MedTech: Own the Front Door, Own the Space

"Those who own the front door of an industry have tremendous influence on the direction of that industry".

I recently sat down with Rajan Patel, Senior Director of Engineering at Google. During our conversation, we discussed what it means to own the "front door" of an industry and the responsibility that comes with that. It struck me as being something so obvious, yet so insightful.

For his part, Rajan was referring to Google's role as a "door" to the internet, a responsibility his company takes very seriously. It got me thinking about the incredible transformation occurring in the medtech space, and who will be the ones owning the "doors" of the emerging landscape in healthcare.

Front Door #1(Old) – Reactive Patient Care (Medtronic, Boston Scientific, Johnson & Johnson)

The legacy healthcare industry of reactive patient care has been the only door for the most part in the healthcare continuum. It's a centuries old system that is driven by an event that has already occurred. It goes something like this:

• Get sick / feel sick, go to the doctor.
• Get diagnosed (physical assessment, imaging, diagnostic test, interventional procedure)
• Get treated (therapy, surgical intervention, drugs)
• Recover (limited if any monitoring)

The healthcare landscape is changing and that means there are new doors opening.

Front Door #2(New) - Proactive Patient Enabled Health (23andMe, Fitbit, Apple Watch, Alexa)

What is interesting about proactive patient enabled health is what appears to be the emergence of the individual managing and taking control of their well-being and being able to prevent or minimize an event from occurring. A step further, we are even upgrading ourselves as higher performing individuals.

The game changers here have been:

• Big Data, Cloud Computing, Artificial Intelligence and Deep Learning – the acceleration of technology in all of these areas has created massive data and processing power and the FDA is fast-tracking the use of it.
• Sensor Development – the improvement in sensor technology and the ability to get more raw and accurate information faster. Ongoing sensor development is key. No sensor development, no meaningful data capture. (Note - I believe this is a huge white space opportunity for companies).
• Sharing of Information – We are the first generation to "openly share private information". Genetic testing products direct to consumer, Apple Heart Project and massive data sets, NIH Grants and incentives for the gathering and sharing of information of over 1 million people.
• FDA Classifications – the Wellness Tracking Device category that uses words like “promote”, “maintain”, “improve”, “track” and “monitor” are quite different than the classic medical device rigor required for Class II device language which holds accountable words like “diagnose”, “treat”, “analyze”, “detect” and “discover”.

The FDA position is a big one. None of the players like Apple, Amazon, Google and IBM want the FDA too deep into their business. The only other government agency as powerful as the FDA is the IRS, and they don’t get invited to many parties either.

The tech companies have been in and out of the medical device industry for years. The FDA’s regulatory oversight tied in with the limited profit margins in “making stuff” has never been a business that any of those players had thought was worth the squeeze.  

At first glance, from a classic business perspective, it may not make a lot of sense to enter this market. There are the low tech barriers, low capital requirements, partial solutions, no reimbursement, no problem solved, poor value prop for the clinician, provider and payor. The other side of that business argument however can point back to the Facebook, YouTube, and Google models, it's the data. These devices are the gateway to the data about you.

This is an interesting sector of the market to track. (Sorry, I couldn't help myself). Even with more data, will people will change their lifestyles and decision making habits? It is hard to say, we know that tobacco, alcohol and sugar kill us at an alarming rate, yet many still overindulge. Perhaps these devices are simply the "gamification" of our lives that we have all become accustomed to. Could it be possible these are simply devices and gadgets that are the door that Apple, Google, and Amazon are able to learn even more about our sleeping, eating, recreational, sexual, work habits and behaviors as consumers?

Either way, it is interesting.

"Those who own the front door of an industry have tremendous influence on the direction of that industry".

Front Door #3(New) – Predictive Analytics & Healthcare (Potrero Medical, iRhythm Technologies LungExpert / Eon Health)

Predictive analytics & healthcare is a market that is quickly emerging in the medical device industry. The use of predictive analytics allows a patient that has already entered through door #1 and currently in a reactive patient care situation to be put into a proactive situation thanks to the use of data analytics. Medical devices that can see around corners and with a very high degree of accuracy, predict what is going to occur and thereby preemptively treat the patient before a situation escalates.

An example of this ICU/CCU technology has been developed by Potrero Medical. Their platform utilizes predictive analytics, big data and AI and empowers the 4-walls of the hospital to tremendously impact a $10B / year acute kidney injury market. There are additional technologies emerging where patients have already entered Door #1, diagnosed with heart failure, Afib, or the detection, diagnosis, and treatment of pulmonary nodules and predictive analytics, AI, machine vision and digital surgery are changing the game.

If you are in medtech, you have to dance with the one that you came with. The current medtech leaders need to understand where they are, Gretzky-up, and predict where the puck is going to be. With the current hand they are holding it may make sense to double down on their position with the FDA and secure the beachfront property that they already own with words like “diagnose”, “treat”, “analyze”, “detect” and “discover”.

In their current Class II / Class III monitoring environment the medical device players have a leg up, for now. The regulatory and clinical rigor involved for approval of such devices is substantial. The manufacturing footprint required and the supply chain of distribution has been established (sales pipelines to hospitals and healthcare providers). However, I wouldn’t count on the past being any indication for what the future holds. The legacy medtech players need to romantically get over what got them here and be sure that they are the ones that proactively put "yesterday's version" of themselves out of business before outsiders do.

While there may never be a 100% "smart device" world, it does not mean we should not pursue it, and the ones that lead that pursuit will own the front doors and influence the direction of the industry.