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"When you fail to reach your goals don’t adjust your goals, adjust your actions"
 
On Saturday 20th October 2022, the Chinese Communist Party (CCP) ended its twice-a-decade Congress. It amended its charter and elected Xi Jinping for a historic third 5-year term, making him China's most powerful ruler since Mao Zedong, the founding leader of the People's Republic. Given these outcomes, followers of HealthPad suggested we re-publish the Commentary, ‘Learn from the Chinese, but don’t misjudge Beijing’, which we do below. The Commentary describes the tightening of China’s regulatory and competitive environments and suggests that Western corporations, with interests in China or thinking of entering the Chinese market, should not underestimate: (i) the large and growing differences between China and the US, and (ii) the CCP’s uncompromising ambition to become economically self-reliant, a world superpower and a global high-tech leader.

Deteriorating East-West relationships
Xi Jinping used the Congress to tighten his hold over the CCP by evicting all remnants of factional opposition, placing political allies in key positions and establishing complete control over the Party and the country. Xi re-emphasized the significance of making science and technology cornerstones of China’s strategy for national economic and military “self-reliance”. He also hinted that China will further decouple its economic links with the US and Europe and increase market restrictions on Western companies trading in China. With Xi’s increased authority and China’s increased global power and influence, it seems reasonable to assume that, in the near-term, China is likely to develop a more aggressive foreign policy, and the US and its Western allies will doubtless respond with a more confrontational approach to China. This significantly raises the possibility that East-West geopolitical relationships will deteriorate further.
 

Guanxi
China and the Chinese are different to the West and Westerners. Whereas most Western nations, have a deep sense of individualism based on democracy with social and political freedoms, China and the Chinese are rooted in Confucian collectivist principles with a top-down hierarchical structure that views individuals as part of a community with ordered and friendly relationships. This is perhaps best understood by the Chinese term, ‘Guanxi’ (关系), which refers to tacit mutual commitments, reciprocity, and trust, and is central to all personal, business, and politico-economic relationships.

China’s ambition
None of China’s renewed global posturing should surprise Western corporate leaders with their fingers on the pulse of their international strategies. For decades China has been increasing its power and influence in the world. In his 2017 report to the 19th Party Congress, Xi Jinping stressed the decline of America’s  international authority and the “substantial and rapidly growing” global power and influence of China. He predicted that, by the mid-21st century, China will have become “a global leader in terms of comprehensive national power and international influence,” and will be a development model for the world.

The past 5-years
Also in 2017, Xi advocated a more aggressive and activist Chinese foreign policy, and over the ensuring 5 years, Beijing has: (i) weakened foreign enterprises trading in China and raised the bar for new entrants, (ii) strengthened Chinese domestic companies and incentivized them to trade internationally, (iii) ratcheted-up pressure on Taiwan, (iv) exerted greater control over Hong Kong, and (v) increased China’s rhetoric and tactics in defence of its interests.
 

Business-as-usual versus strategically active
Over the past 3 decades, China has strategically invested in innovation-driven development, which has helped the nation improve its core competitiveness, and significantly shape its international leadership role. During this time, many Western companies with interests in China have been strategically passive and pursued ‘business-as-usual’ policies, which often meant they: (i) continued to invest in products and services that had been overtaken by technology and were losing market share, (ii) were relatively slow to invest in emerging technologies and develop new offerings, (ii) tended to fixate on their initial success and failed to quickly recognise that something new was replacing it, and (iii) focused scarce resources on short-term performance rather than long-term value. For many corporates, such policies resulted in missed commercial opportunities and weakened global competitiveness.
 

Reducing the healthcare gap
Over the past decades while many Western companies have been strategically passive, China, by contrast, has been strategically active, aggressively developing innovative and technologically advanced solutions to narrow its healthcare gaps caused by increased healthcare demand and shrinking numbers of healthcare professionals. Witness Chinese start-ups that rapidly grew to become significant companies by leveraging data and artificial intelligence (AI) to develop digital healthcare solutions that enhanced patient outcomes and reduced costs. Examples include: WeDoctorAlibaba HealthJD Health, DXY.cn. and Ping An Good Doctor. These, and other digital innovations, provide a range of health services including, online consultations, hospital referrals and appointments, health management, medication regimens, medical insurance, and wellness and prevention programmes. Such initiatives have provided vast numbers of Chinese citizens with easier access to healthcare and enhanced patients’ therapeutic journeys while reducing vast and escalating healthcare costs and shifted many healthcare services out hospitals into peoples’ homes.

Hospital services shifting to the home
This shift is nothing new and not exclusively Chinese. Twelve years ago, Devi Shetty, a world-renowned heart surgeon, was emphasising the impact that digitalization would have on traditional hospital based services. In just 2 decades, Shetty built Narayana Health (NH), India’s 2nd largest hospital group. In 2019, Narayana was recognised by  Fortune Magazine as, “one of the world’s most innovative healthcare providers”. In 2000, Shetty, like his Chinese counterparts, was emphasising that the “next big thing in healthcare is not going to be a magic pill, or a faster scanner, or a new operation. The next big thing in healthcare is going to be IT, which will change the way a health professional will interact with the patient. Every step of patient care will be dictated by a protocol stored on a handheld device. That will make healthcare safer for the patient and shift most hospital activities to the home. The doctor and patient can interact regardless of time and place”. See video.
 
 
Two types of capitalism
The difference between Western and Chinese corporates reflects two different types of capitalist systems: liberal meritocratic capitalism in the West, and state-led authoritarian capitalism in China. In the former, the emphasise on quarterly reporting and the time, effort and costs associated with it tends to encourage short-term performance while the latter creates more opportunities for generating long-term value. There is plenty of evidence to suggest that when executives consistently invest in long-term strategic objectives their companies’ productivity increases, they generate more shareholder value, create more jobs, and contribute to higher levels of economic growth than do comparable companies that focus on the short-term performance. Data also suggest companies that implement effective environmental, social and governance (ESG) strategies, which address the interests of all stakeholders, achieve better long-term value.

Fink criticizes business executives
In 2014, Laurence Fink, chairman of Black Rock, the world’s largest asset manager, criticized Fortune 500 CEOs for their focus on short term corporate behaviour. While recognising the market pressures on company executives, Fink said, “It concerns us that many companies have shied away from investing in the future growth of their companies” and increasingly engaged in actions that “deliver immediate returns to shareholders, such as buybacks or dividend increases, while underinvesting in innovation, skilled workforces, or essential capital expenditures necessary to sustain long-term growth”.

Takeaways
Western corporate leaders are challenged to devise ethical strategies that create long-term value rather than just short-term performance. Following Fink’s suggestions policies to create long-term value might include: (i) developing a suite of strategic initiatives expected to deliver returns that exceed the cost of capital (ii) allocating resources to initiatives that create most value, (ii) focusing on generating value not only for shareholders but for all stakeholders, and (iii) resisting actions that only boost short term profits.
 
  • China is the world’s second largest economy after the US
  • Its MedTech sector is the world’s second largest after the US and accounts for 20% of the global market
  • The size of China’s market is attractive to Western MedTechs but its regulatory and competitive environments are changing, which makes it more challenging for foreign corporations to enter or grow their franchises in China
  • China’s healthcare system has similar structural challenges as those of the US and other wealthy nations: the demand for care is increasing and overwhelming health professionals, which creates care gaps
  • China is ahead of the US and other nations in attempting to reduce such gaps with patient-centric innovative digital therapeutic solutions, which is supported by a deep bench of capabilities
  • Western MedTechs have a lot to learn from Chinese digital health innovations
  • However, Beijing is engaged in an unprecedented mission to become a self-reliant, high-tech economy and a world superpower within the not-too-distant future
  • Misjudging Beijing can have significant commercial consequences
 
Learn from the Chinese, but don’t misjudge Beijing


An earlier Commentary ended by posing the question whether Western MedTechs can compete with China’s large and rapidly growing domestic medical device industry, which benefits from China being the second largest MedTech market in the world behind the US, with annual sales revenues of ~US$84bn in 2020. China now accounts for ~20% of the global medical device market, which is expected to continue an upward trajectory, supported by the nation’s quickly aging population, rising incomes, and the continued enhancement of health services.
 
With this foundation, Beijing is incentivising its domestic MedTech companies to expand internationally. Beijing’s 14th Medical Equipment 5-Year Plan (2021–25) sets a goal to have >6 Chinese MedTechs among the top 50 global industry corporations by 2025. The policy complements Made in China 2025, which is a macroeconomic strategy to reduce China’s reliance on imported foreign products including medical devices. So, while China’s domestic market is becoming more challenging for foreign MedTechs, Beijing is supporting the growth and expansion internationally of its local medical device companies to compete with their Western counterparts. For example, Mindray Medical International, China’s biggest medical device corporation by sales revenue, is the #4 ultrasound vendor in the world and over the next 5 years, expects to increase its overseas sales revenues from <50% today to ~70%.
 
Despite Beijing’s ‘for China’ policies, many Western MedTech leaders view China as a significant commercial opportunity, recall foreign corporations that have prospered in the nation over the past two decades and suggest that it is important to do business there if one of your company’s objectives is to grow its international franchise. But China has changed, and its regulatory and competitive ecosystems are tightening, which present headwinds for Western MedTechs that were not present a decade ago. Further, China has an ambition to become a self-reliant, world leading high tech nation in the not-too-distant future, which could have consequences for foreign companies participating in the Chinese market.
 
With ~400m chronic disease patients, a fast-aging society, vast and rapidly rising healthcare costs, and an economy that has slowed, China is resolute in developing a new model of digitally enabled, patient-centred integrated healthcare. This ambition is supported by significant resources and a deep-bench of capabilities positioned to enable China to achieve its goals, which include transforming its medical devices sector by supporting the development of world class, high tech, patient-centric, digital enterprises.
 
All these factors suggests a dilemma for Western MedTech leaders: China is too big to ignore, but Beijing is too powerful and unrelenting to misjudge.

 
In this Commentary

This Commentary has 3 sections. The first, entitled ‘Reducing care gaps with digital therapeutic innovations’, suggests that China, the US, and other developed nations share a common challenge of care gaps created-by a limited supply of health professionals and a large and increasing demand for care. China’s attempts to resolve these gaps differ from other nations in their scale and nature. They are nationwide innovations predicated upon digital AI strategies, which manifest themselves in digital platforms that directly address patients’ healthcare needs. We briefly describe a few examples of these and suggest that they are advantaged by China’s data policies and AI competencies. Section 2, entitled ‘Capabilities’, describes Beijing’s plans for China to become the world’s leader in AI technologies within the next decade and suggests that China has the capabilities to achieve this goal in the proposed timeframe. The final section entitled, ‘Understanding Beijing’, briefly describes the tightened regulatory and competitive environments and suggests how this impacts the business models of Western corporations seeking to enter the Chinese market or increasing their existing franchises. We posit that China and the Chinese are significantly different to Western democracies and Westerners and emphasize the Chinese Communist Party’s uncompromising ambition to become economically self-reliant, a world superpower and a global high-tech leader. Misjudging Beijing could be commercially damaging for foreign corporations.
 
 
1: Reducing care gaps with digital therapeutic innovations
 
China has similar structural healthcare challenges to the US and other developed economies, which manifest themselves in care gaps caused by a limited supply of overworked healthcare professionals and a vast and rapidly growing demand for care from aging populations. The Chinese population ≥65 years is ~140m, and this cohort is expected to grow to ~230m by 2030. By that time, the nation’s aging middle class will have grown from today’s ~0.3bn to ~0.7bn. High-risk behaviours like smoking, sedentary lifestyles, and alcohol consumption as well as environmental factors such as air pollution take a huge toll on health and increase the demand for care. According to Statista, a large portion of the Chinese population suffer from chronic lifestyle diseases, which account for >80% of the nation’s ~10m deaths each year; >0.5bn people are overweight or obese, while high blood pressure is a common illness among >0.4bn people. China’s healthcare expenditure is growing at >8% a year, and without reform, the nation’s health spending could increase to >US$2trn by 2030. Such factors, together with the nation’s economic slowdown motivate Beijing to prioritize the transformation of its healthcare system.
Significant differences in tackling care gaps

A significant difference between China and the US and other wealthy nations, whose healthcare systems are all in need of reform, is that China has been quicker to develop digital therapeutic technologies to reduce care gaps and relieve its large and rapidly growing burden on hospitals, care systems and families caring for the sick and elderly.
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Should MedTechs follow surgeons or patients?

In any healthcare system, people should be the priority, but because of a dearth of health professionals, overburdened hospitals, soaring health costs and overworked physicians, patients’ needs are often not prioritized. China has been no exception but expects to reverse this trend with the help of artificial intelligence (AI) enabled digital therapeutic solutions that put patients first. Examples include: WeDoctor, Alibaba Health, JD Health, DXY.cn. and Ping An Good Doctor. These, and other digital innovations, provide a range of health services including, online consultations, hospital referrals and appointments, health management, medication regimens, medical insurance, and wellness and prevention programmes. China’s early adoption of AI medical solutions has benefitted from Beijing’s “Healthy China 2030” policy, which, since its launch in 2016, has directed substantial funds to Chinese AI start-ups developing technological innovations to ease the burden of care gaps. According to Tracxn, one of the world’s largest tracking platforms, there are ~227 AI driven healthcare start-ups in China. Let us briefly describe three established ones: WeDoctor, DXY.cn and Ping An Good Doctor.
 
WeDoctor

Tencent-backed WeDoctor, founded in 2010 to provide people with physician appointments, is based in Hangzhou, a city of ~11m and the capital of China’s Zhejiang province. Since its inception, the company has grown into a multi-functional platform offering a range of medical services predicated upon a database of >2,000 Western treatment plans, online pharmacies, health insurance, cloud-based enterprise software for hospitals and other services. Today, WeDoctor hosts >270,000 doctors and ~222m registered patients. It has an impact on reducing care gaps and is one of the few online healthcare providers qualified to accept payments from China's public health insurance system, which covers >95% of the population. WeDoctor's services are especially valued in rural areas, where there are fewer physicians than the national average of 1.5 per 1,000 people.

In response to the COVID-19 crisis the company launched the WeDoctor Global Consultation and Prevention Center (GCPC),  which provided a free 24/7 global online health enquiry service, psychological support, prevention guidelines and real-time pandemic reports. Just before the pandemic, WeDoctor planned to float its medical and health service function on the Hong Kong stock exchange at a valuation ~US$7bn. However, it was pulled because of the Beijing-Hong Kong tensions. WeDoctor’s. other business functions, which include health insurance and health data services, were not included in its proposed flotation, and are likely to stay private to appease Chinese regulators.
 
DXY.cn
 
DXY.cn is an online healthcare community for doctors, patients, and healthcare organizations. It was founded in 2000 and is also based in Hangzhou. Over the past 2 decades it has evolved into the world’s largest community of physicians who use the platform to gain insights from colleagues, discuss new medical research, and report unusual clinical events. More recently, DXY has added a consumer-facing service that brings wellbeing advice and medical consultations to the public. DXY generates revenues from public-facing medical advertising and job recruitment for its life science clients, as well as clinics where patients can receive in-person medical care. According to TechCrunch, in 2021, DXY reached ~130m consumers, >9,000 medical organizations, and had a registered user base of ~20m.
 
Ping An Good Doctor

Ping An Insurance (Group), is one of the world’s largest financial services companies with >210m retail customers and ~560m internet users and is headquartered in Shenzhen, southeastern China. In 2014, it launched Ping An Good Doctor to provide end-to-end, AI-powered health services directly to patients. These include 24/7 online consultations, diagnoses, treatment planning, second opinions, and prescription management solutions. Today, Good Doctor has ~400m registered users and drives synergies across China’s healthcare ecosystem. The platform collaborates with >3,700 hospitals and is supported by an off-line healthcare network of >2,200 in-house medical staff and ~21,000 contracted experts to ensure quality and accuracy of its medical services. The company provides insurance coverage for both users and physicians, which helps to ease China’s healthcare payment pressures. Ping An Good Doctor’s technology also assists patients to manage their personal health records, treatment plans, and medical histories.
 
In 2019, the company launched the world's first AI-powered, un-manned healthcare service: the One-minute Clinic. This is a 3m2 booth, which patients walk into, enter their digitized medical history from their mobile phones, and add their symptoms. The clinic’s algorithms, which have been trained on data from >300m medical records, then make a diagnosis, prescribe drugs, and provide a treatment plan. Medications are purchased from an adjacent vending machine. Within a year of the start of the first clinic, Good Doctor rolled out ~1,000 units in shopping malls, airports and other public spaces throughout China providing onsite medical and pharmaceutical services 24/7. Today, the clinics provide accessible and affordable medical and health services to >3m users. Good Doctor believes that its AI-driven, un-manned clinics have a promising future helping to reduce China’s care gaps and has plans to expand its services into Southeast Asia. In December 2019, the company signed a strategic collaboration with Merck, an American pharmaceutical multinational to advance further intelligent healthcare in China.

 
Internet hospitals

Digital initiatives like those described above have led to the development and spread of internet hospitals, which are online medical platforms associated with offline access to traditional hospitals that provide a variety of services directly to patients. Today, internet hospitals are booming in China, driven jointly by government and market initiatives.
 
The first internet hospital was established in China’s Guangdong province in October 2014. It consisted of four clinics operated by doctors from the Second People's Hospital, an online platform operated by a medical technology company, and a network of medical consulting facilities based in rural villages, community health centres, and large pharmacy chain stores. Initially webcams were used for patients to communicate with physicians and share medical images of their conditions. A patient's vital signs were taken by on-site machines and uploaded onto the system. With all this information, physicians made a diagnosis and prescribed medications, which patients obtained from nearby pharmacies. According to the Lancet, two months after its launch, China’s first internet hospital “was dealing with ~200 patients and issuing ~120 prescriptions every day”. After six months, the number of patients had increased to >500 a day, ~60% of whom needed prescriptions. Soon afterwards, a network of consultation sites expanded to >1,000 facilities in 21 of Guangdong’s municipalities. In 2018, Beijing gave the legislative green light for internet hospitals, which prompted many Chinese digital health companies to start using internet-based AI solutions to meet the country’s medical and healthcare needs and contribute to the reduction of care gaps. By August 2021, >1,600 internet hospitals had been established in China. The public and physician acceptance of these and Beijing’s support for them suggests a new era in digital healthcare.

 
Internet + Healthcare” initiatives

Since 2018, a range of Internet + Healthcare” initiatives have consolidated and enhanced the position of digital healthcare innovations. The success and continual improvement of China’s digital health service platforms all benefit from Beijing’s policies to facilitate medical practice supported by digital tools. Laws and policies have been issued to support this digital transformation, including health data digitalization, data sharing, and interoperability across the whole of China’s healthcare ecosystem. After the outbreak of the COVID-19 pandemic, the government increased its “Internet + Healthcare” efforts to include telemedicine in state medical insurance coverage, and to lift barriers for prescribed drugs sold online.
 
Data advantage

Compared to the US and other Western democracies, China has significant data advantages to drive its digital healthcare initiatives. Eric Topol, a cardiologist, director of the Scripps Research Translational Institute, and author of Deep Medicine: How AI can make healthcare human again, argues that “China has a massive data advantage when it comes to medical AI research”. To put this in perspective, consider that Chinese patient healthcare data are drawn from the nation’s provinces, many of which have populations of >50m. By contrast, US AI research tends to be based on patient data often drawn from one hospital. China’s big data advantage allows machine learning algorithms to be more effectively trained to perform key functions in a range of clinical settings. Another comparative advantage of China is its large workforce of AI specialist, data scientists, and IT engineers, which can work on healthcare projects at comparatively low costs. This is partly the result of China’s emphasis over the past four decades to encourage science, technology, engineering, and mathematics (STEM subjects) in their schools and universities to fuel Beijing’s technological ambitions.

Not known for good data governance practices, but with intensions to expand internationally, China is now tightening its data protection regulations. For example, in November 2021 Beijing introduced the Personal Information Protection Law (PIPL), which is designed to prevent data hacks and other nefarious uses of sensitive personal information. Much like the EU’s General Data Protection Regulation (GDPR), the PIPL stipulates that an individual’s explicit consent must be obtained before their medical health data are collected, and it places the burden on medical AI companies to ensure that these data are secure.
 
2: Capabilities
 
Healthy China 2030

In October 2016, President Xi Jinping announced the nation’s Healthy China 2030 (HC 2030) blueprint, which put patient-centred healthcare at the core of Beijing’s healthcare plans, recognizing its ability to influence both social and economic development. The policy sets out China’s long-term approach to healthcare and shows the nation’s commitment to participate in global health governance, which Beijing recognises as necessary as it seeks to extend its international reach. By 2030, Beijing aims to reach health equity by embracing the United Nations’ Social Development Goal 3.8, which seeks to “Achieve universal health coverage, including financial risk protection, access to quality essential healthcare services and access to safe, effective, quality and affordable essential medicines and vaccines for all”. In 2019, Beijing announced an action plan to accelerate the delivery of Healthy China 2030. This puts patients first in an endeavour to build a healthy society by leveraging AI technologies to reduce the prevalence of lifestyle induced chronic disorders and subsequent care gaps. The World Health Organization (WHO) believes the policy “has the potential to reap huge benefits for the rest of the world”.
 
AI capabilities
 
As China’s economy has matured, its real GDP growth has slowed, from ~14% in 2007 to ~7% in 2018, and the International Monetary Fund (IMF) projects that growth will fall to ~5.5% by 2024. Beijing refers to the nation’s slower growth as the “new normal” and acknowledges the need to embrace a new economic model, which relies less on fixed investment and exporting, and more on private consumption, services, and innovation to drive economic growth. Such reforms are needed for China to avoid hitting what economists refer to as the “middle-income trap”. This is something many Western economies (and corporations) face: it is when countries achieve a certain economic level but then begin to experience diminishing economic growth rates because they are unable to effectively upgrade their economies with more advanced technologies. To avoid this scenario, for the past three decades, China has been investing in AI and systematically upgrading its economy.


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Leaning-in on digital and AI


 
Today, China has a significant supply of innovative AI talent to deliver a Healthy China by 2030. Some of the world’s largest technology companies are Chinese and all are developing different aspects of AI applications. For example, Alibaba’s cloud division concentrates on using AI in healthcare and Baidu, which has numerous AI research laboratories in the US, is focussed on a range of AI innovations, which include “deep learning”, and “big data”. More recently, Baidu added a Business Intelligence Lab, which develops data analytics for emerging data-intensive applications, and a Robotics and Autonomous Driving Lab, which specializes in computer vision.
In 2017 China's State Council launched a 3-step plan to become a world leader in AI technologies by 2030, with a domestic AI industry valued ~US$150bn. Beijing completed step 1 in 2020 by establishing a “new generation” of AI technologies and technocrats and developing national standards, policies, and ethics for its emerging industry. Step 2 is anticipated to be completed by 2025, by which time China expects to achieve “major breakthroughs” in AI applications that will help the completion of upgrading the nation’s industrial sector and thereby avoiding the middle-income trap. The final step is anticipated to take place between 2025 and 2030, which, among other things, will project China internationally as the world leader in AI technologies.
 
3: Understanding Beijing
 
Regulatory changes

A decade ago, foreign MedTechs operated in China with relative ease. Chinese regulations were lighter than they are today, and companies were supported by a multi-layered network of small scale and localised sub-distributors. This fragmented structure resulted in higher prices and tended to encourage corruption, but the relatively high margins obtained from foreign products allowed medical device corporations to compensate the multiple distribution levels and still make a profit. In return, domestic Chinese distributors managed the market and foreign MedTechs did not engage directly with hospitals and physicians.
 
Volume-based procurement

Recent regulatory changes have disrupted this modus operandi for foreign MedTechs. One change positioned to have a significant impact on MedTech profits is volume-based procurement (VBP). This is aimed at lowering the price of medical consumables by tendering the market volume of cities, provinces, or the country to manufacturers with the lowest price. Following a successful pilot with pharmaceuticals, VBP was extended to medical devices in 2019, and since then it has had a significant effect on certain products. For example, the price of cardio stents and hip and knee implants have been reduced by ~70% to ~90%. China’s message is clear: Medtechs are either ‘in’ with significantly lower prices, or ‘out’. This suggests that companies wishing to enter or grow their franchise in the Chinese market will have to adapt their business models by accelerating their pre-launch registrations and post-launch commercialization strategies for new products as margins on legacy offerings are expected to be substantially reduced. However, review processes for new offerings have become longer, more bureaucratic, and more expensive than they were five years ago. For example, if a Class 2 device without clinical studies took ~9 months to register five years ago, today expect ~2 years. VBP has forced foreign MedTechs to consolidate their multi-layered distribution channels to improve economies of scale. 
 
More recently Beijing has introduced a two-invoice policy for the medical devices industry: (i) MedTech to a distributor, and (ii) distributor to a hospital. This will push small and less competitive distributors out of the market and shorten and consolidate supply chains. The likely effect of this is for Chinese distributors to concentrate more on logistics to “deliver product”, rather than managing the market. To the extent that this is the case, a larger share of customer engagement will become the responsibility of MedTechs.
 
This will mean that foreign corporations trading in China will need to reassess their capabilities and adjust their business models. Further, MedTechs operating in China should expect VBP to increase the significance of “value”. This is because the policy is likely to enhance the purchasing power of hospital administrators and reduce that of physicians.  As a result, companies might expect procurement conversations to focus less on clinical outcomes and more on the overall value of products and their potential to minimize costs. Many readjustments companies will be obliged to make to their business models may be achieved by having someone local on the product management team rather than engaging high-margin agencies to resolve critical, but relatively simple domestic challenges.
 
A narrow window of opportunity for foreign MedTechs

Beijing’s “in China for China” policy makes it a condition that foreign companies entering the Chinese market must share their technology and intellectual property (IP) with a domestic “partner”. Beijing has been using this condition to acquire valuable scientific knowhow, which has helped the country to develop a large domestic medical device industry. According to a 2021 research report from Deloitte, a consulting firm, “China now boasts over 26,000 medical device manufacturers”. Beijing’s policies render China a substantially more challenging market to enter and to grow in than it was five years ago. China’s market opportunities for foreign corporations are not only getting tighter; they are getting shorter, and their orientation is changing away from surgeons towards patients. Further, Beijing is on a relentless drive towards self-reliance and tolerates the presence of Western companies in its domestic markets only for as long as they contribute offerings that are useful to the Chinese Communist Party. If China is successful in delivering on its healthcare and high-tech development plans, the window of opportunity for many foreign MedTechs could be only ~10 years.
 
China’s different

China and the Chinese are unlike the West and Westerners. When Deng Xiaoping’s started China’s reforms in 1978 and opened the nation to the world’s trading economies, he created a socialist market economy, in which private capitalists and entrepreneurs co-existed with public and collective enterprise. This formed the foundations for China’s phenomenal economic growth, prosperity, reduction of poverty, massive infrastructure investment, and development as a world-class technology innovator. As a result, many Western business leaders and politicians believed that China had abandoned ideology in a similar way that former communist regimes of Eastern Europe did in the early 1990s after the fall of the Soviet Union. However, such a transformation did not happen in China, which remains a one-party authoritarian state, tightly governed by the Chinese Communist Party (CCP), whose constitution states that China is a “people’s democratic dictatorship”. The CCP has a mission to become the world’s leading technology economy by 2030. This is backed by substantial sovereign wealth and a supply of relevant high tech human capital and an impressive history of national achievements.
 
Scale and speed of transformation

The phenomenal politico-economic progress China has made in a relatively short time is an indication of the nation’s determination, and its ability to affect change, and contextualizes Beijing’s policies to make China a self-reliant economy in the not-too-distant future. A 2022 report jointly released by China’s Development Research Center and the World Bank highlights the nation’s transformation in just four decades, from a struggling agrarian society to a global superpower. The nation’s achievements include increased health insurance coverage to >95% of its 1.4bn population, lifting ~0.8bn people out of poverty, which accounts for ~75% of global poverty reduction in the same period, a burgeoning middle class, which by 2030, will have grown from today’s ~0.3bn to ~0.7bn. In 2010, China overtook Japan to become the world's second largest economic power after the US when measured by nominal GDP. According to the World Bank, in 1960, China's GDP was ~11% of the US, and in 2019, ~67%. Not only is China the world's second-largest economy it has a permanent seat at the United Nations Security Council, modernised armed forces, and an ambitious space programme. China’s growing international clout and economic leadership positions it well to replace the US as the greatest superpower.

Such factors provide a context for Western corporation with global pretentions wishing to engage with and learn from China. At the 13th Annual National People’s Congress in March 2022, Premier Li Keqiang called for “faster breakthroughs” in key technologies, and said the government would increase the tax rebate for small and medium-sized science and technology firms from 75% to 100% and grant tax breaks for basic research to encourage innovation. Significantly, the Congress also underscored self-reliance in China’s economic priorities amid warnings of trade headwinds and geopolitical complexities.

 
Takeaways
 
China is too big a commercial opportunity to ignore. In 2021, China accounted for >18% of the global economy, rising from ~11% in 2012, its GDP was ~US$18trn, and per capita GDP reached US$12,500, which is close to the threshold for high income economies. In recent times, the contribution of China's economic growth to the world economy has been ~30%, which makes China the largest growth engine for the global economy. However, the relationship between China and the rest of the world is changing. As China becomes more self-reliant, its exposure to the world has decreased. Add to this (i) international trade disputes, (ii) increasing geopolitical tensions between the US and China, (iii) the nation’s evolving new rules to evaluate technology flows, (iv) increase of protectionism and (v) its healthcare mission to pivot towards patients, and you have significantly changed trading conditions than a decade ago. Misjudging Beijing’s rapidly evolving commercial ecosystem could be costly for Western MedTechs.
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  • Neurosurgery is a discipline that diagnoses and treats a range of injuries and disorders of the brain and the central nervous system
  • For millennia the speciality was dominated by forms of craniotomies, which are procedures to remove portions of the skull to gain access to brain disorders
  • In the early and mid-20th century visual, guidance and radiation technologies disrupted the treatment of some brain disorders by introducing less- and non-invasive procedures to the discipline
  • At the beginning of the 21st century, a flurry of rapidly developing innovative technologies including, augmented reality, artificial intelligence (AI), robotics and genomic and cellular therapies, are accelerating the trajectory of neurosurgery towards a less- and non-invasive speciality
 
Brain disorders and the changing nature of neurosurgery
 
Populations throughout the world are growing and aging, the prevalence of age-related disabling neurological disorders is increasing, and healthcare systems are facing large and escalating demands for treatment, rehabilitation, and support services for such disorders. According to the most recent Global Burden of Disease (GBD) Study, neurological disorders are the leading cause of disability and the second leading cause of death in the world.
 
The total annual global burden of traumatic brain injury alone is ~US$400bn and in the US, ~16% of households are affected by brain impairment, with many individuals requiring 24-hour care. This suggests that often several family members are involved in the caregiving process, and some are juggling the responsibilities of caregiving, child rearing and employment simultaneously.
 
The scarcity of established modifiable risks for most of this vast and rapidly growing neurological burden suggests that innovations are required to develop efficacious prevention and treatment strategies. This Commentary describes some of these, especially those that have changed or have the potential to change neurosurgery, by making therapies less- and non-invasive, and hold out the prospect of improving patient outcomes and lowering healthcare costs.
 
Neurosurgery is a medical speciality concerned with diagnosing and treating a range of disorders and injuries of the brain and central nervous system (CNS) in patients of all ages. These include tumours of the brain and CNS, infections of the CNS, pituitary tumours and neuroendocrine disorders, traumatic brain injury, cerebral aneurysms and stroke, hydrocephalus and other conditions that affect the flow of cerebrospinal fluid, degenerative spine disorders, Parkinson’s disease, Alzheimer’s, epilepsy, spina bifida, and psychiatric disorders.

Treating brain conditions is complex and challenging. This is partly because the brain is one of the best protected organs of the human body. It is encased in the bones of the skull, covered by the meninges, which consist of three membranes and cushioned by cerebrospinal fluid (CSF). It is also protected by the blood-brain barrier (BBB), which is a network of blood vessels and tissue comprised of closely spaced cells, which shield the brain from toxic substances in the blood, supply brain tissue with nutrients, and filter harmful compounds from the brain back into the bloodstream. The BBB limits the ability of therapeutics to be effectively delivered to the brain and thereby complicates the treatment of CNS disorders. Further, the brain does not feel pain because there are no nociceptors (a sensory receptor for painful stimuli) located in its tissue, which often makes diagnosis of neuro disorders late when treatment becomes more challenging and costly, and survival less likely.

Such factors partly explain why neurology and neurosurgery have been slower than some other specialities to take advantage of new and evolving technologies. However, this is changing. Over the past five decades, progress in three-dimensional (3D) visualization, miniaturisation, digital technology, robotics, computer assisted manipulation, radiation therapy, early diagnosis of cancer, and precision medicine, have contributed to improvements in the diagnosis, prognosis, and prevention of some neurological conditions and started to transform neurosurgery towards less- and non-invasive procedures that efficaciously execute complex challenges, eliminate mechanistic errors, reduce operating times, and improve patient outcomes.
 
Further, the growing significance of applying artificial intelligence (AI) and machine learning techniques to pre-, intra- and post-operative clinical data introduces the possibility of a new suite of medical services that have the potential to enhance patient outcomes and reduce costs by improving diagnosis, planning and the rehabilitation of patients. And more recently, there are growing synergies between neurosurgery and gene and cellular therapies, which promise to accelerate personalized, non-invasive treatments for a range of neuro disorders.
 
In this Commentary
 
This Commentary is divided into 9 sections. Section 1 provides a brief history of neurosurgery, which has its genesis in ancient times when a form of craniotomy (surgical removal of a portion of the skull) was practiced and note the difference between craniotomy and craniectomy. Section 2 describes how, in the mid-20th century, neurosurgery took ~4 decades to pivot when Lars Leksell, a Swedish surgeon, introduced a stereotactic guided device that permitted the accurate positioning of probes to treat small targets in the brain, which were not amenable to conventional surgery. Shortly afterwards Leksell developed ‘stereotactic radiotherapy’, which formed the basis the Gamma Knife®, a device that provides non-invasive surgeries for a range of brain disorders. Section 3 details how advances in magnification, illumination, and the development of fibreoptics contributed to less-invasive endoscopic neurosurgeries, which facilitated a range of brain disorders to be treated through a small burr hole in the skull. Previously such procedures would have required a craniotomy. This section also notes the rapid development of endovascular neurosurgery, which uses tools that pass-through blood vessels to diagnose and treat diseases and conditions of the brain rather than using open surgery. Today, neuro-endovascular surgery is the most practiced therapeutic approach for a range of vascular conditions affecting the brain and spinal cord and is positioned to grow further over the next decade. Section 4 suggests howneurosurgery has benefitted from a range of rapidly developing 21st century technologies including: augmented reality, artificial intelligence (AI), robotics and genomic and cellular therapies. All help to increase less- and non-invasive neurosurgical procedures and contribute to advancing personalized therapies that improve patient outcomes and lower costs. Section 5 provides some insights into the life of a neurosurgeon through the lens of Henry Marsh, an English neurosurgeon who, between 2014 and 2022, published three candid memoirs, which chronicle his career, describe daily challenges and frustrations of the speciality and explain how neurosurgical units have changed the way they are organized and run. Sections 6 briefly mentions the increasing prevalence of dementias. Although outside the direct realm of neurosurgery, the scale and speed of their growth are likely to have an indirect impact on it. Section 7 introduces traumatic brain injury (TBI), a condition caused by a blow to the head and suffered by millions. The section describes the gold standard management of severe TBI and flags a pressing need to develop a non-invasive modality for managing the condition. Section 8 notes the frustration of neurosurgeons with the late diagnosis of brain tumours and describes well-resourced global endeavours to detect a wide range of cancers from a single blood test in asymptomatic people. Takeaways follow in Section 9 and suggest that a significant proportion of neurological disorders, which previously were treated with craniotomies, are now treated with either less- or non-invasive procedures. With the speed at which technology and biomedical science are developing, the only direction of travel for neurosurgery is towards non-invasive procedures.
 
Section 1
History
 
Neurosurgery has a long history with its genesis in Mayan civilizations ~1500 BCE, who practiced cranial deformations that included flattening frontal skull bones. During the Egyptian era, when mummification started to be practiced ~2,500 BCE, embalmers did not use a form of craniotomy to gain access to the brain. Instead, they used hooked instruments to remove the brain through the nose: a prototype of modern transsphenoidal surgery, which is a common procedure today for removing tumours of the pituitary gland. Rather than opening the skull with a traditional craniotomy, the physician reaches the tumour through the nasal passages and the sphenoid sinus.
 
In ancient Peru Inca surgeons practiced an early form of craniotomy referred to as trepanation, which used a scraping technique to penetrate the skull. Such procedures were performed on adult men to treat injuries suffered during combat. A version of this procedure called a trephination was also practiced in Egyptian and Roman times and performed on individuals who had experienced head traumas. The approach entails making a hole in the skull to relieve the build-up of intracranial pressure (ICP) caused by brain oedema (swelling) and is described by Hippocrates in the Greek era. The first known neurosurgery in Greece took place ~1900 BCE in Delphi when skull trephinations were probably performed for religious reasons. Later, the technique was recommended by Galen during the Roman period for people who had suffered a traumatic brain injury (TBI) in battle. From ~500 to ~1500 AD, the rise of religion and war resulted in many craniocerebral traumas, which contributed to the early development of neurosurgery as a distinct specialty.
 
Similar trephination procedures were performed during the American Revolutionary War, which secured American independence from Great Britain, and culminated in the Declaration of Independence on July 4, 1776. During the war soldiers suffered TBIs after being hit on the head with the butt of a rifle. Although the treatment for severe TBI is similar today, (see Section 7) the main difference is that the surgical instruments used in the 18th century were not powered. About 132 years later, in 1909, Theodore Kocher, a Swiss physician and Nobel Laureate in Medicine was the first person to systematically describe a decompressive craniectomy procedure for severe TBI patients. A craniectomy is different to a craniotomy. The latter is a surgical procedure in which a section of the skull is removed to expose the brain and is performed to treat various neurological conditions, or when an injury or infection has occurred in the brain. A craniectomy involves a different surgical technique and is used on people suffering severe TBI to relieve brain oedema. In such a procedure the bone fragment removed may not be replaced immediately and is either replaced during a subsequent surgery or discarded in favour of a future reconstruction using an artificial bone.

 
Section 2
Stereotactic surgery
 
For millennia, a form of craniotomy dominated what we now know as neurosurgery. During the 20th century advances in medical science paved the way for the introduction of less- and non-invasive modalities to treat brain disorders (see below). A landmark event occurred at the beginning of the 20th century with the introduction of stereotactic surgery, which makes use of three-dimensional (3D) coordinates to locate and treat lesions in the brain. The method was first reported in the May 1908 edition of Brain, by two British surgeons Victor Horsley, and Robert Clarke. The device they described became known as the Horsley-Clarke apparatus, and was used to study the cerebellum in animals by enabling accurate electrolytic lesioning to be made in the brain of a monkey. It took ~40 years before the technique was introduced to humans following the publication of a seminal paper by Ernest Spiegel and Henry Wycis,  in the October 1947 edition of Science. Spiegel was a Vienna trained neurologist who moved to Temple Medical School in Philadelphia, which in 2015 was renamed the Lewis Katz School of Medicine. Wycis was one of Spiegel’s students who became a neurosurgeon. By the time they published their 1947 paper, they had performed several neurosurgeries and there had been sufficient advances in neurophysiology, pneumoencephalography, radiology, and electrophysiology for them to design a device like the Horsley-Clarke apparatus, which was fixed to a patient’s head by means of a plaster cast and was accurate enough to be used in human stereotactic surgery. Spiegel’s and Wycis’s surgical innovations attracted attention from physicians internationally, but there were no commercial stereotactic frames and neurosurgeons were obliged to design and manufacture their own. A pivotal moment occurred in 1947, when Lars Leksell, a Swedish physician and Professor of Neurosurgery at the Karolinska Institute, in Stockholm, visited Wycis in Philadelphia and afterwards designed a lightweight titanium head frame to provide the basis for stereotactic surgery, which he described in a 1949 paper entitled, ‘A stereotaxic apparatus for intracerebral surgery’.
 

The Gamma Knife®   
In the early 1950s, Leksell and Börje Larsson, a biophysicist from the University of Uppsala, Sweden, were convinced that agents other than cannulas and electrodes could be used to eradicate pathologies in the brain, and combined a source of radiation with a stereotactic guiding device. This led to the development of a non-invasive device, which Leksell used to perform the first radio-neurosurgical procedure and discovered that a single dose of radiation could successfully destroy deep brain lesions. He called this technique “stereotactic radiosurgery”, which, in 1968, led to the first stereotactic Gamma Knife® that used a focused array of intersecting beams of gamma radiation to treat lesions within the brain. Its success encouraged Leksell to use the device over the ensuing decade in functional brain surgeries to treat intractable pain and movement disorders. Leksell’s radio surgical device used Cobalt-60 (a synthetic radioactive isotope) as a radiation source. The basic physics that drives stereotactic radiosurgery today is substantially the same. It focuses ~200 tiny beams of radiation on a target in the brain with submillimetre accuracy. Although each beam has little effect on the brain tissue it passes through, a strong dose of radiation is delivered to the place where the beams meet.
 
Over time, the Gamma Knife® has been refined and enhanced and its efficacy and safety have been well established. Today, the Gamma Knife® provides a non-invasive operative system for a range of brain disorders, including small to medium size tumours, vascular malformations, epilepsy, and nerve conditions that cause chronic pain. Before its introduction such disorders were treated by surgeries, which involved craniotomies. In 1987, the Gamma Knife® was introduced into the US and installed at the Universities of Pittsburgh and Virginia. Although it took decades to achieve regulatory approval and be widely used throughout the world, the Gamma Knife® represents a significant technological advance in neurosurgery. Unlike craniotomies the device provides painless procedures that do not require anaesthesia, treatments take just one session, and patients can return to normal activities almost immediately. The Gamma Knife® is ~90% successful in killing or shrinking brain tumours, and today, there are ~300 Gamma Knife® sites worldwide, which each year treat >60,000 patients.
 
Neurosurgeon Ranjeev Bhangoo, Clinical Director for neurosurgery at King’s College Hospital, London, UK likens the Gamma Knife® to, “an umbrella, that sits above the patient’s head, rather like the old-fashioned hair dryers in women’s hair salons, but much bigger and more complex”, and stresses that the procedure, “is not painful. Forget any notion of surgery: there’s no knife, there’s no operating theatre. It’s done with the patient awake: you walk in, have your treatment, and walk out.” See videos.

 

What is Gamma Knife Radiosurgery?
 

Is Gamma Knife Radiosurgery painful?

 
Section 3
Endoscopic and endovascular neurosurgery
 
Neuroendoscopy
Neurosurgery pivoted again in the 1990s when disorders that would normally require opening the skull began to be treated less invasively through a small burr hole. Improved magnification, miniaturization, and illumination of lenses and the development of fibre optics facilitated an endoscopic surgical procedure to treat hydrocephalus, a condition in which cerebrospinal fluid (CSF) abnormally accumulates in the brain. There is currently no prevention or cure for the condition, but it can be managed with surgery. The procedure includes creating an opening in the floor of the third ventricle using an endoscope (a thin, flexible, tube-like imaging instrument with a small video camera on the end) placed within the ventricular system through a burr hole in the skull. In the late 1990s, neuro-endoscopy expanded to treat lesions outside the ventricular system and the endoscopic endonasal approach was established as a technique that allowed surgeons to go through the nose to operate on areas at the front of the brain and top of the spine.

Since the early use of the endoscopic procedures for treating intrasellar pituitary adenomas, the approach has been expanded to treat a range of skull base lesions. Today, skull base surgery is undertaken to remove both noncancerous and cancerous growths, and abnormalities on the underside of the brain or the top few vertebrae of the spinal column. Because this is such a difficult area to see and reach, skull base surgery has been advantaged by endoscopic procedures where surgeons insert instruments through natural openings in the skull - the nose or mouth - or by making a small hole just above the eyebrow. This type of surgery requires a team of specialists that may include ear, nose, and throat (ENT) surgeons, maxillofacial surgeons, neurosurgeons, and radiologists. Before endoscopic skull base surgery was developed, the only way to remove growths in this area of the body was by making an opening in the skull. In some cases, today, this type of surgery may be still needed.

Recent advances in endoscope design have produced equipment that is smaller and more efficient, with improved resolution and brighter illumination, than earlier models. Such developments, combined with surgeon enthusiasm, have contributed to the expansion of neuro-endoscopy to treat a range of neuro disorders including intracranial cysts, intraventricular tumours, skull base tumours, craniosynostosis (a birth defect in which the bones in a baby's skull join too early), degenerative spine disease, hydrocephalus and a rare benign tumour called hypothalamic hamartoma.
 
Neuro-endoscopic surgery causes minimal damage to normal structures, carries a lower rate of complications, shortens hospital stays, minimizes cosmetic concerns associated with many neurosurgical conditions and improves patient outcomes. It is positioned to take advantage of further miniaturization of cameras and optical technology, innovations in surgical instrumentation design, and further innovation in navigation and robotics systems.
 

Endovascular neurosurgery
Another innovation that has developed over the past five decades is endovascular surgery. The term ‘endovascular’ means ‘inside a blood vessel’. Endovascular neurosurgery uses tools that pass-through blood vessels to diagnose and treat diseases and conditions of the brain rather than using open surgery. The genesis of endovascular neurosurgery is credited to Professor Alfred Luessenhop, an American physician at Georgetown University Hospital in Washington DC, who, in 1964, carried out the first embolization of a cranial arteriovenous malformation and the first intracranial arterial catheterization to occlude an aneurysm. Over the past 60 years, endovascular neurosurgery has developed and has become a subspeciality. Today, >50% of cerebral aneurysms are treated through this minimally invasive approach.
 
Neuro-endovascular surgery has become the most practiced therapeutic approach for the majority of vascular conditions affecting the brain and spinal cord. It is used more frequently than open surgery for the management of complex vascular conditions, with high rates of safety and efficacy. The expansion of endovascular techniques into the treatment of stroke, the third highest cause of death in the US, has provided meaningful benefits to large numbers of patients worldwide. Further, with populations throughout the world aging neuro-endovascular techniques are poised to become one of the most necessary and important treatment modalities within neurosurgery.
 
With age our brains shrink, which causes a space to develop between the surface of our brain and its outermost covering. This increases the possibility that a knock to the head of a person >60 will result in a brain blood vessel rupturing and bleeding: a subdural hematoma. Research suggests that, “significant numbers occur after no significant antecedent trauma”, and could be the result of “an inflammatory process occurring at the level of the dural border cell”. A chronic version of this disorder can manifest itself within weeks of the first bleeding in which blood accumulates. With aging populations, chronic subdural hematoma (cSDH), is a condition predicted to become one of the most common neurosurgical conditions in the near-term future and expected to be treated with neuro-endovascular techniques.
 
Further, minimally invasive neuro-endovascular procedures are now commonly used to repair cerebral aneurysms, which are weak or thin spots on arteries in the brain that balloon and fill with blood. A bulging aneurysm can put pressure on brain tissue, and may also burst or rupture, spilling blood into the surrounding tissue (brain haemorrhage). Today most brain aneurysms are treated minimally invasively with neuro-endovascular techniques, which means an incision in the skull is not required. Instead, the surgeon guides a catheter or thin metal wires through a large blood vessel in the patient’s groin to reach the brain, using contrast dye to identify the problematic blood vessel. The aneurysm is then sealed off from the main artery, which prevents it growing and rupturing. In the US ~6.5m people are living with an unruptured brain aneurysm. The annual rate of rupture is ~10 per 100,000: ~30,000 Americans suffer a brain aneurysm rupture each year. Ruptured cerebral aneurysms are fatal in ~50% of cases and those who survive, ~66% suffer some permanent neurological deficit. Each year, there are ~0.5m deaths worldwide caused by brain aneurysms and ~50% are <50years.

 
Section 4
Evolving technologies affecting neurosurgery

At the beginning of the 21st century scientific and technological advances are again changing the face of neurosurgery. This section briefly describes four such changes.
 

Neurosurgery and augmented reality
Neurosurgery relies on visualization and navigational technologies and makes liberal use of computed tomography (CT) and magnetic resonance imaging (MRI) scans during preoperative planning and intraoperative surgical navigation. More recently, augmented reality (AR) applications have been used to complement more conventional visualization and navigational technologies to enhance neurosurgery. AR can bring digital information into the real environment and is beginning to play an increasing role to help neurosurgeons train, as well as plan and perform complex surgical procedures. In June 2020, surgeons atJohns Hopkins University successfully carried out a spinal fusion surgery for the first time in the US using xvision™, an FDA approved AR device for spine surgery developed by Augmedics Inc., a Chicago based company, which went public in 2020 through a reverse merger with Malo Holdings. Xvision™ allows surgeons to “see” the patient's anatomy through skin and tissue as if they have X-ray vision, to accurately navigate instruments and implants during surgical spine procedures. Each year, there are ~1.62m instrumented spinal procedures performed in the US, the majority of which are undertaken using a freehand technique, which can lead to suboptimal results.  
 

Neurosurgery and artificial intelligence
Such heavy use of advanced imaging and guidance technologies creates a vast amount of clinical data during a patient’s neurosurgical journey. It is not altogether clear how effectively pre-, intra-, and post-operative clinical patient data are collected and analyzed to enhance surgical procedures and patient outcomes. An article in the August 2021 edition of the journal Neuroscienceentitled, ‘Neurosurgery and Artificial Intelligence’, suggests that the collection and analysis of such data are beginning to happen. Over the past decade, AI techniques applied to data collected during patients’ neurosurgical journeys have enhanced diagnoses and prognostic outcomes and contributed to post operative care and the rehabilitation of patients. Being able to predict prognosis, identify potential postoperative complications, and track rehabilitation are enhanced with AI applications. The future suggests that the symbiotic relationship between AI and neurosurgery, which today is in its infancy, is positioned to grow. This will not only help AI to develop better and more robust algorithms but will provide opportunities for MedTechs to gain access to new revenue streams by providing enhanced patient services.
 
Robotics
Linked to medical imaging and navigation technologies is the increasing use of surgical robotics. However, neurosurgery has been slower than other specialties to incorporate robotics into routine practice owing to the anatomical complexity of the brain and the spatial limitations inherent in neurosurgical procedures. Notwithstanding, the first documented use of a robot-assisted surgical procedure was in neurosurgery. In 1985 Yik San Kwoh and colleagues, at the Memorial Medical Center in Long Beach, California, used an Unimation Programmable Universal Machine for Assembly (PUMA) 200 (which was originally designed for General Motors’ factories) to perform a CT-guided stereotactic biopsy of a brain lesion. Although discontinued, the PUMA 200 is considered the predecessor of current surgical robots.  There are now several robotic systems that have gained regulatory approval for cranial surgery. These include Zimmer Biomet’s ROSA ONE Brain, which obtained FDA approval in 2012 for intracranial applications, and Renishaw’s Neuromate robotic system, which was granted approval by the FDA in 2014. The former has been used extensively in the treatment for epilepsy, and the latter provides surgeons with five degrees of freedom for use in stereotactic applications. Robotics is a fast-moving discipline, which together with AI and machine learning, is positioned to impact neurosurgery in the near to medium term.
  

Neuro-pharmaceuticals and Trojan horses
There are growing synergies between neurosurgery, gene, and cellular therapies. However, the BBB, which plays a significant role in controlling the influx and efflux of biological substances essential for the brain to operated effectively, makes it extremely difficult to effectively deliver drugs to the brain. Over the past three decades, many biologics (medications developed from blood, proteins, viruses, or living organisms) have entered brain and CNS clinical studies. However, they have not gained FDA approval mainly because they did not have effective mechanisms to deliver neuro-pharmaceuticals across the BBB. Instead, the clinical trials were predicated upon a variety of BBB avoidance strategies. Cerebrospinal fluid (CSF) injections are the most widely practiced approach that delivers drugs to the brain by attempting to bypass the BBB. However, this results in limited drug penetration to the brain because of the rapid export of CSF from the brain back into the bloodstream. Future drug or gene-based neuro-pharmaceuticals will need to be accompanied by advances in BBB delivery vehicles.
 
Currently, there are numerous scientific endeavours to devise innovative and effective ways to deliver gene therapies across the BBB to the brain. Success in this regard will mean that genomic and cellular therapies will increasingly have the potential to work synergistically with neurology and neurosurgery to provide non-invasive, personalized care for a range of brain disorders including Alzheimer’s, Parkinson’s, spinal muscular atrophy, spinocerebellar ataxia, epilepsy, Huntington’s disease, stroke, and spinal cord injury. Endeavours are underway to re-engineer biologic drugs as brain-penetrating neuro-pharmaceuticals using BBB molecular Trojan horse technologies. This approach employs genetically engineered molecular Trojan horses (proteins), which carry genes across the BBB to have a therapeutic impact on brain disorders. The future development of neuro-pharmaceuticals linked to effective means to deliver these across the BBB are together positioned to reduce the need for interventional neuro therapies, but this may take some time.

 
Section 5
A perspective: life as a neurosurgeon
 
Three memoirs by Henry Marsh, an English neurosurgeon who treated a range of brain disorders over a 40-year career at a leading neurosurgical unit in London, provide insights into the human dramas that occur in a busy modern hospital. Marsh studied Politics, Philosophy and Economics (PPE) at Oxford University before starting medical school at the Royal Free Hospital in London. In 1984, he became a Fellow of the UK’s Royal College of Surgeons and in 1987, was appointed a consultant neurosurgeon at the Atkinson Morley Regional Neurosciences Centre at St George’s Hospital in London, where he spent his entire career.
 
Marsh’s first book is an unflinching memoir entitled, Do No Harm: Stories of Life, Death and Neurosurgery, which was published in 2014, and describes, with compassion and candour, challenging professional experiences filled with risk and imminent death. The book opens with the sentence, “I often have to cut into the brain and it's something I hate doing.” His first operation as a neurosurgeon was to treat a cerebral aneurysm. Forty years ago, this would have required opening the skull to access the brain. The procedure had a profound impact on Marsh, who commented, “What could be finer than to be a neurosurgeon. The operation involved the brain, the mysterious substrate of all thought and feeling, of all that was important in human life: a mystery, it seemed to me, as great as the stars at night and the universe around us.”
 
Marsh describes the difficult decisions, which neurosurgeons and patients regularly must make that change lives forever. He recalls moments of celebration and gratification when complex operations go well, and candidly recounts some of the more undesirable outcomes and slips of the hand that result in devastating outcomes. Marsh liked working with American neurosurgeons and came to “love their optimism, their faith that any problem can be solved if enough hard work and money is thrown at it, and the way in which success is admired and respected and not a cause for jealously”. He found the attitudes of American surgeons, “a refreshing contrast to the weary and knowing scepticism of the English”. However, after visiting hospitals in the US he expressed some scepticism about “the extremes to which treatments can sometimes be pushed” and wondered whether American physicians and patients “have yet to understand the famous American dictum that ‘death is optional’, was meant as a joke”. Tellingly, Marsh notes that “sometimes doctors admit their mistakes and ‘complications’ to each other, but are reluctant to do so in public, especially in countries that have commercial, competitive healthcare systems.” 
 
Marsh’s second memoir, Admissions: A Life in Brain Surgery, was published in 2017 two years after he retiredfrom his full-time job in England to work pro bono in Ukraine and Nepal. A documentary of his work in Ukraine, The English Surgeon, won an Emmy award. Marsh uses ‘Admissions’ to take an inventory of his life, which makes the book an even more introspective memoir than his first. He compares the challenges of working in troubled, impoverished countries like Nepal with his experience as a neurosurgeon in wealthy nations like the UK and US. The excesses of American medicine intrigued Marsh and he comments, “only in America have I seen so much treatment devoted to so many people with such little chance of making a useful recovery.” But he also expresses disillusionment with the administrative red tape in the English National Health System (NHS), which he maintains has eroded the authority and status of surgeons. In his final years working as a surgeon in St George’s Hospital in London he bemoans, “The feeling that there was something special about being a doctor had disappeared.” Marsh’s true love was patients and neurosurgery and at the end of his career, he was spending less time with patients and more time in meetings justifying his judgements and familiarizing himself with the latest UK government’s targets and edicts, which led him to say, “doctors need regulating, but they need to be trusted as well. It is a delicate balance, and it is clear to me that in England the government has got it terribly wrong”. 
 
Marsh suggests that patients’ fear encourages surgeons to exaggerate their competence and knowledge to “shield our patients from the frightening reality they often face”.  Over time, Marsh suggests, surgeons tend to believe the exaggerated versions of themselves. But the best un-learn their self-deception and come to accept their shortcomings and learn from their mistakes. “We always learn more from failure . . . . . . Success teaches us nothing,” Marsh writes.
 
Marsh’s third memoir,And Finally: Matters of Life and Death, was published in August 2022 and is very British, full of self-deprecation and dominated by the news that he is diagnosed with incurable prostate cancer. Marsh describes the sudden reversal of roles, from omniscient and omnipotent neurosurgeon to humble patient and provides descriptions of the ebbs and flows of his therapeutic journey, which gives valuable insights into how medicine in England works.
 
All three books bear witness to the fact that neurosurgery is a stressful and demanding profession, which requires extensive training, stamina, a high degree of manual dexterity, excellent hand-eye coordination, exquisite precision, extraordinary attention to detail, an ability to rapidly gather and process complex information to resolve challenging problems, compassion and empathy for patients, communication skills and teamwork. Unlike other surgical disciplines, a relatively small mistake can lead to “appalling disability”, coma, and death. According to research published in the October 2014 edition of Surgical Neurology International, ~25% of neurosurgical errors can be prevented or reduced with the increased use of evolving technologies, some of which are described in this Commentary.
 

Changes in the organization of neurosurgical units 
During Marsh’s 40-year career there were changes in the way neurosurgical units were organized and run; particularly the development of subspecialities among physicians and the use of multidisciplinary team approaches to clinical challenges. Much of Marsh’s career reflected a time when neurosurgeons worked in relative isolation and treated a wide range of neurosurgical conditions that presented in their clinics. Today, most neurosurgeons have a primary interest in a subspeciality such as epilepsy, neurovascular surgery, spinal surgery, the excision of tumours etc., and a secondary interest, which they share with colleagues. This tends to facilitate cross referral of patients among a team of physicians and improves patient care and the training of health professionals. In the operating room (OR) neurosurgeons work with other physicians, anaesthetists, trainee doctors, theatre nurses, and medical students. Outside the OR they collaborate with radiologists who use a range of diagnostic tools, including CT, MRI scans, and cerebral angiographies, which are used to detect abnormalities in blood vessels such as aneurysms, blockages, and bleeding. These neuroimaging technologies and neurosurgery have become inseparable. Neurosurgeons also work with neurologists, oncologists, ophthalmologists, and paediatricians. In 2017, Bob Carter, head of neurosurgery at the Massachusetts General Hospital, in the US, appreciated the interconnections between several clinical disciplines that care for people with neurological disorders and merged his neurosurgery department with the departments of neurology, psychiatry, and neuroradiology. While sub specialisms and teamwork have made an impact on the organization of neurosurgical units, new and emerging technologies have expanded the repertoire of neurosurgeons.
 

Awake brain procedures
Marsh specialised in operating on the brain while the patient is awake. This aspect of his work was the subject of a BBC documentary, Your Life in Their Hands. Awake brain procedures are usually performed when a lesion is located near the frontal lobes responsible for motor skills and speech. In the video below, Ranjeev Bhangoo describes the procedure, “It’s a technique where the patient is awake during the brain surgery. The patient is neither in pain nor suffering. When we make a cut in the skin and raise a trapdoor in the skull the patient is completely asleep. We wake them up after that point and the good news is the brain itself doesn’t feel pain. So, you can do this operation without the patient being in any distress or pain. It’s an unusual situation and the patient is prepared for it beforehand. The reason why you might want to do an awake craniotomy is because in some situations, tumours are close to critical structures of the brain that control speech or movement. While we have good maps of the brain and we have image guidance, they’re not precise enough. You want the patient to be talking to you and you want to be stimulating bits of the brain to see precisely where speech is so that you can avoid those areas and do the same with movement, you want to see the patient moving his or her arm or leg while you’re stimulating bits of their brain. So, we use an awake craniotomy when we’re operating near to what we call ‘eloquent’ areas of the brain that, if damaged, would produce a devastating deficit such as problems with speech or movement”. See video.
 

When and why is an awake craniotomy performed?

 
Section 6
The increasing burden of dementias on healthcare systems and economies
 
As populations age and live longer so dementia conditions increase. Alzheimer's, which effects parts of the brain that control thought, memory, and language, is the most common dementia in Western societies. It is a progressive disorder that begins with mild memory loss and leads to a loss of the ability to carry on a conversation and respond to your environment. In the three decades between 1990 and 2019, the global incidence of Alzheimer’s and other dementias increased by ~148%. In 2022, there were >6.5m Americans living with the condition: ~73% >65 and ~66% of these women, but this simply may be due to women living longer. By 2050, it is projected that ~13m Americans will suffer from dementia, which is expected to kill 1 in 3 seniors; that is more than breast and prostate cancers combined.
 
According to the World Health Organization (WHO), there are ~55m people with dementia globally, and >60% are living in low- and middle-income countries (LMIC). Age is the most significant risk factor: the likelihood of Alzheimer’s doubles every 5 years after you reach 65. But also, dementias appear to be increased by conditions that damage the heart and blood vessels, which include heart disease, diabetes, stroke, high blood pressure and high levels of cholesterol. As the proportion of older people in populations increase in nearly every country, people living with dementias are expected to rise to ~78m by 2030 and 139m in 2050. There is no cure for Alzheimer's, and treatments tend to fall to neurologists.  Drug therapies include galantamine, rivastigmine, and donepezil, which are cholinesterase inhibitors (also known as anti-cholinesterase, are chemicals that prevent the breakdown of the neurotransmitter acetylcholine) that are prescribed for mild to moderate Alzheimer's symptoms and may help reduce or control some cognitive and behavioural symptoms. Also, there are non-drug options.  Although outside the direct realm of neurosurgery, the scale and speed of the growth of Alzheimer’s and other dementias are likely to indirectly impact neurosurgery by increasing the burden on over-stretched healthcare systems. Under such circumstances, it seems reasonable to assume that there will be increased pressure on neurosurgery to become less resource intense, which means less invasive and less costly while improving patient outcomes.
 
Section 7
Traumatic brain injury

On Thursday 29th September 2022, Tua Tagovailoa, the Miami Dolphins’ quarterback received a head injury during a match against the Cincinnati Bengals and was stretchered off. Four days earlier he left the field after receiving another head injury while playing against the Buffalo Bills. He was then checked for a concussion and cleared and came back onto the field in the third quarter. Subsequently, the NFL Players Association exercised its right to remove the independent neurological expert who was involved in the decision to clear Tagovailoa to return to the Buffalo Bills game after being evaluated for a traumatic brain injury (TBI). This raises the significance of injuries to the brain and the challenges of accurately assessing their severity and adequately treating them.
 
TBI is as an alteration in brain function pathology by a sudden trauma, causing damage to the brain. Each year, the condition affects ~69m individuals worldwide. Symptoms can be mild, moderate, or severe, depending on the extent of the damage: annually ~5.5m severe cases are recorded globally. The epidemiology of the disorder is challenging because, in low-resourced regions of the world, where the prevalence of TBI is believed to be high, data are poor. According to the World Health Organization (WHO), ~90% of deaths due to head injuries occur in low- and middle-income countries (LMICs), where ~85% of the global population live and where the standards of care are patchy. TBI not only causes health loss and disability for individuals and their families, but also represents a costly burden to healthcare systems and economies through lost productivity and high healthcare costs. The total annual global burden of TBI is ~US$400bn.
 
Since the beginning of the 20th century, our knowledge and understanding of the pathophysiology of brain oedema (swelling) in head trauma patients has increased and today decompressive craniectomy is a recognised procedure for severe TBI to mitigate intracranial hypertension and its impact on clinical outcomes. One of the largest clinical studies, which sought to determine the efficacy of decompressive craniectomies for TBI patients, was the RESCUEicp trial: findings of which were published in the September 2016 edition of the New England Journal of Medicine. The study was carried out over a 10-year period, between 2004 and 2014, on 408 randomly assigned patients, 10 to 65 years of age, and concluded that, “At 6 months, decompressive craniectomy in patients with traumatic brain injury and refractory intracranial hypertension resulted in lower mortality and higher rates of vegetative state, lower severe disability, and upper severe disability than medical care”. 
 
In the US, TBI is a leading cause of death and disability. Each year, ~1.5m Americans sustain a TBI, ~50,000 die from the insult, ~230,000 are hospitalized and survive, and ~90,000 experience the onset of long-term disability. According to the US Centers for Disease Control and Prevention, ~5.3m Americans (~2% of the population) are living with disability as a result of a TBI. In 2010, the economic impact of TBI in the US was estimated to be ~US$77bn in direct and indirect costs. Each year in the UK ∼1.4m patients attend hospital following head injury and TBI is the most common cause of death for people in the UK <40 years.
  
Gold standard monitoring of intracranial pressure
There is no cure for severe TBI, and the gold standard management is to monitor intracranial pressure (ICP), caused by brain oedema (swelling). Current clinical guidelines for raised ICP levels suggest thresholds, usually between 20 and 25 millimetres of mercury (mmHg), at which treatment is recommended to either prevent or reduce further damage to the brain. The device used to monitor ICP is an intraventricular catheter system that requires drilling a burr hole in the skull to insert a catheter and placing it in a cavity (ventricle) in the brain, which is filled with cerebrospinal fluid (CSF). This is then connected to an extra-ventricular drain (EVD) that measures ICP. Such systems are accurate and reliable, but also, they are health-resource-intensive modalities, which run a risk of haemorrhage and infection.

Challenges with gold standard monitoring
According to research findings published in the January 2017 edition of the Journal of Neurosurgery, haemorrhage is a common complication of an EVD placement. Among the cases in which patients underwent imaging after a placement procedure, haemorrhage was found in 94 (21.6%). Another study, of 246 EVDs placed in 218 patients over a 30-month period and published in the November 2014 edition of Interdisciplinary Perspectives on Infectious Diseases, reported the cumulative incidence of EVD-related infections to be 8.3%. Further, because of the dearth of qualified neurosurgeons in under-resourced regions of the world, EVD systems are not widely available in LMIC, where the incidence rates of TBI are understood to be high and increasing.

Non-invasive ICP monitoring
Numerous alternatives to invasive gold standard ICP monitoring are in development, but none have established a valid place within a daily clinical setting. A review paper published in the December 2020 edition of the journal Neurotrauma, entitled “Non-Invasive Techniques for Multimodal Monitoring in Traumatic Brain Injury: Systematic Review and Meta-Analysis”, stresses the significance of monitoring ICP and brain oxygenation continuously in severe TBI patients, and suggests that the “two most prominent and widely used technologies for non-invasive monitoring in TBI are near-infrared spectroscopy [a form of photoplethysmography (PPG)] and transcranial Doppler”. Researchers conclude that, “both techniques could be considered for the future development of a single non-invasive and continuous multimodal monitoring device for TBI”.

Transcranial Doppler (TCD) ultrasonography is a non-invasive, painless ultrasound technique that uses high-frequency sound waves to measure cerebral blood flow velocity that may correlate with ICP. Research suggests that in ~15% of cases the ultrasound waves are unable to penetrate the patients’ skulls, and measurement is prone to intra- and inter- observer variability and accuracy. As the TCD system for measuring ICP non-invasively is encountering challenges, so near infra-red spectroscopy is gaining significance. This is a form of PPG technology, which is an uncomplicated, inexpensive, non-invasive, and convenient optical measurement that has the potential of being used at the site of injuries to quickly assess the severity of the head trauma. In the recent case of Tagovailoa, such a non-invasive ICP measurement device could have been applied on the playing field. Over the next decade, expect PPG technology to impact neurosurgery by potentially providing more accurate triaging and further disrupting the gold standard of care for severe TBI patients.
 
Section 8
Brain cancer and early diagnostics

We mentioned the Gamma Knife’s® ability to treat some brain tumours and suggested that patients have benefitted significantly from its use. The first successful modern brain tumour excision was performed in 1878 by William Macewen, a pioneering Scottish surgeon, at the Glasgow Royal Infirmary. At the beginning of the 20th century, contributions by Americans started with Harvey Cushing, who is generally recognised as the father of modern neurosurgery. Working at the John’s Hopkins Hospital in Baltimore, Cushing introduced meticulous documentation of the clinical and pathological details of cerebral tumours and devised several surgical techniques for operating on the brain that became the foundation of neurosurgery as an autonomous surgical discipline. In 1912, he discovered an endocrinological syndrome caused by a malfunction of the pituitary gland, which is named after him: Cushing’s disease.
 
The prognosis for a brain tumour is dependent upon its type, location, size and time of diagnosis, growth and how much can be surgically removed or treated. Factors including age and general wellbeing as well as some recognised genetic factors also influence prognosis. Poor prognosis for brain cancers is perpetuated by the lack of cost-effective, accurate tests that can be used in a primary care setting to diagnose the conditions. This means that a large proportion of brain cancers are diagnosed too late for current treatments to be effective. However, in recent years there have been advances made in detecting brain cancers early and this is expected to significantly improve prognosis.
 
Although there are >120 different types of brain tumours, lesions and cysts, your chances of developing brain cancer is <1%. Brain tumours account for ~90% of all primary central nervous system (CNS) tumours. In 2020, >0.3m people worldwide were diagnosed with a primary brain or spinal cord tumour. According to the Annual Report of the US Central Brain Tumor Registry, >84,000 Americans were diagnosed with a primary brain tumour in 2021. The US National Cancer Institute, suggests ~0.6% of Americans will develop brain cancer in their lifetime and the 5-year survival rate for those that do is only ~33%. This year, >4,000 Americans <15, are expected to be diagnosed with a brain or CNS tumour. In the UK, each year ~16,000 people are diagnosed with a brain tumour and ~ 60,000 people are living with a brain tumour.
 
The causes of brain tumours are not fully understood and occur because of an abnormal growth of brain cells or cells in the brain’s supporting tissues, which can damage the brain, threaten its function and result in death. Some tumours may occur around the edge of the brain and press on certain parts of it, while others can be more diffuse and grow among healthy tissue. In the video below, neurosurgeon Christopher Chandler, who leads the Paediatric and Adolescent Neurosurgical Service at King’s College Hospital, London explains that, “A brain tumour is an uncontrolled growth of a bunch of cells where the ‘off’ switch is missing. This means that there’s nothing telling these cells to stop growing, so they grow and divide. As this uncontrolled mass, or tumour, grows it displaces brain tissue and causes pressure on the surrounding brain. If you don’t remove the tumour or stop it from growing, it will grow so large that it causes critical pressure on the surrounding structures of the brain, which eventually, if untreated, can kill the patient.” See video.  

 
What is a brain tumour?
 
The Holy Grail
Neurosurgeons are frustrated by the fact that brain cancers are often diagnosed late. This is because brain tumours often present with non-specific symptoms and are therefore challenging to diagnose. In the video below, neurosurgeon Ranjeev Bhangoo explains the reasons for a brain tumour to be diagnosed late. “Firstly, the symptoms are non-specific: tiredness, headache, poor concentration - maybe not finding your keys as well as you use to – the sort of thing that can happen to any of us when we’re tired. The classic thing of having a fit or collapsing occur, but they’re unusual. Your GP is only likely to see just one or two brain tumour cases in his or her whole career. . . . Now, if you do get a scan, the chances of you having a brain tumour are incredibly rare. So, just because a neurologist has organized a scan, you mustn’t get worried because it’s very unlikely that you’ll have a brain tumour. But ultimately, through some path or other, you have a scan, usually a CT scan, which is a form of X-ray, which is quick and safe and if there is a tumour it will show. At that point, what will normally happen is that your doctor will refer you to a neurosurgeon”.    
 
How are brain tumors diagnosed?
 
Technologies positioned to reduce neurosurgeons’ frustration with late diagnosis of brain cancers are quick, easy-to-use, and inexpensive blood tests that can diagnose cancer early. Such tests fall into four general categories: (i) complete blood count used to evaluate your overall health and detect a wide range of disorders, (ii) biomarkers, which are molecules found in your blood and other body fluids that can indicate specific cancers, (iii) blood protein testing that measures the amount of protein in your blood to diagnose cancer, and (iv) circulating tumour cell tests, which look for tumour cells that are shed from a tumour and are now circulating through your bloodstream.
 

Detecting brain cancers early
Two recent examples of simple diagnostic blood tests are reported in the August 2022 edition of Clinical Cancer Research and the October 2019 edition of Nature Communications. In the former paper, scientists at Massachusetts General Hospital (MGH) report findings of a study, which detected the presence of brain cancers early by identifying pieces of tumour cells’ genetic material - mRNA - that circulate in your blood. The test, which has a sensitivity of 72.8% and a specificity of 97.7% can characterize brain tumours and monitor their status after treatment. According to Leonora Balaj, a co-senior author, and assistant professor of Neurosurgery at Harvard Medical School, “There is a real need to make brain tumor diagnosis less invasive than the current technique of tissue biopsy. This research demonstrates that it is now feasible to diagnose a brain tumor via a blood test for one of the most common mutations detected in brain tumors”. Findings of the latter paper suggest that certain brain cancers may be detected early from a simple blood test using PPG technology, which has been used in hospital settings since the 1980s to monitor heart rate and relative blood volume. Today, the technology is used in a wide range of commercially available medical devices, as well as smartwatches (the Apple version is an FDA approved medical device) and fitness trackers, for measuring oxygen saturation, blood pressure and cardiac output, assessing autonomic function and detecting peripheral vascular disease. Previously we described how PPG technology is positioned to provide a non-invasive means to monitor ICP in TBI patients.

The 2019 Nature paper describes how PPG easily, cheaply, and accurately identified asymptomatic people with suspected brain cancer. In the first instance, the technology was used on a retrospective cohort of 724 people, which included those with primary and secondary cancers as well as control participants without cancer. PPG was employed to identify biomarkers from patients’ blood samples and a machine learning algorithm was trained to identify specific biomarkers with cancer present. The algorithm was then used on a sample of 104 random participants and brain cancer was detected in 12. The PPG test revealed a sensitivity of 83.3% and a specificity of 87%. According to Matthew Baker, from the University of Strathclyde, Scotland, the paper’s lead author, “This is the first publication of data from our clinical feasibility study, and it’s the first demonstration that our blood test works in the clinic.
 

A global endeavour
These two studies are part of a well-resourced global endeavour to develop an affordable, simple, point-of-care, blood test, which detects cancer before any symptoms occur. Today, biomedical advances move at a much faster pace than medical technology did in the 1950s and 60s when Lars Leksell was developing minimally invasive stereotactic radiosurgery procedures to accurately locate and remove brain tumours. For example, in ~7 years since its foundation in 2015, GRAIL, a US biomedical start-up backed by Jeff Bezos and Bill Gates, has become a global leader in a ground-breaking multi-cancer, early detection, blood test, Galleri®, which has the potential to detect >50 types of cancers before they are symptomatic. This is achieved by looking for abnormal DNA shed from cancer cells in the blood, called cell-free DNA (cfDNA). The Galleri® test uses genetic sequencing technology and artificial intelligence (AI) to scan for patterns of chemical changes in the cfDNA that come from cancer cells but are not found in healthy cells. If validated, the GRAIL test will provide a simple, cheap, non-invasive means to identify a range of cancers in asymptomatic people when they are more likely to respond positively to therapy.
 

Large UK clinical study
In May 2019, the GRAIL Galleri ® blood test was granted US FDA Breakthrough Device designation. The test is only available commercially in the US but is rapidly gaining provenance in other regions of the world. For example, in September 2021, NHS England launched a massive clinical study for Galleri® and set up ~150 mobile clinics in convenient locations across the country to recruit ~140,000 participants. In July 2022, participants were invited to attend two further appointments spaced ~12 months apart. Findings from the study are expected to confirm the accuracy of the test in asymptomatic participants and lead to its regulatory approval. Although Galleri® is the first of its kind to be trialled on such a scale in the UK, it is not the only player and cfDNA is not the only technology.
 

Guardant Health
Another US biotech developing capabilities to detect a range of cancers early from a simple blood test is Guardant Health. Founded in 2011, the company is now ~US$6bn Nasdaq traded global enterprise with annual revenues ~US$110m. In April 2022, Guardant presented new data at the American Association for Cancer Research Annual Meeting. Findings suggested that the company’s investigational next-generation Guardant SHIELD™ assay has the capacity to analyse ~20,000 epigenomic biomarkers that help to detect a broad range of solid tumours using a single blood test. Guardant’s co-CEO, Amir Ali Talasaz said: “These positive results show that the next-generation Guardant SHIELD multi-cancer assay provides sensitive detection of early-stage cancers with the ability to identify the tumor tissue of origin with high accuracy”.
 
Section 9
Takeaways

For millennia neurosurgery, which has its roots in ancient civilizations, was dominated with forms of craniotomies, which opened the skull to access cerebral disorders. In the 20th century the speciality pivoted and introduced less- and non-invasive procedures to deal with a range of brain and CNS conditions. However, the introduction of these were slowed by the fact that the brain is such a well-protected organ and they took nearly half a century to gain regulatory approval and enter the clinic. At the beginning of the 21st century biomedical research is advancing at such a pace and it positioned to significantly transform neurosurgery towards a less- and non-invasive modality. Further, in the next two decades expect gene and cell therapies to substantially increase their influence as treatments for neurodisoders. Over the past three decades novel neuro-pharmaceuticals have been constantly in clinical trials but failed to receive regulatory approval because they did not have an efficatious mechanism to deliver the therapeutics across the BBB. Today, there are a myriad of novel vehicles under development, which are expected to effectively smuggle 21st century pharmaceuticals across the BBB. These are being advanced in parallel to the drugs, and together are positioned to significantly disrupt traditional neurosurgical procedures over the next two decades.  
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  • China is the world’s second largest economy after the US
  • Its MedTech sector is the world’s second largest after the US and accounts for 20% of the global market
  • The size of China’s market is attractive to Western MedTechs but its regulatory and competitive environments are changing, which makes it more challenging for foreign corporations to enter or grow their franchises in China
  • China’s healthcare system has similar structural challenges as those of the US and other wealthy nations: the demand for care is increasing and overwhelming health professionals, which creates care gaps
  • China is ahead of the US and other nations in attempting to reduce such gaps with patient-centric innovative digital therapeutic solutions, which is supported by a deep bench of capabilities
  • Western MedTechs have a lot to learn from Chinese digital health innovations
  • However, Beijing is engaged in an unprecedented mission to become a self-reliant, high-tech economy and a world superpower within the not-too-distant future
  • Misjudging Beijing can have significant commercial consequences
 
Learn from the Chinese, but don’t misjudge Beijing


An earlier Commentary ended by posing the question whether Western MedTechs can compete with China’s large and rapidly growing domestic medical device industry, which benefits from China being the second largest MedTech market in the world behind the US, with annual sales revenues of ~US$84bn in 2020. China now accounts for ~20% of the global medical device market, which is expected to continue an upward trajectory, supported by the nation’s quickly aging population, rising incomes, and the continued enhancement of health services.
 
With this foundation, Beijing is incentivising its domestic MedTech companies to expand internationally. Beijing’s 14th Medical Equipment 5-Year Plan (2021–25) sets a goal to have >6 Chinese MedTechs among the top 50 global industry corporations by 2025. The policy complements Made in China 2025, which is a macroeconomic strategy to reduce China’s reliance on imported foreign products including medical devices. So, while China’s domestic market is becoming more challenging for foreign MedTechs, Beijing is supporting the growth and expansion internationally of its local medical device companies to compete with their Western counterparts. For example, Mindray Medical International, China’s biggest medical device corporation by sales revenue, is the #4 ultrasound vendor in the world and over the next 5 years, expects to increase its overseas sales revenues from <50% today to ~70%.
 
Despite Beijing’s ‘for China’ policies, many Western MedTech leaders view China as a significant commercial opportunity, recall foreign corporations that have prospered in the nation over the past two decades and suggest that it is important to do business there if one of your company’s objectives is to grow its international franchise. But China has changed, and its regulatory and competitive ecosystems are tightening, which present headwinds for Western MedTechs that were not present a decade ago. Further, China has an ambition to become a self-reliant, world leading high tech nation in the not-too-distant future, which could have consequences for foreign companies participating in the Chinese market.
 
With ~400m chronic disease patients, a fast-aging society, vast and rapidly rising healthcare costs, and an economy that has slowed, China is resolute in developing a new model of digitally enabled, patient-centred integrated healthcare. This ambition is supported by significant resources and a deep-bench of capabilities positioned to enable China to achieve its goals, which include transforming its medical devices sector by supporting the development of world class, high tech, patient-centric, digital enterprises.
 
All these factors suggests a dilemma for Western MedTech leaders: China is too big to ignore, but Beijing is too powerful and unrelenting to misjudge.

 
In this Commentary

This Commentary has 3 sections. The first, entitled ‘Reducing care gaps with digital therapeutic innovations’, suggests that China, the US, and other developed nations share a common challenge of care gaps created-by a limited supply of health professionals and a large and increasing demand for care. China’s attempts to resolve these gaps differ from other nations in their scale and nature. They are nationwide innovations predicated upon digital AI strategies, which manifest themselves in digital platforms that directly address patients’ healthcare needs. We briefly describe a few examples of these and suggest that they are advantaged by China’s data policies and AI competencies. Section 2, entitled ‘Capabilities’, describes Beijing’s plans for China to become the world’s leader in AI technologies within the next decade and suggests that China has the capabilities to achieve this goal in the proposed timeframe. The final section entitled, ‘Understanding Beijing’, briefly describes the tightened regulatory and competitive environments and suggests how this impacts the business models of Western corporations seeking to enter the Chinese market or increasing their existing franchises. We posit that China and the Chinese are significantly different to Western democracies and Westerners and emphasize the Chinese Communist Party’s uncompromising ambition to become economically self-reliant, a world superpower and a global high-tech leader. Misjudging Beijing could be commercially damaging for foreign corporations.
 
 
1: Reducing care gaps with digital therapeutic innovations
 
China has similar structural healthcare challenges to the US and other developed economies, which manifest themselves in care gaps caused by a limited supply of overworked healthcare professionals and a vast and rapidly growing demand for care from aging populations. The Chinese population ≥65 years is ~140m, and this cohort is expected to grow to ~230m by 2030. By that time, the nation’s aging middle class will have grown from today’s ~0.3bn to ~0.7bn. High-risk behaviours like smoking, sedentary lifestyles, and alcohol consumption as well as environmental factors such as air pollution take a huge toll on health and increase the demand for care. According to Statista, a large portion of the Chinese population suffer from chronic lifestyle diseases, which account for >80% of the nation’s ~10m deaths each year; >0.5bn people are overweight or obese, while high blood pressure is a common illness among >0.4bn people. China’s healthcare expenditure is growing at >8% a year, and without reform, the nation’s health spending could increase to >US$2trn by 2030. Such factors, together with the nation’s economic slowdown motivate Beijing to prioritize the transformation of its healthcare system.
Significant differences in tackling care gaps

A significant difference between China and the US and other wealthy nations, whose healthcare systems are all in need of reform, is that China has been quicker to develop digital therapeutic technologies to reduce care gaps and relieve its large and rapidly growing burden on hospitals, care systems and families caring for the sick and elderly.
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Should MedTechs follow surgeons or patients?

In any healthcare system, people should be the priority, but because of a dearth of health professionals, overburdened hospitals, soaring health costs and overworked physicians, patients’ needs are often not prioritized. China has been no exception but expects to reverse this trend with the help of artificial intelligence (AI) enabled digital therapeutic solutions that put patients first. Examples include: WeDoctor, Alibaba Health, JD Health, DXY.cn. and Ping An Good Doctor. These, and other digital innovations, provide a range of health services including, online consultations, hospital referrals and appointments, health management, medication regimens, medical insurance, and wellness and prevention programmes. China’s early adoption of AI medical solutions has benefitted from Beijing’s “Healthy China 2030” policy, which, since its launch in 2016, has directed substantial funds to Chinese AI start-ups developing technological innovations to ease the burden of care gaps. According to Tracxn, one of the world’s largest tracking platforms, there are ~227 AI driven healthcare start-ups in China. Let us briefly describe three established ones: WeDoctor, DXY.cn and Ping An Good Doctor.
 
WeDoctor

Tencent-backed WeDoctor, founded in 2010 to provide people with physician appointments, is based in Hangzhou, a city of ~11m and the capital of China’s Zhejiang province. Since its inception, the company has grown into a multi-functional platform offering a range of medical services predicated upon a database of >2,000 Western treatment plans, online pharmacies, health insurance, cloud-based enterprise software for hospitals and other services. Today, WeDoctor hosts >270,000 doctors and ~222m registered patients. It has an impact on reducing care gaps and is one of the few online healthcare providers qualified to accept payments from China's public health insurance system, which covers >95% of the population. WeDoctor's services are especially valued in rural areas, where there are fewer physicians than the national average of 1.5 per 1,000 people.

In response to the COVID-19 crisis the company launched the WeDoctor Global Consultation and Prevention Center (GCPC),  which provided a free 24/7 global online health enquiry service, psychological support, prevention guidelines and real-time pandemic reports. Just before the pandemic, WeDoctor planned to float its medical and health service function on the Hong Kong stock exchange at a valuation ~US$7bn. However, it was pulled because of the Beijing-Hong Kong tensions. WeDoctor’s. other business functions, which include health insurance and health data services, were not included in its proposed flotation, and are likely to stay private to appease Chinese regulators.
 
DXY.cn
 
DXY.cn is an online healthcare community for doctors, patients, and healthcare organizations. It was founded in 2000 and is also based in Hangzhou. Over the past 2 decades it has evolved into the world’s largest community of physicians who use the platform to gain insights from colleagues, discuss new medical research, and report unusual clinical events. More recently, DXY has added a consumer-facing service that brings wellbeing advice and medical consultations to the public. DXY generates revenues from public-facing medical advertising and job recruitment for its life science clients, as well as clinics where patients can receive in-person medical care. According to TechCrunch, in 2021, DXY reached ~130m consumers, >9,000 medical organizations, and had a registered user base of ~20m.
 
Ping An Good Doctor

Ping An Insurance (Group), is one of the world’s largest financial services companies with >210m retail customers and ~560m internet users and is headquartered in Shenzhen, southeastern China. In 2014, it launched Ping An Good Doctor to provide end-to-end, AI-powered health services directly to patients. These include 24/7 online consultations, diagnoses, treatment planning, second opinions, and prescription management solutions. Today, Good Doctor has ~400m registered users and drives synergies across China’s healthcare ecosystem. The platform collaborates with >3,700 hospitals and is supported by an off-line healthcare network of >2,200 in-house medical staff and ~21,000 contracted experts to ensure quality and accuracy of its medical services. The company provides insurance coverage for both users and physicians, which helps to ease China’s healthcare payment pressures. Ping An Good Doctor’s technology also assists patients to manage their personal health records, treatment plans, and medical histories.
 
In 2019, the company launched the world's first AI-powered, un-manned healthcare service: the One-minute Clinic. This is a 3m2 booth, which patients walk into, enter their digitized medical history from their mobile phones, and add their symptoms. The clinic’s algorithms, which have been trained on data from >300m medical records, then make a diagnosis, prescribe drugs, and provide a treatment plan. Medications are purchased from an adjacent vending machine. Within a year of the start of the first clinic, Good Doctor rolled out ~1,000 units in shopping malls, airports and other public spaces throughout China providing onsite medical and pharmaceutical services 24/7. Today, the clinics provide accessible and affordable medical and health services to >3m users. Good Doctor believes that its AI-driven, un-manned clinics have a promising future helping to reduce China’s care gaps and has plans to expand its services into Southeast Asia. In December 2019, the company signed a strategic collaboration with Merck, an American pharmaceutical multinational to advance further intelligent healthcare in China.

 
Internet hospitals

Digital initiatives like those described above have led to the development and spread of internet hospitals, which are online medical platforms associated with offline access to traditional hospitals that provide a variety of services directly to patients. Today, internet hospitals are booming in China, driven jointly by government and market initiatives.
 
The first internet hospital was established in China’s Guangdong province in October 2014. It consisted of four clinics operated by doctors from the Second People's Hospital, an online platform operated by a medical technology company, and a network of medical consulting facilities based in rural villages, community health centres, and large pharmacy chain stores. Initially webcams were used for patients to communicate with physicians and share medical images of their conditions. A patient's vital signs were taken by on-site machines and uploaded onto the system. With all this information, physicians made a diagnosis and prescribed medications, which patients obtained from nearby pharmacies. According to the Lancet, two months after its launch, China’s first internet hospital “was dealing with ~200 patients and issuing ~120 prescriptions every day”. After six months, the number of patients had increased to >500 a day, ~60% of whom needed prescriptions. Soon afterwards, a network of consultation sites expanded to >1,000 facilities in 21 of Guangdong’s municipalities. In 2018, Beijing gave the legislative green light for internet hospitals, which prompted many Chinese digital health companies to start using internet-based AI solutions to meet the country’s medical and healthcare needs and contribute to the reduction of care gaps. By August 2021, >1,600 internet hospitals had been established in China. The public and physician acceptance of these and Beijing’s support for them suggests a new era in digital healthcare.

 
Internet + Healthcare” initiatives

Since 2018, a range of Internet + Healthcare” initiatives have consolidated and enhanced the position of digital healthcare innovations. The success and continual improvement of China’s digital health service platforms all benefit from Beijing’s policies to facilitate medical practice supported by digital tools. Laws and policies have been issued to support this digital transformation, including health data digitalization, data sharing, and interoperability across the whole of China’s healthcare ecosystem. After the outbreak of the COVID-19 pandemic, the government increased its “Internet + Healthcare” efforts to include telemedicine in state medical insurance coverage, and to lift barriers for prescribed drugs sold online.
 
Data advantage

Compared to the US and other Western democracies, China has significant data advantages to drive its digital healthcare initiatives. Eric Topol, a cardiologist, director of the Scripps Research Translational Institute, and author of Deep Medicine: How AI can make healthcare human again, argues that “China has a massive data advantage when it comes to medical AI research”. To put this in perspective, consider that Chinese patient healthcare data are drawn from the nation’s provinces, many of which have populations of >50m. By contrast, US AI research tends to be based on patient data often drawn from one hospital. China’s big data advantage allows machine learning algorithms to be more effectively trained to perform key functions in a range of clinical settings. Another comparative advantage of China is its large workforce of AI specialist, data scientists, and IT engineers, which can work on healthcare projects at comparatively low costs. This is partly the result of China’s emphasis over the past four decades to encourage science, technology, engineering, and mathematics (STEM subjects) in their schools and universities to fuel Beijing’s technological ambitions.

Not known for good data governance practices, but with intensions to expand internationally, China is now tightening its data protection regulations. For example, in November 2021 Beijing introduced the Personal Information Protection Law (PIPL), which is designed to prevent data hacks and other nefarious uses of sensitive personal information. Much like the EU’s General Data Protection Regulation (GDPR), the PIPL stipulates that an individual’s explicit consent must be obtained before their medical health data are collected, and it places the burden on medical AI companies to ensure that these data are secure.
 
2: Capabilities
 
Healthy China 2030

In October 2016, President Xi Jinping announced the nation’s Healthy China 2030 (HC 2030) blueprint, which put patient-centred healthcare at the core of Beijing’s healthcare plans, recognizing its ability to influence both social and economic development. The policy sets out China’s long-term approach to healthcare and shows the nation’s commitment to participate in global health governance, which Beijing recognises as necessary as it seeks to extend its international reach. By 2030, Beijing aims to reach health equity by embracing the United Nations’ Social Development Goal 3.8, which seeks to “Achieve universal health coverage, including financial risk protection, access to quality essential healthcare services and access to safe, effective, quality and affordable essential medicines and vaccines for all”. In 2019, Beijing announced an action plan to accelerate the delivery of Healthy China 2030. This puts patients first in an endeavour to build a healthy society by leveraging AI technologies to reduce the prevalence of lifestyle induced chronic disorders and subsequent care gaps. The World Health Organization (WHO) believes the policy “has the potential to reap huge benefits for the rest of the world”.
 
AI capabilities
 
As China’s economy has matured, its real GDP growth has slowed, from ~14% in 2007 to ~7% in 2018, and the International Monetary Fund (IMF) projects that growth will fall to ~5.5% by 2024. Beijing refers to the nation’s slower growth as the “new normal” and acknowledges the need to embrace a new economic model, which relies less on fixed investment and exporting, and more on private consumption, services, and innovation to drive economic growth. Such reforms are needed for China to avoid hitting what economists refer to as the “middle-income trap”. This is something many Western economies (and corporations) face: it is when countries achieve a certain economic level but then begin to experience diminishing economic growth rates because they are unable to effectively upgrade their economies with more advanced technologies. To avoid this scenario, for the past three decades, China has been investing in AI and systematically upgrading its economy.


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Leaning-in on digital and AI


 
Today, China has a significant supply of innovative AI talent to deliver a Healthy China by 2030. Some of the world’s largest technology companies are Chinese and all are developing different aspects of AI applications. For example, Alibaba’s cloud division concentrates on using AI in healthcare and Baidu, which has numerous AI research laboratories in the US, is focussed on a range of AI innovations, which include “deep learning”, and “big data”. More recently, Baidu added a Business Intelligence Lab, which develops data analytics for emerging data-intensive applications, and a Robotics and Autonomous Driving Lab, which specializes in computer vision.
In 2017 China's State Council launched a 3-step plan to become a world leader in AI technologies by 2030, with a domestic AI industry valued ~US$150bn. Beijing completed step 1 in 2020 by establishing a “new generation” of AI technologies and technocrats and developing national standards, policies, and ethics for its emerging industry. Step 2 is anticipated to be completed by 2025, by which time China expects to achieve “major breakthroughs” in AI applications that will help the completion of upgrading the nation’s industrial sector and thereby avoiding the middle-income trap. The final step is anticipated to take place between 2025 and 2030, which, among other things, will project China internationally as the world leader in AI technologies.
 
3: Understanding Beijing
 
Regulatory changes

A decade ago, foreign MedTechs operated in China with relative ease. Chinese regulations were lighter than they are today, and companies were supported by a multi-layered network of small scale and localised sub-distributors. This fragmented structure resulted in higher prices and tended to encourage corruption, but the relatively high margins obtained from foreign products allowed medical device corporations to compensate the multiple distribution levels and still make a profit. In return, domestic Chinese distributors managed the market and foreign MedTechs did not engage directly with hospitals and physicians.
 
Volume-based procurement

Recent regulatory changes have disrupted this modus operandi for foreign MedTechs. One change positioned to have a significant impact on MedTech profits is volume-based procurement (VBP). This is aimed at lowering the price of medical consumables by tendering the market volume of cities, provinces, or the country to manufacturers with the lowest price. Following a successful pilot with pharmaceuticals, VBP was extended to medical devices in 2019, and since then it has had a significant effect on certain products. For example, the price of cardio stents and hip and knee implants have been reduced by ~70% to ~90%. China’s message is clear: Medtechs are either ‘in’ with significantly lower prices, or ‘out’. This suggests that companies wishing to enter or grow their franchise in the Chinese market will have to adapt their business models by accelerating their pre-launch registrations and post-launch commercialization strategies for new products as margins on legacy offerings are expected to be substantially reduced. However, review processes for new offerings have become longer, more bureaucratic, and more expensive than they were five years ago. For example, if a Class 2 device without clinical studies took ~9 months to register five years ago, today expect ~2 years. VBP has forced foreign MedTechs to consolidate their multi-layered distribution channels to improve economies of scale. 
 
More recently Beijing has introduced a two-invoice policy for the medical devices industry: (i) MedTech to a distributor, and (ii) distributor to a hospital. This will push small and less competitive distributors out of the market and shorten and consolidate supply chains. The likely effect of this is for Chinese distributors to concentrate more on logistics to “deliver product”, rather than managing the market. To the extent that this is the case, a larger share of customer engagement will become the responsibility of MedTechs.
 
This will mean that foreign corporations trading in China will need to reassess their capabilities and adjust their business models. Further, MedTechs operating in China should expect VBP to increase the significance of “value”. This is because the policy is likely to enhance the purchasing power of hospital administrators and reduce that of physicians.  As a result, companies might expect procurement conversations to focus less on clinical outcomes and more on the overall value of products and their potential to minimize costs. Many readjustments companies will be obliged to make to their business models may be achieved by having someone local on the product management team rather than engaging high-margin agencies to resolve critical, but relatively simple domestic challenges.
 
A narrow window of opportunity for foreign MedTechs

Beijing’s “in China for China” policy makes it a condition that foreign companies entering the Chinese market must share their technology and intellectual property (IP) with a domestic “partner”. Beijing has been using this condition to acquire valuable scientific knowhow, which has helped the country to develop a large domestic medical device industry. According to a 2021 research report from Deloitte, a consulting firm, “China now boasts over 26,000 medical device manufacturers”. Beijing’s policies render China a substantially more challenging market to enter and to grow in than it was five years ago. China’s market opportunities for foreign corporations are not only getting tighter; they are getting shorter, and their orientation is changing away from surgeons towards patients. Further, Beijing is on a relentless drive towards self-reliance and tolerates the presence of Western companies in its domestic markets only for as long as they contribute offerings that are useful to the Chinese Communist Party. If China is successful in delivering on its healthcare and high-tech development plans, the window of opportunity for many foreign MedTechs could be only ~10 years.
 
China’s different

China and the Chinese are unlike the West and Westerners. When Deng Xiaoping’s started China’s reforms in 1978 and opened the nation to the world’s trading economies, he created a socialist market economy, in which private capitalists and entrepreneurs co-existed with public and collective enterprise. This formed the foundations for China’s phenomenal economic growth, prosperity, reduction of poverty, massive infrastructure investment, and development as a world-class technology innovator. As a result, many Western business leaders and politicians believed that China had abandoned ideology in a similar way that former communist regimes of Eastern Europe did in the early 1990s after the fall of the Soviet Union. However, such a transformation did not happen in China, which remains a one-party authoritarian state, tightly governed by the Chinese Communist Party (CCP), whose constitution states that China is a “people’s democratic dictatorship”. The CCP has a mission to become the world’s leading technology economy by 2030. This is backed by substantial sovereign wealth and a supply of relevant high tech human capital and an impressive history of national achievements.
 
Scale and speed of transformation

The phenomenal politico-economic progress China has made in a relatively short time is an indication of the nation’s determination, and its ability to affect change, and contextualizes Beijing’s policies to make China a self-reliant economy in the not-too-distant future. A 2022 report jointly released by China’s Development Research Center and the World Bank highlights the nation’s transformation in just four decades, from a struggling agrarian society to a global superpower. The nation’s achievements include increased health insurance coverage to >95% of its 1.4bn population, lifting ~0.8bn people out of poverty, which accounts for ~75% of global poverty reduction in the same period, a burgeoning middle class, which by 2030, will have grown from today’s ~0.3bn to ~0.7bn. In 2010, China overtook Japan to become the world's second largest economic power after the US when measured by nominal GDP. According to the World Bank, in 1960, China's GDP was ~11% of the US, and in 2019, ~67%. Not only is China the world's second-largest economy it has a permanent seat at the United Nations Security Council, modernised armed forces, and an ambitious space programme. China’s growing international clout and economic leadership positions it well to replace the US as the greatest superpower.

Such factors provide a context for Western corporation with global pretentions wishing to engage with and learn from China. At the 13th Annual National People’s Congress in March 2022, Premier Li Keqiang called for “faster breakthroughs” in key technologies, and said the government would increase the tax rebate for small and medium-sized science and technology firms from 75% to 100% and grant tax breaks for basic research to encourage innovation. Significantly, the Congress also underscored self-reliance in China’s economic priorities amid warnings of trade headwinds and geopolitical complexities.

 
Takeaways
 
China is too big a commercial opportunity to ignore. In 2021, China accounted for >18% of the global economy, rising from ~11% in 2012, its GDP was ~US$18trn, and per capita GDP reached US$12,500, which is close to the threshold for high income economies. In recent times, the contribution of China's economic growth to the world economy has been ~30%, which makes China the largest growth engine for the global economy. However, the relationship between China and the rest of the world is changing. As China becomes more self-reliant, its exposure to the world has decreased. Add to this (i) international trade disputes, (ii) increasing geopolitical tensions between the US and China, (iii) the nation’s evolving new rules to evaluate technology flows, (iv) increase of protectionism and (v) its healthcare mission to pivot towards patients, and you have significantly changed trading conditions than a decade ago. Misjudging Beijing’s rapidly evolving commercial ecosystem could be costly for Western MedTechs.
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  • The traditional strategy of the medical devices industry has been to maximise the experience of the surgeon
  • This has resulted in paying little attention to the demands of patients
  • Surgeon populations are shrinking while the general population is growing, aging, becoming ill and demanding care
  • This creates care gaps, which are challenging to reconcile, prolong unnecessary suffering and cause unnecessary deaths
  • Reconciling the shrinking supply of health professionals with the increasing healthcare demands has given more weight to patient demands
  • MedTechs will be obliged to recalibrate their approach to patients principally because regulators are involving them in the approval process of medical devices
  • Patient centric digital therapeutic solutions help to reduce care gaps
  • However, developing such digital therapeutics and involving patients will not come easy to traditional MedTechs because of their lack of capabilities and organizational culture
  • Notwithstanding, to be relevant in the future, MedTechs will need to continue to improve their ties with surgeons while increasing their focus on the large and rapidly growing patient demands
 
Should MedTechs follow surgeons or patients?
 
 
Traditional MedTech business models are overwhelmingly focussed on manufacturing physical devices for surgeons to use in episodic, hospital-based, interventions. Over decades, a symbiotic relationship between surgeons and medical device manufactures has been established and led to significant commercial success for both parties. This has meant that MedTechs have not paid the attention they should have to the growing demands of patients, which include primary prevention and screening through diagnosis and staging to treatment, rehabilitation, and the subsequent management of a condition. Should medical device companies double-down on their business models to follow surgeons, or should they change approach and follow patients?
 
In this Commentary

This Commentary has 2 sections: (i) Follow surgeons, and (ii) Follow patients. Section1 suggests that medical device companies will need to continue their mutually beneficial relationships with physicians but tighten their governance ties. Further, leaders might consider some aspects of surgeon populations, which could impact their business model. These include: (i) the increasing shortages and aging of surgical populations, (ii) burnout among surgeons that prompts early retirement, and (iii) the prevalence of unnecessary surgeries. Section 2 considers the business model of MedTechs following patients and suggests that this is likely to become more relevant in the future as regulators are encouraging patient participation in the approval process for medical devices. Further, patient demands are supported by advancing technologies and smart platforms such as PatientsLikeMe. Patient centric solutions tend to be digital therapeutics, based on software rather than hardware. Solutions that address patient care pathways require scarce digital, data management and artificial intelligence (AI) capabilities, which MedTechs tend not to have. To stand a chance of attracting these, MedTechs will need to develop non-hierarchical, agile working cultures with the capacity to innovate at speed. The significance of business models that improve patients’ care pathways is illustrated by two recent, transformative MedTech deals. Takeaways suggest MedTechs should continue following surgeons, albeit under enhanced governance principles and involve patients in the development of devices and increase their capabilities to provide patient centric digital solutions.
 
 
SECTION 1
Follow surgeons
 
The medical devices industry is “big business”. In 2021, the US devoted ~US$199bn (~5.2%) of annual national health expenditures to medical devices. Over the past four decades mutually beneficial relationships between surgeons and medical device companies have been built, and this forms the basis of a dominant industry business model to “follow surgeons”.
 
Surgeons play a crucial role in the conceptualization, development, and enhancement of medical devices; they influence hospital purchasing decisions, and are compensated for providing these services. Further, they are remunerated for representing MedTechs at conferences, giving speeches on behalf of corporations, and playing a critical role in training physicians to use devices because their efficacy is often associated with a specific use technique that needs to be taught. Further, surgeons may receive research grants from MedTechs and be promoted because of their association with a successful innovation. More recently, with the rise of medical device start-ups, the financial incentives to surgeons have included equity stakes in lieu of cash for various contributions. This means that significant financial ties between medical device companies and surgeons are relatively common, which can be the basis for potential conflicts of interest.
 
MedTechs code of conduct

AdvaMed, a US medical device trade association, based in Washington, DC, is aware of such conflicts and suggests that physicians should be compensated at fair market rates for work they perform. The Association is against equity compensation and says that there should be no link between the commercial success of a medical device and a physician. AdvaMed encourages voluntary, ethical interactions and advises member organizations and physicians to disclose all potential conflicts of interest, which include consulting arrangements, training, support of third-party educational conferences, participation in sales and promotional meetings, gifts, grants, and charitable donations.
 
Despite AdvaMed’s best efforts its suggested code of conduct does not appear to work. A bibliometric analysis of 100 clinicians receiving compensation from 10 large MedTechs and published in the November 2018 edition of JAMA Surgery found that conflicts of interest were not declared in 63% of 225 research projects that resulted in publications. Given the increasing significance of environmental, social, and governance (ESG) criteria among socially conscious investors to screen potential investments, it seems reasonable to suggest that MedTechs might consider regularly disclosing all their financial ties with surgeons and health professionals.
More issues to consider

In addition to the increasing significance of ESG issues, there are some further questions associated with MedTech business models that follow surgeons, which corporate leaders might wish to reflect upon. These include: (i) the surgeon population is aging and shrinking, (ii) surgeons have a higher propensity to burnout than other medical specialities, and (iii) surgeons are responsible for a substantial number of unnecessary operations. Let us describe these in a little more detail.
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Shrinking surgeon populations

Throughout the world, populations of surgeons and health professionals are shrinking. Findings of a 2016 US Department of Health and Human Services report suggest that by 2025, there will be shortages in 9 out of 10 surgical specialties in America, with the greatest reduction in ophthalmology, orthopaedics, urology, and general surgery. Research prepared for the Association of American Medical Colleges (AAMC) by the healthcare consulting firm IHS Markit and published in June 2020, suggests that, by 2032, the US could lack ~23,000 surgeons. Although the US has a higher number of total hospital employees than most countries, nearly half of that workforce is comprised of non-clinical staff who are not directly involved in delivering care. For instance, compared to Italy and Spain, America has fewer practicing physicians per capita: 2.6 per 1,000 inhabitants, compared to 4 in Italy and 3.9 in Spain. According to the World Health Organization (WHO), the global shortage of health workers is projected to reach 13m by 2033.
 
Care gaps

One reason for this projected shrinkage is that a large percentage of surgeons are nearing traditional retirement age. For instance, more than 2 in 5 currently active American doctors will be ≥65 years within the next decade. Further, people are living longer, and a substantial percentage are not staying healthy and need care. According to the US Census Bureau the number of Americans ≥65 is expected to reach ~84m by 2050, which is ~2X the 2012 level of 43m. Among this older population there is a large and growing prevalence of chronic lifetime diseases such as cancer, diabetes, heart conditions, respiratory diseases, and mental illness. In the US there are ~150m people with such conditions and ~40% of these are living with ≥2 chronic diseases. According to the US Centers for Disease Control and Prevention, ~90% of the US$4.1trn annual medical spend (~20% of the country's GDP) is attributable to chronic disorders. Such trends magnify the vast and growing pressure on a shrinking pool of health professionals, and this creates challenging care gaps.
 
Digital therapeutics

Care gaps will not be reduced by medical schools training more physicians and nurses. This takes too long to have an impact on the size of the problem. The UK has attempted to reduce care gaps by importing physicians: ~190,000 of the 1.35m NHS staff in England report a non-British nationality, and ~27% of NHS staff in London report a nationality other than British. This policy raises some ethical issues as most are imported from developing economies with underdeveloped healthcare systems and a scarcity of health professionals. The option to import physicians is not open to the US because its immigration policies make it difficult for international health professionals to work in America. Recently, many advanced industrial economies have sought to reduce their care gaps by developing digital therapeutic solutions for patients, which extend the reach of physicians by overcoming time, place and personal constraints that limit care delivery.
 
Surgeon burnout

Findings of a research study published in the June 2018 edition of the Journal of the American College of Surgeons suggest that the prevalence of burnout among surgeons has increased over time. The research references the 2015 Medscape Physician Lifestyle Report, which argues that burnout among surgeons is on the rise and documents burnout rates among various specialisms ranging ~37% to ~53%, with general surgeons nearing the top of the list at 50%. Research on the impact of the COVID-19 crisis on healthcare professionals published in the December 2021 edition of the Mayo Clinic Proceedings, found that ~1 in 3 US physicians expressed a clear intention to reduce their work hours, and ~1 in 4 intended to leave their practice altogether. Such trends are concerning considering the aging of the US population and the subsequent increased pressure this puts on healthcare systems.
 
Many factors contribute to surgeon burnout. Common causes among American surgeons include long work hours, delayed gratification, challenges with work-home balance, and issues associated with patient care in a changing healthcare ecosystem. According to the WHO’s International Classification of Diseases, (ICD-11) burnout results from “chronic workplace stress that has not been successfully managed”. It is characterised by being emotionally exhausted, feelings of cynicism and loss of empathy and a sense of low personal accomplishment with respect to one’s work. A meta-analysis of the prevalence of burnout published in the March 2019 edition of the International Journal of Environmental Research and Public Health  suggests that surgeons experience elevated rates of depression and psychiatric distress and posits that burnout among junior surgeons is at an epidemic level, which affects patient safety, quality of care and patient satisfaction.
 
Unnecessary surgeries

Another issue for medical device leaders to consider is the incidence rates of unnecessary surgeries. These are any intervention, which is not needed, not indicated, or not in the patient’s best interest when weighed against other available options.  Unnecessary surgeries are not a recent phenomenon: they are a significant reality that continue to expose patients to unjustified surgical risks. In 1976, the American Medical Association (AMA) called for a congressional hearing to address the issue, claiming that each year there are “2.4m unnecessary operations performed on Americans at a cost of US$3.9bn and that 11,900 patients had died from unneeded operations”.  Across the US, the phenomenon is patchy. A cross-sectional study of five US metropolitan areas and published in the January 2022 edition of the Journal of the American Medical Association found significant differences in physician treatment recommendations across a range of specialisms.

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

Most common unnecessary surgeries

The incidence rates of unnecessary surgeries appear more prevalent in spinal, gynaecological and some orthopaedic procedures. Clinical trials have shown that a significant percentage of spinal fusions for back pain do not lead to improved long-term patient outcomes when compared to non-operative treatment modalities, including physical therapy and core strengthening exercises. Despite these findings, spinal fusion rates continue to increase significantly in the US.
Further, women are at high risk of unnecessary hysterectomies and caesarean sections. Although these rates are moderating, a study for the American College of Obstetricians and Gynecologists, suggested that hysterectomies were improperly recommended in ~70% of cases, even though there were non-surgical alternatives. Hysterectomies can lead to bladder and bowel dysfunction, prolapse, and incontinence,  as well as a 4-fold increased risk of pelvic organ fistula surgery. A study in Health Affairs found that caesarean rates varied significantly (from 2.4% to 36.5%) in hospitals across the US, even among those with low-risk pregnancies.
 
Another study published in Health Affairs suggests that after patients received information on alternatives to joint replacement surgeries, ~26% had fewer hip replacements and ~38% had fewer knee replacements. Each year in the US, >1m total hip and total knee replacement procedures are performed.
 

 
SECTION 2
Follow patients
 
It is not uncommon for MedTech leaders to say that they put “patients first” when developing devices. However, although things are changing, which we describe below, this is more rhetorical that factual. MedTech R&D teams tend to be relatively remote, inwardly focussed, and, particularly in the US, patient voices are generally ignored and not perceived as an integral part of the process.
 
However, the healthcare ecosystem is changing and “following surgeons” cannot constitute an entire strategy for MedTechs. In the future, MedTech business models that follow patients will be driven by patients’ knowledge and their increasing demands to participate in their healthcare decisions, the movement towards personalized care, and regulators’ mandates to incorporate patient perspectives into the development of medical devices and approval processes (see below). Earlier, we suggested that, when surgeons engage with medical device corporations there are competing interests, which often are not disclosed. By contrast, patients are primarily driven by their own safety and wellbeing, which, contrary to surgeons, are grounds for promoting mutual accountability and understanding with healthcare providers.
 
To remain relevant, MedTechs will need to incorporate patient perspectives and patient data into their business models, not least because patients are co-producers of their health and represent a consistent factor, probably the only consistent factor, throughout the care pathway. Further, patients, empowered by digital therapeutics and health information from wearables, hold invaluable personal data, which are often critical to improving care pathways, and outcomes.

 
PatientsLikeMe
 
Patient voices were loud and influential long before MedTechs recognised the significance of engaging patients in development processes. Consider PatientsLikeMea digital platform founded in 2004, with a mission to improve the lives of patients by sharing knowledge, experiences, and outcomes. The company quickly grew to become the world’s largest integrated community, health management, and real-world data platform. Via the site, users can document and share their experiences, track their conditions, and communicate with others living with similar disease states. Data generated by patients who use the site are systemically collected and quantified by the company, while providing users with an environment for peer support and learning. Today, PatientsLikeMe has >0.8bn users representing >2,900 conditions. The company makes money by selling the information patients share in de-identified, aggregated, and individual formats. In 2019, the platform was acquired by the UnitedHealth Group, an American multinational healthcare and insurance company, after former President Trump’s administration forced it to seek a buyer because its majority owner was China-based iCarbonX.
 
Increasing patient input in approval processes for medical devices

What will make MedTechs wake up to the significance of patient perspectives in the development of medical devices are initiatives and demands made by regulators. For the past decade, European regulators through the European Medicine’s Agency (EMA). have solicited patient inputs into their approval process for medical devices. In 2014, the FDA and the EMA created a joint working group to share knowledge and information on patient engagements. In 2007, the Clinical Trials Transformation Initiative (CTTI), a public-private partnership was co-founded by the US Food and Drug Administration (FDA) and Duke University and modelled on the EMA Patients’ and Consumers’ Working Party. CTTI’s mission is to develop and drive patient involvement in the development and approval of devices, which is expected to increase the quality and efficiency of clinical trials. Since its foundation, the CTTI has become a leader in evolving and advancing clinical trials, making them more efficient, and patient focused.
 
In December 2017, a nationwide request in the US was made for patients and patient advocate groups to join the CTTI and become more involved in healthcare product development and in the FDA product reviews. This call came ~1 year after the 21st Century Cures Act became law in December 2016. The Act’s intention is to expedite the process by which new medical devices and drugs are approved by easing the requirements put on companies seeking FDA approval for new products and indications. Under Section 3001 of the Act, the FDA is required to report any patient experience data that were used to support an approval process and to publicly provide aggregate reports on agency use of those data at five-year intervals. This suggests that MedTechs wanting new FDA approvals will need to provide patient-driven data.
 
These initiatives are driven by an ever-improving consumer-controlled social and health data ecosystem, advancements in personal genetic understanding, and increased healthcare cost-sharing. Patient-driven changes are systematically beginning to inject more than token patient participation and viewpoints into all stages of device and drug development.

 
A cultural shift

Improving patient engagement in the development process of medical devices will be challenging for MedTechs that have focussed their business models mainly on manufacturing physical devices and building relationships with surgeons, rather than developing digital assets for patients. The latter requires scarce data management and AI capabilities, which do not thrive in conservative hierarchical organizations. Rather, they require a culture, which promotes innovation at speed and agile ways of working. A recent survey of European executives by The Economist Intelligence Unit, found that poor collaboration between a company’s IT function and its business units slows progress in a firms’ digital objectives. MedTechs that are slow to develop digital capabilities that address patient needs and integrate these into their business models risk not being a party to decisions shaping the emerging healthcare ecosystem.
 
The increasing significance of scarce AI talent

Digital therapeutics predicated upon AI techniques, which are growing in significance with healthcare systems, require large amounts of data collected from electronic health records (EHR), medical images, and information from patients’ wearables. Key areas where AI techniques can improve the delivery of care include: (i) diagnoses, (ii) managing patient journeys, and (iii) improving patient engagement. Streamlining these three areas can ease administrative burdens on healthcare systems, optimize physicians’ time, improve patient outcomes, and lower costs. However, a significant challenge for MedTechs is the scarcity of essential capabilities to develop digital strategies. A 2020 research report by Deloitte Insights suggested that there are significant shortages of “AI developers and engineers, AI researchers, and data scientists”. Corporate leaders might consider bolstering their chances of attracting digital and AI talent by: (i) leveraging their company’s unique value and purpose, (ii) prioritizing and offering best-in-class training over recruiting, (ii) prioritizing diversity, and (iv) engaging with universities.
 
Transformative MedTech deals
 
The significant shift in MedTech strategies towards patients is demonstrated by two recent transformative deals: Teledoc’s 2020 acquisition of Livongo and Siemens Healthineers AG’s 2021 acquisition of Varian Medical Systems Inc. Both combinations emphasise the significance of digitalization and demonstrate the strategic shift towards patients. 
 
The US telehealth giant Teledoc’s acquisition of Livongo for US$18.5bn was the largest digital healthcare deal in history, which valued the combined company at US$38bn. Livongo, founded in 2014, provides digital therapeutic solutions to improve patient health outcomes for a range of chronic conditions including diabetes, and hypertension. The other transformative MedTech digitalization deal was the German health imaging giant Siemens Healthineers AG’s acquisition of cancer device and software specialist Varian in April 2021 for US$16.4bn. Siemens Healthineers is the leading supplier of medical imaging solutions used to support the planning and delivery of radiotherapy. Varian was the leading supplier of radiotherapy solutions. Both deals were substantially larger than Amazon’s US$0.75bn 2019 acquisition of PillPack, and Google’s US$2.1bn 2021 acquisition of Fitbit, and they signal a new and permanent path for MedTech companies towards a digital-first future.
 
Takeaways

To remain relevant MedTechs will need to continue their symbiotic relationships with surgeons albeit in a modified form, while becoming significantly more patient centric and digitally savvy. However, a bigger challenge Western MedTechs will have to face in the next five years is whether they can develop digital therapeutic solutions for patients fast enough to compete with the looming threat from China’s large and rapidly growing capacity to develop and market medical robotics for surgeons and innovative digital therapeutics for patients. This will be the subject of a forthcoming Commentary.
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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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