The COVID-19 pandemic has accelerated the transformation of business models in the life sciences industry, with digital initiatives coming to the forefront. The combination of rapid technological innovation and disruption of traditional models of care has expedited the integration of medtech—digital health, wearables, AI-driven offerings, diagnostics, telemedicine, and other health IT solutions—in healthcare. Here are ten global medtech themes we are tracking in the coming year:
Focus on digital and data assets in life sciences/healthcare M&A
Globally, life sciences technology companies, private equity and other financial investors are focussing on the value of digital and data assets as they evaluate potential targets. We expect to see both the continued consolidation of digital health players along the lines of the Ginger-Headspace merger as well as additional acquisitions by Big Tech and Big Pharma such as Oracle’s acquisition of Cerner to bring complementary datasets, expertise and capabilities from different segments, regions, and specialties in-house to enhance product and service offerings.
Continued interest by private equity and other financial sponsors
Financial sponsors are increasingly emphasising technology and life sciences in their portfolios, and medtech brings together key positive attributes from both sectors. Much like traditional technology offerings, medtech offerings often have a shorter time to market compared to traditional life sciences offerings. Additionally, the medtech market is fragmented, which presents the opportunity to acquire and quickly combine multiple companies to achieve cost synergies and create value through scaling and platform creation. Further, demographic trends—such as an aging population, increasing chronic illnesses, healthcare worker skills shortages, the need to contain healthcare costs and emerging markets where access to care is increasing—are boosting demand for life sciences offerings across the sector, but particularly medtech enabled solutions. Moreover, unlike some other healthcare sub-sectors, medtech companies are often well positioned to serve healthcare providers (B2B) as well as patients (B2C), offering a variety of flexible business models.
Increase in complex strategic medtech collaborations
In reaction to increased scrutiny by regulators and the complexities around cross-border data transfers, we expect to see a rise in the number of complex strategic medtech collaborations. As in other life sciences sectors, we anticipate increased use of pilot/evaluation periods, options, and other collaborative structures to prepare the parties for transformative transactions. We also expect certain healthcare players to explore alternative structures, such as consortia and alliances, as they pursue their commercial and other strategic goals.
Continued scrutiny by antitrust and competition authorities
We expect global antitrust and competition authorities to continue to focus on the tech, life sciences and medtech sectors. In particular, we expect the U.S. antitrust authorities (i.e., Department of Justice Antitrust Division and Federal Trade Commission), the UK Competition and Markets Authority, European Commission, and European National Competition Authorities to continue to use their overlapping – yet at times differentiated – enforcement powers and cooperate across the Atlantic in medtech merger control, particularly for mergers involving large technology companies. Additionally, we expect those authorities to investigate and assess new theories of competition in an effort to account for the value of data and potential novel uses of combined datasets that could be derived from medtech mergers and acquisitions. We also anticipate greater interest in standards-based platform architectures to facilitate interoperability and the easy movement of data across medtech and other technology platforms.
More active engagement with FDA/EMA
We expect tech, retail, and fitness companies to initiate conversations with the U.S. Food and Drug Administration (“FDA”), the European Medicines Agency (“EMA”), and other regulators as such companies explore new medtech business lines and establish their associated regulatory compliance infrastructure. In response to industry needs and the growing amount of data that can be collected remotely through connected devices and other medtech offerings, we expect FDA/EMA to provide additional guidance regarding the use of Real-World Evidence directly collected from patients as well as other cutting-edge aspects of digital health. We also anticipate continued collaboration between the life sciences industry and regulators around the development of digital endpoints that rely on sensor-generated data collected outside of a clinical setting.
Increased support for digital health solutions in Europe
The COVID-19 pandemic accelerated the need for cost-controlling measures and the rise of online pharmacies that facilitate patient access to virtual care. In 2022, we expect to see greater demand for the funding and reimbursement of digital health solutions in Continental Europe, particularly in Germany and Switzerland. We also anticipate increased use of digital therapeutics to cost-effectively complement traditional treatments as well as the evolution or, in certain countries, the further development, of a legal framework for certification of digital apps to achieve digital therapeutic status and reimbursement.
Growth of digital health ecosystems in the Asia Pacific Region
Due to a favourable policy environment—with Singapore arguably leading the way with its Diagnostic Development Hub as a national platform for medtech development—we see many countries in Asia providing emerging companies with high profile visibility to healthcare investors, stakeholders, and decision makers. We are already seeing Asian governments focussing on digital health policy at the national level, with an acceleration in the adoption of comprehensive electronic health records and private-public partnerships. Additionally, we note the convergence of regulatory standards both within Asia (particularly among ASEAN countries) and to international norms. In 2022, we expect to see further adoption of medtech tools to enhance the effectiveness, efficiency and accessibility of healthcare in Asia.
Long-term adoption of telemedicine, virtual care and AI-based support
The COVID-19 pandemic saw the relaxation of many regulations, particularly in the telemedicine space. Many of the concerns that traditionally slowed adoption of telemedicine, such as fraud and abuse by patients and providers, failed to materialize. We expect increased use of virtual care and AI-based clinical decision support tools in remote patient monitoring systems, digital pathology and radiology. Certain specialties, such as mental health, may permanently shift to a virtual model in certain geographies. With these shifts, players across the ecosystem will need to increasingly consider data protection and cybersecurity. Consumer and patient data security are top of mind for regulators and legislatures across the globe.
Greater investments in patient-centric business models
In 2022, we expect to see increased investments by corporate VCs and other investors in personalised and scalable patient-centric solutions. By linking up telemedicine with mail order diagnostics and data collected by wearables, a very detailed patient profile can be generated without the patient ever visiting a doctor’s office. These digitised profiles can then be run through AI-powered solutions to generate care, wellness, and other recommendations. In turn, such recommendations can feed into precision medicine tailored to the patient’s unique biology and behaviour, ideally increasing efficacy and medication adherence while reducing side effects. Such data can also be used by mobile and augmented reality/virtual reality applications so patients can “gamify” and improve their health and wellness.
ESG + digital health
A significant sub-trend in the “Social” element of Environmental, Social and Governance (ESG) criteria is health and safety. Job mobility has sky-rocketed and talent retention is difficult. As a measure to facilitate employee retention and reduce employee healthcare costs, companies are increasingly valuing the promotion of employees’ physical and mental health. Employees increasingly expect innovative solutions to improve their well-being, and employers and insurers are responding by providing increased access to digital health offerings and wellness support, such as on-demand digital mental health services and virtual care programs for chronic conditions. We expect companies to continue to execute transactions and pursue innovative opportunities to provide additional health management tools for their employees. Additionally, we expect investment in medtech solutions that support health equity by reducing structural barriers that contribute to health disparities.
In conclusion, we expect the exponential growth of medtech in the past two years to continue into 2022. We expect 2022 to be a pivotal year in the medtech space as the world moves towards a post-pandemic future. The speed of growth and rapidly evolving business models will present new challenges to entities in the medtech space and to the national and supra-national bodies tasked with regulating them. Although we are seeing certain standards for interoperability emerge, medtech innovators continue to face a patchwork of laws, rules, and norms across the world. For this reason, businesses that take a global approach to compliance in the design and implementation of their medtech products and services will reap the dividends of such future-proofing as they scale their offerings.
Originally published in Med-Tech Innovation on January 11, 2022.
