The Digital Revolution in Medtech: Opportunities in Asia

By Stephen Sunderland and Helen Chen

Digital technology is revolutionizing the healthcare sector. The global digital health market was valued at approximately $122.66 billion in 2017. Investment in digital health startups reached $11.78 billion globally in 2017 alone, with 852 deals in total. Healthcare companies around the world are now taking advantage of these exciting changes to create value for patients, clinicians, and shareholders alike.

From the widespread adoption of digital platforms connecting customers to practitioners to the vast potential of artificial intelligence (AI), digital technology is becoming central to the future growth of medical technology firms all around the world.

While this digital revolution is taking place on a global scale, Asia’s underlying key structural and demographic needs and homegrown tech industries pose a unique opportunity for digital healthcare firms.

Despite the challenges, Asia also provides a strong foundation for further digital growth.

Asia’s aging population creates a higher disease burden in communities, and the urgency of coping with this will only continue to increase. This burden is exacerbated by underdeveloped healthcare infrastructure and clinical talent shortages, especially in China’s lower-tier cities.

Despite the challenges, Asia also provides a strong foundation for further digital growth. The growth of the internet and mobile-based technology has been encouraged with regulatory support from governments, and in China, a legal framework allows leveraging population scale data if for public benefits. There is also a menu of critical enablers in China that can underpin the coming revolution, including an openness to what might be termed “Agile innovation” (aka China pace), global centers of excellence in digital technologies such as AI and blockchain, and ready access to investment capital.

Much has been written globally in recent years about the use of digital technology to support management of patients and interactions with them; in China, it’s BAT (Baidu, Alibaba, Tencent), consumer ecosystems, and an app culture (e.g., apps for recording sleep quality and heart condition, hospital registrations, and medical fee payments). Fewer column inches have been devoted to how the digital revolution will be delivered in the highly regulated world of medical devices and equipment, and the impact of that.

This special report seeks to redress that deficit and expand on how medtech companies—both in China and beyond—are seizing the initiative, and how medtech leaders can think about identifying opportunities in their own businesses.

A framework for digital innovation in medtech

In order to better understand how digitization is changing the medtech landscape, we will be taking a look at how other companies have entered the medtech space. These companies have made varying degrees of progress in their digital journeys; most are established medtech industry participants.

Even with the wide disparity in offerings and experience, digital technology is providing new tools to add to an ever-changing healthcare landscape. We will be looking at this digital revolution through the lens of a three-pronged framework, representing the different paths that companies have taken to add digital technology to their healthcare portfolios.

Business process improvement

While there has been a large focus on patient-facing aspects of digitization, it is also a powerful tool to reduce costs and time on the back-end, resulting in improved levels of service and increased profits from efficiency gains in R&D through supply chain management, sales, and marketing.

For example, leading medical device company Medtronic launched an online business-to-business platform in 2010 to more efficiently manage their more than 500 distributors in China. This digital platform covers a range of logistical and financial systems and allows Medtronic to introduce new features regularly, leveraging new technology to streamline operations according to local market needs. Similarly, Roche Diagnostics began remotely monitoring IVD (In Vitro Diagnostic) devices in 2017, allowing them to leverage the data to optimize availability with predictive maintenance and tailored recommendations. In the same year, GE Healthcare developed a digital biomarker application to measure a range of patient characteristics in Alzheimer’s studies, helping them optimize recruitment and therefore improve the quality of the studies.

Product-service innovation

Beginning with a focus on the boundaries of existing core products, companies can also improve their offerings through high-impact digital strategies that can range from soft-touch development of existing products to innovative and groundbreaking new technologies.

For example, GE Healthcare and Trice Imaging, a company that specializes in cloud medical imaging, partnered to develop an integrated cloud-based platform for clinicians to connect with their colleagues and patients, particularly to share electronic health records. In 2016, Philips launched a telehealth service for patients through a cloud platform for tracking and monitoring health in Singapore. Patients were able to plug their data into the system, which would connect them to providers in a single integrated system.

Tencent is developing an endoscopy solution with Sun Yat-sen University Cancer Treatment Center—Miying—that is able to rapidly analyze endoscopic images for signs of cancer at an unprecedented pace.

Colorectal, gastric and esophageal cancers are major killers in China, and incidence rates are still on the rise. Traditionally, screening requires an extended one-on-one consultation with one of only 29,000 qualified endoscopy doctors in China. However, with 120 million people needing endoscopy each year, 50 times as many qualified endoscopy doctors are needed. Tencent is developing an endoscopy solution with Sun Yat-sen University Cancer Treatment Center—Miying—that is able to rapidly analyze endoscopic images for signs of cancer at an unprecedented pace.

Other advances in this product-service innovation field include smart insulin pens from Emperra GmbH and new augmented reality tools from Bencin Studios, a gaming company, to help radiologists better visualize organ scans.

Disruption with digital

Lastly, some companies are finding inspiration in “digital native” business models and new technologies from outside the healthcare arena to provide a foundation for disruptive digital strategies that have the potential to revolutionize conventional market needs and behavior.

Technology leader IBM and Chinese conglomerate Sichuan Hejia have collaborated to launch a supply chain financial services platform for pharmaceutical procurement using blockchain technology. The highly secure tracking system will enable small and medium-sized pharmaceutical retailers to have increased credit ratings for bank loans, which otherwise suffer under the strain of delayed payments from hospitals. This partnership gives way to a secure and reliable method of process tracking, which promotes transparency and trust along the supply chain.

Conclusion

Medtech companies are now positioned to profit from significant opportunities in digitization, particularly in Asia where conditions are ripe for rapid digitization to take place.

There is a strong technical and financing ecosystem for digitizing medtech in China. However, as with broader medtech, the local priorities from digital innovation are somewhat different from major developed healthcare markets. Market context drives some differences. For example, a relative shortage of clinicians and infrastructure puts more onus on scalability and efficiency of patient handling as opposed to deepening the quality of care and engagement that might be higher priorities in more developed markets.

Breaking through will require strong executive leadership, and often outside partnerships for a start.

Leaders in China’s medtech companies should develop a framework for digital innovation in order to challenge themselves and their teams on how digital technologies can be used across their existing business operations, products and services, and their business models to deliver value for patients, clinicians, and owners.

Based on our conversations with a range of partners across the market, most medtech companies today rate themselves as relatively weak on the cross-functional collaboration and technical capabilities needed to deliver progress on their digital agenda. Breaking through will require strong executive leadership, and often outside partnerships for a start. More structurally, digital leaders can explore inorganic options (e.g., M&A, partnership, licensing) to quickly fill product and capability gaps.

Questions medtech leaders should be clear on:

1. Where is my organization on its own digital journey?
2. What are the value-maximizing digital opportunities in my firm right now? Are they global or local in nature?
3. What capabilities are needed to deliver on our opportunities in the near term and long term? How large is this gap? What are the right choices for partnerships to fill gaps?
4. What is the appropriate pace at which to invest in building capabilities, next-generation propositions, and business models?