Contract Manufacturing of Complex Medical Devices

As Co-founder and former CEO of Source Scientific, a contract developer and manufacturer of clinical diagnostic and therapeutic devices, I spent over 33 years in the Medical Device Development and Contract Manufacturing industry. Since then, I have spent the last 10 years working with other companies to develop and commercialize new products.

Who Actually Manufactures Complex Medical Devices?

Many products that are marketed and sold in medical device markets are not actually manufactured by the companies (Brands) who name, sell, and support them. Typically known as outsourcing, this is where Contract Manufacturers (CM’s) enter the picture. CM’s are independent companies who provide economies of scale by aggregating the specialized production of multiple products from multiple companies. These products are produced under the Brand client’s name. These CM’s typically have no branding of their own nor do they market, sell, or otherwise compete with their own client companies. Instead, they add value by supplying critical, dedicated production resources on a fractional basis; all in a fully qualified and regulated environment. This allows their Brand clients to focus on their core businesses. These clients can be small, medium, and Fortune 500 size companies.

Why do companies use Contract Manufacturing?

CMs typically provide production capabilities on a private label basis to Brands that lack them or need additional capacity. Many of these Brands are focused on the ideation, sales and marketing of their own proprietary products and leave the actual production to CM’s that do it on a more cost-efficient basis. This allows the Brand to focus on developing its products within its core markets.

Brand’s use CM’s for a number of reasons. Shorter time to market can be one important factor. Many Brands lack the expertise, proper production facilities, and assets and thereby avoid the capital investment and setup time required. For some, it is a matter of the capital required to expand existing facilities to accommodate new products or growth of existing ones. Sometimes it is a matter of bottom-line cost when the CM’s facilities and expertise result in a lower COGS.

The Brand’s other consumable products can then be sold in high volumes once there is a companion product that enables it. The classic example of this is Gillette’s famous creation of the safety razor which allowed it to sell millions of razor blades.

The low end of the CM spectrum includes high-volume, low complexity, easy to produce products that are likely to renew and grow year after year. Most CM’s happily take on this business at extremely low profit margins; typically in the low teens to single digits.

At the other end of the spectrum are high complexity instruments that are expensive and complicated to produce. These devices command very high profit margins, but the demand simply does not compare to high-volume consumables. Unlike other types of mass-production contract manufacturing, HCLV products present a unique set of business challenges.

In the medical diagnostics world, this includes complex instruments that analyze specially developed blood chemistries. These instruments enable developers to sell billions of dollars of single-use chemistries. In these cases, the chemistry producers outsourced the development and production of complex, dedicated instrumentation. They sell the instrument once and then sell high-margin consumable chemistries for life.

Once a relationship has been established between a Brand Client and a Contract Manufacturer, it is very difficult and costly for the Brand to terminate or switch to an alternate. Therefore, it is critical to the success of the product that the relationship be carefully considered prior to full engagement. In some cases, a milestone process is considered before the final signoff of a long-term production agreement. For high volume, low complexity products, Brand’s may seek a backup producer from the very start. This is almost impossible, however, for High Complexity projects.

Overview of High Complexity, Low Volume Contract Manufacturing (HCLV/CM) of medical devices.

The remainder of this article focuses on HCLV products that are typically diagnostic or therapeutic devices considered as capital goods, not consumables. They include imaging, treatment, ophthalmic, laboratory analyzers, certain portable equipment, etc. They are big budget items that are sold as capital assets and used on a repetitive basis. End users may lease them or acquire them for thousands (or perhaps tens of thousands) of dollars. User revenue is typically on a per-use basis.

Often, employing a CM can be a matter of professional competence where the Brand Client must focus its expertise on its high-volume consumables or therapies instead of a new instrument.

Since CM’s are dependent on their client’s ability to market and sell the products, they typically seek projects that will run as long as possible. They rarely seek out one-time projects without some form of ancillary benefit. They look for projects that will reward the up-front investment with a predictable stream of long-term profitable business.

Issues Brand Clients should consider when identifying and selecting a Contract Manufacturer

There are dozens of CMs in the US and elsewhere. The challenge is finding a qualified one that meets specific needs and is willing to work with its Brand clients. Issues include:

• What is their reputation within the relevant industry? Are there references from other clients as well as vendors used by the CM.
• How big are they – overall revenue, staffing?
• What products do they focus on?
• How well do they protect the Client’s intellectual property?
• Does the CM’s location make it easy to distribute the manufactured product?
• Are they easy to access, especially during the production transfer phase? Are they across town or
• across the country?
• Are they ISO 13485 certified and FDA registered to the proper level? Any history of non-compliance?
• Track record and relevant expertise and experience with the technology to be produced
• How long will the production transfer process take?
• Is final production domestic or outside the US?
• International support for product sold outside the US
• Long term commitment for production and delivery
• Responsiveness to short and long term adjustments in product delivery demand
• Is the product within the CM’s current experience or will it have to develop new capabilities?

Typical terms of a Brand/CM agreement

• What are the upfront payments to cover fixed costs such as tooling, fixtures, setup, training, lack of credit.
• In addition to the upfront fixed cost, what deposit(s) are necessary to cover vendor deposits and pre-payments.
• What are the Brand Client obligations to take ownership and delivery of the product including volumes and delivery rates.
• Inspection, acceptance, and certification requirements prior to and after receipt of shipments.
• How advance deposits are credited to deliveries. How much of a deposit is allocated to each delivery?
• Invoicing and payment terms on delivered product
• Where will the finished goods inventory be held – Brand Client, CM, third party?
• Is the Client charged for storing finished goods inventory?

Issues a Contract Manufacturer may consider when quoting a project to a Brand Client

Here is a summary of things a Contract Manufacturer will evaluate when taking on a HCLV client. In the end, they must determine if it is profitable and has acceptable and controllable risks. There are a variety of upfront costs, deposits, and delivery terms to be assessed and negotiated. A new HCLV project can take a considerable amount of integration time, effort, and expense before recurring production can begin.

Client relationship

To accept a new project from an existing or prospective client, the CM first evaluates it on a strategic basis. The technology must fit it’s capabilities and resources. It must determine if the project poses a resource or confidentiality conflict with current client projects. To decide if it will take on a new Brand client, it may consider the following:

• Client reliability – Time in business, credit worthiness, and prior history of working with CM’s
• Assessment of target market of client’s product. Is this a known, well understood market or is the Brand client entering a new market with few predicate examples of success?
• What is the client’s potential profit margin when reselling the delivered product? A thin selling margin may mean future cash flow issues.
• Client order demand flexibility – How reliable will the Client’s delivery demands be?

Product considerations:

• Required safety protocols for handling material and operating the equipment
• Post-market surveillance and compliance requirements
• Product lifecycle maintenance
• Special skills, certifications for production staff
• Special proprietary processes and production equipment required for production

Other issues:

• Scalability of product
• Understanding of target market
• Probability of follow-on projects
• Internal product technology competence

In the end, CM’s of high-complexity medical devices typically negotiate 40% to 60% profit margin on transfer price. However, the difficult questions are “what is total cost, what is transfer price, and how is it calculated?” Simply put, cost is the sum of direct material, labor processes, and allocated overhead. Calculating this can be a formidable task as the product complexity rises.

Profit margin is the ratio of profit/price (not profit/cost). In other words, a selling margin of 60% is the same as 2.5 times the loaded BOM cost ($40 cost x 2.5 = $100.00 with $60 profit)

Ultimately, there are two main funding requirements that the Brand Client must cover – prepayments and payments for delivered product.

For the upfront prepayments, there can be multiple components:

• Technology transfer and production setup costs including assembly and test fixtures, process development and validation, documentation, etc.
• Advance deposits, prepayments, and minimum purchases required by vendors and passed through to the Brand client.
• Additional security deposits required by the Contract Manufacturer.

Delivered product costs are typically the sum of:

• Bill Of Materials (less any adjustments for prepaid vendor deposits)
• Direct labor for assembly, test, and handling
• Allocated overhead for production equipment and processes

These components are subject to negotiation and will depend on the size and nature of the project, Brand Client’s creditworthiness, history of relationship between the Brand Client and CM, and the anticipated market for the product.

Step 1 – Technology Transfer and Fixed cost analysis

The entire product design must be initially transferred to the CM. This includes documentation, production processes, creating production fixtures and software, establishing the component supply chain. This also includes validation of quality control and regulatory documentation.

Considerations include:

• Ease of transfer – Is the client (or the products original design and engineering firm) able to provide all necessary details, support and control of the design and engineering of the product? How will they respond with any necessary engineering changes to accommodate production issues?
• What outside tooling will be required for custom molded and machined parts.
• What assembly and test fixtures must be engineered, built, and validated to enable assembly line production of the product?
• What production and test software must be created to operate test fixtures and verify performance of the product in-process and completed?
• What production floor processes must be designed and documented?
• What training is required for production staff?
• Verification of any special handling requirements such as hazardous substances or restricted materials?
• Effort required to incorporate the new product into the Brand Client’s existing ISO and FDA regulatory processes.
• Calculation of factored overhead including general and applied fixed costs. (For example, If the new project occupies 10% of available production space, does that mean it requires 10% of rent, taxes and insurance?)

Once these costs are understood, will the Brand Client be asked to cover these costs up front, or will they be amortized for future deliveries or otherwise absorbed?

Step 2 – Material Supply Chain Issues

These are issues that must be researched and addressed to arrive at a fully costed Bill Of Materials (BOM). It should be researched using the client’s projection of total demand and anticipated delivery schedules.

• Are any of the components and materials designated to be provided by the Brand Client? Why?
• If so, will there be compliant QC controls in place?
• Which components are considered Critical To Quality (CTQ)?
• Are there clear acceptance criteria established for these components?
• What are the incoming quality control requirements for CTQ material?
• Will the vendors provide certifications for these components and materials?
• Must special processes be set up for incoming inspection and testing of these components and materials?
• Review of all specified vendors in the client supplied BOM. Have they all been pre-qualified by the Brand Client?
• Do any of them pose quality control or lead time issues?
• Are there any special cost issues (such as scheduled or bulk delivery) that improve cost?
• Are any of these components already used by the CM on other projects?
• If so, can this relationship improve the delivered cost and delivery terms?
• Will the CM reject any of the specified vendors for cost, quality, or business reasons?
• Is the finished product subject to any “Made in USA” or other content requirements?
• If so, what is the acceptable content allowance?
• Are the designated vendors able to meet the required delivery demand?
• What is their responsiveness to changes in deliveries or lead times?
• Have alternative vendors been designated?
• Do any vendors require advance payment or minimum bulk deliveries?
• Will advance payments to vendors be included in the deposit advance by the Brand Client?

Step 3 – Pilot Production and Process validation

Before continuous production can commence, a pilot production run must be performed using the newly created supply chain, processes, production and test fixtures. The Client then takes delivery and verifies that the finished product complies with all requirements. Any exceptions must be corrected by the CM or accepted by the Client. Upon acceptance, the CM can commence regular production and deliveries of the product.

Step 4 – Finished Goods Production and Transfer Pricing

Transfer pricing is the final amount billed to the client for each finished unit shipped under the agreement. It is based on the cost and volume of delivered products plus an agreed profit margin. Most CMs operate on a transparent, “Open Book” basis where the Brand Client can see actual vendor pricing.

It should include the following:

• Updated BOM cost
• Direct labor for assembly, calibration, burn-in, and testing
• Outside processes – molding, machining, anodizing, coating, sterilization. etc.
• Factored overhead
• Gross profit markup
• Billing and payment terms

Once the product is sold and delivered to a user, what are the demands for Field and Depot Servicing?

• Does the product require on-site installation, calibration, or maintenance?
• Will it need on-site servicing?
• Will the client handle service or rely on the CM?
• Who will perform the necessary servicing?
• Where will the servicing be performed?
• Will the product be returned to the CM for service or exchange?

Recommendations

Any Brand Client considering outsourcing a HCLV project to a Contract Manufacturer should develop a thorough review process of the necessary tasks and issues involved. An experienced manufacturing professional can help greatly in this regard.

Creating Phagetech

It started with a story.

I had spent the prior 30 years in the medical device business when I was introduced to Dr. Reg Penner and Dr. Greg Weiss, both professors at UC Irvine. I had just sold my last business, Source Scientific, and was a member of the UC Irvine Chancellors Round Table, a group of business executives that support the University.

During the last 30 years, many of my clients, most of them in the medical diagnostic business, were constantly looking for ways to extend the reach of medical testing and therefore grow their businesses. Back then, most blood and urine testing was performed in dedicated labs, a practice that goes back almost 100 years. They realized that testing needed to move closer to the patient, commonly referred to as “Point Of Care”. A few tests, such as pregnancy testing, had already made the move. Hundreds of tests were still confined to a lab and most of the global population had little or no access to modern healthcare.

When I walked into Dr. Penner’s lab, I immediately realized what he and Dr. Weiss had created. Their invention promised the ability to detect diseases, including cancers, on the surface of a chip.

Within days, I was on the phone with the licensing people at the UC Irvine legal department. I knew this technology, if fully developed, filled an emerging need to move diagnostic testing closer to the patient. This saves time, money, and can greatly improve healthcare.

Using the funds I had made from selling my former business, I created a company I called PhageTech, LLC and obtained the exclusive world-wide rights to the patents from the University.

The name came from the technology, which originally depended on the characteristics of a harmless virus called bacteriophage*. The two professors discovered how they could produce an electrical signal when they were exposed to something harmful such as a cancer cell.

Within a year, it was obvious that it would take far more funding than I personally had to turn this into a functional, commercializable technology. So, in 2015 we raised another $2.2m and created PhageTech, Inc.

Thus began a challenging chapter for PhageTech’s efforts to change the world.

Although it turned out to be more challenging than originally hoped, the emerging technology, now called CarePoint, promises to become an important contribution to healthcare.

Rich Henson

(*The word bacteriophage literally means “bacteria eater”)

Heart Failure – Solving an Intractable Problem

At the far end of the heart disease spectrum is Heart failure. Most sufferers will tell you it can be depressing. It’s when your heart muscle is beating but gradually losing enough strength to pump adequate amounts of blood, nutrients, and oxygen. It usually starts out on a minor level and progressively gets worse. It has numerous causes but generally only one outcome. In the US, roughly 670,000 people are diagnosed with some form of heart failure each year. It’s the main reason people older than 65 go to the hospital.

Like other diseases, heart failure has stages. The final stage (or end-stage) is the deadliest when not treated. End-stage sufferers cannot do most simple tasks or even get up without gasping for air. They sit around all day waiting for the inevitable. Medications, stimulators, and palliative care all help with symptoms but there are almost no effective treatments except a whole-heart transplant or an LVAD. If you are lucky enough to qualify for one of these, you might get a part of your life back. A few more precious years to add to your life.

Whole heart transplants work quite well for those few qualifying patients who can survive the procedure and are lucky enough to be matched with a donor. The population of older adults is growing, however, and qualified donors are getting harder to find. (Some people point to the improved safety of cars for this) These factors mean that human heart transplants will never scale up to meet the growing demand. Ultimately, only about 2% of end-stage patients per year receive a whole-heart transplant.

A motorized LVAD can also save your life. If your heart has failed to the point where it simply cannot pump enough blood to keep you going, then an LVAD might do it for you. Again, only about 2% of end-stage patents qualify for this.

LVAD’s are tiny electric pumps that are sewn into the left ventricle of the heart. They spin 24 hours a day, boosting blood flow. They are manufactured devices, so they aren’t limited by the lack of human donors nor the uncertainty of a match. Living with an LVAD comes with a profound lifestyle cost, however, that can be brutal.

The Tyranny of LVAD

Like I said, LVAD’s save lives. However, only a small minority of end-stage heart failure patients qualify or are given the option. Not every patient can tolerate the surgical procedure. Not every patient wants to live with the brutal consequences.

Implanting the device involves highly invasive surgery, permanent attachment to the ventricle of the heart, and direct contact with circulating blood. Once implanted, there may be no going back. Then there is the cost of the procedure, recovery, and follow-up.

Once successfully implanted, the patient has a permanent drive line (wire) that pokes through your body so that an external battery pack can be attached. Instead of a pulse, the electric blood pump runs continuously 24 hours a day, powered by batteries. The patient usually has a shoulder pack to hold these batteries underneath their clothing. Freshly charged replacement batteries must always be readily available. You no longer have a pulse. Swimming is out of the question. Intimacy is challenging.

Hospital readmission rates are high with LVAD patients. Many readmissions are related to stroke or life-threatening infections at the site where the driveline penetrates the body. Power failures become very scary if you are denied the ability to keep your batteries charged. If your batteries die, so do you.

What’s next?

As I indicated earlier, human heart transplants will never scale. The population of older people continues to grow as improved treatment for cancers and other diseases means more people are now dealing with heart disease.

Currently, only one company has an FDA approved LVAD on the market in the US, doing almost a billion dollars per year on only about 2% of the addressable market. This leaves about 95% of end-stage heart failure patients without a viable intervention beyond hospice care.

There is intense corporate interest in filling this “white space”. The problem is not expected to be solved with a blockbuster drug treatment. It calls for an implantable device that addresses the dual issues of effectiveness and energy efficiency while being small enough to be completely implanted with nothing sticking out of your body.

Not long ago, a researcher at Caltech wanted to understand how the human heart pumps enormous amounts of blood so efficiently. He figured out how to mimic the natural motion of the heart with an outer sleeve that supports it and gives it strength. The result is a naturally efficient heart support device for those with heart failure. It is small enough to be implanted and efficient enough to not require an external drive line. This device, known as Helix Cardia, is under development now and will eventually be available to patients.

Will this become the next blockbuster treatment for heart disease?

You can see more about Helix Cardia here: https://valvention.com

Want to learn more about heart failure?:
American Heart Association – AHA: https://www.heart.org/en/health-topics/heart-failure
Center for Disease Control – CDC: https://www.cdc.gov/heartdisease/heart_failure.htm

Help save a life. Consider signing up as an organ donor: https://www.organdonor.gov/

The Taliban of Infectious Diseases

Covid is the Taliban of infectious diseases.

The real enemy is the Covid virus, and it is winning. Mindlessly taking over targets and leaving waste behind. This enemy is supported by those who don’t really recognize how deadly it is. The pandemic is impacting all of humanity, even those not (yet) ill.

Are too many people confusing freedom from mask wearing with freedom from a crippling pandemic?

Real freedom from mask wearing and social restrictions comes from winning the battle with this disease, not from fighting vaccination mandates in schools. Proponents are our allies, not adversaries.

The enemy is not the people who want to enforce masks and vaccinations. The enemy is a virus that keeps figuring out how to become deadlier and more infectious. The more it spreads, the smarter it gets. Will the next variant find new ways to be even more infectious? The sooner we stop it, the less opportunity we give it to mutate again.

We know how to win the first battle – build our immunity and block opportunities to jump from person to person. We can starve the virus of the resource it craves – our bodies. All in a matter of weeks.

How do we really regain the freedom we deserve? Not just for the upcoming school year but long term?

The more difficult battle is getting all of us to work together. We must win over those who are skeptical. Those who see a lurking conspiracy instead of the real enemy.

You want your freedom back? Then fight the real enemy. Fighting this pandemic is a team sport. Are you on the team or not?

Thank goodness we have the technology to develop these defenses so rapidly. Give it the chance it deserves and win the battle.

Freedom always comes with a price tag.

RWH

Covid is the event, but not the story.

The real story is far more profound. We can avoid millions of deaths. The story begins with a simple test.

Arguably, improving the availability of testing and treatment has a more powerful effect on global health than the quality of treatment alone. Diagnostic and therapeutic solutions that are half as effective but reach 100 times more people will make a bigger difference.

Every year or so, a new epidemic rages somewhere. It has been that way for millennia. There is evidence the disease originally known as the “plague” struck civilization over 5,000 years go. Each time, our society suffers major social and economic setbacks.

Today, we seem conditioned to accept some level of disease as a way of life. Every year, people get sick and die as a result. Influenza is a good example. In many of these cases, it takes too long to determine the cause and deliver the right help. It’s not just the disease, but our ability to detect and react quickly.

Globally, we spend billions constantly inventing better preventions and therapies for diseases. This effort has yielded incredible improvements in healthcare.

As efficacy steadily increases, however, the parallel problem of availability is preventing these advancements from reaching the majority of the population. It has been estimated that 4/5ths of the global population does not have reliable access to adequate healthcare.

The challenge begins with early, cheap, and and fast detection. After all, there is no treatment without detection. It must be highly available to affected populations. For example, the Gates Foundation, known for delivering vaccines and treatments to developing countries, uses information gathered from detection to decide where to focus their resources.

Take a look at my August 4, 2020 article on Availability for a discussion on self-testing.

And remember, fighting a pandemic is a team sport. We are all in this together.

RWH

The “Availability Thesis” in Healthcare

Availability. How one simple healthcare concept impacts millions, perhaps billions of people.

Not since 1918 has the world been so focused on the devastating effects of infectious disease on our society.

The last 100 years or so has brought us the most dramatic healthcare improvements in the history of humans. Lifespans have doubled. People living into their 100’s have become increasingly common. An increasing number of people now get to die of “old age” instead of acute cancer or infectious disease.

Then, along comes a devastating pandemic. In 6 months, 100 years of progress feels like it’s gone.

Availability of healthcare enables all other factors that are shaping our descendants future. Arguably, it will have the single, most profound effect on the development human society.

Ironically, the benefits of modern healthcare are not reaching enough people. Availability is not advancing fast enough. Witness the long lines of people to get a Covid-19 test. Waiting times for their results often come too late to be effective. The reasons for this are varied. The solutions are starting to emerge.

“Availability” begins with self-testing. This means that testing for disease is cheap, accurate, easy to use. It must always be there no matter who, when, or what is needed. Self-testing includes many forms of non-invasive methods. It begins with simple things like monitoring your blood and heart. It must include infectious diseases like Covid-19 and influenza. It must be able to quickly identify which antibiotic is safe to use. It should also include the ability to screen and monitor chronic conditions like cancers.
“Availability” enables earlier treatments that are more affordable and easier to access. These treatments can be more precise, with less wasted time and resources.
“Availability” reduces overall healthcare cost and dramatically improves productivity and our economy.

Diagnostic testing for human diseases is stuck in a 50 year-old model. More diagnostic testing must shift away from remote labs to the point of care, where the doctor is. This allows your doctor to make faster, better informed decisions. From there, it needs to shift from “point of care” to “point of need”, where the patient is. Only then, will healthcare become truly democratic, allowing the most control of health by the individual. Many tests can now be performed with easily obtainable samples like saliva, urine or stool. Clever new devices are emerging that allow us to take blood painlessly by ourselves.

Self-testing is faster and does not require the attention of other trained healthcare professionals or protective equipment. It eliminates the burden of traveling to the collection site, shipping samples to labs and enduring the backlog and wait times involved.

Technologies that enable the shift of testing are beginning to emerge at a faster pace. Advances in chemistry and biology promise self-tests that can deliver results rapidly, much like the home pregnancy tests that are now available at the drug store. Stay tuned for more information on these developments.

Next time – The Healthcare Imperative

Covid-19 – Making the Invisible Visible

Why is the Corona Virus so scary? How do we know where it is?

How many times have we seen this story? Ebola, Zika, SARS? Every year or two produces a new infectious disease that threatens the world. History has many other examples. Consider the 1918 flu epidemic that killed an estimated 100 million. Disease knows no political or cultural boundaries. It will never stop.

Face it, driving your car has a much higher chance of injury or death but when you drive you have a greater sense of control over your situation. It just isn’t as scary.

Not knowing where this virus is lurking scares us. It is invisible. You won’t know if you have it until it is too late and you feel helpless. Infected people can carry it around for days innocently infecting other clueless people. Only people with symptoms are being tested. This is not stopping the spread of the disease.

To find out where it is lurking, many more people with no symptoms should be tested. This includes anyone who has any chance of exposure. Current testing is done with lab tests that take time to develop, manufacture and may not be available to everyone. Saliva samples must be collected and sent to a lab. It takes trained professionals, time, money and the process puts even more people at risk.

What if you could see the virus? What if people can test themselves at home, get an instant result and report it electronically? All without trained professional help at a fraction of the cost.

This would make the invisible visable. You could take control of your risk.

Such a test could be developed in days instead of weeks. It could be cheaply manufactured by the millions. It could sit on the shelf for months without spoiling.

Such a test is currently under development. Where? Look at my previous article written just a few months ago called “Solving for Availability” Click here:

Solving for Availability

Solving for Availability

(Please note: This article was written last November, months before before the Covid-19 outbreak. The technology I describe here can make a profound change to a massive unmet need in healthcare. Please read on…)

Fixing one of the fundamental problems in healthcare – How a tiny innovation in biosensing is challenging current models.

Healthcare innovations emerge all the time. Most never really address one of the most basic problems – availability.

Only about 1/5th of the world has regular, affordable access to modern healthcare. The remaining 80% have limited access or no access at all. Developing countries are challenged by lower income levels and the tyranny of distance between people and modern healthcare facilities. Even in well-developed countries, availability is a challenge for many.

Successful modern healthcare depends on quickly and accurately diagnosing each disease or condition. Earlier testing and diagnosis usually results in a faster, easier and cheaper recovery. Healthcare costs drop considerably and people can get back to their normal, productive lives again. Cancers caught early are easier and cheaper to treat. Infectious diseases that are caught and treated early can save thousands of others catching it, minimizing the impact of epidemics.

Lowering the impact of diseases has a powerful effect on the world economy. People earn more while spending less of it taking care of themselves.

Many diseases are diagnosed by testing blood, urine or other body fluids. Most of these tests are performed in a clinical laboratory using patient samples obtained at a doctors office or special blood drawing facility. The patient’s sample is then sent to a lab for processing. Results take many hours to several days. This system is inflexible and the basic model hasn’t changed much in 50 years.

Bottom line – current methods of blood testing are too hard, too expensive, take too long or are too far away to help many people. These factors add up to a lack of availability world wide. Improving availability is one of the foundations of change.

An emerging technology from the University of California, Irvine is aiming to radically challenge this problem.

The Irvine researchers proposition is simple. Instead of making people travel to the point of care, bring the diagnostic test directly to the patient – to the actual Point Of Need. It must be accurate, fast, cheap, easy and very portable.

How does it work?

The researchers have created remarkable biosensors that are tuned to detect unique biomarkers for each disease. These tiny biosensor chips connect directly to a microprocessor. The result is a direct fluid to digital converter that instantly reports the presence of each disease marker. The entire process works on the spot and bypasses the need for a special lab.

Just like digital chips, these biosensors will be manufacturable in mass quantities at a far lower cost. They will enable a new generation of portable diagnostic testing that can be delivered directly to patients. This means more in-home testing as well as mass testing of remote populations in developing countries. The complete testing process will be done by minimally trained people or even the patients themselves. Results can be uploaded instantly to the cloud and sent securely to the proper health care provider.

This innovation brings blood testing into the exploding world of “point-of-need” testing and healthcare. Just like other emerging point-of-need products that monitor your cardiac functions, blood sugar, exercise and diet – point-of-need medicine will have the same impact on our lives as mobile digital.

Irvine based PhageTech, Inc. has been developing these biosensors for widespread use. They have invested over $5m to transfer this technology out of the university lab and create a commercializable and manufacturable version. They are now ready to work with partners who can create the actual point-of-use applications. They are hoping for the first FDA cleared version in the upcoming months.

You can learn more about PhageTech’s biosensor technology at http://www.phagetech.com

RWH

Why Some Great Healthcare Innovations Die in Obscurity

How is it that some amazing medical innovations never make it and die in obscurity? Even if they work brilliantly, some innovations suffer an early death and are forgotten.

Boiling it down to a single word – adoption. In MedTech, adoption issues are critical to commercial success. There are multiple adoption factors and no single factor can assure success. This is true of drugs, devices or therapies. Established companies do a better job of focusing on adoption issues but they are not immune.

I spent 30 years developing great technologies dreamed up by other people. Such is the nature of contract product development. In our case, we specialized in medical devices, mostly ones that test blood and urine samples for patients. These devices would then fill up clinics, medical offices and labs where your samples go after you offer them up to a nurse or lab worker. The client would then make money manufacturing and selling the critical chemistries that are consumed by the machines for each patient sample.

One day a client approached us with a very sophisticated blood test they developed. This was an advanced version of a test commonly prescribed by cardiologists and other clinicians. Just about every patient in the country has had the common test at one time or another. However, it was thought, this new one would change the world.

Their new version of this test was more sensitive and far more detailed than the currently accepted test. They were certain that their new test was so powerful that it would easily take over from the well-worn test that everyone already knew. They planned on selling it to virtually every hospital and lab in the country before moving on to the rest of the world.

This client hired us to design and engineer a bench top machine that would run this new test in high volume. They would then have the machine manufactured in volume and sold everywhere. They would make a small fortune selling the special chemistries consumed by the machine for each patient sample. We spent over two years and at least $2 million of their money to create exactly what they wanted.

We never finished the project.

It seems that during these two years, the client was reaching out trying to drum up sales for a system that customers could not get excited about. I wanted to understand why.

One day I visited my own cardiologist, one of the top in his field, for my annual checkup. Afterward, I asked him if he knew about this new test.

He said “yes”

“Would you ever order it for your patients?” I asked.

“No”, he said dryly.

“Why not?”, I asked.

“Because it does not change the way I treat my patients”, he told me.

That was it. Game over. I knew this company was facing strong headwinds to commercialize their new test. The company eventually shut down.

I realized that doctors and other clinicians simply do not adopt new tests, methods or therapies simply because they are better. It takes a lot more than that. In healthcare, adoption takes a lot more than just being the newest or greatest.

I witnessed the same effect with another client that had invested tens of millions on an easier way to screen women for risk of breast cancer. Again, there were dreams of changing the world of breast cancer diagnostics. Women could be diagnosed years earlier, making preventative treatment easier. In spite of the evidence, low cost and ease of use, the clinical professionals simply did not adopt it. Again, the company shut down.

Adoption

Look at it from the clinical professionals point of view. Under what circumstances will they want to adopt a new device, drug, test or procedure? What are the risks and rewards? Would you want to be treated by a doctor that wants to try out anything new that comes along?

Many people already understand that new healthcare innovations must be tested first in the lab and later on animals and people. It takes far more than that, however. Here are some key points:

FDA Approval – Although the FDA does not specifically endorse a drug or device, they do evaluate and approve them based on the claims of the manufacturer and documented clinical trial results. They evaluate safety and efficacy and approve the Indications for Use. In general, you cannot legally sell a drug or device to a patient or healthcare provider without FDA approval (there are exceptions but that is a separate article).

Clinician Adoption – Key Opinion Leaders (KOL’s) in the field must endorse the technology. They must be Independant professionals who are respected in their fields. They get first hand experience with it and then publish objective results in professional journals. They also present their findings at professional conferences and give presentations to other professionals. Clinician familiarity with the technology is also critical. Drug and device companies have critical programs in place to provide detailed support information and training on the use, risks and outcomes of the technology. Clinicians also depend on positive patient awareness (see below).

Professional Adoption – Many times the gold standard in adoption are recommendations from professional organizations such as the American Medical Association (AMA), American Hospital Association (AHA), etc. This can be a long road to achieve but the rewards are huge.

Institutional Adoption – Once you have clinician adoption, the institutional providers (hospitals, clinics, etc.) must get a favorable view of the technology. Sometimes a key institution (such as a university clinic or hospital) must embrace the technology, at least for a trial period. Successful results must be evaluated and published. Providers look at a different set of criteria to evaluate success. This includes cost, risk, reimbursement, recidivism, reputation and more. They want to understand the total impact of adoption.

Third Part Payer Adoption – Insurance companies and government programs such as Medicare must approve and adopt the technology or there may be no reimbursement. Typically, they look at efficacy and long-term cost savings. They are less likely to approve and pay for controversial treatments.

Patient Awareness – Patients rely heavily on the recommendations of clinicians and institutions they trust. They can be strongly influenced by media promotions such as magazine ads and TV commercials. This is why you see massive amounts of money spent advertising products that you cannot buy yourself but must be prescribed by a doctor.

What has been your experience? Write me with your own stories.

RWH

“The future ain’t what it used to be”…(Yogi Berra)

I grew up among all sorts of stories about the future. It seemed to be an obsession at the time.

A few of these stories painted glowing pictures about how technology will make our lives effortless. Think about Disney’s feature “Our Friend The Atom” and their iconic “Carousel of Progress” Oh, and don’t forget “The Jetsons”.

Even more of these stories, however, paint dire pictures of distopian futures. In the late 1800’s H.G. Wells wrote “The Time Machine” and later “Things to Come”. Other famous works included George Orwell’s “1984” and “Blade Runner”. More recently, the “Hunger Games” novels have been popular.

I don’t know why we are obsessed with such dire predictions, but it seems that we don’t seem to think much of our distant future. Or do we?

Although we fantasize about how dysfunctional the future will be, our actions go in the opposite direction.  Businesses are inventing how to get more or better for less. (Think Uber and Air BnB)

In medical technology, the same is true. Although a few innovations raise the cost of healthcare, more strive to reduce costs and improve outcomes. Improved healthcare improves overall productivity and actually benefits the economy.

People now live longer. This trend will continue for quite a while. Traditional views about working and retirement are being challenged. Modern healthcare keeps you alive longer. What does this mean? Do people really want to live longer? Will people with a low quality of life be forced to live longer? How long will they have to work?

In Albert Brooks near-future novel “2030”, he describes a future where the older generation has dominated the working world and the younger, unemployed generation is revolting against them.

I think the truth will be different. Of course, I am an optimist but there is a lot of evidence to support this belief. In future posts, I will be exploring a few of these issues.

Stay tuned.

RWH