pwc's health research institute: medtech companies prepare for an innovation makeover

PwC Health Research Institute

Medtech companies prepare for an innovation makeover

Health Research Institute

October 2013

PwC Health Research Institute 2

About the research

• More than 50 unique companies participated in the research including those doing business in:

• In-vitro diagnostics, disposable medical products, medical equipment, diversified life sciences, implantable devices

• Other healthcare companies

• New players in medtech

• Interviews with more than 30 top executives

• Survey in summer 2013 of more than 35 medtech companies, almost half of which reported revenues in excess of 1 billion US dollars

• Web-based innovation scorecard that assesses companies based on leading practices in organizing, managing and fostering innovation

• www.pwc.com/us/innovationscorecard

http://www.pwc.com/us/innovationscorecard


The importance of innovation in medtech is growing

vs. 43% today

51% in 5 yearsacross all industries

Source: PwC Global Innovation Survey, 2013


The market is demanding a different approach to innovation

R&D-focused innovation no longer generating as much growth and profitability

VC funding and deal value/activity still below pre-Great Recession levels

Increasing competition from emerging markets and new entrants

Regulatory reform demanding value not volume

Global emphasis on increased access, lower costs, and better outcomes

Social, mobile, analytics and cloud disruptive technologies

1

2

3

4

5

6

1


New entrants are staking their claim

5

18# of non healthcare companies that have

entered medtech

Are they friend or foe to medtech?

Source: PwC Medtech Innovation Survey 2013


Few medtech companies believe they are true innovation pioneers

“I think innovation is when you find something that is disruptive—10x the value or efficiency at 1/10 of the cost. Doing things better, cheaper, faster. To me, that’s innovation.”

--- Clint McClellan, Qualcomm Life



The value of a device is no longer solely in the product itself

Products(e.g.,

pacemaker)

Solutions (e.g.,

heartbeats)

Point(e.g., OR)

Continuum(e.g., surgery

to home therapy)

Type

Value

Context

7

Volume(e.g., Sell

more, make more)

Performance(e.g.,

outcomes, cost efficiencies)


New integrated services and business models that address clinician and consumer needs are becoming more important…

46%of medtech executives say product innovation is top priority over the next year

29% across all other industries

VS.

…but product innovation remains king, at least in the short term


PwC 9

Medtech executives expect a higher level of innovation over the next three years

…. but they lack formal processes to achieve their goals for new services and business models

PwC 10

Medtech companies have been slower to apply new social, mobile, analytic, and cloud technologies

Only 18% of medtech companies

are truly using these technologies

to integrate patient-generated data into clinical workflows and EHRs is a big



What does breakthrough innovation in medtech look like today?

11

• Pay-per-procedure business model• 20-25% in hospital efficiency savings• Decrease in patient throughput and waiting lists• Improved physician, nurse and patient satisfaction

Medtronic cath lab program

• $300m/15 yr partnership• At risk for outcomesPhilips and Georgia Regents

Medical Center

• Positive customer feedback• Reduced administrative costs• Increasing salesCovidien mobile sales app

• Help hospitals reducieoperating costs instead of discounting pacemakersMedtronic long-term

coronary care business model



Innovation no longer comes only from R&D

“It used to be that the value of companies derived from what they themselves could invent. I think that the world has changed. It is how you partner in this new era that is going to really determine the winners over time.” -- Sue Siegel, CEO of GE healthymagination

"R&D engineers will make 10,000 decisions in a year, but how many of them have the patient at the center of that decision? So to have cross-functional groups that work together with a focus on the patient is really critical.” --- Stan Rowe, Edwards Lifesciences


PwC 13

Recommendation #1: Be ambidextrous

GE healthymagination“Industrializing

innovation”

Thought leadershi

p

Incubation

Venture investing• Companies must operate

as a “lean startup” while concurrently maintaining lean six sigma discipline to sustain the core businesses

• Innovation is all about fast, frequent, and frugal failure

PwC 14

Recommendation #2: Collaborate to get closer to the patient

"We focus on person-centered care, recognizing that a patient is really somebody that is in our hospital or other site of care, but they are people that have lives outside of the healthcare system. They have families and communities that they go back to. How we build a relationship with those we serve in a meaningful way that extends beyond our hospitals is a question we’re continually

seeking to answer.” -- Michael McGarry, Ascension Health



Recommendation #3: Measure innovation in new ways



For more information

Full report is available for download at www.pwc.com/us/innovationscorecard

More information is available at

www.pwc.com/us/healthindustries

www.pwc.com/us/hri

Follow us on Twitter at

www.twitter.com/pwchealth

http://www.pwc.com/us/innovationscorecard

http://www.pwc.com/us/healthindustries

http://www.pwc.com/us/hri

http://www.twitter.com/pwchealth

pwc's health research institute: medtech companies prepare for an innovation makeover

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