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  • Digital therapeutics and artificial intelligence (AI) techniques are increasing their influence on the medical devices industry and fuelling a shift of healthcare away from hospitals into peoples’ homes
  • This poses a challenge to traditional medical device companies (MedTechs) that solely focus on manufacturing physical devices for hospital-based episodic interventions
  • Some MedTechs are changing their business models and strategies, diverting their focus to patients, and adding digital therapeutic applications to their legacy offerings
  • Zimmer-Biomet and Stryker are MedTechs that have embraced digital therapeutics and AI
  • Stryker’s CEO advises other MedTechs to ‘lean-in on AI and don’t be sceptical’
 
Leaning-in on digital and AI
 
Rapidly growing digital therapeutic technologies are disrupting hospital-based healthcare and posing a challenge to those medical device companies that are slow to complement their legacy physical product offerings with patient centric digital solutions. Such technologies have the potential to enhance patient outcomes, reduce healthcare costs, and give providers access to new revenue streams. Today, digital solutions increasingly contribute to the prevention, management, and treatment of a wide range of diseases and health conditions. Their rapid growth is driven by advances in the behavioural sciences, artificial intelligence (AI) techniques and the increase in the consumer health wearables market, which is converging with the regulated medical devices market. This convergence facilitates care to move away from hospitals and into peoples’ homes.
 
In this Commentary
 
This Commentary describes how two decades ago a world-renowned surgeon and CEO of a large hospital group warned that digital therapeutics would disrupt healthcare and push a lot of hospital-based care to peoples’ homes. For years the medical devices industry did not pay too much attention to such warnings and continued to focus on manufacturing physical products for surgeons in hospitals. The Commentary describes two leading MedTechs - Zimmer-Biomet and Stryker – which have recently begun to reinvent themselves and embrace digital therapeutics and AI techniques expected to improve patient outcomes and reduce surgical inconsistencies. We briefly develop this thought process by suggesting how machine learning AI techniques might be employed to reduce the high failure rates of spinal surgeries. The Commentary describes the large and growing global market for digital therapeutics and prescription digital therapeutics, a large proportion of which are enabled by wearables and telehealth. The market for digital therapeutics is large enough and growing fast enough to pose a threat to traditional medical device companies that solely manufacture physical offerings and fail to develop digital solutions to improve patient journeys. Although some MedTechs neither have the resources nor the mindsets to develop digital solutions, it seems reasonable to suggest that, in the medium term, they will be obliged to acquire or develop such assets to remain competitive. However, achieving this will be challenging.
  
Early warnings of change

Over a decade ago, Devi Shetty, warned health professionals to prepare for care to become heavily influenced by digital therapeutics, which he argued would move a significant portion of care away from hospitals and into peoples’ homes. This warning had resonance because Shetty is a surgeon as well as being the founder and executive director of Narayana Health, one of India’s largest hospital groups. In an interview with HealthPad in 2012 he suggested that hospitals were becoming less relevant in a new, and rapidly growing digitally driven healthcare ecosystem. “Healthcare of the future will be dramatically different to that of the past. The future is not an extension of the past. In the future, chronic illnesses will be treated at home”, said Shetty and continued,The next big thing in healthcare is not going to be a magic pill, a faster scanner, or a new operation. It’s going to be digital therapeutics, which will dramatically change the way health professionals interact with patients. Every step of a patient’s care journey will be informed by software. This will make healthcare safer for the patient and shift most of hospital activities to the home. If a physician doesn’t have to operate on a patient, the patient can be anywhere, distance doesn’t matter”. Shetty repeated this argument at a 2022 Microsoft ‘Future Ready’ conference suggesting that, “95% of people who are unwell, don’t need an operation. All they need is medical intervention, which can be enabled by digital technology and telehealth and treated in the home”.
 
Leading MedTech companies reinventing themselves
 
Two decades after Shetty’s warning, the CEOs of Zimmer-Biomet and Stryker, respectively Bryan Hanson, and Kevin Lobo, have made substantial commitments to digital therapeutic solutions that improve patient outcomes, reduce surgical inconsistencies and extend treatment and monitoring to the entirety of patients’ journeys, much of which takes place in patients' homes. Medical device companies that fail to develop software solutions or link-up with providers of such technologies could risk losing market share to emerging competitors.

 
Zimmer-Biomet and digital therapeutics

Zimmer is a player in total knee arthroplasties, which involve replacing the knee joint with a prosthetic device that carries out similar functions as a person’s own knee. The surgery has become routine. In 2020, US physicians carried out ~1m total knee arthroplasties, and by 2030, ~2m such procedures are expected to be carried out annually in the US. In 2020, the global total knee replacement market was valued at ~US$7.8bn, expected to grow at a CAGR of >6%, and reach ~US$12.5bn by 2027.

In 2021, Zimmer and Canary Medical, a software company, which had developed an implantable digital therapeutic application, received approval from the US Food and Drug Administration (FDA) to market Persona IQ: the world’s first ‘intelligent’ total knee replacement. Zimmer’s traditional knee prosthesis is embedded with Canary’s technology to provide a range of automatic, reliable, and accurate data and analyses that facilitates remote monitoring and tracking of patients' post-operative progress long after they have left hospital.  Following this success, Hanson is directing a substantial percentage of Zimmer’s R&D spend on the development of digital therapeutic solutions, and Persona IQ is expected to be the first in a pipeline of intelligent joint prostheses.

 
Stryker and digital therapeutics

In a March 2022 interview, Stryker’s CEO, Kevin Lobo, stressed his ongoing commitment to increase his company’s digital therapeutic and AI capabilities. In 2021 Stryker acquired Gauss Surgical, which had developed Triton™, an AI-enabled app for real-time monitoring of blood loss during surgery. “After a mother gives birth”, says Lobo “it’s important to calculate how much blood she’s lost. Today, this quantification is very crude and rudimentary. Triton™ allows you to use your smartphone to accurately measure the amount of blood that is in sponges as well as cannisters. It can distinguish between different liquids and measure only the haemoglobin. This is critical to determining whether a mother needs a transfusion or not. You would be shocked, even here in the US, how often a mother doesn’t get a transfusion she needs or gets one she doesn’t need”.

In January 2022, Stryker acquired Vocera Communications for ~US$3bn. Vocera is a US Nasdaq traded company founded in 2000 that makes wireless communications systems for healthcare and has developed a digital platform, which helps connect caregivers and "disparate data-generating medical devices". The platform is used by >2,300 facilities throughout the world, including ~1,900 hospitals. Interoperability between the platform and >150 clinical and operational systems reduce health risks and enhance the consistency of surgical procedures, speeds up staff response times; and improves patient outcomes, safety, and affordability. According to Lobo, "Vocera will help Stryker significantly accelerate our digital therapeutic aspirations to improve the lives of caregivers and patients".

Lobo has made AI a shared service. Stryker employs ~200 software engineers that are using AI. “This we never had before at Stryker. AI is going to be a central core competence for our company. I can see that all our business units are going to be using AI within the next two to three years”, says Lobo, who expects AI inspired digital therapeutic applications to “lead to more consistent outcomes for our procedures”. According to Lobo this is “a big deal because today there are a lot of variations in surgical outcomes”.

AI and its potential impact on spinal surgery

Spinal surgery is a good example of significant inconsistencies in outcomes. Each year, ~7.6m spinal surgeries are performed globally, and ~1.2m in the US, where spinal fusions account for ~60% of all procedures. Although ~50% of primary spinal surgeries are successful,  ~30%, ~15%, and ~5% of patients only experience a successful outcome after the second, third, and fourth surgeries, respectively. Machine learning AI techniques applied to patients’ electronic medical records (EMR) and clinical data could potentially reduce this high failure rate by predicting what product and surgical procedure could produce an optimal solution for individual patients.
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Robotic surgical spine systems, China, and machine learning
Let us briefly explain. Machine learning, a subfield of AI, is the capability of a machine to imitate intelligent human behaviour. It is the process of using mathematical models of data to help a computer to learn and adapt without following explicit human instructions. Machine learning employs algorithms (a set of instructions for solving a problem) to identify patterns in large data sets, potentially comprised of multiple sources, and then uses these patterns to create a predictive model. With increased training on more data, the results of a machine learning algorithm may become more accurate, much like how humans improve with practice. Once this point is reached, regulatory approval for the algorithm can be applied for under the FDA’s category of “software as a medical device”. Once approved, the algorithm may be used to help reduce the high failure rates of spinal surgery.
 
The digitalization of healthcare
 
MedTech leaders should be mindful of the impact that digital therapeutics is having on their industry, which goes far beyond embedding legacy physical offerings with sensors. Digital therapeutics is a rapidly growing healthcare modality, predicated upon scientific advances in the behavioural sciences and AI techniques, that help individuals to form habits, which improve their health, reduce healthcare costs and boosts productivity. Such software tools increasingly are used for the management and prevention of a range of debilitating and costly chronic conditions, including mental health challenges, substance abuse disorders, opioid-induced conditions, cancer, cardiovascular diseases, metabolic disorders, respiratory conditions, and inflammatory diseases. Chronic disease is a public health emergency. In the US, six in ten citizens are living with at least one chronic disorder. Not only are such conditions the leading cause of hospitalizations, disability, and death, but their total annual cost to the US exchequer, which includes lost economic productivity, is ~US$3.7trn.
 
The market for digital therapeutics is driven by a combination of different factors, including: technological advances, particularly consumer wearables (such as the Apple Watch and Fitbit apps, see below), the high penetration levels of mobile telephony, the growth of telehealth, the increasing demand from consumers to take more control of their health, aging populations, the large and escalating incidence of preventable chronic diseases, the need to control healthcare costs, and rising investments in digital therapeutics. According to Statista, a business data platform, in 2021 the number of people globally using digital therapeutic applications reached ~44m. Almost double the number of 2020. By 2025 the number of users is expected to reach >362m, and this only includes devices that have sought validation in clinical trials. The global digital therapeutics market is growing at a CAGR of ~31% and is projected to reach ~US$13bn by 2026, up from ~US$3.4bn in 2021.
 
An advantage of digital health modalities is their ability to deliver continuous personalized care and bridge large care gaps created by shortages of specialized health professionals. In the US, for instance, there are ~6,500 specialist physicians in full-time clinical practice to treat diabetes (endocrinologists), but there are ~27m Americans living with the condition. Similar health gaps occur in other common disease states. In developing economies, care gaps are even wider. For example, India has a chronic shortage of doctors and nurses and has ~77m people living with diabetes and ~55m people living with cardiovascular disease. The latter kills ~5m Indian citizens each year. India, like many other Asian countries, has chosen to deal with care gaps by establishing itself as a major presence in the digital health economy. By several key metrices, from internet connections to app downloads, both the volume and the growth of India’s digital economy now exceeds those of most other countries. Expect this shift to increasingly influence corporations looking to enter and extend their franchises in large and rapidly growing medical devices markets in developing economies. 

 
Cybersecurity challenges

Headwinds for digital therapeutic applications, particularly in Western democracies, include challenges of informed consent to use, safety and transparency, algorithmic fairness and biases, and data privacy. Digital therapeutic applications tend to be more vulnerable to cyberattacks than traditional medical devices, which are manufactured according to strict protocols by a handful of regulated manufacturing partners. By contrast, digital applications often rely on third-party software, which may be less rigorous than the usual medical device standards. Cybersecurity threats to digital therapeutics include data theft, identity disclosure, illegally accessing data, corruption of data, loss of data, and violation of data protection. These risks are accentuated by the fact that the modality is predicated upon the continuous monitoring of patients’ vital signs and increased connectivity between physicians, providers, payers, and patients and breaches can occur at various points along the path of data movement. Risk mitigation includes encryption protocols and the ability to control data access and data integrity. An indication of how quickly the US policy environment around cybersecurity is changing is in March 2022, the US Senate unanimously passed legislation, which would usher in sweeping changes to the federal legal landscape relating to cybersecurity and mandate companies to report damaging hacks and ransomware payments to the government.
 
Prescription digital therapeutics

Another indication of the growing significance of digital therapeutics is a recent US policy push to establish an equivalence between some wearable healthcare solutions and prescription drugs and medical devices. On 10 March 2022, two US senators, Catherine Cortez Masto, D-Nevada, and Todd Young, R-Indiana, introduced legislation to expand Medicare and Medicaid coverage to include prescription digital therapeutics. Medicare is a federally run US medical insurance programme covering ~64m citizens >65 and younger disabled people. Medicaid is a government assistance programme, funded by both federal and state governments, but run by individual states and covers the medical expenses of ~75m Americans on low incomes and with limited resources. This is significant because of the vast number of individuals covered by these health insurances and the fact that the US regulatory hurdle is one of the toughest in the world. Prescription digital therapeutics fall under the FDA category of “software as a medical device” and are subject to the same stringent requirements as drugs and medical devices, and must demonstrate evidence of clinical effectiveness, safety, and quality. After that they require a prescription for use, following a consultation with a doctor.
 
The bill would standardize US reimbursement codings for prescription digital therapeutics, which is expected to incentivize American doctors to increase prescribing them. This would not only facilitate greater access to a wide range of digital therapies for >44% of Americans receiving state healthcare support but potentially create a precedent for US private health insurance companies to increase their coverage of prescription digital therapeutics. This would significantly help to propel the modality into mainstream healthcare.



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The future of health wearables

In June 2020, as the COVID-19 crisis escalated, the FDA expanded its guidance for non-invasive patient-monitoring technologies, including the Apple Watch’s ECG function. In 2021, ~34m Apple Watches were sold worldwide; up from ~22.5m in 2018. In addition to smartwatches, there is a wide range of intelligent wearables that monitor your vital signs in real time, promote self-management of chronic conditions, help people to engage with their own health and incentivize them to change their behaviour to improve their health and lifestyles. Thus, digital therapeutic applications have the potential, among other things, to slow the development of chronic disorders and reduce hospital visits and readmissions. The size and growth rate of the wearable health technology market influences the decisions of insurers, employers, health providers and producers. For example, insurers use data from wearables to adjust their premiums,  corporates derive benefits from their employees using wearables, which include healthier company cultures, a reduction in employee turnover, an increase in workplace safety and enhanced efficiency.  
In the US, consumers' use of wearables increased from 9% to 33% in four years as of 2021. The use of wearables is likely to increase as they become more conventional, connectivity expands, and more accurate sensors are developed. Such developments are likely to provide further incentives for insurers and employers to use wearables to develop healthier lifestyles to boost profitability and cut costs. According to Gartner, a technological research and consulting firm, in 2021 worldwide user spending on wearable devices was ~ US$82bn, ~18% increase from the previous year. This seems reflective of consumers, encouraged by the COVID-19 pandemic, becoming more conscious about their health, wellbeing, and changes to their lifestyles. According to a 2021 Deloitte’s survey, ~58% of US households own a smartwatch or fitness tracker, and ~39% of Americans personally own a smartwatch or fitness tracker. ~14% of consumers have bought their fitness devices since the start of the COVID pandemic in 2020, and activities such as counting steps, workout performance, heart health, and sleep quality monitoring are amongst the most popular activities.
 
Telehealth

Another factor driving the shift of care away from hospitals to peoples’ homes is the development of telehealth. The COVID-19 pandemic caused telehealth usage to surge as consumers and providers sought ways to safely access and deliver healthcare. According to the US Centers for Disease Control and Prevention (CDC), by late March 2020, telehealth had increased >154% compared to the same period in 2019.  Since the peak of the COVID-19 pandemic, telehealth has become a permanent part in the delivery of healthcare. The telehealth market is expected to rise to >US$397bn by 2027 from US$42bn in 2019. According to Devi Shetty the history of healthcare will be written in two sections, BC, and AC: before COVID and after COVID.COVID-19 disrupted and transformed healthcare and forced inward looking healthcare professionals to rapidly change and adopt digital therapeutic technologies”, says Shetty.
 
The legacy of the COVID-19 related surge in digital therapeutics is an opportunity to make permanent hybrid care modalities created during the pandemic. The foundations for the opportunity are described in a 2021 McKinsey research report, which suggests that the pandemic, (i) accelerated the growth and acceptance of telehealth, which “stabilized at ~38X higher than before the crisis”, (ii) improved the attitudes of consumers and providers towards telehealth, (iii) made permanent some regulatory changes put in place during the pandemic (for example, Medicare and Medicaid’s expansion of reimbursable telehealth codes introduced in 2021 for US physician fee schedules, which have been made permanent), (iv) fuelled venture capital’s digital health investments, and (v) drove the adoption of digital therapeutics across a wide range of disease states. 
Shift in mindset

In the changing healthcare ecosystem, a primary strategic objective for MedTech leaders is to define relevant planning cycles and efficaciously manage from one cycle to the next. The current planning cycle in the medical devices industry is influenced by data, AI techniques, and patient centric digital therapeutic solutions. To effectively manage this cycle, MedTechs might consider copying Zimmer and Stryker and acquire complementary digital therapeutic assets and capabilities. Adapting M&A knowhow and experience to make such acquisitions is an option but not without risk.
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MedTech must digitize to remain relevant
This is because enterprises with digital assets and capabilities have different cultures, development practices, reimbursement policies and data management policies and practices compared to traditional medical device companies. It seems reasonable to suggest that poorly managed acquisitions could result in MedTechs ending up with a graveyard of unfulfilled digital technologies. To reduce this risk industry leaders might consider following Stryker’s example and recruit experienced digital and AI specialists, and make them a core competence.
 
Takeaways

In the near-term, disruptive digital technologies present both challenges and opportunities for medical device companies. Zimmer and Stryker have started to reinvent themselves through parallel efforts to digitize their legacy businesses, acquire complementary digital assets, and make AI a core competence. However, many MedTechs have not changed their business models and still focus R&D on making small improvements to existing product offerings. Corporate leaders considering changing their business models and strategies should be mindful that digital and AI assets and capabilities with the potential to create disruptive growth need to be protected from unnecessary bureaucratic burdens common in many traditional companies. To survive and prosper, managers might consider rethinking their operating models for innovation-led growth. The most effective models appear to combine a strategic process with multiple mechanisms for driving innovation development and scale-up. Stryker’s shared service of AI expertise is one example of a contrived core “capability” expected to transform legacy devices into growth engines that could help secure the company’s long-term survival. MedTech CEOs might do well to follow Lobo’s advice and, “lean-in on AI and do not be sceptical.”.
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Over the past decade HealthPad has published ~30 Commentaries on significant developments in cancer therapies. On this World Cancer Day, we would like to share our contribution, to show how scientific knowledge and therapies have progressed to improve the lives of people living with cancer. The genesis of the HealthPad platform owes a lot to Professor Hani Gabra, a cancer expert who, together with many of his colleagues, believe that it is important to provide people with easy and convenient access to premium information to help them make informed medical and lifestyle choices and improve patients’ treatment journeys. 
 
 
In addition to our Commentaries, HealthPad has built a unique and exclusive premium cancer content library of >1,100 videos, which address peoples’ frequently asked questions across several cancer pathways. The videos have been contributed by leading oncologists and scientists from world renowned medical institutions across the world and can be accessed anytime, anywhere, anyhow.
 
We reconfirm HealthPad’s commitment in helping to make cancer less scary by empowering people with the knowledge we have gathered and shared in our Commentaries.
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PEACE, HEALTH AND BEST WISHES FOR 2022
from the HealthPad Team
 
The HealthPad Team wishes you and your loved ones a very happy Festive Season and a peaceful and prosperous New Year.

2021 might not have been the year we were hoping it would be, but it has shown once again that when communities work together, great things can be achieved. May this spirit endure once again.

Thank you for your continued support throughout 2021, we look forward to another year together!
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  • MedTechs have built proficiencies to successfully create and market physical devices predominantly for the US and Western European markets
  • To remain relevant in the rapidly changing healthcare ecosystem they will need to develop advanced digital and data capabilities and increase their penetration of Asian markets, which will present challenges for most of them
  • Will companies be forced to decide whether to remain hardware manufacturers or become software enterprises, or can they look both ways and prosper?
  • Given the rate of market changes, the next 5 years represent a window of opportunity for traditional MedTechs to pivot and transform their strategies and business models
 
Can elephants be taught to dance?
MedTech’s strategic challenges
 
MedTechs are at a crossroad of manufacturing physical devices and developing software solutions. Both aim to deliver value by enhancing patient outcomes while reducing costs. Can these two scenarios co-exist, or will industry leaders be forced to choose one or the other?
 
For decades, many companies have displayed a deep-rooted reluctance to transform their business models and adopt digitalization strategies and have used M&A activity to become bigger. This suggests that a significant proportion of MedTech leaders are likely to manage increased competition and changing healthcare ecosystems by accelerating M&A activities, which are familiar to them and require no significant change. However, such activities alone will not future-proof companies. Over the next five years, “informed” MedTechs will benefit by shifting away from their current business models that depend on developing and selling physical products predominantly to hospitals in the US and Western Europe and move toward providing patient-centric software solutions as partners in dynamic, connected international healthcare ecosystems.
 
M&A activity to enhance scale

For decades, M&A activities have helped MedTechs to acquire mature assets to tuck into their existing sales and distribution channels. More than anything, this has assisted them to increase their scale, while optimising their portfolios, reducing competition, and improving profits. Over the past decade, when Western markets became more uncertain, monetary policy tightened, technologies advanced, and global economic growth slowed, MedTechs responded by exploiting the fall in the cost of capital to increase their M&A activities with the main purpose of increasing their scale: bigger was generally perceived by industry leaders to be better.
 
Before the COVID-19 pandemic crisis, 2020 was expected to be a strong year for MedTech’s M&A. However, the disruptive impact of the coronavirus outbreak slowed the industry’s M&A performance, and between July 2019 and June 2020, M&A expenditures plunged by 60% compared to the previous 12-month period. Activity returned in Q3, 2020, and today, although high asset valuations and increasing cost of capital have impacted M&A transactions and re-focused attention on organic growth, there are signs that a M&A buyer’s market is developing, but with a difference.
 
The difference is a significant number of M&A transactions do not appear to be focussed entirely on acquiring scale. While there are still some advantages to increasing scale, there are disadvantages, which include having to integrate and service more customers, more employees, and more institutional investors, and this often contributes to strategic rigidities.

 
The demise of scale

The significance of scale was first elaborated in 1937 by Nobel economics laureate Ronald Coase in his seminal paper, The Nature of the Firm, and ~50 years later, repeated by Michael Porter in his book, Competitive Advantage. Both Coase and Porter suggested that scale gained from reducing the ratio of overhead to production would increase the power of firms in markets. In 2013, Rita McGrath challenged this thesis in, The End of Competitive Advantage, by suggesting that bigger was not necessarily better. According to McGrath, in an increasingly high-tech environment, more important than size, is whether enterprises have access to technical capabilities, which can drive top-line growth in dynamic market settings.


Recapitalized MedTech’s M&A firepower
 
According to a 2020 report on the state of the MedTech industry, published by EY, a consulting firm, between July 2019 and June 2020, MedTechs took advantage of low interest rates, and financing levels more than doubled to a record US$57.1bn compared to the previous 12 months; with >40% resulting from debt financing. Thus, as we emerge from restrictions imposed by the COVID-19 pandemic, there is a lot of liquidity in the market and larger MedTechs have significant M&A firepower. Will they use this to become bigger, or will they use their capital to make strategic investments in new technologies and to penetrate large rapidly growing Asian markets?
M&A driving a shift to digital health

In H1,2021, the MedTech sector recorded a total of 33 M&A deals, up from 25 in the whole of 2020. There is some evidence to suggest that some companies in the sector are using their renewed M&A firepower to acquire high growth digital and AI opportunities that can be integrated into their existing product offerings to provide access to new revenue streams and help companies pivot away from being solely dependent upon manufacturing physical devices. We briefly describe four such deals.
 
In January 2020, as the first COVID-19 case was reported in the US, Boston Scientific paid US$0.925bn for Preventice, a developer of mobile health solutions and remote monitoring services, which connect patients and caregivers. Its digitally enabled service has the potential to reduce healthcare costs and improve patient outcomes. In February 2020,  Medtronic, acquired, for an undisclosed sum, Digital Surgery, a London-based privately-held pioneer in surgical AI, data and analytics. The acquisition is expected to accelerate Medtronic’s plans to incorporate AI and data into its laparoscopic and robotic-assisted surgery platforms. In December 2020 Philips acquired BioTelemetry for US$2.8bn. BioTelemetry is a US-based provider of remote cardiac diagnostics and monitoring, with offerings in wearable heart monitors and AI-based data analytics and services. The deal provides Philips with the capability to expand its remote monitoring business outside of hospitals and into lower cost day-care settings and patients’ homes. One of the largest healthcare deals of 2020 was Teladoc’s US$18.5bn acquisition of Livongo, a remote patient monitoring company, founded in 2014, to build a cloud-based diabetes management programme, linking a person’s glucose monitor to personalized coaching to help control blood sugar levels. In 2019, just one year before Teladoc’s acquisition, Livongo IPO’d at a valuation of US$355m, and expanded its products and services to cover high blood pressure and behavioural health with an ultimate goal of leveraging digital medicine to address “the health of the whole person”. 
 
These four acquisitions are from market segments, which run parallel to traditional medical devices and are often perceived by some MedTech executives to be competitors destined to be controlled by giant tech companies such as Apple, Huawei, and Samsung. However, given the rate at which technology is developing, the speed at which MedTech and pharma are converging, and the renewed liquidity in the market, it might be more efficacious for MedTechs to view such specialised digital health companies as partners rather than competitors.
 
Technologies helping MedTechs to develop actionable solutions

Today, many new biomedical technologies are being developed and benefit from continuous miniaturization, enhanced battery life, cost reductions and increasing data storage capacity. One such technology is photoplethysmography (PPG), a non-invasive, uncomplicated, and inexpensive optical measurement method that employs a light source and a photodetector to calculate the volumetric variations of blood circulation. PPG is employed in smartphones and wearables that are used by billions of people worldwide. There is a large and growing global research endeavour to develop more effective and sophisticated PPG algorithms that could be attached to traditional, non-active medical devices and implants to provide accurate and reliable real time monitoring of a wide range of conditions.
 
Outside of specific health monitoring technologies, few MedTechs collect, store, and analyse data generated by their existing traditional devices and implants, and even fewer use such data to facilitate real time, monitoring of conditions. However, some companies are beginning to transform their dumb devices into intelligent ones to gain access to new revenue streams. For example Zimmer-Biomet’s smart” knee, utilizes a biosensor [an analytical device that uses natural biological materials to detect and monitor virtually any activity or substance] to generate self-reports on patient activity, recovery, and treatment failures, without the need for physician intervention and dependence upon patient compliance. 
 
According to Roger Kornberg, Professor of Structural Biology at Stanford University and Nobel Laureate for Chemistry, “the excitement of biosensors pertains to their microscopic size and the ease with which they can transmit wirelessly in real time information about responses to treatment from an implantable device within the body”. [See video below].
 
A fast-growing field of AI is tiny machine learning (TinyML), which has the capability to perform on-device, real time, sensor data analytics at extremely low power, typically in the mW [one thousandth of a watt] range and below. The technology is expected to make always-on use-cases economically viable and accelerate the transformation of dumb devices and implants into smart ones.

 
 
Changing traditional R&D models
 
In their search for innovative healthcare solutions, MedTechs might consider increasing their R&D spend and reorganizing their R&D function. MedTech’s R&D spend, as a percentage of revenues, has slowed compared to levels the industry recorded prior to the 2007 financial crash. Overall, the industry tends to allocate more of its capital to share buybacks and investor dividends than to R&D. This strategy may please shareholders in the short term, but it suggests some uncertainty among industry leaders about how to invest for growth in the longer term and could have a medium- to long-term potential downside. 
 
Further, a significant percentage of R&D spend goes on tweaking existing products rather than creating new ones. Given that the future of the industry is dependent upon innovation, it seems reasonable to suggest that, as competition increases and markets tighten, MedTechs will need to consider increasing their R&D resources and capabilities to develop innovative technologies that provide improved actionable solutions across entire patient journeys.

Unlocking value from R&D innovations might require a different culture and new operating models to the ones that tend to prevail today. Instead of lengthy R&D cycles fixed on the launch of a physical product, it could be more beneficial to focus on developing minimum-viable patient-centric solutions, which research teams can deploy early, test, learn from and enhance. Moreover, R&D strategy sessions might benefit by including a mandatory question: “In the near- to medium-term, are there any evolving technologies likely to disrupt a specific market segment important to our company?”.

 
The potential of innovative technologies to disrupt markets
 
To illustrate the significance of this question, consider traumatic brain injury (TBI), which each year affects ~69m individuals worldwide. There is no cure for the condition, and the cornerstone of its management is to monitor intracranial pressure (ICP). [Pressures >15 millimetres of mercury (mm Hg) are considered abnormal, and ICP >20 mm Hg is deemed pathological]. An ICP monitor is expected to be easy to use, accurate, reliable, reproducible, inexpensive and should not be associated with either infection or haemorrhagic complications. Currently, the gold-standard is to drill a small burr hole in the skull, insert a catheter and place it in a cavity [ventricle] in the brain, which is filled with cerebrospinal fluid (CSF). Such an invasive intraventricular catheter system is accurate and reliable, but it is also a health-resource-intensive modality, which runs a risk of haemorrhage and infection. Recent advances in PPG and other technologies have accelerated research developing non-invasive techniques to continuously measure and monitor ICP, which in the medium-term, could replace the gold standard and avoid drilling a hole in a traumatised patient’s skull.   
  
Pros and cons of the COVID-19 crisis

One beneficial outcome for MedTechs of the COVID-19 crisis has been the change in regulatory norms, which favour innovation. In the US, the FDA reduced barriers to market entry for new devices by increasing its emergency use authorization (EUA), which fast-tracks the availability of medical devices. Also, at the onset of the pandemic, the EU deferred for one year the implementation of its Medical Device Regulation (MDR), which governs the production and distribution of medical devices in Europe. In mid 2021, when governments began removing the outstanding legal restrictions imposed to reduce the impact of the third wave of the COVID-19 pandemic, some MedTechs, which had invested in remote communication strategies, chose to build on the changes they had made and invest further in digitalization AI strategies, while many others reverted to their labour-intensive supply channels. According to a June 2021 Boston Consulting Group (BCG) study, “On average, MedTech companies are still spending two to three times more on selling, general, and administrative (SG&A) expenses (as a percent of the costs of goods sold) than the typical technology or industrial company”.
 
A potential disadvantage for MedTechs of the COVID-19 pandemic is that it can lead to an excessive focus on short-term challenges and put off addressing longer-term strategic threats.
 
MedTech executives have never had it so good

Why are some companies reluctant to transform their strategies and business models?

We suggest that a deep-rooted resistance to change results from MedTechs “never having it so good” over a long period. Indeed, for several decades before the global economic crisis in 2007 and 2008, the medical device market was buoyed by limited competition, benign reimbursement policies, aging populations, and a slower pace of technological change compared to today. These factors promoted double-digit growth rates, investor confidence, and solid valuations. This fostered a sense of security among C suites and encouraged “business as usual” agendas, which tended to focus on sharpening legacy products, legacy business models, legacy forms of market access and pricing and legacy capabilities.
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Who should lead MedTech?

The 2007-8 financial crisis only inflicted a short-lived blow to the industry and most companies bounced back relatively quickly. Throughout the decade that followed, MedTechs maintained solid financial performance, steady growth, investor confidence and robust valuations. Many enterprises across the industry ended 2019 in a strong position, with some trading at 52-week highs and the industry overall growing revenues at ~6%.
In 2020, the COVID-19 pandemic threw some segments of the industry off course by a substantial reduction in elective care. However, by 2H 2021, most MedTechs had recovered, albeit their annual growth in revenues did not recapture the heights of the early years of the 21st century.
 
MedTechs became like elephants

It seems reasonable to suggest that decades of commercial success shaped the mindsets of industry leaders and resulted in MedTechs becoming like elephants. In 1990, James Belasco published, Teaching the Elephant to Dance, in which he likened organizations to elephants. The book describes how trainers shackled young elephants to a stake securely embedded in the ground so that they could not move away despite their efforts. By the time the elephants became fully grown and had the strength to pull the stakes out of the ground, they were so conditioned they did not move and remained in position even though most were no longer tethered to the stakes. The author uses this analogy to warn how companies can become stuck in obsolete working practices, which are obstacles to their future commercial success.

In 1993, IBM, the world’s largest manufacturer of mainframe computers, had become “an elephant” continuing to produce hardware appliances when the industry was embracing software solutions. IBM, which had posted a US$8bn loss, appointed Lou Gerstner, an executive from outside the computer industry, to turn the company around. Nine years later, IBM had become one of the world's most admired companies. In a book published in 2002, entitled, Who Says Elephants Can't Dance?, Gerstner described how he successfully changed IBM from a maker of hardware to a service orientated company.
 
A 5-year window of opportunity
 
A doubt as to whether many traditional MedTechs can be taught to dance was sewn in a 2021 BCG study cited above, which suggested that enterprises “do not yet have the capabilities in place to develop and implement a next-generation, omnichannel commercial model”. Ten years from now, the MedTech market is projected to be significantly different to what it is today, and what it has been for the past four decades. However, it seems reasonable to assume that because of its size and growth rate, [~US$0.5tn, growing at a compound annual growth rate (CAGR) of ~6% and projected to reach US$0.75tn by 2030], many industry leaders will not feel any pressing need to transform their strategies and business models in the short-term.

However, with a rapidly changing healthcare ecosystem, it seems reasonable to suggests that, to remain relevant after 2030, MedTechs will need to use the next five years as a window of opportunity to prepare solutions that enable them to focus on entire patient treatment pathways, create best-in-class distributive services, and develop digital marketing and sales capabilities that help to expand their influence beyond selling hardware. This will require targeting the “right” market segments, developing the “right” solutions, funding in the “right” R&D, creating the “right” playbooks; and recruiting, retaining, and developing the “right” people with the “right” capabilities.

 
From restricted staged events to real time distribution

Companies are rich reservoirs of clinical data and expertise, but the data tend to be kept in silos and distributed intermittently to a limited number of clinicians and providers at “staged” events. Digital technologies can unlock these assets and facilitate real time, online marketing, self-service portals, and virtual engagements; all of which can provide physicians and providers with unprecedented access to knowhow that can help improve the quality of care and reduce costs. However, shifting to such a distributed care model to drive profitability requires developing a digital, remote, marketing and sales force, which is supported by data analytics, virtual demonstrations, automated call reporting, and AI-supported coaching tools.
 
The reduction of obstacles to data rich digital distributed care strategies

While distributed computing and communications systems have significantly enhanced a wide range of commercial organizations, they have yet to take root in MedTech settings, despite data sharing being critical in modern clinical practice and medical research. A challenge for MedTechs is to engage in data sharing that reconciles individual privacy and data utility. This will entail universally agreed AI and machine learning practices. Although there are sophisticated technologies that can help with this, MedTech’s management and information systems’ personnel may not be prepared to effectively reconcile these competing interests and push for universal data standards. According to a US National Institute of Health report, “The lack of technical understanding, the lack of direct experience with these new tools, the lack of confidence in their management, the lack of a peer group of successful adopters (except for a few academic medical organizations), and uncertainties about reasonable risks and expectations all leave conservative organizational managers hesitant to make decisions”. 
 
While the mindsets of some industry leaders appear to be obstacles to change, other obstacles to transformative business models have been reduced. For instance, privacy is now less of an obstacle for data-rich strategies than it once was. Increasingly, patients show a willingness for their clinical and personal data to be used anonymously in the interest of improving healthcare. Further, regulators’ attitudes towards data are changing.  In September 2021 the FDA published its AI enabled devices that are marketed in the US, which embrace the full scale of approvals from 510(k) de Novo authorizations to Premarket (PMA) approvals. The FDA’s initiative comes at a time of continued growth in AI enhanced digital offerings that contribute to a variety of clinical spheres, and the increasing number of companies seeking to enter this space. There are ~130 algorithms approved for clinical use in the US and Europe.
 
A recent report from Frost & Sullivan, a US market research company, suggests that although in the near-term, traditional medical devices will continue to make up the bulk of the market, after 2024, they are expected to grow at only a CAGR of ~2%. By contrast, digitally enhanced medical devices, and algorithms, which facilitate managing patients remotely and non-intrusively, are expected to grow at a CAGR >14% and reach US$172bn by 2024.

 
The shift to low-cost settings

Over the next five years, as technology advances, populations age, healthcare costs escalate, patient expectations continue to rise, and markets tighten, we can expect the shift away from hospitals to outpatient settings and other lower-cost venues to accelerate. This move to a distributed care model is a headwind for traditional MedTechs, whose principal focus is provider systems rather than patients, and a tailwind for new players entering the market unencumbered by legacy supply chains, costs, and infrastructures. According to an EY 2020 study, ~70% of start-ups in the diagnostics segment have products applicable to the point-of-care setting.
 
Corporate venture funds

To help traditional MedTechs dance leaders of medium sized, well capitalized enterprises might consider copying the world’s largest MedTechs and create corporate venture capital (CVC) funds to invest in tech-savvy start-ups. While 7 of the top 10 MedTechs by sales have venture arms, many company leaders shy away from investing in early-stage, unproven technologies. However, CVC funds offer traditional corporates access to innovations and scarce science, technology, engineering, and mathematics (STEM) skills, which are necessary to capture and analyse data, deliver enhanced care, and drive biomedical R&D with the potential to improve patient outcomes and lower costs.
 
The latest giant MedTech to launch a CVC fund is Intuitive Surgical. In Q4 2020, the company started disbursing capital from its initial US$100m venture fund to start-ups developing digital tools and precision diagnostics, with an emphasis on minimally invasive care. Intuitive is the world’s largest manufacturer of robotic surgical systems for minimally invasive surgery. Since its lead offering, the da Vinci Surgical System, received FDA approval in 2000, it has been used by surgeons in all 50 US states, ~67 countries worldwide and has performed >8.5m procedures.

In the first three quarters of 2020, CVCs participated in investment rounds worth US$1.2bn, which amounted to >25% of the total venture funding the sector raised. The lion’s share went to products and solutions that address digital therapies, telehealth, and treatments for low-cost settings. Such technologies are positioned to continue receiving significant funding in 2022 and beyond. A 2021 study by Deloitte, a consulting firm, suggests that MedTech start-ups, unencumbered by legacy products and practices have capabilities, which stretch beyond traditional devices that support episodic care, and focus on distributed solutions, which address the full patient journey: from diagnosis to rehabilitation. The study also maintains that technologies employed by these enterprises are getting smarter, with ~70% of them including digital AI capabilities.
 
Further, MedTechs with CVC arms might consider allowing their digital business functions to operate within a different organizational framework, giving them greater decision-making authority and enhanced freedoms.

 
Asia Pacific MedTech markets

Before closing let us briefly draw attention to the increasing significance of the emerging Asia Pacific MedTech markets. For the past 4 decades, industry leaders were not obliged to seriously consider penetrating markets outside the US and Western Europe because ~70% of global MedTech revenues came from the US and Western Europe. However, as Western markets tighten, and become increasingly competitive, attention is moving East towards Asia.

Over two decades ago, a handful of giant MedTechs began investing in Asia, but most companies in the sector preferred not to risk navigating such unfamiliar healthcare territories. An early investor in the region was Medtronic, which, since ~2000, has achieved significant growth from a multi-faceted strategy that included exporting innovative products from the US to China, establishing R&D facilities in China to design products specifically for the needs of the Chinese market, crafting partnerships with Beijing to educate patients in under-served therapeutic areas, and acquiring domestic Chinese MedTech companies.

Because of the current political stand-off between the two countries, such a China strategy is not so feasible as it has been over the past two decades. However, it is worth bearing in mind that Asia is comprised of 48 countries with a combined population of ~5bn, which is projected to reach 8.5bn by 2030, [~60% of the world’s population], with 1 in 4 people >60. In 2020, ~2bn Asians were members of the middle class, and by 2030, this demographic is projected to grow to ~3.5bn. Moreover, health insurance coverage in the region is expanding. By contrast, the middle classes in the US and Western Europe are smaller and growing at lower rates. According to the Pew Research Center in 2018, ~52% of the 258m US adults (>18 years) was considered middle class. The dynamics of the Asian middle class is driving a large and rapidly growing Asian MedTech market, which is on the cusp of eclipsing Europe to become the world’s second largest regional market, growing at a CAGR of ~9%.

Further, the region has become an important source of technological innovation. For example, in 2020, its digital health market was valued at ~US$20bn and projected to grow at a CAGR of ~21% until 2027, when its value is expected to be ~US$80bn. Despite its complexities and unfamiliarity, Asia represents a substantial opportunity for MedTechs. However, for Western enterprises to succeed in Asian markets they will require in depth local knowhow, long term commitments, agility, innovation, and robust strategies that can prosper under fiercely competitive conditions.  

 
Takeaways

MedTechs have built capabilities to develop, launch, market and sell physical devices. With some notable exceptions, few have the capabilities necessary to drive significant growth from digitalization and data strategies. Sharpening traditional commercial procedures and practices alone is unlikely to significantly increase growth, especially when competitors and new entrants have business models that are more effective, promote better patient outcomes and provide greater value to healthcare systems.  

MedTechs could play a significant role in the transformation of healthcare, but not without risks and some significant changes to the way they operate. Over the next five years, as competitive pressures increase, industry leaders have a window of opportunity to pivot. Here are six strategic questions that might help in this regard:
  1. Should we support significant investments in digitalization, and data analytics to improve our supply chains and R&D endeavours to convert dumb devices and implants into smart ones?
  2. What are the top three actionable innovations that we can develop in the near-term to provide access to new revenue streams?
  3. What are the top three technologies likely to disrupt our product offerings in the near- to medium-term and what should we do about them?
  4. Can we remain a hardware manufacturer while developing significant software solutions that embrace entire patient journeys or must we choose between manufacturing and software?
  5. How do we create valuable solutions that enhance patient journeys from data?
  6. How are global markets changing in ways that are not reflected in our company’s discussions?
The answers to these questions will help to shape a corporation’s strategy, and inform M&A and CVC activities, “must have” capabilities, desired partnerships, R&D spend and agendas, and the type of business models to pursue. All critical for teaching elephants to dance.
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Because of recent concerns raised by the UK’s Health Security Agency (UKHSA),colleagues suggested that we republish a Commentary entitled, “Slowing the steep rise in antimicrobial resistance”, which features Nobel Laureate Roger Kornberg. Since it was first published it has received >15,000 openings. UKHSA warned of a “hidden pandemic” this winter because last year, in the UK, 1 in 5 infections were resistant to antibiotic. The organization feared that as COVID-19 restrictions are lifted social mixing is likely to spread infections some of which will be resistant to antibiotics.
 
  • Currently 700,000 people die each year from Antimicrobial Resistance (AMR) and this could rise to 10 milion by 2050
  • AMR could make routine surgeries and childbirth as dangerous and lethal as in the pre-antibiotic era killing millions and costing trillions worldwide
  • Doctors inappropriately prescribing antibiotics for minor aliments shorten the useful life of antibiotics threatening modern medicine as there is an antibiotic pipeline deficiency
  • 90% of GPs feel pressured by patients to prescribe antibiotics
  • 70% of GPs are unsure whether sore throat and respiratory infections are viral or bacterial resulting in 50% of sore throats receiving antibiotics
  • Clinical diagnosis leads to 50% of patients with a sore throat being prescribed antibiotics without having Group A Streptococcal infection
  • 30% of patients with pharyngitis will not be treated but will be infected with Group A Streptococci
  • 24% of doctors say they lack easy-to-use diagnostic tools
  • 10m prescriptions for antibiotics are handed out in England each year to patients who do not need them
  • A Nobel Laureate has developed a new technology to provide rapid, accurate, cost-effective diagnosis of bacterial sore throat resulting in informed prescribing and reducing unnecessary antibiotic usage
 
Slowing the steep rise of antimicrobial resistance
 
Should we listen when a professor of medicine and a Nobel Laureate says that the technology already exists to develop a cheap hand held device, which can rapidly and accurately diagnose a bacterial sore throat?  
 
Without such a device to determine whether minor ailments require antibiotics, doctors will continue to prescribe them, and thereby contribute to the steep rise in Antimicrobial Resistance (AMR). In 2016 the National Institute for Health and Care Excellence (NICE), the UK government's NHS watchdog, reported that as many as 10m prescriptions for antibiotics are handed out in England every year to patients who do not need them. According to a 2016 report on AMR, by 2050 a staggering, “10m people will die from AMR each year . . . . The world needs rapid diagnostics to improve our use of antibiotics,” says the report.
 

Sore throat
 
Acute throat infections are among the most common infectious diseases presented to primary healthcare and A&E departments and are frequently misdiagnosed. They are responsible for 2 to 4% of all primary care visits. Viruses cause 85% to 95% of throat infections in adults and children younger than 5. For those aged 5 to 15, viruses cause about 70% of throat infections, with the other 30% due to bacterial infections, mostly group A β-hemolytic streptococcus (GAS), which can cause 0.5m deaths a year. There are challenges in diagnosing GAS because its signs and symptoms are often indistinguishable from viral and other causes of sore throat.
 
If a doctor intends to treat suspected GAS pharyngitis, it is generally recommended that laboratory confirmation of the presence of GAS be sought to limit unnecessary antibiotic prescription. The gold standard laboratory investigation is of a bacterial culture of a throat swab. However, this is expensive, and there is a relatively long lag time between the collection of the specimen and final microbiological diagnosis: so doctors tend not to it. 
 
Rapid antigen diagnostic tests (RADTs) are an alternative to the gold standard laboratory test for GAS. However, widespread use of RADTs has been hindered by low sensitivity for most commonly used RADTs (immunoassays). Reviews of RADTs performance have identified significant variability in the diagnostic accuracy, especially sensitivity, between different test methodologies.

 
Urgent need for rapid and accurate diagnostic test
 
A principal recommendation of a 2016 report on AMR is to ban doctors from prescribing antibiotics until they have carried out rapid tests to prove the infection is bacterial. The report also stresses that doctors need urgent help to temporise their use of antibiotics if AMR is to be reduced.

Notwithstanding, the AMR challenge is bigger than doctors overprescribing antibiotics. Farmers feed antibiotics to livestock and poultry, and spray them on crops to make our food supply ‘safer’. We dump antibiotics in rivers, and even paint them on the hulls of boats to prevent the build up of barnacles. However, it seems reasonable to suggest that successfully reducing doctors’ over prescribing antibiotics would represent a significant contribution to denting the burden of AMR. To do this, “We need a step change in the technology available . . . Governments of the richest countries should mandate now that, by 2020, all antibiotic prescriptions will need to be informed by up to date surveillance and a rapid diagnostic test,” urges the AMR report.
 
The technological ‘step change’, which the report says is essential, has already been achieved, says Roger Kornberg, Professor of Medicine at Stanford University and Nobel Laureate for Chemistry.Advanced biosensor technology enables virtually instantaneous, extraordinarily sensitive, electronic detection of almost any biomarker (protein, nucleic acid, small molecule, etc.). With relatively modest resources it would only be a matter of months to develop a simple, affordable handheld device, which not only would tell you immediately and accurately whether a sore throat requires antibiotics or not, but would also tell you which antibiotics you require, and for how long you should take them,” says Kornberg. See videos below in which Kornberg describes how tried and tested biosensor technology could facilitate rapid and accurate diagnosis of a sore throat.


Click to watch a cluster of videos by Professor Kornberg on Antimicrobial resistance and biosensor technology
Serious and growing threat
 
Each year, millions of people throughout the developed world present themselves to their doctors with minor ailments, such as a sore throat. 97% of these patients demand antibiotics although 90% of their ailments are viral and therefore do not require antibiotics. 90% of doctors, who do not have the means to rapidly and accurately determine whether a minor ailment requires antibiotics, feel pressured by patients to prescribe them.
 
A 2014 study of four million NHS patients from 537 GP practices in England found that more than 50% of those presenting with a minor ailment were prescribed antibiotics, despite warnings that the medication will not help, but increases their risk of developing resistance. The study, by scientists at Public Health England and University College London, published in the Journal of Antimicrobial Chemotherapy, found that antibiotic prescriptions for minor ailments increased by some 40% between 1999 and 2011. 70% of GPs surveyed said they prescribed antibiotics because they were unsure whether patients had viral or bacterial infections, and 24% of GPs said it was because of a lack of an easy-to-use, rapid and accurate diagnostic device.
 
Superbugs will kill millions and cost trillions
 
Concerned about the rising levels of drug resistance whereby microbes evolve to become immune to known drugs, in 2014 the UK Government, in collaboration with the Wellcome Trust, commissioned a review of the large and growing global burden of AMR. Jim O’Neill, a former Goldman Sachs chief economist who coined the phrase “BRICS”, was appointed to lead the endeavour and propose actions to tackle AMR. In 2015 O’Neill was elevated to the House of Lords, and appointed Secretary to the UK government’s Treasury.

During the 18 months it took O’Neill to complete his final report, one million people worldwide died from AMR. At least 25,000 people die each year in Europe from AMR. According to the Centers for Disease Control and Prevention (CDC), more than 2m people in the US become infected with resistant bacteria every year, and at least 23,000 of them die. According to O’Neill, “If we don't do something about antibiotic resistance, we will be heading towards a world with no-antibiotic treatments for those who need them.”
 
A threat to modern medicine
 
O’Neill’s findings are congruent with warnings from the World Health Organization (WHO), which suggests AMR is a crisis worse than the Aids epidemic – which has caused some 25m deaths worldwide – and threatens to turn the clock back on modern medicine. The misuse of antibiotics has created, “A problem so serious that it threatens the achievements of modern medicine. A post-antibiotic era, in which common infections and minor injuries can kill, far from being an apocalyptic fantasy, is instead a very real possibility for the 21st century,” says a 2014 WHO report. “Superbugs risk making routine surgery potentially lethal, killing millions and costing the world economy US$100 trillion a year by the middle of the century,” says O’Neill.
 
These dire warnings are supported by a case study of AMR published in Antimicrobial Agents and Chemotherapy in 2016, which suggests that we might be closer to a "post-antibiotic era" than we think. A particular group of bacteria (Gram-negative) have become increasingly resistant to currently available antimicrobial drugs. Colistin is one of the only antibiotics that still show some effectiveness against such infections, but the study suggests that even Colistin may no longer be effective.
 
Takeaways
 
AMR is widely recognized as a serious and growing worldwide threat to human health. New forms of AMR continue to arise and spread, leaving doctors with few weapons to bring potentially life-threatening infections under control. The injudicious use of antimicrobials, and the proliferation of AMR pathogens are compounded by the inability to rapidly and accurately diagnose minor ailments such as sore throats. Professor Kornberg has an answer.
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  • A wind of change is blowing through MedTech markets
  • MedTech markets have matured and are experiencing slower growth and increased competition, which have fuelled endeavours to increase growth rates
  • Artificial intelligence (AI) techniques applied to data from existing devices have the potential to achieve this and improve care
  • Obstacles to developing AI solutions include rigid manufacturing mindsets and a dearth of appropriate talent
  • To remain relevant MedTech leaders will need to “think beyond physical products”, develop new business models, new types of investments and new approaches to R&D
  • Will a wind of change that is blowing through MedTech markets be perceived as a temporary breeze?
 
A prescription for an AI inspired MedTech industry
 
Thinking beyond physical products and the growing significance of AI in MedTech markets


A wind of change is blowing through MedTech markets, which has prompted some key opinion leaders to think beyond physical products and begin to use artificial intelligence (AI) techniques to develop value added services that bolt-on to their existing physical offerings to improve clinical care and economic efficiencies while providing access to new revenue streams.

Bryan Hanson, Zimmer-Biomet’s CEO, recently suggested that >70% of his company’s R&D spend is now being invested in data informatics and robotics. Not far behind is Stryker, another global orthopaedic corporation, which has implemented AI strategies to improve care and differentiate its offerings. Both are thinking beyond their physical products to create a suite of services derived from AI enhanced data collected from their existing devices. Such actions provide a template that can be copied by other enterprises. How long will it take for AI solutions to represent a significant percentage of MedTechs’ revenues?

 
In this Commentary

This Commentary: (i) describes the growing significance of AI, (ii) explains the difference between data mining, AI, and machine learning, (iii) illustrates AI technologies that have become an accepted part of our everyday lives, (iv) highlights technical drivers of AI solutions, (v) describes obstacles to the development of AI systems, (vi) indicates how such obstacles may be reduced, (vii) describes Zimmer’s and Stryker’s AI driven data initiatives, (viii) suggests that the Zimmer-Stryker AI template has broad potential, (ix) suggests that AI systems can breathe life into 'dead data', (x) provides an example of a company at the intersection of medical information and AI techniques, (xi) describes the origins of the phrase, ‘wind of change’, and defines the ‘winds’ driving change in current MedTech markets, (xii) reports that ~80% of B2B sales in the economy generally are digitally driven, (xiii) provides some reasons for MedTechs’ slow adoption of AI systems, (xiv) floats the idea that the future for producers is to partner with tech savvy start-ups and (xv) describes how US AI supremacy is being challenged.
 
AI: vast and fast growing
 
It is challenging for baby boomers and older millennials, who populate MedTechs’ C suites, to fully grasp the potential of AI. This is largely because their corporate careers were underway before the digital age started, and for three decades they have personally prospered from manufacturing physical devices without the help of AI.
 
A person who understands the potential of AI is Sundar Pichai, the CEO of Alphabet, one of the world’s largest tech companies. In a recent BBC interview Pichai suggested, "AI is the most profound technology that humanity will ever develop and work on . . .  If you think about fire or electricity or the Internet, it's like that, but even more profound". This suggests that Hanson is right to redirect Zimmer’s R&D spend towards AI-driven solutions. A February 2021 report from the International Data Corporation (IDC), a market intelligence firm, suggests that the current global AI market is growing at a compound annual growth rate (CAGR) of ~17% and is projected to reach ~US$554bn by 2024.
 
Data mining, AI, machine learning and neural networks

Among MedTechs’ C suites there is some confusion about data strategies and AI solutions. Many enterprises use data mining techniques on existing large datasets to search for patterns and trends that cannot be found using simple analysis. They employ the outcomes to increase revenues, cut costs, improve customer relationships, reduce risks and more. Although data mining is commonly used when working on AI projects, in of itself, it is not AI. So, let us briefly clarify.

AI is the science and engineering of developing intelligent computer programs to enable machines to provide requested information, supply analysis, or trigger events based on findings. AI creates machines that think, learn, and solve problems better and faster than humans. This is different to traditional computing, where coders provide computers with exact inputs, outputs, and logic. By contrast, AI systems can be “schooled” to carry out specific tasks without being programmed to do so. This is referred to as machine learning, which usually requires large amounts of data to train algorithms [mathematical rules to solve recurrent problems].

A critical element of machine learning’s success is neural networks, which is an AI technique modelled on the human brain that is capable of learning and improving over time. Neural networks are comprised of interconnected algorithms that share data and are trained by triaging those data: a process referred to as ‘back propagation. In healthcare, machine learning outputs range from the ability to recognise images faster and more accurately than health professionals to making in vivo diagnoses.

 
AI systems have become an accepted part of our everyday lives without us realising it
 
Most people are aware of significant AI breakthroughs such as self-driving cars and IBM’s Watson computer winning the US quiz show Jeopardy by beating two of the best players the show had produced. Lesser known, is in 2012, AlexNet, a neural network learning system, won a large-scale visual recognition contest, which previously was thought too complex for any machine. In 2016, Google’s AlphaGo, a machine learning algorithm, defeated Lee Sedol, who was widely considered the world’s greatest ever player of the ancient Chinese game Go. Most observers believed it would be >10 years before an AI programme would defeat a seasoned Go champion. Although Go’s rules are simple, the game is deceptively complex, significantly more so than chess. It has a staggering 10170 possible moves, which is more than the number of atoms known in the universe. Significantly, machine learning algorithms embedded in AlphaGo, mastered the game without any prior knowledge and without any human input. More recently Google launched AlphaGo Zero, an AI system, which can play random games against itself and learn from it. During the decade of these breakthroughs, AI systems became an accepted part of our everyday lives without us realising it. Examples include, Google searches, GPS navigation, facial recognition, recommendations for products and services, bank loans we receive, insurance premiums we are charged, and chatbots, which organizations use to provide us with information.
 
Technical drivers of AI systems

In addition to commercial drivers, AI techniques are driven by easy availability of data, an explosion in computing power and the increased use of clusters of graphic processing units (GPUs) to train machine-learning systems. These clusters, which are widely available as cloud services over the Internet, facilitate the training of more powerful machine-learning models. An example is Google's Tensor Processing Unit (TPU), which has the capability to carry out more than one hundred thousand trillion floating-point operations per second (100 petaflops). This has the potential to accelerate the rate at which machine-learning models can be trained. Further, the cloud has made data storage and recovery easier, which has motivated government agencies and healthcare institutions to build vast unstructured data sets that they make accessible to researchers throughout the world to stimulate innovation.
 
Obstacles to the development of AI systems
 
So far, we have emphasised the benefits of AI, but there are concerns that machine intelligence will accelerate at an incomprehensible rate, surpass human intelligence, and transform our reality. This is referred to as “singularity”, which has generated concerns from key opinion leaders. Nearly a decade ago, Stephen Hawking, a pre-eminent British scientist, warned in a BBC interview, that singularitycould spell the end of the human race”. More recently, Hawking’s view has been echoed by Elon Musk, founder, and CEO of Tesla and SpaceX, who suggests that AI is, “more dangerous than nuclear warheads and poses a fundamental risk to the existence of human civilization". Musk has called for stronger regulatory oversight of AI, and more responsible research into mitigating its downsides. In 2015, he set up OpenAI, a non-profit research organization, with a mission to promote and develop AI systems that benefit society. 

 

In the June 2018 edition of the Atlantic Review, Henry Kissinger, who served as national security adviser and secretary of state for two US Presidents, described the potential harms from AI by addressing the question: “What would be the impact on history of self-learning machines that acquired knowledge by processes particular to themselves, and applied that knowledge to ends for which there may be no category of human understanding?”. Singularity might be more imminent than once thought. In a book published in 2015, futurist Ray Kurzweil predicted that singularity would occur in ~2045, but a paper published in the June 2020 edition of the International Journal of Astrobiology suggests that it is more likely to occur within the next decade.

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Robotic surgical spine systems, China, and machine learning

Overcoming obstacles to AI
 
In clinical settings there are growing concerns that complex algorithms can blur the reasoning behind specific machine interpretations and consequent actions of robotic surgical systems. As AI and machine learning develop so surgical robots are expected to become more autonomous and have the capability to make instantaneous diagnoses and pursue immediate therapies, which surgeons using the systems do not fully understand. The failure of humans to understand the workings of an AI system is referred to as an “interpretability challenge”, or more commonly, the black-box” problem, which could impact future clinical regulations.
 
Combatting the possible dangers of AI systems not being understood by humans is a relatively new and growing research area, referred to as Explainable AI” (XAI). XAI attempts to use AI techniques to develop solutions that can describe the intent, reasoning, and decision-making processes of complex AI systems in a manner that humans can understand. This could provide Stryker and Zimmer, and other manufacturers, a solution to potential future regulatory obstacles associated with advances in their robotic surgical systems
.
Zimmer’s and Stryker’s initiatives

In August 2021, the FDA granted De Novo marketing authorization [applicable for a new and novel device whose type has not previously been classified] for a “smart knee”, which Zimmer had developed in partnership with Canary Medical, a data analytics company. The device, called Persona IQ®, is the world's first and only smart knee cleared by the FDA for total knee replacement surgery. It combines Zimmer’s proven and trusted knee implant, Persona® The Personalized Knee®, with Canary’s proprietary sensor technology, which provides real-time feedback on how surgical implants and devices are working by generating self-reports on patient activity, recovery, and treatment failures, without the need for physician intervention and dependence upon patient compliance. The partnership is also expected to leverage Canary’s machine learning capabilities to identify further patterns in data from implants that could help clinicians catch problems, such as infections or loosening of the implants before they worsen. Persona IQ® will work together with Zimmer’s remote care management platform, mymobility® with Apple Watch®, as well as with other components of the  ZBEdge™ connected intelligence suite of currently available, and soon to be launched, digital and robotic technologies engineered to deliver transformative data-powered clinical insights, shared seamlessly across the patient journey, to improve patient outcomes. 

In January 2021, Stryker acquired OrthoSensor, a privately held technology company that makes intraoperative sensors for use in total joint replacements. Stryker expects these sensors to empower surgeons with AI-driven solutions and enhance its surgical robotic systems by eventually providing them with the capability to predict surgical outcomes. Additionally, OrthoSensor’s remote patient monitoring wearables, combined with a cloud-based data platform, are expected to significantly improve Stryker’s data analytics capabilities. According to a Stryker press release issued at the time of the acquisition, “OrthoSensor quantifies orthopaedics through intelligent devices and data services that allow surgeons and hospitals to deliver evidence-based treatments for all healthcare stakeholders. The company’s advancements in sensor technology, coupled with expanded data analytics and increasing computational power, will strengthen the foundation of Stryker’s digital ecosystem”.
 
The Zimmer-Stryker AI template has potential across MedTech

Despite Zimmer’s and Stryker’s AI-driven data initiatives to improve their respective competitive advantages and gain access to new revenue streams, few MedTechs collect, and store the data produced by their existing devices, and even fewer use such data to provide novel AI solutions. The Zimmer-Stryker template for achieving this is not limited to orthopaedics. For example, consider neuro critical care and traumatic brain injuries (TBI), which are a “silent epidemic”. Each year, globally ~69m individuals sustain TBIs. In the US, every 15 seconds, someone suffers a TBI. In England, ~1.4m people present at A&E departments each year following a head injury.

Despite extensive research, successful drug therapies for TBI have proven to be elusive. The gold standard management of the condition is to monitor intracranial pressure (ICP) and attempt to avoid elevated levels, which can cause further insults to an already damaged brain. Currently, there are no FDA approved means to identify advance warnings of changes in ICP. However, it might be possible to create an early warning of ICP crises by applying machine learning algorithms to standard physiological data produced by existing medical devices commonly used to monitor patients with TBI. This would not only provide time for interventions to prevent further trauma to critically ill patients but would also give producers access to new revenue streams.



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MedTech must digitize to remain relevant


Breathing life into dead data

There are potentially limitless opportunities to improve care by breathing life into 'dead data'. This can be achieved simply by applying AI solutions to underutilized data from existing medical devices. The global MedTech industry is comprised of ~6,000 companies (mostly small to medium size). The overwhelming majority of these manufacture devices that produce, or could produce, patient data. These companies serve ~14 surgical specialisms each of which treat numerous conditions. For each condition there are millions of patients at any one time. For each patient, multiple devices used in therapies display real time data. Most producers are awash with dead data because they do not collect, store, and analyse these data to improve the quality of care. AI systems can change this.
A MedTech start-up at the intersection of medical information and AI techniques

A start-up, which understands the clinical and economic potential from the intersection of medical data and AI solutions is Komodo Health, which was founded in 2014. According to Web Sun, the company’s co-founder, and president, “We had a vision that integrating robust data with software solutions was the way forward for healthcare at a time when no one was doing this”. Komodo has created an AI platform, which it refers to as a "healthcare map", comprised of large-scale anonymous health outcome data from hundreds of sources.

In January 2020, Komodo announced a deal to import Blue Health Intelligence’s patient data onto its platform. Blue Health provides US healthcare claims data and actionable analytics to payers, employers, brokers, and healthcare services. The combined database charts >325m individual patient care journeys through tests and therapies at hospitals and clinics. In March 2021, Komodo raised US$220m to extend its platform to offer real-time assessments of patients’ healthcare journeys to detect disparities in the quality of care and outcomes, and to provide a basis for interventions aimed at improving outcomes and lowering costs.

The ability to introduce clinical insights into enterprise workflows potentially helps producers and providers close gaps in care journeys and address unmet patient needs. Not only are Komodo’s services designed to deliver timely interventions and alerts to improve care, but the company also records and reports the performance of specific medical products on patient cohorts. These data provide a basis to develop and market further innovative healthcare services, and novel therapeutics, which are expected to boost Komodo’s revenues.

 
A wind of change

We borrowed the ‘wind of change’ phrase used in our introduction from a famous speech made by British Prime Minister Harold Macmillan to the Parliament of South Africa on 3 February 1960 in Cape Town. Macmillan was referring to a system of institutionalised racial segregation, called Apartheid, which enforced racial discrimination against non-Whites, mainly predicated on skin colour and facial features. Despite the UK Prime Minister’s belief that in 1960, the days of White supremacy in South Africa were numbered, it took >30 years before Apartheid was ended and Nelson Mandela was inaugurated as the first Black President of South Africa on 10 May 1994. Mandela was an anti-apartheid activist and lawyer, who had spent 27 years as a political prisoner under the Apartheid regime.

A wind of change is now blowing through MedTech markets. In less than a decade, healthcare will be faced with significantly more patients, more data, more technology, more costs, more competition, and less money for producers and providers. Over the past five years, US providers’ profit margins have fallen, in Europe the gap between public health expenditure and government budgets has increased, and throughout the world healthcare systems are under budget pressure and actively managing their costs. With such strong headwinds, a sustainable future for MedTechs might be to reduce their emphasis on manufactured products distributed through labour intensive sales channels and increase their AI service offerings using data from their existing devices. Over the past five years AI solutions have become more prolific, easier to deploy, and increasingly sophisticated at doing what health professionals do, but more efficiently, more quickly and at a lower cost.  

 
~80% of B2B sales are digital

In addition to AI solutions being used to improve clinical outcomes, they can be employed to enhance business efficiencies. A previous Commentary described how AI systems can help to transform traditional labour intensive MedTech supply chains and personalise sales. A recent study undertaken by Gartner, a global research and advisory firm, suggests that, “Over the next five years, an exponential rise in digital interactions between buyers and suppliers will break traditional sales models, and by 2025, ~80% of B2B sales will occur in digital channels”. Giant tech companies are taking advantage of this to enter healthcare markets, MedTechs have been slow to implement such changes despite the boost in online engagements provided by the COVID-19 pandemic.
Reasons for slow adoption of AI systems

So, why are MedTechs slow to implement AI solutions to enhance clinical outcomes and improve economic efficiencies? Over ~3 decades they have achieved double-digit revenue growth from manufacturing physical devices and marketing them through labour intensive channels in a few wealthy regions of the world with relatively benign reimbursement policies. During this period of rapid growth and commercial success, MedTechs have not been required to confront data issues, bridge the science, technology, engineering, and mathematics (STEM) skills gap, and commit to new structures, new processes, new behaviours, and new aptitudes.
This suggests that despite a wind of change, now blowing through MedTech markets and challenging traditional business models and strategies, it could be perceived as a 'temporary breeze' and nothing will change. However, a step change in the direction of more AI solutions might occur when digital natives [people who have grown up in a digital age] replace digital immigrants [people whose careers were well underway before the onset of the digital age] in MedTechs’ C suites. According to a Gartner executive, “As baby boomers retire and millennials mature into key decision-making positions, a digital-first buying posture will become the norm. . . . . . Sales reps will need to embrace new tools and channels, as well as a new manner of engaging customers, matching their sales activity to their customers’ buying practices and information collecting needs”. A 2019 research report from the Boston Consulting Group (BCG), suggests that companies, which use AI systems to personalise sales can expect productivity gains of ~10%, and incremental revenue growth of ~10%.
 
Partnering with tech savvy start ups

Currently, many MedTechs neither have the mindsets nor the in-house STEM capabilities to create AI enhanced services. So, what might be a way forward? STEM skills, although scarce, tend to reside in people <30. Although there are ~68m of these people in the US, people with STEM skills tend to prefer to work either for giant tech companies or tech start-ups devoted to leveraging the potential of AI. Giant tech companies and start-ups are outside the comfort zones of most MedTechs. However, in the future, they may be obliged to partner with tech savvy start-ups engaged in developing AI driven solutions. Such collaboration will be challenging because it requires MedTechs to change their business models, create new ways of making strategic investments, and develop novel approaches to R&D that encompass a broader spectrum of partners.

Most of MedTechs’ R&D investment is consumed by incremental innovations to their current suite of devices. This tends to reinforce existing revenues rather than develop disruptive technologies aimed at capturing new revenue streams. Such strategies are efficacious in stable, fast growing economic environments, but lose their edge in slower markets. It seems reasonable to assume that, as market conditions tighten, MedTechs will need to consider shifting their R&D strategies towards the development of more disruptive technologies. We see this already in Stryker’s R&D investment in robotic surgical systems and Zimmer’s proposed R&D spend on AI, data informatics and robotics.

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China’s rising MedTech industry and the dilemma facing Western companies


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Can Western companies engage with and benefit from China?
US supremacy challenged  

US tech giants are investing heavily in AI R&D and driving the adoption of advanced technologies in healthcare. Although these companies have made, and will continue to make, a significant contribution to the field, it would be a mistake to think that they have AI healthcare markets sewn up.
 
Three Chinese tech giants, collectively referred to as ‘BAT’, are also investing heavily in AI systems. All three offer services well beyond their core products and have far-reaching global ambitions. BAT is comprised of Baidu, China’s largest search provider, Alibaba the nation’s biggest eCommerce platform and Tencent, which runs WeChat that has access to >1bn users on its platform. For the past five years BAT has been expanding into other Asian countries, recruiting US talent, investing in US AI start-ups, and forming global partnerships to advance their AI ambitions.
In addition to these private endeavours, China has made AI a national project. Since 2017, Beijing has been pursuing a three-step New Generation AI Development Plan, which aims to turn AI into a core national industry. To this end, China is vigorously carrying out research on brain science, brain computing, quantum information and quantum computing, intelligent manufacturing, robotics, and big data. Already, China has become a world leader in AI publications and patents. The nation’s global share of AI research papers increased from 1,086 (4.26%) in 1997 to 37,343 (27.68%) in 2017, surpassing any other country, including the US. Most AI patents are registered by companies in the US and Japan. However, when it comes to AI patents registered by research institutes, China is the undisputed leader. According to a 2021 report on China's AI development,  ~390,000 AI patent applications were filed in China over the past decade, accounting for ~75% of the world total. Beijing’s competitive advantage in big data and AI strategies is driven by a combination of its weak privacy laws, a national plan, huge government investments, concerted data-gathering, and big data analytics by the BAT tech giants and others. Currently, China’s AI market is valued at ~US$22bn, and by 2030, the nation is expected to become a leader in AI-empowered healthcare businesses and the world’s leading AI power.

Beijing’s policies have given rise to hundreds of AI driven start-ups aimed at gaining access to new revenue streams in China’s rapidly growing healthcare market. Western MedTechs might consider accepting Beijing’s  Made in China 2025 policy, partner with these  tech savvy start-ups and jointly benefit from the nation’s current 5-year economic plan aimed at a “healthier China”.

 
Takeaways
 
We have presented an AI-driven prescription for MedTechs to enhance the quality of care while providing access to new revenue streams. We suggest that this can be achieved by bolting on AI solutions to existing devices, and over time through partnerships with tech savvy start-ups. But ~30 years of double-digit growth derived from manufacturing physical products and distributing them through labour intensive sales channels might have cemented mindsets among C suite incumbents that find it challenging to think beyond physical product offerings. This could suggest that the wind of change, now blowing through MedTech markets, will be perceived as a temporary breeze that does not require thinking beyond physical products, and AI solutions will be a long time coming.
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  • The spine market is challenged by the physical and digital worlds converging
  • Lucrative traditional markets are slowing, and large emerging markets are growing
  • Environmental, social and governance (ESG) issues are growing in significance
  • Future clinical and financial success will depend on industry leaders pursuing smart and aggressive diversity and inclusion policies, but it won’t be easy
 
- Low back pain and the global spine industry -

The spine market and smarter diversity and inclusion policies
 
Spine companies are predominantly manufactures led by White males who find themselves on the cusp of a transformation driven by the continued convergence of the physical and digital worlds, slowing traditional Western markets and growing emerging markets, and an increasing need to provide patients with the best outcomes at the lowest cost. This raises the bar for spine companies to demonstrate differentiated clinical and economic value. Over the next five years, the spine market is likely to face disruptions and opportunities that impact its core and emerging businesses. Industry leaders are tasked to discover ways to own their disruptions and find solutions to challenges associated with change. Given the projected nature and speed of this transformation, spine leaders’ quest for answers is unlikely to be satisfied by pursuing business as usual. To benefit from the opportunities presented by market challenges, industry leaders will need to recruit new talent with capabilities and competences relevant to an evolving ecosystem. Smarter and more aggressive diversity and inclusion policies, as part of a wider environmental, social and governance (ESG) focus, will be essential to stand a chance of hiring such talent.
 
Environmental, social and governance issues

Environmental, ‘E’ issues, include the energy a company consumes, the waste it discharges, the resources required to address these matters and the impact ‘E’ questions have on people (e.g., radiation emissions). Social, ‘S’ issues, include a company’s diversity and inclusion policies. ‘S’ emphasises the fact that companies operate within a broader diverse society and addresses an enterprise’s relationships with people, institutions, and the communities where it does business. Governance, ‘G’ issues, represent the internal processes and controls an organization adopts to make effective decisions, comply with the law, and meet the needs of their stakeholders.
  
In this Commentary

This Commentary focusses on the significance of social, 'S', issues to spine companies and suggests that adopting more aggressive diversity and inclusion policies could help them adapt their business models and strategies to become more clinically relevant and commercially successful in a rapidly changing ecosystem.
 
Changing emphasis

Historically, ESG issues have been of secondary concern to corporate leaders and investors, but this has changed because ESG matters can provide insights into factors that impact on a company’s financial performance and thereby inform investment decisions. In recent years, institutional investors and pension funds have grown too large to diversify away from systemic risks, which has obliged them to consider the ESG impact of their portfolios. The possibility of commercial enterprises being held accountable by shareholders for their ESG performance puts pressure on managers to prioritize such matters. Already, public companies in the US are being encouraged to: (i) publish statements of purpose, (ii) provide investors with integrated financial and ESG reports, (iii) increase the involvement of middle managers in ESG matters, (iv) invest in robust IT and data management systems, and (v) improve internal practices for measuring and reporting the ESG impact on financial performance.
 
ESG issues and spine companies
 
A spine company’s environmental ‘E’ footprint is comprised of instruments and devices, which have a variety of impacts and lifecycles. For example, imaging and guidance equipment eventually becomes electronic waste, surgical instrument sets require sterilisation before reprocessing and infected single-use devices add to recycling challenges.

 

 
Spine companies’ play a role in the populations they serve and derive significant revenues from governments: S issues. This is demonstrated in an analysis of Medicare [a US national health insurance programme] data by researchers from the University of Michigan and Harvard University Medical School and published in the July 2014 edition of the Spine Journal. Findings show that between 2000 and 2010, the US government spent >US$287bn on fusion-based spine surgeries.
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The research also suggests that for patients covered by Medicare, the rate of complex spine surgeries increased 15-fold between 2002 and 2014, and concludes that, “despite these large expenses, there is no consensus on the accepted indications for which spinal fusions are performed”: an issue discussed in a previous Commentary.

Governance, ‘Gissues, for spine companies are dealt with at the sector level, and involve safety testing of their implants and devices, monitoring outcomes and manufacturing quality, safeguarding patient information, and ensuring marketing compliance. However, the future focus of governance ‘Gissues will likely be company specific, and more attention is expected to be paid to companies’ cultures and ownership structures.
 
Short supply of relevant talent

As spine enterprises adapt and change their business models and strategies to remain competitive, and as ESG issues increase in significance, corporations will need new expertise, new roles, and new employees to assist them to take a fresh look at legacy issues and turn disruptions into opportunities. The skills required to create and develop future clinical and commercial success include digital expertise, and data management abilities or STEM subjects; [science, technology, engineering, and mathematics] and a knowledge of international markets. However, such capabilities are in short supply, and millennials [people born between 1981 and 1994/6] and older generation Z’s [people born between 1997 and 2015], who tend to possess such skills, prefer to work for giant tech companies, which have untraditional work environments.
 
A 2018 Forbes study describes the US as having, “a significant high tech STEM crisis”. Another recent study suggests that the greatest demand for STEM workers is from the healthcare industry, which is among the fastest growing sectors, and therefore is expected to face the greatest shortage of STEM talent. Thus, it seems reasonable to assume that, over the next decade, MedTech’s will be challenged to recruit and retain an adequate supply of appropriate talent to help them transform their businesses and this will oblige them to increase their search for capabilities among women and minorities.
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Diversity and inclusion as investment criteria
 
Currently, MedTechs have a predominance of White males in their workforces. 2020 data from the US Bureau of Labor Statistics show that US MedTech’s employ ~660,000 people, of which ~40% are women; ~77% are White, ~8.4% Black/African American, ~11.5% Asian and ~13% Hispanic or Latino, with women and minorities significantly underrepresented in leadership positions.
Company initiatives to promote diversity have recently gained impetus following the death of George Floyd. On 25 May 2020, Minneapolis police officers arrested George Floyd, a 46-year-old Black man, after a convenience store employee called the police and told them that Floyd had bought cigarettes with a counterfeit US$20 bill. Seventeen minutes after the first police car arrived at the scene, George Floyd was pinned beneath three police officers and was dead. This triggered condemnations from the CEOs of the biggest US banks and the world’s largest asset managers, and turbocharged their intention to make ESG assessments critical to investment decisions.
 
Reflecting on racial injustices in the US, Larry Fink, chairman and CEO of BlackRock,  the world’s largest asset management firm, said that protests following George Floyd’s death, “are symptoms of a deep and longstanding problem in our society and must be addressed on both a personal and systemic level.  . . . This situation also underscores the critical importance of diversity and inclusion within companies and society at large”. A similar reaction came from Jamie Dimon, chairman and CEO of JPMorgan Chase, the largest bank in the US and the forth largest bank in the world, who said, “we are watching, listening and want every single one of you to know we are committed to fighting against racism and discrimination wherever and however it exists”. This signalled a corporate shift to a more proactive stance, leading to policy initiatives focused on board refreshment, board gender diversity, and holding boards accountable to a higher standard of ESG practices.

Striking a different note, Omar Ishrak, a Bangladeshi American business executive, Chairman of Intel, and former CEO of Medtronic, stressed the importance of diversity of thought. According to Ishrak, it is not just important to have different people in your organization, but more significant is what you do with the difference. “What happens when you leave the room? How does diversity challenge your thinking and impact your customers?”, asks Ishrak. Such pressure from investors and key opinion leaders serves as a catalyst for change and a greater emphasis on ESG issues, which will become the new normal.
White men rule

Outwardly, all companies, generally agree on the importance of diversity across organizations, and executives promise to rebalance their workforces. However, it is not altogether clear whether such promises lead to tangible outcomes. For example, as of 2021, only ~7% of Fortune 500 company CEOs were women, despite the fact that there were ~77m women in the US labour force, representing close to half (47%) of the total labour force. Similarly in Britain where the 100 largest companies (the FTSE 100) have only six female CEOs, which is the same number as between 2017 and 2019. Also, Black individuals are particularly under-represented in the higher echelons of corporations. According to Equilar, a clearinghouse for corporate leadership data, ~30% of companies on the S&P 500 do not have at least one Black board member, and currently, there are only five Black CEOs in the Fortune 500.
Available data suggest that women and minorities are significantly underrepresented when moving up the corporate ranks. Tracking such progress is difficult since corporations are not required to disclose information on the composition of their workforces. However, a 2020 report from Mercer, a human resources consulting firm, suggests that the problem of diversity in companies begins early, with minorities not advancing at the same rate as their White colleagues. ~64% of workers in entry level positions in large US corporations are White, ~12% are Black, ~10% are Hispanic, ~8% are Asian or Pacific Islander and ~6% are other races. The share of positions held by White employees increases with seniority. At the executive level, ~85% of positions are held by White employees, while Black and Hispanic employees make only ~2% and ~3% of these positions, respectively. This suggests that minorities face a significant promotion gap in US corporations.
 
Economic consequences
 
According to Haim Israel, a Bank of America (BofA) analyst, increasing diversity has significant commercial benefits. According to studies undertaken by Israel, diversity means higher sales and lower earnings volatility risk. “Companies focused on gender diversity at a board, C-suite and firm level consistently achieve higher ROE [return on equity] and lower earnings risk,” says Israel; while highlighting the fact that corporate executives, “don't forcefully step-up their diversity efforts”. S&P 500 companies with above-median gender diversity on their boards see ~15% higher ROE, and the ROE in companies with ethnic and racially diversified workforces is ~8% higher. Israel suggests that the continued lack of diversity inside corporate America, “could cost the US economy ~US$1.5tn in lost consumption and investment over the next decade". If US business and government leaders had decided more than 30 years ago to act on diversity and inclusion, about US$70tn would have been added to the nation’s economic output, says Israel.
 
Diversity and company performance

The BoA’s findings on diversity are supported by research from several global consulting firms. For instance, a  2018 McKinsey study suggests that there is a significant correlation between diversity in the leadership of large corporations and financial outperformance. More diverse companies outperform their more homogeneous counterparts. This is supported by findings of a 2020 report from the same consulting firm. The research shows that, “companies in the top quartile for gender diversity on executive teams were 25% more likely to have above-average profitability than companies in the fourth quartile - up from 21% in 2017 and 15% in 2014”. Findings were more compelling for ethnic and cultural diversity, where companies in the top 25% outperformed those in the bottom quartile by ~36% in terms of profitability. These conclusions support a 2018 study by the Boston Consulting Group, which found that companies with more diverse management teams had ~19% higher revenues.
 
Diversity and spine companies

It seems reasonable to suggest that spine companies have been behind the curve when it comes to attracting and promoting women, Black, Asian, ethnic minorities, and people with disabilities. Over the next decade, this could change; not because of imposed quotas, guilt, or shame, but because within these groups, there is a wealth of diverse experience, talent and thought, which could help companies adapt and change. Not only is greater diversity and inclusion expected to help spine companies develop optimum solutions to such issues as the convergence of the physical and digital worlds, but also help them to take advantage of the growing spine market opportunities in emerging economies.
 
Emerging market opportunities
 
For the past three decades US corporations have dominated the spine market, but this is beginning to change. American market rule can be attributed to suppliers’ ability to manufacture sophisticated surgical implants and devices relatively cheaply and market them expensively, predominantly in the US, EU-27, and a few other wealthy regions of the world, with highly developed healthcare infrastructures, generous reimbursement policies and well-trained physicians.
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If spine surgery fails to relieve low back pain why is it increasing?


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Low back pain, spine surgery and market shifts
However, over the next decade, the US spine market is expected to slow, and the Asia Pacific (APAC) market is projected to grow at a much higher compound annual growth rate (CAGR). This is partly because the US has a shrinking working-age population to provide for the vast and escalating spine surgery costs required by the large and rapidly growing cohort of >65-year-olds with age related spine disorders. This has led to the tightening of previously benign reimbursement policies and more stringent regulations, which has squeezed spine companies’ revenues. APAC countries, on the other hand, have ageing populations and a consequent increase in the incidence rates of low back pain (LBP) and degenerative disc disorders, but they also have improving healthcare infrastructures and reimbursement scenarios, increasing numbers of trained clinicians, and increased affordability due to rising per-capita GDP.
Recent policies enacted by several Asian governments are positioned to support the growth of healthcare spending. China represents the largest and fastest-growing market in Asia-Pacific, having already surpassed the combined market value of most nations that make up the EU-27. China is seeing some of the fastest growth in healthcare spending, which support sales of spinal implants and devices, which are growing at a CAGR of 9%.

China has broadened its healthcare insurance coverage and is working on an ambitious programme of reforms, which include the government raising medical subsidies, and improving the quality and range of services of its ~9,000 tier 1, and ~11,000 tier 2 hospitals, which serve townships in rural areas and medium size cities throughout the country. Health expenditure in China has soared from <US$72bn in 2000 to >US$690bn in 2019. According to OECD data, in 2016 China surpassed Japan in total healthcare spending with US$574bn compared to Japan's US$469bn; and surpassed the US in hospital beds per 1,000 persons, with 3.8 for China and 2.9 in the US.

While such changing market dynamics are expected to exert further downward commercial pressure on US spine companies, they also present opportunities for American corporations with the capabilities to fully leverage the fact that by 2022, >30% of the global healthcare expenditure is expected to arise from emerging economies. To put it into a spine perspective; the global spinal surgery market’s competitive landscape is maturing and consolidating while serving an increasingly demanding healthcare sector. Spinal implants and devices represent ~US$14bn global industry projected to approach US$18bn by 2023. Industry leaders are tasked to achieve growth in developed markets and to capture market share in emerging countries. This will require a more diverse employee base with capabilities to develop cost-efficient products, with improved medical outcomes, tailored to local needs. To increase share of emerging markets over the next decade, it will not be sufficient for MedTech companies to simply duplicate what is already being sold in traditional developed markets, both due to cost, resource, and competence reasons in diverse market segments. The spine industry will therefore increasingly need to be agile enough to adapt solutions to local needs.
 
Takeaways
 
The bar for spine companies to demonstrate differentiated clinical and economic value has risen over the past decade and is likely to continue rising over the next decade. This new “value bar” increases the pressure on enterprises to rethink their legacy strategies and business models. ESG policies that increase diversity and talent pools could help them do this. The economic consequences for companies that are slow to adopt and pursue ESG policies and promote diversity could be significant.
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  • Traditional spine companies’ supply chains are linear, labour intensive and siloed and their inventory-to-revenue ratios tend to be high
  • To remain relevant in an environment where the physical and digital worlds are converging company leaders will need to improve their supply chains
  • Digitalization can help achieve this but requires embracing data management techniques
  • As a response to the COVID-19 crisis some MedTech’s introduced and extended their digital strategies
  • Have they done enough to remain relevant in a rapidly evolving ecosystem?
  
- Low back pain and the global spine industry -
 
Digitalization: the reinvention of spine companies’ supply chains and controlling the inventory-to-revenue ratio
 
In 2020, spine companies, like most MedTechs, absorbed shocks of the COVID-19 crisis by digitizing aspects of their supply chains, which consists of a wide range of transactions and constitute a significant part of a company’s’ total value creation. Industry observers are asking: Will enterprises extend their digitalization strategies and emerge stronger after the impact of the pandemic, or will they reduce their digital activities and emerge weaker?

 
Market changes

Even before the COVID-19 pandemic, the days of business-as-usual for spine companies were numbered as technologies advanced, regulations became more stringent, populations aged, healthcare systems struggled with unsustainable costs of surgeries for common age-related degenerative disc disorders, and payors tightened their reimbursement policies. In the US, which is the biggest market for spinal implants and devices, an increasing percentage of people have become covered by Medicare and Medicaid [state and federal government healthcare programmes], which reimburse providers at a fraction of private healthcare insurance levels. These changes encouraged independent hospitals in the US to join purchasing syndicates, clinicians to give up private practice and become salaried employees of hospitals, and private payors to shift away from a fee-for-service provision towards a value-based reimbursement approach focussed on improving patient outcomes and lowering costs. This shift encouraged policies to keep patients out of hospitals and increased the utilization of outpatient settings and other measures expected to improve outcomes and generate shared savings.

The structural headwinds described here have not abated and are likely to intensify over the next five years. To prosper in this evolving ecosystem, companies will need to devise and enhance solutions that bring enhanced clinical benefits to patients and economic rewards to the system. Tried and tested and widely used digital strategies can help to improve supply chains. However, while these structural changes have been progressing, spine market supply chains have tended to remain linear and labour-intensive and are now becoming significant obstacles to change, while producing infrastructures with unsustainable costs.

 
In the Commentary

This Commentary suggests that, over the next five years, market forces will oblige spine companies to pivot away from their inefficient supply chains and start developing supply networks, predicated upon digital strategies that add value to patients and reduce costs. Such systems, employ common digital applications that are used extensively in other industries to ensure the right products and services are delivered to the right place, at the right time, at the lowest cost. This would constitute a “first step” in a bigger digital transformation of the spine market, which will be necessary to create new levels of productivity, growth, and sustainability. We suggest that the reluctance of some MedTech’s to transition from inefficient supply chains to efficient ones could be explained by a significant proportion of their C suite members not acquiring a familiarity with digital systems until much later in their careers when they were adults. The Commentary uses two concepts: ‘digitization’ and ‘digitalization’. The former is a process to convert various physical signals into digital formats and the latter leverages digitized information to improve business processes.
 
Digitizing supply chains

Over the past two decades the cost of digital technologies has plummeted while their power and capabilities have substantially increased. This has enabled business leaders to combine technologies associated with information and operations and empowered them to create value in new and different ways. Improved processing capabilities now augment human thinking to analyse more data more quickly, and then act upon the outcomes. Such changes have ushered in the new digital era for MedTech’s.
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Will a rear mirror mindset slow the adoption of technologies poised to influence the spine market?

However, the spine market has been slow, compared to other industries, to adopt digital supply networks. The process of developing such strategies to drive productivity, while absorbing the shock of a pandemic has not been easy as it meant installing new technologies under pressure. However, the COVID-19 crisis created an incentive to reconfigure operations. The companies that did this have an opportunity to develop an omnichannel [multichannel approach to sales and marketing] dedicated to enhancing engagements with healthcare professionals and improving the overall quality of care, patient outcomes, revenues, productivity, employee satisfaction, and talent attraction and retention. But this will mean companies establishing virtual options as a core competence and reinventing the way they engage with stakeholders to provide a seamless experience across digital, remote, and in-person channels.
 
Neo Medical and value-based spine care
 
A firm that has employed digital strategies to streamline part of its supply chain to enhance value and gain a competitive edge is Neo Medical, a privately held Swiss company founded in 2013 by two former Stryker employees. The company has developed a universal value-based surgical spine platform to provide patients with high quality outcomes at relatively low costs. Neo’s approach is predicated upon its ability to reduce an instrument set, comprised of >200 screw sizes to 14, and use it in a novel approach to thoracolumbar fusion. [The thoracolumbar spine is the area between your stiff thoracic cage and your mobile lumbar spine].

Neo refers to its solution as a ‘controlled fixation’, which is beginning to have an impact in markets across the EU-27, Asia-Pacific (APAC) and more recently, the US. The approach is designed to facilitate an anatomically neutral, balanced, and stable spine load bearing to achieve a more functional fusion. It is reported that the platform: (i) enables clinicians to limit stress overload on a patient’s spine and thereby reduces the risk of screws loosening and hardware failing, (ii) limits infections, (iii) removes the need for re-sterilization, (iv) declutters the operating room, (v) reduces revision rates and (vi) cuts costs.Equally important are Neo’s digital strategies to provide an easier and more efficient experience for patients, surgeons, and hospitals.

Findings of a study, published in the December 2020 edition of Interdisciplinary Neurosurgery,  suggest that Neo Medical’s value proposition saves costs by: (i) reducing supply chain processing and logistical expenses, (ii) decreasing rates of contaminated instruments, (iii) minimizing operating room delays and (iv) potentially lowering revision and infection rates.

 
Reconfiguring the supply chain

By contrast, traditional industry supply chains tend to be linear, labour intensive and siloed. As suggested by Neo Medical and others, digitalization can transform these inefficient systems into dynamic, interconnected efficient networks with the capacity to accommodate a range of stakeholders simultaneously. The shift from linear, sequential structures to interconnected, open supply operations could provide a foundation for how spine companies compete in the future.
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Robotic surgical spine systems, China, and machine learning


Companies in other sectors have already made such transformations and integrated their supply networks into their operations and decision-making processes with the objective of gaining competitive advantages. However, business leaders should be mindful that the more customer focussed enterprises become, the more developed their data and analytical capabilities must be.
Currently, few MedTech’s integrate their supply chains into their long-term strategies, and few actively and fully embrace the potential of data management techniques. This reluctance decreases a company’s ability to optimize inventories and enhance operational efficiencies of product offerings moving across supply chains. Given the increasing number of exogenous forces affecting the spine market, [e.g., ageing populations, vast and escalating healthcare costs, more stringent reimbursement policies, pricing pressures, tightening regulations, increasing competition, advancing technologies and heightened customer expectations], it seems reasonable to suggest that investing in and developing digital supply networks could be a logical step to enhance value agendas.

Appropriate digitalization of supply chain planning and processing could help to: (i) reduce operational siloes, (ii) respond effectively to market disruptions, (iii) minimize the time, costs and risks associated with onboarding and collaborating with suppliers, (iv) deliver products and services that customers need, when they need them, where they need them at the lowest cost and (v) enable end-to-end supply chain visibility and transparency to facilitate gathering and analysing real-time intelligence to enhance efficiencies.
 
C suites and digital immigrants
 
Given that there are significant advantages in adopting digital technologies, why is the spine market lagging other industries in adopting such strategies to improve its supply chains to enhance its productivity and sustainability? A preponderance of digital immigrants among C suites could help to explain why some MedTech’s fail to grasp the full potential of digitalization strategies. Let us explain.
 
According to research undertaken by Korn Ferry, a consulting firm, the average age of a C suite executive of the top 1,000 US organizations is ~57. Statista confirms this and reports that in 2018, the average age of CEOs in US at the time they were hired stood at 54 years, while the average age of CFOs when they were hired was 50. Since 2005 the average age for CEOs and CFOs has been trending upwards. To the extent that these data are indicative of MedTech’s, it seems reasonable to suggest that their C suite members: (i) would have completed their formative schooling before the digital era, and (ii) when they started their professional careers the digital age was just beginning. For example, in 1989 only 15% of US households owned a personal computer, <1% of the world's technologically stored information was in a digital format, and the World Wide Web did not become publicly available until 1991. In 1990, when the average C suite member would have been ~31, there were only ~12.5m cell phone subscribers worldwide; ~0.25% of the world’s population, and Internet users only amounted to ~2.5m; 0.05% of the world’s population. In 2002, when the average US C suite executive would have: (i) been ~37, (ii) completed their professional training and (iii) well into their careers, digital technologies were still relatively underdeveloped. For example, cell phone subscribers were only ~1.5bn; 19% of the world’s population, and Internet users were only ~631m; 11% of the world’s population.
 
This suggests that during C suite executive’s formative education and professional training, digital technologies were embryonic, and the Internet, mobile devices, social networking, big data, and computing clouds, had not yet transformed work practices and healthcare. Thus, a significant proportion of current executives of US MedTech’s could be digital Immigrants: people whose professional careers were influenced by analogue technologies, paper, and television, and they only acquired a familiarity with digital systems later in their careers when they were adults. This could affect their ability to appreciate the full potential of digital technologies and help to explain the relative reluctance of MedTech’s to digitize labour intensive, inefficient, linear supply chains.
Stringent regulation and digitization
 
This reluctance becomes more significant as regulators demand that MedTech’s employ more sophisticated digital strategies. Increasingly, people are being given spinal implants and devices, which cannot be subsequently removed. Patients rely on these to be safe and to perform as intended for their lifetime, and regulators are devising more stringent rules to ensure that this is the case. For example, the European Medical Device Regulation (MDR), which entered into force in May 2017, requires all medical devices sold in the EU-27 and Switzerland to be MDR approved. The EU-27 represents ~33% of the spine market’s global revenues. MDR governs the production and distribution of medical devices and their compliance. The regulation states that, “Medical device manufacturers are required to have systematic methods for examining their devices once available on the market, by systematically gathering, recording, and analysing data on safety and performance”. MDR expects all MedTech’s to have robust supply chains and the ability to conduct data-driven audits to trace manufacturing modifications to specific implants and devices and to prove the resolution of any problem that might arise. While tightening regulations increase approval costs and prolongs product development time, they also provide incentives for companies to enhance their digital supply networks.
 
Controlling the inventory-to-revenue ratio
 
A digital supply network can enhance an organization’s ability to manufacture products in optimum volumes and deliver them to the right customers at the right time. This could help to improve patient outcomes and lower costs. Also, digitalization assists enterprises to enhance the control of their inventory by improving planning, forecasting and management, which is critical given their relatively high inventory-to-revenue ratios.

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If spine surgery fails to relieve low back pain why is it increasing?



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Low back pain, spine surgery and market shifts

Spine surgeons in hospitals need to have relevant implants and devices available in the operating room at the right time. Hospitals need to be able to locate products in their cabinets. Without appropriate digitalization strategies health professionals would need to spend time searching for devices that may or may not be used during an operation. This means increased costs, as high value surgical trays would flow through inefficient supply chains.

To reduce costs, hospitals and healthcare systems push the responsibility for inventory management onto their suppliers. This results in a range of different models, which tends to increase the risks to manufacturers. Currently, spine companies manage a range of different types of inventories, with a significant proportion of their product offerings being held either on consignment or by sales reps, who often spend time managing offerings on behalf of their customers. This increases the difficulty to accurately account for supply levels, location, ownership, and usage, which further complicates billing and replenishment and often leads to excess inventory and unnecessary costs.  
A digital supply network can help to reduce these inefficiencies by eliminating waste and saving costs for all stakeholders. Typically, spine surgical sets contain several types of devices, plates, and screws, and usually are sold on consignment. Hospitals return these for re-provisioning often after only having used some of the items in the trays. To guarantee that sales-reps and hospitals have sufficient supplies, manufacturers maintain relatively large, consigned inventories, at significant costs, which impact on the rate of excess and obsolete inventories.
 
A digital supply network effectively connects manufactures with their sales-reps and hospitals to reduce inefficiencies. Surgical trays are tagged with radio-frequency identification (RFID), so they can be effortlessly tracked by hospitals’ smart cabinets and by all other stakeholders. This allows: (i) hospitals to be billed as soon as a surgical tray, or a part of it, is removed, and the replenishment process started, and (ii) suppliers to reduce their consigned inventory, reduce their excess and obsolete inventory, and reduce their costs.
 
Ethical issues

We have broached some of the functional benefits and challenges of digitizing supply chains. Before closing, let us briefly draw attention to some ethical issues associated with digitization, which include increasing the challenges associated with data privacy, cybercrime, and the need to keep pace with new and rapidly developing technologies. This gives weight to environmental, social and governance (ESG) agendas, which are positioned to play an increasingly prominent role over the next five years and shall be discussed in a future Commentary.
 
Takeaways

We have made some suggestions about how common digitalization strategies could improve spine market supply chains and create added value for patients while delivering the highest sustainable returns for manufactures. We have also suggested reasons for the reluctance of some companies to employ digital strategies to transition from linear labour-intensive supply chains to supply networks. In response to the COVID-19 crisis, many organizations partially digitized their supply chains to sustain trading during what became a “new normal” of remote engagements. This suggested that digital enhancements could help spine companies improve their way of working, expand access to services, and deliver more valuable patient-clinician experiences. Dynamics within sectors usually change after a crisis. For example, following the 2008 economic crash, strong companies emerged stronger while weak companies emerged weaker.  A defining difference between the strong and the weak was resilience: the ability not only to absorb shocks, but to use them to transform supply chains and enhance competitive advantage. Will spine companies emerge from the COVID-19 crisis stronger and extend their digitized supply networks or will they revert to their costly and inefficient labour-intensive linear supply chains? Keep an eye on the inventory-to-revenue ratio.
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  • Artificial discs, 3D printing, orthobiologics, and the Internet of Medical Things (IoMT) are technologies positioned to increase their impact on the spine market
  • The speed of their adoption should not be overestimated given the nature and structure of the industry
  • The challenge for spine companies is not too few employees who understand the traditional spine market but too many
  
-Low back pain and the global spine industry-

Will a rear mirror mindset slow the adoption of technologies poised to influence the spine market?
 
This Commentary describes four evolving medical technologies: motion preserving spinal techniques, 3D printing, orthobiologics, and the Internet of Medical Things (IoMT). All are poised to contribute to improving the therapeutic pathways of people with low back pain (LBP) and age-related spine disorders, which cause significant disability and are common reasons for people to visit primary care doctors and A&E departments.  At what speed will these technologies be adopted by the spine market?

An optimistic view suggests that by 2025, all four technologies will be commonly used in spine care. More people will be focussed on aging well, they will be better informed about their health and taking proactive rather than reactive approaches to common spine disorders and treatments. Developed nations and some emerging economies will have extended their public healthcare systems and larger percentages of their populations will have access to quality spine care. Digital inclusion will have spread, and the acceptance of scientific and technological advances will have accelerated. The spine market will have increased its use of AI, behavioural sciences, genomics, and screening and healthcare risks will have been substantially reduced. Spine companies would have shifted from being predominantly manufacturers of hardware to more solutions orientated patient-centric enterprises focused on maintaining the health and wellbeing of an ageing population in an healthcare ecosystem designed around people rather than places.

A less optimistic view is that by 2025, the spinal implant and devices market will continue to be conflicted between increasing patient demands and the level of evidence for various spine care options. This will perpetuate the current system, which leaves clinicians obligated to provide treatments based on insufficient information. Entering this environment will be an increasing supply of spine surgeons trained to deliver interventional care, and economic incentives for them to perform surgical procedures with increasing frequency. Due to decreasing fertility rates and increasing life expectancy, there will be >0.8bn people ≥65 years: ~11% of the global population, (~19% and ~21% respectively of the populations of the US and Europe). The result will be a spine care ecosystem that: (i) continues to emphasize the performance of narrowly focused and insufficiently studied procedures to address what are complex biopsychosocial pain problems and (ii) eschews technologies outside a relatively narrow surgical bandwidth. This will support a business-as-usual mindset among spine companies, and in turn, slow the adoption rates of technologies described in this Commentary.

 
Motion preserving spinal techniques

Spinal fusion, which permanently connects two or more vertebrae in your spine and eliminates motion between them, is one of the most performed spinal procedures indicated for a wide range of spinal conditions. Given that people are ageing and living longer after spinal surgery, there is the beginnings of a movement away from the gold standard spinal fusion-based solutions towards motion preserving surgery. This aims to maintain normal, or near normal, motion to prevent adverse outcomes commonly seen with conventional spinal fusion, most notably the development of adjacent-level degenerative disc disorders.
Several different surgical approaches have been developed to preserve motion in the lumbar spine, including total disc replacement (spinal arthroplasty), partial disc (nucleus) replacement, interspinous spacers, dynamic stabilization devices, and total facet replacement devices. The design of artificial (manufactured) discs varies, but all aim to stabilize the spine and eliminate pain while conserving natural motion of the functional spinal unit, which is essential for mobility, walking, reaching, and having the stamina to participate in activities for periods of time. 
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Robotic surgical spine systems, China, and machine learning

Motion preserving technologies were introduced ~2 decades ago. In 2004, DePuy’s Charité Artificial Disc received FDA approval for the treatment of LBP due to a damaged or worn out lumbar intervertebral disc. Since then, more than a decade passed before AESCULAP’s activL®  Artificial Disc received FDA approval in 2015. Findings of a 2016 clinical study suggest that, “the activL® Artificial Disc results in improved mechanical and clinical outcomes versus an earlier-generation of artificial discs and compares favorably to lumbar fusion”. In 2019, RTI Surgical, an implant company, acquired Paradigm Spine, a privately held company, for US$300m. Paradigm manufactures Coflex, an FDA approved spine motion preserving solution.
 
Some artificial discs adapt traditional titanium implants with specialized coatings and advanced surfacing to allow for a smoother press-fit fixation and future bone ingrowth, which is expected to keep the new discs more securely located. Despite growing enthusiasm for motion preserving spinal techniques, their utilization rates have remained relatively low.  This may be attributable to size constraints of available total disc replacements (TDR), stringent regulatory indications for their use, difficult instrumentation, mixed clinical outcomes, and reimbursement challenges. Despite these headwinds, the artificial disc market  surpassed US$1.6bn in 2019, and its compound annual growth rate (CAGR) is expected to be >18% for the next five years. The US represents >50% share of this market. 
 
The wider adoption and growth of motion preserving techniques for the treatment of low back pain (LBP) and degenerative disc disorders will depend on the long-term outcomes assessed by controlled randomized clinical studies of spinal arthroplasties. As studies demonstrating the efficacy for TDRs increase and the procedures become more established, incidence rates of traditional spinal fusions are likely to slow.
  
3D printing
 
3D printing, also known as “additive manufacturing”, facilitates the conversion of computer-added anatomical images into physical components using special printers, which add successive layers of material. The technology is believed to be particularly suited to the complex anatomy and the delicate nature of spine surgery and is used for spinal implants, pre-operative surgical planning, intra-operative guidance, customised and off-the-shelf devices as well as patient–clinician communications, and medical education. Reports suggest that 3D printing enhances procedural accuracy, decreases surgical time and improves patient outcomes.
 
Over the past decade, 3D printed spinal implants have developed and grown as access to the technology improved. Today, 3D printed spinal implants are being created from materials such as porous titanium, which has the benefit of being strong and durable as well as achieving faster bone growth and osseointegration than conventional PEEK (polyetheretherketone) implants. Increasingly, 3D printing is being used in the pre-operative planning stage for spine surgery by providing a full-scale, stereoscopic understanding of the pathology, which allows for more detailed planning and simulation of a procedure. It is also used to create intra-operative guides for placing pedicle screws using patient-specific data, which lowers risks. [Pedicle screws are fixations routinely used in spinal surgery to stabilize vertebrae. The placing of the screws is dependent on the experience of the surgeon and can result in a breach of the pedicle and cause complications and injury].

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Another advantage of 3D printing for spinal surgery is its ability to manufacture customised, patient-specific devices for difficult to treat cases. With traditional off-the-shelf implants, patients run an increased risk of a suboptimal fit into the reconstructive site. Although research on 3D patient specific implants is limited, they are expected to have enhanced durability due to a more even load distribution and superior osseointegration. The cases of 3D printed customised implants performed to-date have been limited to anatomically challenging pathologies where an individualized solution to restore patient-specific anatomy is a key prognostic factor.
3D printing is also used to manufacture off-the-shelf implants. Spine companies, such as 4Web Medical, and Stryker, are beginning to extend their use of 3D printing techniques to optimise the properties of implants, including the ability to mimic the interconnected structure of cancellous bone [a meshwork of spongy tissue of mature adult bone typically found at the core of vertebral bones in the spine]. In the future, it is expected that 3D printing techniques will be used to incorporate more innovative features into spinal implants, such as porous matrices where density, pore diameter and mechanical properties can differ in different regions of the implant.

As 3D printing evolves and becomes cheaper, faster, and more accurate, its use in spine surgery is likely to become routine in a range of procedures. The production of 3D orthopaedic and medical implants is estimated to grow at a CAGR of 29% between now and 2026, of which spinal fusion devices are expected to be one of the fastest-growing segments. Stryker, which has novel spinal implants comprised of highly porous titanium, has invested €200m (~US$226m) in its Instrument Innovation Centre and the Amagine Institute, in Cork, Ireland, which are focussed on the development of 3D printed spine products.
 
However, currently, there are only a handful of vendors that design and manufacture medical grade 3D printers. Spine companies are constrained by the limited availability of such machines and typically are not privy to certain proprietary aspects of the manufacturing process. In addition, 3D printing is more costly and time consuming than conventional manufacturing processes. The FDA has issued guidance for “patient specific” 3D implants, but as of July 2021, it has not issued a standardized framework for 3D spinal implants to be approved. This regulatory challenge can make surgeons and hospitals hesitant to use the technology. A study of 3D printed surgical implants published in the July 2019 edition of The Lancet suggests that, “Comprehensive and efficient interactions between medical engineers and physicians are essential to establish well designed frameworks to navigate the logistical and regulatory aspects of 3D printing to ensure the safety and legal validity of patient-specific treatments”. As the body of research continues to grow, larger scale studies and longer-term follow ups will enhance our knowledge of the effect 3D printing has in spinal surgery.
 
Orthobiologics
 
Compared to the introduction of innovative spine surgical techniques such as computer assisted navigation (CAN), minimally invasive spine surgery (MISS) and surgical robotic systems, the cadence for new spinal implant materials has been relatively slow to impact the market: titanium and cobalt chromium remain common choices for spinal implants.

One reason for this is because the biology of spinal fusion is a complex process that mimics bone healing after a fracture. Techniques used to enhance spinal fusion include stabilization with metallic or polymeric implants, grafting with bone products and more recently augmenting grafts with a variety of biologic agents. With autologous [patient’s own tissue], and allogenic [donor tissue] bone grafts, tissue is often manipulated to remove mineral content and/or maintain a cell population to enhance fusion.

Although autologous bone grafts remain the gold standard, concerns about their failure to achieve fusion has prompted the evaluation of an increasing range of new biologic materials. These new materials are synthetic, and are generally composed of ceramic or bioactive glass. Recombinant growth factors [proteins derived from a combination of materials that stimulate cell growth], most commonly bone morphogenic protein 2, are sometimes added because they are potent stimulators of bone formation. However, morphogenic protein 2 can be associated with enhanced risks.

A growing number of mid-size and smaller biotech companies engage in the production of orthobiologics. Thus, there is a growing number of new biologic agents specifically developed for spinal implants coming onto the market. These tend to be more durable and bio-friendly than traditional implants and have the potential to improve recovery times for patients and minimize soft tissue disruption. 
Two examples of new biologic materials used in spine surgery for improving bone growth and fighting infection are Xiphos™-ZFUZE™, and molybdenum rhenium (MoRe).

The former is a new interbody fusion system designed to provide an alternative to the more commonly used titanium and PEEK spinal implants.  It’s developed by Difusion Technologies, a biotech company based in Austin, Texas, and received a 510(K) FDA clearance in November 2019. Xiphos™ is the first spinal implant created from ZFUZE™; which is a new biomaterial specifically engineered to interact with the human immune system so that it does not attack the spinal implant as a foreign body. Such foreign body responses can lead to long-term chronic inflammation and a significant number of patient complications. Studies suggest that ZFUZE™ is superior to nano-surfaced titanium and conventional PEEK materials.

The latter, MoRe, is a new biomaterial for spine surgery, which received FDA approval in 2019, and is produced by MiRus Bio, a US biotech company founded in 2016. MoRe is compatible with MRI and CT scans, and is also corrosion resistant. The material is reported to be two to three times stronger, and more fatigue resistant, than either titanium or cobalt chromium. This is significant for the spine market where rods used in surgical constructs can break. It is also reported that MoRe is >2X more hydrophilic [a strong affinity to water and mixes well] than titanium. Spinal implants that contain MoRe have double the osseointegrative characteristics of 3D printed titanium spinal implants. MiRus has ~14, 510(K) clearances from the FDA and >150 patents in its portfolio and is well positioned to address increasing unmet needs in this segment of the spinal implant market.

With an increasing array of biologic interbody graft materials available for use in spine surgery, maintaining a comprehensive understanding of their characteristics, benefits and drawbacks is becoming increasingly important. As these new materials enter the market, traditional titanium or cobalt chromium implants are likely to be surpassed, and as they become more diverse and more widely used, their characteristics, cost effectiveness and efficacy in specific patient populations will need to be better understood and communicated to assist hospitals and surgeons to select materials that are optimal for their patients.
 
Despite the desirability of such a register, it is unlikely that it will materialise in the medium term given security issues, the large and escalating number of producers, patients, hospitals, and surgeons, which are dispersed and have little or no incentive to provide implant information to a central register. Further, independent studies on orthobiologics tend to be relatively weak and patchy. Thus, it seems reasonable to suggest that, in the near to medium term, purchasing parties will continue to be influenced by producers’ marketing endeavours.
 
Internet of Medical Things

Most spine companies are manufacturers, which are focussed on hospitals, surgeons, and operating rooms. However, hospitals, looking to reduce their expenditures on implants and devices, have formed purchasing syndicates, concentrated purchasing to a narrow range of trusted offerings and changed their reimbursement policies.

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Low back pain, spine surgery and market shifts

Vast and escalating healthcare costs, ageing populations, advancing medical science and technologies, more stringent reimbursement policies, and stricter regulations conspire to nudge conventional spine companies to shift away from their traditional production processes and move towards solutions-based, patient-centric endeavours. The Internet of Medical Things (IoMT) can help to facilitate this. Some spine companies have reinvented themselves to become more solutions-orientated and patient-centric. However, for such new business models to be sustainable, companies will need to make data management a core, rather than a peripheral, capability.
A typical treatment journey for a patient with LBP and degenerative disc disorders includes: the presentation of symptoms, diagnostic tests, treatments, monitoring and rehabilitation. This usually involves interacting with several healthcare functions and a range of equipment and devices, including MRI and CT scanners, blood pressure and heart monitors, surgical instruments, implants, and software applications as well as a range of healthcare professionals, systems, and services. Advances in wireless technology, the miniaturization of medical electronics, and the increased power of computing create opportunities for the IoMT to connect all these disaggregated entities and retrieve from them a range of relevant clinical and scientific data, which can be used to improve a patient’s therapeutic pathway.

The IoMT is an amalgamation of sensors, software, data management, and networking technologies and is driven by: (i) the general availability of affordable broadband Internet, (ii) almost ubiquitous smartphone penetration(iii) increases in computer processing power, (iv) enhanced networking capabilities, (v) miniaturization, especially of computer chips and cameras, (vi) the digitization of data, (vii) growth of big data, Cloud-based repositories, and (viii) advances in AI, machine learning (ML), and data mining. This provides the potential for common spinal implants and devices to become ‘intelligent’ by having the added capability to retrieve, analyse and communicate clinical and scientific information. The IoMT can assist spine companies to streamline their clinical operations and workflow management, enhance patient outcomes, lower costs and transform their role and relationship within the evolving value-based healthcare ecosystem.
 
Indicative of this is Canary Medical, a privately held Canadian company founded in 2013, which uses IoMT to enable remote monitoring of patients’ implants. Starting with artificial knees, Canary’s technologies provide real-time feedback on how surgical implants and devices are working by generating self-reports on patient activity, recovery, and treatment failures, without the need for physician intervention and dependence upon patient compliance. Canary applies machine learning algorithms to the data it collects to identify patterns that could help clincians catch problems, such as infections or loosening of the joints before they worsen.
 
The COVID-19 crisis forced physicians to use more remote services. It seems reasonable to assume that over the next five years this will increase, remote monitoring will become the norm, and the value of data generated by spinal implants and devices will be significantly enhanced. The growing importance of data, which are derived from implants and medical devices, is evidenced by the fact that the FDA has embraced AI and has several ongoing projects designed to develop and update regulatory frameworks specific to it. A research paper published in the January 2021 edition of The Lancet Digital Health demonstrates the increasing significance of data and algorithms for MedTech’s. In 2015, the FDA approved nine AI-machine learning (ML) based medical devices and algorithms. The number increased to 12 in 2016, 32 in 2017, 67 in 2018, and a further 77 in 2019. In Q1,2020, 24 AI/ML-based medical devices were approved by the FDA.
 
Canary is unusual as the spine industry generally has been relatively slow to embrace the IoMT. This partly could be associated with security and privacy issues. However, according to a July 2018 report from Deloitte, a consulting firm, there are, “more than 500,000 medical technologies currently available, which all share a common purpose: having a beneficial impact on people’s health and quality of life” and all are currently accessible to collect, analyse and transmit healthcare data. The increasing significance of data also is stressed in another research report by Deloitte on the European MedTech industry. Findings suggest that AI technologies, which, “can be used across the entire patient journey”, save European healthcare systems “~€200bn (~US$238bn) each year” and “have the potential to assist European health systems in responding to major challenges they face”.
 
A February 2020 Fortune Insights Report, valued the global IoMT market at ~US$19bn, and projected it to reach ~US$142bn by 2026, exhibiting a CAGR of ~29%. Given the growing significance of the IoMT to the spine market, in the medium term, data could become more valuable than actual spinal implants and devices. Spine companies need to consider developing new business models to take advantage of this and develop a deeper understanding of the needs of patients and demonstrate how their offerings improve patients’ therapeutic journeys.
 
Takeaways
 
Because the risks associated with spine surgery are non-trivial and reducing complications is critical, over the next decade we are likely to see the introduction and adoption of technologies, which have the potential to improve precision, enhance patient outcomes and reduce costs. These, together with technologies described in previous Commentaries, provide companies with an opportunity to influence how the spine market will play out over the next decade. However, the speed that the technologies described in this Commentary will be adopted by the spine market should not be overestimated given the deep-rooted interests and established practices of the industry. To take advantage of these developing technologies spine companies will need to stay ahead of consumer-focussed tech-savvy companies, like Canary, which are entering the market and: (i) increase their digital expertise, (ii) improve their patient-centric interactions, (iii) enhance their data management capabilities, and (iv) extend their digital infrastructures. Over the next 5 years, a challenge for spine companies will not be a lack of executives who understand traditional spine markets, but an excess of them. Executives who know the traditional spinal implant and devices industry well, are likely to keep looking in their rear-view mirrors and assuming that what made money in the past will make money in the future.
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  • Robotic surgical systems have gained a small but significant share of the surgical spine market and assist surgeons to improve accuracy and patient outcomes
  • The industry has been dominated by Western corporations and benefited from advancing technologies, ageing populations with age related spine disorders and the need to reduce costs
  • High costs, training and the cumbersome nature of the systems are frequently cited as obstacles likely to slow the adoption of surgical robotic systems
  • Over the next decade expect competition from China’s emerging robotic surgery industry
  • Systems are expected to become smarter and more autonomous
  • Greater autonomy raises an “interpretability challenge” not broached in surgical studies, but likely to be a more significant obstacle to the development and adoption of robotic surgical systems
  
- Low back pain and the global spine industry -

Robotic surgical spine systems, China, and machine learning
 
Over the past two decades many spine companies have pursued a strategy of incremental innovations of their existing product portfolios to launch ‘new’ offerings at a higher price point. This has served the spine industry well by providing producers with relatively stable revenues and protection from a sudden loss of market share, such as that experienced by pharma companies when their patents expire. The disadvantage of such a tactic is that it encourages a mindset focussed on profit margins and revenue growth rather than on strategic issues and enhancing value for patients. In today’s increasingly value orientated healthcare ecosystem driven by high and escalating healthcare costs, more stringent reimbursement policies, tougher regulations, advancing technologies and increased competition, it seems reasonable to suggest that incremental fixes to existing products are unlikely to return spine companies to the high margin profitable growth businesses, which they once were.
 
Today, healthcare systems are looking for more disruptive technologies to provide them with cost effective, high quality, affordable surgical spine solutions for the vast and increasing aging populations with degenerative disc disorders. This has created an opportunity for robotic surgical systems to gain a small (<10% of lumbar procedures), but significant share of the spine market. Robot-assisted spine surgery, which aims to automate repetitive tasks and improve the quality of patient outcomes, is being championed by some healthcare professionals as a potential paradigm altering technological advancement. Systematic reviews and meta-analyses have found that clinical benefits of robotic surgery, compared to laparoscopic surgery, include less blood loss and shorter hospital stays. Compared to conventional open surgery, evidence indicates robotic surgery holds potential for smaller incisions with minimal scarring and faster recovery.
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Since the widespread dissemination of minimally invasive surgical modalities, a critical mass of physicians appears to have enthusiastically embraced robotic-assisted surgery. A cohort study published in the January 2020 edition of the Journal of the American Medical Association used clinical registry data from the US state of Michigan from 1st January 2012, through 30th June 2018; comprised of ~169, 000 patients across 73 hospitals. The average patient age was ~55 and ~54% of the cohort were women. The study found that the use of robotic systems for general surgical procedures increased from ~2% in 2012 to 15% in 2018 and concludes that the introduction of robotic surgical systems has been, “associated with a decrease in traditional laparoscopic minimally invasive surgery”. According to ResearchandMarkets, a leading market research firm, over the next decade, the global surgical robotics market is projected to grow at a compound annual growth rate (CAGR) of ~10% and reach ~US$17bn by 2031 from ~US$5.5bn in 2020.

 
In this Commentary

This Commentary describes how robotic surgical systems have been enthusiastically embraced by a growing number of spine surgeons but draws attention to studies that suggest obstacles to the widespread adoption of surgical robots. These include costs, training, set up time and their somewhat cumbersome nature in the OR. We describe a significant tailwind and a countervailing headwind for the further adoption of robotic surgical systems. The tailwind is the significant investments being made by China in the development of robotic surgical systems. The headwind is an ethical issue associated with the increased use of AI and machine learning algorithms, which are likely to make surgical robots more autonomous. Before discussing these issues, the Commentary describes: (i) robotic surgical systems and spine surgery, (ii) two categories of robotic surgical technologies, (iii) the principal robot systems that are currently in clinical use, (iv) the critical nature of training, (v) China’s increased investment in the development and commercialization of surgical robots, (vi) the ‘interpretability challenge’, which could become a more significant obstacle for the further adoption and increased automation of robotic surgical systems in certain regions of the world.
 
Robotic surgical systems and spine surgery

The term, “robot” implies a machine capable of carrying out a complex series of actions automatically. Robotic surgical systems have not reached this stage of development and are machines designed to interact and assist humans to make surgery safer and more efficient.
 
As of 2020, the application of robotics in spine surgery has been predominantly associated with pedicle screw insertion for spinal fixation [pedicle screws are a fixation technique routinely used in spinal surgery to stabilize vertebrae]. Most studies on robot-assisted spine surgery have investigated lumbar or lumbosacral vertebrae while studies on the use of robotics for placing screws in the cervical and thoracic vertebrae are limited.
 
Robotic systems in spine surgery are commonly used for posterior instrumentation with pedicle screws and rods, which are procedures that require repetitive movements during lengthy operations, as well as delicate manipulation of vital structures in restricted surgical areas. Traditional manual techniques of placing screws are dependent on the experience of the surgeon and can result in breaching the pedicle. Misplaced pedicle screws not only create complications for patients but also can result in a risk of malpractice litigation for surgeons. Safety and precision concerns have fuelled the demand for the use of robotic systems in pedicle screw implantation to increase consistency, reduce inaccuracy, minimize radiation exposure, and decrease operative time. Findings of a research study published in the May 2017 edition of Neurosurgery, reported accuracy of pedicle screw placement using robotic systems as high as ~94% to 98%.
 
The spine market appears to be at an inflection point with an increasing number of companies developing and launching robotic surgical systems. It seems reasonable to suggest therefore that the increased investment in this emerging area is likely to impact the spinal implant and devices market over the next decade.
Two categories of surgical robots

There are two categories of surgical robots used in spine surgery: (i) master-slave systems and (ii) trajectory assistance robots. A prominent, commercially available example of the former is the da Vinci surgical system,  developed by Intuitive Surgical, a Nasdaq traded pioneer in robotic surgery founded in 1995. An example of the latter is the Mazor X Stealth™, which since 2018, has been owned by Medtronic, a giant American MedTech corporation and one of 4 dominant players that control >70% of the global spine market.  

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If spine surgery fails to relieve low back pain why is it increasing?


 

The da Vinci

The da Vinci robot is a master-slave system and the most popular surgical robot in the world. It is designed to facilitate minimally invasive surgeries and is controlled by a surgeon while seated at ‘master’ console. In 2000, it received FDA-approval for general laparoscopic procedures. Despite costing ~US$2m and having high operating costs, there is an installed base of ~6000 da Vinci units worldwide. The system is used by surgeons in all 50 US states and in ~67 countries. In 2020, >8.5m surgical procedures had been performed using the system. 

In 2014, the da Vinci system first entered the Chinese market and by 2019, 112 robots had been installed and used in >110,000 surgeries. However, China’s high import tax on foreign machinery limits the broader use of da Vinci in the country. Currently, the prevalence of robotic surgery in China is much lower than in some Western countries, as well as Japan and South Korea. However, this is could change when China launches its first surgical robotic system, which is expected to be the Micro Hand S. This is a system based on origami-like panels, and features a foldable, compact design that allows for a wide range of possible movements by the instruments in the limited space of an OR. 

 
A user’s opinion

In the video below, Christopher Anderson, the lead robotic surgeon at St George’s University Hospital, London, describes the da Vinci robot and says, “The term ‘robotics’ is a misnomer because it implies that the instrument has its own intelligence, but it’s not the case”. Surgeons control the “master” system while seated at an ergonomic console viewing high-definition 3D images of the surgical site. The system’s “slave” aspect consists of 3 to 4 interactive arms, which hold surgical tools, and one controlling a camera. With Intuitive’s proprietary “endo wrist” technology, the robotic arms replicate what a surgeon’s arm can do by scaling the surgeon’s hand movements in relation to the robotic arm movements and filtering out tremors. The system’s ergonomic design means greater comfort for the operating surgeon, reducing the problem of fatigue. Patient benefits include smaller incisions, less pain, and faster recovery.
 

Some surgeon-operators of the da Vinci suggest that the lack of haptic feedback and the inability of the surgeon to be stationed at the operating table are limitations of the system. Not according to Anderson, however, “The system is completely and intuitively controlled by the surgeon”, and the “3D vision inside the visor of the console provides a depth perception, which enables the surgeon to know how far to manoeuvre inside the tissues.

The da Vinci has been used for numerous spine procedures including anterior lumbar interbody fusions (ALIF) [a common spine fusion from the back], resections of thoracolumbar neurofibromas and paraspinal schwannomas [rare usually non-malignant spine tumours]. Compared with traditional open surgery and other robotic systems, more recent versions of the da Vinci provide enhanced visualization and increased magnification of the surgical field, which facilitates careful dissection of fine structures and improved patient outcomes.

 
The Mazor
 
The Mazor is a trajectory assisted surgical system and the first robot to be widely used in both open and minimally invasive spine surgery (MISS) for a variety of clinical indications. The system positions surgical instruments according to a preoperative virtual plan and provides superior intraoperative navigation compared to traditional guidance systems. It is designed to position an effector [a gripper] over a target for a precise stereotactic insertion procedure. In some Mazor systems, the target insertion site and trajectory can be virtually planned on preoperative images, such as X-rays, CT scans and MRIs. Such planning allows surgeons to safely visualize surgical trajectories, avoid critical regions and adjust if necessary. The positioning of surgical instruments mounted at the end of the system’s robotic arm is registered to a preoperative image and automatically adjusted by a control computer, which instructs and directs the robotic arm based on its interpretation of intraoperative imaging.

An early version of the Mazor called the SpineAssist, which was developed by Mazor Robotics, an Israeli company, received FDA approval in 2004 to assist with placement of pedicle screws and since then, it has had several upgrades. In 2016 the company launched the MazorX, which was enhanced by combining proprietary software to plan surgical procedures, a robotic arm to precisely guide the placement of implants during complicated spine surgery, and real-time 3D imaging feedback to ensure procedures proceed as planned. This increased accuracy and improved patient outcomes compared to traditional spine surgery. In 2018, Medtronic acquired Mazor Robotics for US$1.7bn and soon afterwards, launched the Mazor X Stealth™ with even more advanced capabilities. Mazor systems have been installed in ~15 countries and used in >24,000 spine surgeries.
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Other robotic surgical spine systems

In addition to the da Vinci and the Mazor, there are further robotic systems currently used in spine surgery. These include: (i) Zimmer Biomet’s ROSA® Spine, which is like the Mazor and received FDA approval in 2016, (ii) Brainlab’s Cirq®, launched in 2015, (iii) Globus Medical’s ExcelsiusGPS® launched in 2017, (iv) Stryker’s Mako, also launched in 2017, and (v) TINAVI Spine’s TiRobot®, launched in 2016.
Syed Aftab (pictured above), consultant spinal surgeon and robotic surgical lead at the Royal London Hospital, Barts Health NHS Trust, a major London teaching hospital, uses Brainlab’s Cirq®, a trajectory assistance system in combination with a 3D C-arm. “We were the first surgical unit in the UK to have a robotic spinal system and the first to perform robotic spinal surgery”, says Aftab, who teaches spine and orthopaedic surgery at London’s Queen Mary University, and is also the spinal surgery lead at Complex Spine London. He adds “We chose Brainlab’s Cirq® because it has a small footprint, it’s lightweight, easy to transport from one OR to another and is also cost effective compared to other systems”.

According to Aftab, Brainlab’s second generation system is a significant improvement on its first, “it has a true automatic feature, which finds and holds my screw trajectories based on my preoperative plan. I primarily use the system for pedicle screw insertion. It has applications in the lumbar spine but has significant advantages in the upper cervical spine where the surrounding at risk structures are more challenging and the bony anatomy is less forgiving. The combination of navigation and robotics substantially increases accuracy, reduces the time of surgery, and frequently takes away the need for large dissections to create visual exposure of the operating field. Also, I’ve found the robotic system extremely useful where anatomical localisation is difficult due to previous surgery or altered anatomy, such as in degeneration or ankylosing spondylitis [a form of arthritis in which the spine becomes inflamed and fused]”.

Aftab and his colleagues have found the outcomes of their robotic surgeries “very positive” from both patient and health professional perspectives. “Robotic surgical systems definitely add value to pedicle screw placements compared to traditional open or minimally invasive spine surgery. However, it seems important to point out that it is not altogether clear whether the benefits are derived from the robotic system or from the embedded advanced navigation”, says Aftab.


According to a study published in the February 2017 edition of Neurosurgerythe ExelsiusGPS®, “has the potential to revolutionize the field of robotic-assisted spinal surgery. With automated accuracy, reproducible outcomes, efficient integration, automatic patient registration, constrained motion for safety and automatic compensation for patient movement”. The system is like the Mazor and ROSA® Spine but appears to address many of the drawbacks of previous robotic-assisted systems. In November 2019 DePuy Synthes announced a joint venture with TIVANI, to market the TiRobot® for spine surgery in China.

In May 2021 South Korean MedTech company Curexo  received FDA approval for its Cuvis-spine robot, which guides pedicle screw insertion and uses a robotic arm to make surgery safer and more efficient. The company expects to market Cuvis in Europe and the US. NuVasive, a US MedTech company, expects its robotic platform, Pulse, to receive FDA approval in summer 2021 for all spinal surgeries, not just complex or low-acuity cases. When launched, it will combine neuromonitoring, surgical planning, rod bending, radiation reduction, imaging, and navigation functions and is expected to compete with other robotic spine offerings on the market, including Medtronic's Mazor X, Globus Medical's ExcelsiusGPS® and Zimmer Biomet's Rosa Spine®.
 
Headwinds
 
Compared to traditional fluoroscopic-assisted freehand approaches to pedicle screw placement and other spinal procedures, robotic systems may be more accurate, more efficient, and safer. However, it is worth mentioning that there is a range of robots being used in spine procedures and they do not all guarantee the same accuracy and precision. Errors arise because of their complexity relative to fluoroscopically guided surgery and some existing user interface software can be cumbersome and unintuitive, which suggests that there is a steep learning curve for health professionals wishing to introduce robotic surgical systems into their practice. Studies show that the accuracy of pedicle screw placement increases, and operating time decreases with the number of robotic surgical procedures performed by a clinical team. Thus, there is a learning curve and training is critical; not only for surgeons, but also for other health professionals in the OR.
 
It is generally accepted that the cost of training and the time it takes could slow the further adoption of robots in spine surgery. Surgical education is just beginning to include robotics as part of standard training for surgeons. However, there are several different robotic systems in clinics and learning curves can vary according to the version of the robotic system used, so standardization of surgical training becomes a challenge, and surgical expertise plays a significant role in obtaining a fair comparison between robotic-assisted and traditional surgery.
 
Added to the increased training burden associated with robotic techniques are of the high costs of systems. To reduce the financial burden on hospitals, some producers provide innovative financing terms and bundle a robotic system with a range of implants and other devices and services. These issues together with current patchiness of evidence on the efficacy of robotic surgical spine systems are barriers to t the widespread utilization and development of surgical robots. 
 
Tailwinds: China and robotic surgical systems
 
Over the past two decades Western corporations have dominated the robotic surgical spine market. US, UK, and EU have differed in their approaches to the development and adoption of robotic surgical systems. The US has tended to focus on technical challenges such as tactile sensing and navigating confined spaces, while the UK has been more market driven and focused on the cost effectiveness and regulatory standards of systems. The EU, on the other hand, has attempted to address both R&D and translational issues by promoting academic and industrial collaborations. In recent years, Chinese initiatives, which are more closely aligned with the EU approach, have been gaining momentum and are positioned to impact the spine market in the next decade.
 
China is challenged by its vast and rapidly ageing population and a shortage of surgical expertise. By 2050 China’s senior citizen population (those ≥60) is projected to grow to >30% of the total population, up from ~12% today, and this is expected to substantially increase the percentage of its retirees relative to workers, which will significantly increase the burden on its healthcare providers. 
 
Beijing believes these challenges can be helped by robotic surgical systems. In addition to acquiring >100 da Vinci systems, China has made the production of domestic robotic surgical systems part of its 2006 15-year plan for science and technology. In 2011 the Chinese government reaffirmed this commitment by including the increased use of robotics in healthcare in its 12th 5-year plan, and over the past decade, Beijing has made substantial R&D investments in the development of robotic surgical systems.
 
In 2019, China opened the Medical Robotics Institute in Shanghai Jiao Tong University, which is the nation’s first academic establishment dedicated to the study of medical robotics, and appointed Guang-Zhong Yang as its founding dean. Professor Yang formerly was the founding director of the Hamlyn Centre for Robotic Surgery at Imperial College London. According to Yang, medical robotics have been growing in China for the past two decades driven by, “The clinical utilization of robotics; increased funding levels driven by national planning needs; and advances in engineering in areas such as precision mechatronics, medical imaging, artificial intelligence and new materials for making robots”.
 
China’s robotic surgical industry started later than its foreign peers, but the nation now has ~100 medical robot companies. The Chinese sector is in a transitional phase from R&D and clinical trials to commercialization and mass production. The nation’s medical robot market is expected to be worth ~US$2.5bn by 2026. China’s growing interests in surgical robotic systems is expected to significantly increase competition and accelerate technological developments.
  
Tinavi Medical Technologies
 
A notable example of a Chinese enterprise specialising in surgical robotic systems is Tinavi Medical Technologies, a Beijing-based company, backed by China’s Ministry of Science, the Beijing Government, and the Chinese Academy of Science and listed on China’s National Equities Exchange Quotation [an over-the-counter system for trading the shares of a public limited company]. In 2016, Tinavi received fast-tracked approval from the central government to sell the TiRobot®, the first robot-assisted surgical product made in China. As of December 2020, the system had assisted in 10,000 surgical procedures. With its unique algorithm for calculating pedicle screw trajectories, the TiRobot® can precisely move to a planned position and provide surgeons accurate and stable trajectories for implants and pedicle screws; it is expected to make high volume spine surgeries more accurate and standardize less common and more complex spine surgeries. Research published in the January 2021 edition of the Journal of Orthopaedic Surgery and Research, suggests that, “iRobot-assisted vertebroplasty can reduce surgery-related trauma, post-operative complications, and patients’ and operators’ exposure to radiation”. 
 
University-industry-research ecosystem

The production of surgical robotic systems in China is advantaged by the nation’s deep and functional university-industry-research cooperation. It is relatively common in China for technology companies to have strategic alliances with university research institutes with years of accumulated technical expertise. With respect to robotic surgical systems that require application of medical theories and technologies, mechanical engineering, robotics, optics, computer science and AI, such joint ventures bring together interdisciplinary teams with years of multidisciplinary research experience in bio-machine interfaces, integrating bionic techniques, and investigating new materials technologies.

An example of such an interdisciplinary joint venture is a project focussed on making robotic surgery systems more capable of replicating the tactile feel and sensation a surgeon experiences during more invasive traditional procedures. The project is led by researchers at the 3rd Xiangya Hospital of Central South University, in collaboration with Tianjin and Beihang Universities.
 
Based on their combined experiences of minimally invasive surgery, researchers have built and analysed classified databases on the physical characteristics of patients, on the interaction between human soft tissues and surgical instruments, and on operator-instrument interfaces. This combined knowledge has been used to optimize the design of surgical robotic systems to make them more effective, more intuitive, and safer than exiting robots.
 
The project team is planning for a multi-centred, prospective, randomised trial to collect more data associated with the system’s safety and effectiveness, which is expected to accelerate the manufacture of their surgical robot. Further, the project team leaders at the 3rd Xiangya Hospital, plan to build a national training institute to educate surgeons in the use of the system, and this is expected to contribute to the robot’s broader use. There are also plans to establish a clinical information centre, by collecting data on the use of the system, and employ AI and machine learning algorithms to analyse them. This is expected to optimize performance, inform upgrades, and make the robot globally competitive.

 
The “interpretability challenge

Currently, robotic surgical systems neither make cognitive decisions nor execute autonomous tasks but assist clinicians to enhance pre-operative planning, improve intra-operative guidance, provide superior interpretations of complex in vivo environments, and increases the accuracy, safety, and efficiency of surgical procedures. It seems reasonable to suggest that robotic surgical systems will become more autonomous as they increase their AI and machine learning capabilities, which facilitate instantaneous assessment of complex surgical settings that trigger immediate therapeutic actions, that the surgeon using the robot might not fully understand. This situation can be further complicated by the complexity of algorithms that depend on neural networks comprised of thousands of artificial neurons. This further blurs the reasoning behind specific interpretations and consequent actions of robotic systems. In many such cases the developers of machine learning algorithms cannot explain why an AI driven system arrived at a specific interpretation or a suggested action.
 
This failure to understand is referred to as an “interpretability challenge”, or more commonly, the black-box” problem; a concept not broached in surgical studies but discussed in medical ethics.
 
Reactions from market stakeholders to such a challenge are likely to be mixed. For example, some healthcare providers might welcome more autonomous robotic surgical systems to compensate for shortages of experienced surgeons, others might perceive autonomous robots as having the potential to “level the playing field” among surgeons and contribute to a generally accepted level of surgical services across diverse regions, while other providers might be against surgeons abdicating responsibility to a robot. Whatever the reaction of providers, as robotic surgical systems advance, they are likely to become more complex and less interpretable by the surgeons using them. Increasingly, stakeholders will be required to “place their trust in the system”. Gaining this trust from surgeons, patients and providers could be a more significant obstacle to the further adoption of robotic surgical systems than the obstacles commonly referenced such as costs, scarcity of resources, lack of training, and inconclusive clinical studies.
 
To counter the “black box” syndrome is “explainable AI” (EAI), an AI solution designed to explain its intent, reasoning and decision-making processes in a manner that can be understood by humans. Until EAI becomes an integral part of robotic surgical systems it seems reasonable to assume that such could face some difficulties progressing beyond their assisted surgical status.
 
Takeaways
 
Currently, robotic spine surgery is in its infancy and most of the objective evidence available regarding its benefits draws from the use of robots in a shared-control model to assist with accurately placing of pedicle screws with minimal tissue damage. The performance to-date of robotic surgical systems suggest a new era for spine surgery by their capacity to refine surgical dexterity and augment human capabilities. The current limitations of surgical robots are likely to provide incentives for innovation, which holds out the prospect of developing more advanced robots that further enhance spine surgery outcomes while reducing costs. This is likely to provide a significant boost to well-resourced spine companies developing robotic systems and put pressure on others to change their business models dominated by incremental fixes to their existing product offerings. But keep an eye on Chinese endeavours in robotic surgical systems and the responses to the interpretability challenge in different regions of the world.
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