BB&T Contributing Writer

MINNEAPOLIS — The largest amount ever — $2.7 billion — was invested in med-tech companies in 2006, with the 1Q07 figure of $1.1 billion already trending to top that figure. That med-tech investing total represented 10.2% of all U.S. venture dollars in 2006, and 1Q07 again already tops that percentage so far, at 15%.

These numbers highlighted the opening remarks of Ralph Weinberger, a partner with the Technology Industry Group of PricewaterhouseCoopers (Minneapolis) at the 6th Annual LifeScience Alley/International Business Forum (Minneapolis/IBF; Long Island, New York) held here last month. Weinberger added: “Over the past 11 years of tracking this type of data, 2006 also produced, on average, the largest sized deals.”

Against this backdrop Phil Nalbone, senior research analyst for RBC Capital Markets (San Francisco), cited a large cloud behind med-tech’s silver lining: “It has also become a difficult area to invest in, with challenges never greater, especially in terms of highly regulated, reimbursement-driven, intellectual property-mediated issues. All of these things mean more investment risk.”

With the abundance of money flowing into med-tech companies, come higher expectations for delivery of success. Although investor receptivity and curiosity in this sector is the highest ever — because the deals are larger and more frequent as initial investors continue to re-up their dollars — tolerance for poor execution has decreased significantly. Private investors are seeking a higher return on their risk-burdened investment than they might receive from the public markets.

Steve Shapiro, a technology partner with Galen Associates & Advanced Technology Ventures (Palo Alto, California), queried a panel of venture capitalists — their answers highlighting longer roads to “exit,” tough reimbursement issues and the need to prove products in the court of customer acceptance, not just FDA decisiion-making.

According to Jim Glasheen, general partner of Technology Partners (Palo Alto, California), lifestyle medicine “is being driven by growing payor pressure, coupled with consumer assertiveness,” this consumer usually a “Boomer,” willing to pay out-of-pocket for some types of healthcare products — Viagra and Botox being obvious examples, both initial failures for the specific medical conditions they were designed to treat, and “blockbusters” once finding homes in lifestyle applications.

Other examples, importantly, most in the device category, are breast implants, dermal fillers, lightweight portable oxygen delivery systems (as opposed to in-home heavy tanks that are reimbursable), high-tech intraocular lenses (compared to generic lenses paid for by Medicare), refractive surgery for vision correction, less-invasive bariatric products, and cosmeceuticals.

With clinicians suffering decrease in annual salaries by 6% to 8%, they more frequently are offering lifestyle products paid for directly by the consumer and, importantly, when the service is rendered.

Panelists said that direct-to-consumer advertising is often a critical component of these opportunities and must be accompanied by clinician management of patient expectations, since the therapeutic endpoints in these areas are often fuzzier than in traditional medicine. So while investments in therapeutic medical products require a lengthy regulatory and reimbursement pathway, lifestyle medical products can get to market quicker and produce revenues for their providers immediately.

Report: U.S. lagging in financial support for HIT

A new report, just released by Commonwealth Fund (New York), underlines what we have been told many times before: that while the U.S. can boast the most costly healthcare system on the planet — and perhaps the most technologically sophisticated — it doesn’t have the best health — or at least not the best delivery of healthcare. And the report says that the U.S. is way behind the curve when it comes to the use of new information technologies.

The report puts the U.S. as fifth among six developed countries in the use of “high clinical information functions” by primary care practices. High clinical information functions are defined in the report as the presence of seven of 14 office practice information functions, such as electronic records, electronic prescribing, computerized safety alerts, and patient reminders systems and registries (19% vs. 8%-87% in other countries).

The executive summary says that the U.S. is lagging in this area and that it could learn “from what physicians and patients have to say about practices that can lead to better management of chronic conditions and better coordination of care.”

Germany, New Zealand and the UK use their information systems, it says, to “enhance the ability of physicians to monitor chronic conditions and medication use.”

The report says that despite spending more than twice as much per capita on healthcare as other nations ($6,102 vs. $2,571 for the median of Organization for Economic Cooperation and Development [OECD] countries in 2004), the U.S. spends far less on health information technology, just 43 cents per person, compared with about $192 per person in the U.K.

The report, “Multinational Comparisons of Health Systems Data, 2006,” by Jonathan Cylus and Gerard Anderson, PhD, of The Johns Hopkins University (Baltimore), compares health spending data in nine Organization for Economic Cooperation and Development (OECD) countries: Australia, Canada, France, Germany, Japan, the Netherlands, New Zealand, the United Kingdom, and the United States and, where possible, the median of all 30 OECD countries.

Among the key findings:

• In 2004 the U.S. spent the most per capita on hospital services, and Canada and Japan spent the least. Adjusted for differences in cost of living, inpatient acute care spending per day in the United States was nearly three times the median OECD country ($2,337) and over five times more than Japan ($419).

• The U.S. spent twice the OECD median per capita on drugs in 2004, $752 compared with $377.

The U.S. healthcare system ranks last compared with five other nations on measures of quality, access, efficiency, equity, and outcomes, according to Commonwealth Funds’ third edition of its analysis of international health policy surveys.

The report, titled “Mirror, Mirror on the Wall: An International Update on the Comparative Performance of American Health Care,” was written by Karen Davis, PhD, president of Commonwealth, and her research colleagues. It compares surveys on physicians’ and patients’ experiences and views of their health systems in Australia, Canada, Germany, New Zealand, the UK, and the U.S. between 2004 and 2006.

Major study launched on use of telehealth in home care

In what is being pitched as the largest and most comprehensive study in the history of home healthcare technology, two major industry players in the sector, together with a consultant firm, announced the launch of a national study on the future telehealth in home care. Sponsored by the consumer healthcare solutions division of Royal Philips Electronics (Amsterdam, the Netherlands), and co-sponsored by the National Association for Home Care (NAHC; Washinton) and Fazzi Associates (Northampton Massachusetts), the study is designed to generate industry-wide insights into the use of technology and telehealth by the full range of home care agencies.

“As a result of this project we hope to get a clear understanding of the scope of technology usage —primarily telehealth — by home care and hospice providers — what their experiences with technology are, problems they encounter, and the successes that they, and their patients experience,” Mary St. Pierre, VP for regulatory affairs of the NAHC, told Biomedical Business & Technology.

“We also hope to learn what help they need to use technology more effectively. Strategies that they use with certain conditions like congestive heart failure, wound care, diabetes will be identified.”

She added: “The telehealth part of the research will be both quantitative and qualitative.”

Philips’ sponsorship of the study followed an earlier survey by Fazzi of home care association leaders. “Association leaders were asked to rate the importance and need for five different studies,” said Robert Fazzi, president of the benchmarking and research firm that will be conducting the study. “A study on the present and future uses of technology was by far the No. 1 choice of both association and home care leaders.”

The study will involve three phases, St. Pierre told BB&T, with Sept. 1 targeted as the date for completion. “Analysis will take place during September,” she said, “and the results will be presented at the NAHC meeting in October. The statistical analysis will represent the field by size of agency, rural versus urban, region of the country, and hospital-based vs. free-standing agencies. We plan to have a statistically representative sample of agencies by size and urban versus rural.”

As part of this study, Philips said it has made a commitment to make the findings available free to every agency in the country as well as to technology vendors. “Philips is committed to fostering growth and vision in this field and to do whatever we can to advance the mission and work of home care agencies,” said Lemnitzer.

NAHC is the nation’s largest trade association representing the interests of home care agencies, hospices, home care aide organizations and medical equipment suppliers.

Fazzi Associates is a consulting, benchmarking and best practice research firm that it says helps clients create “outcome-oriented solutions to present problems while creating the capacity to successfully address and resolve future challenges.”