In the next phase of the global pandemic, lifescience leaders and investors want to confirm the resiliency of the healthcare sector. In a time of questions, how do we continue to progress and where should we focus? As we journey through this season, speculations and comparisons emerge for what the healthcare market will look like on the other side of the global COVID-19 pandemic, and how medical device and biotechnology investment and hospital purchasing will compare to life before. Geoff Martha, newly appointed CEO of Medtronic comments on pursuit of resiliency through changes to come, “We see a path through this pandemic, and it’ll come in phases. … a “new normal” will emerge. Throughout, we must support customers and patients in entirely new ways.”[i]
According to PriceWatersCoopers the 2020 healthcare market started off strong. “Despite a slowdown in deals at the end of the quarter, 59 companies raised rounds worth $100M or more, making Q1’20 the third busiest mega-round quarter in history.”[ii] We do not yet have substantial data reporting how COVID-19 is impacting 2020 Q2 healthcare investments and deals. However, many agree that in this time investors will continue to look for healthcare innovators, especially companies equipped to answer the call of the times, such as those developing technologies solving unmet needs. An example of such was the rush to adopt innovation in telemedicine. From CB Insights’ State of Healthcare, “Healthcare stakeholders have responded to the crisis by providing new and expanded product offerings, adjusting regulatory policy, and forging collaborative partnerships.”[iii] Deloitte & Touche partner Peter Micca notes, “On March 17, the US CMS said that a 1135 waiver would allow Medicare to pay for office, hospital, and other virtual-health visits..”[iv] Peter Micca goes on to address how the dampening of regulatory and reimbursement hurdles will influence healthcare sector investments, “…While the loosening of certain restrictions might be temporary, we expect adoption could continue to grow even after the COVID-19 emergency has passed. Demand from clinicians and consumers could cause some restrictions to be removed permanently”
Venture capitalist and respected industry leader, Lisa Suennen, considers Mercom Capital Group reporting Healthcare IT/Digital Health Investment.[v] “Indeed, while the virus began to make its way around the world during Q1, over 142 digital health deals were done in 19 countries, according to Mercom Capital Group. …Average deal sizes were up to $29 million. And we did get a little bit of foreshadowing that this might come as we saw investments in telemedicine go from $220 million in Q1 2019 (and number 3 on the list of investor priorities) to number 1 with a bullet garnering over $788 million in capital.”
As with telemedicine and tele-behavioral health, industry leaders have seen a shift in clinical trial implementation towards disruptive technologies that ensure the expedited study management that leverages technology in areas that were previously traditional. In an interview with Ed Miesta, Donald Deieso, Executive Chairman and CEO of WCG Clinical, said, “Existing healthcare and clinical models are being disrupted and will continue to be disrupted by progressive companies, sites, and patients. When it comes to new technology implementation, I feel more optimistic now than I’ve felt in more than a decade.”[vi] The hope is that the moving forward and out of this pandemic, the industry will continue to make way for disruptive technologies in unprecedented ways.
Take action to be prepared for opportunities
Stay ready. Despite current market and economic uncertainty, it is important for medical technology innovators to remain diligent in preparing for business opportunities that lie ahead. Again, consider the message from new Medtronic CEO, Geoff Martha to his team, “We must continue to out innovate others. We must be easy to work with, and we need to intimately know and meet our customers’ needs. The speed of change requires us to be nimble, fast, and action-oriented…”[i] Use this time to secure the diligence you’ll need to intimately know your customers’ needs and how best meet them so that you are most strategically positioned as the industry moves forward with increasing investments.
Anticipate how COVID-19 will influence purchasing decisions
What we anticipate for the lifescience industry post-COVID is an uptick in the desire and requirements for rigorous due diligence. Health technology value analysis teams will require enhanced evidence of improved outcomes and decreased budgetary impact. With more limited resources, medical technology innovators may find themselves focusing on indications anticipating the greatest financial benefit. Furthermore, we expect investors will be seeking an increase in rigorous clinical and market diligence where a tight economy requires the most strategic investment strategy.
Lisa Suennen says, “For investors, the coronavirus crisis has highlighted the importance of certain due diligence items that may have previously been glossed over… Science was already making a comeback, but it will be more and more essential to understand how new digital health offerings demonstrate true clinical and financial value. No one can afford “good enough” sensitivity and specificity during the crisis; we shouldn’t settle for it afterwards either.”[v]
Health system purchasing has already been moving towards reimbursement driven outcomes and budgetary impact considerations with expanding Value Analysis Committees and a review process leaning away from only physician preference items. From this, outcomes-based reimbursement is expected to gain even more traction, met with an increased need for quantifiable reduction in resources and demonstrated comparative-effectiveness against the standard of care. New innovation adoption will likely be swiftest for indications demonstrating the highest value, as determined by improved outcomes and reduced total cost of care.
Develop a Value Analysis Strategy
To ensure that your emerging technology secures a coveted spot on the formulary, a carefully constructed and well-informed plan for how to achieve acceptance by the Value Analysis Committee needs to be in place. It is no longer sufficient to direct a marking strategy only towards clinician leaders. As health systems continue to move away from relying solely on the recommendation of physician champions and toward the inclusion of clinical outcomes and health economic data, a strategy for preparing for the changing purchasing review process becomes, not just beneficial, but essential early in the development process. It is necessary to understand who the Value Analysis Committee are, what are their requirements and how to address them.
Hospital, and other health system, purchasing happens through established Value Analysis Teams or Committees that meet regularly to review technologies up for formulary inclusion. These multidisciplinary committees are built from value analysis and supply chain managers, health administration executives, physician department heads and/or managers, budgeting, allied nursing personnel as well as others. Purchasing decision makers increasingly consider how the product or service provides them added value by improving patient outcomes and reducing the overall cost of care.
Developing a timely Value Analysis Strategy will provide actionable due diligence to guide sales and marketing teams as well as inform clinical trial design. A deep dive into current value analysis programs helps teams to strategically focus resources to develop and prepare the requisite information to facilitate their product selection for formulary inclusion.
Furthermore, the Value Analysis Strategy can help medical device innovators to understand the extent that physician preference item (PPI) influence in target clinical areas, determine the value of the technology’s improved outcomes compared to competitive vendors, as perceived by a Value Analysis Team, and focus on improved outcomes that substantiate stronger price negotiations.
As health system purchasing is forced to focus on adopting lifescience technologies with the greatest potential for clinical improvement and reduced cost of care, investors will also be seeking out those medical innovations with the highest potential for ROI with laser focus. The pursuit of a diverse portfolio with too many indications is not viewed favorably. Strategy Inc. recommends innovators determine the commercialization potential of their life science technology pipeline to focus resources in a time when resources especially need to be allocated carefully. Smaller and midsized medical technology developers with a diverse portfolio may be faced with challenge of determining how to best allocate limited resources towards innovation with the highest probability of successful commercialization.
A TechSelect Portfolio Analysis delivers a road map for technology innovators to gain objective direction about which technologies are projected to deliver the greatest return. The TechSelect Portfolio Analysis includes top line competitive and market analysis, peer reviewed literature analyses woven together with business threads to deliver a clear recommendation. Additionally, with inclusion of primary interviews to deliver “in-the-trenches” clarity, executives benefit from determining those technologies with the greatest probability to deliver the highest ROI.
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