Medtech R&D is in dire need of a reboot.
 
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. Philip Remedios, principal, director of Design & Development at BlackHägen Design, was among the experts interviewed for the feature; his full input is provided in the following Q&A.

Michael Barbella: An EY report last fall concluded that R&D spending is declining. How could that potentially impact future medical device/technology innovation?
Philip Remedios: The trend is to acquire the technology/company versus develop via from scratch R&D. Therefore, actual R&D spend must be combined with acquisition investment. R&D spending has been tempered since the 2008-2009 Great Recession, and further discouraged when the Obama Administration slapped a tax on medical device sales. The current uncertainty in the global economy has not changed cautionary control of non-essential expenses, which also explains the massive increase in M&A activity.

Barbella: Where are companies spending their research dollars now—is it more on incremental improvements, or game-changing innovation? Why is that?
Remedios: In-house R&D largely handles incremental and sustaining engineering, technology acquisition replaces internal teams for real innovation due to lower risk and instantaneous time-to-market. Plus, if the acquired company has actual revenue to leverage, this also boosts reported income to shareholders.

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?
Remedios: Large, multi-platform manufacturers are trying to introduce enterprise platforms that network together to provide greater function, supervision, and data acquisition to make long-term bulk purchasing more attractive to hospital groups. Capital equipment is often leased or sold at cost if revenue from single-use supplies are part of the equation; however, disposables are quickly becoming unpopular, especially in emerging markets and the EU. Software-driven technology enables a great deal of attractive features for very little recurring cost of manufacture; for example, a "smart" system can vastly reduce clinician involvement by doing much of the grunt work while minimizing use error.

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?
Remedios: Partners can be found in global safety compliance consultants like Intertek and in national hospital and/or healthcare groups. Specialist usability engineering consultants help in defining local market needs and customer preferences.

Barbella: How is digital healthcare, big data, and trends like miniaturization affecting the way companies conduct R&D and their R&D business models?
Remedios: There is a fine line drawn by the FDA in terms of what kind of healthcare function is allowed by consumer-based medical devices. These add-on systems can screen vital signs, monitoring and advising on trends, ultimately advising the customer to seek professional clinical intervention as necessary. If this leads to early treatment, then it is of great advantage to favorable patient outcomes and lower overall healthcare costs. However, mainstream medical device companies have yet to fully embrace the importance of this emerging technology, leaving it to small starups to pursue home and mobile health products. In the United States, there is still significant operational disconnect between emergency, institutional, and home healthcare device providers, but we see evidence in some EU markets of more holistic solutions that benefit from socialized healthcare.

Barbella: Why should a company outsource R&D? What is driving the need to outsource R&D?
Remedios: Medical R&D providers are now more sophisticated than ever before, and are typically driven by seasoned 'alpha' personality technologists who have become disenfranchised wth the inefficiency and bureaucracy of the corporate structure. While most consultants cannot provide the bandwidth required to gestate, develop, and commercialize every aspect of a complex medical device, many can advance the quality and innovation of the design in much less time, and often less overall cost than if that same effort was retained by the corporate team. Cross-pollination of ideas, materials, processes and design execution is another benefit of contracting an independent team that will design a dozen different devices a  year. Outsourcing has become even more attractive in an era where employees are less loyal and the cost of employment benefits skyrocket.

Barbella: How does your company source talent for internal product development?
Remedios: BlackHägen Design is a well-established medical R&D firm with a client list that includes many of the largest medical device firms on the planet. As a result, maintaining and growing our seasoned team requires a delicate objective of balancing experience senior personnel with younger, intelligent and highly motivated members. Many of our senior staff were once clients who ultimately wished to be consultants and enjoyed witnessing the work we do. Younger staff often come from other industries with impressive portfolios but little medical device experience. On-the-job training, further education sponsorship, and appropriate levels of oversight bring these focused individuals online for future growth and advancement. We also sponsor internships to bright students year-round, some of whom will be offered full-time employment upon graduation.

Barbella: How important is outside collaboration in medtech R&D? Please elaborate.
Remedios: We use a cadre of part-time but well-vetted strategic consultants who bring specialty resources to BlackHägen's corporate profile. Again, many of these engineers used to be clients at large corporations while others have worked with us as part of a hybrid outsourced team by a client. Over 23 years, our 'army' of resources has grown to offer most of the engineering talent that the medical device industry requires for product development and qualification.