilator was a bit ambitious when the call for ventilators went out,” Hunter recalled in a Med-Tech Innovation News interview. “But the CoVent-19 Challenge was different, as it was looking for the most basic and cost-effective ventilator design. I saw this as a real challenge.”

A challenge Hunter just couldn’t pass up.

Can-do.

That challenge, however, wasn’t as difficult as Hunter expected, for he had inadvertently created the ventilator’s basic design with his coffee machine prototype. Not surprisingly, Hunter took an unconventional approach to his ventilator concept, equipping the device with enlarged bellows in order to contain the inhalation and PEEP (Positive End Expiratory Pressure) functions in one system, and enable an extended stroke during exhalation. The device’s main electronics and drive mechanism are pre-manufacturable, but nevertheless designed to provide for point-of-care fabrication of the chassis and oxygen bottle supports.

Like the outdoor living pods he builds (via his company, Armadilla Ltd.), Hunter’s ventilator is designed to be fully manufacturable or available as a box kit, ready for assembly on site. Either option would cost significantly less than current market models.

Can-do.

Hunter’s ventilator design (CORE Vent) was one of only seven selected for final consideration in the global search for a rapidly deployable (and affordable) mechanical ventilator.

Two-hundred thirteen entrants from 43 countries submitted ideas in the CoVent-19 Challenge; the winning concept came from Smith College (Northampton, Mass.) engineers, whose device featured solenoid valve technology, off-the-shelf components, 3D printed parts, and an air-oxygen mixing chamber. The machine, Challenge organizers noted, cost about one-tenth the price of a traditional ventilator.

Despite his ultimate placement among the finalists, Hunter does not regret answering the call for ventilators. “…it’s been a great to find a really worthwhile way of using my skills and experience,” he declared to Med-Tech Innovation News. “I’ve been solving problems and learning a totally new branch of the life science sector. The hardest part was understanding the terminology used and what that actually meant in a physical form. I believe my lack of understanding of conventional ventilator technology actually gave me an advantage—it helped me think outside the box.”
Can-do.

Outside-the-box thinking from entities outside the medtech sector helped the industry meet surging demand for ventilators and personal protection equipment (PPE) during the pandemic’s early spring assault. Companies large and small—unknown startups and global icons alike—stepped up to bat for ventilator manufacturers hamstrung by global supply chain problems, a low U.S. stockpile, and America’s delayed response to the virus.

General Motors (GM) and Ford switched from car production to ventilator manufacturing in mid-March, when the U.S. government’s breathing machine reserve amounted to 16,600 machines—just 2 percent of the estimated total needed in a severe coronavirus outbreak, and one-quarter of the sum necessary to battle a moderate epidemic, according to Johns Hopkins University data.

GM partnered with Bothell, Wash.-based Ventec Life Systems to produce 30,000 ventilators for Uncle Sam, while Ford helped 3M and GE Healthcare increase their ventilator production. Medtronic, in parallel, partnered with Elon Musk’s Space Exploration Corporation (SpaceX) to produce a highly complex valve for its Puritan Bennett 980 Ventilator line. Comprised of more than 50 parts, the proportional solenoid valve controls air and oxygen flow inside the Puritan machines; the valves also are used in the aerospace industry to manage fluid in hydraulic equipment.

“We had their [SpaceX] best technicians. We had their best engineers. Some of the people working on this project are the very people who launched the first private commercial crew to the International Space Station,” Medtronic engineer Matt Phillips, manager of a California-based ventilator R&D team, noted in an online post. “They brought the same kind of energy to this project that they brought to putting astronauts in space. I have never seen anything like this in my life. The partnership came together so quickly, and everyone moved with a sense of urgency and purpose because we knew people’s lives were on the line.”

Such resolve spawned countless non-traditional medtech partnerships during the pandemic’s first wave: Godrej Aerospace produced and delivered 1,000 proportional solenoid valves to India’s Defense Ministry; luxury car maker Ferrari converted snorkel masks into respirators; and London residential college Newspeak House created an online pandemic response guide that featured more than a dozen open-source plans for constructing emergency ventilators using inexpensive hardware. Other first-time ventilator manufacturers included Dyson (designed and built a machine in 10 days), Foxconn, SmileDirectClub, Toyota, and Virgin Orbit, among others.

Similar alliances arose to help address the global personal protection equipment shortfall. Luxury and fashion brands like Joseph Abboud, Brooks Brothers, Gap, Gucci, Hanesbrands Inc., Kontoor Brands (Wrangler, Lee Denim), Ralph Lauren, Alexander McQueen, Prada, and Louis Vitton used their vast resources to produce face masks, hospital gowns, and other necessary personal protection equipment, as did apparel bigwigs Bauer, Fanatics, Nike, and Under Armour.

“You can go down the list—personal protective equipment, diagnostic tests—the partnerships that were in place, the dialogues that occurred, and the urgency everyone felt…nobody was talking about cutting corners,” U.S. Food and Drug Administration Commissioner Stephen M. Hahn extolled to AdvaMed President/CEO Scott Whitaker during the organization’s virtual MedTech Conference in early October. “With ventilators, industry partners stepped into this area [having] never manufactured a ventilator before, and [they] stepped up to the plate to construct, develop, and create ventilators. Now we have many thousands in the Strategic National Stockpile. We are very well-protected from a ventilator point of view. The fact of the matter is we would not have been able to get the medical products we’ve gotten out to the American people—as a country—without that public-private partnership.”

Maybe now those partnerships will be longer-lasting.

Read more: bit.ly/37byr19

Unleashing the Genie
Yet even as they walk through the valley of the shadow of death, chief executives and corporate strategists are beginning to look to the post-COVID world to come. What they think they see, for good or ill, is an acceleration… — The Economist, April 11, 2020

The chatter was disappointing, to say the least.

Earlier this year—ostensibly a lifetime ago now—Eric Jensen journeyed to the West Coast with high hopes for the telehealth industry. A promising but vastly underutilized resource, telehealth solutions have proven effective in combating the shortcomings of cost, quality, and access ingrained in American medicine. The technology’s use has largely been limited though, stifled by patient privacy concerns, strict regulations, financial roadblocks, and scant clinical evidence.

Nevertheless, Jensen was optimistic as he headed West. He knew the sector had experienced exponential growth over the last 15 years, with virtual doctor visits increasing nearly 1,000-fold between 2005 and 2017, and hospital (telehealth) usage more than doubling from 2010 to 2019. He also was aware of the investment surge that funneled roughly $5.5 billion into telehealth services during the 2010s, a decade in which the global market swelled to $45 billion.

Surely such growth should count for something, Jensen reckoned. It should at least help validate telehealth’s role in the total care continuum, and remove the barriers to its widespread adoption. Shouldn’t it?

Perhaps, but telehealth’s skyrocketing growth did not have the impact Jensen was expecting. “…there was still more talk than action,” he wrote in a springtime guest post for healthcare technology news website HIT Consultant. In his post, Jensen described the undertone of uncertainty that shaped digital health discussions at the J.P. Morgan Healthcare Conference in San Francisco. Jensen attended the event in his role as chief product officer for digital health consultancy AVIA.

“…in January 2020, digital [health] still inspired discussion and debate, not investment and action,” he wrote. “Leaders and boards of directors worriedly asked, ‘How might physicians respond to these changes?’ ‘How will digital solutions impact near-term revenue?’ ‘How will we fund these solutions?’ ‘How will these solutions integrate with our EMR?’ And they dithered.”

Not for long, though. The dithering died within weeks of the J.P. Morgan conference as COVID-19 ran amok worldwide, turning telehealth into a societal darling practically overnight.

There was no going back at that point. As Jensen noted in his post, “the genie [was] out of the bottle.”

Released courtesy of Uncle Sam, of course: Federal agencies and public payers scrambled to expand access to telehealth during the pandemic’s initial U.S. assault, removing regulatory and administrative roadblocks, and distributing funding for health IT infrastructure development.

In early March, for example, the Trump administration allowed Medicare to temporarily reimburse telehealth appointments in proportion to office visits, thereby expanding the number of reimbursable virtual care services (144 as of mid-October). Several weeks later, Congress passed a $2.2 billion stimulus bill that benchmarked $200 million for the development of a comprehensive telehealth infrastructure, IT networks, and hardware.

Around the same time, the Centers for Medicare and Medicaid Services (CMS) boosted payments for audio-only telehealth visits and permitted licensed providers to treat patients in different states. In addition, the government relaxed its enforcement of HIPAA privacy and security rules, which had long been hampering telehealth’s widespread use.

CMS also released a new toolkit during the spring to expedite the state adoption of virtual care coverage policies. The toolkit is intended to help states identify potential telehealth services and the regulatory restrictions preventing their quick deployment.

So many changes. So short a time.

Extremely short, actually. In a matter of weeks, the telehealth industry had gone mainstream, bolstered by expedited regulatory shifts and near-instant consumer adoption.

“There are generations where nothing happens. There are decades where nothing happens. And there are weeks when decades happen,” Amwell CEO Roy Schoenberg told Healthcare Dive in July. “And that’s exactly what we’ve gone through.”

In those decades-rich weeks, telehealth services skyrocketed: The proportion of virtual primary care visits among Medicare patients swelled from 0.1 percent in February to 43.5 percent in April, and more than 10.1 million beneficiaries accessed their care remotely between mid-March and early July, government data show.

CMS records paint a similar picture—over 34.5 million Medicaid and CHIP (Children’s Health Insurance Policy) services delivered remotely between March and June, an increase of more than 2,600 percent compared with the same period in 2019. Adults aged 19-64 received the most virtual services, though substantial variations existed across age groups and states, the statistics indicate.

Telehealth providers like Amwell, GlobalMed, Teladoc Health Inc., and Zipnosis nurtured the industry’s meteoric rise with their on-demand platforms and asynchronous offerings. Such innovations helped overwhelmed healthcare systems manage surging demand for virtual services in early spring, when the number of remote care visits grew proportionally to the rising U.S. caseload. MedStar Health’s volume, as an example, spiked from about two daily telehealth visits to 4,150 in two months, and its remote care case total surpassed 100,000 in just 48 days (March 13-May 1).

Similarly, NYU Langone Health conducted 144,940 remote care visits with 115,789 patients in a six-week period (March 2-April 14), according to study data published in the Journal of the American Informatics Association. The numbers show virtual urgent care visits ballooned 683 percent over those six weeks, and non-urgent care appointments swelled an astounding 4,345 percent.

“COVID-19 has fueled a rapid transformation, with telehealth and virtual care driving the new paradigm in care delivery,” American Telemedicine Association (ATA) President Joseph C. Kvedar, M.D., told a U.S. Senate committee on June 17. “This pandemic has forced America’s healthcare system into the 21st century. Telehealth has not been merely a novelty; telehealth has kept the entire healthcare system afloat and has enabled patients to continue to receive care. As technology has advanced, so too has healthcare innovation, creating new and better ways to connect patients and providers, empower individuals to manage their health better, and create more efficient and effective care and improved clinical outcomes. Even just a few short months ago, we could not have anticipated a public health emergency of this magnitude, nor the role telehealth would play in helping to ‘flatten the curve’ while delivering care to millions of Americans.”

In blindsiding the world, COVID-19 exposed some longstanding weaknesses in the U.S. healthcare system. Besides supply chain, testing, data sharing, and communication challenges, SARS-CoV-2 unmasked the financial, cultural, and physical barriers hampering widespread care access.

Telehealth removed at least one of those hurdles—namely, helping improve patients’ overall comfort level with virtual doctor visits. By mid-June, three-quarters of U.S. hospitals were using digital technology to communicate with patients by video, audio, chat, or email, and patients’ use of telehealth technologies had more than quadrupled, Kvedar’s Congressional testimony noted. Interest in telehealth services also spiked, with 76 percent of consumers expressing a future interest in remote care, the testimony read.

“Patients have grown accustomed to the convenience, safety, and quality of remote visits. The overwhelming acceptance and implementation of telehealth during the pandemic—and the significant levels of patient and provider satisfaction—clearly speak to the value of these technologies,” Kvedar said. “Given the patient and provider satisfaction we have seen, I believe many, if not most, providers and patients will want to continue to use telehealth in some way indefinitely.”

Such a future is untenable, however, without further policy changes to ensure permanent, easy access to virtual care. In his testimony, Kvedar outlined the necessary legislative/regulatory steps for making telehealth services permanent. They include:

• Addressing currently outdated statutory restrictions on patient geography and originating site limitations;
• Expanding the list of eligible practitioners and therapy services, and maintaining the authority to add or remove specific telehealth services;
• Allowing CMS to determine and manage the range and scope of telehealth services;
• Considering maintaining HIPAA rule flexibility; and
• Encouraging states to continue working together to offer more streamlined licensing across state lines.

AdvaMed added several recommendations to Kvedar’s list, suggesting that policymakers create a public-private consortium for digital health innovations; expand remote patient monitoring and other digital patient-provider communications; and better link Medicare coverage processes with FDA authorization channels for breakthrough technologies.

“These are not the only policy changes that will be required to ensure telehealth can continue post-pandemic, but they are the most immediate federal policies that must be addressed. Additionally, technology and telehealth infrastructure remain a critical need,” Kvedar said in his testimony. “Essential telehealth services will abruptly end with the national emergency, and beneficiaries who have come to rely on critical services will be forced back into a world with restricted access to convenient, digitally enabled care. We need [to] ensure patients and providers do not go over the telehealth ‘cliff’ as our nation emerges from the pandemic.”

Indeed, for the fall could be crippling.

Read more: bit.ly/2Hgkyno

Suppy Chain Strains
Mike Bowen knew the day was coming.

He didn’t know the timing or method of its arrival, but he knew it was forthcoming.

And he knew America wasn’t ready for it.

Bowen did his best to prevent the inevitable, sounding the alarm to anyone willing to listen—healthcare executives, politicians, business leaders, government workers—but his efforts fell on deaf ears. “I talked to [U.S. Rep.] Michael Burgess, [U.S. Sen.] Patrick Leahy, [U.S. Sen.] Chuck Schumer,” Bowen recalled in May. “I wrote Barack Obama 20 letters. I wrote [President] Trump and everybody in his early administration—Defense Secretary Mattis, [U. S. Sen.] Jeff Flake, [Assistant Attorney General] Jeffrey Clark, Anita Patel with the CDC, Greg Burel [former director of the Strategic National Stockpile], hundreds of hospitals, the Hospital Risk Managers Association…”

And so on.

Dozens of letters. Countless conversations and emails. All with the same purpose: To increase domestic production of medical masks (N95 respirators).

The United States’ dependency on foreign-made N95 masks has long been a source of anxiety for Bowen. Since 2006, he’s considered the shrinking domestic production of masks to be a national security risk, and has tried to persuade policymakers to deem it as such. Among the only converts was Rick Bright, the former BARDA (Biomedical Advanced Research and Development Authority) director who was ousted in April after clashing with U.S. Health and Human Services (HHS) officials over the nation’s overall pandemic preparedness and the department’s alleged industry biases.

Bowen contacted Bright and other HHS administrators on Jan. 22—the day after COVID-19 made its U.S. debut—and offered to boost production at his Texas-based medical supply company, Prestige Ameritech, by 1.7 million N95 masks per week. But there was little interest in the offer.

“I’ll never forget the emails I received from Mike Bowen indicating that our mask supply—our N95 respirator supply—was completely decimated,” Bright told lawmakers during a Capitol Hill hearing this past spring. “And he [Bowen] said, ‘We’re in deep shit. The world is. And we need to act.’ I pushed that to the highest levels I could in HHS and got no response. From that moment I knew we were going to have a crisis for healthcare workers because we were not taking action. We were already behind the ball.”

Bowen knew it, too. The day he had been dreading for 14 years had finally arrived.

And, like he had feared, America was not ready.

At the start of COVID-19’s U.S. rampage, the country’s Strategic National Stockpile contained about 12 million N95 masks, or 0.34 percent of the estimated 3.5 billion needed to fight the pandemic, according to published reports. There are various reasons for the meager reserve—funding shortfalls, shifting disaster priorities, lack of replenishment, and a jurisdictional change among them—but truthfully, the stockpile was never intended to be a bottomless source of medical supplies. Ideally, the cache was supposed to augment individual hospital reserves, but those depositories never materialized due to waning finances.

Albeit challenging, the dangerously low national stockpile was actually not the main cause of America’s mask shortage early in the pandemic. Rather, it resulted from a breakdown in the global medtech supply chain caused by a longstanding dependence on Chinese imports. When the virus first surfaced, China produced about half the world’s supply of surgical masks (yet only 3 percent of N95 respirators) but as infections spread, the Middle Kingdom restricted its PPE (personal protection equipment) exports to safeguard its own population. Shuttered factories and restricted air travel hampered efforts to secure the necessary materials and supplies for critical medical products, leaving countries like the United States scrambling to increase domestic production of needed medical supplies.

“Globalization has worked at one level, but what this [pandemic] has demonstrated is that it can all fall down if your suppliers are from one place only and their production goes down,” Keele University (U.K.) biomedical engineering professor Peter Ogrodnik noted over the summer. “Our supply chains are all too predicated on buying the equipment from somewhere else. It’s very hard to kickstart an industry to replace that when the expertise isn’t there domestically.”

It’s easier, though, when the expertise already exists. 3M, the largest U.S. producer of N95 respirators, more than quadrupled its domestic output, producing 95 million masks by May. The company also imported 166.5 million respirators from its manufacturing plants in China and other Asian locations, and was awarded contracts by both FEMA and the U.S. Department of Defense that will allow the firm to double its global mask production (2 billion) by year’s end. Honeywell and Prestige Ameritech (Bowen’s firm) were tapped by Uncle Sam too, the latter receiving a $9.5 million, one-year contract to produce 1 million N95 respirators per month.

In an effort to secure and strengthen the medtech supply chain, President Trump signed an executive order in August that urged federal agencies to purchase “essential” U.S.-made drugs and healthcare supplies, and the U.S. Food and Drug Administration that same month issued a public list of medical supply shortages. The list was mandated by the $2.2 trillion CARES Act signed into law in March.

The medtech sector hatched its own supply chain solutions, employing such fixes as repositioning inventory, retrofitting/reimagining products for new uses, and partnering with outside industries to boost PPE and ventilator production. AdvaMed augmented the partnership initiative by linking device and diagnostics manufacturers with component suppliers through an online portal (MedDeviceNetwork.org). More than 100 companies—including Arrow Electronics, Boeing, Google, Honda, and Stanley Black & Decker—have signed up to help scale part production and distribution.

AdvaMed intends to continue MedDeviceNetwork for the foreseeable future, an acknowledgement, perhaps, of the serious challenges facing healthcare supply chains and the need for effective solutions.

“Companies must have updated business continuity plans that address all levels of the supply chain,” Charlie Mason, senior vice president of Sanmina’s Medical Division, told MPO. “Having a detailed understanding of where components are coming from, the number of available suppliers for a particular component, and the locations where components are being produced, will be critical moving forward. In some instances, there may be only a small handful of suppliers for certain vital components, so organizations need to be prepared to address these types of situations before the next unexpected event occurs.”

An event likely expected sooner rather than later.

Read more: bit.ly/3mhLZw4 

Fragmented Finances
All was well at first.

The medtech industry welcomed the new year—and decade—on solid financial footing, with rising total revenue, high investor confidence, and double-digit R&D growth. Strong dealmaking was in the forecast, particularly within digital health. And, the bothersome medical device tax was (finally) no longer a threat, thanks to a rare yuletide miracle from Uncle Sam.

Indeed, 2020 looked promising. But that optimism quickly faded as COVID-19 circled the globe, upending society with government-imposed shutdowns and social distancing measures. Global stock markets crashed (the Dow lost 30 percent of its value in just a few weeks), unemployment skyrocketed, and economic activity slowed to a trickle. The pecuniary carnage that followed ended America’s historic 128-month expansion and forced the world into recession.

The volatility utterly decimated medtech finances, but manufacturers were impacted in varying degrees. PPE producer 3M, for example reported a 14.5 percent second-quarter profit on a 12.2 percent sales decline, while Baxter International and Fresenius Medical Care AG fended off Q2 losses through higher sales of infusion sets and renal dialysis equipment. Similarly, Abbott Laboratories and Thermo Fisher Scientific posted higher second-quarter reagent revenue but lower instrument proceeds, whereas Hologic benefited from strong demand for reagents and test kits.

Some device companies, however, were not as fortunate: Medtronic plc’s Q2 revenue was down 24.3 percent year-over-year even though the company was a major ventilator supplier. J&J’s Medical Devices sales plummeted 34 percent, and Stryker Corp. sustained a 36 percent sales loss in April due to elective procedure deferrals.

Those deferrals ultimately doomed Endologix Inc., which filed for Chapter 11 bankruptcy protection and went private in early July. The company shed $180 million in debt and gained $110.8 million in financing by reorganizing under the auspices of its largest creditor, San Francisco-based real estate investment firm Deerfield Partners.

“Although COVID-19 has presented a delay in many AAA procedures that, in turn, has negatively impacted our revenue, we remain confident we have taken the right steps to ensure we are consistently providing valued support to customers and patients…” Endologix CEO John Onopchenko told the press. “We are excited to begin a new chapter for our organization now characterized by financial stability.”

Such stability was rare this year, though. Roughly two-thirds of pure-play medtech companies and conglomerates lost 5 percent in total revenue in H1 2020, according to EY report data. IPO valuations were up, but the number of offerings fell to their lowest level in a decade (14), and venture capital investments contracted 22 percent (the second quarter was particularly disastrous).

Much of the surviving venture activity involved non-imaging diagnostics innovation. EY analysts note the largest VC round in the United States went to Redwood City, Calif.-based Karius Inc., which raised $165 million in February for its blood testing platform that combines genomics and AI to spot trace DNA marking the presence of infectious pathogens. British robotics system developer CMR Surgical Limited captured top venture capital honors, raising 195 million pounds ($240 million) to commercialize its Versius robot.

M&A was fairly muted this year too, as total deal value and transactions declined from 2019 levels. Expenditures between July 2019 and June 2020 plummeted 60 percent to $27.1 billion compared to the previous 12-month period, EY statistics indicate. Similarly, the total number of deals in the first half of 2020 sank 83 percent to 19, Capstone Headwaters analysts claim.

The year’s largest acquisition by far was Siemens Healthineers’ $16.4 billion takeover of Palo Alto, Calif.-based Varian Medical Systems. Announced in August, the all-cash deal gives Siemens a suite of cancer treatment technologies, including a growing proton therapy business.

The Siemens-Varian union was medtech’s only big-name pairing in 2020, though other deals were in the works. QIAGEN N.V. investors turned down Thermo Fisher Scientific’s proposed $12.5 billion buyout in mid-August, contending the company was worth significantly more money ($46/share). “QIAGEN saw its operating income jump 84 percent in the first six months of 2020 due to the impact of COVID-19, leaving its shareholders reluctant to accept Thermo Fisher Scientific’s offer,” EY’s pulse of the industry: Medical technology report 2020 stated.

Regulatory issues wound up wrecking J&J’s proposed $400 million buyout of Takeda Pharmaceutical’s surgical patch product, TachoSil. The U.S. Federal Trade Commission (FTC) reportedly opposed the deal over J&J’s potential monopoly of the U.S. fibrin sealant patch market (the company sells Evarrest, the only other FDA-approved product designed to control bleeding during surgery).

The FTC and the U.K.’s Competition and Markets Authority (CMA) had the same antitrust concerns about Stryker’s $4 billion bid for Wright Medical Group, which was first announced in November 2019. In July, the CMA suggested that Stryker divest its Scandinavian Total Ankle Replacement (STAR) product line to ease regulatory concerns. The merger also has been further complicated by a class-action lawsuit filed by a Wright Medical shareholder accusing Stryker of failing to disclose financial projections related to the deal.

Megadeals, however, were not the only transactions impacted by COVID-19. Total non-megadeal expenditures fell 41 percent (July 2019-June 2020) and average deal value declined to $167 million (from $463 million in the previous 12-month period). Indeed, many smaller transactions occurred in the year’s first 10 months, including Royal Philips’ $275 million purchase of Intact Vascular, QIAGEN’s $248 million acquisition of NeuMoDx, and Anika Therapeutics’ $100 million buyout of ArthroSurface.

Although the slowdown in M&A, IPOs and VC funding threatens to disproportionately impact innovation among startups and small companies, industry analysts believe the pandemic is creating a buyer’s market among medtech firms that have doubts they can survive the pandemic-induced economic uncertainty. Larger companies, in the meantime, have recapitalized through debt and follow-on offerings, and now have substantial MA& firepower, according to EY.

“The industry anticipates an accelerated growth cycle, with companies valued at $30 million to $40 million becoming targets,” John Babitt, EY Americas Strategy and Transactions Medtech leader, suggests in the pulse of the industry report. “…if we as an industry get some sense of normalcy into the fall, the high level of available capital could trigger an M&A acceleration.”

Normal doesn’t seem likely, though. Not this year, anyway. 

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