Ben Franklin said, “When you’re finished changing, you’re finished.” That’s advice medical device makers can take to heart because 2016 really is shaping up to be a year of unprecedented industry change. Non-traditional medical device companies, such as Google and Apple, are entering the space, disrupting the business models of major industry players. The explosion of consumers interacting with brands on Facebook, Twitter and other social platforms is forcing device makers (and regulators) to get serious about social media, specifically how they engage sponsors, correct misinformation and field off-label requests. Outdated IT infrastructures and increased cybersecurity threats are sabotaging operational and compliance efforts. Beyond all of this is a regulatory environment in an unprecedented state of flux. Here are five trends likely to affect the medical device industry this year.
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Note: This post is an excerpt from the white paper, “5 Trends Medical Device Companies Can’t Afford to Ignore in 2016,” which you can download here.
Trend #1: Non-Health Care Companies Will Continue to Invade the Device Market
Google has infiltrated most industries, so it was only a matter of time before it invaded health care. Verily is Google’s life sciences division. Originally launched in 2013 as part of the Google X innovation lab, the research unit was rebranded as Verily in December of 2015. Since its inception, Verily has managed to recruit an esteemed roster of scientists and researchers. Aside from having a veritable scientific dream team, Verily’s greatest competitive advantage may be its Google parentage, which puts it light years ahead of traditional device companies in terms of understanding consumers’ tastes and preferences. For device makers used to designing for and marketing to hospitals and health care professionals, consumer centricity is relatively unchartered territory. The industry has only recently had to deal with intense pressure to be more competitive, cost-effective, efficient, ergonomic and user-friendly, challenges B2C companies have been grappling with for decades.
Mobile Health (mHealth) is the Entry Point
Many of these medical device space invaders are focusing on mobile health, or mHealth, initiatives to gain market entry. This particular form of digital technology is attractive to new entrants because it is subject to less regulatory scrutiny, which can accelerate time-to-market. Verily is attacking the wearables market with gusto, but its not stopping there. The company is developing miniaturized medical devices designed to improve daily life such as a contact lens with an embedded glucose sensor that allows diabetics to measure the glucose in their tears. Medical software is another target. Verily software engineers, analytics gurus and user experience experts are “developing platforms, products, and algorithms that can analyze complex health information.”(1) The goal is to detect patterns or warning signs that would allow for the prevention or earlier detection of disease and improve treatment outcomes—the crux of health care reform.
Rival Apple has also invaded the medical device space. It too is looking beyond wearable technology (Apple Watch) and health and fitness apps (Apple Healthkit). The consumer electronics giant is exploring ways to predict heart attacks by studying the sound blood makes as it flows through arteries. If successful, Apple could use the sizeable medical device market to reignite its product portfolio, as smartphone and tablet sale start to slow.(2) Apple is a master marketer, and it knows how to design aesthetically superior products that deliver an exceptional user experience—two areas device manufacturers are just dipping their toes into. It is very likely that 2016 will see many other non-traditional device companies, large and small, attempt to snag a piece of the life sciences pie.
Trend #2: Companies that Master Social Media Will Gain a Competitive Edge
Social media’s rapid, casual communication style represents both possibility and liability for the life sciences industry, which has been slower to add it to its marketing mix than other industries. This is not surprising since life sciences companies face unique regulatory challenges. It was not until 2014 that the FDA provided some clarity on how to compliantly engage with consumers and caregivers on social platforms. Many felt it was not enough, and the FDA admits that its social media policy is still evolving. Its biggest concern appears to be ensuring that social media platforms are not used to promote off-label use of devices and drugs.
Given the character space limits on most social platforms (e.g., 140 character maximum on Twitter), critics of the FDA’s social media policy are suggesting it is unlikely any drug or device could be promoted to the FDA’s satisfaction on social media. Which begs the question: Are the FDA’s social media disclosure and compliance requirements impractical? (3) To date, the FDA has released four social media-related draft guidances. A thorough examination of these guidances is beyond the scope of this post, but tips for using social media compliantly can be found in this white paper
Social Media is Where the Customers Are
Despite the restrictions and sometimes vague FDA guidelines, device makers that shy away from social media are missing out on valuable opportunities. Research shows that almost three-quarters of U.S. adults have searched online for health care information, a number which is rising rapidly as seniors become more familiar with technology and the Internet. What’s more, 58 percent of physicians perceive social media to be an effective way to access current, high-quality information, according to the Journal of Medical Research.(4) For this reason alone, it is vital for device makers to develop and maintain a strong social presence; even a passive presence will generate value.
A passive social media strategy, based on monitoring social platforms for customer and patient feedback, carries little risk and no need for adverse event reporting.(5) An aggressive strategy, in which the manufacturer actively engages with consumers online to generate brand and product awareness, is riskier but yields higher rewards. Manufacturers that opt for the latter must develop a system for adverse event reporting to ensure fair balance. Since only a minority of medical device organizations currently have a well-developed social media presence, working to increase development may create a significant competitive advantage for those willing to become early adopters.
Trend #3: 2016 Will Bring a Stronger Focus on Cybersecurity Threat in Medical Devices
Last year’s highly publicized Anthem security breach was a wake-up call to the health care industry, according to security experts. On February 5, 2015, hackers stole the social security numbers and personal information of 80 million Anthem members and employees, leaving them vulnerable to identity theft and blackmail. That same month, the FDA published a cybersecurity guidance for medical device makers, outlining the security measures developers should build into their products when seeking approval for a new device.
The final guidance, titled “Content of Premarket Submissions for Management of Cybersecurity in Medical Devices,” recommends that manufacturers consider cybersecurity risks as part of the design and development of a medical device. Manufacturers should submit documentation about the risks identified, and the controls instituted to lessen those risks. By carefully considering possible cybersecurity risks while designing medical devices, and having a plan to manage system or software updates, the FDA believes manufacturers can reduce the vulnerability in their medical devices.
The FDA’s Postmarket Cybersecurity Recommendations: Key Highlights
On January 22, 2016, the agency issued another draft guidance, titled “Postmarket Management of Cybersecurity in Medical Devices,” which “clarifies the FDA’s postmarket recommendations [for managing postmarket security vulnerabilities] and emphasizes that manufacturers should monitor, identify and address cybersecurity vulnerabilities and exploits as part of their postmarket management of medical devices.”
In general, the FDA recommends the establishment of a risk assessment process using a cybersecurity vulnerability assessment tool to rate vulnerabilities and determine the need for and urgency of the response (e.g., the Common Vulnerability Scoring System) and the ANSI/AAMI/ISO 14971 standard (Application of Risk Management to Medical Devices) to assess the severity impact to health, if the cybersecurity vulnerability were to be exploited.(6) If a device manufacturer neglects to respond to uncontrolled risks/vulnerabilities that impact clinical performance, the manufacturer may be subject to enforcement action. Cybersecurity is not just a regulatory concern. Fifty percent of consumers say they would avoid, or hesitate to use, a connected device that had been breached.(7)
The Future of Medical Device Security
The proliferation of electronic medical records (EMR), networked devices, mHealth applications, and cloud-based technologies has added to the complexity of information management. In this new digitized health economy, balancing convenience, safety, and privacy will be an ongoing challenge; one that multiple regulatory bodies will share. Shortly after the FDA released its postmarket cybersecurity draft guidance, the U.S. Department of Health and Human Services Office of Inspector General (OIG) released its 2016 Work Plan, which indicates that the OIG will be monitoring the FDA’s oversight of hospitals’ networked devices to ensure that the electronic health information of Medicare beneficiaries is being protected adequately. The fact that so many federal agencies are participating in cybersecruity efforts is a clear indication that cybersecurity in health care will be a regulatory priority throughout 2016 and beyond.
Trend #4: Increasing Health Care/Medtech Consolidation Will Expose the Need for Better IT Tools
The staggering number of large–scale health care mergers and acquisitions that have occurred over the last few years have transformed the way physicians and hospitals deliver patient care. Independent hospitals are being acquired by large health care systems in record numbers, and the shift toward larger health care delivery systems is expected to continue to evolve in the post-Affordable Care Act (ACA) World, which favors large entities that can leverage economies of scale. PricewaterhouseCoopers has coined 2016 the “year of merger mania.”
In the medical device industry, 2015 was the biggest year (so far) for merger and acquisition activity, and 2016 has already seen several billion-dollar deals. The first quarter of 2016 yielded more than $34 billion dollars in M&A deals.(8) Device companies are using mergers and acquisitions as a strategy to better serve consumers’ demands for increased convenience and value, and to survive the shift toward a value-based care model, which links reimbursement to quality, better care and cost containment. As part of this transition, medical device companies are required to provide evidence of real-world value and positive outcomes. Device products that fail to provide such evidence will struggle to generate investor support or attain reimbursement.
Meeting New EBR and EMDR Compliance Requirements
Growing pains are inevitable as two companies struggle to integrate their people, products, and processes into one well-oiled machine. Life science companies carry the added burden of having to harmonize their manufacturing and quality processes under intense regulatory scrutiny, and to ensure there are no compliance lapses. Businesses that operate in an environment of departmental and technology silos, wherein each department acts independently with its own processes and systems for collecting and accessing critical data, will find consolidation extremely challenging. New FDA compliance requirements for electronic batch records (EBR) and electronic medical device reporting (EMDR) call for end-to-end product traceability, rendering the use of disparate homegrown and point solutions woefully inadequate for satisfying regulatory burdens, not to mention highly inefficient.
To navigate the challenges of fast growth—whether it is organic or acquisitional—medical device manufacturers will need to invest in next generation tools, such as enterprise quality management software (EQMS), to help lower business risk in core quality process areas like document control, design control, CAPA, audit management and supplier management.
Trend #5: Regulatory Turmoil Will Continue to Deepen in the U.S. and Europe
Increased regulatory oversight and change is on the rise in the medical device industry, and has been for several years. Consumers, as well as industry stakeholders, are demanding better, safer products, and regulators have been compelled to act on their demands. Many regulations and regulatory issues are expected to impact the medical device market in 2016 including:
The Publication of ISO 13485:2016
After numerous delays, the latest revision of ISO 13485 was published on March 1, 2016, the first major revision to the standard since 2003. Device makers will have three years to transition to the updated 2016 version (March 1, 2019). This is a concern for many device makers as the changes are significant. The biggest are:
One thing that hasn’t changed is the structure of the standard. ISO 13485:2016 does not follow ISO’s High-Level Structure (HLS) format, which was introduced in ISO 9001:2015. This presents a quandary for companies that want to maintain both ISO 9001 and ISO 13485 certification: How to comply with the varied requirements within only one quality system? Adding to the confusion is the recent decision to repeal the Medical Device Directive (MDD), which harmonizes the laws relating to medical devices within the European Union.
Suspension of Medical Device Excise Tax
The medical device excise tax, which was implemented in 2013 as part of the ACA, was suspended on December 18, 2015—much to the relief of the U.S. medical device industry. The suspension took effect on January 1, 2016, and is set to be automatically reinstated on January 1, 2018.(9)
According to the Advanced Medical Technology Association (AdvaMed), the tax was particularly devastating to start-ups and smaller device firms, forcing them to cut jobs as well as R&D and expansion efforts. The trade group has also argued that the tax threatens to seize a sizeable portion of the funding earmarked for product innovation and advancement in the U.S. medical device market, which is already heavily taxed and subject to stringent regulatory and reimbursement procedures.
Proponents of the tax argue that lobbyists continue to distort the tax’s impact. They claim that the expansion of health coverage will increase the demand for medical devices and could offset the effect of the tax. What’s more, they argue that health reform will promote innovation, not postpone it, by encouraging more cost-effective ways of delivering care. Whether the medical device excise tax will be repealed remains to be seen; however, the two-year moratorium is predicted to rejuvenate the device market and bring relief to small and mid-sized manufacturers.
Unique Device Identification (UDI) Compliance Deadline for Class II Devices
The timeline for UDI implementation started on September 24, 2014, with compliance of all devices expected in 2018. UDI legislation requires that manufacturers establish a unique device identifier (i.e., tracking tag) for each device. The regulations are intended to reduce counterfeiting and improve supply chain security and efficiency. To be compliant, device manufacturers must submit their device identifiers (DIs) to the FDA for inclusion in its Global Unique Identifier Database (GUDID), by the applicable compliance dates. For companies that are FDA-registered, selling or operating in the U.S., the deadline for Class II medical devices to be UDI compliant is September 24, 2016. Class III devices must be compliant by September 24, 2018.
The medical device industry is facing unprecedented challenges in 2016, but many opportunities as well. What other trends do you expect to see? What do you consider to be your biggest challenges this year, and how are you planning to address them?
Lisa Weeks, a marketing communications specialist at MasterControl, writes extensively about technology, the life sciences industry, and other regulated environments. Her two decades of marketing and advertising experience include work with McNeil Pharmaceuticals, SAP AG, SCA Mölnlycke Health Care, Crozer-Keystone Health Systems, and NovaCare Rehabilitation/Select Med.
(1)From the Verily website home page, https://verily.com/. Accessed February 22, 2016.
(2)Lee, Thomas, and Baker, David R., “Apple Exploring Cars, Medical Devices to Reignite Growth,” February 16, 2014. http://www.sfgate.com/news/article/Apple-exploring-cars-medical-devices-to-reignite-5239850.php
(3)Butler, Alex, “OMG! The FDA is Keeping Up with Kim Kardashian, Too,” August 28, 2015. http://mastercontrolinc.blogspot.com/2015/08/omg-fda-is-keeping-up-with-kim.html
(4)“Social Media Benefits for Medical Device Companies.” Retrieved from http://www.mrchouston.com/social-media-benefits-medical-device-companies/
(5)“Why Healthcare Can’t Afford to Ignore Social Media.” Retrieved from http://www.mdgadvertising.com/blog/why-healthcare-cant-afford-to-ignore-social-media/
(6)Burrows, Vanessa K., Geetter, Jennifer S., Gottlieb, Daniel F., and Ryan, Michael W., “FDA Releases Draft Guidance on Postmarket Management of Cybersecurity in Medical Devices,” January 27, 2016. https://www.mwe.com/en/thought-leadership/publications/2016/01/fda-releases-draft-guidance-on-postmarket
(7)PWC Health Research Institute, “Top Health Industry Issues of 2016.” http://www.pwc.com/us/tophealthissues
(8)Newmarker, Chris, and Buntz, Brian, “The Largest Acquisitions of 2016 (So Far),” February 19, 2016. http://www.qmed.com/news/largest-acquisitions-2016-so-far
(9)Pennic, Jasmine, “Medical Device Excise Tax Suspension Could Rejuvenate Market,” January 21, 2016. http://hitconsultant.net/2016/01/21/medical-device-excise-tax-suspension-could-rejuvenate-market/