Medical Device Daily National Editor
MINNEAPOLIS For a lot of folks, "looking ahead" means planning for or forecasting what's going to happen in the next fiscal year, or at most, five years down the road.
For consulting giant PricewaterhouseCoopers (PWC), that's short-term thinking.
At last week's IBF Med-Tech Investing Conference here, Peter Claude, who is part of the Life Sciences Advisory Services unit at PWC's Florham Park, New Jersey, offices, delivered a look further into the future.
His "Life As a Medical Device Company in 2020" presentation at the Radisson Plaza Minneapolis Hotel drew on two documents produced by PWC analysts, "Healthcare 2020" and "Pharma 2020."
Citing the market potential of emerging nations, Claude noted that "new opportunities reemerging via the economies of the E7 (emerging 7) countries: Brazil, China, India, Indonesia, Mexico, Russia and Turkey."
He said those markets "are going to at least double" in size between now and 2020, in part reflecting what he termed "the rapid growth of wealth in those countries." The annual growth rate in those developing markets is 6.5%, as opposed to roughly 2.5% in the traditional economic powers, the G7 .
One of the reasons behind the strong potential for growth of healthcare markets in those emerging countries, Claude said, "Is that we expect the so-called diseases of the West' obesity, heart disease, cancer, etc. to emerge among these large populations."
Generally speaking, he said, one of the central reasons behind healthcare's stature as a key present and future market is that "more people are living longer with chronic diseases that used to be fatal. The aging population requires more orthopedic implants, more diabetes care, and so on."
However, he warned that sustainability of the U.S. model for healthcare spending clearly is threatened, with significant jumps in the percentage of Gross Domestic Product (GDP) devoted to providing medical care.
Another general rule of thumb impacting healthcare spending, according to Claude, is that global warming will expand the range of tropical disease, with those diseases becoming more prevalent in northern geographies to the point that inoculations against such diseases will become as necessary in those previously cold-weather climes as in tropical areas today.
"This will drive the diagnostic and vaccine sectors," he said.
Claude cited "conflicting agendas" for medical technology sectors, saying that greater government regulation will be the norm, compete with "new rewards structures" for intellectual property, for example.
"We think there's going to be an incentive placed on IP rewarding those inventions that decrease the costs of healthcare with longer patent periods."
He also said that PricewaterhouseCoopers expects to see payers, providers and manufacturers in a "risk-sharing" structure when it comes to reimbursement, an extension of the "pay for performance" push that is just getting its legs.
"There's a great need for data," Claude said. "Outcomes, patient access all that type of information is critical to the sharing of risk."
As for a long-term model, he put it succinctly: "No quick bucks."
In other words, "me too" products or outer-skin changes in medical devices won't make the cut. "Tomorrow's challenge is going to be how to incentivize prevention and care," Claude said.
The traditional concept of simply spending more and more dollars on treatment "is not going to be an option in the future," he said. "Those companies that get into helping prevent disease and cut off the costs of treatment will be rewarded."
Companies will have an ability to show how their products drive outcomes, Claude said. "And innovation will drive reimbursement."
Simply put, "payers will focus on those products that reduce the costs of treatment. Those products that reduce the spending are the ones that payers will reward."
Claude noted that if the basis for reimbursement is a product's ability to reduce spending, then you'll need to have the data to support that."
He predicted a "continued polarization of the [device] industry toward Class I and II products that lower costs and manage disease."
Any Class III and IV products that make it through the regulatory and reimbursement approval processes, Claude said, "will need to be disease-modifying."
Another potential growth area for device companies is in developing products "that can help buck the downward spiral of patient compliance."
In a system where providers "often throw good money after bad in prescribing therapies that patients don't follow, a company's success may have everything to do with how its product is used," he said.
"You can't just sell a product," Claude said, "but [also] a method to drive its use and for you as a manufacturer to differentiate yourself by getting compliance. We think there's a role for devices to play in this."
He also forecast what he termed "the coming golden age of diagnostics," with increasing use of biomarkers to identify diseases quickly, to assist in identifying the most effective treatment for a given patient, and to monitor compliance with treatments in "real time."
Claude said this already is under way, "cutting the waste out of healthcare spending from the traditional try one thing, then try another' approach."
As part of what he characterized as "a huge push on quality," he said that by 2020, "you're going to see more calls for devices that can talk to each other."
As part of that quality push, he said that we may see "worldwide quality regulations" by 2020, with a greater focus on voluntary and anonymous error reporting as a means of improving quality.
"I think you'll see companies leveraging quality to move the market," Claude said, citing the present-day examples of hospitals featuring billboard ads trumpeting their improved infection rates.
The 7th edition of the annual conference was co-presented by International Business Forum (IBF; Massapequa, New York) and the Upper Midwest industry association, LifeScience Alley (St. Louis Park, Minnesota).