How do I write predictions in a year that promises to bring a great deal of change, uncertainty and upheaval? Actually, it’s not as hard as you think when you put that which shall not be named to the side and focus on the bigger picture it exposed, so I’m going to try my hand at predictions with only a passing mention of spike proteins and lockdowns. Here goes:
I’m not talking about the locked-in-your-home-afraid-to-peek-out kind of healthcare, but instead reflecting on how we are now, as we speak, rethinking what a hospital is for. In early 2021, the hospital is reserved for desperately sick patients, mostly suffering from trauma and infectious disease, who are quite likely receiving very significant acute care.
Routine procedures are moving out, testing is moving out, diagnostic imaging is already moved out, infusions out, non-emergent orthopedics out — you get the idea. If you can safely do a procedure somewhere other than the hospital, you will. This wasn’t a new trend by any means, but 125,000 people bursting the seams of our acute facilities, patient perceptions of hospitals as viral cesspools and caregivers at their mental and physical breaking point have led us to improvise and rethink hospital-centric care delivery in the United States.
Additionally, who will be the vaccination heroes of the spring? My money is on pharmacies and their clinics to save the day in terms of distribution. If this proves to be the case, we’ll all get a chance to experience this burgeoning solution first hand. Put digital doctor consults together with rapidly growing point of care testing technology, and I’m betting that more and more primary care and wellness is going to come from your phone and your neighborhood pharmacy. I hope medtech companies are watching to make sure they know where the patients are in 2021.
Medical technology therapies in cardiology are a great illustration of my point: Right now, patients aren’t as active as they normally would be, aren’t visiting their doctor and aren’t getting an EKG. They aren’t seeing the symptoms and warning signs of cardiac issues. Or if they are experiencing issues, they may well be managing those issues with anti-arrhythmics or heart failure drugs. Primary care physicians are more confidently managing patients with serious underlying cardiac issues with this new class of drugs. Instead of identifying aortic stenosis, finding A-fib or referring a heart failure patient to an interventionalist, patients are more and more being medically managed and unaware of interventional options to address the underlying condition until they have progressed too far for them to work.
I’m trying to say it nicely, but to my friends and colleagues I’m a little more blunt about the fact that there are many instances where pharma and medtech really aren’t pulling in the same direction. I’ll take the medtech point of view in my examples, but I’m starting to see more instances of situations when the euphemistic “medical management” of patients is actively working against the penetration of medical technology.
Medtech has an obligation to get the message out that patients need to be seen, diagnosed and treated. To do this, we need to go big in reaching the patient. I don’t mean big TV ad campaigns – they’ll work for only a very few – but rather digital, personal and possibly more indirect ways to drive patient engagement. Relying exclusively on the surgeons we normally serve definitely won’t cut it in 2021.
Yes, sorry, it’s a little tiring to keep talking about robotics, but it’s even more important in 2021, when some of the promised platforms start to deliver. In 2020, I became convinced that orthopedic robots are well down the road of ubiquity. I was skeptical at first, but the acceleration of their uptake even during the horrific financial strains of the pandemic proved that these things simply must have value. We’re no longer wondering how many orthopedic centers will start a robotics program and instead discussing how many platforms from different companies each facility will decide to use. Ambulatory surgery centers are in the game as well, proving that it’s not just a toy for pedants in academia. We might be absent the truly definitive studies proving their value, but they are coming.
However, there is so much work to do here, and so many things that haven’t been worked out: business models, selling models, value propositions, evidence strategies, patient privacy, data capture infrastructure and even mundane things like how the heck we bill for software. Start-ups have a massive advantage over legacy device firms because this transition is so fundamental and so much DNA has to be rewritten. There’s a reason that so far that the only successful robotics platforms have been acquired versus built by legacy device companies.
I think this is very slow going, and I’m going to need to talk about robots for a few more years to come. But now I’m finally willing to concede that robotic surgery is more inevitable than the Jetsons future that never comes. It’s going to be a long and painful journey, but even soft tissue robots are inevitable.
Our analysts did some pretty compelling work looking at medtech company performance on a variety of measures over the last five years, including business development strategies and internal R&D productivity. While there was no consensus on organic vs. inorganic performance, the dominant strategies focus on category leadership. There’s little debate that organic R&D and tuck-ins in existing lines of business are the name of the game.
So what does this mean in 2021? As an industry, the pandemic has weakened our ability to conduct trials and drive penetration of new therapies. Data released on a virtual podium doesn’t pack nearly the punch of a four-day conference, and access restrictions are hampering the normal dissemination and training approaches. A start-up or single product company without a deep well of commercial resources is struggling right now, even if funding is still relatively easy to get. This means the environment for tuck-in acquisitions will be hot in 2021.
Will there be any mega-mergers in 2021? While there was a precipitous fall of procedures in March and April, almost all big medtech companies have gotten back on firm footing. There don’t appear to be too many wounded ducks. If there is to be a mega-merger like we’ve seen in the past, my guess is that it will be driven by a desire to buy into category leadership. While I’m stopping short of saying I don’t expect any big transactions, I don’t see a great deal of tailwinds driving them.
I’m writing this the day the runoffs in Georgia just confirmed a Democratic majority in both houses. So the possibility of bigger legislative moves in healthcare reform feels a lot more possible. As we limp through early vaccination, the only phase of “Operation Warp Speed” that has been slow, it’s still hard to speculate on how healthcare priorities will change in 2021.
First, I don’t think we’re going to see an overhaul of how we pay for healthcare, at least not along the lines of “Medicare for all.” But addressing the uninsured is a reasonable priority to see progress, most likely using the various channels that already exist. Obamacare is safe for a variety of reasons, and it is entirely reasonable to expect that its aim of addressing the uninsured and reducing the link between employment and insurance, while confirming the prohibition on penalizing pre-existing conditions, will progress.
If I were betting on where change is most likely to occur, it would be hospitals and especially critical access hospitals. Hospital finances were already rickety, and COVID hasn’t helped. If the trend away from hospital services continues as strongly as we have already seen, in both procedures and diagnostics, hospital finances will become even more dire. Something will need to be done here. I’m not smart enough to predict what that will be, but my money is on more consequential, even if less flashy, activity. Since this is where many medtech companies do business, we need to watch closely and be partners to our weakened customers as their environment and priorities shift.
The other thing I’m watching is a reshuffling of overall health priorities. For the last few years, the marginal spending has been on oncology and rare disease. What we learned from COVID is the importance of more basic chronic conditions like diabetes, obesity and heart disease. While this obviously won’t benefit every medical device, our industry often provides transformative interventions to address these chronic conditions. In that sense, I’m optimistic that the shuffling of healthcare priorities will place greater emphasis on medical technology that improves the underlying causes of these chronic conditions. Largely this is a strong trend, as long as we’re ready to prove our case.
The first week of 2021 has been a bit harsh, but I still approach the year with a great deal of optimism, both for our loved ones and for our industry. Welcome 2021 and let’s get started – there isn’t a moment to lose.