High demand for continued technological advances is deeply embedded in the healthcare system. More informed and better equipped to make knowledgeable healthcare decisions, patients and other consumers expect unfettered access to new, safe, and effective drugs, medical devices and equipment, and medical and surgical procedures. Superior healthcare is no longer considered a luxury but the benchmark by which healthcare has come to be defined. However, most advanced technology is costly on a unit basis, aggregate basis, or both. For hospitals, meeting the ongoing need to remain cutting edge is essential for remaining competitive.
Tight budgets make capital outlays for new purchases problematic. Addressing the needs of competing interests, including purchasing costly new equipment, financing the high cost of specialized physical plants, and maintaining a skilled workforce within the constraints of a limited budget makes setting priorities a continued challenge to hospital administrators. With continued proliferation of medical technology, developing strategies to maximize limited healthcare resources and manage costs to deliver high-quality healthcare is expected to pose a continued challenge to policy makers, healthcare providers, insurers, and consumers of healthcare.
Innovations Likely to Transform Healthcare over the Next Decade
An external survey of innovation leaders across several segments of the healthcare system to gather their opinions about which innovations are most likely to transform healthcare over the next decade was conducted by Deloitte recently. They narrowed down their study to ten top innovations that will most likely achieve more for less in healthcare:
- lNext-generation sequencing (NGS): Application of genetic sequencing to identify at-risk populations or target therapies to patients who are likely to respond
- l3-D-printed devices: Lower-cost and highly customized medical technology products that can be tailored to suit the physiological needs of individual patients
- lImmunotherapy: Treatments with the potential to significantly extend survival for cancer patients, without the negative side effects and related healthcare costs of traditional chemotherapy
- lArtificial intelligence (AI): The ability of computers to think like humans and complete tasks currently performed by humans with greater speed, accuracy, and lower resource utilization
- lPoint-of-care (POC) diagnostics: Allow for convenient, timely testing at the point of care (e.g., physician office, ambulance, home, or hospital), resulting in faster, more cohesive patient care
- lVirtual reality (VR): Simulated environments that could accelerate behavior change in patients in a way that is safer, more convenient, and more accessible
- lLeveraging social media to improve patient experience: Tapping data from social media and online communities to give healthcare organizations the ability to track consumer experience and population health trends in real time
- lBiosensors and trackers: Technology-enabled activity trackers, monitors, and sensors incorporated into clothing, accessories, and devices that allow consumers and clinicians to easily monitor health
- lConvenient care: Retail clinics and urgent care centers that provide more convenient and lower-cost care to patients for a number of health issues
- lTelehealth: A more convenient way for consumers to access and increase self-care while potentially reducing office visits and travel time; may also prevent complications and emergency room (ER) visits
Incorporating these top 10 innovations into business models will require changing how healthcare organizations currently prevent, diagnose, monitor, and treat diseases.
Driving clinical innovation. Driving and sustaining clinical innovation persists as a life sciences sector priority in 2017, as stiff competition and patent cliffs continue to jeopardize revenue. Soaring R&D costs, increasing pricing pressures, growing market share for generic pharmaceuticals and biosimilars, and heightened scrutiny by regulators are having a dampening effect on clinical innovation. And even though health systems report substantial improvements in outcomes for infectious diseases, heart disease, and stroke – the result of broad use of vaccines and antibiotics, and the prescribing of blockbuster drugs such as statins – the demand for new, innovative treatments is unrelenting, driven by the proliferation of age-related diseases such as cancer and dementia, and lifestyle-influenced or behavior-related chronic diseases, such as obesity and diabetes.
Unfortunately for many life sciences companies striving to innovate efficiently and cost-effectively, a Deloitte analysis shows that while the costs of taking a blockbuster drug from idea to market have somewhat stabilized after years of increases, forecast peak sales per asset continue to decline.
For the past two decades, the United States was considered the world's leading funder and innovator – providing up to 70 to 80 percent of global life sciences R&D funding. Yet in recent years, the country has had a major decline in its R&D competitiveness, with other nations (especially those in Asia) more actively competing and investing in various elements of the value chain. Similarly, the UK life sciences sector has lost some global prominence relative to a number of other markets. Still, there is positive news: The UK's Minister for Life Sciences in November 2014 announced the Accelerated Access Review, with the aim to consider how to speed-up patient access to cost-effective and innovative medicines, devices, and diagnostics. Two years later, the US government approved the 21st Century Cures Act, a package that includes bills on mental health reform, FDA approval pathways, and biomedical innovation funding. The 21st Century Cures Act has broad industry, advocate, and stakeholder support, but concerns remain. Some advocates say that the act does not go far enough in addressing prescription drug prices. Others say that the act's funding is not stable since it is not mandatory and would have to be re-appropriated every year.
Companies and governments are expected to continue to increase funding into new product development:
- lWorldwide pharmaceutical R&D spending totaled USD 149.8 billion in 2015, and is expected to grow by 2.8 percent annually to USD 182 billion in 2022 (compared with CAGR of 1.7 percent between 2008 and 2015).
- lOverall medical device R&D spending is expected to grow at a CAGR of 4.3 percent from 2015 to 2020. R&D spend among leading medical device manufacturers has grown by 38 percent YoY, from
USD 1.6 billion in 2014 to USD 2.2 billion in 2015, driven by investments in less-invasive devices, such as the innovative leadless pacemaker.
- lCurrently, more than 7000 drugs and treatments are under development globally.
However, according to the Deloitte UK Centre for Health Solutions' 2016 pharmaceutical innovation study, its seventh-annual review of 12 leading biopharma companies' estimated returns, R&D productivity remains hit-or-miss:
- lAnnual projected pharma R&D returns have continued to decline, from 10.1 percent in 2010 to 4.2 percent in 2015 to 3.7 percent in 2016.
- lPeak sales per asset have fallen
11.4 percent year-on-year since 2010. Costs to bring a product to market have stabilized, from USD 1.57 billion in 2015 to USD 1.53 billion in 2016.
- lSmaller pharma companies have seen a decline in overall performance, but on average they continue to outperform their larger counterparts, generating returns up to three times higher.
- lEven with less-than-stellar productivity gains, more treatments are moving swiftly through the R&D pipeline: Fifty-six products were approved in 2015, a record high – although 2016 may yield less stellar results. The number of orphan drugs (i.e., drugs that treat very rare diseases that are often life-limiting) approved in both the United States and Europe has increased significantly over the last 5 years.
A number of vertical and horizontal clinical trends are expected to drive life sciences innovation; have significant, transformative impacts on the products and services offered to patients; and improve how companies operate in terms of the efficiency and security of their product supply.
IVD and MedTech
In vitro diagnostics continues to be one of the fastest-growing areas. The rise in demand for IVD testing is being driven by the prevalence of chronic diseases, especially among people aged 65 years. Advances in genomics, including gene editing and proteomics, are also expected to create new growth opportunities for the IVD market through 2020.
Medtech manufacturers are also focused on developing minimally invasive devices. For example, increasing adoption of MRI-compatible implantable cardioverter-defibrillators (ICDs), next-generation insertable cardiac monitors, and drug-coated balloons, as a result of increased minimally invasive cardiac procedures, should help drive the cardiology diagnostics market through 2020.
Many industry players – both traditional MedTech organizations and new market entrants – are capitalizing on recent and emerging technological advancements and providing digitally enabled healthcare solutions using mobile health applications, sensor technology, data analytics, and artificial intelligence (AI).
In 20 or even 10 years, the vast majority of devices are anticipated to have imbedded sensors. New handheld diagnostics with built-in AI will revolutionize the way primary care is delivered outside the physician's office. Diagnostics and AI will truly usher in the personalized medicine era. These new offerings will produce a huge new growth engine with the power to transform clinical care.
Even though MedTech companies are focusing considerable attention and resources on IVD, minimally invasive devices, and digital health applications, the biggest challenges many face are not at the product development level; rather, they are on the commercial side and along the supply chain. Questions such as which strategies and tactics should be employed to more efficiently and cost-effectively manage a changing customer base, how best to right-size the organization, where to streamline distribution channels, or how to wrap services around products to differentiate themselves in the marketplace will be key to ongoing market success.