U.S. Losing Ground In Medical Technology Innovation

By Ken Congdon, editor in chief, Health IT Outcomes

After decades of being the clear world leader in its capacity to produce the latest in medical technology innovation, the United States now has cause for concern according to a recent report released by PricewaterhouseCoopers. The report titled Medical Technology Innovation Scorecard: The Race For Global Leadership, indicates that while the U.S. continues to be the leading medical technology innovator, it is beginning to lose ground to emerging markets including China, India, and Brazil.

The report examined medical technology innovation trends from nine different countries — the U.S., the UK, China, India, Brazil, France, Germany, Israel, and Japan — between the years of 2005 and 2010. The data collected was broken down into the following five different medical technology innovation "pillars":

• powerful financial incentives, such as reimbursements for adoption of new technologies;
• resources for innovation, such as academic medical centers;
• a supportive regulatory system;
• demanding and price-insensitive patients; and
• a supportive investment community of venture capitalists and other investors.

Out of those five categories, China and India have made the most significant gains in the last five years. Furthermore, over the next 10 years it is projected that the U.S., which is traditionally strongest in all five areas, will lose ground, while China, India, and Brazil will continue to make the largest gains.

Reasons For U.S. Downfall
A key reason for this shift includes the expensive and often unpredictable FDA regulatory approval process for medical technology that exists in the U.S. This problematic regulatory structure often makes it difficult for companies (particularly smaller organizations) to bring new medical devices to market or attract early-stage investors. This obstacle, combined with an increase in international investments and R&D, has prompted several medical technology companies to look outside of the U.S. for clinical data, new-product registration, and first revenue.

The PricewaterhouseCoopers report is not the first time FDA chinks in America's medical innovation armor have been exposed. Last November, a report titled FDA Impact On U.S. Medical Technology Innovation highlighted weaknesses in current FDA processes and how these weaknesses are jeopardizing America's medical innovation leadership position. The report, prepared by Josh Makower MD with support from the Medical Device Manufacturers Association (MDMA) and the National Venture Capital Association (NVCA) called the U.S. regulatory system "unpredictable, inefficient, and expensive."

Another reason for the shift may also be due to changes in the innovation ecosystem itself. For example, the report states: "Emerging-market countries such as China, India, and Brazil, despite comparatively weak healthcare system infrastructure, are quickly taking the lead in developing lean, frugal, and reverse innovation. This type of innovation simplifies devices and processes, retaining essential functions while applying newer technologies that are more mobile, customized to consumers' needs, and less costly. Such innovation will enable these nations to leapfrog developed countries in innovative healthcare delivery."

It is widely regarded that the U.S. healthcare system maintains an infrastructure that seeks to maintain the status quo rather than reinvent itself to take full advantage of newer innovation methodologies. This is another key reason why the report states that "developing nations are becoming attractive markets for developing smaller, faster, more affordable devices that enable delivery of care anywhere and help bend the healthcare cost curve downward."

Implications Of Inaction
While definitely cause for concern, the data contained in both reports is not all doom and gloom. For example, the PricewaterhouseCoppers study ranked each of the nine nations evaluated on a scale on 1 to 9, with 9 being the highest possible score. The U.S. topped the list of nations with a score of 7.1. The next closest threats were Germany and the UK with scores of 5.4. Of the developing countries gaining ground on the U.S., China ranked highest with a total score of 3.4. So, the numbers show that the U.S. still holds a significant leadership position in regards to medical technology innovation.

The concerning data point in the study was the fact that the U.S. lost 0.3 points over the past five years in the study, while China gained 0.5 points. This trend is not necessarily preordained to continue, however. Factors related to intellectual property protection and weak local supplier networks in emerging countries could make it difficult for medical device companies to do business in other nations, stunting their growth. Similarly, proposed changes to how the FDA approves medical devices may make U.S. regulatory processes more attractive, or at least more bearable. In any case, steps need to be taken to prevent a continued slide in the area of medical innovation. Even the slightest loss in our leadership position can have serious implications on the U.S. job market and economy. Even more important is the impact a weakened leadership position can have on patient care. If fewer new medical devices are brought to market first in the U.S., American patients will have to wait to gain access to this new technology, conceivably making us the last to benefit from new innovation.

Ken Congdon is Editor In Chief of Health IT Outcomes. He can be reached at ken.congdon@jamesonpublishing.com.