After Leading the Pack in Healthcare Innovation for Five Decades, the US is Slipping.
According to the PwC Medical Technology Innovation Scorecard released in 2011, researchers predict that China, India, and Brazil will experience the strongest gains in healthcare innovation over the next ten years. Meanwhile, the US, Japan, Israel, France, the UK, and Germany are set to decline.
PwC defines innovation as “value-creating novelty.” They explain that “a new idea or product becomes innovative only when it creates value...In business, innovation that is not commercialized is essentially worthless.” One can divide innovation into three categories based on the amount of value it generates: incremental (adding a new feature to an existing product), substantial (next generation), and radical (revolutionary).
For the past 50 years, the US has been an “ideal innovation ecosystem” leading US companies to dominate the $350 billion global device industry. Thirty-two of the 46 medical technology companies that earn more than $1 billion revenue annually are based in the US. According to PwC, the US’s dominance stems from its strength in five innovation pillars: powerful financial incentives, leading resources for innovation, supportive regulatory system, demanding and price-insensitive patients, and supportive investment community.
However, between 2010 and 2020, PwC expects US performance to decline on every pillar.
One of the primary reasons for the US’s drop in status is a changing marketplace. With government and private insurers determining what sells and at what price, incremental innovations that “add bells and whistles but do not significantly improve health or reduce cost” simply aren’t cutting it. Instead, “faster, better, smaller, cheaper advances…portend the future of medical technology.”
Emerging market countries, such as China, India, and Brazil, are quickly taking the lead in developing lean, frugal, and reverse engineered technologies that are simpler, newer, and more customizable. Whereas the more developed countries, like the US, are hindered by “an entrenched healthcare system infrastructure that seeks to maintain the status quo.”
PwC identifies three evident trends in the changing nature of healthcare innovation:
- The innovation ecosystem for medical device technology, long centered in the United States, is moving offshore. Increasingly, medical technology innovators are going outside the United States to seek clinical data, new-product registration, and first revenue.
- US consumers are not always the first to benefit from advances in medical technology and could eventually be last in line. Innovators already are going first to market in Europe and, by 2020, likely will move into emerging countries next before entering the United States.
- The nature of innovation is changing as developing nations become the leading markets for smaller, faster, more affordable devices that enable delivery of care anywhere and help bend the healthcare cost curve downward. These countries are free of the handicap of an entrenched healthcare system infrastructure that seeks to maintain the status quo. However, the difficulty of doing business in emerging countries and poor intellectual property protection could make these markets less attractive to multinational companies, despite their size, and could hinder these nations’ innovation leadership.
Why does innovation matter? Value-creating medical technology will lead to better health outcomes at lower costs, increased jobs, and economic growth. A study conducted by the Lewin Group for AdvaMed shows that:
- each medical technology job generates an additional 1.5 jobs;
- each medical technology payroll dollar generates an additional $0.90 in earnings; and
- each dollar of medical technology industry earnings generates an additional $0.90 in earnings elsewhere in the economy.
Thus, the countries that “can adapt quickly to the changing drivers of healthcare innovation...will reap the greatest benefits...” Because developed nations are quickly slipping in their capacity for innovation while emerging markets are rapidly gaining ground, the US needs a large scale shift in healthcare public policy to continue to compete.
Looking for a more complete summary of the PwC Scorecard? Check out PWC Medical Technology Innovation Scorecard: US Falling Behind in the Race for Global Leadership on Policymed.com. Or download the complete Medical Technology Innovation Scorecard: The Race for Global Leadership free after PwC registration.