The Implications of a Changing Healthcare Environment

In manufacturing, medical device, medtech, mfg, siemens by Generis0 Comments

James_DonnellyAn Interview with Siemens Healthcare Diagnostics’ Dr. James Donnelly.

The medical device industry has achieved significant growth over recent years, with the industry expected to generate $365 billion in sales by the end of 2015, and $460 billion by 2018 (information sourced from TÜV SÜD). The initial and continued success of a medical device is dependent on the value it brings to the delivery of healthcare, where there is a need to reduce waste in an evolving regulatory and reimbursement climate.

Prior to his speaking engagement at the upcoming American Medical Device Summit 2015 in Chicago next week, we had the opportunity to sit down with James Donnelly ,Ph.D., Chief Scientific Officer, Global VP, Medical, Scientific & Statistical Affairs, Siemens Healthcare Diagnostics to gather his perspective on the medical device industry in the U.S., and understand how changes to the healthcare system will influence the industry moving forward. Donnelly has been with Siemens for more than eight years, beginning as Global Vice President of Medical, Clinical and Statistical Affairs. He is passionate about integrating customer input, quality, and innovation into the design of products. He also believes the customer must be an active partner in product lifecycle management and that innovation without purpose will not consistently add value to the healthcare system.

Jim, how would you describe the current healthcare environment in the U.S. for medical devices?

The current healthcare spend is not sustainable. We spend too much on healthcare delivery without the expected return in value. The healthcare system and its stakeholders are all experiencing significant cost pressures right now and certainly need to bring more value into the system as opposed to simply contributing on a transactional basis.

If you look at our per capita spend and the benefit we are gaining from this outlay for healthcare right now, there is much room for improvement. In 2012, the Institute of Medicine estimated that 30% of healthcare spending in the U.S. is waste. A way to look at it would be for every dollar you spend, you should see some tangible improvement in the quality of life for the individual, or at least a greater reduction in costs downstream. Optimizing preventative care is one aspect of this. Considering we are one of the greatest spenders in healthcare, the U.S. is not exactly sitting at the global forefront.

So what are the implications of this evolving healthcare need for medical device manufacturers?

State of the art changes; and products need to adapt or become obsolete. From that perspective we need to anticipate what is needed as far into the future as possible. We also need to act fast to understand whether or not, in the changing environment, we will still have viable products. If you don’t have a viable product then your alternative is to change your business plan to sustain your business in other ways; whether it’s through new product investments or changing business models.

Only certain manufacturers will be able to move beyond their core product and this will depend on how a medical device is positioned. For example, if it’s a stent or joint replacement, then it will have its clearly defined intended use. Manufacturers of these types of products should always strive to ensure that the device is easily implemented, has user acceptance, leads to minimal complications, and has a longer life than other current available devices.

Medical devices cover a wide spectrum of products. On the diagnostics side we deliver information that is actionable for a physician or other caregiver so that they can make informed treatment decisions. Device manufacturers that generate data need to get to a point where we deliver more value not only by providing information that’s actionable but also by helping to reduce healthcare costs. The way to do it of course is to look at new applications such as wellness and prevention. Can healthcare providers anticipate when someone is going to become chronically ill and take action to avoid it happening?

With respect to personalized medicine it comes down to being able to determine whether or not the treatment options are correct and working. In other words: the right drug or treatment for the right patient at the right time. Further, can we improve a patient’s quality of life by using diagnostics that help us understand whether or not there is further progression of a disease or a need for a change in therapy? Does the test indicate that the prognosis is positive with that particular therapy and if not what other options are available?

From an international perspective, other countries are going to catch up with some of the changes underway in reimbursement in the U.S. and with that cost pressures may be similar or in some circumstances, approached differently. It all comes down to the same thing there will be shrinking revenue available for care.

In your opinion what will the future hold for the medical device industry over the coming years?

It is the best of times and worst of times.

I always try to look at the up side when pressure like this comes. If you are capable of responding to it and getting ahead of it you end up benefiting from the changes. This is not limited to the U.S., although the U.S. is certainly going to be one of the markets where diagnostic manufacturers will see less growth organically. More of the revenue and benefits will come from providing solutions that don’t just produce a result, they bring clinical value.

I think right now the drive to reduce costs and the need for shared risk (payer and provider), really make for an interesting time. We are going to see either reallocation or contraction of spending in certain areas and much more value coming into the system. In any way that we can smartly begin shaving down the healthcare spend in the U.S. there will certainly be the added benefit of helping the economy in other ways.

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