Value-driven healthcare, evolving regulatory requirements, and the emergence of new, nontraditional players are rewriting longstanding rules for medical device development and production. Companies accustomed to traditional R&D strategies are finding those methods ineffective at gaining (or maintaining) market share. Consequently, medtech firms are revamping their research and development models by collaborating with organizations outside the industry; incorporating sensors and software into devices and diagnostics for data generation and transmission; and rebalancing their portfolios.
Device manufacturers also are shifting their focus from core products and line extensions to more transformational innovation—i.e., technologies that create and deliver customer value through novel products, solutions and business models that address unmet market needs.
Such solutions, however, are not easily attainable without outside help. Thus, device companies increasingly are outsourcing R&D work to firms that specialize in value-driven product development. MPO’s January/February feature story “Valued R&D” examines the trends and challenges confronting medtech R&D teams as they strive to adapt to the changing healthcare ecosystem. Jim Kelley, senior director of R&D, Cardiovascular; and Keith Seitz, senior director of R&D, Cardio Rhythm Management & Neuromodulation at Integer, were among the experts interviewed for the feature; their full input is provided in the following Q&A.
Michael Barbella: Please discuss the trends and challenges in medtech R&D.
Jim Kelley: I see three trends in medtech that could be a challenge or an opportunity. First, we've reached a point of maturity in some of the markets we service, which has driven a focus on cost-out initiatives. As our customers look for operational efficiencies, our R&D efforts are focused more on value engineering.
Second, devices are becoming more and more connected with the outer world in the quest for more information and insights. Examples include wireless and mobile connectivity, data mining, and smart devices. Cybersecurity and demonstrating device safety in a connected world will be an important focus for the industry.
Last, we're seeing a trend in the convergence of biology and medical devices—more development of combination devices like the incorporation of drugs or a biologically active agent into a mechanical device.
Keith Seitz: Implantable devices are increasing in sophistication and now allow multifunctional cardiac therapy delivery with increased number device leads. For example, CRT-D devices deliver atrial and ventricular synchronous pacing therapy, defibrillation, and cardiac resynchronization all in one device, with multiple added sensing and diagnostic capabilities captured from the multiple device sensors. Neurostimulators have also evolved into multi-electrode devices, with the number of electrodes per devices also increasing in numer. Retinal stimulators are trending to even higher channel counts. From a technology perspective for Integer, the expanding sensing and therapy delivery needs is driving high density, multiconductor components, particularly multipin conductor feedthroughs and filtered feedthroughs. Hence, the trend towards miniaturization coupled with the trend toward increasing channel counts is driving high-density leadless hermetic seals. Power components, such as primary (single-use) batteries, secondary (rechargeable) batteries, and electrolytic capacitors, are evolving to provide more energy in smaller packages. Neurostimulators have evolved to rechargeable power sources.
Barbella: An EY report last fall concluded that R&D spending is declining. How could that potentially impact future medical device/technology innovation?
Seitz: Medical device investment focus, particularly in the cardiac space, has shifted from R&D to cost savings due to price pressures and commoditization of the industry. This can slow down revolutionary breakthrough innovations in favor of more evolutionary developments that provide quicker return on investment.
Kelley: Some of the investment historically made by bigger medtech firms has moved to startups and smaller companies, which then end up being purchased by the larger companies.
Barbella: Where are companies spending their research dollars now—is it more on incremental improvements or game-changing innovation: Why is that?
Kelley: I think we see both. Some companies are innovating quickly and need rapid innovation, others are focused on value engineering and design for manufacturability.
Barbella: How has value-based healthcare impacted the kinds of medical devices/technology being developed through R&D? Are costs prompting more companies to develop combination devices that perform several functions in one embodiment as compared to developing bigger, more 'revolutionary' technology?
Kelley: There's a trend to develop more smart devices, and the inclusion of sensors and data transmission from devices is certainly becoming more prevalent in today's market. Using data to better manage patients' chronic disease is important. There are also companies focused on making the 'big' leaps in technology to improve patient quality of life or to increase access to more patients.
Seitz: Value-based healthcare is about improving patient care and doing it at a lower cost. There are several ways to achieve this through R&D. One approach is to focus on cost-cutting initiatives to reduce the total cost of a medical device. Another approach is to invest in R&D innovation that enables lower total healthcare costs. For instance, leadless pacing can be less invasive than a traditional pacemaker, and that reduces overall patient risk and ultimately brings cost savings to the healthcare system. Or Sub-Q ICDs that remain 'outside the heart' can reduce the risks for patients prone to infection. This also has a benefit of lowering the total healthcare costs.
These are two examples (there are many) where technology innovation is driving value-based healthcare. Regardless of what drives the economic goals for medical device innovation, it's important to realize that innovation requires investment, and if a company focuses merely on cost containment, they can lose sight of great ideas that enable clinical and economic outcomes.
Barbella: Many companies are targeting emerging markets to qualify new devices first before introducing them to the U.S. market. How do these companies find the right partner for this strategy? What should companies be looking for in these partners?
Kelley: That's a difficult question to answer, as there are several firms that specialize in helping with clinical and regulatory filings. The key would be to find those firms with local in-country experience, understand the hospitals' procedures, etc.
Seitz: Most OEMs already have presence, sales and distribution in emerging markets that allow early trials and efficacy confirmation of their device and therapy before being introduced (FDA trials) into the United States. A common path is to achieve CE Mark in Europe because this accelerates market entry and the data acquired in winning CE approval is often used as part of an FDA regulatory approval. Partners that have a common interest in CE Mark and U.S. FDA approval should be pursued.
Barbella: How is digital healthcare, big data, and trends like miniaturization affecting the way companies conduct R&D and their R&D business models?
Kelley: Companies are thinking beyond their traditional core competencies to develop relationships with other companies to fill their technology and manufacturing gaps. The business models are also being challenged. Are there new revenue streams? If so, how do we capitalize on them? It forces R&D to think more broadly about identifying the customer and associated requirements.
Barbella: Why should a company outsource R&D? What is driving the need to outsource R&D?
Kelley: There are three main reasons: Greater domain knowledge, speed of execution, and ability to scale manufacturing. One or all of these are key decision factors for companies.
Seitz: As mature markets become increasingly competitive and resources constrained, many companies will outsource R&D to reduce risk, time, and cost of bringing new technologies to market. This applies to both small startups and large medical device companies. The emerging companies may have an innovative idea and a small window to achieve success. They benefit from outsourcing to someone that has the experience developing and designing for manufacturability, navigating regulatory requirements and ramping to large scale when success is achieved. The larger companies can also benefit when resources are limited and they are in a race to maintain their competitive edge. Medical device outsourcing companies are generally smaller and more nimble, with a faster innovation process. Additionally, university-outsourced research is increasingly being focused on discovery that can be quickly commercialized.
Barbella: How does your company source talent for internal product development?
Seitz: Talent acquisition happens through investment and development of internal resources and through acquiring targeted external talent to complement existing resources.
Barbella: How important is outside collaboration in medtech R&D? Please elaborate.
Kelley: Integer collaborates with universities and industrial partners. Typically, a need is identified and we tap our internal and external network to find those partnerships. It becomes a win-win for both parties—we fill a gap in our technology or knowledge, and our partners learns more about the needs they may not have previously considered.
Seitz: It's very important. Medtech R&D collaborates with customers, suppliers, research institutes, and other industry partners to improve design and processes as part of innovating new technologies.