Medical device companies, with rare exception, are just beginning to enter into meaningful collaborations with digital health businesses. While pharmaceutical companies have been working in the digital sandbox for several years, most medical device companies are just realizing that these partnerships can not only help them gain insight on the effectiveness of their devices and how best to improve them in future iterations, but also how they can lead to a better understanding of a patient’s overall health beyond acute care engagement. This has the potential to lead to earlier and different interventions as well as diversified revenue streams, particularly as organizations track patients and engage with them around device efficacy and long-term recovery and rehabilitation.
Medical device manufacturers have traditionally focused on products in the context of episodic and/or acute care. This legacy is based on traditional, fee-for-service reimbursement models whereby healthcare providers are paid by insurance companies for the surgical interventions they perform using a specific device or group of devices; inpatient ongoing monitoring post-surgery is also included in the typical payment for an inpatient stay. Reimbursement models have (albeit slowly) begun to shift toward bundled payments as part of the Affordable Care Act. Additionally, there has been an increased interest in and payments for ongoing patient monitoring, rehabilitation, and other supportive approaches to keep patients healthier pre- and post-surgery. There is also a meaningful movement towards care in the home, including hospital-at-home care. Together these market evolutions, combined with the advent of new and interesting ways to accumulate data and use it for various R&D and clinical purposes, are causing medical device firms to think more about becoming medical technology (“medtech”) companies in a much broader sense of the words.
In this article we’ll explore some of the opportunities for medtech and digital companies to partner across the medtech product lifecycle in order to support longitudinal care. We will also discuss the inherent challenges that these partnerships face and how medtech companies can benefit from the lessons learned from pharma companies’ efforts on the digital frontier.
Clinical verticals that have already made the digital leap
The combination of medical devices and ongoing monitoring and data analysis is not entirely new. Companies providing products for patients with diabetes have taken these areas of convergence to heart for a while. There is a pressing need to help Type 2 diabetes patients improve the way they manage their condition. Because behavior change is essential in addition to medical intervention, we’ve seen significant advances and partnerships between medtech companies and healthcare technology upstarts. Having already developed continuous glucose meters so patients can gain insights about their condition in real time, diabetes medical device companies are going even further.
Dexcom, for example, is a glucose monitoring company that partnered with Verily. By providing a user-friendly interface, they created an effective application for both patient and physician engagement. It serves as a great example of how a partnership can create something that neither company could have accomplished on their own.
Livongo offers another great example of how a medtech company can serve as a solution provider by building services around data and devices. The company essentially took a glucose meter and wrapped coaching services around it, enhanced by digital and analytics tools. The company eventually expanded into adjacent clinical areas such as hypertension and heart disease. Livongo was able to position itself as a business that could help both health plans and employee benefit plans, not just provider systems. Shortly after the company went public, Teladoc acquired the company. Tellingly, Teladoc CEO Jason Gorevec noted at the time of the M&A deal that if the companies had not merged, they would have ended up competing with each other as the device company expanded more into services and the services company sought to add monitoring devices.
In the sleep and respiratory disorder categories, ResMed has connected devices to monitor sleep disorders, such as a CPAP machine to support sleep apnea patients. Its acquisition of Propeller Health in 2019, which has successfully developed connected products to support COPD and asthma patients, could provide the impetus for more digital collaborations. The last one is notably a convergence of device, pharmaceuticals and digital products, a rare hybrid that has found a place in the delivery system.
Medical training is another area that has offered fertile ground for medtech and digital collaborations. Last year, Johnson & Johnson’s provider training institute partnered with OssoVR to roll out VR headsets to help providers train surgeons to use their devices through advances in simulation.
But much more can be done
Although it is clear some medtech companies have demonstrated a deep commitment to digital health, others have operated around the edges of the field with little to show for it. A large number of medical device firms continue to question the potential this field offers to improve their value proposition, measuring it only against traditional revenue and margin models. Some regard having a website or self-reported patient information as digital health but aren’t striving to engage in meaningful clinical interaction. Some do lengthy pilot studies with emerging digital enterprises but never find them landing as true commercial endeavors.
So what else can be done?:
- Companion digital diagnostics
Typically, patients have had to come to labs or clinic sites to have conditions diagnosed. Yet a new world of digital diagnostic tools makes remote diagnosis not only possible, but in some cases more accurate. Digital heart patches, like those sold by iRhythm, or phone-based tools such as that of AliveCor, can allow patients suspected of having atrial fibrillation to be tracked while they go about their day. Many other such digital diagnostic products have come to market since, including some that send data in real time or provide rapid diagnostic feedback, offering a way of identifying patients who need medical intervention. Digital diagnostics also enable people with chronic conditions to be monitored for disease progression or severity far more intensively than was previously possible, enabling physicians to better identify patients who need attention. Most of these digital diagnostics tools are the purview of young startup companies seeking distribution channels that could be well-served by medical device and diagnostics companies. We are starting to see these partnerships evolve, but at a much slower pace than might be expected given the opportunities they present for finding patients in need of intervention.
- Digital therapeutics as adjuncts to surgery
Notably many procedures result in pain and stress that could be treated concomitantly with medical device intervention. There are innovative new models of virtual reality digital therapeutics, like those of Applied VR, that help patients manage pain and that can be utilized immediately post-surgery and during recovery as an extension of treatment. There are also many new digital therapeutics targeted at treating stress and anxiety, and these can significantly assist patients dealing with the aftermath of serious medical intervention, including from intensive cardiovascular and neurovascular interventions. The use of digital technologies in the rehabilitation of patients after cardiac and muscular-skeletal surgery is on the rise, as it provides a way to ensure that patients take full advantage of the devices that have been implanted to help them live better lives. Yet there has been too little integration of these capabilities into medical device offerings, in part because medical device companies have by and large shied away from services offerings; it’s a shame, since offering patients more effective and comprehensive recovery could be a significant differentiator in medtech areas where there is typically little product differentiation. In those segments, the integration of digital interventions with mechanical ones could make a potentially dramatic difference in outcome and, thus, comparative effectiveness between devices.
- Remote Patient Monitoring after surgery
Remote patient monitoring post-procedure is another opportunity for medtech companies, particularly when patients have been discharged with a surgically-implanted device. Mobile apps that monitor the effects of implanted devices or implanted devices themselves, when outfitted with sensors themselves (as in the case of Canary Medical), can transmit patient data about the patient’s level of activity to give care teams insight on patient recovery. This is a particularly good opportunity to create ongoing knowledge about device performance that can inform not only the care of patients, but also R&D for future devices. It is also a way of knowing when an implanted device, whether a knee, hip or other part that may have a limited life should be replaced, when it is otherwise hard to know that limit has been reached.
With the previously mentioned Propeller Health device, the data streaming from the device enables care managers to determine whether patients are correctly using their drug delivery inhaler device, what exposures may be driving their asthma incidents and whether the drug itself is improving the patient’s condition.
- Automation of tasks: giving time back to physicians
One of the goals of healthcare innovation generally is to automate some tasks so that other members of the care team, aside from physicians, can manage patient care. This could free up physician time to focus on more complex patients. For instance, Babyscripts pairs medical devices with mobile apps to support expectant mothers and neonatal care such as monitoring blood pressure, weight and blood sugar levels to automate a big swath of prenatal care that previously required human intervention. The information can be used to alert doctors early enough to avoid adverse events, and allow them to devote more time to high-risk pregnancies.
Similarly, Abbott has launched its Neurosphere Virtual Clinic, which allows physicians to remotely program its deep brain stimulation devices via telemedicine, a great example of a medical technology company that has embraced digital technologies for clinical and administrative good.
Winning over the provider community
Medical technology companies have typically employed sales forces that are great at selling devices but have little experience selling software. As a result, the sale to physicians and health systems is often quite complex. Further, the last mile in the doctor’s office stretches from their Electronic Medical Record (“EMR”) to their prescription pad. Unless the digital offering is easily selected, prescribed/recommended, and integrated into the EMR, it is difficult to get into the workflow; anything that complicates the workflow is an even tougher sell than software.
While digital technologies can significantly assist providers with the management of their value-based businesses, the truth remains that few providers have 100% of their business under value-based programs. For this reason, digital uptake has been hard to foster and medical device companies have rarely tried to close the gap. But by helping the health systems see that their products, when integrated with digital tools that reduce unnecessary readmissions, expensive ER visits, or surgical complications, medical device companies can be true partners with their customers in lucrative new ways. Further, by helping providers manage their patients after surgery and for the long term in the case of chronic care, medical device companies can create a greater customer affinity and deeper relationships that can be more persistent and mutually advantageous. And yet, it is still a work in progress.
Why is this so hard?
- Culture clash: as previously discussed, medical device companies have rarely sought to be in the services or software business. Those businesses tend to have higher hands-on requirements, lower financial margins and more sales complexity. They also require a shift from thinking about the provider as a customer to thinking about the patient as part of the customer equation. Many medical device companies are just coming to terms with these changes and have yet to start thinking of themselves as further down the digital device spectrum.
- Lack of deep digital expertise: While many pharmaceutical organizations have developed gigantic digital teams, most medical device companies are still in the early stages of this transition. There are exceptions, but often the digital teams are segregated from product teams, lack the right kind of engineers and data analytics, and operate in their own silos rather than integrated into R&D and product strategy. Until this becomes more commonplace and medtech companies think “beyond the procedure” is core to their strategy, they will be unable to take advantage of the value that data and holistic thinking can bring to their customer relationships and next generation products.
- Unequal partnerships: Many medical device companies have begun making venture investments and forming partnerships of various kinds with young digital health companies, but often these lead to perennial pilots that never land, or distant arrangements that don’t produce truly integrated offerings. Device giants worry that their investments work mostly in favor of the startups, who get capital to do what they need to do to thrive but deliver little value to the sponsors. Digital upstarts worry that the true market distribution strategies they hoped to gain through the relationships will never be realized due to bureaucracy, concerns over data ownership and circular legal discussions that don’t support their milestone timelines. Digital and device companies come together too often with high hopes but lack the ability to meet each other’s objectives.
Look out behind you, it’s the new competitors
Medical device companies must overcome their digital challenges or they will be left by the wayside. New companies are coming for this market and they are digitally savvy. We are already seeing such entities as CVS (which is building its own dialysis device), Apple (which is building biometric monitoring devices) and Amazon (which is building its own branded medical products) coming for you. Yes, it’s small competition now, but time is on the side of those who rise to the digital opportunity.
The path forward
Medical device companies are slowly realizing that the digital world is not going away and it’s time to get on the digital train. A few companies have already made consequential investments in these areas, adding people, developing meaningful partnerships and even executing acquisitions.
The more effective transactions recognize that there is a coming together of different cultures and that this needs to be recognized and celebrated right from the start – it’s not possible to force change on either, but rather systems must be designed to foster collaboration and mutual understanding. Sometimes this is done through team-building, other times through compensation strategies. In any event, the commitment must be real. Dabbling is not a strategy.
Partnerships with digital health companies can help medical device enterprises overcome their digital health learning curve. Digital health companies tend to be agile. They also have knowledge of health applications and integration among and between multiple devices and sources of data. They also tend to have a greater familiarity with design thinking from the patient perspective. These are all things that medical device companies need.
Medical device companies, on the other hand, have resources, regulatory and reimbursement skills and distribution channels that even the most successful digital health companies cannot match. The trick is recognizing that the two types of organizations likely speak different native languages and have different financial models. Attention must be paid and time committed to finding ways to communicate and collaborate that deliver success to both parties. Key to this is transparently discussing goals, objectives, fears, and concerns from the beginning and setting up structures that reward everyone for successes, which are clearly measurable based on well-articulated goals. This is a long game and partnerships, in whatever form they take, must have the investment, both financially and psychologically, of the executive teams in order to succeed. There is no doubt the digital world has arrived and that business models are in flux. For medical device companies to prosper in this changing world, they will have to think differently about products, revenue models and relationships. For digital health startups to prosper, they must understand the models upon which large device companies are built and appreciate the immense value-creation that has occurred before they arrived. Both must flex so all can bend to the new market imperatives.
The U.S healthcare world is clearly advancing towards more value-based models, comparative effectiveness through data analytics, rapid development cycles, and artificial intelligence as a key driver of knowledge. Companies that can combine hardware and software into products that match these skill sets, extensive clinical expertise, deep health system relationships and customer service excellence will be the next generation medtech winners.