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New Zealand’s medtech exports are already worth more than $1.5 billion a year, but medtech veteran Faye Sumner says government procurement and regulatory changes in play could either hamper or turbo-boost the high-potential sector.
When NBR spoke to Sumner late January, most people were still shaking sand from their hair, but Sumner was fizzing with a sense of exigency. After three decades in medtech industry leadership roles, including nearly 21 years as chief executive of the Medical Technology Association of New Zealand (MTANZ), she is stepping down from the role in June.
“I’ve been so passionate about and committed to this, it’s going to be very hard to let go,” she said. “That’s why I want to take this knowledge … the potential for New Zealand is huge. I’m running out of runway,” said Summer, who was made a Companion of the New Zealand Office of Merit in 2018, and who previously was New Zealand manager for American medical device company Davis and Geck.
The sector is complex, containing many moving parts, much like a ventilator, which comprises 1000 different parts from 120 different global suppliers, each with a different patent. Innovation is intrinsically dependent on collaboration between many players – hospitals, clinicians, researcher, industry, and procurement bodies.
Sumner said: “Medical devices are developed at the bedside, not in the laboratory. And medical devices are useless unless they reach the patient.”
Innovation is also eye-wateringly fast. “Devices develop with iterative improvements every 18 to 24 months, they move fast. And if New Zealand doesn’t move with it, it’ll get left behind with what’s coming, Sumner said.
“DHBs [district health boards] need to be incentivised to work with clinicians and industry [on medtech trials].”
As healthcare costs balloon, “we have to deliver healthcare in a different way, more efficiently and effectively. Technology is part of the solution, it’s not the problem, and government policy is going to be vital to that: that it doesn’t stifle the very innovation we need.”
Vibrant and fast-growing
MTANZ is the main industry body representing medical technology manufacturers, importers and distributors of medical devices in New Zealand. The country imports 95% of devices used domestically, but local manufacturers comprise a growing sector. Devices include anything from PPE to hip implants, cardiac stents, MRI scanners, in vitro diagnostics, surgical instruments, to dental equipment.
The healthtech sector – comprising medical devices, digital health and IT products, diagnostics, and therapeutics – has shown steady export-driven growth over the past five years, according to a report by Technology Investment Network (TIN) in association with the Consortium for Medical Device Technologies (CMDT). The industry and government-sponsored report, published last April, calculated that healthtech companies in New Zealand generate $1.9b in revenue (about two-thirds from device companies), with a five-year compound annual growth rate (CAGR) of 9.1%, and employ 7636 people globally.
US is the biggest export market (40%), followed by Europe (25%), Asia, and Australia. The average sector wage is $85,000, about 40% above the national average and equating to $245,000 revenue generated per employer.
“While there are just 22 healthtech companies with more than $3.6 million annual revenue – the threshold required for inclusion in the TIN200 – a further 163 companies provide a rich pipeline of early-stage innovation and investment opportunity,” the report said.
Of the 200 companies in the 2019 TIN report, 11% are healthtech firms, yet they generated 15.4% of the TIN200 revenue.
“If we’re looking to improve New Zealand’s productivity, this is an area where investment will deliver,” Sumner said.
Investment
While investment money is pouring into the health sector globally, Sumner said private investors and government needed to channel more investment into the Kiwi medtech ecosystem to support its role in the economic recovery.
Private investors needed to understand that it was a long game: “With medical technology, you don’t see your return on your investment easily for 10 years. If you talk to Fisher & Paykel Healthcare, for every dollar you spend on research and development, you need five times that to cater to the global market, in terms of sales and marketing.”
“We need an innovation-focused policy. Government needs to shift from volume to value with an economic plan now for our sector.”
Covid has been a double-edged sword. As with many export sectors, upheaval from supply chain disruption and travel bans have hurt local companies, who can’t easily travel to target markets to demonstrate their new devices in person. About 85% of medical technology imports arrive by airfreight, and lead times have stretched from six to eight weeks to five to six months. Global shortages of materials, especially polypropylene for PPE, plus freight costs have pushed up prices (a Kiwi arm of a German multinational that normally pays $400,000 for a shipment of renal dialysis equipment was getting quotes of $1m at the peak, Sumner said).
However, the crisis also spearheaded new levels of innovation, cross-sector partnerships, and collaborative problem-solving. The challenge, Sumner said, was to keep that going. If implemented, key recommendations from the Health and Disability Sector Review would support this: namely, culling DHBs from 20 to between eight and 12 (“that doesn’t go far enough,” Summer said), more national collaboration under a new central health agency, a greater emphasis on population health, and less duplication.
Covid also exposed massive holes in health data collection and sharing, also highlighted by the report as an area that needed overhauling.
Value-based procurement
Sumner pointed to two changes afoot in the health sector that could make a big difference to medtech. The first was a shift in procurement of medical devices from individual DHBs to Pharmac, expected to take effect in the next two to three years.
MTANZ is working closely with Pharmac as it develops a model for the procurement of medical devices. Sumner said this model will necessarily be different from its drug-buying model, under which assessments can take years and the approach has been to wait for generics to contain costs.
Sumner said: “There’s no such thing as a generic medical device. It’s just old technology.”
It would also need to avoid a ‘one-size fits all approach’ and ensure choice for health providers.
There was an opportunity to move from what Sumner called “cost-based procurement” – the current approach that is chiefly concerned with keeping upfront costs low, is volume-based, and involves no measure of patient outcomes – and “value-based procurement”, which considers the value of a device in the context of a patient’s entire treatment and outcomes. Data collection was critical to this shift, which would likely foster greater emphasis on early diagnostics for better outcomes. The Ministry of Health was doing work on joined-up data collection, she said.
“It’s where global healthcare is going,” Sumner said.
The second policy area was a new therapeutic products regulatory regime that will replace the Medicines Act 1981. Under the new regime, devices used in New Zealand will need to be registered as meeting international quality and safety standards. Currently there is only a requirement for them to be notified on a database, though “99.9%” have been audited overseas,” Sumner said.
“We need to have a register here, that’s a given, but we do not want to see a great big regulatory bureaucracy set up that’s going to cost this industry at a time when the pressures on price and cost are extreme.
“We need to be very careful that government policies don’t introduce cost or time-to-market barriers.”
Hospital and clinician buy-in
The Productivity Commission’s draft report, ‘Frontier Firms’, called healthtech “vibrant and fast-growing”, but noted sector feedback suggested a major handbrake, with a few exceptions, was the lack of support by DHBs.
The report said DHBs stand to benefit from hosting clinical trials of new devices in several ways: efficiency and therapeutic gains, attracting and retaining clinical staff, reputation, and catalysing uptake across other DHBs.
But participation in clinical trials is currently neither mandated nor rewarded. There’s no framework for DHBs for collaborating with industry, no targeted innovation funding, and siloed working “means that companies need to work separately with individual DHBs – across which cultures, mindsets, priorities, and risk tolerance can vary widely.”
Sumner said access to DHBs was vital for both local arms of multinational device makers, whose engagement brings investment and builds capacity for local startups, and for local players, who use New Zealand as a launch pad to develop and validate products for export.
“If you talk to Fisher & Paykel Healthcare, their relationship with Counties Manukau DHB over 20 years has been critical to the development of their product, because the engineers work with clinicians in ICU [intensive care unit]. They realised that ICU has so much technology, they had to make it smaller and interconnected.”
The Productivity Commission report also mentioned Canterbury DHB and Waitemata DHB as two boards that have consistently supported innovation despite investing “quite small” funds.
Sumner said five or six multinationals were running clinical trials in New Zealand DHBs.
“With the health and disability reform, we have an enormous opportunity to incentivise hospitals to engage in innovation,” Sumner said.
That could involve clinicians helping identify problems to be tackled with new medtech to give them a sense of ownership, or even the ability for hospitals to take a stake in IP, as universities currently do through their commercialisation bodies.
Future
After leaving MTANZ, Summer will continue her directorships on various health-focused boards, including the NZ Heart Foundation and NZ Standards Approval Board. She was a founding member of the Global Medical Technology Alliance, which comprises 30 national or regional medtech associations representing companies that develop and manufacture 85% of the world’s medical devices.
Internationally, major trends in medtech include data-hungry artificial intelligence and machine learning, robotics, and 3D printing, Sumner said. Medtech will increasingly play a role in advances in broader goals around health equity and personalisation.
“We need an innovation focus policy. Government needs to shift from volume to value with an economic plan now for our sector.”
By Nicola Shepheard
Senior Journalist
Contact the Writer: nicola@nbr.co.nz
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