Sean Fenske, Editor-in-Chief09.06.19
The medical device industry is a collection of independent companies working toward a common goal. That is, virtually every firm tied to medtech is invested in the betterment of the technologies available to healthcare systems around the globe. Whether developing products for the cardiovascular, neurological, diagnostic, orthopedic, surgical, or any other specialty, the mission is quite similar throughout.
Similarly, the challenges and issues those within the industry face are equally connected. While each organization deals with those obstacles using their own, unique methods, much can be gained from the sharing of ideas and best practices. One way to accomplish that is to shine a spotlight on those topics and discuss them.
With this in mind, MPO reached out to Ken Reali, president and CEO of Clinical Innovations, to gain his perspective on a variety of subjects impacting medical device manufacturers. Clinical Innovations provides technology solutions exclusively for labor and delivery and the NICU. It has products in more than 80 countries around the world and estimates over 10,000 of its devices are used daily. The Salt Lake City, Utah-based company employs more than 225 people at locations in the U.S., Europe, Australia, and China.
Sean Fenske: Overall, is the medical device industry heading in the right direction? Why or why not?
Ken Reali: We’re moving in the right direction. The industry continues growing quickly—faster than most others—and is creating many well-paying jobs throughout the country and globally as well. We’ve seen this first-hand in Utah.
The jobs being created cover many disciplines across corporate, R&D manufacturing, sales, marketing, finance, and operations. And, on top of all that, it’s a large, international industry that American companies continue to lead relative to manufacturing and innovation.
We have, unfortunately, seen venture capital pull back from medical device investments somewhat due to uncertainty in the medical device development pathway, but others are stepping up. Large hospitals, private equity groups, and some of the major device companies have all started funds investing in new ideas and new technology that have potential to improve patients’ lives and reduce the cost of healthcare.
Overall, it’s a great time to be in the medical device area.
Fenske: Are current market forces impeding innovation, enhancing innovation, or is it somewhere in between?
Reali: There are some strong forces spurring innovation. But there are others slowing it down as well. Most notably, the potential return of the medical device tax.
One of the biggest issues with this tax is its outsize effect on small medical device startups, which often have the most innovative, fresh ideas and also make up the majority of medical device companies. These firms don’t have the resources of larger companies, and unfortunately, the medical device tax—which taxes on revenue—can make it very difficult for them to operate profitably and continue to invest in innovation.
Our industry keeps innovating despite the chance of the tax returning, but with a permanent repeal, we’d see much more R&D investment by small and large companies.
Fenske: Should tech industry leaders (e.g., Google, Apple, Samsung, etc.) be viewed as frightening competitors to device manufacturers or potential partners who offer unique benefits/capabilities?
Reali: Definitely the latter. These companies are leaders for a reason and integrating their technology with our devices opens up all sorts of opportunities that can really push our industry forward in innovative ways that can reach a greater number of patients.
Fenske: Given the numerous changes to regulatory oversight in a variety of locations around the world, is the environment becoming more or less restrictive for device manufacturers?
Reali: The environment is becoming more restrictive overseas, as we’ve seen in Europe, and is more or less status quo in the United States. Communication with the Food and Drug Administration (FDA) has improved over the last 10 years. The FDA has worked on collaborative efforts with the industry to ensure innovative technologies can be moved forward in the development pathway. This is a great thing for the medical device industry and ultimately patients.
Fenske: As the healthcare industry moves to a value-based reimbursement model, does it open the door to device makers to become true partners with healthcare providers?
Reali: Value-based healthcare is a team effort between medical device companies and clinicians. Direct contact and compliant collaboration with clinicians on new device development leads to the most impactful and innovative devices that drive true clinical benefit and cost improvements, and ultimately change and improve healthcare.
At the same time, device makers and healthcare providers have inherently different definitions of value creation at times—and different roles. In today’s healthcare environment, it is the medical devices that improve outcomes while also showing an economic benefit by their use that win in the market and win with healthcare providers. Engaging healthcare providers in the clinical studies, product design, and evolution of innovation is a best practice in our industry that leads to winning devices for patients.
Fenske: Does your company partner with any academic institutions or universities on such an agreement? Can you share any takeaways/benefits/challenges of the arrangement?
Reali: We have a partnership with the University of Utah that involves both students and teachers. It’s been positive in all regards.
With students, we’re involved with the school’s Bench to Bedside medical device development competition. Teams of medical, engineering, and business students work together in a competition where the best medical device ideas are voted on and the winning teams earn scholarship money to continue the device development. The student teams work in concert with medical device companies and clinicians to come up with the business ideas and solutions. We’ve helped with both mentoring and judging. The ideas the students come up with are incredible, so we’re always left inspired. The students get lots of valuable experience and can continue development efforts if they win a scholarship through the competition.
We also work with teachers and researchers at the school—in our case, mostly OBGYNs—on projects and products in development. It’s been a fantastic partnership and something we plan to keep investing in.
Fenske: Do you have any other thoughts, comments, or ideas you’d like to share?
Reali: I think, with the ways the industry is changing, companies of all sizes should continue to be bold when it comes to the international markets. The U.S. leads in medical device innovation and we have much to offer in both developed and less-developed parts of the world. There’s a perception that you must be large to compete, but that’s not actually the case.
Our company, for example, has found a lot of success expanding to underserved markets in Africa, India, and Southeast Asia, and by doubling down in some of the places where we already had a presence. We also branched out into neonatal care, which was a natural progression of what we were already doing.
With birthrates growing in the developing world and the health issues we’re seeing in certain regions, there’s a lot of need for innovative and cost-effective products. We’re doing everything we can to fill it.
Editor’s Note: Interested in providing your insights on how your firm is addressing industry challenges, responding to healthcare trends, and/or dealing with common issues being faced in the medical device community? Reach out to Sean Fenske, editor-in-chief, at sfenske@rodmanmedia.com to share your ideas and comments in a future issue of MPO.
Similarly, the challenges and issues those within the industry face are equally connected. While each organization deals with those obstacles using their own, unique methods, much can be gained from the sharing of ideas and best practices. One way to accomplish that is to shine a spotlight on those topics and discuss them.
With this in mind, MPO reached out to Ken Reali, president and CEO of Clinical Innovations, to gain his perspective on a variety of subjects impacting medical device manufacturers. Clinical Innovations provides technology solutions exclusively for labor and delivery and the NICU. It has products in more than 80 countries around the world and estimates over 10,000 of its devices are used daily. The Salt Lake City, Utah-based company employs more than 225 people at locations in the U.S., Europe, Australia, and China.
Sean Fenske: Overall, is the medical device industry heading in the right direction? Why or why not?
Ken Reali: We’re moving in the right direction. The industry continues growing quickly—faster than most others—and is creating many well-paying jobs throughout the country and globally as well. We’ve seen this first-hand in Utah.
The jobs being created cover many disciplines across corporate, R&D manufacturing, sales, marketing, finance, and operations. And, on top of all that, it’s a large, international industry that American companies continue to lead relative to manufacturing and innovation.
We have, unfortunately, seen venture capital pull back from medical device investments somewhat due to uncertainty in the medical device development pathway, but others are stepping up. Large hospitals, private equity groups, and some of the major device companies have all started funds investing in new ideas and new technology that have potential to improve patients’ lives and reduce the cost of healthcare.
Overall, it’s a great time to be in the medical device area.
Fenske: Are current market forces impeding innovation, enhancing innovation, or is it somewhere in between?
Reali: There are some strong forces spurring innovation. But there are others slowing it down as well. Most notably, the potential return of the medical device tax.
One of the biggest issues with this tax is its outsize effect on small medical device startups, which often have the most innovative, fresh ideas and also make up the majority of medical device companies. These firms don’t have the resources of larger companies, and unfortunately, the medical device tax—which taxes on revenue—can make it very difficult for them to operate profitably and continue to invest in innovation.
Our industry keeps innovating despite the chance of the tax returning, but with a permanent repeal, we’d see much more R&D investment by small and large companies.
Fenske: Should tech industry leaders (e.g., Google, Apple, Samsung, etc.) be viewed as frightening competitors to device manufacturers or potential partners who offer unique benefits/capabilities?
Reali: Definitely the latter. These companies are leaders for a reason and integrating their technology with our devices opens up all sorts of opportunities that can really push our industry forward in innovative ways that can reach a greater number of patients.
Fenske: Given the numerous changes to regulatory oversight in a variety of locations around the world, is the environment becoming more or less restrictive for device manufacturers?
Reali: The environment is becoming more restrictive overseas, as we’ve seen in Europe, and is more or less status quo in the United States. Communication with the Food and Drug Administration (FDA) has improved over the last 10 years. The FDA has worked on collaborative efforts with the industry to ensure innovative technologies can be moved forward in the development pathway. This is a great thing for the medical device industry and ultimately patients.
Fenske: As the healthcare industry moves to a value-based reimbursement model, does it open the door to device makers to become true partners with healthcare providers?
Reali: Value-based healthcare is a team effort between medical device companies and clinicians. Direct contact and compliant collaboration with clinicians on new device development leads to the most impactful and innovative devices that drive true clinical benefit and cost improvements, and ultimately change and improve healthcare.
At the same time, device makers and healthcare providers have inherently different definitions of value creation at times—and different roles. In today’s healthcare environment, it is the medical devices that improve outcomes while also showing an economic benefit by their use that win in the market and win with healthcare providers. Engaging healthcare providers in the clinical studies, product design, and evolution of innovation is a best practice in our industry that leads to winning devices for patients.
Fenske: Does your company partner with any academic institutions or universities on such an agreement? Can you share any takeaways/benefits/challenges of the arrangement?
Reali: We have a partnership with the University of Utah that involves both students and teachers. It’s been positive in all regards.
With students, we’re involved with the school’s Bench to Bedside medical device development competition. Teams of medical, engineering, and business students work together in a competition where the best medical device ideas are voted on and the winning teams earn scholarship money to continue the device development. The student teams work in concert with medical device companies and clinicians to come up with the business ideas and solutions. We’ve helped with both mentoring and judging. The ideas the students come up with are incredible, so we’re always left inspired. The students get lots of valuable experience and can continue development efforts if they win a scholarship through the competition.
We also work with teachers and researchers at the school—in our case, mostly OBGYNs—on projects and products in development. It’s been a fantastic partnership and something we plan to keep investing in.
Fenske: Do you have any other thoughts, comments, or ideas you’d like to share?
Reali: I think, with the ways the industry is changing, companies of all sizes should continue to be bold when it comes to the international markets. The U.S. leads in medical device innovation and we have much to offer in both developed and less-developed parts of the world. There’s a perception that you must be large to compete, but that’s not actually the case.
Our company, for example, has found a lot of success expanding to underserved markets in Africa, India, and Southeast Asia, and by doubling down in some of the places where we already had a presence. We also branched out into neonatal care, which was a natural progression of what we were already doing.
With birthrates growing in the developing world and the health issues we’re seeing in certain regions, there’s a lot of need for innovative and cost-effective products. We’re doing everything we can to fill it.
Editor’s Note: Interested in providing your insights on how your firm is addressing industry challenges, responding to healthcare trends, and/or dealing with common issues being faced in the medical device community? Reach out to Sean Fenske, editor-in-chief, at sfenske@rodmanmedia.com to share your ideas and comments in a future issue of MPO.
