Is It Worth Following Trends in Medtech?
The word is everywhere these days: “The Top Medtech Trends in 2024.” “Medical Technology Trends Toward Six Winning Roles.” “Transformative Trends in Medtech and Healthtech.” “The Latest Trends in Wearable Technology for Healthcare.” “HIMSS24: Four Trends in Digital Health and Patient Experience.”
Untold numbers of stories have been written about trends. These tales have appeared in various publications and online, televised, and also debated at industry events. Such media interest calls into question whether trends—subjective as they may be—are tied to medtech organizations’ competitive edge.
Clearly, trends evolve but they rarely develop synchronically with the annual calendar. Thus, it makes little sense to regularly change course and chase a trend based on the latest whisperings by so-called experts. Doing so is risky, as it can lead to dead ends and/or embarrassing faux pas.
Since trends tend to come and go, jumping on the bandwagon too early has cost some companies dearly. Remember the Tamagotchi, the digital pet that fit in a pocket? Didn’t think so; the toy’s parent company, Tokyo-based Bandai, was forced to shutter the Tamagotchi LIFE brand based on poor sales. The most well-known example, perhaps, is the DeLorean Motor Company, which folded in 1982 after its $25,000 sports car featuring gull wing doors failed to catch on with the car-buying public.
Before deciding whether a trend is worth a second look, its relevancy must first be determined. To establish relevance, medtech companies should ascertain whether the fad in question will lead to short-term gains or losses, or mark the start of a paradigm shift in technology. Organizations also must figure out the trend’s potential impact on customers, the market and competitors (not that easy a task).
Fortunately, there are a few indicators that can help companies distinguish between fads (short-term trends) and longer-lasting market changes. A detailed discussion of those indicators follows.
Market Opportunity
This is an obvious indicator, though it’s not totally fool-proof because market opportunity is not always visible or clear cut. Case in point: robotic surgery. Millions of words have been written and spoken about this technology (technically, it’s computer-aided surgery), but it is still evolving and undoubtedly will continue to develop as it becomes a permanent fixture within the operating room.
However, it was clear from its inception that robots—i.e., computer-aided surgery—in the OR would be limited to a select few hospitals. While “robots” captured the attention of many healthcare institutions, only a small percentage could afford to finance the technology (the typical costs are about $2 million, according to a UCLA study).
Robotics’ high admission price has left many hospitals and ambulatory surgery centers in rural or poor areas of the world without access to the technology. There’s a high price to pay for entering this limited market but it yields a high return. Thankfully companies are developing lower-cost solutions that offer the precision of robotic surgery without the high cost (or footprint). Regardless, many major medtech OEMs have developed or acquired robotic technology to please shareholders (yes, investors follow trends too).
Another interesting market trend is the rapid increase in ambulatory surgical centers (ASCs) throughout the United States. These facilities offer a less expensive, more efficient alternative to hospital-based surgeries. According to data from healthcare consulting firm Surgical Directions, high-functioning ASCs typically have cancellation rates of less than 1% and turnover times between one-half to one-third of similar hospital cases.
The shift to ASCs has enabled medtech manufacturers to introduce their surgical equipment into a new environment with unique requirements, little of which concerns robotics. Companies that recognized this trend early on have benefited from this change, as ASCs will continue to become entrenched in the surgical market.
Clinical Relevance with Reimbursement
Maybe this issue should top the list. Great innovations tend to die without some type of reimbursement reassurance (either from third-party payers or the consumer).
Digital therapeutics, for example, was once considered the future of healthcare. While there was reasonable clinical data for some solutions, most payers were not convinced of its merit and did not financially support it, prompting many digital therapeutics companies to crash and burn. Pear Therapeutics fell victim to this misguidance, having gone from industry, media, and Wall Street darling to belly-up in just a few short years.
Home care or “hospital at home” is another trend-prone segment. During COVID-19, it became imperative to increase remote patient care options to free up beds in overwhelmed hospitals and clinics. Capacity, infection, and “brick and mortar” costs were just a few of the factors, though physical distance from infected people was a major motivator as well. Although some products were adaptable for home care, many were not designed for home use. Monitors, for instance, are necessary to observe and track patients’ vital signs; the data they capture is a window, so to speak, into the body’s mechanics. Consumer grade watches—while informative—are not the best devices to monitor patients with serious medical conditions. Thus, it was clear the trend for home monitoring devices was truly a clinical need and would last well beyond the pandemic. Companies like ResMed Inc. quickly understood the long-term clinical need for these products and have offered up new solutions to the market through organic (R&D) and inorganic (M&A) means. And, there are many organizations now nipping at ResMed’s heels.
Scalability
The question of whether scalability is a short-term or long-term opportunity is often overlooked. Companies that potentially can benefit from a trend must assess the steps needed to commercialize their products and the impact it might have on their overall portfolio. Ventilators is a prime example. The need for these breathing assistance machines was crucial during COVID-19’s early days. At that time, there was no way of knowing exactly how long the pandemic would last and the extent of the planet’s need for them. Some companies shifted their entire production to support the need at a great cost, assuming the trend would continue for a prolonged period. After all, there had never been a device in modern times that was produced in excess like the ventilator. Companies that never even heard of a ventilator began development plans: General Electric and Ford Motor Co., for instance, partnered to scale up production for a device they had never produced, and delivered more than 50,000 units in a very short period of time. Others like Medtronic, Draeger Medical Inc., and Getinge answered the call in similar fashion. However, some manufacturers who scaled up to meet the world’s ventilator demand wound up with warehouses of extra stock and stalled development on other products. Consequently, some firms have abandoned the once-thriving ventilator business—Medtronic plans to exit the ventilator market after less than four years and turn its remaining patient monitoring and respiratory businesses into a new unit.
Risk and Reward
Trends require that companies ask themselves some hard questions—namely, whether it is worth spending time to analyze whether the trend has longevity; the risks involved in not following the trend, and how the trend can potentially fit in their overall growth strategy. Organizations also must figure out whether the trend adds value to their product offerings and if it will shift priorities without impacting the business. If it does shift priorities, companies must find a way to fund it.
A good rule of thumb is to consider the rewards a gamble on a trend would bring, yet keep an alternative in mind when making the final decision. Another factor to contemplate is the impact on the organization if the trend turns out to be a “fad.” At that point, a recovery plan would be required. Unfortunately too many companies (including some already mentioned) have learned this lesson the hard way.
Risk should always be weighed in any business decision. Every company takes risks on a daily basis, but their ability to carefully measure risk against trends and fads (and knowing the difference between the two) will guarantee market success. Happy trend hunting!
Florence Joffroy-Black, CM&AA, is a longtime marketing and M&A expert with significant experience in the medical technology industry, including working for multi-national corporations based in the United States, Germany, and Israel. She currently is CEO at MedWorld Advisors and can be reached at florencejblack@medworldadvisors.com.
Dave Sheppard, CM&AA, is a former medical technology Fortune 500 executive and is now focused on M&A as a managing director at MedWorld Advisors. He can be reached at davesheppard@medworldadvisors.com.
