Patient Power: PI Technologies Key to Medtech Survival

“… reality denied comes back to haunt.” —Philip K. Dick, “Flow My Tears, the Policeman Said.”

Near the end of Dick’s dark 1974 science-fiction novel, fascist Police General Felix Buckman reveals his strategy for outwitting a small group of genetically engineered humans known as “sixes.” Buckman’s plan is as brilliant as it is simple: He pretends to be part of a secret faction of genomically enhanced individuals called, quite intentionally, “sevens.”

Buckman is boasting about the ingenuity of the ruse when his leather-clad, drug-addicted sister/wife Alys asks him an obvious question. “Why a seven?” she demands to know. “As long as you’re shucking them why not say eight or thirty-eight?”

“The sin of vainglory,” Buckman quickly replies. “Reaching too far. I will tell them what I think they’ll believe.”Alys, though, doubts the sixes will fall for the ploy.

“Oh hell, will they!” Buckman insists before embarking on a diatribe about secret fear (“bête noire,” he calls it) and DNA. Unfazed by the rant and clearly bored with the subject, Alys ends the conversation by sarcastically advising her brother/husband to become a soap-selling television announcer.

“And that constituted the totality of her reaction,” Buckman observes in the novel. “If Alys did not give a damn about something, that something, for her, ceased to exist. Probably she should not have gotten away with it for as long as she had…but sometime, the retribution will come: Reality denied comes back to haunt. To overtake the person without warning and make him insane.”

Or, at the very least, irrevocably damaged. In business, denial acts like a cancerous tumor, growing and spreading to each vital part of a corporate body before finally conquering the basic building blocks of free enterprise. Denial can sap a company’s vitality, drain its morality and rob the very reason for its existence. Ignorance rarely is blissful in the business world.

Consider for a moment the nescience that helped trigger the downfall of former telecommunications industry darling Research in Motion (RIM). Just three years ago, the company’s signature product—the BlackBerry—dominated 50 percent of the smartphone market and 20 percent of the global mobile market. At the height of its entrepreneurial reign, RIM shares sold for nearly $150 and the phone’s most renowned user—President-Elect Barack Obama— lobbied hard for the right to keep his own device while in office.

RIM built its fortune by catering to the mobile email needs of business executives, lawyers, bankers and government officials. But in doing so, the company virtually ignored consumers, who increasingly are dictating the kinds of devices companies use. That omission and RIM’s failure to turn the BlackBerry into a “pocket mobile computer” such as the iPhone and Android has led to a staggering loss of market share. On Sept. 24, RIM stock fell to a low of $6.18 and its slice of the global mobile phone market currently is estimated at 1.9 percent.

“The reason that RIM is losing market share is not that IT departments are saying, ‘Let’s get this device out of here,’ ” Barclays analyst Jeff Kvaal recently told the United Kingdom’s Sunday Telegraph. “The reason is that consumers are bringing their own devices to work.”

RIM, however, isn’t the only corporate ostrich out there. Reality checks (or the lack thereof) have haunted the likes of Borders Group Inc., Blockbuster LLC and Eastman Kodak Co. Borders Group—which operated Borders and Waldenbooks stores—liquidated last year after failing to gain a toehold in e-books, while Blockbuster sold itself to Dish Network as its retail outlets lost ground to online competitors like Netflix. Kodak, meanwhile, is working to emerge from Chapter 11 bankruptcy, though it may never fully recover from its initial aversion to digital photography.

The medical device industry could suffer a similar fate unless it adopts a business model that reduces overall healthcare costs through preventative medicine, behavioral changes and improved outcomes-based incentives. To achieve such a model, however, companies must be willing to embrace revolutionary new technologies defined in a new report as “PI” (patient-empowering and information-leveraging).

These nascent advancements, which include smartphone apps, social media platforms and sensor-enabled smart devices, potentially can reinvent healthcare by providing real-time insights into patients’ health, according to a comprehensive analysis on the medtech sector by global advisory services firm Ernst & Young. These PI technologies, the 46-page report claims, also may possibly disrupt much of the traditional medtech industry due to their ability to vastly improve efficiency.

“PI technologies are driving the consumerization of medical devices and the ‘medicalization’ of consumer devices,” Ernst & Young principal Dave DeMarco said. “In the past, you may have gone to the doctor for an annual physical and had your blood pressure checked once a year. But these [PI] technologies can provide you with that kind of information on a daily basis. Just imagine the effect of real-time healthcare data on the system. It really has the potential to take major costs out of the system. Nike has created a wristband that measures all your activity—running, walking, playing basketball, whatever it might be—and uploads the data to a website so you can keep track of your progress or compete with friends. We are seeing more of these kinds of advancements now.”

Such advancements will allow patients to better manage their health by identifying correlations between outcomes and changes in medication, diet, exercise or sleep. Consumers already are toying with technologies that provide real-time physiological and biological data; Ernst & Young analysts predict breakthroughs such as cardiac monitoring iPhone apps, ingestible sensors and wearable devices that predict falls eventually will encourage consumers (and patients) to assume more responsibility for their health.

For example, traditional apnea monitors have been controlled by healthcare providers. But current models, such as the Zeo Sleep Manager from Newton, Mass.-based Zeo Inc., contain sensors that monitor daily sleeping patterns—a breakthrough that gives users better ownership of the data and valuable insight into the triggers that may exacerbate their condition.

Similar futuristic technology is available to cardiac and Parkinson’s patients. Cardiio Inc., a healthtech firm spun from the Massachusetts Institute of Technology, has developed an iPhone app that uses the device’s front-facing camera to calculate heart rate. The app, which requires no physical connection to the body, detects a user’s heart rate (within three beats) by measuring the amount of light reflecting off a person’s face.

Researchers at Texas Tech University are working on a product that can predict the timing of a fall, sometimes days in advance. The wearable device—loaded with sensors that track movement patterns over time and look for significant changes in a person’s gait and posture—could potentially prevent falls in elderly patients with Parkinson’s disease, epilepsy or dementia.

“We’re going to have to look more holistically along the entire continuum of care to reduce [healthcare] costs,” noted Glen Giovannetti, Ernst & Young’s global life-sciences sector leader who discussed the firm’s analysis at length during AdvaMed 2012 The Medtech Conference in Boston, Mass. “Some things are always going to be hospital-based, but due to changes in the way healthcare is going to be delivered, companies should start thinking differently about possible [treatment] solutions. There are sophisticated technologies out there that use these mobile platforms. It’s about more than the device—it’s about helping patients change their unhealthy behaviors. The technologies that are going to be at the center of this [PI] movement are those that help patients manage their conditions more effectively. 

Medical technology companies are going to have to think differently about delivering care. A huge opportunity exists for the organization that can figure out how to improve outcomes and reduce costs.”

One way to help improve outcomes is by tailoring products to patients’ needs rather than doctors’ and/or hospitals’ whims. Such a shift in focus might warrant easier access to data, better compatibility with other consumer technologies and platforms, easy-to-understand instructions, and improved user-friendly designs.

Traditional patients outreach channels will be different too, with more emphasis on mobile apps, social media and, in certain instances, direct-to-patient marketing. Stryker Corp. used the latter option earlier this year to educate patients about its Triathlon knee rebrand. The move was driven in part by market research that found the Triathlon’s round shape resonated most with patients (a feature that gives knee replacement recipients greater range of motion than oval-shaped implants, the company contends).

The data prompted Stryker to rename the Triathlon the “Get Around Knee” to better emphasize its selling point.

“Companies that will be leaders in the outcomes-focused industry of tomorrow will be the ones that use [PI] technologies to become more patient-centric and payer-savvy, are bold with their investment in new business models, and are keenly focused on how they can change the value proposition for the customer,” predicted John Babitt, Ernst & Young’s medtech leader for the Americas.

Changing the value proposition won’t be easy. Medtech leaders them must think differently about customers, research and development, innovation, and risk. Those that succeed will target products to payers, patients, providers and surgeons. They’ll be more open to new ideas, focus on value creation, and have no trouble proving the technology they develop can improve outcomes. “It’s both exciting and scary,” said Karen Licitra, worldwide chairman of the Global Medical Solutions Group at Johnson & Johnson. “You’re going to have to disrupt yourself a little bit.”

A little (or not-so-little) disruption, however, is a small price to pay for survival. Medtech firms that ignore PI technologies and rely instead on the traditional non-information-leveraging, provider-controlled business model risk their futures, industry experts claim. Shrinking venture capital dollars, anemic economic growth in developed markets, austerity measures in many countries, the lingering Eurozone debt crisis and a looming 2.3 percent medical device tax in the United States are likely to stymie corporate profits for the foreseeable future. Last year, U.S. medtech firms fared surprisingly well amid the tumult, growing revenues 4 percent to $204.3 billion, according to Ernst & Young’s report, “Pulse of the industry: Medical technology report 2012.”

Research and development expenses rose 2 percent in 2011, while net income jumped 19 percent to $13.7 billion. Ernst & Young analysts, however, attribute the increase to significant merger-, impairment- and litigation-related charges incurred in 2010 by such companies as Boston Scientific Corp., Alere, and Hologic Inc. When the impact of these charges is taken into account, overall net income falls to just 2 percent.

Much of the industry’s growth last year was driven by commercial leaders. Net income among the 30 largest U.S. medtech firms jumped 22 percent to $14.3 billion and revenue rose 3 percent to $108.1 billion, the report states. Smaller companies, by comparison, sank deeper into debt, as revenue remained flat at $19.4 billion and net income fell a staggering 186 percent.

Venture financing rose slightly, climbing 8 percent to $4.3 billion in the year ended June 30, 2012. Most of the increase originated in the United States, where venture capital funding jumped 11 percent to $3.7 billion; the remaining $676 million came from Europe and represented a 5 percent decrease compared with the year ending June 30, 2011. While analysts were surprised by the rise in funding, they are not convinced the increase is indicative of a turnaround in the foundering venture capital market.

“The fact that it went up year over year certainly is positive,” Giovannetti noted. “But we don’t like to read too much into annual trends. The longer-term trend is we know there are less venture capital funds for companies. Firms going out to raise their own dollars are raising fewer funds these days, and some are not raising money at all. A few are raising more money but the longer-term trend is more concerning because we know there are fewer dollars to go around. And that results in a higher bar for new investments.”