The spate of vertical integration in the healthcare sector is leading medtech companies to up their use of data to prove positive outcomes and value, as they eye Amazon and others disrupting traditional ways of doing business.
As providers, payers and newer entrants like Amazon, Apple and CVS make the biggest headlines in combining, medical technology companies are scrambling to adapt.
“Vertical integration 10 years ago was pretty much nonexistent,” noted Ivan Tornos, worldwide president, BD interventional urology & critical care, speaking at The MedTech Conference sponsored by AdvaMed, taking place in Philadelphia.
Now, he said, several factors are driving medical device companies to think differently, not the least of which includes forays by the likes of Amazon, but also consolidation among the legacy giants like Medtronic.
Exact Sciences looks at the consolidation of payers, providers and others as all about improving outcomes and cutting costs, spurring it to prove the value of its tests.
"That’s the approach we’ve taken – we’re asking you to make a bet on a new technology," said David Harding, senior vice president for business development at Exact, which sells a colorectal diagnostic test that can be done at home with a doctor's prescription. Exact recently inked a deal with Pfizer to co-promote the product.
Both Exact and BD said they are increasingly sharing the risk with payers as a way to prove the value of their products.
"One of the ways we are mitigating risk is putting our money where our mouth is," Tornos said, adding that about 50 percent of its portfolio is in a capitated structure. "Sometimes you win, sometimes you lose."
The biggest private U.S. payer called that the right approach.
"Talk to me about risk, talk to me about shared risk," said Ted Langan, senior VP at UnitedHealth Group's Optum and a former longtime exec at Baxter. "We're all ears."
His further advice to device makers: “Don’t sell parts and pieces (one device) – sell solutions. ... if you can put together outcomes, programs that impact the larger ecosystem that we are operating in – now you have our attention.”
The Amazon threat is keeping everyone on their toes. UnitedHealth bought Optum years ago, before much of the Amazon moves and the CVS-Aetna bid, but it still sees Amazon at its back. Langan said the payer seeks to be “internally disruptive enough so we don’t have an external disruptor … an Amazon … that blindsides us.”
Exact and BD both hope to partner with Amazon to help it promote its products.
“If you can’t beat them, associate with them,” Tornos said.
It's a relatively new stance for the industry, noted management consultant Brian Chapman, a principal at ZS Associates.
"What worries me ... [is we are] asking medtech to do a lot of things that historically you’ve not been good at."