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    Online Exclusives

    Sounding Board: 2018 Reflections and Looking Ahead

    MPO’s board members speak on 2018’s most significant headlines and offer insights on what’s on the horizon for the industry.

    Sounding Board: 2018 Reflections and Looking Ahead
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    MPO Editorial Advisory Board12.18.18
    Prior to Michael Barbella, managing editor, writing his 2018 Year in Review feature, the team reached out to the magazine’s Editorial Advisory Board to ask two questions:
     
    1. What news headline, event, or technology was the most significant in 2018 and why?
    2. What’s one expectation you have for 2019 that will make an impact on the medtech industry? (i.e., What will you be keeping an eye on?)

     
    As always, we received great feedback from a number of board members who shared their thoughts on the questions. Unfortunately, only a handful of quotes were able to be featured in Barbella’s article, so all of the responses are provided here.
     
    Note: These responses were provided throughout the second half of October 2018, so that should be taken into account given events that have occurred since that time period which may alter how a given response is viewed.
     
    Sara E. Dyson, Esq., Assistant Vice President of Risk Management, Medmarc Insurance Group
    2018 Reflections—The ongoing opioid litigation will forever change the life sciences industry. As companies grapple with the fallout of this litigation, pharmaceutical manufacturers will have to make significant changes to both their practices and the products they create, and device manufacturers will rethink drug delivery systems as well as other technologies—alternatives to pharmaceuticals—that help patients manage pain.
     
    Looking Ahead—In 2018, FDA came under simultaneous attack by two different constituent groups, each critical of the time it takes FDA to bring new products to market. However, one side claims FDA takes too long to bring new products to market, and the other side argues FDA doesn’t take enough time to assess product safety. Pressure from the one side has already resulted in policy changes designed to put products in the hands of patients faster, such as the “right to try” laws that give terminally ill patients the right to try new drugs while they are still in clinical trials. Meanwhile, the other side is advocating changes that will make the 510(k) process more rigorous, among other things. I think 2019 will continue to see FDA “squeezed” by pressure from both sides, though it is unclear who will win this “tug-of-war” over the long term. Much will depend on the political climate as well as the public’s perception of high-profile examples of device failures alleged to result from a “rushed” process.
     
    J. Mark King, President and CEO, Tegra Medical
    2018 Reflections—The news items with the most impact in 2018 have been those discussing the evolution of healthcare. Market forces are precipitating a higher focus on value that is tied to patient outcomes [e.g., treating patients appropriately and reducing the need for return visits (often the ER), reducing unnecessary diagnostic tests, and finding alternatives to avoidable surgeries]. Medtech companies offer the technology to help streamline and improve the quality of care and can play a huge role in the transformation.
     
    Looking Ahead—I always say that people are what is most important, so keep an eye on them! Your people can make the biggest impact. Medtech companies that place a high value on their employees and treat them well are making a critical investment. The institutional knowledge and expertise of long-term employees is a strong competitive advantage; customers appreciate working with someone they have long learned to trust.
     
    Patrick Lynch, Supply Chain Director, Tear Film Innovations
    2018 Reflections—The U.S.-led trade war implications have upended medical device cost models not only for contract manufacturing but also component sourcing as a whole, with China markets taking the biggest hit.
     
    Sizable landed cost increases of 5-15 percent have forced renegotiations, and in some cases, subsequent sourcing efforts to move production to new suppliers as a means of offsetting the tariffs, which have created a backlog of sourcing projects, including:
     
    • Re-shoring
    • Identifying new suppliers and performing qualifications
    • Insourcing (make vs buy)
     
    Our experience has shown these past several months that incumbent suppliers, sensitive to the customer’s cost impact have provided some relief, allowing a portion of cost increases to be recovered, however, best results have been achieved by initiating new RFQs.
     
    Looking Ahead—Repositioning of the major contract manufacturers to shuffle equipment and resources to alternate sites and countries to retain their customer base, in light of the tariff action.
     
    Steve Maylish, Co-Founder and CCO, Fusion Biotec
    2018 Reflections—One of the biggest changes our healthcare system is undergoing is the move to consumerization. It started slowly, but in 2018, the investment in Oscar Health has now gone over $1 billion dollars. In addition, there are a large number of startups crowding into this space; Bright Health, Devoted Health, and Clover Health, just to name a few. This year, Devoted Health raised $300 million in a series B round and Clover Health has raised $425 million over the last few years. These “payvidors” offer patient-centric care designed to support and monitor patients by using data science to cut costs and promote preventative care. Some are working with prescription services. Others are using genomic data, machine learning, and artificial intelligence to promote health. Some offer in-home primary care programs and house calls.
     
    Looking Ahead—The large interest in digital healthcare is driven by this move to consumerization. Although many of these startups are targeting the Medicare Advantage segment, they will eventually migrate to the larger insurance industry. This is the typical path of disruptive innovation. The days of jumping from primary care doctors to specialists to hospitals to imaging facilities may be numbered. Because patient experience is uncoordinated, reactive, and filled with administrative bureaucracy, 2019 should see continued interest, investment, and growth in the “payvidor” space.
     
    Susan Mucha, President, Powell-Mucha Consulting Inc.
    2018 Reflections—I think the China tariffs are the most significant event in 2018. The unintended consequences of placing a tariff on electronic components is incentivizing migration of U.S. manufacturing to Mexico and other parts of the world. If the tariff situation is short-lived or it is adjusted to impact only finished goods, it will be good for U.S. manufacturing if it helps open Chinese markets to a larger amount of U.S. goods and reduce unfair trade practices. However, if it continues as is currently written through 2019, I think it will impact U.S. manufacturing growth negatively.
     
    Looking Ahead—I think the most significant event of 2019 will relate to what Congress does regarding healthcare. The Affordable Care Act (ACA) changed the healthcare landscape dramatically. Legislative action has eliminated the penalties associated with not buying insurance and insurance costs have skyrocketed for both individuals and employers. If the situation continues unchecked, healthcare providers will be dealing with larger populations of uninsured and/or underinsured patients, and most likely a drop in elective procedures. That could slow medical capital equipment purchases and put more cost pressure on all medical devices.
     
    Tony Mulone, President, Winstable Group LLC
    2018 Reflections—Trade negotiations with China and its impact on "re-shoring or on-shoring." As a way to avoid tariffs, companies may use China as a component supplier and move finished goods assembly out to other countries. This could help U.S.- and Mexico-based CMs gain back lost OEM medical device business.
     
    Looking Ahead—I’ll be watching the China trade negotiations and its impact on tariffs and IP protection.
     
    Jeff Nelson, President, Nelson Laboratories
    2018 Reflections—The medical device industry is experiencing increasing compliance requirements. FDA is regulating mobile medical apps and stressing human factors engineering; while the EU has implemented a new set of Medical Device Regulations (MDRs) that will require manufactures’ close attention. Also, regulators continue to look at new ways to evaluate the biocompatibility and biological risk of materials in medical devices—driving the need for more in vitro and chemical characterization solutions.
     
    Looking Ahead—As healthcare becomes more personalized, 3D printing (additive manufacturing) will continue to take a larger role in medical device manufacturing. The goal of 3D printing is to manufacture medical devices that are uniquely customized to each patient, are safer, and reduce costs and decrease time to market. However, this could create a new set of challenges and opportunities for evaluating biocompatibility, testing for particulates, validating cleaning, sterilizing, packaging, and distributing devices.
     
    Chris Oleksy, CEO and Founder, Oleksy Enterprises and Next Life Medical
    2018 Reflections—To me, the top news event of 2018 was the announcement that players like Walmart and CVS were partnering and/or acquiring organizations like Humana and Aetna, which could ultimately control “where” an individual spends their healthcare dollars or even “what type” of healthcare an individual will be “allowed” to have within their offerings. Additionally, the new venture between Amazon, Berkshire Hathaway, and JP Morgan could create some very interesting value chains for these organizations and their employees. Bottom line, the “eat or be eaten—survival of the fittest” mantra I have been writing about the past two years is no longer speculation, but reality!
     
    Looking Ahead—Regardless of which party controls Congress, one key expectation I have for 2019 is the return of an old term to Washington—gridlock—creating an environment in which it will be very difficult to make further needed improvements to Obamacare. The divisive bickering in Washington makes it practically impossible to accomplish much. But, there could be one silver lining; the Senate will finally finish the work started by the House and repeal the medical device tax at the beginning of 2019, before the new Congress is installed.
     
    Paul Orlando, Vice President of External Operations, Olympus Surgical Technologies America
    2018 Reflections—By far, President Trump’s action and strategies regarding fair trade and tariffs was most significant. This will impact companies to reconsider where/how to outsource. Second would be the continuation of suppliers being acquired and consolidated via private equity plays. These mergers and acquisitions make financial performance a higher priority than patient health, product performance, and quality.
     
    Dr. Bryce G. Rutter, Founder and CEO, Metaphase Design Group
    2018 Reflections—One of the most active spaces for R&D in 2018 was in robotic surgery, with giants including Medtronic, Stryker, and J&J jumping into a market space that, for so many years, has been dominated by Intuitive Surgical. It will be interesting to see how each of these companies try to differentiate themselves by specializing in specific surgical techniques and/or marrying adjacent technologies with their robotic systems.
     
    No one can ignore the intersection between surgical, test, and monitoring devices and the Internet of Things. And, while not new, the acceleration is geometric. The potency of this juncture is undeniable, however, it's clear that because it is easy to create an app to support a device, far too many are not asking the fundamental question of whether or not it truly adds value to the end user or is just one more thing to learn, adding more noise to the user experience.
     
    Looking Ahead—Without a doubt, the FDA's requirement for conducting thorough user needs research and usability testing throughout the design development process will drive down use errors and improve clinical efficacy by making products, instructions for use, and secondary packaging more intuitive and easier-to-use.
     
    Dave Sheppard, COO and Principal, MedWorld Advisors
    2018 Reflections—2018 has been an interesting year as there has not been any one defining event or technology. However, there are several key issues that had possible impacts on the future of the medtech industry. In summary, 2018 was a C.O.M.A. (China, Obamacare, M&A, and AI) year for medtech.
     
    • China: Impact of tariffs on supply chain and M&A had ramifications as it slowed down some supplier and merger activities
    • Obamacare: Lack of action on Obamacare provided some form of industry stability (for better or worse)
    • M&A: While there was not a big blockbuster deal of industry giants, there continued to be significant acquisitions of innovative companies (with huge relative valuations) by large strategics (e.g., Stryker, Boston Scientific, etc.).
    • AI: The promise of artificial intelligence and digital health continues to be a focus for future activities
     
    Looking Ahead—2019 has the potential to be a R.A.D. (Robotics, Acquisitions, and Digital Health) year for the following reasons.
     
    • Robotics: The maturity of the various developing robotics platforms will begin to move from the clinical phase to the competitive arenas across the healthcare procedural segments.
    • Acquisitions: 2019 might be the year we see large crossover acquisitions between traditional consumer/industrial technology companies (e.g., Apple, Microsoft, HP, etc.) and traditional medtech companies (e.g., Medtronic, Cardinal, BD, J&J, etc.).
    • Digital Health: Look for the continued development of sophisticated software to begin to have growing levels of adoption to improve both product performance and industry efficiencies to have a positive impact on outcomes.
     
    Tom Vassallo, Executive Vice President, Global Business Development, Freudenberg Medical
    2018 Reflections—My top choice would be the future application of robotics in the delivery of surgical procedures. This is relevant to the progress of joint ventures between premier medical device companies and tech giants. It is also significant to the anticipation of shared knowledge, technologies, and resources in joint ventures/partnerships.
     
    Looking Ahead—I’ll be primarily watching three things.
     
    1. Wearables and the interface with apps and devices
    2. The myriad of possible combinations of insurance companies, clinics, and the supply chain (CVS)
    3. The Googles and Microsofts of Silicon Valley and Nashville’s entrepreneurs anticipated (disruptive) entrance into healthcare.
     
    One additional item of interest will be most important for component manufacturers and custom/special medical device providers—3D printing of components and implantable devices. Rapid progress is being made regarding the types of materials available including frameworks (scaffolds) for growing new tissues utilizing the 3D printing process.
     

    Interested in getting further insights on these questions? Jump over to ODT and see what the Editorial Advisory Board members there had to say. Click here to go to the ODT feature.
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