I recently had the privilege of participating in a digital health panel at The MedTech Forum in Paris. The title of the panel was “New Business Models for Digital Health: A Look at Value,” and I was joined by two industry colleagues—Agnes Simon, senior business director, EMEA, at Medtronic, and Lucile Blaise vice president of Western Europe at ResMed—to share our thoughts on business models for digital health in medtech. The conversation was wide-ranging and included tangible strategies for how the industry is currently trying to monetize its digital health innovation. Here are four:
1. Add-on-focused strategies: The most obvious and common way to monetize the value of digital health is by integrating it into an existing product or solution as a way of creating differentiating value.
My fellow panelist, Agnes, described Medtronic’s CareLink as a good example of how digital health can transform a company’s share in a category. CareLink, a remote monitoring system, allows physicians access to the cardiac rhythm patterns of their most vulnerable patients. This provides both the physician and patient peace of mind and adds tremendous value to healthcare systems by removing unnecessary (or enabling necessary) clinical visits.
The challenge with an add-on focused monetization approach, like many product-oriented innovations, is that it quickly becomes table stakes in a category as competitors launch copy-cat solutions.
2. Outcome-focused strategies: Sometimes, the best way to monetize an innovation in the digital health space is to focus on the health outcomes that it’s able to prove.
During the panel, Lucile described the work that ResMed has done developing an outcome-based reimbursement strategy for its digitally connected sleep apnea machine. The solution dramatically increases adherence, improving patient outcomes and ensuring that therapy money is well spent. And with the ability to clearly evaluate adherence, ResMed is well positioned to leverage these outcome benchmarks for continued competitive advantage.
Of course, this type of monetization strategy only works in areas where outcomes can be clearly benchmarked and monitored (think diabetes and its blood glucose biomarker, or lab efficiency metrics). And, as in other situations, appropriate performance and outcome metrics need to be established and adopted by key stakeholders first.
3. Patient- or consumer-focused strategies: The focus for many non-medtech companies eyeing the healthcare space, patient-pay digital health solutions remain rare at many traditional medtech companies. However, the opportunity does exist, especially for specific categories: for example, those where patients are increasing their own engagement (such as diabetes, nutrition, biomarkers, etc.) or where caregivers desire more peace of mind (like heart health, brain health, etc.)
A recent example comes from Klue, a digital health startup focused on behavior tracking and change. The company offers AI technology that pairs with the Apple Watch and can detect eating and drinking gestures. Recently, Klue launched a brand-new feature that includes a reminder for mealtime insulin administration. It also included automated text messaging features to keep caregivers up to date on their loved one’s care. The feature is currently available via a limited free trial, but one could imagine a future where it becomes a subscription-based service for either the patient or family.
The challenge, as always, with a patient-pay strategy is that not every country in the world is as willing to pay for healthcare. In the U.S., patient willingness to pay is high given the history of the healthcare landscape. Recent market research we’ve done in Europe suggests that the U.K., Italy and Spain have a similar willingness to pay even though they have one-payer systems. German citizens, on the other hand, are very reluctant to pay out of pocket for care and expect all health-related technology to be supported by reimbursement.
For Klue, this lack of willingness to pay requires a focus on helping health plans and providers recognize the value in subsidizing wearables.
4. Real-world-evidence-focused strategies: The last approach discussed is also the one that many medtech companies have shied away from due to their historic unique selling proposition, organizational capabilities and risk aversion. However, big data will transform healthcare and drive new monetization strategies and business models just as it has in other industries. The only question is the role that medtech will play as both tech companies and government payers dive headlong into the big data journey.
A recent example is Johnson & Johnson's electrophysiology-focused Biosense Webster division. It recently launched a new cloud-based network to link up the myriad of connected devices in the heart-mapping and ablation catheter space. The platform allows doctors and health systems to review patient case information (including 3-D image files) and discuss patient care. While the focus now is on improving the standard of care and patient outcomes at a local level, one could quickly imagine the value that this big data set could provide in the future.
Of course, even this example shows the current difficulty in systematically collecting and monetizing this type of data. Most of it is due to a lack of payer uniformity and significant questions regarding data ownership. (Sound familiar? This scenario is quite similar to other industries.) However, payers—both public and private—are quickly modernizing, and the companies that are prepared as the infrastructure catches up will have an advantage.
Perhaps the most insightful panel conversation regarding all of these strategies focused on the years that it took Medtronic and ResMed to align with payers, other manufacturers and patients to support their transformative ideas. When patient lives and well-being are at risk, it takes significant coordination among many parties to ensure the right outcome. This is the uniqueness of healthcare and a key advantage for established medtech companies that have spent decades building trust with the system vs. new entrants that are expecting extreme disruption.
Overall, the panel focused on what I would term “cautious optimism” about the digital health category for large medtech manufacturers. There’s no question that the digital health market will eventually be a significant revenue stream for most in the industry. In my mind, the question isn’t whether medtech should be aggressively investing in digital health, but rather how they can recalibrate the ROI expectations for early innovation.
Tech companies have the luxury of significant funding and patient investors who are willing to trust that a transformative business model will find a good idea. Though the profitability expectations certainly differ for large medtech organizations, I believe that the philosophy shouldn’t. The future is digital and—either via partnerships or capability—the lasting medtech organizations will be those that embrace that future now.
