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The medical technology industry was on the forefront of innovation for decades, but now return on innovation investment is declining. The very notion of medtech innovation needs redefining in a new health economy that is focused on higher expectations for value and convenience. For more information please visit: http://www.pwc.com/us/en/health-industries/medical-technology-innovation/index.jhtml
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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
PwC Health Research Institute 3
The importance of innovation in medtech is growing
vs. 43% today
51% in 5 yearsacross all industries
Source: PwC Global Innovation Survey, 2013
PwC Health Research Institute
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
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New entrants are staking their claim
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18# of non healthcare companies that have
entered medtech
Are they friend or foe to medtech?
Source: PwC Medtech Innovation Survey 2013
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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
Source: PwC Medtech Innovation Survey 2013
PwC Health Research Institute
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
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Volume(e.g., Sell
more, make more)
Performance(e.g.,
outcomes, cost efficiencies)
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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
Source: PwC Medtech Innovation Survey 2013
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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
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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
Source: PwC Medtech Innovation Survey 2013
PwC Health Research Institute
What does breakthrough innovation in medtech look like today?
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• 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
Source: PwC Medtech Innovation Survey 2013
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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
Source: PwC Medtech Innovation Survey 2013
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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
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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
Source: PwC Medtech Innovation Survey 2013
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Recommendation #3: Measure innovation in new ways
Source: PwC Medtech Innovation Survey 2013
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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