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5 years, 9 months ago

A paradigm shift in cancer diagnosis

HealthPad
Directory:
Cancer
Tags:
breath biopsy
cancer diagnosis
cancer research
chemical signature
commentary
image recognition
liquid biopsy
personalized medicine
tissue biopsy
  • People and doctors often miss early warning signs of cancer
  • Nearly 50% of all cancers are diagnosed late when they have already spread
  • Each year cancer kills 8m people worldwide and cost billions
  • 40% of cancer deaths could be prevented by early detection
  • Traditional tissue biopsies used to diagnose cancer are invasive, slow, costly and often yield insufficient tissue
  • New non-invasive tests are being devised to detect cancer early
  • Such tests are positioned to significantly reduce the vast and growing global burden of cancer
  • But before these tests enter clinics, they need to overcome a number of challenges
 

A paradigm shift in cancer diagnosis


How close are we to developing a simple, cheap, rapid and exquisitely sensitive non-invasive test to diagnose cancer in healthy-looking people?

Recently, attention has been drawn to a breathalyser test for cancer diagnosis, which is just starting a significant 2-year clinical study in the UK. In 2018, a “liquid biopsy” was popularly heralded as “the holy grail” of cancer diagnosis, only quickly to be quashed by medical experts who warned that this conclusion was “premature” and “misleading”. Further, image recognition is increasingly being used as a technique to detect cancer. Given the extent and depth of these endeavours it seems reasonable to assume that, within the next decade, gold-standard solid tumour biopsies for detecting cancer will be replaced by non-invasive diagnostic techniques.
 
In this Commentary
 
In this Commentary we describe evolving innovative techniques to detect cancer early, which include a breathalyser, a liquid biopsy and an image recognition test. But first we: (i) briefly describe the epidemiology of cancer, (ii) explain the extent, implications and some of the causes of late diagnosis, which is driving the development of these new non-invasive detection techniques, (iii) describe how ‘personalized’ medicine, predicated upon the molecular signatures of cancer tumours, has become routine clinical practice and demand more efficacious techniques to understand the complexities of cancer.
 
Cancer snapshot
 
Cancer is among the leading causes of death worldwide. In 2012, there were 14.1m new cases and 8.2m cancer-related deaths worldwide. 57% of these new cancer cases occurred in less developed regions of the world, which include Central America, parts of Africa and Asia. 65% of cancer deaths occurred in these regions. The number of new cancer cases per year is expected to rise to 23.6m by 2030. It is estimated that over 40% of cancer cases are preventable. In the UK there are more than 360,000 new cancer cases and over 166,000 cancer deaths every year. Since the early 1990s, incidence rates for all cancers combined in England have increased by 13% each year. Annual NHS costs for cancer services are over £5bn, but the cost to British society - including costs for loss of productivity - is over £18bn. In the US, over 1.7m new cases of cancer were diagnosed in 2018 and some 0.61m people died from the disease. It is estimated that in the US the annual national expenditure on cancer is some US$150bn. Early diagnosis and cancer prevention would significantly reduce  cancer morbidity and mortality and achieve large cost savings for healthcare systems.
 
The challenge of late cancer diagnoses

The significance of developing a simple non-invasive test to diagnose cancer early cannot be over-emphasised. For a number of reasons, almost half of people who get cancer are diagnosed late, which makes treatment less likely to succeed, reduces chances of survival and significantly increases the cost of care. For instance, in the UK about 25% of all cancer cases only are diagnosed following presentation in A&E. The vast majority of these cases are already at a late stage, when treatment options are limited, and survival is poorer. Further, a substantial percentage of people neither avail themselves  of cancer screening nor present themselves to primary care physicians with early symptoms. A good example of this is cervical cancer screening in the UK, which is offered every three years to all women aged between 25 and 64. Despite the test only taking a few minutes, each year over 1.3m women choose not to attend, and non-attendance is the biggest risk factor to developing cervical cancer. Each year, some 220,000 women in the UK are diagnosed with cervical abnormalities and over 800 women die from the disease.
 
Implications of inefficient healthcare systems
 
Late diagnosis not only occurs for non-compliance. Some cancers are asymptomatic while others have general non-specific symptoms and are often mistaken for lesser ailments. Further, inefficiencies in healthcare systems can lead to late diagnosis and increased cancer morbidity and mortality. For example, in February 2019 the UK’s National Audit Office (NAO) published an “Investigation into the management of health screening”, which concluded that none of the key screening programs in England - for bowel, breast or cervical cancer - met their targets because of management and IT failures.  As a consequence, about 3m women across England have not had a cervical cancer test for at least three-and-a-half years. In 2018, more than 150,000 cervical screening samples piled-up in laboratories due to outdated IT systems, staff shortages and changes in testing procedures. Faulty IT systems also are reported to have resulted in 5,000 women not being invited for breast screening, which in England is currently offered once every three years to women aged 50 to 70. According to the NAO report, in 2017 450,000 women missed a final breast cancer screening test because of a system failure, which is believed to have been responsible for some 270 deaths.
 
Molecular biology challenges to gold standard solid tissue biopsies
 
In the past decade, ‘personalized’ medicine predicated upon the molecular signatures of cancer tumours has become routine clinical practice. The identification on tumour tissue of predictive biomarkers of response to personalized targeted therapies is now considered optimal patient care. Notwithstanding, such treatment faces a number of biological and technological challenges associated with traditional solid tumour biopsies' access to tumours and the heterogeneity of tumours.
 
While some cancer tumours are easily accessed, others have limited accessibility because they are either deep in the body or embedded in critical organs. This makes obtaining a comprehensive “picture” of such tumours challenging and may increase clinical complications. Further, tissue samples from different regions of the same tumour may differ and tissue specimens from primary and metastasized tumours can also differ. In addition, studies have shown the dynamic changes of tumour features over time and the emergence of therapy-resistance. Thus, inter- and intra-tumour heterogeneity pose a pivotal challenge to guide clinical decision-making in cancer therapy as traditional biopsies may be unable to capture a complete genomic landscape of a patient’s tumour. 
 
A non-invasive test, such as sampling blood, urine, salvia and breath can provide the same genetic information as a solid tissue biopsy and has certain added advantages, which include: (i) they are a source of fresh tumour-derived material, unhampered by preservatives and (ii) they provide an alternative sample type in routine clinical practice when tumour sampling is unavailable, inappropriate or difficult to obtain.
Breath test to diagnose cancer

Because of the challenges associated with traditional biopsies, clinical attention is turning to non-invasive tests and recently to a breath test, which promises to be able to diagnose cancer early. A study to detect cancer through breath, which was carried out by researchers from Imperial College London and the Karolinska Institutet in Sweden and presented at the 2017 European Cancer Congress (ECC) in Amsterdam, Holland was promising but inconclusive.

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The study aimed to test whether a “chemical signature”, composed of five substances, which seemed to typify cancer could be the basis for a diagnostic test for the disease. Breath samples were tested of some 335 patients attending leading London hospitals. Of these, 163 had been diagnosed with oesophageal or stomach cancer and 172 presented with upper gastrointestinal symptoms, but without any evidence of cancer after an endoscopy.

Findings suggested that four of the five chemical substances were expressed differently in the breath samples from those diagnosed with cancer, compared to those where no cancer had been found. The breath test was able to correctly indicate cancer in around 80% of patients who had cancer (sensitivity), and able to correctly exclude cancer in around 80% of cases, which did not have cancer, (specificity). Although the findings were promising, researchers concluded that, "The study shows the potential of breath analysis in non-invasive diagnosis of oesophageal cancer. The potential benefits of this technology to patients may be early diagnosis and improved chance of survival. If placed as an endoscopy triage test, the benefits to healthcare systems may include cost-saving through reducing the number of negative endoscopies. However, these findings must be further validated in an un-enriched larger population of patients undergoing diagnostic endoscopy and in false negative patients the value of repeat testing should be established".
 
Expanded clinical study for breath biopsy

Following these promising conclusions a large two-year clinical trial of a breath test, called the Breath Biopsy, supported by Cancer Research UK was started in January 2019 at Addenbrooke’s Hospital in Cambridge, UK, and aims to detect whether exhaled airborne molecules called volatile organic compounds (VOCs) can be useful in detecting cancer. The study expects to recruit 1,500 participants including healthy people to act as a control group. Scientists hope the study will lead to a simpler, cheaper method of spotting cancers at an early stage when they are more likely to respond to treatment. Study participants will be asked to breathe into a device called the Breath Biopsy, which has been developed by Owlstone Medical, a private company founded in 2003 and based in Cambridge. 
 
Breath biopsy to target two challenging cancers
 
In the first instance, only patients with oesophageal and stomach cancers will be invited to try the Owlstone breath biopsy.  Both of these cancers are aggressive and tend to be diagnosed late because in the early stages they either cause no symptoms - in the case of oesophageal cancer - or symptoms that are vague and easy to mistake for other less serious conditions - in the case of stomach cancer. Currently, oesophageal and stomach cancers are diagnosed using endoscopy, which involves a camera attached to a flexible tube being passed down the throat. The procedure is invasive, it risks complications and is expensive. If the breath test is successful with these two cancers, it will be expanded to include patients with prostate, kidney, bladder, liver and pancreatic cancers.
 
Oesophageal and stomach cancers
 
Oesophageal cancer is the 7th most commonly occurring cancer in men and the 13th most commonly occurring cancer in women. In 2018, there were over 0.5m new cases diagnosed globally. The 5-year survival rate for patients with oesophageal cancer is less than 20%. Each year, there are around 9,000 new cases diagnosed in the UK and around 7,900 oesophageal cancer deaths. In the US, it is estimated that there were 17,290 new cases of the disease and 15,850 deaths in 2018
 
Stomach cancer is the 4th most commonly occurring cancer in men globally and the 7th most commonly occurring cancer in women. The disease represents the 3rd cause of cancer death in the world with about 723,000 deaths each year, which accounts for 8.8% of all cancer deaths. In 2018, there were over 1m new cases of stomach cancer worldwide. The five-year survival rate for the disease is about 30% and the 10-year survival rate 15%. According to the American Cancer Society's estimates, over 27,000 patients are expected to be diagnosed with stomach cancer in the US in 2019, of whom some 11,000 are expected to die. In the UK, there are around 7,000 new stomach cancer cases every year and around 4,500 stomach cancer deaths.
 
Chemical signature

According to the lead investigator of the breath biopsy clinical study, Rebecca Fitzgerald, professor of Cancer Prevention at Cambridge University and Consultant in Gastroenterology and General Medicine at Addenbrooke's Hospital, “We urgently need to develop new tools, like this breath test, which could help to detect and diagnose cancer earlier, giving patients the best chance of surviving their disease. Through this clinical trial we hope to find signatures in breath needed to detect cancers earlier. It’s the crucial next step in developing this technology.”
 
Liquid biopsies

Following the presentation of research findings of liquid biopsy clinical studies at the 2018 annual conference of the American Society of Clinical Oncology (ASCO) there were press reports suggesting that the new test was the “holy grail” of cancer diagnosis. This was quickly quashed by medical experts who described the press claims as “premature” and “misleadingly”.

A “liquid biopsy“ has the potential to detect and classify mutations from minute fragments of circulating tumour in a blood sample and entails assessing circulating tumour cells (CTCs) and cell-free DNA (cfDNA) and its subsets of circulating tumour DNA (ctDNA) and cell-free RNA (cfRNA). Liquid biopsies are considered to provide significantly superior biomarkers than the traditional cancer biomarkers such as the prostate specific antigen (PSA) and cancer antigen 125 (CA125) tests, which have been used for decades to support the diagnosis and management of cancer. With the exception of the PSA test, which is used as a screening test for prostate cancer, none of the traditional cancer tests are recommended for population screening because their sensitivity and specificity are not accurate enough.
 
Liquid biopsies effective only after diagnosis
 
While promising, liquid biopsies represent an emerging technology, which has been shown to be effective in personalizing therapy after diagnosis but has yet to demonstrate its clinical utility against the current gold standard tissue biopsies for confirming a cancer diagnosis. There is a relative dearth of evidence on the capabilities of liquid biopsies for detecting cancer early. Expert consensus suggests that liquid biopsies have significant limitations and the tests are not sufficiently developed for widespread use. Liquid biopsies are neither as good nor better than existing screening methods and are not ready for meaningful clinical application because their accuracy, reliability, and reproducibility are still unknown.
 
US biotech start-up conducting large clinical studies of liquid biopsies
 
Notwithstanding, the development of liquid biopsies continue at a pace. Not least the R&D being undertaken by GRAIL Inc., a private US biotech company, spun out in 2015 from San Diego-based Illumina, the world’s largest gene sequencing company. GRAIL is currently valued at US$2.5bn and since its inception has raised US$1.5bn. The company has started two large long-term clinical studies aimed at developing a liquid biopsy for early cancer detection.
 
Early test results suggest that it is not money holding these liquid biopsies back, but basic biology. To evaluate potential blood screens, thousands of patients will have to get tested - and then researchers will have to wait for some of them to actually get cancer, which is the only way to determine not only the predictive power of the tests, but also whether they lead to improved patient outcomes.
 
Image recognition and medical diagnosis
 
Image recognition is another technology being used to develop non-invasive cancer diagnostic tests. Examples include Google’s Lymph Node Assistant (LYNA), which claims to be better than doctors at spotting late-stage breast cancer. LYNA can detect secondary cancer cells in medical scans with 99% accuracy. Secondary cancer cells are responsible for spreading cancer and detecting them is time-consuming and challenging for pathologists.

A study published in the August 2018 edition of Nature Mind reports findings on the first phase of a study undertaken by Moorfields Eye Hospital and Google’s DeepMind, which enables computers to analyse high-resolution 3D scans of the back of the eye to detect more than 50 eye conditions. 

A study published in the October 2017 edition of the journal Frontiers in Psychology, report findings of research conducted by scientists from  Macquarie University in Sydney, Australia, which suggests facial shape analysis can correctly detect markers of physiological health in individuals of different ethnicities.

Shanghai based Yitu Technology and Beijing-based Infervision are among start-ups racing to improve medical imaging analysis by using the same technology that powers facial recognition and autonomous driving. These examples, and others, are indicative of an intensifying competition between the US and China to dominate the life sciences, which is a significant growth industry of the future. In a forthcoming Commentary we shall describe this competition in more detail and explain the comparative advantages of the two nations.
 
Takeaway

It seems reasonable to suggest that over the next decade the gold standard solid tissue biopsy for diagnosing cancer will be replaced with cheap, rapid, non-invasive diagnostic tests, which are able to detect cancer early and thereby make a significant dent in the vast and escalating global burden of the disease.
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5 years, 10 months ago

Is the digital transformation of MedTech companies a choice or a necessity?

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Directory:
Medical Technology
Tags:
big pharma
bull market
commentary
healthcare expenditure
Medical Technology
MedTech

Is the digital transformation of MedTech companies a choice or a necessity?
 
Will 2019 see medical technology (MedTech) companies begin to digitally transform their strategies and business models to improve their commercial prospects?
 
We describe some of the changing market conditions that drive such transformations. We also briefly report the findings of two research papers on corporate digital transformations published in recent editions of the Harvard Business Review. These suggest that there are two “must haves” if company transformations are to be successful: leadership with the appropriate mindset and access to talented data scientists.
 
A bull market encouraging a business-as-usual mindset
 
MedTech is a large growing industrial sector (see below), which has benefitted significantly from the bull market in equities over the past decade but is one of the least equipped to prosper over the next decade in a radically changing healthcare ecosystem and a more uncertain global economy.

For the past decade equity markets have outperformed global economic growth and protected a conservative, production-orientated business-as-usual mindset in MedTech C-suites and boards of directors. This has made organizations either slow or reluctant to transform their strategies and business models, which define how they create and capture value. As we enter 2019 the protection that the MedTech industry enjoyed for years has been weakened by more uncertain markets, the tightening of monetary policy, slower global economic growth and disruptive technological change.

In this new and rapidly evolving environment MedTech markets are expected to continue growing but at a slower rate, operating margins are expected to decline as unit prices erode and companies will no longer be able to earn premium margins by business-as-usual strategies. Building a prosperous organization in a more uneven future is an important challenge facing MedTech leaders and will require a significant shift in their mindset and the talent they engage and develop.  
 
Medical technology

MedTech represents a significant sector of global healthcare, which has been relatively stable for decades. It has a market size of some US$430bn and has consistently experienced high margins and significant sales growth. For example, over the past decade the sector has grown at an annual compound growth rate of about 5%, with operating margins between 23% and 25%. The sector includes most medical devices, which prevent, diagnose and treat diseases. The most well-known include in vitro diagnostics, medical imaging equipment, dialysis machines, orthopaedic implants and pacemakers. The US and Western Europe are established centres for the sector, but trends suggest that China and India will grow in significance over the next decade. The sector is dominated by about 10 giant companies, which account for nearly 40% of the global market in sales revenues. All MedTech companies have significant R&D programs and the global spend on R&D is expected to grow from US$27bn in 2017 to US$34bn by 2022. An indication of how far developments in medical technology have come is robot-assisted surgery, which employs artificial intelligence (AI) for more precise and efficacious procedures. Robot-assisted surgery is expected to become a US$13bn global market by 2025. In the US the repeal of the medical device excise tax was not included in the recent tax reform. The industry believes the tax has a negative impact on innovation, and the rate of R&D spending by US MedTech companies is expected to fall by 0.5% over the next five years.
 
Resistance to change

For the past decade a substantial proportion of MedTech companies either have resisted or been slow to transform their strategies and business models despite increasing pressure from rapidly evolving technologies, changing reimbursement and regulatory environments and a chorus of Industry observers calling for MedTech companies to become less product-centric and more solutions orientated. This reluctance to change can be explained by a bull market in equities, which began in March 2009, outperformed economic growth, delivered some of the best risk-adjusted returns in modern market history and encouraged a conservative mindset among corporate leaders, who were reluctant to change and developed a “if it’s not broken why fix it” mindset.

Because the MedTech sector has been stable for years, established players have been able to compete successfully across the device spectrum, applying common business models and processes without much need for differentiation. MedTech’s strategy has been to market high priced sophisticated product offerings in a few wealthy regions of the world; mainly the US, Western Europe and Japan, which although representing only 13% of the world’s population account for more than 86% of the global MedTech market share (US: 42%, Europe: 33%, Japan: 11%). It seems reasonable to assume that in the future, as markets become more turbulent and uncertain, this undifferentiated strategy and business model will need to transform into ones that are far more distinctive and proprietary.
 
M&A has been MedTech’s principal response to market headwinds

MedTech’s principal adjustment to market headwinds over the past decade has been to increase its M&A activity rather than transform its strategies and business models. M&A’s increased companies scale and leverage, drove stronger financial performance, allowed companies to obtain a broader portfolio of product offerings and increased their international footprints. Some recent high-profile examples of M&A activity in the sector include Abbott’s acquisition of St. Jude’s Medical in January 2017, which led to Abbott holding some 20% of the US$40bn global cardiovascular market. Johnson & Johnson’s US$4bn buyout of Abbott Medical Optics Inc in February 2017, and the “mother of all M&A activity” was Becton Dickinson’s 2017 acquisition of C.R. Bard for US$24bn, which is expected to generate annual revenues of US$15bn.

According to a January 2018 McKinsey report between 2011 and 2016, 60% of the growth of the 30 largest MedTech companies was due to M&A’s, and between 2006 and 2016, only 20% of 54 pure-play publicly traded MedTech companies, “mostly relied on organic growth”. 
As MedTech leaders return to their desks in early 2019 after the worst December in stock market recent memory, they might begin to reflect on their past all-consuming M&A activity, which resulted in bigger but not necessarily better companies. After such a prolonged period of M&A’s, there is likely to be a period of portfolio optimization. Divestitures and spin-outs allow companies to capture additional value by improving capital efficiency, reducing operational complexity and reallocating capital to higher-growth businesses as the industry invests more in R&D to develop innovative product offerings that demonstrate value in an increasing volatile era and increasing price pressures. But divestitures are not necessarily changing strategies and business models, so MedTech’s vulnerabilities remain.
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The IoT and healthcare


 
Black December 2018 for equities
 
It is too early to say whether “Black December 2018” represents the end of the longest equity market bull-run in recent history, but it is worth noting that on Friday 21st December the Nasdaq composite index closed at 6,332.99, which was a drop of 21.9% from an all-time high of 8,109.69 on August 29th. The generally accepted definition of a bear market is a drop of at least 20% from a recent peak. World markets followed Wall Street. Japan’s Topix Index fell to its lowest level for 18 months and the pan European Stoxx 600 Index hit a two-year low. However, seasoned market observers suggest that although the average bull market tends to last for about 10 years, it does not simply die of old age, and the December 2018 market behaviour is consistent with a “maturing cycle” in which there is still room for stocks to grow. This note of optimism could encourage a continuation of a “business-as-usual” mindset in MedTech C-suites and boards of directors.
 
Anaemic economic growth forecasted

The outlook for the global economy in 2019 does not bring any comfort. In October 2018 the International Monetary Fund lowered its forecast for global economic growth for 2019, from 3.9% to 3.7%; citing rising trade protectionism and instability in emerging markets. In September 2018 the Organisation for Economic Cooperation and Development (OEDC) suggested that economic expansion may have peaked and projected global growth in 2019 to settle at 3.7%, “marginally below pre-crisis norms with downside risks intensifying.” The OECD also warned that the recovery since the 2008 recession had been slow and only possible with an exceptional degree of stimulus from central banks. And such support is ceasing.
 
Tightening of monetary policy

Global monetary policy is tightening as central banks retreat from their long-standing market support. After four years of quantitative easing (QE) the European Central Bank (ECB) has ended both its money printing program and its €2.6trn bond purchasing program. The Bank has done this just as the Eurozone growth is cooling and Europe seems to be destined for a slow relative decline, which raises concerns about the sustainability of the single currency area. Notwithstanding, some observers suggests that for the next few years capital can be reasonably safely deployed in the beer-drinking nations of northern Europe, but not in the wine-drinking countries of southern Europe; especially France and Italy, two countries at the centre of the Eurozone’s current challenges. France’s budget deficit exceeds that permitted by the EU and in the latter part of 2018 the nation’s anti-government gilets jaunes demonstrators led to President Macron promising more welfare spending than the nation can afford. This could suggest that France is on the cusp of an Italian-style debt crisis. Although these economic trends have been telegraphed for some time, after nearly a decade of a bull market and low interest rates, there seems to be some complacency in the equity markets about the risks from higher rates and elevated corporate debt. But this sentiment is expected to change in 2019.
 
Transformation is no longer a choice

This more uncertain global economic outlook, heightened US-China tensions, tighter monetary policy and a maturing global business cycle together with significantly changed and evolving healthcare ecosystems suggest that transformation of MedTech strategies and business models is no longer a choice but a necessity if they are to maintain and increase their market positions over the next decade.
 
A challenge for many MedTech companies is that they still work on dated and inappropriate systems or hierarchical processes, and too few leaders and board members fully comprehend the speed and potential impact of advanced digital technologies. Those organization with some appreciation of this are already looking to adjacent sectors for talent and knowhow that could help them evolve their strategies and business models. But such partnerships might not be as efficacious as expected. We explain why below.
 
Digital transformations

Let us turn now to consider digital transformations. Data scientists and machine learning engineers are critical to any digital transformation. One significant challenge for companies contemplating such change is talent shortage, which disproportionately affects companies not use to dealing with such talent. Data scientists are aware of their scarcity value and they tend not to work in IT silos of traditional hierarchical organizations but prefer working for giant tech companies in devolved networked teams, focusing on projects that interest them.

Companies that fail to engage talented data scientists will be at a disadvantage in any digital transformation. Mindful of such challenges some MedTech companies are beginning to partner with start-ups and smaller digitally orientated companies. But this is not necessarily an answer because talent shortage also affects start-ups. The answer lies in understanding how giant tech companies recruit talented individuals. Companies like Google and Facebook are more interested in “tech savvy” individuals and less interested in formal qualifications. They tend to catch such talent with attractive internships when they are seniors in high school and juniors at university. These companies understand digital technology and have seen enough interns that they can correlate their performance on coding tests and technical interviews with their raw ability and potential rather than relying on formal qualifications as a proxy for skill.
 
A new and more dynamic leadership mindsets

Future MedTech leaders will not only need to have a deep knowledge of disruptive digital technologies and AI systems, but will need to have the mindset of an “inclusive networked architect” with an ability to create and develop learning organizations around diverse technologies with dispersed talent. Traditional hierarchical production mindsets, which have benefitted from business-as-usual for the past decade are unlikely to be as effective in an environment which is experiencing the impact of a significant and rapid shift in technological innovation. Sensors, big data analytics, AI, real-world evidence (RWE), robotic and cognitive automation are converging with MedTech and encouraging companies to pivot from being product developers to solution providers. This requires leaders with mindsets that reward value instead of volume and are agile enough to meet increasing customer expectations, whether those customers are payers, providers or patients.

Without leaders with informed, forward-thinking mindsets, enthused about new models of organizational structures, culture and rewards that provide greater autonomy to talented teams and individuals, MedTech companies could remain at a disadvantage in competing with other technology companies for similar talent and expertise. Future MedTech leaders must understand how work is being redefined and the implications of this for talented individuals and devolved networked teams. It seems reasonable to assume that future MedTech leaders will be generalists: executives with more than one specialism with an ability to breakdown silos and bridge knowledge gaps across organizations and develop new models of organizational structure, culture, and rewards.
 
Successes and failures of digital transformations

We have focused on digital transformation of traditional companies as a means for them to prosper in radically changing market conditions. Although there has been a number of successful corporate digital transformations there has also been a significant number of failures. Understanding why some succeed and some fail is important.
 
Successful digital transformations

One notable successful digital transformation is Honeywell, a Fortune 100 diversified technology and manufacturing company, which overcame threats from market changes and disruptive digital technologies by transforming its strategies and business models. In 2016, Honeywell’s Process Solutions Division, a pioneer in automated control systems and services for the  oil, gas, chemical and mining industries, set up a new digital transformation unit to assist its customers to harness advantages from the Internet of Things (IoT) by increasing their connectivity to an ever-growing number of devices, sensors and people in order to improve the safety, reliability and efficiency of their operations.

The Unit’s primary focus is on outcomes, such as reducing costs and enabling faster and smarter business decisions. Honeywell’s IoT platform called Sentience, is considered a toolkit to collect, store and process data from connected assets, offering services to analyse these data and generate insights from them to enable data-based, value-added services. Unlike similar platforms developed by Siemens and General Electric (GE), Honeywell does not sell their platform as an app, but markets data-based services predicated on its platform, which enable its customers to optimize the performance of their connected assets and improve overall production efficiency. Other corporations that have set up similar transformation units to harness the benefits of disruptive technologies include Hitachi, Hewlett-Packard, SAP and UPS.

Failed digital transformations

Perhaps the biggest digital transformational failure is General Electric (GE). In 2011, the then CEO Jeff Immelt became an advocate for the company’s digital transformation. GE created and developed a significant portfolio of digital capabilities including a new platform for the IoTs, which collected and processed data used to enhance sales processes and supplier relationships. Immelt suggested that GE had become a “digital industrial company”. The company’s new digital technology reported outcomes of a number of indices, which over time improved and attracted a significant amount of positive press. Notwithstanding, activist investors were not so enamoured, GE’s stock price languished, Immelt was replaced and the company’s digital ambitions came to a grinding halt. Other notable corporates, which tried and failed to harness the commercial benefits from disruptive technologies include Lego, Nike, Procter & Gamble and Burberry.  

Digitally transformed companies outperform those that resist change

Notwithstanding, research findings published in the January 2017 edition of the Harvard Business Review suggest that digitally transformed companies outperform those that lag behind. Findings were derived from 344 US public companies drawn from manufacturing, consumer packaging, financial services and retail industries with median revenues of some US$3.4bn. Conclusions suggest that digitally transformed companies reported better gross margins, enhanced earnings and increased net income compared to similar companies, which lagged behind in digital change. “Digital technology changes the way an organization can create value: digital value creation stems from new, network-centric ways your business connects with partners and customers offering new business combinations,” say the authors of the study. Critically, the mindset of leaders is significantly linked to successful digital transitions. According to the study’s authors, “Our research indicates that these leaders approach the digital opportunity with a different strategic mindset and execute on the opportunity with a different operating model.”

Reasons for failing to transform

According to a paper published in the March 2018 edition of the Harvard Business Review there are four reasons why digital transformations fail.
  • Leaders’ narrow understanding of “digital”, which is not just technology but a blend of talented people, organizational culture, appropriate machines and effective business processes
  • Poor economic conditions and depressed demand for product offerings
  • Bad timing. It is important that your market sector is prepared for the changes your company is proposing
  • Paying insufficient attention to legacy business. “The allure of digital can become all-consuming, causing executives to pay too much attention to the new and not enough to the old”. 
 
Takeaways
 
Business history has shown that large and established companies, which fail to respond to disruptive technologies in a timely and appropriate fashion can fail and disappear. Notable examples include America Online, Barnes & Noble, Borders, Compaq, HMV, Kodak, Netscape, Nokia, Pan Am, Polaroid, Radio Shack, Tower Records, Toys R Us and Xerox. MedTech leaders might be mindful of Charles Darwin’s hypothesis, which he describes in his book, On the Origin of Species published in 1859. Darwin suggests that “in the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment”. Such a statement would not be out of place in a modern boardroom. It suggests that all industrial sectors need to develop to keep abreast of innovations and evolving trends. The main difference is that Darwin’s natural selection processes take millions of years, while significant changes that effect commercial businesses can take a matter of months.
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5 years, 11 months ago

Bridging the gap between medical science and policy to reduce the biggest 21st century healthcare burden

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Directory:
Diabetes
Tags:
commentary
diabesity
diabetes prevention
diabetes prevention program
obesity
obesity prevention
pre-diabetes
T2DM
Type 2 diabetes
Bridging the gap between medical science and policy to reduce the biggest 21st century healthcare burden

 
In November 2018 the Mayor on London Sadiq Khan, announced that junk food adverts will be banned on all London transport from February 2019 in an attempt to reduce the “ticking time bomb” of childhood obesity in the city.

London has one of the highest obesity rates in Europe with some 40% of 10 to 11-year olds either overweight or obese, with children from more deprived areas disproportionately affected. Obesity is a common and costly source of type-2 diabetes (T2DM), which is much more aggressive in youngsters and complications of the condition - blindness, amputations, heart disease and kidney failure - can present earlier. What is happening in London and the UK is replicated in varying degrees in cities and nations throughout the world: there is a global epidemic of obesity and T2DM, which together is often referred to as ‘diabesity’.
 
The “good” news is that at the same time Khan announced the advertising ban, the UK’s national news outlets were reporting the product of four decades of scientific research, which suggested that T2DM could be reversed by a liquid diet of 800-calories a day for three months.
 
Although this offers hope for millions of people, an unresolved challenge is whether this simple and cheap therapy will be implemented effectively to significantly dent the burden of diabesity, which arguably is the biggest healthcare challenge of the 21st century.
 
In this Commentary

We describe some of the research behind the news reports about the therapy to reverse T2DM. Although the scientists’ innovative solution of a low-calorie liquid diet has been adopted enthusiastically by some healthcare providers and organizations specifically set up to dent the burden of diabesity, it is questionable whether the gap between science and policy can be bridged. This, we suggest, is because the prevalence of diabesity is growing at a significantly faster rate than the effect of programs to prevent and reduce the condition.
 
Obesity and T2DM

Obesity, which is a significant risk of T2DM, is a complex, multifaced condition, with genetic, behavioural, socioeconomic and environmental origins. Diet and sedentary lifestyles may affect energy balance through complex hormonal and neurological pathways that influence satiety. Also, urbanization, the food environment and the marketing of processed foods are contributory factors to becoming overweight and obese. Notwithstanding, the main driver of weight gain is energy intake exceeding energy expenditure.
 
T2DM is a chronic, progressive metabolic disease, which until recently has been perceived as incurable. Although genetic predisposition partly determines the condition’s onset, being overweight and obese are significant risk factors. Generally accepted clinical guidelines to treat the condition is to reduce glycated haemoglobin (HbA1c) - blood sugar (glucose) - levels. The HbA1c test assesses your average level of blood sugar over the past two to three months. The normal range for HbA1c is 4% to 5.9%. In well-controlled diabetic patients HbA1c levels are less than 6.5% or 48mmol/moll. High levels of HbA1c mean that you are more likely to develop diabetes complications, such as serious problems with your heart, blood vessels, eyes, kidneys, and nerves. T2DM is treated primarily with drugs and generic lifestyle advice, but many patients still develop vascular complications and life expectancy remains up to six years shorter than in people without diabetes. 
 
Obesity

The Organisation for Economic Co-operation and Development’s (OEDC) 2017 Health at a Glance Report warned that obesity in the UK has increased by 92% in the past two decades. Two-thirds of the UK’s adult population are overweight and 27% have a body mass index (BMI) of 30 and above, which is the official definition of obesity. In 2017 there were 0.6m obesity-related hospital admissions in the UK, an 18% increase on the previous year. Each year, obesity cost NHS England in excess of US$10bn in treatment alone.
 
A 2018 World Health Organization (WHO) report suggests that obesity globally has almost tripled since 1975. In 2016, more than 1.9bn adults, 18 years and older, were overweight. Of these over 650m were obese. According to a 2018 WHO report on childhood obesity 41m children under the age of 5 were overweight or obese in 2016 and over 340m children and adolescents aged 5-19 were overweight or obese.
Bad diets
 
Diets in the UK, and in most wealthy advanced industrial economies, tend to have insufficient fruit and vegetables, fibre and oily fish and too much added sugar, salt and saturated fat. Rising consumption of processed food and sugary drinks are significant contributors to the global obesity epidemic. A typical 20-ounce soda contains 15 to 18 teaspoons of sugar and upwards of 240 calories. A 64-ounce cola drink could have up to 700 calories. People who consume such drinks do not feel as full as if they had eaten the same number of calories from solid food and therefore do not compensate by eating less. While healthy diets are challenging for most populations, low income levels and poor education are associated with less healthy diets.

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and

Weight loss surgery to treat T2DM
T2DM brief epidemiology

Almost 4.6m people in the UK and 30m Americans are living with diabetes:  90% of whom have T2DM. It is estimated that 12.3m people in the UK and some 70m in the US are considered pre-diabetic, which is when you have high blood glucose levels, but not high enough to be diagnosed with diabetes. The first WHO Global report on diabetes published in 2016 suggests that 422m adults (1 in 11) worldwide are living with the condition, which has quadrupled over the past three decades. The International Diabetes Federation (IDF) estimates that this figure will rise to 642m by 2040.  A further challenge is the undiagnosed. A December 2017 paper in Nature Reviews: Endocrinology suggests 46% of all cases of diabetes globally are undiagnosed and therefore at enhanced risk of complications. Until complications develop, most T2DM patients are managed within primary care, which constitutes a significant part of general practice activity. International data suggest that medical costs for people with diabetes are two to threefold greater than the average for people without diabetes.
 
T2DM treated but not cured

The most common therapy for T2DM patients who are overweight is metformin, which is usually prescribed when diet and exercise alone have not been enough to control your blood glucose levels. Metformin reduces the amount of sugar your liver releases into your blood and also makes your body respond better to insulin. Insulin is a hormone produced by your pancreas that allows your body to use sugar from carbohydrates in food that you eat for energy or to store glucose for future use. The hormone helps to keep your blood sugar levels from getting too high (hyperglycaemia) or too low (hypoglycaemia). Metformin does not cure T2DM and does not get rid of your glucose, but simply transfers your excess sugar from your blood to your liver. When your liver rejects your excess sugar, the medicine passes the glucose onto other organs: kidneys, nerves, eyes and heart. Much of your excess sugar gets turned into fat and hence you become overweight or obese. T2DM has long been understood to progress despite glucose-lowering therapy, with 50% of patients requiring insulin therapy within 10 years. This seemingly inexorable deterioration in control has been interpreted to mean that T2DM is treatable but not curable. Research briefly described in this Commentary suggests that T2DM can be beaten into ‘remission’, but it requires losing a lot of weight and keeping it off.
 
Reversing T2DM

Over the past decade a series of studies, led by Roy Taylor, Professor of Medicine and Metabolism at the University of Newcastle, England and colleagues from Glasgow University have explored the notion that losing weight could be the solution for controlling T2DM and lowering the risk of debilitating and costly complications.
 
Findings of a study in the December 2017 edition of the  Lancet, suggested that nearly 50% of people living with T2DM who had participated in a low-calorie liquid diet of about 800 calories a day for three to five months had lost weight and had reverted to a non-T2DM state. The study was comprised of 298 adults between 20 and 65 who had been diagnosed with T2DM within the past six years drawn from 49 primary care practices in Scotland and Tyneside in England. Half of the practices put their patients on the low-calorie diet, while the rest were in a control group and received the standard of care of anti-diabetic medicines to manage their blood glucose levels. About 46% of 149 individuals with T2DM who followed a weight loss regimen achieved ‘remission’, which the study defined as a HbA1c of less than 6.5% after one year. Only 4% of the control group managed to achieve ‘remission’. ‘Remission’ rather than ‘cure’ was used to describe the reversal of T2DM because if patients put weight back on, they may become diabetic again. Results improved according to the amount of weight lost: 86% of those who lost more than 33 pounds attained remission, while 57% of those who lost 22 to 33 pounds reached that goal.
 
Another paper by Taylor and his colleagues published in the October 2018 edition of Cell Metabolism, examined reasons why substantial weight loss - (15kg) in some patients - produces T2DM remission in which all signs and symptoms of the condition disappear, while in other patients it does not. Using detailed metabolic tests and specially developed MRI scans, Taylor observed that fat levels in the blood, pancreas and liver were abnormally high in people with T2DM. But after following an intensive weight loss regimen, all participants in the study were able to lower their fat levels. As fat decreased inside the liver and the pancreas, some participants also experienced improved functioning of their pancreatic beta cells, which store and release insulin, controls the level of sugar in their blood and facilitates glucose to pass into their cells as a source of energy. The likelihood of regaining normal glucose control depends on the ability of the beta cells to recover. But, losing less than 1gm of fat from your pancreas through diet can re-start your normal production of insulin and thereby reverse T2DM.
 
“The good news for people with T2DM is that our work shows that you are likely to be able to reverse T2DM by moving that all important tiny amount of fat out of your pancreas. At present, this can only be done through substantial weight loss,” says Taylor.

While a significant proportion of participants in Taylor’s study responded to the weight loss program and achieved T2DM remission, others did not. To better understand this, researchers focused on 29 participants who achieved remission after dieting and 16 who dieted but continued to have T2DM. Taylor and his colleagues observed that people who were unable to restart normal insulin production had lived with T2DM for a longer time than those that could. Individuals who had lived with T2DM for an average of 3.8 years could not correct their condition through weight loss, while those who had the condition for an average of 2.7 years were able to regain normal blood sugar control.

“Many [patients] have described to me how embarking on the low-calorie diet has been the only option to prevent what they thought - or had been told - was an inevitable decline into further medication and further ill health because of their diabetes. By studying the underlying mechanisms, we have been able to demonstrate the simplicity of T2DM and show that it is a potentially reversible condition. but commencing successful major weight loss should be started as early as possible,” says Taylor.
 
Click on Newcastle University to find out more information about reversing T2DM by weight loss.
 
Bridging the gap between science and policy

Taylor and his colleagues describe their research findings as “very exciting” because “they could revolutionise the way T2DM is treated”, but caution that a series of management issues will need to be overcome before their therapy becomes common practice. This includes, (i) familiarizing primary care doctors and T2DM patients with the treatment regimen, (ii) establishing a generally accepted standard for what actually constitutes “remission”. Taylor and colleagues recommend “remission” to be when a patient has not taken diabetes medicines for at least two months and then has two consecutive HbA1c levels, taken two months apart, which are less than 6.5%. Researchers also recommend that data on T2DM reversal rates should be routinely collected, stored, analysed and reported.

Notwithstanding, the ‘elephant in the room’ is the vast extent of diabesity, the eye-watering rate at which it is growing and the general ineffectiveness of policy makers and prevent programs to dent the burden. Research findings presented at the 2018 European Congress on Obesity in Vienna emphasize the magnitude of the problem. If current trends continue, almost a quarter (22%) of the world’s population will be obese by 2045 (up from 14% in 2017), and 12% will have T2DM (up from 9% in 2017). Findings also suggest that in order to prevent the prevalence of T2DM from going above 10% by 2045, global obesity levels must be reduced by 25%. The problem is no less grave at the national level. For example, in the UK, if current trends continue obesity will rise from 32% today to 48% in 2045, while diabetes levels will rise from 10.2% to 12.6%, a 28% rise. This is unsustainable. Here’s the challenge for policy makers.

To stabilise UK diabetes rates over the next 25 years at 10%, which is high and extremely costly, obesity prevalence must fall from 32% to 24%. Similarly, in the US, if current trends continue over the next 25 years, then to keep diabetes rates stable over the same period, obesity in the US would have to be reduced by 10%: from 38% today to 28%.
 
Takeaways

Taylor and his colleagues have delivered a simple and cheap solution to one of the biggest burdens of the 21st century. But unless there is effective strategy to implement this solution the four decades of research undertaken by Taylor and his colleagues will be wasted. Previous Commentaries have described the vast and crippling burden of diabesity and the failure of well-funded programs to make any significant dent in this vast and escalating burden, which is out of control. We have suggested, this is partly because, at the operational level, programs have tended to be predicated upon inappropriate, old fashioned, 20th century organizational methods and technology and focused on “activities” rather than “outcomes”. At a policy level, government agencies have systematically failed to slow the rise of processed food becoming the “new tobacco”.  Most UK endeavours to reduce the burden of diabesity are like putting up an umbrella to fend off a tsunami. This must change if we are to harness and effectively deploy the research findings of Professor Taylor et al.
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5 years, 11 months ago

WeDoctor’s impact on global healthcare

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WeDoctor
  • Experienced Western healthcare professionals have little knowledge of WeDoctor a Chinese internet healthcare start-up positioned to have a significant impact on global healthcare systems over the next decade
  • Founded in 2010 and backed by Tencent, a US$0.5trn Chinese conglomerate, WeDoctor has grown rapidly to become an influential US$6bn enterprise
  • WeDoctor bundles services AI and big data strategies into smart devices to help unclog China’s fragmented and complex healthcare system and increases citizens’ access to affordable quality healthcare
  • WeDoctor has expanded its franchise outside of China and has global ambitions to become the “Amazon of healthcare”
  • Is WeDoctor an exemplar for Western healthcare providers?
 
WeDoctor’s impact on global healthcare

The speed and scoop of technological change is forcing traditional healthcare providers to move beyond the comfort of their production models, embrace services and develop smart devices, which support customer-centric, value-based, data driven strategies. To illustrate this shift, we describe a Chinese internet healthcare start-up WeDoctor, which is having an impact on re-engineering China’s overly bureaucratic, fragmented and complex healthcare system and is positioned to influence the delivery of value-based healthcare services globally in the next decade.
 
In this Commentary

This Commentary describes WeDoctor and some of its recent activities to expand its influence and market share. Three things of note:

  • The partnerships that WeDoctor has developed with payers and providers, which are different to conventional transaction-based contracts
  • WeDoctor’s pragmatic approach to evolving technologies, which differentiates it from Western technology companies entering healthcare markets
  • WeDoctor might be considered as an exemplar and its strategy copied by Western companies. Because most giant Western technology companies are banned in China, local firms have stopped copying Western counterparts and innovate. This has resulted in many Chinese apps and services being better than their Western rivals. For example, Huawei’s mobiles outperform Apple’s, and China is ahead on 5G, mobile money and artificial intelligence. In 2016 the US technology publication Wired ran a cover story entitled: “It’s Time to Copy China”.
Smart Clinics

Imagine going to your primary care physician and, within a 15-minute consultation, receiving up to eleven tests, which include analysing your blood and urine, taking your blood pressure and measuring the electrical activity of your heart; and all the tests being delivered by a small portable all-in-one diagnostic device weighing just 5 kilos (11Ibs) and situated on the table of your doctor’s consulting room.

Imagine further that your test results are returned in minutes rather than days or even weeks and uploaded to your cloud-based electronic medical record to be reviewed in real time by your doctor. Simultaneously, your data are anonymously merged with similar information collected from millions of other patients and stored in a cloud file embedded with AI, in the forms of machine learning and cognitive computing, which complement and enhance the capabilities of your doctor. Your physician plays a key role in interpreting your test results and providing you with a diagnosis and treatment options as well as giving you an essential human touch of reassurance and guidance. Notwithstanding, as soon as you leave your doctor’s office, your mobile phone will suggest smart ways to monitor and manage your condition remotely. Information about your condition will appear on your social media feeds, you will also receive prompts for treatments, alerts about health supplements and suggestions about appropriate insurance policies. Currently, no amount of money can buy such a service in advanced wealthy Western economies, but it is a lead device of WeDoctor, which is available in rural China and in other emerging countries. According to Frost and Sullivan, a consultancy, the China market alone for remote diagnostics is currently estimated to be US$2bn and projected to grow to US$28bn in 10 years. WeDoctor’s  near-term goal is to capture a significant share of this market and help re-engineer China’s healthcare system by nudging individuals with the right piece of information at the time to maintain their health. This makes the device valuable to patients, healthcare providers and payers.
 
Reverse innovation
 
It seems reasonable to assume that, in addition to being useful in China and other emerging countries, WeDoctor’s all-in-one diagnostic device is well positioned to help enhance primary care practice in developed Western nations by a process of ‘reverse innovation’. This refers to a strategy where a product offering, which is specifically developed for emerging countries is subsequently successfully marketed in developed wealthy nations. It is particularly relevant to healthcare systems, which are universally challenged to deliver high quality outcomes with increasingly scarce resources. The strategy was formalized in a paper entitled, ‘How GE is Disrupting Itself’, which was published in the October 2009 edition of the Harvard Business Review (HBR), and subsequently expanded into a book published in 2018 entitled, ‘Reverse Innovation in Healthcare: How to make value-based delivery work’.
 
In the early 2000s, General Electric (GE) took an affordable, high quality portable ultrasound device, which it had developed for the Chinese market and successfully marketed it in the US and elsewhere. GE found that ‘affordability’ and ‘portability’ were universally valued healthcare factors. Jeffrey Immelt, then chairman and CEO of GE and one of the authors of the 2009 HBR paper, challenged other multinationals, “to see innovation opportunities in emerging markets in a new light”. Reverse innovation was more widespread than Immelt first thought and over the past decade the strategy has become a significant part in the armoury of many multinational corporations. Although the strategy is relevant for value-based healthcare,it is rarely practiced by Western healthcare providers.
 
The starting point for reverse innovation healthcare strategies is emerging markets where the rapid growth in the demand for quality healthcare outstrips the development of resources and infrastructure. This creates significant opportunities for Western companies with smart solutions to common healthcare challenges. Similar to GE’s portable ultrasound device, WeDoctor’s smart all-in-one diagnostic device, in time, could be marketed in developed regions of the world where healthcare systems are struggling to improve patient outcomes while reducing costs.
 
WeDoctor’s pragmatism

WeDoctor, founded by Liao Jieyuan an AI specialist, is backed by Tencent, which is one of the world’s largest technology and internet companies with a market cap of US$0.5trn and a mission to enhance the quality of life through the development and global distribution of emerging technologies. WeDoctor has a market cap of US$6bn, an established network in China of some 240,000 doctors, 2,700 large premier hospitals, over 15,000 pharmacies in 30 of China’s 34 provinces and about 160m platform users and joins a growing contingent of technology companies with a mission to change the healthcare industry, which to-date has resisted online disruption.
 
Notwithstanding, there is a significant difference between giant Western technology companies who have entered healthcare markets and WeDoctor. While the former have tended to invest heavily in aspirational projects such as unravelling the medical mysteries of anti-ageing, and AI systems to replace clinicians, WeDoctor has been more pragmatic and focused on making money by unclogging bottlenecks in the Chinese US$1trn healthcare market. Although Liao is an AI expert and WeDoctor is a significant user of AI, Liao believes, “AI won’t replace doctors, but will become an important tool for doctors to help improve their efficiency and accuracy”. WeDoctor has a practical mission: to enhance access to quality medical resources, improve patient outcomes and reduce costs. Indeed, Liao founded WeDoctor simply to help people book physician appointments, which is challenging in China. Chinese primary care practices are underused due to the poor distribution of resources, a lack of reputable practitioners and the nation’s relatively low number of doctors per capita. Further, waiting times to see a hospital specialist are long and patients reportedly have to pay significant amounts of money to middlemen to secure appointments.
 
AI healthcare systems are more challenged in the West than in China
 
In 2017, the Chinese central government released a plan to become the world leader in AI by 2030, aiming to surpass its rivals technologically and build a domestic industry worth almost $150 bn. WeDoctor and other Chinese healthcare providers are mindful that AI is a transformative technology for healthcare partly because of its ability to recognise patterns in vast amounts of data and to detect and quantify biomarkers in non-solid biological materials. Jamie Susskind, in his book Future Politics, published in 2018, suggests that doctors consulting both medical and legal big data banks in support of diagnoses and treatments, will become as commonplace as  consulting standard images such as MRIs or X-rays. And if such data banks are not consulted it will be considered negligent.  
 
WeDoctor’s AI systems hold out the prospect of delivering rapid diagnoses, efficient triage, enhanced monitoring of diseases, improvements in personalized care and making medicine safer. Notwithstanding, a limiting factor in the use of AI systems in healthcare generally is neither investment nor the technology, but the ability to amass vast amounts of reliable personal and genomic data. This is a bigger challenge in the West than in China. More robust privacy legislation, higher levels of security and broader-based ethical concerns in the West are substantial obstacles. A significant advantage of WeDoctor is the freedom in China to collect, store, analyse and use patient, personal and genomic data on an unparalleled scale. China has yet to establish laws to protect such personal information and is systematically building health profiles on its 1.4bn citizens, which, together with Beijing’s commitment to AI, will provide scientists in China a significant advantage to lead and dominate life sciences over the next decade.
WeDoctor is one of several similar start-ups
 
WeDoctor is just one of several recent Chinese online start-ups employing evolving technologies to improve China’s healthcare system. Another is Good Doctor, which is an offshoot of the Ping An Insurance Group, a financial giant with a US$181bn market cap, annual revenues of US$142b and 343,000 employees. Both start-ups compete to build smart clinics in rural China.
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Can Western companies engage with and benefit from China?
WeDoctor endeavours to extend its franchise

In addition to its smart diagnostic device, WeDoctor has leveraged Tencent’s substantial expertise and resources in mobile, AI and cloud-based technology to develop a significant customer-focused retail prowess and is rapidly developing a range of services for healthcare providers and manufacturers of medical devices. This positions the company well to have a significant near-term impact on Asia’s healthcare systems. In 2018 alone, WeDoctor has strengthened and extended its franchise by entering into a number of partnerships with a range of healthcare stakeholders, which include insurance companies, specialist in the procurement and distribution of medical devises and also investment companies interested in improving the physical infrastructure of southeast Asian healthcare systems. We describe some of these partnerships, which enable WeDoctor to consolidate and expand its market position both in China and internationally and suggest that Western healthcare providers should be considering similar partnerships to help them make the product to service shift.
 
WeDoctor and the AIA insurance group

In May 2018, WeDoctor formed a strategic alliance with the AIA Group, which is the largest public listed pan-Asian life insurance group with customers in China and across the Asia-Pacific region. WeDoctor and AIA are aligned in their ambition to partner with consumers in China and across southeast Asia to provide innovative quality healthcare and wellness offerings and financial protection solutions. The partnership provides WeDoctor with preferred access to AIA’s customer base and thereby strengthens and enlarges its networks and strategies to deliver affordable, digitally-enabled personalised healthcare offerings. AIA becomes WeDoctor’s preferred provider of life and health insurance solutions and gains access to its 160m registered users. According to Liao the partnership, “leverages AIA’s long history and extensive operations across the Asia-Pacific region . . . and is crucial to meeting the diversified life and health insurance requirements of our growing user base as we look to anticipate users’ needs, through our platform’s expanding functionality and our mission to transform healthcare through technology. This partnership not only helps us to cement our position as the premier technology-enabled healthcare solutions platform in China but also supports us as we expand our international presence in the years to come”.  
 
WeDoctor and China’s IVF market

Also, in May 2018, WeDoctor made a strategic investment in Reproductive Healthcare,a new in-vitro fertilisation (IVF) group, which was formed by a merger between two of Hong Kong’s largest and most reputable IVF practices. This was WeDoctor’s first investment outside of Mainland China and represents a significant milestone for the implementation of its international strategy. The new company provides a comprehensive range of IVF services, which include intra-uterine insemination, frozen-thawed embryo transfer and egg freezing services for China and the Asian region. The new company’s established frozen embryo services benefit from findings of a paper published in the January 2018 edition of the New England Journal of Medicine, which suggest that pregnancy and live birth rates are similar among women who use fresh or frozen embryos.
 
WeDoctor and its expanded international IVF market
 
In August 2018 WeDoctor, entered into an agreement with the Mason Group and Aldworth Management to acquire an 89.9% stake in Genea, Australia's leading provider of integrated advanced assisted reproductive technology (ART) services. Headquartered in Sydney, Genea has over 400 employees and is a leading international fertility group with a 30-year track record and a significant presence in New Zealand and Thailand as well as Australia. The company offers a comprehensive range of ART services, including IVF, egg and embryo freezing, genetic testing, sperm banking, day surgeries and pathology. Genea has developed proprietary technologies, including culture media and embryo transfer catheters, which are used in more than 600 clinics across 60 countries and is the only ART platform, with both services and technology, in the industry worldwide. The agreement strengthens both WeDoctor’s international strategy and its ability to increase its share of China’s US$2bn and fast-growing IVF market. WeDoctor also is targeting a bigger share of the outbound Chinese IVF medical tourism market, which in 2017, grew approximately 40% year-over-year to approximately US$151m. According to Grand View Research, the global IVF market in 2017 was valued at about US$15bn and is expected to grow at a CAGR of around 10%.
 
WeDoctor is China's first smart medical supply chain solutions and procurement company
 
In July 2018, WeDoctor entered into a joint venture (JV) with IDS Medical Systems Group (idsMED Group), to form idsMED WeDoctor China Ltd. This is China's first smart medical supply chain solutions and procurement company and is positioned to transform China’s fragmented, multi-layered and relationship-driven medical device distribution systems.
 
idsMED is a leading Asian medical supply chain solutions company specialising in the distribution of medical devices and consumables, clinical education and hospital design and planning. It represents over 200 global MedTech companies and has extensive Asia Pacific distribution networks with access to over 10,000 healthcare institutions. The company has 1,600 employees, including 700 experienced field sales, product and clinical specialists and 300 professional bio-medical engineers providing installation and maintenance services.
 
The JV, owned 51% by WeDoctor and 49% by idsMED Group leverages the respective companies’ strengths, innovative resources and networks to procure medical devices and services centrally by connecting global manufacturers directly to China’s hospitals and healthcare providers. The JV will further enhance WeDoctor’s value proposition by managing and optimizing China’s entire medical supply chain, which until now has been fragmented, overly bureaucratic and complicated. In addition, idsMED WeDoctor will set up medical education and training academies throughout China to deliver and promote medical devices and clinical education as well as accredited medical training courses for doctors and nurses.
 
WeDoctor & Fullerton
 
In September 2018 WeDoctor entered into a strategic partnership with Fullerton Health a Singapore-headquartered healthcare service provider. The alliance is, “In line with WeDoctor’s international growth strategy and will extend our reach and facilitate our development in Asia,” said Jeff Chen, WeDoctor’s Chief Strategy Officer. The JV provides WeDoctor access to Fullerton Health’s 500 healthcare facilities and its network of over 8,000 healthcare providers across eight Asian pacific markets. Fullerton Health benefits from WeDoctor’s footprint in China and broadens its patients’ access to online healthcare consultations. In the near term, both companies aim to broaden their reach in the corporate healthcare service market by opening onsite medical centres for businesses across China. In addition, the partnership plans to create about 100 primary care and specialist outpatient facilities.
 
Takeaways

Healthcare has become digital and global and long ago, the geo-political axis of the world has moved East. To remain competitive, Western healthcare providers must increase their knowledge and understanding of initiatives in China and southeast Asia, be prepared to transform their strategies and business models and engage in partnerships with a range of healthcare stakeholders, complementary enterprises and start-ups in emerging nations.
 
Two of China’s largest healthcare challenges are the uneven distribution of its services and its vast and escalating costs. The nation has an underserved primary care sector and the most qualified and experienced doctors are concentrated in a few premier mega-city hospitals, which account for 8% of the total number of medical centres but handle 50% of the nation’s outpatient visits. These challenges are not unique to China but experienced by healthcare systems throughout the world.

WeDoctor is an exemplar of how such universal healthcare challenges might be improved by a combination of evolving smart technologies and strategic partnerships with a range of healthcare stakeholders. As MedTech companies continue to transform their business models to increase customer-centricity, the types of partners they need to engage will only expand. In a rapidly moving market, keeping abreast of these potential collaborators is critical.

Another takeaway is that WeDoctor does not use AI and big data technologies to resolve the mysteries of medicine, but to increase access to healthcare, improve diagnoses, enhance patient outcomes and lower costs. The company also is increasing the effectiveness and efficiency of healthcare providers by simplifying and centralizing procurement processes of medical devices and pharmaceuticals.
 
Once WeDoctor has helped to improve China’s healthcare infrastructure, the nation would have amassed the world’s largest personal, medical and genomic data base of its citizens. WeDoctor will then be well positioned to turn its formidable AI prowess to accelerating R&D in lifesciences, improving the accuracy of early diagnoses, enhancing the monitoring of devastating life-threatening diseases and improving personalized care.
 
WeDoctor is an exemplar for Western MedTech companies.
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6 years ago

Is social media an accelerant for life-threatening eating disorders?

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anorexia
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thin ideal
  • Life-changing eating disorders are increasing, and their causes are assumed to be more about emotional and psychological challenges than food
  • For 60 years the global fashion industry has encouraged teenage girls and young women to emulate an unrealistic ‘thin ideal’ body image
  • As social media became the principal means for young people to communicate and receive information, so billions of fashion advertising dollars migrated to social media to propagate the ‘thin ideal’  
  • Although nearly a third of the world’s population participate in social media and a significant proportion are “extreme” daily users, the mechanisms of social media and their effect on young peoples’ mental health are not fully understood
  • Notwithstanding, there is a growing body of evidence suggesting that the more time people spend on social media the greater is their likelihood of developing mental ill-health and eating disorder

Is social media an accelerant for life-threatening eating disorders?
 
A May 2018 Brooking’s Institute research paper suggested that social media has become a significant mechanism for spreading and reinforcing misinformation - fake news - which can influence and disrupt democratic political processes and thereby are a threat to 21st century democracy.  Similarly, we contend that misinformation about body images, diets, lifestyles and beauty distributed on social media could be an accelerant for teenage and adolescent girls to engage in life-changing disordered patterns of eating to achieve an unrealistic body image.
 
A September 2018 report by Sky News UK suggested that entities, which actually promote eating disorders and unhealthy and dangerous attitudes towards food and body image were not picked-up by Instagram, an online photo-sharing app with 1bn active monthly users. Daniel Magson, vice chair of Anorexia & Bulimia Care, a charity, suggested that Instagram is "not a safe space” because it hosts communities, which promote, “the best ways to injure or self-harm,” and recommend “the best places to dine with private toilets for afterwards”.
 
A 2017 survey of 1,500 14 to 24 year-olds in the UK carried out by the Royal Society for Public Health (RSPH) rated Instagram the worst social media site for young people’s mental health, and suggested that, "social media may be fuelling a mental health crisis" in young people. Shirley Cramer, the CEO of the RSPH, said: "It's interesting to see Instagram and Snapchat (another photo sharing app with 191m active daily users) ranking as the worst for mental health and wellbeing; both platforms are very image-focused.” Instagram is addressing the issue and recently announced that it is doubling the number of people working across safety and security teams for Facebook and Instagram to 20,000 by the end of 2018, which includes a team of 7,500 content reviewers (Facebook acquired Instagram in 2012 for US$1bn, 18 months after its launch).
 
In this Commentary

This Commentary:
1. Describes common eating disorders
2. Provides a brief analysis of the incidence, distribution and determinants of eating disorders
3. Explains the genesis of the ‘thin ideal’ and how it has become an unrealistic body image, which the fashion industry encourages young people to emulate
4. Provides a short historical description of Western social media and notes that although it has rapidly become a global phenomenon the mechanisms that drive it are not widely understood
5. Explains some of the hidden mechanisms how social media may affect a user’s perceptions of themselves and influence their behaviour
6. Provides a brief selective summary of the growing body of research, which reports “extreme” use of social media by teenager girls and young women and the rise in incidence rates of mental ill-health and eating disorders in this cohort
7. Describes how the fashion industry was quick to realise the significance of social media as a cost-effective means to influence the opinions and purchasing behaviour of teenage girls and young women and shifted billions of marketing dollars away from traditional content providers to social media platforms to promote the ‘thin ideal’
8. Suggests that longitudinal studies are necessary in order to increase our understanding of the association between multifaceted eating disorders and social media
9. Concludes that social media was a communications revolution that promised to increase interactions and flows of information and knowhow between millions of dispersed people and lower cultural, religious and regional divides. On one level it achieved this. But as social media developed and was better understood, so it was realized that social media could also be used as an agent for misinformation – fake news - and to encourage discordant behaviour. And therefore, social media could become an accelerant for mental ill health and life-threatening eating disorders.
 
1
Eating disorders
 
Almost everyone worries about their weight occasionally. Abnormal eating disorders are when individuals take such concerns to extremes and obsessively focus on their weight, body shape and food and this can threaten their health, emotions and their ability to function in important areas of life. The most common eating disorders are: (i) anorexia nervosa, which is a serious, potentially life-threatening illness where individuals often equate thinness with self-worth; think they are fat even when they are dangerously thin, and restrict eating to the point of starvation, which leads to extreme weight loss and a low body mass index (BMI) 2, (a BMI of between 18.5 kg/m2 and 24.9 kg/m2 is considered a healthy range for young women); (ii) bulimia nervosa: is when individuals eat excessive amounts of food, then purge, which may include self-induced vomiting, abuse of laxatives, diuretics, diet pills, appetite suppressants or other stimulants; and (iii) binge eating, which is when individuals regularly eat too much food (binge) and feel a lack of control over their eating, but they do not purge. Two further eating disorders, which are growing in significance, but as yet, are not officially recognised as medical conditions are orthorexia and drunkorexia. The former is when individuals want to live healthier lives by eating well, but then get so obsessed with “healthy” food that they become unwell and socially isolated. The latter is a condition where individuals use extreme weight control methods as a means to compensate for planned binge drinking.
 
2
Epistemology

Before 2000 the overall incidence rates of eating disorders were relatively stable for a few decades. But following the introduction and spread of social media there was a hike in the incidence rates, especially among Western teenage girls. However, it is not altogether clear whether this is due to an increase in eating disorders or the result of more effective diagnoses and a greater awareness of the conditions.

The US National Eating Disorder Association, estimates that there are some 70m people worldwide with eating disorders and about 30m in the US. A 2017 US National Institutes of Health report suggests that between 2001 and 2003 the lifetime prevalence of anorexia nervosa in American adults was 0.6%, and 3-times higher among females (0.9%) than males (0.3%). The prevalence of bulimia nervosa was 0.3%; 5-times higher among females (0.5%) than males (0.1%), and the overall prevalence of binge eating was 1.2% and twice as high among females (1.6%) than males (0.8%).

A 2013 report from the UK’s Joint Commissioning Panel for Mental Health suggested that there are over 1.6m people in Britain with eating disorders, but this is likely to be an underestimate since a significant proportion of people with such disorders do not seek help. The UK’s Department of Health suggests that a more likely figure is about 4m. Information provided by The Priory, a private hospital group specialising in mental health, suggests that 1% of all women aged between 15 and 30 in the UK are affected with anorexia nervosa, 40% of people with eating disorders suffer from bulimia, and the people most affected with eating disorders are females between 11 and 25.
 
The exact causes of eating disorders are not well established, but a significant body of opinion suggests that they are not about food, but more to do with unhealthy and sometimes life-threatening ways to cope with emotional problems. In parallel with these psychological explanations there is research to suggest that eating disorders have either genetic or biological causes associated with 2-way communications between the gut and the brain through both nerve connections and biochemical signals. A recurring theme shared by people with all types of eating disorders is an expressed or implied dissatisfaction with their body image and their aspiration to achieve the “thin ideal”, which is a concept that has been propagated by the fashion industry for the past 60 years.
 
3
The thin ideal
 
Over time what has generally been accepted as a beautiful body has changed. In recent history, the biggest change occurred in the I960s when thinness and the absence of a figure became a body image propagated by the global fashion industry as an ideal for teenage girls and young women to emulate. This was personified by Lesley Lawson, an English model known as “Twiggy”, who had a slim androgynous look and a body mass index (BMI) of 15 kg/m2, (a BMI under 18.5 kg/m2 is considered malnourished). Twiggy replaced the notion of a beautiful woman as full-figured and gave birth to the “thin ideal”.  In the 1970s diet pills and amphetamines became widely used to suppress appetite in order to cultivate the thin ideal. The 1980s was the decade of the supermodel when the thin ideal became even thinner, and about the same time anorexia nervosa began to receive mainstream medical attention. Notwithstanding, in the 1990s the ideal body for young women became an extremely thin look with big breasts, and by the end of the 90s the fashion industry propagated a “heroin chic” look, which was characterised by a skeletal body, emaciated features, androgyny, red lips and dark circles under the eyes. Thus, for the past six decades the body shape of the “most admired” models, which fashion advertising encouraged young girls to emulate, has remained consistently slimmer than that of the average western woman. However, at the end of the 1960s there was a “hippie” era when, for a relatively short period, a more full-figured look returned, and more recently there have been movements towards a more realistic standard of beauty. Notwithstanding, the thin ideal persists and continues to affect teenage girls and young women who emulate this unrealistic body image and become preoccupied with their weight and size, which some control by various unhealthy means and this results in anxiety, negative body image and dieting to below their natural body weight.
 
4
Social media

Over the past decade, as social media has become the primary means by which young people communicate, share and receive information, so the fashion industry has increasingly used social media to propagate the thin ideal. Social media is comprised of a collective of websites and applications, which enable users to create and distribute content and to interact and collaborate with friendship groups. Social media’s power and influence is significantly related to the number of users, its penetration and the regularity of usage. By the end of 2019 it is projected that there will be around 2.77bn social media users worldwide and 3bn by 2021, which equates to about a third of the world’s population. Social media’s global penetration is increasing: in 2017, 71% of internet users were social media users. Recent studies - see section 6 below - suggest that there is an increasing proportion of “extreme users” who spend up to 8 hours a day on social media.
 
A brief history of social media

Here we provide a brief and partial history of Western social media platforms. Social media started in 1997 with Six Degrees, which was an online platform that enabled users to upload their profile and share it with friends. MySpace followed in 2003 and was acquired 2 years later by News Corporation for US$0.58bn. At its peak in 2008, MySpace was the world’s most visited social media site with 76m unique monthly visitors. LinkedIn, a business and employment networking platform was also founded in 2003 and today has some 0.5bn registered members in 200 countries, 106m of whom are active. Facebook launched in 2004, has become the world’s most widely used social media platform with some 2.23bn active monthly users. 76% of Facebook users are female. In 2012 it was estimated that 83m Facebook accounts were bogus, (for relevance see discussion on ‘social bots’ in section 5 below). YouTube founded in 2005, is a global video sharing platform featuring a wide variety of user generated and corporate media content and is now the world’s 3rd most visited site after Google, the world’s most used search engine. Every minute some 400 hours of video are uploaded onto YouTube, each day people watch 1bn hours of videos, more than half are watched on a mobile device and the average viewing session lasts 40 minutes. Reddit, founded in 2005, is a social media forum where content is socially curated and promoted by users through voting. It was acquired by Condé Nast in 2006 for an undisclosed amount between US$10 and US$20m but is now independent. As of February 2018, Reddit had 542m active monthly visitors. Twitter, an online news and social networking site launched in 2006 has some 328m monthly active users. Tumblr, founded in 2007 and acquired in 2013 by Yahoo! for US$1.1bn, is a microblogging and social networking website. As of 2017, Tumblr had almost 738m unique visitors globally and generated over 148bn posts. Instagram a photo and video-sharing social media network was founded in 2010, acquired by Facebook in 2017 for US$1bn, and has 1bn monthly active users. Snapchat, a multimedia messaging app launched in 2011 has some 188m active daily users sharing over 400m photographs every day. Facebook, Instagram and Snapchat are the most popular social media sites.
 
5
Hidden mechanisms that drive social media

Human biases
Social media encourages users to constantly compare and judge their bodies with that of the thin ideal of “friends” and “celebrities” they follow. Cyberbullies and body shamers, can relatively easily use social media to infiltrate an individual’s private space and daily life. They may then constantly post information, which can affect that individual feeling inadequate about themselves and their body image. Social media postings can be 'shared', 're-tweeted', 'liked', copied and end up 'going viral'.  Where a posting is defamatory, the damage done can be significant.  Cyberbullying is a form of wilful and repeated harm, which is inflicted through the use of social media and is often directed at a user’s body image and appearance. Shamers are people who use social media to publicly mock or criticize someone for a particular aspect of their appearance or behaviour and makes them feel either humiliated or ashamed.

Females under 25, are predisposed to perceive what they see on social media as reality despite the fact that many images could have been altered and information might be fake. Social media differs from traditional mediabecause it is a distributor of content and not a publisher. This means that social media platforms are not regulated in the same way as traditional media outlets, which suggests that misinformation can be spread unimpeded. Individuals tend to pay more attention to information that supports their previously held beliefs and are more prone to share such information even if it is false. Further, individuals have different tolerance levels towards the ambiguity of information and have an innate desire to minimize uncertainty. Social media provides a means to do this. Users can use the “like”, sharing and friendship functions to give precedence to information that accords with users’ perceptions of self, body image and beauty etc. This tends to narrow the scope of information, which individuals receive, and therefore users of social media are often unaware of competing perspectives. Thus, social media can have the effect of segregating people into virtual communities of likeminded individuals, which makes them potential targets of specific marketing endeavours seeking to influence their behaviour.

Social media and Al
The behaviour of social media users is also influenced by deep learning algorithms. Originally social media used artificial intelligence (AI) to forward information chronologically. Now algorithms are taught to identify information, which already has significant engagement among friendship groups and then to distribute that information to millions of like-minded users, who, in turn share it with their friendship groups, which then is identified again by algorithms and distributed even further and so on and so forth. This creates a significant ‘cycle of influence’, which can be used to effectively spread messages and body images to people predisposed to such information and is a gift to marketers who can use such mechanisms to influence peoples’ beliefs and behaviours at zero cost. Marketing firm Tribe Dynamics has developed a metric called “Earned Media Value” (EMV), which measures the marketing revenues saved through such social media promotional endeavours. It seems reasonable to suggest that such cycles of influence could transform social media platforms into agents for establishing and confirming user biases towards body images, diets and lifestyles just as fake news can influence peoples’ political beliefs and behaviours.
  
Social bots
Bots are automated software applications. Social bots, with fake identities, control social media accounts and trick legitimate users that they are real human beings and they then automatically generate and spread images and information at a much higher rate than any human. This can significantly affect users’ opinions and behaviours. Although illegal, social bots are provided as a service by marketing companies. Celebrities use them to boost their social media images and make them appear to have many more followers than they actually do; and this can legitimize them being social influencers.  Social bots are most common on Twitter, but they are also used on other social media platforms. For instance, as mentioned above, Facebook is reported to have some 83m fake accounts. What differentiates social bots from other forms of malware is the fact that they specifically exploit social media’s trust factor to join networks and friendship groups so that they can influence users’ opinions and behaviours. Social media platforms are beginning to employ neural networks to identify social bots and close them down, but still they persist.
 
Users’ naivety
A significant proportion of social media users do not understand the hidden mechanisms used to influence an individual’s opinions and behaviours. While most social media users understand that not all information they find online is truthful, a  2018  study by the UK government’s telecommunications regulator Ofcom suggests that 10% of social media users do not think about whether the “factual” information they find is truthful, and 23% do not make any checks on the trustworthiness of the content on social media. Although 54% are aware of how search engines are mainly funded, 18% give an incorrect response, and almost 28% do not know. Only 48% of search engine users are able correctly to identify advertising on Google, despite it being identified by a box with the word “Ad” in it, and just under 18% think that if something has been listed by a search engine it must contain accurate and unbiased information, although this figure has decreased since 2016, when 21% thought so.
 
6
The evidence

“Extreme” users
It is well-established that teenagers and young adults spend a significant amount of time on social media and increasingly less time with traditional media such as TV, magazines and newspapers. According to Statista, in 2017, the average daily usage of social media worldwide amounted to 135 minutes, up from 126 minutes in 2016. Teenagers and young adults in the US and UK spend an average of 170 and 180 minutes a day respectively on social media. The 2018 Ofcom report, mentioned above, suggests that 6% of British children between 12 and 15 are “extreme users” of social media and spend up to 8 hours a day online at weekends, and this could negatively affect their mental health. Findings further suggest that during the week 1% of this cohort spends more than 8 hours a day on social media, 4% more than 6 hours and 11% between 4 and 8 hours. The report concludes that social media use in the UK is almost universal: 98% of 16 to 24-year-olds use social media as do 96% of those between 25 and 54.

Eating disorders
A 2011 study by researchers from the University of Haifa, Israel, examined 248 young women between 12 to 19 and found that more exposure to social media contributed to higher rates of eating disorders and related concerns. Specifically, the more time they spent on social media, the more likely they were to struggle with “…bulimia, anorexia, physical dissatisfaction, negative physical self-image, negative approach to eating and more of an urge to be on a weight-loss diet.”

Mental ill health
A  July 2015 paper published in Cyberpsychology Behavior and Social Networking, suggests a significant correlation between time spent on social media and experiences of high levels of psychological distress and suicidal ideation. Findings show that students with poor mental health spend longer on social media. An association between time spent on social media and mental ill-health is also suggested in a 2015 US study by the non-profit group Common Sense Media. Based on a national sample of more than 2,600 young people aged between 8 and 18, findings suggest that teenagers are spending more than 9 hours a day using social media; and children between 8 and 12 nearly 6 hours a day; and that time spent on social media impacts their mental health.

A 2015 report from the UK’s Office for National Statistics suggests that children who spend more than 3 hours a day on social media are twice as likely to report ‘high’ or ‘very high’ scores for mental ill-health. These findings accord with a 2017 study undertaken by Emily Frith for the OECD entitled Social Media and Children’s Mental Health. Frith’s findings suggest that there is a significant correlation between time spent on social media and mental ill-health: 37% of British 15-year-olds are “extreme social media users” spending at least 6 hours a day online and this may have damaging mental health consequences. Further, 18% of extreme social media users in the UK were more likely to report being bullied, which is a contributory factor of mental ill-health.

Cyberbullying and eating disorders
A 2018 UK all party parliamentary inquiry into social media and cyberbullying found that cyberbullying is, “distinct and potent, particularly due to its potential to be relentless". . .and there is an, “association between the time children spend on social media and their emotional well-being . . . . . Children and young people who are currently experiencing a mental health problem are more than three times more likely to have been bullied online in the last year.” The Inquiry also suggests that, “There is a connection between intensive social media use and mental ill-health - 38% of young people reported that social media has a negative impact on how they feel about themselves, compared to 23% who reported that it has a positive impact. This was exacerbated for girls, with 46% of girls stating that social media had a negative impact on their self-esteem.” A 2015 report by the US National Eating Disorders Association found that, “65% of people with eating disorders say bullying contributed to their condition”.
 
7
The global fashion industry’s advertising dollars
 
The global fashion industry has a market value of about US$3trn, and employs some 116m people. In recent years, as traditional media declined and social media became the principal way people consumed and shared content, so marketing revenues shifted from traditional content providers to social media. This migration is aided by the increase popularization of mobile telephony and the increasing availability and affordability of mobile internet. eMarketer, a consultancy, estimates that in 2018 US marketers will spend some US$48bn on digital display ads. Social advertising in all formats is gaining traction and will be among the key drivers of digital advertising growth in the next five years. Social advertising revenue is expected to reach US$31bn by 2021, up from US$16bn in 2016.
 
8
More research needed

We have described some research, which documents the “extreme” use of social media by teenagers and young adults and the rise in incidence rates of mental ill-health and eating disorders. Also, we have described some studies that suggest a significant association between the two variables. Notwithstanding, establishing significance between complex eating disorders and social media remains challenging despite the fact that the incidence levels of eating disorders increased during the period of rapid social media growth. Challenges to establishing significance include: (i) a relative lack of deep understanding of social media and the global fashion industry, (ii) a relative lack of consistent data for long-term time series studies, (iii) the fact that over the past few decades the diagnostic criteria of eating disorders have changed, and (iv) research methods and access to patient mental health data have also changed.

We also have shown that the concept of the thin ideal has been propagated by a media driven celebrity culture over the past 60 years. We describe some of the “hidden” mechanisms and techniques used by social media to spread specific messages in order to influence users’ opinions and behaviours. These, together with: (i) the rapid spread and “extreme” usage of social media and (ii) the fact that billions of marketing dollars have shifted away from traditional media to social networks in order to influence opinions and behaviours, is evidence to suggest that social media could have a significant influence on impressionable young girls’ perceptions about themselves, their body images and encourage them to engage in disorderly eating to reduce their body weight to an unhealthy level.
 
9
Takeaways
 
Social media is a communications revolution, which promised unprecedented connectivity and the free flow of ideas and knowhow, which transcends cultural and geographic boundaries and brings greater choice and enhanced freedom to billions of people. There is no better illustration of its power and influence than the Arab Spring, in 2010 when social media was used to instigate the overthrow of numerous dictatorships in various regions of the world. For a short time afterwards, social media appeared to be the gateway to a new era for democracy and freedom of choice. However, none of the spontaneous uprisings fuelled by social media resulted in any discernible long-term benefits. As social media grew so did peoples’ knowledge and understanding of the phenomenon, and so grew concerns that social media could be a two-edged sword with the capacity to damage and harm as well as do good. Social media might well be an accelerant for life-changing eating disorders, but it still has to be proven.
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6 years ago

CRISPR-Cas9 genome editing a 2-edged sword

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bioethics
commentary
CRISPR
CRISPR technology
genome editing
incurable inherited diseases
  • CRISPR-Cas9 genome editing technology discovered in 2012 has revolutionized biological science and brought hope to millions of people born with incurable inherited killer diseases
  • In July 2018 the UK’s Nuffield Council on Bioethics endorsed the technology to make changes at the cell level in the human body that are heritable
  • This alarms bioethicists because there is no universally agreed regulation for CRISPR and the technology is cheap, easy-to-use and accessible and the line between “therapy” and “enhancement” is blurred
  • CRISPR was invented in the West but is rapidly being transformed into therapies in China where regulation is less than stringent
  • Will genome editing be used to enhance off-springs that satisfy parents’ preferences for children with specific characteristics?
 
 
CRISPR-Cas9 genome editing a 2-edged sword 
 

The genie is out of the bottle!
 
On the 17th July 2018 the UK’s Nuffield Council on Bioethics published a report entitled, Genome Editing and Human Reproduction: Social and Ethical Issues, which concluded that germline editing, a process by which every cell in the human body could be altered in such a way that the change is heritable, is “morally permissibly” under certain circumstances. The Council was referring to developments of an invention made in 2012 by scientists Jennifer Doudna, and Emmanuelle Charpentier. They discovered how to exploit an oddity in the immune system of bacteria to edit genes, which resulted in CRISPR-Cas9, (an acronym for Clustered Regularly Interspaced Short Palindromic Repeats), which is generally considered the most important invention in the history of biology. Since its discovery, modified versions of the technology have found a widespread use to engineer genomes and to activate or to repress the expression of genes. Clinical studies testing CRISPR-Cas9 in humans are underway.
 
In this Commentary

In this Commentary we: (i) describe CRISPR-Cas9 and indicate how it has impacted medicine, biotechnology and agriculture, but suggest that it is most famous for its potential to modify human embryos to provide therapies for inherited killer diseases for which there are no known cures, (ii) suggest that although the technology is gaining regulatory support for its use in humans, there is no universal regulatory agreement. Some countries remain opposed to using CRISPR to edit human embryos while in China regulations is less than stringent. This patchy and loose state of affairs raise concerns among bioethicists, (iii) describe a non-profit agency that has significantly increased the accessibility of the technology, which has helped to democratise CRISPR, but also makes it easier for less stringently controlled laboratories to acquire it, (iv) briefly describe the Chinese scientists first use of the technology in humans and some of the unintended consequences which resulted. We provide examples of research that followed and briefly describe the US-China race to transform CRISPR into viable therapies, and suggest that China, helped by laxed regulation, is winning the race, (v) suggest that these factors, plus the fact CRISPR blurs the distinction between ‘therapy’ and ‘enhancement’, seems to convince bioethicists that the technology at some point in the future will be used to create ‘designer babies’, (vi) conclude by noting that for millennia people have been using radical and painful methods to modify their own and their children’s bodies and this seems to suggest that in time, germline editing will be perceived as a logical extension of these customs and practices, the genie is out the bottle and customize children are likely to become the norm.
 
CRISPR-Cas9

CRISPR is a mechanism deployed by bacteria to identify the DNA of invading viruses and is used by scientists to target a specific gene. Cas-9 is an enzyme, which acts like a pair of molecular scissors to cut out a piece of DNA and, if need be, replace it with a new gene. The process is faster, cheaper and easier to use than traditional genetic modification and has been likened to editing a Word document on a computer. Thus, gene editing has been taken away from highly skilled and tightly regulated molecular biologists and made more widely available. This not only democratizes science but also heightens ethical concerns.
 
CRISPR technologies impact medicine biotechnology and agriculture
 
Since the breakthrough was made in 2012, CRISPR-Cas9 has quickly development into a powerful, cheap and accessible tool in genetics. The technology is programmable, efficient, precise and scalable and has driven significant advances across medicine, biotechnology and agriculture throughout the world. As the world’s population and average temperatures increase, the demand for larger, more nutritious harvests and climate-adaptable crops will grow. The application of CRISPR technology to agriculture allows for an efficient and accurate mode of genetic manipulation to meet these increasing needs. The technology also has been used in the fight against malaria. According to a 2018 World Health Organization report, in 2016 there were 216m cases of malaria worldwide and 445,000 deaths from the disease. Malaria is spread by the female Anopheles-gambiae mosquito, which is one of 3,500 species of mosquitoes. Scientists have used CRISPR technology to edit the genes of this specific type of mosquito to avoid the malaria causing parasite. In a study carried out at Imperial College London and published in the September 2018 edition of Nature Biotechnology researchers succeeded in destroying a population of trapped Anopheles mosquitoes by using CRISPR  technology to genetically alter cells  to spread a genetic modification that blocks female reproduction so, over time, the malaria spreading Anopheles mosquitoes die out. The research demonstrates how a specific CRISPR application can propagate a particular suite of genes throughout an entire population or species and empower scientists in the war against diseases. “It provides hope in the fight against a disease that has plagued mankind for centuries,” says Andrea Crisanti, lead author of the Imperial study.
 
But the one application, which has made CRISPR famous is the modification of the human genome, which promises to cure some of the world’s deadliest diseases for which there are no known therapies. There are some 10,000 genetic diseases of which less than 6% have approved treatments.
 
Regulatory support
 
CRISPR genome editing technologies have been gaining regulatory acceptance for their use in humans and an increasing number of scientists in the US, UK and China have reached conclusions similar to those of the Nuffield Council, and suggest that if germline editing is shown to be safe and there are no medical alternatives, it should be permitted to prevent children being born with fatal diseases. In 2017, the UK’s Human Fertilization and Embryology Authority approved an application to use genome editing, which allows scientists to change an organism’s DNA in research on human embryos. Also, in 2017 a report from the US National Academy of Sciences (NAS) stated that clinical trials for editing-out heritable diseases could be permitted in the future for serious conditions under stringent oversight. At the same time as the Nuffield Council published its findings, - July 2018 - the US Food and Drug Administration (FDA) Commissioner Scott Gottlieb announced a new regulatory framework for genome editing for rare diseases. The following month, - August 2018 - the FDA along with the US National Institutes of Health (NIH) issued joint guidelines for a new streamlined process for assessing the safety of gene-therapy human clinical studies.  And in an August 2018 New England Journal of Medicine editorial Gottlieb and NIH Director Francis Collins argue that, “there is no longer sufficient evidence to claim that the risks of gene therapy are entirely unique and unpredictable - or that the field still requires special oversight that falls outside our existing framework for ensuring safety.”
 
No international regulatory framework for CRISPR triggers concerns
 
Despite increasing support for genome editing, to-date no internationally agreed regulatory framework exists that addresses the ensuing scientific, socio-ethical and legal challenges CRISPR technologies pose for regenerative and personalised medicine. Regulation is on a country-by-country basis and most nations struggle to assess whether gene editing may or may not be different from classical genetic engineering. Several nations remain opposed to the use of the technology in humans. The most contentious issue is human germline editing.

In Canada human germline editing is a criminal offence and sanctions range from fines of US$400,000 and up to ten years imprisonment. However, there is mounting pressure from Canadian scientists to change the law. France restricts genome editing research and supports the Oviedo Convention, which is the first multilateral binding instrument entirely devoted to bio-law. It came into force in 1999, backed by the Council for Europe and aims to prohibit the misuse of innovations in biomedicine. The treaty states that, “An intervention seeking to modify the human genome may only be undertaken for preventive, diagnostic, or therapeutic purposes and only if its aim is not to introduce any modification in the genome of any descendants”. In Germany germline editing is constrained by its 1990 Embryo Protection Act, which prohibits the generation and use of embryos for basic research, and also prohibits the harvesting of embryonic cells. South Korea’s Bioethics and Biosafety Act prohibits genetic experimentation, which modifies human embryos. Western observers suggest that regulation in China is “thin” and tends to be at the provincial and hospital levels. It has been reported that Chinese hospital review boards have approved clinical studies involving gene-editing and cancer patients without fully understanding the nature and power of the technology.
The “dark-side” of CRISPR technology

Weak regulation raises concerns about the level of ethical conduct in clinical studies and the potential dangers this holds for future therapies. Cognisant of CRISPR’s powerful capabilities, its relative cheapness and accessibility, (see below) James Clapper, the former US Director of National Intelligence describes CRISPR-Cas9 gene editing in the 2016 and 2017 Agency’s Worldwide Threat Assessment reports submitted to the US Congress as, “a potential weapon for mass destruction”. Jennifer Doudna, one of the inventors of CRISPR-Cas9 says that there are things which you would not want the technology used for and, “most of the public does not appreciate what is coming”. These sentiments resonate with bioethicists concerned about the absence of stringent universal regulation and the technology getting into the “wrong hands” and resulting in “designer babies”, an escalation of societal inequalities and increased safety and biosecurity issues.
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The global competition to translate genomic data into personal medical therapies

PART 1
 

and

PART 2
 
 
Democratizing the CRISPR technology
 
Notwithstanding, many scientists view the ease of access to CRISPR technologies as a significant driver of cutting-edge research and the speed at which therapies for life-threatening diseases will enter clinics. The organization most responsible for CRISPR’s widespread accessibility is Addgene, a self-sustaining, non-profit plasmid repository, which facilitates the exchange of genetic material between laboratories throughout the world. (A plasmid is a small DNA molecule within a cell that is physically separated from a chromosomal DNA. It can replicate independently and is used in the laboratory manipulation of genes). It is free for scientists to deposit plasmids in Addgene and a nominal fee is charged for requests. This allows for maintenance and growth of the repository without reliance on grants or external funding. Founded in 2004, Addgene has significantly reduced the frustration scientists experience sharing plasmids with one another. The organization has developed into an important one-stop-shop for depositing, storing, and distributing plasmids globally and this has significantly enabled the democratization of CRISPR technologies. More than 6,300 CRISPR-related plasmids have been developed by over 330 academic laboratories throughout the world and deposited with Addgene. Since 2013, the organization has distributed over 100,000 CRISPR plasmids to some 3,400 laboratories in more than 75 countries. 
 
Mixed results when CRISPR was first used in humans
 
CRISPR technology was first used in humans in China, when a group of scientists led by Junjiu Huang from Sun Yat-sen University in Guangzhou, attempted to modify the gene responsible for β-thalassemia, a potentially fatal blood disorder. Although the genomes of human embryos edited by the scientists could not be developed into a foetus, the researchers had difficulties publishing their findings because of ethical concerns. After being rejected by the journals Science and Nature their paper was published in 2015 in the journal Protein & Cell. The work triggered an international debate, but the research had a low success rate: only 4 of the 54 embryos that survived the technique carried the repaired genes. Huang and his colleagues identified two challenges. One was unintended genetic modifications - off target effects - when CRISPR either changes a gene scientist did not want changed or it fails to change a gene that they did. The second was that embryos, which did not get edited correctly mixed with those that did and became what is referred to as a “mosaic”.  
 
New study discovers the deletion of thousands of DNA bases
 
Initially, these anomalies were thought to be minimal and improvements to the technique were thought to be able to reduce them so that they were virtually undetectable. Indeed, since 2015 the science of human genome editing has advanced significantly and there has been an explosion of research. In 2017 alone, there were some 3,500 research papers published on CRISPR technologies but concerns about CRISPR’s accuracy remain. During the past three years of intense research CRISPR-Cas9 became popularly perceived as a technique that can edit genetic code to correct defects inside individual cells and prevent and heal many intractable illnesses. Notwithstanding, also there has been a growing concern among scientists that because Cas9 enzymes reprogram the DNA of a cell, which is the fundamental building block for the development of an organism, the technique, if inaccurate, may cause more harm than good. Recent research supports this view. A study published in the July 2018 edition of  the journal Nature Biotechnology discovered deletions of thousands of DNA bases, including at spots far from the edit. Some of the deletions can silence genes that should be active and activate genes that should be silent, including cancer-causing genes. This suggests that previous methods for detecting off-target mutations may have underestimated their true scale and therefore the potential for unintended consequences when using CRISPR technologies might be higher than originally thought. This finding poses a significant challenge for developing policy associated with CRISPR because you do not know what off-target effects will occur in humans until you use the technology.
 
Who is developing CRISPR-Cas9 therapies?
 
Notwithstanding, CRISPR–Cas9 is fast entering mainstream R&D and is perceived as a principal technology for treating diseases with a genetic basis and is increasingly playing a significant role in drug discovery. Scientists use the technology to either activate or inhibit genes and can determine the genes and proteins that cause or prevent specific diseases and thereby identify targets for potential therapies. Notwithstanding, drug development is a long and expensive process: it can take more than a decade and cost some US$2bn for researchers to move from the discovery of a target molecule to the production of a clinically approved therapy.  So, it could be some time before the first drugs using CRISPR–Cas9 gene editing make it to the clinics. Notwithstanding, a lot has been achieved in a relatively short time.
 
Research examples

UK examples of research using CRISPR technology include scientists from the Huntington’s Disease Centre at University College London’s Institute of Neurology, who in 2017 completed the first human genetic engineering study, which targeted the cause of Huntington’s disease and successfully lowered the level of the harmful huntingtin protein that irreversibly damages the brains of patients suffering from this incurable degenerative condition.  In another study using CRISPR technology and published in a 2017 edition of the New England Journal of Medicine, researchers from Barts Health NHS Trust and Queen Mary University London  made a significant step towards finding a cure for haemophilia A, a rare incurable life threatening-blood disorder, which is caused by the failure to produce certain proteins required for blood clotting. 
 
Human clinical studies
 
Although CRISPR has proved its worth as a research tool, its use as a therapeutic is still uncertain. This is partly because the technology is so new there is a dearth of data upon which to base clinical evaluations. Notwithstanding, since Chinese scientists first used CRISPR to edit a human embryo's genome, new and more accurate variants of CRISPR have been developed. At about the same time - 2015 - that Huang published his findings using CRISPR for the first time in humans, two children with Acute Lymphoblastic Leukaemia, an incurable cancer, were treated at Great Ormond Street Hospital (GOSH) in London with a version of CRISPR called CAR-T cell therapy. This entails extracting blood cells from patients, then using CRISPR technologies to edit the T cells outside the body - ex vivo gene therapy - in order to transform the cells into enhanced cancer fighters before reintroducing them back into the patient’s blood stream. The treatment proved to be such a success that in 2018 CAR-T cell therapy was made available on the NHS. A US clinical study using the same technique started in August 2018 for people with Acute Lymphoblastic Leukaemia. 
 
Over the past three years scientists in China have used newer versions of CRISPR to genetically engineer cells of at least 86 cancer and HIV patients. These cases form part of eleven human clinical studies using CRISPR-Cas9 technologies, ten of which are being undertaken in China. Another development of CRISPR is ‘base-editing’, which chemically modifies rather than cuts DNA. An August 2018 edition of the journal Molecular Therapy, describes how scientists in China used  base editing, to remodel the DNA of human embryos to treat patients with the Marfan syndrome, which is a relatively common inherited connective tissue disorder with significant morbidity and mortality. A further milestone for the technology was reported 2018 when a study, led by Zheng Hu of the First Affiliated Hospital, Sun Yat-Sen University, Guangzhou, Guangdong, China, was the first to edit human cells while inside the body in an attempt to eliminate the human papilloma virus, which is the main cause of cervical cancer.
 
Company activity and clinical studies
 
Since the first publications in 2012 showcasing CRISPR-Cas9 as a gene editing tool, a number of companies have been set up to leverage the technology to develop innovative therapies. For example,  Editas Medicine, was founded in 2013 by Feng Zhang, Jennifer Doudna, David Liu, George Church, and J.Keith Joung. However, just a few weeks after the company’s formation, Doudna stopped all involvement with Editas after Zhang was granted a number of CRISPR patents and issues concerning intellectual property began to appear. In October 2018 Editas filed an Investigational New Drug (IND) application with the US Food and Drug Administration (FDA) for a clinical study of a CRISPR genome editing medicine called EDIT-101 for the treatment of Leber Congenital Amaurosis type 10 (LCA10). This is a serious eye disorder that affects the retina, which is the specialized tissue at the back of the eye that detects light and colour. People with LCA10 typically have severe visual impairment from infancy.

In 2018 the European Patent Office granted Cellectis, a French biopharmaceutical company, the first patent to use CRISPR technology in human T cells.The patent will protect the application of CRISPR gene editing for T cell research until 2034, meaning every other company employing similar systems will need a license from Cellectis. Also, in 2018 CRISPR Therapeutics, co-founded by Emmanuelle Charpentier began a clinical study using CRISPR genome editing technologies and a similar ex vivo approach to target the blood disorder β-thalassemia. As yet no CRISPR therapies have reached the clinic.
 
US-China competition
 
There is intense and growing scientific competition between the US and China. Although CRISPR was invented in the West, it is more rapidly being transformed in China into therapies that can be used in clinics. An article in a January 2018 edition of the Wall Street Journal suggests that regulation governing genome editing of human embryos in China is much less stringent than in the West where researchers have to pass muster with hospital review boards, ethics committees and government agencies before receiving approval. In China it is not unusual simply for hospital committees to give such permissions. According to Carl June, director of translational research at the Abramson Cancer Center, University of Pennsylvania and well-known for his research into T-cell therapies for the treatment of cancer, “We are at a dangerous point in losing our lead in biomedicine. It is hard to know what the ideal is between moving quickly and making sure patients are safe”. Western scientists believe that the less that stringent regulation in China gives Chinese researchers a significant competitive advantage in the race to get CRISPR therapies into clinics and bioethicists believe that loose regulation will result in unintended consequences that will harm patients and lead to “designer babies”, which could set-back the field for everyone.
 
Blurred line between therapy and enhancement
 
What makes regulation challenging is that CRISPR technologies blur the distinction between “therapy” and “enhancement”. Indeed, the 2018 Nuffield Council report referred to at the beginning of this Commentary suggests that such a distinction between therapy and enhancement cannot be expected to hold. Thus, it seems reasonable to assume that sometime in the future, CRISPR technologies, which are cheap, easy to use and accessible could be used to genetically enhance off-springs. In the first instance this solely might be focused on eradicating life-threatening diseases, but in the longer term it seems probable, especially in the absence of any universally agreed and tightly administered regulations, that genome editing will be used to create off-springs, which satisfy parents’ preferences for children with specific characteristics. Further, CRISPR technology is becoming popular among DIY scientists and biohackers – people who experiment on themselves - which exacerbates the concerns of bioethicists.
 
People have been radically altering bodies for millennia
 
Another reason to believe that germline editing will be used for ‘cosmetic’ enhancements rather than medical therapies is that for millennia people have used radical techniques to modify their own and their children’s bodies for cosmetic rather than therapeutic purposes. Here we illustrate the point with a few examples.
 
From the Song dynasties, which ruled China between 960 and 1279 until the early 20th century, the Chinese practiced the custom of breaking their first daughter’s toes and tightly binding them under the soles of their feet in order to stunt growth so that when the girl grew up she would walk diffidently, which was perceived as attractive. In England during the Victorian era between the mid 19th and the beginning of the 20th century, women, to make themselves attractive to men, corseted their bodies so tightly to create twelve-inch waists that their internal organs were redistributed with potentially dangerous consequences. Girls as young as 4 from the Kayan tribe of Myanmar use heavy brass coils to elongate their necks; a painful tradition dating back to the 11th century. The brass coils, that weigh an average of 10 kilos, deform their collar bones and neck and shoulder muscles. The Mursi tribe in Africa cut the lower lips of girls and insert plates to stretch the lips up to 12 cm in diameter.
 
In the 1970s and 1980s elective cosmetic surgical procedures gained popularity among wealthy people on the East and West coasts of America in order to enhance their appearance. The trend soon became global through the explosion of mass media. According to the International Society of Aesthetic Plastic Surgery in 2017 there was a 9% overall annual increase in surgical and nonsurgical cosmetic procedures globally. The US was the leader, accounting for 17.9% of all procedures. The top five countries were the US, Brazil, Japan, Italy and Mexico, which together accounted for 41.4% of all cosmetic surgical procedures worldwide. Russia, India, Turkey, Germany and France completed the top ten countries. In 2017, 400,000 American women elected to have breasts augmentation surgery; a 41% increase since 2000. About 1m rhinoplasties are carried out each year, with high volumes in Brazil and Mexico. The International Society of Aesthetic Plastic Surgery also reported that in 2016 surgeons in South Korea carried out the most cosmetic surgical procedures per capita: 20 per 1,000 people. V-shaped chins, with minimal jaw or cheekbone, round skulls, lifted lip corners, petite lips and slight puffiness under the eyes have been popular surgeries in South Korea, but recently the demand for such procedures has decreased while simpler and less invasive surgeries have increased. The Society also reported that labiaplasty showed the biggest (45%) increase since 2015. Lower body lift procedures increased by 29%, while upper body lift, breast augmentation using fat transfer, and buttock lifts increased by some 20%.

Such examples suggest that body enhancements, using a range of techniques, have been practiced in many cultures throughout the world for millennia. Thus, it seems reasonable to assume that in the absence of stringent regulation CRISPR will be perceived by some as just another enhancement technique.
 
Takeaways

The discovery of CRISPR Cas9 has revolutionized the way we think about developing therapies for the world’s deadliest diseases. This powerful technology has significant advantages over traditional medical technologies; it is cheap, easy-to-use and accessible, and these factors have helped to drive CRISPR’s global acceptance and use as a tool for new and innovative therapies. Over the past three years CRISPR R&D and clinical studies have developed at a pace and bring huge promise and significant hope to millions of people living with conditions with high rates of morbidity and mortality. Notwithstanding, bioethicists warn that with the absence of stringent universally agreed regulation, all these advantages could easily pivot into significant disadvantages and lead to parents enhancing the genetic composition of their children to make them taller, more intelligent etc. This could be a small step away from reigniting the ‘Charles Galton movement’. Galton was an English scholar and cousin of Charles Darwin. He lived during the Victorian era and died in 1911. Among other things, Galton studied anthropology and sociology and suggested that the elevated social position and heightened intelligence of the English upper classes and the criminality and lack of intelligence of the English under classes were all inherited traits and the result of superior and inferior genetic make-up respectively. According to Galton societies could be improved by selective breeding. Bioethicists are concerned that CRISPR technologies could be used for a 21st century version of Galtonism.
 
The genie is truly out of the bottle.
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6 years ago

Base-editing next-generation genome editor with delivery challenges

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  • ‘Base editing’ is a more efficient version of CRISPR Cas-9 technology
  • CRISPR Cas-9 is a ground-breaking gene editing technology that was discovered in 2012
  • CRISPR Cas-9 operates like molecular scissors to cut and remove mutant strands of DNA and creates space for functioning genes to be inserted
  • CRISPR technologies raise hope for new therapies to replace traditional medicines and provide a one-time procedure to cure devastating inherited disorders that have no cure or few treatment options
  • Recent studies suggest that CRISPR Cas-9 is not as accurate as initially thought and can introduce thousands of unintended ‘off-target’ mutations into the genome
  • Base editing significantly reduces ‘off-target’ mutations because it does not cut the DNA but uses a chemical process to convert just one letter (base) of DNA into another
  • 66% of genetic illnesses involve mutations where there is a change in a single letter of DNA
  • A significant challenge for base editing is in the delivery of the technique
 
Base-editing next-generation genome editor with delivery challenges

Since the first human genome was sequenced in 2003 there has been a revolution in human genomics, which has transformed the way we think about diseases and their causes and has paved the way for the development of therapies that target both the illness and the patient. It has also led to the introduction of the genome-editing tool CRISPR Cas-9 in 2012. This transformed gene editing from a devilishly difficult task to an easy and inexpensive “day-to-day” laboratory technology, which allows scientists to cut-out and change sections of DNA at specific sites in an organism or cell. CRISPR technology revolutionized genetic research and raised hope that it could provide a powerful therapeutic tool for millions of people living with inherited debilitating diseases for which there are either no cures or few treatment options. Recently, next-generation gene-editing technologies have been developed, which have reignited the hope that gene therapies could eventually replace traditional medicines and be used by physicians in clinics as a one-time procedure to cure some of the most devastating inherited disorders. Notwithstanding, scientists have cautioned that the therapeutic use of CRISPR technologies have significant technical, safety, regulatory, ethical and delivery obstacles to overcome before they can be used as therapies.
 
In this Commentary
 
This Commentary describes a new and expanded gene editing technology called base editing or chemical surgery, which compliments CRISPR Cas-9, but instead of cutting strands of DNA it provides a more accurate and predictable means to rewrite single letters (bases) of DNA and RNA. This enables scientists to make more targeted and precise alterations to DNA and RNA with less unintended consequences, referred to as “off-target” effects.  Base editing has significant therapeutic potential for thousands of human disorders known to be caused by a single genetic error and range from sickle-cell anaemia to metabolic disorders to cystic fibrosis, which currently lack options. The new base editing techniques are described in three research papers, which appeared in scientific journals in late 2017. One was published in the November 2017 edition of the journal ‘Protein and Cell’, another in the October 2017 edition of the ‘Nature’ and a third in the October 2017 edition of the journal ‘Science’. Research reported in these papers represents an important advance in our ability to alter single letters (bases) in peoples’ DNA and RNA. Notwithstanding, scientists caution that before base editing techniques become standard clinical practice the technology will require more research, extensive clinical studies and significant advances in delivery methods.
 
CRISPR and intellectual property battles

Base editing is a development of CRISPR Cas-9 technology, which was developed by a group of researchers from University College Berkeley, the Max-Plank Institute, Harvard University and The Massachusetts Institute of Technology (MIT) and others. The Broad Institute, a non-profit disease research facility established jointly by Harvard University and MIT, obtained the basic US patents on CRISPR Cas-9 in February 2017 after a heated patent dispute between two of the technology’s originators. On one side Jennifer Doudna of University College Berkeley and Emmanuelle Charpentier of the Max-Planck Institute in Berlin. On the other side Feng Zhang of the Broad Institute. While the Broad Institute has been considered the winning party in the US, the European intellectual property landscape is a different story.  Due to technical errors associated with listed CRISPR inventions and claimed priority dates, the European patents filed by the Broad Institute have been revoked. 

The Broad Institute is expected to appeal the decision and the gene-editing intellectual property battles continue. Notwithstanding, this has not slowed the development and commercialization of the technology.
 
Technologies to edit the genetic code and some ethical challenges

CRISPR Cas-9, discovered in 2012, is a particularly versatile and inexpensive gene editing technology. Since its discovery it has been used extensively by scientists throughout the world in an attempt to further their understanding of the role played by genes in disease. The technology works by slicing through the two strands of bases that spiral to create DNA’s famous double-helix and is especially useful when the goal is to insert or delete DNA bases. CRISPR acts like a genetic GSP: a guide molecule made of RNA that allows a specific site of interest on the DNA double helix to be targeted. The RNA molecule is attached to a bacterial enzyme called Cas-9 that works like a pair of “molecular scissors”, which can cut out strands of DNA at an exact point. This allows scientists to target and remove faulty genetic material and create space for functioning genes to be inserted in a similar way a word processor allows you to correct and enhance documents. Although CRISPR Cas-9 is increasingly being used in studies of genetic disorders, it has been challenging for the technology to fix a point mutation, caused by a change in a single DNA letter in a given gene. Further the technology’s cutting mechanism can result in “off-target” activity, which either can make changes to a gene you do not want changed or fail to change a gene that you do. This represents a significant challenge for scientists, and a major concern for the technology’s therapeutic applications.

For example, research published in the July 2018 edition of  the journal Nature Biotechnology discovered unintended deletions of thousands of DNA bases, including at spots far from the edit. Another study reported in the May 2017 edition the journal Nature Methods found that CRISPR Cas-9 introduced hundreds of unintended mutations into the genome. And a third study published in December 2017 in the Proceedings of the US National Academy of Sciences suggested that genetic variation between patients may affect the efficacy and safety of CRISPR-based treatments enough to warrant custom treatments. In addition to these technical concerns, ethical concerns about the technique also have been raised. In the March 2015 edition of the journal Nature, Michael Werner, the executive director of the Washington DC based Alliance for Regenerative Medicine suggested that ethical and safety issues should put germline editing research (a process by which every cell in the human body could be altered in such a way that the change is heritable) off limits because, “It’s still a little premature to say that we’ve resolved all these safety issues now,” says Werner. Notwithstanding, in July 2018 the UK’s Nuffield Council on Bioethics suggested that germline editing is “morally permissibly” under certain circumstances.
 
CRISPR triggers intense commercial activity

Despite safety and ethical concerns about CRISPR, genome editing has rapidly become a large fast-growing global market. In late 2012, Charpentier  suggested to a few colleagues, including Doudna, Zhang and George Church, professor of genetics at Harvard University Medical School who is credited with developing the first direct genomic sequencing method in 1984, that they should start a company to accelerate the gene editing technology into clinics.  They did not, but later the same scientists and others started separate genome editing companies. Four have become publicly traded companies and have successfully raised billions. For example, in 2013 Charpentier founded Crispr Therapeutics. Based in Switzerland, the company has become a US$2bn Nasdaq traded company. The other three, all based in the US are: Editas Medicine, which has a market cap of US$1.3bn and was founded by Zhang, Church and David Liu, Professor of Chemistry at Harvard University, a core member of the Broad Institute, and the first to describe base editing in research published in the May 2016 edition of the journal Nature. Doudna is  a founding member of Intellia Therapeutics, which today has a market cap of US$1bn,  and Juno Therapeutics, which has a market cap of US$10bn was founded in 2013 through a collaboration of the Fred Hutchinson Cancer Research Center, Memorial Sloan-Kettering Cancer Center and the Seattle Children’s Research Institute.

Since their inceptions, big pharma companies have been competing to invest in them. In January 2018 Celgene, which already owned 9.7% of Juno agreed to acquire the rest of its stock for US$9bn in cash in order to gain access to Juno's pipeline of CAR-T cancer drugs. This technology entails extracting blood cells from patients, then using CRISPR to edit T cells (immune cells) outside the body - ex vivo gene therapy - in order to transform the cells into enhanced cancer fighters before reintroducing them back into the patient’s blood stream. Earlier Bayer, a German pharmaceutical company, acquired a US$35m equity stake in Crispr Therapeutics, which it increased in January 2018. In 2016 Bayer invested US$335m over 5-years in a joint venture with Crispr Therapeutics called Casebia, with the intention to discover, develop and commercialize new breakthrough therapeutics to cure blood disorders, blindness, and congenital heart disease. Casebia also expects to develop new delivery mechanisms for CRISPR technologies, which will be critical to future drugs meant to target cells in the human body. Crispr Therapeutics retains a 50% interest in the joint venture, and also gains access to Bayer’s state-of-the-art delivery technologies and protein engineering knowhow.
According to market analysis the global genome editing market is expected to grow at a CAGR of 14.5% to reach US$6.3bn by 2022. Market drivers include rising government funding and the growth in the number of genomic projects, high and increasing prevalence of debilitating and often fatal diseases, technological advancements, increasing production of genetically modified crops, and growing application areas of genomics.
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CRISPR positioned to eliminate human papilloma viruses that cause cervical cancer

Tens of thousands of devastating diseases are the result of a single minute error in one letter the human genome
 
While big pharma competes to commercialize CRISPR Cas-9 technologies, scientists compete to develop ever-more versatile and efficient versions of the technology. One result of the competition among scientists is “base editing”, which is predicated upon the same basic mechanism as the standard CRISPR technology but differs because it does not require the DNA to be physically cut. Instead, base editing uses a chemical process to directly convert a single base (letter) of DNA to another without deleting and inserting random bases in the process.  Think of base editing as similar to changing one letter in a vast WORD document. The technique allows scientists to edit the body’s genes one letter at a time with exquisite precision.  Base editing rewrites single errors in the genetic code instead of cutting and replacing whole strands of DNA. The technique is not a replacement for CRISPR, but a complementary technology for altering the genome in an attempt to correct disease. Converting one letter to another may not sound significant until you consider that there are billions of letters in the human genome, and tens of thousands of diseases can be traced to a single minute error in just one letter in the human genome. Indeed, of more than 50,000 genetic changes currently known to be associated with disease in humans, 32,000 are caused by the simple substitution of one base letter for another. Base editing is significantly more efficient than standard CRISPR systems at making single base substitutions.
 
DNA molecules as a sequence of letters

Your genes are an instruction manual for your body. Hidden inside every cell in your body is a chemical called DNA. Genes are short sections of DNA, which are the biological templates your body uses to make the structural proteins and enzymes needed to build and maintain your tissues and organs. Genes influence how you look on the outside and how you function on the inside. The DNA that makes up all genomes is composed of four related chemicals called nucleic acids: (i) adenine ‘A’, (ii) guanine ’G’, (iii) cytosine ‘C’, and (iv) thymine ‘T’.  A sequence of DNA is a string of these nucleic acids (also called “bases” or “base pairs”). These bases connect in a specific way: ‘A’ always pairs with ‘T’, and ‘C’ always pairs with ‘G’. The letters represent the “alphabet” scientists use to write genetic code. The principal biological function of a base is to bond nucleic acids together. Nucleic acids are complex organic substances present in living cells, especially DNA or RNA. There are some 24,000 genes in the human genome, which are bundled into 23 pairs of chromosomes all coiled up in the nucleus of every one of your cells. There are about 37trn cells in the human body. Only about 1.5% of your genetic code, or genome, is made up of your genes. Another 10% regulates your genes to ensure that they turn on and off in the right cells at the right time.
 
The November 2017 Protein and Cell study

In the April 2015 edition of the journal Protein and Cell, scientists led by Junjiu Huang from Sun Yat-sen University in Guangzhou, China, reported research where he and his colleagues used CRISPR Cas-9 to correct abnormal β-thalassemia genes in human embryos without much success. Researchers suggested, “our work highlights the pressing need to further improve the fidelity and specificity of the CRISPR Cas-9 platform, a prerequisite for any clinical applications of CRISPR Cas-9-mediated editing”. In the November 2017 edition of Protein and Cell Huang and colleagues demonstrated that they had enhanced the fidelity of CRISPR and used the new base editing technique for the first time in human embryos to repair a faulty gene that gives rise to β-thalassemia. They suggested that, “their study demonstrated the feasibility of curing genetic disease in human somatic cells and embryos by a base editor system”.
 
Β-thalassemia

Β-thalassemia is a serious blood disorder, common in China and southeast Asia, which can be caused by a single mutation in the DNA code. The disorder reduces the production of haemoglobin, which is an iron-containing protein in red blood cells that carries oxygen to cells throughout the body. Without treatment, patients with a severe type of β-thalassemia, usually die before age 5. Correcting this mutation in human embryos may cure people with the disorder and also prevent the disease being passed on to future generations.

Innovative approach

Humans carry two copies of every gene, and in many cases both versions have to be “healthy” to avoid disease. Because it is challenging for researchers to find a lot of embryos, which all have a rare double mutation, Huang’s team created a batch of cloned embryos, then took skin cells from patients with β-thalassemia, removed their DNA-containing nuclei, and introduced them into donor eggs that had their own nuclei removed. The eggs then developed into early stage embryos, which carried the β-thalassemia mutation. Despite the study’s success to effectively edit the embryos and repair the mutations it was only about 20% efficient. Huang noted that the base editing technique he and his colleagues used was not uniform across all cells in the embryos, and their endeavours only sometimes repaired one faulty gene instead of 2. This created what is called “mosaic embryos”, which have both normal and mutant cells and result in a patchwork of cells with different genetic make-up and is potentially dangerous. 

Huang concluded that more research is required to improve the safety of the study’s base editing approach. Notwithstanding, scientists believe Huang’s research represents a significant advance, and that base editing techniques hold out the potential to treat and prevent a number of serious and debilitating inherited human diseases, which are more common than some people realise. For example, 1 in 25 children are born with some genetic disorder, which includes β-thalassemia, cystic fibrosis, genetic blindness, sickle cell anaemia, muscular dystrophy, and Tay-Sachs disease.
 
The October 2017 Nature study

In October 2017, David Liu, and colleagues from the Broad Institute published a paper describing their latest and improved base editing research in the journal Nature. Liu's group genetically transformed base pairs at a target position in the genome of living cells with more than 50% efficiency, with virtually no detectable ‘off-target’ effects such as random insertions, deletions, translocations, or other base-to-base conversions. The work of Liu and his team is significant because it, “introduced point mutations more efficiently and cleanly, and with less off-target genome modification than a current Cas-9 nuclease-based method, and can install disease-correcting or disease-suppressing mutations in human cells”. This clears the path for scientists to use base editing to address many more single-letter mutations than was previously possible. “What we’ve developed is a base editor, a molecular machine, that is a programmable, irreversible, efficient, and an extremely clean way to correct mutations in the genome of living cells,” says Liu.
 
Delivery is the challenge

Notwithstanding, Liu suggests that the status of base editing is like Amazon without UPS, its principal delivery agent, “Creating a machine that makes the genetic change you need to treat a disease is an important step forward, but it’s only one part of what’s needed to treat a patient. We still have to deliver that machine”, says Liu, and further, “We have to test its safety, we have to assess its beneficial effects in animals and patients and weigh them against any side-effects. We need to do many more things. But having the machine is a good start.” Liu is hopeful that base editing of DNA and RNA could be used as complementary approaches for a “broad set of potential therapeutic applications.” He and his colleagues are exploring base editing to fix blood and neurological disorders as well as hereditary deafness and blindness.
 
The October 2017 Science study and the advantages of editing RNA
 
In a paper published in the October 2017 edition of the journal Science, Feng Zhang, of the Broad Institute who is one of the original architects of CRISPR, and senior author describes a variant of base editing, which acts on RNA in human cells instead of DNA. RNA acts as a temporary genetic messenger within cells and naturally degrades in the body. This means that editing RNA instead of DNA does not result in a permanent change to a person’s genome, and therefore has significant potential as a tool for both research and disease treatment. Zhang’s base editing technique makes a temporary correction of a disease-causing mutation without permanent alteration to the genome. According to Zhang, editing DNA is, “permanent and very difficult to reverse, which poses a safety concern, while editing RNA is not.” Zhang’s approach is a potentially safer option when it comes to gene-fixing therapeutics, although any treatment using the technique would need to be administered repeatedly. But Zhang believes repetition could be an advantage because it allows for a therapy to be “upgraded” as scientific knowledge increases and provides a better understanding of specific disease states. The system can change single RNA nucleotides in mammalian cells in a programmable and precise fashion and has the ability to reverse disease-causing mutations at the RNA level, as well as other potential therapeutic and basic science applications.
 
Zhang and colleagues made one RNA-editing enzyme into a programmable gene-editing tool. “There are 12 possible base changes you can do,” says Omar Abudayyeh, a researcher at the Broad Institute and one of the paper’s authors. Having edited one, “we’re now thinking about the ways to do the other eleven.” By operating on RNA, Zhang and his colleagues avoid ‘off-target’ effects. “With RNA, you have to think about ‘off-targets’ a little differently.” says Abudayyeh. “If some of the RNA gets edited incorrectly the cell will have at least some amount of the right protein. If things go really wrong, the edit is reversible. You can always remove the system and the RNA will eventually degrade and recycle and revert back to normal,” says Abudayyeh. Liu and his team call their new creation REPAIR. They tested it on human cells growing in dishes and edited up to about 27% of the RNAs of two genes. The researchers did not find any ’off-target’ effects and suggest, “REPAIR presents a promising RNA editing platform with broad applicability for research, therapeutics, and biotechnology.”
 
Delivery challenges

Liu and other medical researchers have stressed the significant challenges associated with delivering CRISPR technologies, which have yet to be resolved before gene editing techniques become viable therapies. The conundrum researchers face is that your body’s biological barriers, which protect you from diseases are the same barriers that create significant obstacles for the delivery of genetic editors. Let us explain. Your DNA is like Fort Knox gold in that it is extremely well protected. For a harmful agent to access your DNA it first has to get under your skin and into your bloodstream. It then has to travel through your bloodstream without being detected by your immune system, which is comprised of networks of cells, tissues, and organs that work together to protect your body. One of the important cells involved in your immune system are white blood cells, also called leukocytes, which come in two basic types that combine to seek out and destroy disease-causing agents. Assuming the harmful agent successfully gets past all these biological barriers, it then has to penetrate your cell membrane and find a way to the nucleus of the cell. These biological defences help to keep you healthy by preventing harmful agents penetrating and transforming your cells into disease-making entities. But, they are the same obstacles that prevent scientists getting gene editors to the right place at the right time in the right quantity. Although delivery technologies are improving, Crispr Therapeutics, Editas Medicine, and Intellia Therapeutics, as well as, Casebia are all investing in delivery mechanisms, which remain significant challenges to overcome before gene editing becomes a regular therapy.  This is not only a concern for private companies, but also for the public sector. In January 2018 the US National Institutes of Health announced it will be awarding US$190m in research grants over the next six years, in part to “remove barriers that slow the adoption of genome editing for treating patients”.
 
Takeaways

Researchers have made substantial scientific advances in embryo gene editing technologies, which have significant potential for next-generation therapeutics. Base editing, described in this Commentary, is one advance, which has the potential to provide effective therapies for a range of disorders known to be caused by the mutation of a single letter in a gene, which currently have either little or no means of a cure. This is important because about 66% of genetic illnesses in humans involve mutations where there is a change in a single letter (or base). Notwithstanding, before such technologies become regular therapies in clinics there are major technical challenges, which need to be overcome in the delivery mechanism for these gene editors.
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6 years, 1 month ago

Can Western companies engage with and benefit from China?

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  • China will not challenge the economic supremacy of the US in the near to medium term
  • But with a GDP of US$14trn growing at 6.9% a year China is a substantial economy and a significant trading partner of the US
  • China is replacing imported high-tech products with domestic ones and incentivizing Chinese companies to dominate high value global industries
  • China’s large and increasing supply of appropriately qualified human capital gives it a competitive edge
  • Beijing’s US$8trn-30-year Belt and Road (B&R) strategy aims to make China the centre of a new world order in which knowledge-based Chinese companies dominate high-value global markets
  • China is challenged by substantial debt and significant credit it has extended to economically weak nations
  • Notwithstanding, Western companies seeking growth outside their current wealthy markets need to develop constructive trading relationships with China
  • Lack of understanding and cultural differences are barriers to productive West-East trading relations
 
Can Western companies engage with and benefit from China?
 
Previously we described how Beijing had offered Western companies a ‘poisoned challis’: either localize your value chain and help China achieve its goals to dominate key industries globally or be progressively squeezed out of markets. Washington responded by levying punitive tariffs on products manufactured in China and marketed in the US in an attempt to force Beijing to change. China hit back, cross fire ensued, more US tariffs were levied, markets became nervous and a ‘flight for liquidity’ seems a possibility. This is when equity players become nervous about uncertainties in markets and move their investments into more liquid securities in order to increase their ability to sell their positions at a moment’s notice. To some observers the current trade conflict between the world’s two largest trading nations must seem like Stanley Kramer’s 1952 epic ‘High Noon” movie. The difference being the 2018 showdown could affect the lives of billions and threaten the global economy. The fact that the world can be brought to such a position in such a short time is partly due to a profound lack of understanding and cultural differences between Washington and Beijing and vice versa. The differences manifest themselves as: (i) competition versus harmony, (ii) short-termism versus long-termism, (iii) tactics versus strategy and (iv) nationalism versus globalism. These differences pervade organizations, institutions and mindsets in the respective regions.
 
In this Commentary

This Commentary is divided it into 3 parts.
  • Part 1: China’s penetration of emerging markets discusses the implications of China’s stated aim to become a major global high-end, knowledge-based economy and describes how, for the past three decades, the nation has been preparing for this by systematically upgrading its human capital. From a perceived position of strength Beijing suggested to Western companies seeking or increasing their franchises in China that unless they are prepared to localize their value chains, not only will they be squeezed out of the China market, but they will also encounter challenges in other large emerging markets as China’s presence and influence in these markets increase. This is significant because the world’s emerging economies are the growth frontiers of many high-tech industries. 
  • Part 2: China’s economic rise and its strategic objectives briefly describes China’s phenomenal transformation from a centrally managed economy to the world’s second largest economic power and a significant commercial partner of the US. We provide glimpses of some aspects of China’s recent history in order to convey the scale of its industrial reforms and its well-resourced, central government-backed long-term strategies to establish China as a world leader in knowledge-based high-value industries. We describe China’s planned slowdown of its economy and how Beijing is systematically upgrading its human capital. Indicative of China’s increasing trading prowess are its new technology companies. We describe three, which are likely to have a significant global impact in the next 5 years. We conclude part 2 with a description of the Pearl River Delta, China’s high tech production hub, in order to provide further insights into China’s achievements, the nature and scale of its projects to upgrade its economy and the thinking that drives China’s economic transformation. 
  • Part 3: China’s ‘Belts and Road’ (B&R) initiative. B&R is a bold ‘neo colonialist’ initiative to build a 21st century ‘Silk Road’ of infrastructure and trade-links between China and Eurasia. This is expected to stimulate trade, economic growth and domestic employment in some of the least developed regions of the world, which have suffered from post-colonial decline and are neglected by the West. Beijing expects that the B&R project will position China at the centre of a newly formed global trading network. We review some of the concerns raised by the R&D initiative including China's increasing exposure as a principal creditor to economically weak nations. This, together with China's mounting debt, presents Western companies with a dilemma: China is too big to be ignored but its structural weaknesses could be damaging.   
 

Part 1
 
 China’s penetration of emerging markets
 
 
Made in China 2025 (MIC25) incentivizes Chinese enterprises to develop their competences and capacities in order to respond to the pivotal needs of global customers to reduce costs while maintaining value by providing affordable quality product offerings.  It also encourages Chinese companies to become ‘global champions’ and help China establish itself as a dominant international force in knowledge-based technologies of the future. As a result, Chinese companies are successfully taking share of key segments in emerging markets. So, Beijing’s industrial strategies not only increase the challenges for Western companies in China, but also provide potential barriers for them to penetrate and increase their franchises in other large emerging markets such India and Brazil, which are the future growth frontiers.
 
China’s investment in human capital

Beijing’s well-resourced strategies to transition China from a manufacturing-based economy to a high-end, innovation-driven, knowledge-based economy could not be achieved without a significant supply of relevant human capital. It is instructive that for the past three decades China has been systematically upgrading its human capital, while Western nations have not been doing so at a similar pace.
 
According to the World Economic Forum, China has committed massive resources to education and training. In 2016 China was building the equivalent of one university a week and graduated 4.7m citizens, while in the US 568,000 students graduated. In 2017, there were 2,914 colleges and universities in China with over 20m students. The US had 4,140 with over 17m students enrolled. Significantly, between 2002 and 2014 the number of students graduating in science and engineering in China quadrupled. In 2013, 40% of all Chinese graduates completed a degree in science, technology, engineering or mathematics (STEM), whilst in the US only 20% of its graduates did so. In addition to China producing more STEM graduates than either the US or Europe, which are vital for high-tech knowledge-based industries of the future, the gap between the top Chinese and US and European graduates is widening. Projections suggest that by 2030 the number of 25 to 34-year-old graduates in China will increase by a further 300%, compared with an expected rise of around 30% in the US and Europe. This represents a substantial shift in the world's population of graduates, which was once dominated by the US, and gives China a potential competitive edge in high-tech growth industries of the future.
 
Further, US students struggle to afford university fees. Many American colleges and universities are struggling financially and as a consequence actively recruiting foreign students. In recent years, the number of Chinese students admitted to US universities has increased significantly. In 2017 for instance, some 350,000 Chinese students were recruited. Most graduates return to China with quality degrees. European countries have put a brake on expanding their universities by either not making public investments in them or restricting universities to raise money themselves.
 
Shanghai students are world’s best in maths, reading and science

Supporting this competitive edge is China’s world-beating performance of its 15 and 16-year-olds. According to an internationally recognised test, Shanghai school children are the best in the world at mathematics, reading and science. Every three years 0.5m students aged 15 and 16 from 72 countries representing 80% of the global economy sit a 2-hour examination to assess their comparative abilities in these three subjects. The examination, called the Program for International Student Assessment (PISA), is administered and published triennially by the Organisation for Economic Co-operation and Development (OECD). When the 2009 and 2012 PISA  scores were released they created a sensation, suggesting that students in Shanghai have significantly better mathematics, reading and science capabilities than comparable students in any other country.  Although these scores have been contested, and the most recent test scores suggest Shanghai students have slipped down the rankings, in the 2012 tests Shanghai students performed so well in mathematics that the report compared their scores to the equivalent of nearly three years of schooling above most countries.
 
Human capital strategies challenged by aging populations
Human capital strategies in China, the US and Western Europe are all challenged by aging populations. According to the United Nations, China’s population is ageing more rapidly than any country in recent history. America’s 65-and-over population is projected to nearly double over the next three decades, rising from 48m to 88m by 2050. The UK’s population also is getting older with 18% aged 65-and-over and 2.4% aged 85-and-over. In 2014, 20% of Western Europeans were 65 years or older and by 2030 25% will be that age demographic.
 
Taking share of high-value MedTech markets
 
Many Western MedTech companies are late-bloomers in emerging markets. This can partly be explained by the two decades of economic growth the industry experienced from developed markets and the continued buoyancy of the US stock market.  Thus, Western MedTech companies have felt little pressure to adjust their strategies and business models and venture into territories committed to “affordable (low priced) medical devices”. Beijing seems determined to take advantage of this and Chinese companies are increasing their share of large fast growing and underserved emerging markets by: (i) increasing their innovative go-to-market strategies and (ii) making sure they “localize” their product offerings. We briefly describe these two strategies.
 
Innovative go-to-market approaches

According to OEDC data, between 2000 and 2016 China doubled its R&D investment to 2% of GDP, which is more than the EU but less than America. In 2016, the US spent 2.7% of its GDP on R&D, which is more than any country. Individual Chinese domestic companies are also increasing their investments in R&D as part of their growth strategies. For instance, over the past decade, Mindray, China’s largest MedTech company has spent more than 10% of its annual revenues - currently US$1.7bn - on R&D. The company has a large R&D team of over 1,400 located in 2 centres: 1 in Mahwah, China and another in Seattle, USA. BGI, China’s largest manufacturer of next-generation gene-sequencing equipment, devotes more than 33% of its revenues to R&D, double that of its US competitor Illumina. In aggregate, however, Chinese companies are a long way behind their Western counterparts when it comes to R&D spending.
 
Supercomputers
High-tech companies require supercomputers to assist with their R&D and innovative strategies. These are powerful and sophisticated machines with enormous processing power, which can support medical and scientific R&D. According to an internationally recognised ranking, which has been conducted biannually by leading scientists since 1993, China leads the world with its installed-base of supercomputers. China has 206 and  America has 124. In 2000 China had none. The most recent rankings show that the US has regained the top performance position from China with an IBM-system-backed supercomputer now running at the US Department of Energy’s Oak Ridge National Laboratory. 
 
Increasing number of Chinese patents
Although the US maintains a lead in scientific breakthroughs and their industrial applications, innovation is increasing in China. The number of invention patent applications received by China in 2016 was 1.3m, which was more than the combined total from the US (605,571), Japan (318,381), South Korea (208,830), and the EU (159,358). Patents from these five countries accounted for 84% of the world total in 2016. 
 
Increasing share of high-tech markets
Emboldened by enhanced processing power, increased patents, greater R&D capacity and improved capabilities, Chinese MedTech companies are increasingly represented across a broad spectrum of high-end medical technologies and have made significant inroads into emerging markets. Some manufacture Class III product offerings such as orthopaedic implants and are beginning to compete in medium-level technology markets in Brazil, India, Japan and the UK. For instance, SHINVA markets its linear accelerators globally. Sinocare is #6 in the global market for blood glucose monitoring devices. In 2008 Mindray paid US$200m to acquire the patient monitoring business of US company Datascope, making it the third-largest player by sales in the global market for such devices. Also, Mindray has increased its share of the ultrasound imaging market to 10%, behind GE and Phillips. MicroPort broke onto the world stage in early 2014 when it acquired Wright Medical’s orthopaedic implant business for US$290m. In 2015 China overtook Germany to become Japan’s second largest supplier of MRI devices, behind the US, and Biosensors International is among the largest suppliers of drug-eluting stents in France, Germany, Italy, Spain and the UK.
 
Localized product offerings in India
 
Mindray, which positions itself as a world-class MedTech solutions company, has established a significant presence in India where it has built local operations, tailored its line of affordable high-quality patient monitoring, ultrasound and in vitro diagnostic devices to address India’s unmet needs, hired local engineers and operators and built a local marketing and sales team, which provides a 24-7 customer service. Mindray has understood that many of the factors, which drive China’s MedTech market growth are mirrored in India and other rapidly growing emerging markets that share a similarly high disease burden, aging demographics and a desire to reduce healthcare costs.
 
Mindray was one of China’s earliest MedTech companies to list in New York in 2006. However, the company felt its shares were undervalued and privatized in 2016 in a deal, which valued the company at US$3.3bn. A funding round shortly after its delisting valued Mindray at US$8.5bn. The company employs over 8,000 and its 2017 revenues were US$1.7bn.
 
India’s MedTech market
 
The attraction of India to MedTech companies is easy to understand. India’s MedTech market is the 5th largest in the world and could rival that of Japan and Germany in size by 2022 if it continues its 17% annual growth. Although India mainly has been an out-of-pocket healthcare market this is changing. In September 2018, the Indian government launched one of the world’s largest publicly funded health insurance schemes, which will provide some 0.5bn poor people with health cover of US$7,000 per year (a sizable sum in India) for free treatment of serious ailments. India’s medical device markets, like those of China’s, will benefit from this, but also from the country’s large and growing middle class with relatively high disposable incomes in an economy growing at around 7 to 7.5% annually.
 
In 2016 India’s middle class was estimated to be 267m - 83% of the total population of the US - and projected to increase to 547m by 2025. Further, India has a large and growing incidence of lifetime chronic diseases, which expands the need for medical devices. Between 2009 and 2016, China emerged as India’s 3rd largest supplier of medical devices (behind the US and Germany) and is currently India’s leading provider of CT scanners, representing 50% of the US$69m that India spent on imports of these high-tech devices during 2016. India’s orthopaedic devices market is estimated to be around US$375m and is projected to grow at about 20% each year for the next decade to reach US$2.5bn by 2030. In contrast the global orthopaedics industry is estimated to grow at 5% annually.

China is positioned to increase its share of MedTech markets in India and other emerging countries. This suggests that unless Western companies are prepared to transform their strategies and change their business models similar to what Medtronic and GE Healthcare have done, they will not only be squeezed out of the China market but shall encounter challenges to penetrate and increase their franchises in other large emerging MedTech markets. This is significant because the world’s emerging economies are the growth frontiers of the MedTech industry.


Part 2

China’s economic rise and strategic objectives: background

 
“How long can China sustain its rise?”. We broach this question in the next two parts of this Commentary. Here in Part 2, we describe some relevant aspects of China’s recent commercial history, its success in producing high tech global companies and we also provide a glimpse of its urban communities for creating and developing companies of the future.

It was not until the early 1980s, after the death of Mao Zedong in 1976, that China started to dismantle its centrally planned economy and began implementing its free market reforms and opened its economy to foreign trade and investment. Shortly afterwards China: (i) became the world’s fastest growing market-based economy with real annual GDP growth averaging 9.5% through 2017, (ii) lifted 800m citizens out of poverty and (iii) overtook Japan to become the world's second largest economy. By 2010 China had become a significant commercial partner of the US and is now America’s largest merchandise trading partner, its biggest source of imports and America’s third largest export market. Also, China holds US$1.7trn of US Treasury securities, which help fund the federal debt and keep US interest rates low. It is worth noting that China has a long history dating back more than 2,000 years BC. In more recent times, Adam Smith the father of modern capitalism, described China in The Wealth of Nations (1776) as a country which is, “one of the most fertile, best cultivated, most industrious, most prosperous and most urbanized countries in the world”.
 
Avoiding a middle-income trap
 
Over the past decade China’s economy has matured and Beijing has managed a planned slowdown of its growth rate to what it calls the “new-normal”. In 2017 China’s GDP was 6.9% and is projected to fall to 5.6% by 2022. The orchestrated slowdown is less based on fixed investment and exports and more on private consumption of China’s large and growing middle class, enhanced services and innovation. A previous Commentary described Beijing’s Made in China 2025 (MIC25) initiative and other policies, which prioritised innovation and the systematic upgrading of its domestic industries whilst decreasing its reliance on foreign technology. This is essential for China to avoid a ‘middle income trap’, which happens when nations achieve a certain level of economic growth, but then begin to experience diminishing returns because they are unable to restructure their economies to embrace new sources of growth.
 
Baidu, Alibaba and Tencent: BAT

An example of China’s ability to upgrade its economy and avoid a middle-income trap is its new technology companies, which are positioned to have significant global roles in the next five years. We briefly describe three: Baidu, Alibaba and Tencent: collectively referred to as BAT. Baidu, is a Chinese language Internet search provider incorporated in 2000, which has grown to  become the world’s 8th largest internet company by revenue. It has a market cap of US$80bn, annual revenues US$13bn and has the world’s largest Internet user population of about 800m. Alibaba, was founded in 2000 as a business-to-business (B2B) portal connecting Chinese manufacturers to overseas buyers. Today, the company is a multinational conglomerate with a market cap in excess of US$500bn and annual revenues of US$13bn. It is the world’s largest e-commerce company in terms of gross merchandise volume (GMV). For the fiscal year ended March 31, 2017, Alibaba had a GMV of US$0.43trn and 454m annual active buyers on its marketplaces. Alibaba’s long-term vision is to become a global company providing solutions to real world problems and using e-commerce to help globalization by making trade more inclusive. The company expects GMV to reach US$1trn by 2020, and to serve 2bn consumers(one-third of the world’s total population)and to support the profitable operation of 10m businesses on its platforms by 2036. Alibaba is sometimes referred to as the "Amazon of China," but the company’s founder Jack Ma suggests there are differences. "Amazon is more like an empire: everything they control themselves. Our philosophy is be an ecosystem”, says Ma. Tencent, founded in 1998, has become a multinational investment holding corporation with a market cap of US$556bn, annual revenues of US$22bn and specializes in various internet-related services, entertainment, AI and technology.  
 
The Pearl River Delta
 
Tencent has its HQs in Shenzhen, a megacity in the Pearl River Delta, which is China’s hub for high tech production. We briefly describe the delta to further show the progress China has made in transforming its economy. In the early 1980s the Pearl River Delta was primarily an agricultural area and Shenzhen was an unassuming town of about 30,000 (now 13m). The delta witnessed the most rapid urban expansion in human history to become the world’s largest urban area in both size and population by 2015, with more inhabitants than Argentina, Australia or Canada. Today the Pearl River Delta has a population of 120m and a GDP of US$1.5trn - growing at 12% per year - which is greater than that of Indonesia and equal to 9.1% of China’s output.
 
Land, sea and air infrastructure serving the delta is state of the art. For example, the delta has six airports; three of which are international air hubs. In 2016, the passenger traffic of Baiyun Airport in Guangzhou (population 15m) surpassed 60m and the volume of freight it handled was over 2m tonnes. In the same year passenger traffic at Shenzhen (population 13m) airport was in excess of 42m and the volume of freight it handled was over 1m tonnes.  This compares favourably with JFK and Newark Liberty airports. In 2017 both airports set records with more than 59m and 43m passengers respectively.

Part of the delta’s infrastructure is the new Hong Kong-Zhuhai-Macau Bridge, which spans 34 miles (55klm), crosses the waters of the Pearl River and connects Hong Kong with Macao. It is the longest sea-crossing bridge ever built and has a section that runs for seven kilometres in a submarine tunnel that passes four artificial islands. Its construction cost US$16bn, which is part of a US$30bn plan announced in 2009 to develop an infrastructure network to connect the nine cities in the delta so that collectively they would become the largest contiguous urban region in the world, which was achieved in 2015.  One of the infrastructure goals is to reduce travel time between the nine cities and Hong Kong and Macao to one hour from any which way.
 
The Pearl River Delta is the most southern of three major Chinese coastal growth areas. In the middle is the Yangtze River Delta region, which includes Shanghai with a population of 130m and a GDP of US$2trn. To the north is the Beijing-Tianjin-Bohai corridor, covering 10 cities and has a population of 100m and a GDP of US$1.3trn. These three urban clusters account for 21% of China’s population and about 40% of its GDP.


Part 3

 China’s Belt and Road initiative

 
It is not only important to understand the changes in China within the context of its recent history, MIC25 and Beijing’s restructuring of its healthcare sector, but also against the backdrop of China’s ambitious “Belt and Road” (B&R) initiative. Unveiled by President Xi Jinping in September 2013, it has become the centre of Beijing’s ambitions for a new world order predicated upon a modern-day Silk Road connecting China by land and sea to Southeast Asia, Central Asia, the Middle East, Europe and Africa. It is a bold model of economic development, which Xi has called, “the project of the century”. The initiative is supported by the new Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund. Some estimates suggest that Beijing has already invested US$900bn in the project. Overall, it is expected to cost US$8trn and take three decades to complete. At its core are 6 economic corridors, which connect 65 countries, about 65% of the world’s population, involve some 40% of global trade and 33% of global GDP.
 
Belt and Road’s 6 economic corridors
  1. The Eurasia-Land-Bridge economic corridor is developing rail transportation between China and Europe through Kazakhstan, Russia and Belarus
  2. The China-Mongolia-Russia economic corridor aims to develop trade between China and Mongolia by modernizing transport, telecommunication and energy networks to make Mongolia a hub between China and Russia
  3. The China-Central Asia-West Asia economic corridor connects the Chinese province of Xinjiang to the Mediterranean Sea, through Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan, Iran and Turkey 
  4. The China-Indochina-Peninsula economic corridor aims to strengthen cooperation among states of the Greater Mekong sub-region and support trade between China and the 10 nations of the Association of Southeast Asian Nations (ASEAN) that are already bound by a free trade agreement since 2010 to facilitate economic growth
  5. The China-Pakistan economic corridor connects Kashgar in the Chinese province of Xinjiang to the port of Gwadar in Pakistan and includes the construction of railways, highways, optical fibre networks, and the creation of an international airport in Gwadar as well as the establishment of special economic zones
  6. The Bangladesh-China-India-Myanmar economic corridor links Kunming to Kolkata (Calcutta) via Mandalay and Dhaka to strengthen connections between China and various economic centres of the Gulf of Bengal in order to increase interregional trade by reducing non-tariff barriers.
China’s neo-colonial strategy
 
China’s B&R initiative is based upon an interpretation of colonialism, which is significantly different to Western  interpretations. While Western nations struggle with a sense of guilt associated with their past colonial rule and feel responsible for the abject economic failure, widespread poverty and erosion of governance in post-colonial independent states, Beijing believes that there are lessons to be learned from colonialism, which are relevant today and necessary prerequisites to stimulate trade, economic growth and domestic employment. Beijing’s B&R initiative is best understood as a neo colonial strategy to strengthen China’s slowing economy, enhance its industrial capabilities and improve its geopolitical standing by driving economic growth in some of the least developed regions of the world, which are neglected by the West.
 
The lessons of Singapore
 
China’s neo-colonialist policies are influenced by Singapore, an island city-state located in Southeast Asia off southern Malaysia. The country gained independence from Malaysia in 1965 and has become a global financial centre with a multicultural population and a multi-party parliamentary representative democracy with a President as head of state and a Prime Minister as the head of government. Although China is 14,000-times bigger than Singapore, has 1bn more citizens and its GDP is US$14trn compared to Singapore’s US$300bn; China views Singapore as an object lesson of political stability and prosperity predicated upon aspects of its colonial legacy, which Beijing believes can be replicated in under-developed regions of the world. These include basic infrastructure, improved administration, widened employment opportunities, female rights, expanded education, improved public healthcare, taxation, access to capital, independent judiciary, and national identity. Such factors China views as benefits of colonialism and necessary prerequisites for trade, economic growth and prosperity. Singapore has a colonial history, but today is a rich country with a GDP per capita of US$55,235, (higher than that of the US: US$53,128) and where Asian culture is intact and Western knowhow is harnessed for economic growth and prosperity for its citizens and is where China would like to be in the future.
 
The AIIB comparable to other development banks
 
In 2013, when Xi Jinping first proposed creating the Asian Infrastructure Investment Bank (AIIB), Washington was against it and campaigned rigorously to persuade potential donor countries not to participate. The US expressed concerns that the AIIB would undermine the World Bank, and the Asian Development Bank (ADB), which operate in Asia and lend to China. Washington also believed that the AIIB would unfairly benefit Chinese companies and argued that China would not adhere to international banking standards of transparency and accountability. Today, the AIIB is up and running as a medium-sized regional development bank with capital of US$100bn and lending at around US$4bn. It is broadly comparable with other development banks and Washington’s concerns appear unfounded.
 
Systematically migrating low-tech manufacturing to low-cost locations
 
An important role of the AIIB is to assist the B&R initiative to open up and create new markets for Chinese goods and services, to stimulate exports and to provide low-wage locations, to which China can migrate its light manufacturing industries. Beijing no longer sees its country’s economy as competitive on the basis of low wages. China’s labour costs are rising faster than gains in productivity and cost estimates of outsourcing production to China will soon be equal to the cost of manufacturing in the US and Western Europe. China is adjusting to rising real wages in its domestic markets by systematically migrating its low-tech industries to less-common low-wage production operations in new locations in Africa such as Ethiopia.

A rationale for this strategy is provided in a 2017 paper from the Center for Global Development, which suggests that “Ethiopia could become the new China” as, “the cost of Ethiopian industrial labour is about 25% that of China today”. This suggests that migrating Chinese low-tech manufacturers might leap-frog middle and lower-middle income developing countries in favour of the poorest countries such as Ethiopia, which is included in China’s B&R initiative. African countries view B&R as a platform to promote global cooperation based on win-win strategies. Speaking at a conference in June 2018 in Addis Ababa, Tan Jian, the Chinese ambassador to Ethiopia said, "We are working closely with Ethiopia in advancing the Belt and Road Initiative. Ethiopia is a very important partner in this regard. We have been doing a lot of projects here in Ethiopia: infrastructure, policy dialogue, trade, financing and people-to-people exchanges.” At the same conference Afework Kassu, Ethiopia's Minister of Foreign Affairs, said, “the Belt and Road initiative is an advantage for African countries for infrastructure development and for economic growth”.
 
Concerns about China’s neo colonialism and debt management
 
Despite these good words, China's B&R initiative is not free of criticism mostly from Western nations and international institutions, which suggest Beijing’s motivation is a retrograde strategy that employs globalization to service its domestic economy, and many of the concerns are about China’s potential economic predominance.
 
A March 2018 Center for Global Development (CGD) paper suggests that because China’s record of international debt financing is not good, and the B&R initiative follows China’s past practices for infrastructure financing, which entail lending to sovereign borrowers, then the initiative runs the risk of creating debt distress in some borrower nations. The paper identifies 8 of the 68 B&R borrower countries as “particularly at risk of debt distress”. Pakistan is the largest country at high risk with the development of its Gwadar deep-sea port, which is part of the B&R China-Pakistan Economic Corridor. China is financing about 80% of this endeavour, which is estimated to cost US$62bn.  Other countries mentioned in the CGD paper to be at high-risk of debt distress from the R&D initiative include Djibouti, the Maldives, Laos, Mongolia, Montenegro, Tajikistan and Kyrgyzstan. The concern is that these at-risk nations could be left with significant debt ‘overhangs’, which could impede their ability to make essential future public investments and thereby challenge their economic growth more generally. Recently, public concerns from within China have been raised over the costs of the initiative. There is also concern that debt problems will create “an unfavourable degree of dependency” on China as a creditor. Several US Senators have expressed similar concerns and suggest that potential defaults could have a deleterious economic impact more generally. In addition to B&R loans, which have been questioned, it has been rumoured that Beijing has lent Venezuela US$60bn and also extended significant credit to Argentina. Venezuela is in economic meltdown and Argentina has applied to the IMF for a bailout. 
 
China’s mounting debt
 
China’s increasing exposure as a significant creditor to economically weak developing nations is compounded by its mounting debt and triggers concerns about China’s future stability. A popular Washington view, endorsed by President Trump’s chief economic adviser Larry Kudlow, is that China’s mounting debt and slowing growth mean that its “economy is going south”, and the recent imposition of tariffs on Chinese exports to the US will accelerate the nation’s demise. However, there is a view that Washington’s imposition of punitive tariffs is an over-reaction because the Chinese economy is nowhere as strong as that of the US economy. Notwithstanding, China is an important trading partner for the US and American companies should find a way to engage with China.
 
Since the 2008 financial crisis, China’s debt has been a concern in Beijing because it was a driver of the country’s economic growth. In 2016, Vice-Premier Liu He, President Xi’s top economic adviser, conscious of the potential national security risks of China’s mounting debt, took steps to de-risk the country’s financial sector. More recently, Liu has accelerated infrastructure investment and taken steps to avoid a banking crisis by ensuring that the renminbi does not fall too rapidly against the US dollar. Over the past 5 months the renminbi has weakened about 10% against the US$ and could weaken further if the currency becomes politicized. Despite Liu’s efforts to reign-in and control China’s debt, which some estimates put at about  260% of GDP, it is not altogether clear how successful these efforts will be especially if China’s debt challenges are considered in conjunction with its loose credit conditions.
 
Changing world economic order

Putting aside these concerns, it is instructive to note that a 2017 study by Price Waterhouse Coopers (PwC), suggests, ceteris paribus, that within the next decade China’s economy will be bigger than America’s and within the next three decades India’s economy will overtake that of the US. The study argues that the US will rank 3rd in the world and in 4th place could be Indonesia. The study suggests that China will have an economy of US$59trn, while India’s will be around US$44trn and America’s will total $34trn. Significantly, Japan (US$6.7trn), Germany (US$6.1trn), the UK ($5.3trn) and France (US$4.7trn), key markets for Western MedTech companies, are expected to fall respectively to 8th, 9th, 10th and 12th in the list. They are expected to be replaced by Indonesia (US$10.5trn), Brazil (US$7.5trn), Russia (US$7.1trn), and Mexico (US$6.8trn), which climb to 4th, 5th 6th and 7th positions respectively. This signals some significant economic shifts likely to take place over the next two to three decades and underlines the importance of emerging economies in the medium-term strategic plans of Western companies.
 
Takeaways
 
The world is on the cusp of some significant  economic changes and the two nations most likely to affect those changes are the US and China. Beijing’s policies and global aspirations are helping China to step into a leadership void created by Washington’s current rejection of multilateralism. However, it is still not altogether clear whether China will be able to sustain this new position, and the uncertainty this causes presents a significant strategic dilemma for Western companies seeking growth outside their current markets in the developed world. China is too big to be ignored by Western companies, but China’s conditions for engagement are onerous and its long-term stability remains in doubt.
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China’s rising MedTech industry and the dilemma facing Western companies

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  • China is seen as a significant growth frontier for MedTech
  • Over the past 2 decades Western companies have derived billions from China
  • But today companies seeking or extending their franchises in China will encounter significant barriers
  • China is successfully decreasing its dependence on Western medical devices and other high-tech products and replacing them with domestic offerings
  • The choice facing Western companies expecting to derive revenues from China is: either localize your value chain and help China achieve its goals to dominate key industries globally or be progressively squeezed out of markets
  • Some Western companies have localized and manufacture their offerings in China
  • Some MedTech companies concerned about China’s weak intellectual property (IP) protection and buoyed by 2 decades of growth and the current performance of the US stock market are turning away from China
  • Could adherence to history dent their futures?
  
China’s rising MedTech industry and the dilemma facing Western companies

 
This is the first of two Commentaries on China.
 
Increased cost pressures, maturing home markets, resource constraints, growing regulatory pressures and rapidly changing healthcare ecosystems are driving Western MedTech companies to seek or expand their franchises in large fast-growing emerging economies. For many, the country of choice is China. AdvaMed, the American MedTech trade association says, “China presents the most significant growth market for the medical device industry today and for the foreseeable future.”

Despite only accounting for 3% of the global MedTech market share, China’s attraction is a US$14trn economy growing at some 7% per annum, a population of 1.42bn with a large, ageing middleclass with disposable incomes, rising healthcare consumption and Beijing’s commitment to increase healthcare expenditure to provide care for all its citizens from “cradle-to-grave”. All these factors drive China’s MedTech market and the certainty of its increasing demand.

Despite this positive scenario, there are an increasing number of non-tariff barriers facing Western MedTech companies in China. This is because Beijing has launched extensive and aggressive initiatives to decrease China's dependence on Western medical devices and replace them with domestic offerings. Opportunities in China for Western players are shrinking and becoming tougher as Beijing’s new healthcare reforms kick-in and Chinese MedTech companies strengthen, increase their capacity, move up the value chain and take a bigger share of the domestic markets. To compete effectively in China, Western companies need to enhance their understanding of Beijing’s extensive healthcare reforms, increase their understanding of the complexities of China’s new procurement processes and be prepared to localize their value chains.
 
In this Commentary

This Commentary is divided it into 2 parts.
  • Part 1: China an ‘el Dorado’ for Western MedTech companies describes the significant commercial benefits derived by some Western companies who, for the past two decades, have supplied high-end medical devices to the Chinese market and benefitted from: (i) Beijing’s commitment to extend healthcare to all citizens, (ii) the country’s vast, rapidly growing and underserved middleclass and (iii) China’s large and aging population with escalating chronic lifetime diseases. These market drivers have profited Western companies because domestic Chinese MedTech enterprises had neither the capacity nor the knowhow to produce high-end medical devices. This gave rise to a bifurcated MedTech market with domestic Chinese companies producing low-end offerings and Western companies supplying high-end products.
  • Part 2: China the end of the ‘el Dorado’ for Western MedTech Companies suggests that commercial opportunities in China for Western MedTech companies have shrunk significantly and become much tougher as domestic manufacturers, incentivized by Beijing, move up the value chain and capture a bigger share of the domestic market. We describe Made in China 2025 (MIC2025), which is a well-resourced government initiative aimed at decreasing China’s dependence on Western MedTech suppliers by enhancing the capacity and scale of Chinese companies. This, together with China’s current 5-year economic plan aimed at a “healthier China” and its 2009 healthcare reforms are already significantly effecting some segments of MedTech markets previously dominated by Western companies.

PART 1
 
 China an el Dorado for Western MedTech companies
 
China’s healthcare market and the MedTech sector
The attraction of China’s healthcare market to Western investors over the past decade is easy to comprehend. In 2013 China surpassed Japan to become the world’s second-largest healthcare market outside the US and the fastest growing of all large emerging markets. Healthcare spending is projected to grow from US$854bn in 2016 to US$1trn in 2020. In 2016, China’s healthcare expenditure as a proportion of its GDP was 6.32%, up from 4.4% in 2006, and this is expected to rise to between 6.5 and 7% by 2020. Although this is a lower percentage than that of the US with 17%, Germany with 11%, Canada, Japan and the UK with about 10%; it suggests that China’s healthcare market has a substantial upside potential; especially as the country’s middleclass grows and becomes economically stronger and Beijing’s healthcare reforms kick-in.
 
The attraction of China’s MedTech market to Western investors also is easy to understand. It is one of the fastest growing market sectors, which has maintained double-digit growth for over a decade. In 2016 China’s MedTech market was valued at US$54bn, an increase of 20% compared to 2015; 72% of which was fuelled by hospital procurements. In 2017 China imported more than US$20bn worth of high-end medical devices the overwhelming majority of which was supplied by Western companies.
 
Drivers of China’s MedTech markets
 
Three China market variables making for highly valued Western MedTech businesses include: (i) the country’s vast, rapidly growing and underserved middleclass, (ii) China’s large and aging population with escalating chronic lifetime diseases and (iii) Beijing’s commitment to extend healthcare to all of its citizens.
 
  1. Rapidly growing and underserved middleclass
China’s past rapid economic growth lifted hundreds of millions of its citizens out of poverty and into the middleclass. As China’s middleclass has grown, its healthcare market has expanded and the opportunities for Western MedTech companies have increased. This partly offsets slower demand experienced by Western MedTech companies after 2009 when middleclass consumers in developed countries were challenged by the shocks to their living standards caused by the 2008 recession and subsequent lower global economic growth.
 
Since 2015, Chinese middleclass consumers have become a significant driver of the country’s economic activity and are projected to remain so through at least 2025. Since 2000, annual real GDP growth per capita has averaged 8.9% while real personal disposable income on average has risen 9.2%. According to Credit Suisse’s Global Wealth Report, in 2015 China overtook the US as the country with the biggest middleclass, which is comprised of some 109m adults compared with 92m in the US. Today, the Chinese middleclass is facing more lifestyle related diseases, whilst expecting more and better healthcare. By 2025, China’s middleclass is projected to reach 600m and have an annual disposable income between US$10,000 and US$35,000. Further, compared to the US and the UK, China’s middleclass has a low level of household debt. China’s household debt-to-GDP ratio is 40% compared with 87% for that of the US and UK. This suggests that consumer led growth in China still has a significant upside. However, there are cultural obstacles to Chinese citizens assuming more personal debt.
 
  1. Large aging population with escalating chronic lifetime diseases
China has a population of 1.42bn and each year Chinese citizens give birth to some 20m. In January 2016 China lifted its 40-year-old one-child policy, which is expected to increase the country’s birth rate and increase the demand for in-vitro fertilization among older parents. Notwithstanding, partly because of the country’s falling fertility rates and partly the increasing life expectancy of the elderly share of the country’s population (In 2017 total life expectancy was 76.5), the number of elderly Chinese citizens has been increasing. According to China’s Office of the National Working Commission on Aging, in 2017 the number of its citizens aged 60 or above had reached 241m, accounting for some 17% of the total population and this is expected to peak at 487m, or 35%, around 2050, when it is projected that China will have 100m citizens over 80.

This is significant because elderly people have a higher incidence of disease, demand more frequent, longer and more complicated treatment regimens and use medical services more often than their younger counterparts. For example, China’s ageing population is fuelling the rise in demand for orthopaedic devices. Projections suggest that over the next decade China could become the world’s largest orthopaedic device market. As the Chinese population continues to age, demand for healthcare services and medical devices are expected to increase substantially. Notwithstanding, a ‘dependent’ large growing and aging population has a significant economic downside.
 
Further, the 600m Chinese citizens of prime earning age tend to live in large urban centres. China has some 662 cities; 6 of which are mega cities with populations of about 10m. 160 Chinese cities have populations in excess of 1m. Increased urbanization, changing diets and lifestyles and increased air pollution and other environmental hazards are causing a substantial rise in the prevalence of chronic lifetime diseases. It is estimated that 330m Chinese citizens currently have chronic diseases. According to a 2018 study almost 100m adults (8.6%) have chronic obstructive pulmonary disease (COPD), about 110m have diabetes and more than 80m Chinese citizens are handicapped. Altogether this creates a vast and growing demand for various high-end medical devices.
 
  1. Beijing’s commitment to extend healthcare to all citizens
A 3rd driver of China’s expanding healthcare sector is Beijing’s healthcare reforms launched in 2009 and its current 5-year economic plan, which prioritizes a "Healthy China". According to a 2016 World Bank report, ”Since the launch of the 2009 health reforms, China has substantially increased investment to expand health infrastructure; strengthened the primary-care system; achieved near-universal health insurance coverage in a relatively short period; reduced the share of out-of-pocket expenses - a major cause of disease-induced poverty - in total health spending; continued to promote equal access to basic public health services; deepened public hospital reform; and improved the availability, equity and affordability of health services. It has also greatly reduced child and maternal mortality and rates of infectious diseases and improved the health and life expectancy of the Chinese people.”
 
The share of healthcare expenses covered by the government is expected to increase from 30% in 2010 to 40% in 2020, but current regional differences in access to and quality of healthcare are expected to remain in the near term. China’s current economic plan, which was approved in 2015 and adopted in 2016 is responsible for a number of well-funded and aggressive healthcare reform programs, and increased investment in healthcare infrastructure. The plan also encourages private capital investment to improve service quality and meet the public’s diverse, complex and escalating healthcare needs.
 
Bifurcated MedTech market

These three healthcare drivers have significantly benefitted Western MedTech companies who leveraged their pre-existing products and business models and served China’s fast growing and underserved high-end MedTech markets with sophisticated medical devices. Chinese domestic MedTech companies, which today are comprised of about 16,000 small-to-medium sized light manufacturing enterprises on China’s east coast, participated in the low end of the global value chain and mostly produced Class I and II cheap disposable medical devices, which required simple forms of manufacturing or assembly, but created large numbers of jobs and made a significant contribution to poverty reduction. This mutual dependence gave rise to a bifurcated market and reflected the type of foreign direct investment that China attracted at the time and the relative lack of capacity of the domestic labour force.
 
The foreign sourced market segment has been served historically by large, well-resourced Western MedTech companies such as Medtronic, General Electric (GE), Philips, Siemens, Zimmer Biomet  and DePuy Synthes. Before 2009, such companies enjoyed a near monopoly supplying their pre-existing high-end medical devices to large Chinese hospitals (see below). US MedTech companies were the #1 foreign supplier of such offerings, followed by Germany and Japan. These 3 countries represented the overwhelming majority share of China’s imports of medical devices.

PART 2

China the end of the el Dorado for Western MedTech companies
 
Between 2003 and 2009 foreign direct investment in China’s MedTech sector was concentrated in low-value-added activities. This pattern reversed during 2010-2018 and enabled Chinese MedTech companies to move up the value chain and develop more sophisticated manufacturing processes, increase their R&D capacity, enhance their post-market services and begin to penetrate more segments of the higher-value-added Class lll MedTech markets. As this happened so the predominance of Western MedTech companies providing high-end product offerings was reduced. This shift suggests that late entrants to the China market may struggle.
 
A 2017 survey conducted by China’s New Center for Structural Economics, covering 640 Chinese export-oriented labour-intensive companies across four sectors between 2005 and 2015 suggests that upgrading low-tech industries is pervasive throughout China. “’Technology upgrading’ was the firms’ most common response to their challenges: 31% of firms ranking it top and 54% in their top three responses. Tighter cost control over inputs and in production was next (top for 27% of firms) and changing product lines or expanding markets was third most common (24%)”, says the report.
 
Taking share from Western companies

To-date domestic Chinese MedTech companies have captured about 10% of the technologically intensive segments of endoscopy and minimally invasive surgery as measured by value, and 50% of the market in patient monitoring devices and orthopaedic implants. Only 5 years ago Western companies such as Zimmer Biomet  and DePuy Synthes controlled 80% of the Chinese high-end orthopaedic market segments. Further, about 80% of China’s market of drug-eluting stents, (medical devices placed into narrowed, diseased peripheral or coronary arteries, which slowly release a drug to block cell proliferation), which is another relatively high-end therapeutic device segment, is controlled by Biosensors International, Lepu Medical, and MicroPort. These three Chinese companies market drug-eluting stents, on average, for about 40% less than their Western counterparts. Just over a decade ago 90% of this market was controlled by Western MedTech companies. Similarly, Chinese companies have increased their domestic market share of digital X-ray technologies to 50%. In 2004 they had zero share of this market.
 
Made in China 2025
 
In May 2015, Beijing launched “Made in China 2025” (MIC2025), which is a national strategy to enhance China’s competitive advantage in manufacturing. Increasing competition from developing nations with similarly competitive costs, coupled with technology-driven efficiency gains in developed countries, means that China’s abundance of cheap labour and the competitive advantage of its infrastructure will soon be insufficient to drive sustainable economic growth. MIC25 is expected to redress this by comprehensively upgrading, consolidating and rebalancing China’s manufacturing industry, and turning China into a global manufacturing power able to influence global standards, supply chains and drive global innovation.
 
The strategy names 10 sectors, including medical devices, which qualify for special attention to help boost the country’s goal of accelerating innovation and improving the quality of products and services. The initiative incentivizes domestic Chinese companies, including SMEs, to increase their usage of artificial intelligence and digital technologies to move up the value chain and capture a greater market share from their Western counterparts. MIC2025 is explicit about China reducing its reliance on Western imports and includes subsidies, loans and bonds to support and encourage domestic companies to: (i) continue increasing their capacity, (ii) devise lean business models that emphasize “affordability”, (iii) increase their R&D, (iv) expand their franchises overseas, and (v) acquire foreign enterprises with cutting-edge technologies. The initiative  also addresses issues of quality, consistency of output, safety and environmental protection, which are all considered strategic challenges to China’s development.
 
Beijing expects MIC2025 to increase the market share of Chinese-produced medical devices in the country’s hospitals to 50% by 2020 and 70% by 2025, enable Chinese companies to compete with Western MedTech giants by 2035 and make China a world MedTech leader by “New China’s” 100th birthday in 2049. The initiative is expected to quickly spread beyond China’s borders as its leading manufacturers seek to develop global supply chains and to access new markets. MIC25 is important for the next stage of China’s emergence as an economic superpower and its ambition to design and make the products of the future required not only by the Chinese consumer, but consumers around the world.
 
US attempts to halt MIC25

While many Western countries are debating how to respond to MIC25 Washington sees the initiative as a well-defined, well-orchestrated strategy, which is “unfair and coercive” because it includes government subsidies and the “forced transfer” of technology and IP to enable the Chinese to “catch-up and surpass” American technological leadership in advanced industries.  An August 2018 US Council for Foreign Relations response says, “MIC25 relies on discriminatory treatment of foreign investment, forced technology transfers, intellectual property theft, and cyber espionage”. In June 2018 Washington sought to halt the policy by levying punitive tariffs on Chinese imports into the US and blocking Chinese-backed acquisitions of American technology companies.
 
The commercial effects of increased tariffs are unclear

It is not altogether clear how successful Washington’s punitive tariffs will be because they could unsettle the US medical supply industry given that a growing number of product offerings marketed in the US are made in China. MRIs, pacemakers, sonograms and other medical devices manufactured in China and imported into the US are all included in the list of items subject to the increased US tariffs. Some estimates suggest that the tariffs will cost the American medical device industry more than US$138m in 2018, and about US$1.5bn every year there after. According to AdvaMed, the US enjoys a trade surplus with China for medical products and rather than grow US productivity, the tariffs could result in less trade and a smaller surplus in medical devices. Whilst protectionist, the MIC25 initiative is permitted under World Trade Organization rules as China is not a signatory to the Agreement on Government Procurement, which covers state run hospitals. Further, historically healthcare products have been excluded from tariffs on humanitarian grounds and because they are seen as an asset to public health.
 
Western companies ‘encouraged’ to localize their value chains
 
Although Beijing is seeking to reduce its dependence on imported medical devices, it has not shut-out Western companies who are expected to continue to be significant high-tech market players in the short to medium term. This is because such international trade is crucial to facilitate China’s access to global knowhow and technology. But Beijing has amended its procurement and reimbursement policies to incentivise hospitals to purchase domestically manufactured medical devices and introduced tough conditions on companies seeking to do business in China. To qualify for inclusion in China’s new hospital procurement arrangements Western companies are obliged to localize their value chains and partner with domestic enterprises. Some companies have done so, while others have been reluctant to localize their value chains because of China’s weak record of IP protection. Beijing is aware of this and is streamlining and strengthening its IP prosecution system (see below).
 
Western importers seriously handicapped
 
Importers who choose not to localize their value chains face a number of significant non-tariff barriers. Unlike other Asian countries such as Japan, China has no national standard for tendering and bidding and there are significant differences between its 34 provincial administrations and 5 automatous regions. Further, China has a dearth of large ‘general’ distributors. Western MedTech companies importing product offerings into China are obliged to engage small-scale distributors dedicated to one sector, one imported brand and one type of product. Such distributors are ill-equipped to effectively navigate China’s vast hospital sector (see below) and its complex, rapidly changing and disaggregated procurement and reimbursement processes. A clash of sales cultures is a further disadvantage for Western MedTech companies’ whose marketing mindset is product-centric territory driven, while winning sales strategies in China and in other emerging markets are customer-centric key-account driven.
 
China’s vast hospital sector
 
One dimension of the challenges faced by Western MedTech companies who are obliged to engage small-scale distributors is the enormity of China’s hospital sector. China has about 30,000 hospitals, which have increased from about 18,700 in 2005, serving a population four and a half times that of the US across a similar land mass. By comparison, the US has some 15,500 hospitals and England 168 NHS hospitals. About 26,000 hospitals in China are public and some 4,000 are private. Although public hospitals in China provide the overwhelming majority of healthcare services, this is changing.  Recently, Beijing has loosened its regulations and private sector healthcare has witnessed an influx of private capital. Over the next decade, China’s private healthcare sector is expected to see new hospital chains, expansion of existing hospitals and improvements in a range of private healthcare services. Currently, Western participation in the Chinese private healthcare market is nascent but expected to grow over the next decade.
 
China’s hospitals provide about 5.3m beds, compared with about 890,000 in the US and 142,000 NHS beds in the UK. Chinese public hospitals, which are the biggest consumers of Western medical devices, are categorized into 3 tiers according to their size and capabilities. The largest are tier-3 hospitals of which there are about 7,000. These are 500-bed-plus national, provincial or big city hospitals, which provide comprehensive healthcare services for multiple regions as well as being centres of excellence for medical education and research. There are about 1,500 tier-2 hospitals, which are medium size city, county or district hospitals. Together teir-2 and 3 hospitals represent about 3.5m acute beds. Tier-1 hospitals are township-based and do not provide acute services. There is a range of specialist hospitals, which are also significant users of imported high-end medical devices. Further, Beijing is beginning to develop primary care facilities, which are normal in North America and Europe, but underdeveloped in China.
 
Mega private hospitals
 
Healthcare in China has traditionally been the monopoly of the central government. However, Beijing’s recent relaxation of the rules on private investment referred to above has triggered an explosion in the number of private healthcare facilities and the development of mega hospitals on a scale not seen elsewhere in the world. For example, Zhengzhou Hospital, which is nearly 700km south of Beijing and can be reached by bullet train in under 3 hours at a cost of about US$45, was officially opened in 2016 and was dubbed the “largest hospital in the universe”. Zhengzhou is a mega-city with a population of 10m and is the capital of east-central China's Henan province. The hospital has some 10,000 beds, facilities are spread across several buildings and over 28 floors and it has its own fire department and police station. In 2015, the hospital admitted some 350,000 inpatients and treated 4.8m people. In one day in February 2015 the hospital received 20,000 out-patients. 
Centralizing procurement
 
Most noticeable among the changes taking place in China’s procurement processes for domestically produced medical devices is the development of centralized e-commerce facilities, which are expected to increase efficiency and reduce spiralling hospital costs. The initiative is a partnership, announced in 2018, between IDS Medical Systems and Tencent’s digital healthcare subsidiary WeDoctor, to establish China’s first smart medical supply chain solutions and procurement company, which in the near term, is expected to dominate the Chinese market by becoming the “Amazon of healthcare”. Tencent is the world’s 6th largest social media and investment company and IDS Medical Systems is a Hong Kong based medical supply company with an extensive Asia-Pacific distribution network, which represents over 200 global medical brands in medical devices and consumables. 
 
WeDoctor, was founded in 2010 to provide online physician appointment bookings, which is an issue in China and patients often stand in-line for hours from 2 and 3 in the morning outside hospitals to get brief appointments with physicians. From this modest beginning WeDoctor has rapidly evolved into a US$5.5bn company, which employs big data, artificial intelligence and other digital tools to deliver cutting-edge healthcare solutions and support services to over 2,700 Chinese hospitals, 240,000 doctors, 15,000 pharmacies and 160m platform users; and these numbers are expected to increase significantly in the next few years.
 
Underpinning WeDoctor’s business model and differentiating it from Western endeavours such as Google’s DeepMind, is the freedom in China to collect and use patient data on a scale unparalleled in the West. WeDoctor is designed to leverage Tencent’s significant complementary strengths, innovative resources and networks in order to centralize device procurement by connecting domestic MedTech companies with China’s vast hospital network. WeDoctor’s ability to manage petabytes of patient data, its knowledge of and favoured position in China’s hospital procurement processes, its rapid and sophisticated distribution capacity and central government support, positions WeDoctor to have a significant impact on the procurement of medical devices in China and beyond in the next five years, and this is expected to provide domestic companies with a further competitive edge.
 
Localizing the value chain in China

Manufacturing in China has been an option only for larger Western MedTech companies with the necessary management knowhow, business networks and finance to bear the costs. Companies which have localized their value chains and support the MIC25 initiative include Medtronic and GE Healthcare.
 
Medtronic
Medtronic, the world’s largest MedTech company, has had a presence in China for the past 2 decades and has established local R&D facilities to design products specifically for the needs of the Chinese market and crafted partnerships with provincial governments to help educate patients about under-served therapeutic areas. In 2012 Medtronic acquired Kanghui Medical, for US$816m. In December 2017 the Chinese government approved sales of a new pacemaker, which is the product of a strategic partnership between Medtronic and Lifetech Scientific Corporation. In January 2012 Medtronic paid US$46.6m for a 19% stake in Lifetech and a further US$19.6m for a convertible loan note. The agreement called for LifeTech to develop a line of pacemakers and leads using its manufacturing plant in Shenzhen, (population 13m). Medtronic supplied “technology, training and support” and LifeTech provided local market expertise, brand recognition and growth potential within China. The alliance has made Lifetech the first Chinese domestic manufacturer with an implantable cardiac pacing system with world-class technology and features. In 2015 Medtronic entered into a partnership with the Chengdu’s (population 14.4m) municipal government in the south west of China to enable people with diabetes in Chengdu and the broader Sichuan province (population 87m) to access a new, locally produced next generation sensor augmented pump system with Medtronic’s SmartGuard technology and software displayed in the Chinese language. Medtronic’s 2017 revenues from its China operations amounted to US$1.6bn, 5% of total revenues, and US$3.4bn from other Asia-Pacific countries, 12% of total revenues.
 
GE Healthcare
GE Healthcare is the largest medical device manufacturer in China and China is a key manufacturing base for GE. GE started conducting business in China in 1906 and today has over 20,000 employees across 40 cities in the country. One third of GE's ultrasound probes, half of its MRIs and two thirds of its CT scanners, which are marketed globally are manufactured in the Chinese cities of Wuxi, Tianjin and Beijing respectively. These devices and others are now subject to a punitive US tariff levied in June 2018. “We remain concerned that these tariffs could make it harder for US manufacturers to compete in the global economy, and will shrink rather than expand US exports,” says Kelly Sousa, a GE Healthcare spokesperson.
 
Rachel Duan, president and CEO of GE China explains that, “GE China has been investing in people, processes and technologies throughout the value chain so that it can design, manufacture and service products closer to customers. This goes beyond market and sales localization, to product R&D, manufacturing and product services." GE has pinpointed localization, partnership, and digitization as the three key initiatives to drive its future development in China. In May 2017 GE opened an Advanced Manufacturing Technology Center in Tianjin, its first outside the US, and has partnered with over 30 Chinese engineering, procurement and construction (EPC) companies. "With a global footprint and depth of localized capabilities in China, we are partnering with customers and helping them win both in China and worldwide by connecting machines, software, and data analytics to unlock industrial productivity," says Duan. 
 
Changing IP environment
 
Medtronic and GE Healthcare provide object lessons of how best Western MedTech companies might leverage commercial opportunities in China. But many remain reluctant to manufacture in China because historically the country’s legal system has been weak in prosecuting IP infringements and more recently they have been further handicapped by Washington’s response to MIC25. For many years, when dealing with China, Western companies have faced a combination of IP challenges, which included litigation with low level damages, an inability to effectively enforce judgments, an inability to patent certain subject matter and a lack of transparency on legal issues. This amounts to substantial disincentives for Western companies to localize their value chain in China. However, the country’s IP environment is changing. In 2017 Beijing spent some US$29bn for the rights to use foreign technology, with the amount paid to US companies increased by 14% year-on-year. China’s IP legal system is maturing and has improved in the scope of allowable patent subject matter to enhancements of litigation options. However, Western reluctance to localize production in China is not only influenced by the country’s weak IP protection and recent trade tensions with the US, but also by ethical concerns and the perceived need for more predictable rules and institutions about environmental and regulatory issues.
 
All this, together with two decades of growth in developed nations and the continued performance of the US stock market might be enough for some MedTech companies to turn-away from China, but could such a reaction dent their futures?
 
Takeaways

This Commentary describes some of the near-term challenges facing Western MedTech companies looking to offset increasing challenges in their home markets by extending their franchises in China. We have suggested why operationalizing this strategy in the short term will be tougher than 5 years ago, especially if Western MedTech companies are reluctant to innovate and transform their strategies and business models. China presents a challenging dilemma for Western companies: either they manufacture in China and support that nation’s endeavours to become a world class manufacturing platform or they progressively get squeezed out of markets. Whatever Western companies decide, we can be sure that their near to medium term futures will be shaped by maturing developed world markets, encumbered by short termism and aging infrastructures and a rising Chinese economic power with state-of-the-art infrastructures and significantly enhanced capacities and capabilities. But how long can China sustain its rise?
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Who should lead MedTech?

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  • The MedTech industry is undergoing an era of unprecedented change
  • Pressure on revenues and margins have forced leaders to cling tightly to business as usual
  • In the next decade business as usual will come with significant commercial risks
  • For commercial success future MedTech leaders will need to be different to past leaders
 
Who should lead MedTech?
 
Questions about who should lead medical device (MedTech) companies in the future and what strategies and business models they should pursue are critical. Over the next decade MedTech faces an era of unprecedented change, when it will be necessary to develop new strategies, new business models, new markets, new capabilities and new technologies, while keeping the legacy business running. Future MedTech leaders will be tasked with bridging the gap between traditional manufacturing and sophisticated, digitally driven services while managing unprecedented change and significant competition. For the past 20 years MedTech leaders have been drawn from a relatively narrow set of people with a relatively narrow set of skills. Although this has served the industry well, it might not be the most appropriate policy to ensure commercial success over the next decade.
 
In this Commentary

In this Commentary we: (i) describe the traditional MedTech market, indicate the structure parameters of the industry and note that there is a rapidly evolving parallel digital healthcare technology market: one that is growing more than twice as fast and soon will be comparable in size to the traditional manufacturing-based market, (ii) suggest that MedTech leaders tend to be men in their 50s with limited understanding of this parallel digital healthcare universe, which is positioned to play a significant role in  shaping MedTech companies of the future, (iii) suggest that because MedTech leaders have performed relatively well over the past two decades, they have tended to become prisoners of their own traditions and felt little or no need to evolve their strategies and business models, (iv) contend that MedTech leaders’ principal response to market changes to-date has been increased M&A activity, which has made companies bigger but not better, (v) suggest that the industry is undergoing a significant market shift from manufacturing to solutions and services driven by the 4th industrial revolution, which is characterized by a fusion of technologies, and (vi) conclude that future MedTech leaders will require a deep knowledge and understanding of the 4th industrial revolution if they are to successfully transform traditional strategies and business models in order to deliver superior healthcare solutions at lower prices.
 
MedTech market and the structure of the industry

MedTech is a conservative manufacturing industry, which produces and markets a diverse group of product offerings predominantly in a few developed wealthy markets. Over the next decade the MedTech market is expected to change significantly. For the past two decades the industry has fallen into three broad segments: (i) diagnostic products, which include imaging devices, with a global market of some US$100bn, (ii) medical aids including consumer durables, such as hearing aids and bandages with a worldwide market of about US$150bn, and (iii) surgical products that include equipment and instruments used in the operating room, which has a global market of some US$140bn.
 
A 2017 EvaluateMedTech report suggests the global MedTech market is projected to eclipse US$500bn in sales by 2021, over 33% of which is expected to be derived from the US. The worldwide market is projected to continue growing at a compound annual growth rate (CAGR) of 5%. Ranked by 2017 revenues, seven of the world’s largest MedTech companies are American and a significant proportion of the world’s MedTech companies trade on Nasdaq. This includes 13 large companies with a market cap in excess of US$10bn, some of which are divisions of even larger corporations such as Johnson & Johnson Medical Devices and Diagnostics, with estimated global sales of US$38bn for 2018; this equates to approximately 7.6% of the worldwide MedTech market. Medtronic, which is the world's largest stand-alone MedTech company, has a market cap of US$117bn and in 2017 recorded revenues of US$29.7bn; 26% of which was generated in the US. Nasdaq has about 24 mid-cap MedTech companies ranging in value from US$2bn to US$10bn. The majority of these are American and tend to be regionally based with relatively small markets outside the US, Europe and Japan. There are some 27 small-cap companies with market caps between US$300m and US$2bn, 46 micro-cap companies ranging from US$50m to US$300m and finally some 28 nano-cap MedTech companies with market caps less than US$50m.
 
In recent years, a digital healthcare technology industry, where medical devices meet innovative software, has grown substantially, but mostly in parallel to the traditional manufacturing-based MedTech industry. According to Transparency Market Research, in 2016 this industry, which is based on healthcare information systems and wearable devices, had annual sales of US$180bn, and is projected to grow at a CAGR of 13.4% between 2017 and 2025, reaching US$537bn in annual sales by the end of 2025.
 
MedTech executive leadership
 
There is a relative dearth of data specifically on MedTech leaders and the demographics of MedTech C-suites (senior executives which tend to start with the letter C). Notwithstanding, there are data on Fortune 500 and S&P 500 company leaders from regular surveys undertaken by executive search firms Korn Ferry, and Spencer Stuart. Some of the larger MedTech companies, such as Abbot Laboratories, Baxter International, Stryker and Boston Scientific, are listed in the Fortune 500 and S&P 500. If we assume a significant similarity between the demographics of Fortune 500, S&P 500 and MedTech company executives, then MedTech leaders will tend to be white males in their 50s, predominantly drawn from similar sector company C-suites and will have an average tenure of about eight years.
  
Middle-aged men
 
Over the past 20 years MedTech leaders have benefitted from the industry’s commercial success, albeit in recent years at a slower pace than before 2007. Most leaders are constrained by quarterly earnings targets, shareholder expectations, regulations and the high risk and cost associated with changing manufacturing systems. MedTech CEOs received their formative education before the widescale uptake of the Internet and email. Many had just started their careers in large corporations when giant technology companies such as Amazon (launched 1994) and Google (1998) in the US and their Chinese equivalents - Alibaba (1999) and Baidu (2000) - were start-ups, and the Chinese and Indian economies were still somewhat underdeveloped and inchoate. Consequently, most MedTech leaders were entering middle-age when US social media giants such as Facebook (2004), YouTube (2005), WhatsApp (2009) and Instagram (2010) and their Chinese counterparts such as WeChat (2011), RenRen (2005), Weibo (2009) and Youku (2005), were just taking off.
 
This might partly explain why some MedTech leaders appear to be challenged by the rapidly evolving new digital technologies and the industry’s shift from manufacturing to solutions and services. Such is the pace of change, it will require a shift of mindset among incumbent MedTech leaders if they are to fully grasp this new and significant opportunity set.
 
Similarly, with emerging markets. Most CEOs have knowledge of the wealthy MedTech markets, in particular the US and Europe. Few, however, have in-depth knowledge or first-hand experience of the large and fast-growing emerging economies such as Brazil, Russia, India and China (BRIC). The BRIC countries are at a similar stage of their economic development, and have a combined population of more than 3bn, which equates to about 40% of the global population. BRIC countries are differentiated from other promising emerging markets by their demographic and economic potential to rank among the world’s largest and most influential economies in the 21st century, and by having a reasonable chance of realizing this potential.
 
A future HealthPad Commentary will examine the opportunities for Western MedTech companies seeking or expanding their franchise in China and will suggest that they might not find it as easy as it would have been 5 years ago. Opportunities in China for global MedTech players are becoming tougher as the Chinese economy slows and restructures; Beijing’s healthcare reforms kick-in and local MedTech producers, buoyed by legislation, revenue growth and increased capacity, become commercially stronger, more technically sophisticated and take a bigger share of both the Chinese domestic and international emerging MedTech markets.
 
Underrepresentation of women
 
Not a single woman serves as CEO of a large MedTech company. Only 22% of their board members are women, which is about the same proportion as the Fortune 500 overall (20%), and about 22% of MedTech C-suites are women. In 2017, nearly 50% of the US labour force were women and 40% of these worked in management, professional and related occupations.  Although women are underrepresented in MedTech leadership positions they are key stakeholders in healthcare. About 35% of active US physicians are women. According to the Association of American Medical Colleges, (AAMC), 46% of all physicians in training and almost 50% of all medical students in the US are women.  60% of pharmacists in America are women.

It should not be forgotten that women have played significant roles in medicine and healthcare. For example, Marie Curie, the only person to win a Nobel Prize in two different sciences, pioneered research on radioactivity. Curie made a significant contribution to the fight against cancer and is credited with having created mobile radiography units to provide X-ray services to field-hospitals during World War I. Sussman Yalow, was awarded the Nobel prize in Physiology or Medicine in 1977 for the development of the radioimmunoassay technique, and Gertrude Elion won a Nobel Prize in Physiology or Medicine in 1988 for her work in helping to develop drugs to treat leukaemia and AIDS. More recently, Jennifer Doudna, and Emmanuelle Charpentier, were credited with the discovery of the ground-breaking CRISPR-Cas9 gene-editing technology, which effectively changes genes within organisms and is positioned to radically change healthcare and MedTech in the 21st century.

In addition to under-representation, which suggests that the pipeline of women candidates for top jobs in MedTech is weak, there is some evidence to suggest that the MedTech industry does not have a positive attitude towards women. Findings of a 2015 survey conducted by AvaMed, the industry’s principal trade association, suggest that women in the industry feel discriminated against. Some 42% of women respondents of the survey said they, “felt held back from senior leadership positions” and 37% felt “overtly discriminated against”. "The world cannot afford the loss of the talents of half its people if we are to solve the many problems which beset us,” said Yalow in her 1977 Nobel Prize acceptance speech.
 
MedTech’s business model
 
Over the past two decades MedTech leaders have drawn comfort from the fact that the global MedTech market is highly centralized. The US, Western Europe and Japan, which represent only about 13% of the world’s population, account for more than 86% of the global MedTech market share (US: 42%, Europe: 33%, Japan: 11%). Conversely, the BRIC countries, which represent about 40% of the world’s population, currently only account for about 5% of the global MedTech market. This has enabled MedTech leaders to market their product offerings to healthcare providers principally in a few wealthy developed regions of the world via well-compensated sales representatives with deep product knowledge and expertise. The industry’s predominant business model has been to raise prices on existing products and market new offerings at higher prices than the products they are meant to replace. This worked very well before 2007 during a period of sustained global economic growth, predominantly fees-for-service healthcare systems and relatively benign reimbursement policies; all of which contributed to high margins and significant sales growth.
 
Market changes not perceived as acute enough to trigger transformation
 
Since the 2008 recession the MedTech market has changed. The global economy has weakened, debt (sovereign, corporate and personal) has escalated, populations have continued to grow, and the prevalence of chronic lifetime diseases and multi-morbidities have increased. Over that period, healthcare systems have become fiscally squeezed, costs have become pivotal and impacted all stakeholders. This has led to: (i) a shift in healthcare systems from fees-for-service to fees-for-value (ii) increased consolidation, convergence, and connectivity of stakeholders and a consequent change in purchasing decisions from individual (fragmented) hospitals and clinicians to centralized procurement bodies, which can leverage economies of scale and negotiate for larger purchases at volume discounts, (iii) the decline of MedTech R&D productivity, and (iv) increased competition from new market entrants, often from different industries. MedTech’s gross margins have been squeezed and annual growth rates have slowed to a CAGR of between 4 and 5%. Notwithstanding, MedTech leaders, buoyed by continued but slower revenue growth, and doubtless comforted by a prolonged surge in US equity markets, have not perceived these market changes as being with sufficient acuity to transform their strategies or business models.  Their principal response has been to increase M&A. 
 
M&A main strategic response to market changes
 
Over the past decade M&A has provided MedTech leaders with a means to: (i) increase scale and leverage, (ii) drive stronger financial performance, (iii) obtain a broader portfolio of product offerings, (iv) enhance therapeutic solutions and (v) increase international expansion; without changing their companies’ fundamental manufacturing structures and strategies. According to a January 2018 McKinsey report, between 2011 and 2016, 60% of the growth of the 30 largest MedTech companies was due to M&A. The report also suggests that between 2006 and 2016, only 20% of 54 pure-play publicly traded MedTech companies, “mostly relied on organic growth”.  M&A activity has resulted in bigger MedTech companies but not necessarily better ones. This is because M&A and collaborative relationships have not encouraged healthcare providers to change their strategies and business models and develop powerful data-sharing networks, which help drive integration across the continuum of healthcare.
 
Need for portfolio transformation
 
Encouragingly, the 2018 McKinsey report also suggests that some MedTech companies are beginning to use M&A to acquire “non-traditional” assets, such as software and service companies, to assist them in transforming their portfolios. Notwithstanding, portfolio change in a rapidly evolving and increasingly competitive healthcare ecosystem requires a sound strategic understanding of the potential role that the 4th industrial revolution can provide for MedTech. Given our discussion so far, it seems reasonable to assume that many current MedTech leaders and C-suite executives might not have fully grasped the commercial implications of this revolution for their industry. Portfolio change in the MedTech industry is arguably more likely to be led by executives from, or with an intimate knowledge of, adjacent, service-based companies; those who have successfully employed sophisticated digital technologies and big data strategies to transform their business models and who are now looking to do something similar in MedTech and healthcare markets.
 
The relative slowness of the MedTech industry to transform its strategies and business models is perceived as an opportunity by giant technology corporations. They sense the disruptive potential, just as they do in financial markets due to Wall Street’s inertia to digital change.  For example, in early 2018, Amazon, Apple, Google, and Uber announced their intentions to enter and disrupt the healthcare market by leveraging digital technologies to provide quality healthcare solutions and services at lower costs.
 
Rather than marketing products, MedTech companies are now increasingly being tasked with marketing solutions that can deliver better care at lower prices. The 4th Industrial Revolution is a primary enabler for achieving this. However, given the demographics and the conservatism of the MedTech industry, it seems reasonable to suggest that companies in the sector, which do not adapt, run the risk of becoming simple commodity producers stuck in the middle of a new and rapidly evolving value chain.
 
The 4th Industrial Revolution

The 1st industrial revolution used water and steam to mechanize production, the 2nd used electric energy to create mass production, the 3rd used electronics and information technology to automate production. The 4th industrial revolution, also known as ‘industry 4.0’, is characterized by a fusion of technologies, which is blurring the boundaries between medical devices, drugs, software and patient data and redefining relationships between the physical, biological and digital worlds. These exogenous shifts are likely to demand different strategies, different business models and different leaders for the MedTech industry.
 
Industry 4.0 provides MedTech with an opportunity for portfolio transformation by developing sophisticated data and digitization strategies to enhance company operational and financial performance. Industry 4.0 is driven by greater connectivity via the Internet and computing devices embedded in physical objects and advanced digital technologies, which enable them to send and receive data to help integrate producers, suppliers, business partners and customers; at the same time providing opportunities for MedTech companies to become smarter, more efficient and fully-networked organizations.
 
Key for superior shareholder returns
 
To date, MedTech leaders have been relatively slow to integrate new and evolving digital technologies into their core business operations, although there are encouraging signs that some companies are beginning to do so. Findings of a 2017 report by the Boston Consulting Group, (BCG) suggest MedTech companies are, “masking unsustainably high costs and underdeveloped commercial skills” and relying, “on an outdated commercial model”.  The BCG findings are based on a survey of some 6,000 MedTech employees in commercial functions, more than 100 interviews with MedTech leaders and benchmarking financial and organizational data across 100 MedTech businesses (including nine of the 10 largest companies) worldwide. According to BCG, although the industry overall has made little progress to change its business model and upgrade its skill levels, the companies, which have done so, are winning in the market and generating superior shareholder returns.

MedTech leaders should not mistakenly think that because their companies hold plenty of enterprise data they are implementing industry 4.0 strategies. Often, enterprise data do not provide any competitive advantage whatsoever but are simply a legacy cost of doing business. New sources of data, and the ability to use data’s power, are essential to enhance a company’s competitive advantage. A next-generation enterprise resource planning (ERP) platform, launched by SAP in 2017, is already being used by service companies to provide them with a digital core, which helps to create real-time matrixed data produced by social media, third party information, genetics, the Internet of Things, points of sale, etc.
 
Shift from selling products to selling solutions

To remain competitive in the next decade MedTech leaders will need to employ artificial intelligence (Al), augmented reality, robotics, advanced sensors, the Internet of Things (IoT), blockchain, nanotechnology, 3D printing, petabytes of data, enhanced processing power and storage capacity to help them transform their strategies and business models and enable their companies to evolve from being product-centric to customer-centric, with an emphasis on digitization and the capture and communication of data. Industry 4.0 and the convergence of the physical, biological and digital worlds will fundamentally change MedTech strategies and business models, as decision-making powers continue to shift from manufacturers to other healthcare stakeholders. Critical to this transformation will be those MedTech leaders who are well positioned to ensure that companies remain competitive in their core markets while establishing new markets underpinned by 4.0 technologies.
 
"Out-of-touch leaders" the main cause of company failure

A book published in 2016 entitled Lead and Disrupt suggests that company transformations fail because of out-of-touch leaders rather than competition. According to Michael Tushman, co-author of Lead and Disrupt, “The things that help organizations execute their current strategy - the cultures they build, the structures they forge, the processes that work so well to get today’s strategy executed - actually collude to hold the organization hostage to that soon-to-be-obsolete strategy. The more firms engage in getting today’s work done, it actually reduces the probability of making shifts in innovation and strategy. That is what is so strikingly paradoxical to leaders: The very recipes that work so well for today often get in the way of the future. It’s a challenge to incrementally improve what you’re doing as you’re trying to complement it with something different. The dual strategies are inconsistent.”
 
Takeaways

Over the past two decades MedTech companies have helped to shape healthcare systems in wealthy advanced industrial societies and have been rewarded with commercial success. But just as the fund investment axiom tells us, past performance is no guarantee of future success.

Crucial to the future success of MedTech companies will be their leaders. We have suggested that employing recruiting criteria, which have worked in the past might not guarantee future success. The next 10 years will be an era of unprecedented technological change for MedTech companies when the boundaries between medical devices, drugs, software and patient data become blurred.

Business as usual, which has served the industry well in the past, is unlikely to bring continued commercial success in this new healthcare ecosystem. In recent years, investment in digital healthcare has soared and the momentum towards a digital future has gathered pace. Future successful MedTech leaders will be those who combine a deep understanding of the 4th industrial revolution to leverage sophisticated digital technologies and data to assist them in creating and delivering enhanced healthcare solutions at lower costs, with an ability to keep the legacy manufacturing business running.  

MedTech companies face a stark choice: either appoint leaders similar to those of the past and become challenged or appoint leaders able to integrate new and evolving technologies into the core of the business to create and market cost effective quality healthcare solutions and remain profitable. MedTech leaders might consider adopting the motto: tempora mutantur et nos mutamur in illis.
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