With the US innovation ecosystem widely perceived to be under severe stress, both government and business leaders are actively reviewing their options for meeting emerging market needs.

More than two-thirds of respondents to PwC’s medtech innovation survey believe their companies are leaders in innovation, but far fewer companies claim to be true pioneers. Source: PwC 2013 Medtech Innovation Survey.
One such set of approaches was recently examined by Douglas W. Elmendorf, director of the Congressional Budget Office, in a presentation on “What Changes in Federal Policy Might Spur Inn ovation?” at a Washington, DC, conference on federal tax policy and entrepreneurship sponsored by the Kauffman Foundation. See http://www.cbo.gov/publication/44610 . Elmendorf id entified a number of federal policy changes that could be used to support innovation, including increased R&D spending, increased support for science education, reduced taxes on private investment, greater immigration of skilled workers, patent reform, and adjustments to regulatory policies.

Considering the paralysis of US federal policy in recent years, however, innovators may never find out whether such approaches might be effective. “All of those approaches to enhancing innovation would require either a redirection of federal money from other purposes or compromises on other national goals, which would require that spur r ing innovation be viewed by lawmakers as an important national priority,” Elmendorf admitted.

Medical device and diagnostics companies would be well advised not to wait around for government action. Instead, say the authors of Medtech Companies Prepare for an Innovation Makeover, a new report by the Pricewaterhouse Coopers Health Research Institute, companies need to focus on redefining medtech innovation for an emerging health economy that is focused on higher expectations for value and convenience. See http://  www.pwc.com/us/innovationscorecard.  “Medtech companies must be ready to compete in the new environment or risk being displaced by companies that can show evidence that their innovations create value,” say the authors.

To examine current trends affecting medtech innovation, the PwC team conducted a global survey and interviews with more than 50 companies, including new competitors that have entered the medtech space from fields such as telecommunications and consumer electronics. Findings of the report describe an industry that remains focused on the diminishing value of incremental product innovation, and lacks formal processes to develop the innovations in services and business models that will be essential to meet emerging market conditions.

“To drive changes in their business models, medtech companies will also need to adopt new approaches to innovation that go beyond their traditional core business areas,” says Christopher L. Wasden, EdD, managing director and global healthcare innovation leader at PwC. “Using the information generated by their devices, for instance, medtech companies can create new business models focused on monitoring patients in order to deliver improved outcomes— making them the providers of a total healthcare solution.”

The PwC report offers three recommendations for medtech companies seeking to innovate for the emerging healthcare marketplace:

  • Be ambidextrous by creating an innovation operating model that separates breakthrough and radical innovation from the incremental innovation necessary to support the core business.
  • Collaborate to get closer to the patient by integrating into the broader patient experience, the larger health ecosystem, and new payment models.
  • Measure innovation in new ways by using forward-looking metrics and connecting the dots for shareholders, who need help understanding the changing role and nature of innovation.

It remains to be seen whether an industry whose identity is dominated by a commitment to advanced technologies can also become a leader in healthcare business model innovation. If not, the PwC report suggests, nimbler companies from other industries may soon find ways to reimagine healthcare along new pathways that marginalize older and slower device companies. In that case, even a fully enlightened federal tax policy that supports technological innovation won’t offer those companies much protection.

Steve Halasey is a contributing editor with Medical Design Briefs, and a specialist in executive and business development issues for the medical device and diagnostics industry.