DC Advisory director explains NHS and Brexit challenges for medtech

Larger corporates need to respond to some of the big technological and demographic trends affecting the medtech industry, according to the executive director of mid-market corporate finance advisor DC Advisory.

David Sanders, executive director and head of UK healthcare practice at DC Advisory said there has been some ‘revolutionary’ technology affecting the industry but it hasn’t had an effect in facilitating a fundamental restructuring of the industry, or a threat to its current shape.

Speaking to Med-Tech Innovation News, Sanders said: “If there is a game changing new generation of products around 3D printing, for example, it would still be the medtech industry who produce those; and the larger, more slow-moving corporates have the option, at least, of developing their own or buying the smaller pioneer companies.

“I guess that the difference some observers would see this time around is that some of the technological change is not that sort of game-changing new product, but rather a more revolutionary shift which opens up the risk of disruption for these big medtech companies. More and more product companies are having to make their products smarter and that is creating a risk of new entrants into the industry who are fundamentally technology companies, or service companies but are capitalising on the convergence between medtech and services and technology.”

One of the challenges that medtech companies are currently facing is the change to the NHS procurement model, with the Department of Health and Social Care establishing a new model to replace the NHS Supply Chain contract. While there are several factors that work in favour of medtech companies, top line pressure can work against them.

“They’ve got this fantastic demographic tailwind because the patient populations are increasing and populations are ageing, therefore chronic disease is on the increase. But those demographic drivers are running at such a rate that funding can’t keep pace. So, every taxpayer is well aware that the NHS is under significant pressure – that’s the same for pretty much every funding system in the developed world.

“What we see with the NHS transformation agenda is just a symptom of that and you can see elsewhere – for example on the continent with the development of group purchasing organisations, which is another way of trying to drive down the cost of healthcare, and that is just the reality of being a medtech business.”

With the UK expected to leave the European Union at the end of the month, regulatory divergence is likely to be one of the challenges faced by the sector, though Sanders suggested it would be evolution rather than revolution that will drive such a change as the UK departs from the bloc.

“I think generally speaking larger medtech groups like harmonious regulation, and like unified regulations and it would be painful but manageable for them to have a different regulatory environment to navigate through.

“We’re certainly not talking about any tearing up of the old rules, certainly not revolution it’s gradual evolution. We’re talking about generational change I think rather than more short-term than that.”