More than two years since the world lurched into crisis due to the outbreak of Covid-19, the medical device industry saw a return to revenue stability in 2022. However, with growing supply chain challenges, geopolitical conflict, surging inflation, and global economic downturn, the sector has not been without complications.
Overall, an analysis of 2022 MedTech company revenues suggest that industry growth normalised during the year. An Ernst & Young Pulse of the Industry report highlights that companies with over $500 million in revenues saw growth drop to 6% in 2022, compared to the record-breaking rates of over 16% seen in 2021.
In certain sub sectors, the pandemic is having a lasting impact on product development. A GlobalData analysis from the pre-pandemic period to 2022, revealed that the proportion of in vitro diagnostic (IVD) products amongst devices under development has significantly increased. The surge in IVD production is a trend predicted to continue over the next few years.
“As a result of Covid-19, nations around the world massively ramped up their capacity for conducting molecular testing, with many of the leading nations now able to conduct such testing at a mass population level,” explains Ashley Clarke, GlobalData medical device analyst. “Long after the pandemic subsides, countries will find themselves with an increased capacity for molecular testing including clinical grade genomic sequencing. This is reflected in both upgraded infrastructure and the emergence of a highly skilled biomedical and bioinformatics workforce.”
Major milestones of 2022
Innovation across the IVD space is touching all indications, with diagnostic tests for metabolic disorders, and other infectious diseases such as hepatitis and HIV expected to contribute to product demand as Covid-19 testing declines globally. The widespread use of lateral flow assays during the pandemic also broadened the application of point-of-care testing outside of traditional healthcare settings.
“It’s possible that the pandemic helped new molecular diagnostic technologies such as CRISPR gain wider acceptance in healthcare in a way that didn’t happen during previous public emergencies such as the Ebola epidemic,” says Clarke.
On the regulatory side, 2022 was another busy year for FDA breakthrough medical device designations. By mid-2022, the FDA had issued 129 designations, putting it on track to beat the record of 206 that it set in 2021.
The rapid adoption of telemedicine products during the pandemic continued to drive an increase in healthcare IT development. Although the proportion of new products has decreased somewhat in recent months, the pipeline of products in development still grew in 2022 according to a GlobalData analysis. The sector also showed signs of being a long-term revenue gainer, as top medical device companies competed to acquire or develop the latest health IT innovations.
“Looking back at 2022, one clear trend transforming the medtech landscape, is the ongoing convergence of traditional medtech (physical device businesses) and the rapidly growing range of healthtech software and AI businesses,” says Paul Mussenden, CEO of cloud-based software company Cydar Medical.
“With the significant amount of capital injected into the healthtech sector over recent years and the consequent rapid advancements in artificial intelligence (AI) technology, AI is making a significant difference in the healthcare settings,” says Mussenden.
AI has the ability to analyse large quantities of complex information, make sense of it, and present actionable insights in a useable way, he adds. “This allows clinicians and medtech companies to access valuable insights to help personalise care for patients and to drive efficiencies in the clinical workflow.”
Mussenden says there has been a notable increase in the number of collaborations and acquisitions between the medtech industry leaders and other healthtech and tech companies. In January, Johnson & Johnson joined up with Microsoft to help build a cloud-connected software ecosystem around its digital surgery efforts. In April, Medtronic’s Aortic signed a collaboration with Cydar Medical for its cloud and AI based image-guided surgical solution, as well as Affera Inc, which provides a navigation platform for cardiac arrhythmia treatment.
“In each case, medtech companies are progressing longer term digital and AI strategic plans, with the goal of improving device performance, personalising medicine, and making their devices smarter,” says Mussenden. “We have also seen larger tech companies making strategic acquisitions of AI platform companies like Microsoft’s acquisition of Nuance, which already have the infrastructure that can be easily integrated into the parent company.”
Overall, the industry is embracing technology that connects people and allows them to collaborate more easily to provide optimal care. “This is another example of the value of cloud technology: connected care, where people don’t need to be together to collaborate effectively. They can share information, images, and large bodies of data seamlessly, supported by AI tools, to transform the value that can be derived from that,” Mussenden says.
On the patient side, health systems saw more patients opting for remote monitoring technologies and other telehealth tools as a means of receiving care. An increased use of data analytics and healthcare IT is expected to lead to a larger emphasis on home healthcare, particularly remote monitoring of discharged patients to reduce hospital readmission rates.
“One of the major reasons for the lack of hospital capacity in Western economies is the inability to safely discharge some patients due to their living circumstances. Thus, improving home healthcare over the next few years will allow more patients to be discharged safely,” says Clarke.
2022 medical device spend
Globally, medical device spend varied in 2022, with all geographic regions spending less compared to 2021. The largest decrease occurred in the Asia-Pacific region (-6.5%), with the spend for Covid-19-related devices also decreasing dramatically. However, normal growth rates are predicted to continue in all regions from 2023 onwards.
Another key influencer for 2022 revenue trends was the Ukraine-Russia conflict. Although medical devices were not directly impacted by sanctions, the industry felt the hit due to worsening economic conditions that affected the ability of the private sector to operate.
The Russian Federal Service for Surveillance in Healthcare expanded a list of medical devices that encountered shortages in Russia to cover over 1,600 device types. The list included products such as immunohistochemical tests, tumor marker tests, defibrillators, and multi-channel electrocardiographs.
“The conflict has encouraged the Russian government to reduce their need for medical device imports and bolster their domestic device industry. Therefore, Russian manufacturers that can provide this service are expected to see expedited approvals,” notes Clarke.
In the post-pandemic years, product development is expected to move towards cancer indications to address the pent-up demand for treatment, particularly delayed diagnoses, and interventions. Looking beyond 2022, GlobalData’s Pipeline Product Database starts indicating a medical device landscape that is less concerned about devices to tackle orthopedic and infectious diseases, to one where cancer is taking an increasingly prominent role.
“Some of the technology unveiled during Covid will undoubtedly find applications in new IVD for cancer, helping to provide earlier and more accurate diagnosis,” says Clarke.
However, with the global economy ripe with uncertainty, the industry will face challenges over the coming year. “While this can be a tumultuous period, the industry is healthy and continues to invest in itself,” says Jim Welch, EY Global Medtech Leader. “R&D spending is well above the past-decade average, new FDA approvals offer promise of more innovation and there’s an opportunity for supply chains to be reinvented. If the industry can focus on making itself more resilient, there is a lot of optimism to be had.”