Innovation Scorecard Report PDF

January 2011
The PwC Medical

Technology Innovation
Scorecard explores the
changing nature of
healthcare innovation.
The results show that the
gap between innovation
leaders and emerging
economies is rapidly
narrowing.
Medical Technology
Innovation Scorecard
The race for global leadership
Table of contents
January 2011
The heart of the matter 2
New dynamic redefnes medical
technology innovation
An in-depth discussion 4
US innovation foundation weakening
Scorecard ranks nine countries capacity for innovation
What this means for your business 32
Which countries will lead medical
technology innovation in 2020?
Appendix 36
The heart of the matter
New dynamic redefnes
medical technology
innovation
3 The heart of the matter
The way we assess value in medical
technology is changing radically.
In Bangalore, the mantra made in
India for India echoes throughout
GE Healthcares John F. Welch
Technology Centre and Philips
Innovation Campus. These research
and development facilities have
spawned such revolutionary devices
as low-cost, lightweight, battery-
powered electrocardiogram machines
to serve remote, rural areas with
little access to healthcare. In Europe,
Merck Serono is revolutionizing the
delivery of human growth hormone
with diagnostic screening, counseling,
and monitoring services tied to its
easypod wireless injection device.
The company focuses on the indi-
vidual needs of patients, providing
support that encourages adherence to
prescribed treatment, improving their
chances for better health.
These companies recognize that
the old dynamic of the physician as
arbiter of value is giving way to a
new one: Government and private
insurers and self-pay consumers
increasingly determine what sells
and at what price. They refuse to pay
for incremental innovations that add
bells and whistles but do not signif-
cantly improve health or reduce cost.
The faster, better, smaller, cheaper
advances so common in consumer
electronics portend the future of
medical technology.
In addition, providers are assuming
more of the fnancial risk in healthcare
as payers increasingly base compensa-
tion on quality and results. If a new
technology doesnt help patients get
better at the same or lower treatment
cost, providers might not be motivated
to use it.
Emerging-market countries such
as China, India, and Brazil, despite
comparatively weak healthcare system
infrastructure, are quickly taking
the lead in developing lean, frugal,
and reverse innovation. This type
of innovation simplifes devices and
processes, retaining essential func-
tions while applying newer technolo-
gies that are more mobile, customized
to consumers needs, and less costly.
Such innovation will enable these
nations to leapfrog developed coun-
tries in innovative healthcare delivery.
Healthcare could take a path in
emerging markets similar to that of
telephone communications. These
nations bypassed development of
broad landline infrastructures and
jumped headlong into mobile tech-
nology, which the masses across the
socioeconomic spectrum quickly
adopted. Such technological coup
dtats are not impossible in developed
nations, but radical innovation cannot
happen in the absence of some type
of pain and constraints that create
tension and an impetus for change.
The PwC Medical Technology
Innovation Scorecard explores the
changing nature of healthcare inno-
vation. The results show that the
innovation leaders of today will fnd
their position slipping during the next
decade. Three trends are evident:
The innovation ecosystem for
medical device technology, long
centered in the United States, is
moving offshore. Increasingly,
medical technology innovators are
going outside the United States
to seek clinical data, new-product
registration, and frst revenue.
US consumers are not always
the frst to beneft from advances
in medical technology and
could eventually be last in line.
Innovators already are going frst
to market in Europe and, by 2020,
likely will move into emerging
countries next before entering the
United States.
The nature of innovation is
changing as developing nations
become the leading markets for
smaller, faster, more affordable
devices that enable delivery of
care anywhere and help bend the
healthcare cost curve downward.
These countries are free of the
handicap of an entrenched health-
care system infrastructure that
seeks to maintain the status quo.
However, the diffculty of doing
business in emerging countries
and poor intellectual property
protection could make these
markets less attractive to multina-
tional companies, despite their size,
and could hinder these nations
innovation leadership.
An in-depth discussion
US innovation
foundation weakening
5 An in-depth discussion
Scorecard ranks nine
countries capacity
for innovation
The Innovation Scorecard assesses the
capacity of nine countries with strong
medical technology market potential
to adapt to the changing nature of
innovation: Brazil, China, France,
Germany, India, Israel, Japan, United
Kingdom, and United States. It exam-
ines where these countries stand rela-
tive to fve pillars that have supported
US medical technology innovation for
the past several decades: powerful
fnancial incentives, leading resources
for innovation, supportive regulatory
system, demanding and price-insen-
sitive patients, and supportive invest-
ment community.
As well as providing a current view
of innovative capacity and capa-
bility, the Innovation Scorecard
looks at the past fve years to gain a
historical perspective and projects
into the future to present the outlook
for 2020. PwC sees the innovation
pillars of today transforming into a
new support system during the next
decade (see page 8: Five new pillars
of innovation).
The Innovation Scorecard combines
primary and secondary data. It uses
86 metrics to calculate the current
score and 56 for the historical score
(see Appendix for methodology).
These metrics range from objective to
subjective and help to identify trends
in medical technology innovation.
A top-level view of current scores
reveals:
The United States at 7.1 (on a scale
of 1 to 9, with 9 as best) holds a
leadership position. Because of
decades of innovation dominance,
the United States demonstrates the
strongest capacity for innovation in
the medical technology market.
United
States
Germany United
Kingdom
Japan Israel China Brazil India
2005 2010
Scorecard
7.4 7.1 5.6 5.4 5.5 5.4 5.1 4.8
France
5.0 5.0 4.7 4.6 2.9 3.4 2.3 2.7 2.3 2.7
Source: PwC analysis
Figure 1: Historical and current scores
The scores of the other developed
economies (United Kingdom,
Germany, Japan, and France) fall
within a tight band of 4.8 to 5.4.
Among the European countries
included in this study, France
demonstrates the weakest support
for innovation.
Israel, despite a population of only
7.5 million, ranks near the level of
the European nations included in
this study. The medical technology
industry has long recognized
Israels strong capacity to foster
innovation.
Developing economies lag behind
developed ones. China, with
its superior economic growth
engine, scores 3.4, ranking it higher
than India and Brazil, which each
score 2.7.
6 Innovation scorecard
Looking at past scores and the outlook
for the future along with current
scores changes the perspective and
reveals that although the United
States will hold its lead, the country
will continue to lose ground during
the next decade. The Innovation
Scorecard also projects declines for
Japan, Israel, France, the United
Kingdom, and Germany.
China, India, and Brazil will experi-
ence the strongest gains during the
next 10 years. Of the nine countries,
China, which has shown the strongest
improvement in innovative capacity
during the past fve years, is expected
to continue to outpace other countries
and reach near parity with the devel-
oped nations of Europe by 2020.
The remainder of this report presents
some of the fndings that have led to
these projections.
Why create an Innovation
Scorecard?
Hearsay and anecdotes have driven
much of the discussion regarding
threats to sustaining the US medical
technology ecosystem. Lack of
concrete evidence stifes the discus-
sion regarding what is happening,
what impact it will have, and whether
something should be done about it.
The Innovation Scorecard attempts to
provide that evidence.
PwC believes that the Innovation
Scorecard could help industry work
with regulatory and political leaders
in making decisions and setting
policies that will determine medical
technology leadership. More informed
decisions could enable further
advances within the new value-based
paradigm in medicine.
Innovation = value-creating novelty
Innovation often is defned as
something that is new, creative,
and radically different from
what has gone before. PwC
defnes innovation as value-
creating novelty. A new idea or
product becomes innovative
only when it creates value. Are
people willing to pay for it? Is it
marketable? In business, inno-
vation that is not commercial-
ized is essentially worthless.
Not all innovation is equal.
Based on the amount of value
it generates, innovation can be
classifed as follows:
examples of substantial innovation include remote
patient monitoring and the application of mobile
health technologies that employ new devices and
sensors and the Internet to move physician consul-
tations in densely populated and remote regions
online. In mobile care, text messaging, e-mail,
social media, and videoconferencing signifcantly
decrease the need for physical networks of clinics,
hospitals, and technicians. Pilot projects that have
measured the benefts of this transformation of
healthcare delivery from analog to digital have
consistently shown cost savings and new value
creation of 20percent to 50percent.
3. Radical (revolutionary): new value creation
in excess of 50percentAn example is GE
Healthcares Vscan, a pocket-sized, wireless
ultrasound device, which costs about $7,500 and
weighs less than one pound. In comparison, a
laptop-sized ultrasound machine can weigh more
than 20 pounds and cost $30,000 to $40,000; a
bulky, cart-based version can weigh hundreds of
pounds and cost well above $100,000. The Vscan
potentially reduces the need for expensive tests
and referrals and makes healthcare more acces-
sible because of its portability and lower cost.
The Vscan represents a radical innovation over its
much more expensive predecessors because on
many dimensions (quantity, price, location, time),
it creates greater than 50 percent new value (see
Appendix for PwCs value-creation matrix).
1. Incremental (adding a new feature to an existing
product): new value creation of 0percent to
20percentAn example in medical technology
is a next-iteration pacemaker that is safe for
magnetic resonance imaging (MRI). An MRI scan
can cause the wires of older pacemakers to over-
heat. Among the millions of people worldwide
who have a pacemaker today, a large percentage
will develop a medical condition that calls for
an MRI scan. Device manufacturers seeking to
market pacemakers that would solve this problem
have discovered that payers are unwilling to pay a
premium for this added feature.

The pacemaker story points to a new reality facing
medical technology companies: They cannot count
on incremental innovation to increase proft. For
many years, a similar market dynamic has driven
the consumer electronics industry, where features
and capabilities increase but prices decline. For
example, with each iteration, the iPhone has
offered substantially greater features and func-
tionality but for the same price, and consumers
have stood in line to scoop up the new models as
soon as they were introduced. For the medical
technology industry, the days of feature creep with
price increases are over as payers and consumers
demand higher value at lower cost.
2. Substantial (next generation): new value creation
of 20percent to 50percentIn healthcare,
Incumbents
New entrants
Incremental
N
e
w

v
a
l
u
e

c
r
e
a
t
e
d
0-20% 20-50% 50%+
Substantial,
next generation
Radical, disruptive,
revolutionary
Classes of innovation
The fve pillars of medical
During the past 50 years, the United
States has provided an ideal inno-
vation ecosystem that has fostered
signifcant advances in medical tech-
nology. US-based companies dominate
the roughly $350 billion global device
industry. Thirty-two of the 46 medical
technology companies with more than
$1 billion in annual revenue are based
in the United States. The country
accounts for approximately 40percent
of the world market for medical
devices and instruments.
1

1 Jeffrey W. Englander and Phillip M.
Seligman: Standard & Poors Industry
Surveys: Healthcare: Products &
Supplies, February 4, 2010. S&P is not
responsible for errors or omissions in the
data or for the context of the information.
US dominance of this industry stems
from its strength in fve innovation
pillars (Figure 2), which form a struc-
ture for the Innovation Scorecard.
The Scorecard divides each pillar into
two dimensions containing several
measures on which it scores the indi-
vidual countries (see Appendix for
the measures for each dimension).
On three of these fve pillars, the US
scores have declined between 2005
and 2010; on two pillars, the US score
has improved. The biggest decline
appears in the ffth pillar, where entre-
preneurial activity and private foreign
direct investment have dropped.
Between 2010 and 2020, PwC expects
US performance to decline on every
pillar (see Figure 3).
innovation system patients community
Powerful
financial
incentives
Market incentives
Healthcare incentives
Innovative resources
Innovative output
Regulatory approval
process
Legal environment
Healthcare demand
Needs and infrastructure
Investment environment
Medical technology
commercialization
Leading resources
for
innovation
Supportive
regulatory
system
Demanding and
price-insensitive
patients
Supportive
investment
community
The US spent more
per capita on
healthcare than
the other eight
Scorecard countries.
High levels of
reimbursement for
medical procedures
and generous
coverage fueled
physician adoption
of new innovations.
The US established
itself as a world
leader in academic
medical centers.
Annual NIH grant
funding exceeding
$25 billion per year
supported the
advancement of
medicine.
The FDA has been a
global leader in
setting standards
and guidelines for
the safety and
efficacy of medical
technologies.
Other countries
would often wait to
see FDAs position
before acting upon
medical technology
applications.
Americans seemed
to have a higher
demand for
healthcare services
as measured by their
frequency of doctor
visits.
During the past 50
years, the proportion
of healthcare costs
paid by US patients
has declined from
47% to 12%.
Medical technologies
ranked as the
second- or third-
largest category
among venture
capital and angel
investors.
US venture capital
funding averaged
approximately
$2.5 billion annually
during the last
decade, enabling
commercialization
of innovations from
academia and
elsewhere.
Figure 2: Five pillars of innovation
Pillar 1: Powerful fnancial
incentives
US performance: 7.1 (past),
7.2 (present), (future)
The US score for this pillar improved
slightly between 2005 and 2010, but
PwC expects it to drop during the
next decade.
Key fndings
The United States spends a larger
percentage of its GDP and more per
capita on healthcare than any other
country (Figure 4). It spends nearly
twice as much on total healthcare
per capita as Japan, 50percent
more than the European nations
included in this study, and 15
times more than China. In 2009,
the United States spent a record
17.3percent of GDP ($2.5 trillion)
on healthcarean average of
$8,050 per person. The US Centers
for Medicare and Medicaid Services
(CMS) predicts national health
expenditures will increase an
average of 6.3percent annually
from 2009 through 2019, reaching
19.6percent of GDP by 2019.
2
2 CMS, National Health Expenditure
Projections 2009-2019 (September
2010), https://www.cms.gov/
NationalHealthExpendData/Downloads/
NHEProjections2009to2019.pdf.
than that of the emerging nations.
For this reason, the Innovation
Scorecard predicts a downward
direction for the US score over the
next decade and an upward one for
the scores of developing countries.
The Chinese medical device market
is predicted to expand about
15percent annually during the
next fve years; and Indias, about
23percent.
4
BMI estimates that
Chinas medical device sales will
reach $42.8 billion by 2019; and
Indias, $10.7 billion.
5
This shift
in growth could draw the focus
of multinational device manufac-
turers away from the United States
and toward emerging markets.
Domestic manufacturers in
emerging markets may be content
with the potential for growth
within their own borders and might
not seek regulatory approval in the
United States and other developed
countries. Citizens of those nations
will beneft from domestically
produced technology before the
people who have been the frst to
beneft from medical advances in
the past.
4 Phillip M. Seligman, Standard and Poors
Industry Survey, Healthcare: Products &
Supplies, August 12, 2010. S&P is not
5 Business Monitor International, 2010.
Government expenditure
on health as % of total
government expenditure
United States
Germany
Japan
France
United Kingdom
China
Israel
Brazil
India
19.3
17.9
17.9
16.7
16.3
9.9
9.9
7.2
3.4
%
Source: World Health Organization, based on 2006
data, which was the latest available
Note: The US percentage in Figure 4 reects
government spending only. Unlike the European
countries, where a single payer (the government)
accounts for most of the spending, in the United
States, employers and private individuals account
for a large share of healthcare spending. If this
chart included that share, the US bar would grow
substantially.
Figure 4: Government expenditure
on health as percentage of total
government expenditure
Figure 3: US scores by pillar
Past Present Future
Powerful nancial incentives 7.1 7.2

Leading resources for innovation 7.2 7.3

Supportive regulatory system 7.2 6.8

Demanding and price-insensitive patients 7.3 7.1

Supportive investment community 8.2 7.2

Total 7.4 7.1

Market size provides critical mass
for market access and adoption
of innovation. The United States
is the largest healthcare market
today and should remain so during
the next decade. Business Monitor
International (BMI) estimates that
US medical device sales will reach
$185.9 billion by 2019.
3
But the US
market will grow at a slower rate
3 Business Monitor International, 2010.
Today most developed countries
daily cost for a hospital stay falls
within a tight range of $100$200,
but the US cost is seven times
their average and approximately
25 times that of China, India, and
Brazil. Despite extremely higher
hospital costs, the US hospital
bed density ratio ranks among the
lowest of the nine countries, which
should have a positive impact on
future innovation and partially
offset the effect of high hospital
costs as the United States applies
new digital technologies to increase
access to healthcare rather than
building new hospitals (Figure 5).
Figure 5: Hospital beds per capita versus hospital cost per bed day
India
United
Kingdom
United
States
China
Brazil
Israel
France
Japan
Germany
Hospital beds per capita
vs. primary hospital cost per bed day
Primary
hospital cost
per bed day,
USD
Hospital beds
per 10,000
of population
0 20 40 60 100 120 140 160
$0
$200
$400
$800
$1,000
$1,200
Fewer
hospital
beds
More
hospital
beds
Higher cost per day
Lower cost per day
Source: World Health Organization
All countries reviewed in the
Scorecard expect to continue to
see signifcant growth in per capita
and total healthcare costs over the
next decade. The US growth rate
is expected to push its per capita
spending to a level nearly double
that of Europe and 2.5 times that of
Japan. The three emerging econo-
mies will experience the steepest
increase in total and per capita
spending, with China emerging as
the third-largest healthcare market
by 2020, closing in on Japan at
second place. The graying of Japan
and Europe will continue to drive
total and per capita healthcare
spending upward.
Figure 6: Total health expenditure vs. health expenditure per capita
Total health expenditure
vs. health expenditure per capita:
2003, 2007, and 2020 forecast
H
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s
$0 $3,000 $6,000 $9,000 $12,000
$0
$1,000
$2,000
$3,000
$4,000
United States
2020
2007
2000
France
Germany
United Kingdom
Japan
Israel
China
Brazil
India
Health expenditure per capita, USD
Health expenditure per capita, USD
$0 $3,000 $1,000 $2,000 $6,000 $4,000 $5,000
$0
$200
$300
$400
$500
$600
$700
$800
Sources: The World Bank, World Health Organization, and PwC analysis
Note: This chart depicts past, current, and future numbers for total and per capita healthcare spending. Because eight of the nine countries cluster close together, the
bottom section is enlarged for easier viewing. This chart clearly shows that the United States is an outlier, far outspending the other countries in this study now and
into the future.
Looking forward
Historically, building of system
infrastructure, such as hospitals,
encouraged innovation. In the future,
excess capacity could have the reverse
effect. Those countries with limited
infrastructure will be more driven to
innovate to stretch their resources.
PwC predicts that the US score on this
pillar will drop because the US health-
care system will suffer the innovators
dilemma. That is, the United States
has been so successful in medical tech-
nology innovation that it has created
a legacy that the current system will
continue to seek to defend, support,
and protect. The powerful fnancial
incentives that form the corner-
stone of the US system will present
a barrier to adopting faster, smaller,
cheaper, and better technologies that
would represent radical, disruptive
innovations.
Such innovations are emerging more
quickly in China, India, and Brazil.
These developing nations are, in many
ways, starting without the innovation
handicap of a comfortable level of
performance and payment. A scarcity
of fnancial resources is driving them
to experiment with more effcient
technologies, processes, distribution
strategies, and business models (see
sidebar: Expanding access to health-
care through frugal innovation).
Developed nations do have some
recourse. Government pressure to
lower healthcare costs could eventu-
ally help offset the innovation hand-
icap, forcing developed nations to turn
to innovative technology to achieve
better results at lower costs. In the
United States, for example, the Patient
Protection and Affordable Care Act
of 2010 (PPACA) calls for reduced
annual payment updates for most
Medicare services, substantial cuts to
managed care plan payments, and the
creation of an Independent Payment
Advisory Board. These are small
steps in what will be a prolonged and
complex effort by Western nations to
reign in healthcare costs.
Dr. Devi Prasad Shetty of Bangalore, who hopes to
export an Indian-borne model of care to other parts
of the globe, exemplifes emerging-market innova-
tion. Dr. Shetty, famous in India for performing heart
surgery on Mother Teresa, is known worldwide for
bringing low-cost, high-quality, mass-production
healthcare to people who can afford it least. The
doctor whom The Wall Street Journal has called the
Henry Ford of heart surgery has become a prime
example of frugal innovation.
In part driven by the absence of high payer reim-
bursement and a scarcity of resources, Dr. Shetty has
become a master at refning process. He has perfected
high-volume throughput and supply chain manage-
ment to the point that he can break even on a $1,500
heart surgery. Patients who can afford it pay full
price, but many pay less.
At Dr. Shettys 1,000-bed fagship Narayana
Hrudayalaya hospital, 42 cardiac surgeons perform
about 600 operations a week. Physicians specialize
in one type of operation and, as a result, become
highly skilled, even in procedures considered rare.
Dr. Shettys proft margin is reportedly higher than
that of the average US hospital; and his quality, as
good or better.
6
6 Geeta Anand, The Henry Ford of Heart Surgery, The Wall
Street Journal, November 25, 2009, http://online.wsj.com/
article/NA_WSJ_PUB:SB125875892887958111.html.
Dr. Shetty has expanded his chain of hospitals to
seven cities in India and hopes to have 30,000 beds
there within the next few years.
7
In comparison,
Hospital Corporation of America, the largest hospital
organization in the United States, has 41,000 beds.
8
Dr. Shetty also has pioneered the use of telemedicine
in India to provide digital healthcare delivery, setting
up satellite-connected coronary care units in rural
villages, where patients live days away from any type
of specialist. The remote clinics transmit electrocar-
diogram results and connect patients and local physi-
cians to specialists at hospitals in India, Malaysia,
Nepal, and Mauritius via video conferencing.
9
Dr. Shetty channels the tension generated by a
resource-constrained healthcare system into process
innovation. He uses medical technology effciently
to reduce his costs and increase patient access to
care. Developed countries have less incentive for this
type of innovation, which is much more common in
emerging markets.
7 Anand.
8 SEC, Form S-1, HCA Inc., http://www.faqs.org/sec-
lings/100507/HCA-INC-TN_S-1/.
9 The International Forum, Devi Shetty, Narayana
Hrudayalaya, Social Entrepreneurs provide examples of
leadership and vision, http://www.internationalforum.com/
Text%20Pages/metaphores_for_leadership.htm.
Expanding access to healthcare through frugal innovation
Pillar 2: Leading resources
for innovation
The United States slightly improved
its score for this pillar between 2005
and 2010 primarily because of a
relatively high level of R&D spending,
strong labor productivity, high-quality
academic medical centers (AMCs),
and a high average of patent applica-
tions per capita. However, Scorecard
data indicate that the US score will
decline in the future as other coun-
tries improve their educational and
research facilities and become more
productive in patent applications.
Key fndings
The United States, home to 133
accredited medical schools and
hundreds of teaching hospitals, is
the current and historical leader in
AMCs. During the past six years, US
medical schools graduated more
than 97,000 students.
10
The AMCs
associated with leading US educa-
tional institutions have spawned
many breakthrough medical
advances in the past half-century,
including the frst successful
10 American Association of Academic
Medical Centers (AAMC), FACTS:
Applicants, Matriculants, Enrollment,
Graduates, MD/PhD, and Residency
Applicants Data, 1995-2010.
liver transplant and balloon
angioplasty.
11

The highly ranked US universities
attract large numbers of foreign
students. In the 2010 Academic
Ranking of World Universities,
the United States had 17 of the
top 20, 58 of the top 100, and
11 American Association of Academic
Medical Centers, Americas Teaching
Hospitals: Discovering Tomorrows Cures,
https://www.aamc.org/download/148398/
data/thrsts.pdf.pdf.
Figure 7: Researchers versus medical technology patent applications
0 10 20 30 40 50
0
300
600
900
1,200
1,500
Researchers vs. medical technology patent applications
Number of
researchers,
thousands
Medical technology
patent applications,
thousands
Fewer
patent
appli-
cations
More
patent
appli-
cations
More researchers
Fewer
researchers
China
Germany
Israel
France
Brazil
India
United Kingdom
United States
Japan
Sources: United Nations Educational, Scientific and Cultural Organization and World Intellectual Property
Organization
187 of the top 500 institutions.
12
In 2006, foreign students earned
approximately 36.2percent of US
doctorate degrees in the sciences
12 Academic Ranking of World Universities,
Statistics, http://www.arwu.org/
ARWUStatistics2010.jsp. [The Academic
Ranking of World Universities, rst
published in June 2003 by the Center for
World-Class Universities and the Institute
of Higher Education of Shanghai Jiao Tong
University, China, is updated on an annual
basis. ARWU uses six objective indicators
to rank world universities, including the
number of alumni and staff winning Nobel
Prizes and Fields Medals, number of highly
cited researchers selected by Thomson
Scientic, number of articles published in
journals of Nature and Science, number of
articles indexed in Science Citation Index:
Expanded and Social Sciences Citation
Index, and per capita performance with
respect to the size of an institution. More
than 1,000 universities are ranked every
year, and the best 500 are published on
the Web.]
and approximately 63.6percent of
the doctorates in engineering.
13
China ranks second among the nine
countries in number of research
professionals. It has nearly as many
as the United States and twice the
number as Japan. Yet China has
not been as productive in obtaining
medical technology patents as the
other countries. The United States
obtains more patent applications
on an absolute basis, averaging
more than 44,000 per year; but
Israel and Japan lead in fling
medical technology patent applica-
13 Christine M. Matthews, Foreign
Science and Engineering Presence in
U.S. Institutions and the Labor Force,
Congressional Research Service,
March 23, 2010, http://www.fas.org/sgp/
crs/misc/97-746.
tions on a per capita basis. If China
were as productive per researcher
as the other countries, it could
produce the second-largest number
of medical technology patents in
the world (Figure 7).
Figure 8: R&D spending as percentage of GDP versus total R&D spending (USD), 2000, 2007, 2020
China and India show the most
rapid rates of growth in triadic
patent families, with China
growing at 34percent per year and
India at 10percent. This growth
portends higher future scores for
these two countries for this pillar.
(Triadic patents are a series of
corresponding patents fled in the
United States, Europe, and Japan
for the same invention.)
With the exception of the United
States and United Kingdom, R&D
spending as a percentage of GDP
is growing. The United States
invests more in R&D than any other
country in terms of dollar amount.
However, in terms of percentage
of GDP, the US investment in R&D
is declining, which should lower
its future score. Whereas China
ranks sixth today, PwC expects it
to have the second-largest R&D
budget among the nine Innovation
0% 1% 2% 3% 4% 5%
$0
$10
$20
$30
$40
$50
2020
2007
2000
United States
China
India
Brazil
United Kingdom
France
Germany
Japan
Israel
R&D spending as a % of GDP
vs. total R&D spending ($USD):
2000, 2007, and forecast for 2020
Sources: United Nations Educational, Scientific and Cultural Organization and PwC analysis
T
o
t
a
l

R
&
D

s
p
e
n
d
i
n
g
,

U
S
D

b
i
l
l
i
o
n
s
R&D spending as a % of GDP
Figure 9: Research publications versus number of universities ranked in worlds top 500
0 25 50
0%
10%
15%
20%
30%
35%
Research output vs. number of Top 500 universities
Research
output=
annual
publications
as share
of world
output
Number of universities
in Academic Ranking
of World Universities
Top 500 list
Fewer
Top 500
universi-
ties
More
Top 500
universi-
ties
More annual publications
Fewer
annual
publications
25%
5%
75 100 125 150 175
United States
Israel
Brazil
Japan
Germany
United Kingdom
China
India
France
Sources: Thomson Reuters and Academic Ranking of World Universities
Scorecard countries by 2020. We
expect Chinas R&D expenditure as
a percentage of GDP to approach US
levels within 10 years (Figure 8).
China has already eclipsed all other
countries except the United States
in research publications, and the
quality of its research institutions is
improving (Figure 9).
Looking forward
PwC predicts that the US score for
this pillar will drop and the emerging
countries scores will rise. As the
quality of non-US educational and
research institutions improves, R&D
funding outside the United States
increases, and other developing
nations innovative output matches
that of the developed countries, the
United States will face increasing
competition for innovative talent,
resources, and output. Chinas innova-
tive output will grow at a much faster
rate than that of the United States and
move its future score higher.
Pillar 3: Supportive
regulatory system
The US score for this pillar dropped
between 2005 and 2010, a trend that
PwC expects will continue. PwC bases
the current US score and future direc-
tion on data relating to the regula-
tory and legal environments in the
nine countries and interviews with
executives at 13 US-based medical
technology companies, representing
approximately 10percent of global
industry revenue.
US success in medical technology
during recent decades stems partially
from the global leadership of the US
Food and Drug Administration (FDA).
FDAs standards and guidelines to
ensure safety and effcacy have instilled
confdence in the industrys products
worldwide. Other countries regulators
often wait to see FDAs position before
acting on medical technology appli-
cations, and often model their own
regulatory approach on FDAs.
During the past decade, however, FDA
has faced growing responsibilities
along with heightened public demand
for drug and device safety. In a recent
survey of 50 life sciences companies
(including 19 companies developing
medical device or diagnostic prod-
ucts), PwC found that respondents
experienced frequent problems in
gaining product approvals, even to
the point of FDA changing its position
during the application review process.
Fortypercent of survey participants
agreed that FDA denied some product
approvals primarily because of inad-
equate review resources.
14
The industry also has expressed
concern about FDAs effort to
14 Improving Americas Health V, PwC
and BIOCOM survey of the life sciences
industry, 2010.
revamp its 510(k) process,
15
through
which 90percent of devices gain
US approval. The cost of a 510(k)
application ranges from $1 million
15 The Center for Devices and Radiological
Health (CDRH) within the Food and
Drug Administration (FDA) reviews and
processes Premarket Notication 510(k)
submissions for medical devices. The
Ofce of Device Evaluation (ODE) and
the Ofce of In Vitro Diagnostic Device
Evaluation and Safety (OIVD) within CDRH
are responsible for the processing and
review of 510(k)s for marketing clearance
in the United States. Branches within
these ofces are organized according to
medical scientic disciplines. ODE and
OIVD biomedical engineers, physicians,
microbiologists, chemists, and other
staff perform scientic reviews of 510(k) s
and other research (Investigational
Device Exemption) and marketing
applications (Premarket Approval). Their
recommendation determines whether a
new device is substantially equivalent (SE)
or not substantially equivalent (NSE).
to $50 million, compared with
$50 million to $150 million for higher-
risk device applications. The industry
is concerned that additional 510(k)
requirements calling for more exten-
sive clinical or manufacturing data
could drive up cost and lengthen time
to market. The agency argues that
requiring applicants to submit more
thorough data upfront will make the
process more effcient.
16

16 David Olmos and Sophia Yan, Medical
Device Makers Face Revamped U.S.
Rules for Approvals, Bloomberg,
August 4, 2010, http://www.bloomberg.
com/news/2010-08-04/medical-device-
makers-face-revamped-u-s-rules-for-
approvals.html.
Figure 10: Regulatory approval time versus ease of regulatory approval
0
mo
6
mo
12
mo
18
mo
24
mo
30
mo
0
1
2
3
6
7
8
9
Regulatory approval time vs.
ease of regulatory approval process
Ease
of regulatory
approval
ranking,
9=easiest
1=most
difficult
Regulatory
approval time,
months
Shorter
approval
time
Longer
approval
time
Easier approval process
More difficult
approval process
Japan
China
Brazil
United States
Israel
France
Germany
India
United Kingdom
Source: PwC survey
Key fndings
New market entrants are going to
Europe for approval in half the time
it takes to obtain FDA approval,
but the same devices eventually
gain approval in both markets.
Addressing the length and diffculty
of obtaining government approvals
for new medical devices, company
executives said:
It takes twice as long for the
United States to approve the
same technology as it does the
European countries included in
this study and Israel. The United
States takes six months, whereas
the other countries take three.
Agencies in Brazil and India take
longer than the United States for
approvals.
Figure 11: Intellectual property protection versus software piracy rate
0% 20% 40% 60% 80% 100%
0
1
2
3
4
5
6
7
Intellectual property protection vs. software piracy rate
Intellectual
property
protection
rating,
7=best
Software
piracy rate
Lower
software
piracy
Higher
software
piracy
Better IP protection
Worse IP protection
China
India
Brazil
Israel
Japan
Germany
United
States
France
United
Kingdom
Sources: The World Bank and Business Software Alliance
China ranks next, at about one
year.
Japan, at three years, takes the
longest (Figure 10).
Medical technology company exec-
utives ranked Israel frst in overall
ease of regulatory approval (Figure
10). Those executives said they
found the US regulatory approval
process the most uncertain of all
countries in this study. They gave
European regulators high marks for
being more predictable.
Medical technology company
executives said they expect the
ease of the US regulatory approval
process to regress within fve
years compared with other
countries. Survey respondents
said they expect signifcant
improvement in China, India,
and Brazil.
Interviewees cited signifcant
barriers to growth for medical
technology companies in China,
India, and Brazil: (1) diffculty of
doing business in those countries,
(2) poor protection of intellectual
property, and (3) high level of
piracy (Figure 11). These factors
contributed to relatively low past
and current scores for developing
nations in the study. Their scores
should rise in the future, but the
degree depends upon whether they
can improve on these measures.
Looking forward
PwC expects the US innovation score
for this pillar to drop in the future,
primarily because European coun-
tries will continue to provide more
supportive regulatory processes that
encourage innovation yet ensure
safety and effectiveness on a timely
basis. For this pillar, the future scores
for France, Germany, and the United
Kingdom should rank higher than the
United States. The developing coun-
tries should see some improvement,
but not to the level of the European
nations.
The citizens of countries with more
effcient and less uncertain, capri-
cious, and complex regulatory
approval processes will gain earlier
access to innovative medical tech-
nology, and providers in those coun-
tries will beneft from more experience
in using new devices. Those nations
also will attract medical tourists
who are willing to travel to obtain
treatments unavailable in their
home countries. Countries with
long, complex, arbitrary, nontrans-
parent, costly approval pathways will
discourage entrepreneurs and inves-
tors, causing them to launch new
products elsewhere. (See sidebar,
Four companies tell of a tortured road
to product approval.)
Note: The Y-axis relates to how countries rate the strength of their intellectual property protection; whereas
the X-axis reects the extent to which intellectual property is protected.
As part of the research for the Innovation Scorecard,
PwC interviewed industry executives about their
experiences with the regulatory approval process.
Information gained from some of those interviews
follows. The opinions expressed are those of the
people interviewed, not PwC. Those opinions consis-
tently support PwCs fnding that medical technology
innovators are going outside the United States to
seek clinical data, new-product registration, and
frst revenue because of a challenging US regulatory
environment.
ExploraMed, a medical device incubator based on
the West Coast, has developed a strategy of going
outside the United States for frst clinical studies in
almost every one of the six companies it has created
so far, said Chief Executive Offcer Josh Makower,
MD, who also serves as a consulting professor of
medicine at Stanford University Medical School.
I prefer going to Tier 1 countries
17
so that I dont risk
experiencing the delays that might occur if I had to
navigate the US IDE [investigational device exemp-
tion] or export approval process early on, he said.
Today, many device companies are experiencing
substantial costs and delays attempting to obtain IDEs
in the United States, so seeking other places in the
17 FDA.gov. Tier 1 countries are: Australia, Canada, Israel,
Japan, New Zealand, Switzerland, South Africa, a member
of the European Union (United Kingdom, Spain, Ireland,
Denmark, Greece, Belgium, Portugal, Germany, France,
Italy, Luxembourg, Netherlands, Sweden, Finland, Austria,
Bulgaria, and Romania), or the European Economic Area
(includes the European Union countries and Norway, Iceland,
and Liechtenstein). As of May 2004, the European Union
also includes Cyprus, the Czech Republic, Estonia, Hungary,
Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia.
world where high-quality clinical work is prevalent,
such as Tier 1 countries, is one of the few avenues
left for US companies to advance their research into
clinical testing quickly.
We need an FDA that is more reasonable and
supportive of innovation, said Makower, who is also
a venture partner with New Enterprise Associates.
Out of the four companies Makower has founded
during the past six years, only one has obtained
commercial status in the United States, and three
have already received the European CE mark and
initiated sales overseas. One of those companies
has been in negotiations with the FDA for two years
attempting to obtain an IDE. When you have exces-
sive delays, you have to come up with more money
just to allow the enterprise to survive, he said. This
increases the cost of innovation and makes it more
diffcult for small companies to survive to the end of
the approval process.
Fairway Medical Technologies spent two years and
$1 million to take a Class III application through the
review process in the United States. Leo Womack,
Fairways chairman, said the FDA reviewer kept
coming back to the company with more questions,
lengthening the process by 90 days each time.
The device eventually gained approval. Womacks
company is commercializing a new device that it
will take to Europe for approval and frst revenue,
but it will seek US approval later. Investors prefer
that companies that launch in Europe also obtain
US approval because, Womack said, we are still the
gorilla market.
Four companies tell of a tortured road to product approval
OrthoAccel Technologies, a Houston-based company,
launched AcceleDent, a removable orthodontic device,
in the United Kingdom in 2009 and Australia in 2010
as a lightly regulated Class IIa product (posing no
serious harm or threat to patients). AcceleDent applies
cyclic forces to accelerate the bone remodeling process
performed by traditional braces to move teeth in
bone faster than conventional orthodontic methods.
Although the company began seeking approval in
the United States at the same time as it did in other
countries, the product remains under review by FDA as
a Class II device.
Michael Lowe, OrthoAccel CEO, said this type of
delay to market entry can increase the cash burn rate
by several million dollars and force a start-up to raise
additional funding before it can begin to earn US
revenue. We made the decision to pursue an inter-
national strategy as soon as we realized that the FDA
pathway would be time consuming, Lowe said.
We shifted our resources to hitting international
revenue frst.
ThromboVision, a small biomedical start-up also
based in Houston, failed to obtain 501(k) clear-
ance from the FDA after fve rounds of questions
and two years. The company developed a device
called the T-Guide to measure platelet aggregation
(stickiness). To develop the T-Guide, ThromboVision
licensed patented light-scattering technology devel-
oped by scientists affliated with the Utah Artifcial
Heart Institute, Brigham Young University, and the
University of Utah.
18

18 Thrombovision, www.thrombovision.com.
Of the 28 million people who currently take Plavix
(clopidogrel) to prevent heart attacks, strokes, blood
clots, and stent occlusions, an estimated 20percent
respond poorly.
19
FDA added a boxed warning this
year to Plavix alerting patients and healthcare profes-
sionals that the drug can be less effective in people
who cannot metabolize the drug to convert it to its
active form. The T-Guide identifes which patients
could beneft from this type of blood-thinning drug.
Detecting which patients will not respond to Plavix
could save money because they could be put on more
effective alternatives. President and CEO Edward
R. Teitel, MD, JD, said the FDA rejected T-Guides
510(k) based on its misunderstanding of the statis-
tical analysis of the clinical data and the rigid applica-
tion of guidance documents that were ill suited to this
type of technology.
Teitel said his company has ceased operating and is in
Chapter 7 bankruptcy. In hindsight, we would seek
regulatory approval in Europe, achieve early revenue,
then secondarily focus on obtaining FDA clearance
and US market entry. The United States has a very
ugly regulatory environment right now, he noted.
The US should rethink this whole paternalistic,
zero-risk attitude because that regulatory environ-
ment makes it safe to do incremental change but very
diffcult to do dramatic, revolutionary change.
19 Thrombovision.
Pillar 4: Demanding and
price-insensitive patients
Low out-of-pocket spending and a
relatively generous level of payer
reimbursement account for high past
and current US scores for this pillar.
PwC expects a lower future US score
as this trend reverses.
In the United States, patients share
of total health expenditures declined
from 47percent in 1960 to 12percent
today,
20
making them responsible for a
small part of the total medical bill and
often unaware of the entire cost of
their treatment. US patients covered
by health insurance have become
accustomed to asking for the latest
wonder drug, service, or device.
That scenario is changing. Most
employers are increasing deductibles,
copayments, and co-insurance. In
2011, most employers are expected to
require a deductible of $400 or more.
21

In addition, according to a PwC survey,
high-deductible plans are primary
for 13percent of employers surveyed
in 2010, up from 6percent in 2008.
In these plans, consumers are forced
to spend more out of pocket, often
funding expenses with tax-favored
20 CMS, National Health Expenditures
Data, Historical, http://www.cms.
gov/NationalHealthExpendData/02_
NationalHealthAccountsHistorical.asp.
21 PwC Health Research Institute, Behind
the Numbers: Medical Cost Trends for
2011, June 2010.
health savings accounts, which roll
over from year to year and encourage
shopping for lower-cost services.
A recent Kaiser Family Foundation
and Health Research & Educational
Trust survey confrms that patients
share of costs is going up. This survey
fnds that while total premiums for
family coverage increased by 3percent
in 2010, workers share shot up
14percent, pushing more of the cost
and risk to the healthcare consumer.
The survey also reveals that 46percent
of small employers (3 to 199 workers)
require workers to pay annual deduct-
ibles of at least $1,000.
22
Key fndings
Medical technology companies
interviewed by PwC regard Israel
as the easiest market for obtaining
reimbursement today, followed
by the United States. Surprisingly,
the United Kingdom, with its
largely single-payer, government-
controlled system, ranks third in
ease of reimbursement and signif-
cantly above the other European
countries included in this study.
China and Japan rank lowest,
indicating the most diffculty in
obtaining reimbursement and
payment approval (Figure 12).
22 Kaiser Family Foundation News Release,
Family Health Premiums Rise 3 percent
to $13,770 in 2010, but Workers Share
Jumps 14 percent as Firms Shift Cost
Burden, September 2, 2010, http://www.
kff.org/insurance/090210nr.cfm.
Ease of reimbursement approval
ranking: 1=most difficult, 9=easiest
Israel
United States
United Kingdom
Brazil
India
France
Germany
China
Japan
6.9
6.6
6.0
5.3
5.1
5.1
4.9
3.9
3.4
Source: PwC survey
Figure 12: Ease of reimbursement
(1=most difcult, 9=easiest)
Companies surveyed expect that
obtaining reimbursement in the
United States will become much
more diffcult in the future. These
same companies expect it will
become much easier to obtain reim-
bursement for their technologies
in China, India, and Brazil. They
foresee that it will remain diffcult
to receive payment for innovations
in Japan during the next decade.
Signifcant investment in hospitals
and high numbers of physicians
tend to have a negative impact on
the development of new medical
technology, creating barriers
to process and business model
innovations as countries seek to
increase utilization of existing
healthcare infrastructure. Those
systems that have an abundance of
hospitals and physiciansJapan
and the Continental European
oneshave few tensions to drive
the development and adoption of
digital healthcare delivery. Lower
hospital and physician density
in the United States and United
Kingdomat levels more similar
to those of Brazil and China than
the rest of Europe or Japanlikely
Figure 13: Hospital beds versus physicians per capita
0 5 10 15 25 40
0
25
50
100
125
150
Hospital beds vs. physicians per capita
Hospital
beds per
10,000 of
population
Physicians
per 10,000
of population
Fewer
physicians
More
physicians
More hospital beds
Fewer hospital beds
30 35
Japan
Germany
France
Israel
United States
United Kingdom
Brazil
China
India
Source: World Health Organization
will generate creative tensions to
drive innovations that more effec-
tively apply technology in mobile,
care-anywhere networks. China,
Brazil, and India, which lack a large
physical delivery infrastructure,
have already begun to channel
tensions that result from shortages
of physicians and hospitals into
innovative ways to provide digital
care (Figure 13).
Looking forward
PwC expects that the US score for
this pillar will drop, while scores for
China, India, and Brazil will rise. In
the United States, employers as well
as government and private payers
will push more of the fnancial risk to
healthcare consumers and providers.
They will hold providers more
accountable for health outcomes,
penalizing them for poor quality and
high cost. These actions will tend
to drive reimbursement for medical
technology lower.
Although payers in developed nations
will tighten their purse strings and
demand more effcient care delivery,
countries that already experience
the greatest tensions in access to care
and availability of infrastructure and
resources will move ahead in creating
innovative delivery and payment
models. By 2020, process innovation
based on novel use of information
technology to achieve better outcomes
at lower cost will make China, India,
and Brazil stand out as innovators.
investment community
The US medical technology industry
has benefted from the countrys
unparalleled venture capital infra-
structure, which no other nation has
replicated. A historical abundance of
capital has helped move innovations
out of academia and laboratories and
into the marketplace. The medical
technology industry has consistently
ranked among the top venture capital
investment categories.
Figure 14: US venture investment in life sciences and technology
United States, it jumped almost
60percent in Europe and Israel.
23

Although the United States ranks
frst in venture capital investment,
it ranks fourth among the countries
in this study in entrepreneurial
activity, behind the three emerging
markets. China already represents
the second-largest pool of venture
capital, followed by Brazil. The
developing nations are spending
nearly as large a proportion of their
GDP on venture investing as the
United States (Figure 15).
23 AdvaMed, A Healthy Medical Technology
Industry and a Healthy America:
Testimony before the Senate Commerce
Subcommittee on Competitiveness,
Innovation, and Export Promotion, June
22, 2010.
Yet the US score for this pillar dropped
the most of the fve pillars from past
to present primarily because of a
decline in domestic entrepreneurial
activity, new business density, and
private foreign direct investment. PwC
expects the decline to last into the
next decade.
Key fndings
Despite a relatively high level of
support for the life sciences sector
and a rise in the medical tech-
nology share, US venture capital
investment has dropped since 2007
(Figure 14). From 2000 through
2009, although venture capital
investment in medical technology
grew about 40percent in the
$0
$5
$10
$15
$20
$25
$30
Medical devices and equipment
Biotechnology
Technology
2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995
Source: PwC and National Venture Capital Association, MoneyTree
TM
report based on data from Thomson Reuters, PwC analysis
I
n
v
e
s
t
m
e
n
t
s
,

U
S
D

b
i
l
l
i
o
n
s
Figure 15: Early-stage entrepreneurial activity versus venture capital investment
as percent of GDP
0% 0.2% 0.4%
0%
5%
15%
20%
Early-stage entrepreneurial activity vs.
venture-capital investment as % of GDP
Early-stage
entrepreneurial
activity
Venture capital
investment as % of GDP
Less venture
capital
investment
More venture
capital
investment
Higher activity
Lower
activity
0.6% 0.8% 1.0% 1.2% 1.4%
China
Brazil
India
United States
United Kingdom
Germany
France
Japan
Israel
Size of venture capital
investment
=USD$1 billion
Sources: Global Entrepreneurship Monitor, Economist Intelligence Unit, and the World Bank
The medical technology compa-
nies surveyed by PwC ranked
the United Kingdom second
to the United States in overall
market attractiveness and access.
Throughout the Innovation
Scorecard, the United Kingdom
consistently ranked near the
United States in most measures of
innovative capability and capacity.
Innovation Scorecard interviewees
saw the United Kingdom as much
more attractive than the rest of
Europe and second only to the
United States in opportunities for
commercializing innovation.
Medical device executives inter-
viewed by PwC expressed wide-
ranging views of the attractiveness
of market access in the United
States, Israel, and Germany.
They consistently ranked Japan,
Brazil, and China lower than other
countries. India performed better
relative to the other emerging
markets. Despite the absolute
superior attractiveness of the US
market, the country elicited widely
varied responses regarding market
access. With tight consensus,
survey respondents saw Japan as
least attractive for market access
(Figure 16).
Market access by country
1=most difficult, 9=easiest
United States
Israel
United Kingdom
Germany
France
India
Brazil
China
Japan
7.3
6.5
6.5
6.1
5.3
5.0
4.0
3.3
1.8
Source: PwC survey
Figure 16: Market access by country
1=most difcult, 9=easiest
Much worse
Worse
Same
Better
Much better
China, India
Brazil
Israel
Germany
United Kingdom
France
Japan
United States
Source: PwC survey
In 2015, do you believe that the
attractiveness of the commercialization
opportunity will become much worse, worse,
same, better, or much better?
Future expected attractiveness
of the commercialization opportunity
Figure 17: Attractiveness of market
commercialization opportunity
Survey respondents indicated that
the emerging economies were the
only ones they expect to become
more attractive for medical tech-
nology commercialization oppor-
tunities. Device companies saw a
new and growing consumer class in
these markets (Figure 17).
Looking forward
PwC predicts that the US score for
this pillar will decline during the
next decade, but scores for emerging
markets will rise. Rapid growth in
venture capital investment in China,
India, and Brazil, fueled by local
and US investors, is building some
of the worlds most entrepreneurial
cultures. Although US private equity
investors and venture capitalists
are contributing to this expansion,
their role is smaller than that of the
governments of India and China,
which are aggressively promoting
venture funding and providing
capital to early-stage frms within
their borders.
Because most innovation in medical
technology occurs in start-ups and is
later acquired by larger companies,
multinational medical technology
companies will increasingly look to
these emerging markets for acqui-
sitions to fll their product pipe-
lines. US medical technology frms,
which already obtain 40percent to
50percent of their revenue in foreign
markets
24
and see themselves as global
companies, will not hesitate to invest
where growth is most promising.
With the growth of emerging markets,
global venture capital frms increas-
ingly will see developing nations as
more attractive. They will see the US
market as less attractive because of
the diffcult regulatory environment,
uncertain payment structure, and
relatively weak rate of growth in R&D
and resources for innovation. Venture
capital will seek out countries where
the growth opportunity is stronger
and the approval process is less costly
in time and money.
24 Jeffrey W. Englander and Phillip M.
Seligman: Standard & Poors Industry
Surveys: Healthcare: Products &
Supplies, February 4, 2010. S&P is not
For several years, pharmaceutical companies have
been moving more clinical trials outside the United
States. Urged by their investors, device companies
have followed this lead.
The following case study refects the growing attrac-
tiveness of medical technology markets outside the
United States. It was the result of a PwC interview
with an industry executive and refects the opinions
and experience of the interviewee, not PwC.
For early-stage clinical experience, you want to
go somewhere that the regulatory burden is not so
high, said Mike Dugery, a former Johnson & Johnson
engineer who heads Vasculab Technologies, an early-
stage device incubator/accelerator. I look to Europe
as one of the proving grounds because you can move
quickly from your clinical phase into getting a CE
mark. That enables you to use and assess the tech-
nology more broadly. You can still make improve-
ments in the technology, but you beneft from what
you learn early on in Europe.
Dugery noted that countries also beneft when they
host early-stage research. Many European clinicians
are sought after for clinical studies because they have
so much experience with early-stage technology. That
puts them on the map in terms of clinical studies and
becoming thought leaders in technology adoption.
Dugery said that one example lies in the cardiovas-
cular device feld, where some European clinicians
have been working with US device manufacturers for
as many as 10 years.
He said Israel is prolifc in bringing out new innova-
tive technologies because of the following:
1. Regulatory environment: speed to get technology
into the clinic
2. Excellent technical people: engineers, clinicians,
technicians
3. Mature early-stage venture funding network and
seasoned entrepreneurs
You need all of those things to prove out a tech-
nology and bring it to market and even get it to
the point that you can secure funding and move
forward, he added.
For sourcing innovation, Vasculab still looks
primarily to the United States. We source innova-
tions primarily in the US by licensing technology or
acquiring assets from other companies, he said. The
clinical need for the disease states we target often
presents in the US because of lifestyle, diet, and/
or demographics. There are big markets throughout
the world, but the US is still the one where you can
generate large amounts of revenue. That does not
preclude Vasculab from looking outside the United
States for talent and innovation. We are ambivalent
to borders; we will look anywhere, Dugery said.
Vasculab does have qualms about intellectual prop-
erty protection in countries such as China, where its
harder to do business and there is a concern that
your technology would be copied. He added, When
we source technology overseas, we make sure the IP
is fled in the US.
Incubators look outside United States for clinical studies and frst revenue
Five new pillars of
innovation
To develop the type of medical tech-
nology ecosystem required for 2020,
countries and companies will have to
adapt to fve new pillars of innovation.
The fve pillars of today will give way
to the following:
1. System-oriented and value-
based incentives
Mobile health, value-based
purchasing, and personalized medi-
cine will combine to drive more
cost-effective, outcome-based initia-
tives and greater collaboration among
payers, providers, and the medical
technology industry to develop and
deliver whole-care, patient-centered
solutions. Information technology
will connect the elements of care
throughout the entire healthcare
system and validate results.
Emerging markets, where the cost
of research and engineering can be
a fraction of that in the West, will
continue to function as living labora-
tories for the design of cost-effective
products that can translate to other
markets. More importantly, the cost
constraints on the demand side of
innovation will create the tensions to
drive radical innovations that deliver
superior value at a fraction of the costs
seen in the developed markets.
If companies can demonstrate the
effcacy of new technologies in
developing markets, they can present
them to US and European regulators
and payers as proven alternatives.
Medical device marketing could take
the same path as Tatas $2,000 Nano
car, designed in India but exported to
Europe. The Nano shows how lower-
cost engineering, production, delivery,
and service can translate across
national boundaries and cultures to
deliver value never thought possible.
25
25 James Lamont, The Age of Indovation
Dawns, The Financial Times,
June 14, 2010, http://www.ft.com/
cms/s/0/6762f77a-77de-11df-82c3-
00144feabdc0.html#axzz16y7tAS.
2. Global networks of academic
medical centers
As emerging nations invest in
academic medical centers, increase
R&D funding, and attract returning
nationals trained overseas, the
academic leadership that helped
enable innovative research in
the West is migrating to Asia and
South America. Already, Asian and
Pacifc universities are ascending
the Academic Ranking of World
Universities, accounting for 106 of
the top 500 slots. China alone has
34 universities on the list, more than
double the number seven years ago.
26
Some US and European universities
and medical colleges have responded
to this challenge by seeking partner-
ships abroad to reduce competitive
overlap and create synergies. Notable
programs already under way include
the American Hospital MD Anderson
in Istanbul, UPMC cancer centers in
26 Academic Ranking of World Universities,
Statistics, http://www.arwu.org/
ARWUStatistics2010.jsp.
System-oriented
and value-based
incentives
Global networks of
academic medical
centers
Competing
regulatory
systems
Individualized
solutions and price-
sensitive customers
Global
financial
networks
Fiscal and financial
needs compelling
payers to press
providers for greater
value, exemplified by
value-based
reimbursement
models
Focus shifting from
silo-based to
integrated healthcare
systems
Emerging markets
investing in their own
academic medical
centers
US and European
institutions seeking
partnerships with
research centers in
diverse countries
Greater ease and
cost-effectiveness of
regulatory approvals
occurring in other
nations
Companies seeking
European, Asian, or
Australian approvals
in advance of US
review
Personalized
medicine and
cost-shifting
measures driving
individualization of
healthcare and
consumer-centric
focus
Emerging markets
creating frugal and
lean innovation,
which is redesigning
product and
distribution
processes
US venture capital-
ists partnering with
overseas counter-
parts and seeking
co-investment
opportunities
US venture capital
firms opening offices
abroad in Israel,
India, China, and
Europe
Figure 18: Five new pillars of innovation
Ireland, Cleveland Clinic Abu Dhabi,
and the Mayo Clinic-Karolinska
Institute partnership in Sweden.
Johns Hopkins recently announced
a partnership with King Khaled Eye
Specialist Hospital in Riyadh, Saudi
Arabia.
27
In addition, Johns Hopkins
recently signed an agreement with a
Kuala Lumpur-based private develop-
ment corporation to help Malaysia
develop its frst fully integrated,
private four-year graduate medical
school and teaching hospital.
28

Within the United States, exam-
ples of cooperation abound. The
Michigan-headquartered Van Andel
Research Institute (VARI) recently
entered into a strategic alliance with
the Arizona-based Translational
Genomics Research Institute (TGen),
which has its roots in the Human
Genome Project. Both VARI and TGen
seek to conquer cancer and other
diseases through genetic research. By
combining forces on certain projects,
they have been able to share expertise
and operate on a larger scale than
27 Johns Hopkins Medical School, Leading
Ophthalmological Centers in the United
States and Saudi Arabia Announce
Afliation, January 11, 2010,
http://www.hopkinsmedicine.org/
news/media/releases/Leading_
Ophthalmological_Centers_In_The_United_
States_and_Saudi_Arabia_Announce_
Afliation.
28 Johns Hopkins Medical School, Johns
Hopkins to Develop Medical School and
Teaching Hospital in Malaysia, Johns
Hopkins, November 2, 2010,
http://www.hopkinsmedicine.org/news/
media/releases/johns_hopkins_to_
develop_medical_school_and_teaching_
hospital_in_malaysia.
either could do independently. In
addition, the partnership has gener-
ated jobs and economic activity in
both states.
29
TGen also has formed a collaborative
relationship with the government
of Luxembourg to help the country
establish a bioscience center of
excellence. Two other US organiza-
tionsSeattle-based Partnership for
Personalized Medicine and Institute
for Systems Biologyare involved in
the collaboration.
30
3. Competing regulatory
systems
Medical technology companies will
continue to move into markets where
they can obtain regulatory approval
more quickly, generate revenues
faster, and engage patients and
providers in the cycle of innovation to
advance their products and services.
The FDA and other more restrictive
regulators will come under greater
pressure to improve and streamline
how they review new products.
Regulatory policy must be driven
by data, not anecdotes, said
ExploraMeds Josh Makower. People
will have to decide whether they are
willing to accept yesterdays thera-
pies rather than taking a risk on new
29 Proprietary PwC study, The VARI-TGen
Alliance.
30 Leading US Bioscience Pioneers
Enter International Collaboration with
Government of Luxembourg to Accelerate
Biomedical Research, TGen, June 6,
2008, http://www.tgen.org/news/index.
cfm?newsid=1167.
technologies. We will have to fnd a
way to embrace the fact that innova-
tion always comes with some risk.
Regulators in some developing
nations, such as China, are reluctant
to grant regulatory approval unless
a company already has it in its home
country. This gives US companies an
additional reason to operate in
Europe because they can obtain
approval there faster, opening the
door to Asia.
4. Individualized solutions and
price-sensitive customers
In the United States, employers,
governments, and payers will force
patients to assume a greater share
of the fnancial burden, risk, and
decision making in healthcare,
which should make them use care
more responsibly. In addition to
shifting more of the healthcare cost
to employees, many employers have
instituted wellness programs that
reward employees for healthy behav-
iors and penalize them for unhealthy
lifestyle choices, such as smoking.
Providers, who will be more respon-
sible for health outcomes, will look to
companies worldwide for technology
solutions that offer more integrated,
holistic, cost-effective devices
combined with wellness and disease
management services.
Although patient-centered, person-
alized care requires individualized
solutions, it accomplishes those within
a complex, adaptive system that inte-
grates devices, services, therapeutics,
and information technology. Like
Merck Serono has done with disease
management services surrounding
its easypod device, companies must
rethink their business models to align
with personalized medicine and wire-
less technology. According to CEO
Don Cowling, You have to frst blow
up the current model. Only then can
companies deliver more targeted and
effective solutions at lower cost.
5. Global fnancial networks
As investment opportunities shift
offshore, more US-based venture capi-
talists will open local offces overseas,
partner with counterparts outside the
country, seek co-investment oppor-
tunities, and identify target investee
companies abroad. Already, Bain
Capital, Highland Capital Partners,
and the Carlyle Group have offces
in China;
31
the Blackstone Group,
31 China Venture Capital Association,
Membership List, http://www.cvca.com.
cn/membership/MembersList.asp.
Providence Equity, and Trident
Capital, in India;
32
and Bessemer
Venture Partners and Sequoia Capital,
in Israel.
33
Beyond private funding, some poli-
cymakers have taken bold steps
to encourage innovation within
their borders. Denmark, Finland,
Ireland, Japan, Singapore, South
Korea, and Sweden have adopted
national innovation strategies,
while India established a National
Innovation Foundation a decade
ago.
34
The European Commission
32 Indian Venture Capital Association,
Members, http://www.indiavca.org/
mem_directory.aspx.
33 High Tech Industry Association (Israel),
Financial Investors, http://www.iva.co.il/
index.php?option=com_content&view=arti
cle&id=50&Itemid=58.
34 Stephen Ezell, America and the
World: Were No. 40! Democracy:
A Journal of Ideas, Fall 2009, http://
www.democracyjournal.org/article.
php?ID=6703.
recently announced its intent to
invest 6.4 billion (USD$8.3 billion)
in research and development during
2011.
35
Within the United States,
individual states and regions have
undertaken cooperative plans, such
as the Massachusetts super cluster
initiative, to foster innovation in
the medical device and life sciences
realms.
These efforts show increasing will-
ingness on the part of policymakers,
regulators, and companies in the
historic and emerging technology
powers to adapt to create the kinds of
reform, effciencies, and partnerships
needed to maintain their position in
innovation.
35 Matej Hruska, Brussels to Invest
$8.3 Billion in Research, Bloomberg,
BusinessWeek, July 20, 2010, http://
www.businessweek.com/print/globalbiz/
content/jul2010/gb20100720_317244.htm.
What this means for your business
Which countries
will lead medical
in 2020?
33 What this means for your business
Global leadership of medical tech-
nology innovation is already in play.
The Innovation Scorecard shows
clearly that the developed nations
are slipping in their capacity and
capability for innovation, while
the emerging markets are rapidly
gaining ground.
Why should countries care who
becomes tomorrows leader?
Innovative medical technology that
follows the new value-creation
dynamic will lead to better health
outcomes at lower cost for a coun-
trys citizens. It also will drive jobs,
tax revenue, and economic growth.
A study conducted by the Lewin
Group for AdvaMed shows that each
medical technology job generates
an additional 1.5 jobs; each medical
technology payroll dollar generates
an additional $0.90 in earnings; and
each dollar of medical technology
industry earnings generates an addi-
tional $0.90 in earnings elsewhere in
the economy.
36
Those countries that
can adapt quickly to the changing
drivers of healthcare innovation and
channel tensions into creative output
will reap the greatest benefts from
medical technology.
Although we expect the United
States to maintain its lead in medical
36 The Lewin Group, State Economic Impact
of the Medical Technology Industry,
June 7, 2010, http://www.socalbio.org/
studies/MTI_Lewin_2010.pdf.
technology innovation for years to
come, long-term US dominance is
no longer assured. The supportive
ecosystem that fostered this domi-
nance creates inherent limits to
change, encourages an incremental
and less radical path to innovation,
and discourages innovations that
could transform healthcares cost
structure and deliver greater value.
Radical innovations that have a
greater chance to bend the cost curve
are more likely to emerge from devel-
oping countries such as China, India,
and Brazil.
Looking toward 2020, the gap
between the United States and other
countries will narrow as emerging
nations rapidly progress by a number
of measures. These countries already
have leapt forward in other indus-
tries. For example, a recent report
by the PEW Charitable Trusts indi-
cates that China may be winning the
clean energy race. China took the
top spot within the G-20 and glob-
ally for overall clean energy fnance
and investment in 2009, while the
United States slipped to second place.
In relative terms, China and Brazil, as
well as the United Kingdom, invested
three times more in clean energy than
the United States.
37
Could medical
37 PEW Charitable Trusts, Whos Winning
the Clean Energy Race? 2010,
http://www.pewglobalwarming.org/
cleanenergyeconomy/pdf/PewG-20Report.
pdf.
technology investment take the same
direction?
Fledgling medical technology compa-
nies already seek regulatory approval
of new products outside the United
States frst. By 2020, consumers and
clinicians in Europe, Israel, and other
countries where the approval process
is faster and less complicated increas-
ingly will beneft from new technology
before those in the United States.
Investors will lend their support
where the ecosystem provides the
greatest opportunity for innovative
products to succeed.
By 2020, emerging markets with
exceptional growth potential will
gain more attention from medical
technology companies and inves-
tors. Companies are already tailoring
new products to the specifc needs
of developing countries, making
use of digital technology to extend
care to large populations with little
income or access to hospitals and
physicians. Brazil, China, and India
most likely will move far ahead of the
United States and Europe in digital
healthcare delivery because this type
of technology addresses their acute
access shortages in cost-effective and
valuable new ways.
Still, a decline in medical technology
for the United States and Europe is
hardly foreordained. Some of the
other nations that are candidates
for innovation leadership lack key
essentials, whether it be a supportive
regulatory regime, strong intellectual
property protection, reliable suppliers,
a robust venture capital market, or
high-quality research institutions.
These factors are not easily replicated,
and most of the countries that trail in
the Innovation Scorecard today lack
one or more of them. For instance,
easier regulatory approval in some
countries is offset by poor reimburse-
ment for many products. Poor intellec-
tual property protection undoubtedly
is holding back medical technology
advancement in emerging markets.
Countries that overcome their current
weaknesses and develop a supportive
ecosystem to help medical technology
companies seize the new value-driven
innovation dynamic will lead in 2020.
By taking the lead in medical tech-
nology, they will be able to deliver
greater economic and health benefts
to their citizens.
35
Appendix
37 Appendix
What is medical
technology?
The medical technology industry
manufactures and sells medical
instruments, devices, and equip-
ment, including medical diagnostic
machines (X-ray, CT scan, MRI);
medical therapeutic devices (drug
delivery, surgical instruments,
pacemakers, artifcial organs); and
other health-related products, such as
medical monitoring equipment, hand-
icap aids, reading glasses, and contact
lenses. Medical technology also
includes molecular diagnostic devices
and health information technology,
such as smart phone and IT applica-
tions. This broad range of products
goes from simple, noninvasive equip-
ment, such as wheelchairs, to high-
tech and highly regulated invasive
devices, such as pacemakers and
insulin pumps. The industry addresses
patient needs in diverse clinical areas,
including cardiovascular diseases,
orthopedics, ophthalmic diseases and
disorders, aesthetics, dental products,
medical and surgical supplies, medical
imaging, and in vitro diagnostics.
Methodology
The PwC Medical Technology
Innovation Scorecard incorporates
qualitative and quantitative data and
analysis to identify and provide support
for industry best practices. The overall
scores and rankings in each dimen-
sion, as well as in aggregate, should be
regarded as heuristics to help support
the advancement of regulatory and
advocacy work within the medical
device industry.
PwC received guidance in develop-
ment of the Innovation Scorecard
from a steering committee, consisting
of the following medical device
professionals:
Mark Gordon, vice president, global
regulatory and clinical affairs,
Synthes (At the time of his service,
he was vice president, global
regulatory advocacy and policy, at
Boston Scientifc.)
Michael Gropp, vice president,
global regulatory strategy,
Medtronic
Steve Phillips, director, health
policy and reimbursement, govern-
ment affairs and policy, Johnson &
Johnson
Stephen Dibert, president and CEO,
Medec, Canadas national associa-
tion for medical device technology
companies
To understand and apply best prac-
tices, PwC conducted a benchmarking
analysis of eight other innovation
scorecards:
Boston Consulting Group
Deloitte
INSEAD Business School
World Economic Forum
Economist Intelligence Unit
ITIF (Information Technology &
Innovation Foundation)
IMD International
Scientifc American
Apply best practices
and Scorecard
framework based on
10 dimensions
Collect and analyze
data from
Third-party sources
PwC data sources
Interviews from
participating
medical device
companies
Normalize data on a
scale of 1 to 9, with
9 being the best
Calculate the scores
for each of the
10 dimensions
Calculate the five
pillars and the
overall score
Scorecard
framework
Data collection
and analysis
Normalization
of data
Dimension scores
calculation
Pillar and overall
score calculation
1. 2. 3. 4. 5.
To calculate historic and current scores, PwC applied the following ve-step process.
Collect data
PwC collected data from third-party,
publicly available sources, including
but not limited to the World Bank and
World Health Organization. PwC also
gathered data from the frms Health
Industries practice. Additionally, with
the help of AdvaMed, PwC analyzed
data gathered during interviews
with medical device company execu-
tives. PwC conducted 13 interviews
with medical device executives, who
provided perspective on regulatory
and reimbursement environment,
market opportunity, and market
success for the nine countries.
The medical device organizations
represented by these 13 executives
accounted for approximately
$34 billion in revenue for 2009.
They market a wide range of prod-
ucts, varying in risk level and
application, for diagnostics, thera-
peutics, and surgical use in the
orthopedics, oncology, urology, and
cardiovascular disciplines.
The following example shows the
results of data collection for the third
dimension (innovative resources)
within the second pillar (leading
resources for innovation) for the
historical scores.
Brazil China France Germany India Israel Japan United
Kingdom
United
States
Researchers per million
inhabitants
629 1,071 3,440 3,453 137 5,000 5,573 2,881 4,663
Expenditures on R&D as
percentage of GDP
1.02 1.49 2.10 2.55 0.80 4.74 3.45 1.84 2.67
Number of universities in
Academic Ranking of World
Universities Top 500 list per
capita
6 30 23 40 2 7 31 40 152
Brain drain [1=no, the best
and brightest normally leave to
pursue opportunities in other
countries; 7=yes, there are
many opportunities for talented
people within the country;
Mean: 3.5] [WEF Survey]
4.3 4.2 4.1 4.4 4.2 4.2 4.8 4.8 6.0
International Internet
bandwidth (bits/second/
person)
1,041 280 29,356 25,654 32 2,003 3,734 39,650 11,289
Total xed broadband
subscribers per 100 population
5.3 6.3 28.4 27.5 0.5 23.0 23.6 28.1 24.0
Internet users per 100
population
35.2 22.3 51.2 75.7 6.9 28.9 68.9 79.9 71.2
Mobile telephone subscribers
per 100 population
77.6 47.4 93.6 129.9 29.2 127.5 86.3 123.8 87.6
Availability of latest
technologies [1=not available;
7=widely available; Mean: 4.9]
[WEF Survey]
5.3 4.3 6.3 6.3 5.5 6.3 6.3 6.2 6.6
Policies to increase
employment, R&D, production
and overall growth in the
medical device industry [6
companies] (1=least active
policies, 9=most active
policies) [PwC Survey]
3.3 6.9 3.9 5.9 5.2 7.1 3.0 4.9 5.9
39 Appendix
Normalize data
Next, PwC normalized and weighted
the raw data on a scale of 1 to 9 by
assigning the most favorable score in
each metric a 9 and the least, a 1. The
remaining scores were then plotted
within that distribution. The chart
below illustrates this step for the data
shown below.
Kingdom
United
States
Researchers per million
inhabitants
1.7 2.4 5.9 5.9 1.0 8.2 9.0 5.0 7.7
Expenditures on R&D as
percentage of GDP
1.4 2.4 3.6 4.6 1.0 9.0 6.4 3.1 4.8
Number of universities in
Academic Ranking of World
Universities Top 500 list
1.2 2.5 2.1 3.0 1.0 1.3 2.5 3.0 9.0
Brain drain [1=no, the
best and brightest
normally leave to pursue
opportunities in other
countries; 7=yes, there
are many opportunities for
talented people within the
country; Mean: 3.5] [WEF
Survey]
1.8 1.4 1.0 2.3 1.4 1.4 3.9 3.9 9.0
International Internet
bandwidth (bits/second/
person)
1.2 1.1 6.9 6.2 1.0 1.4 1.7 9.0 3.3
Total xed broadband
subscribers per 100
population
2.4 2.7 9.0 8.7 1.0 7.5 7.6 8.9 7.8
Internet users per 100
population
4.1 2.7 5.9 8.5 1.0 3.4 7.8 9.0 8.0
Mobile telephone
subscribers per 100
population
4.8 2.4 6.1 9.0 1.0 8.8 5.5 8.5 5.6
Availability of latest
technologies [1=not
available; 7=widely
available; Mean: 4.9] [WEF
Survey]
4.5 1.0 8.0 8.0 5.2 8.0 8.0 7.6 9.0
Policies to increase
employment, R&D,
production and overall
growth in the medical
device industry [6
companies] (1=least active
policies, 9=most active
policies) [PwC Survey]
8.4 1.4 7.3 3.4 4.7 1.0 9.0 5.3 3.4
Calculate scores
To calculate the score for each pillar,
PwC averaged the two dimensions
included in that pillar. For example,
the score for the leading resources for
innovation pillar is the average of the
scores for the innovative resources
and innovative output dimensions.
PwC used the same approach to
calculate the overall score, which is
the straight average of all fve pillars.
The example below uses Brazils data
for 2010 :
Future scenario
To calculate the future outlook, PwC
identifed metrics within each dimen-
sion to serve as key indicators. In some
instances, forecast metrics rely upon
PwC interview survey data or forecast
fgures of GDP and population gener-
ated by Goldman Sachs and the World
Health Organization, respectively.
For other metrics, PwC assumed
continued growth based on historical
trends or estimated the change for an
identifed metric target.
Similar to the method for calculation
of scores for 2005 and 2010, PwC
2.7
3.5 2.4 3.2 2.4 2.1
2.8 3.2 1.7 5.3 1.8 3.2 3.1 2.9 1.9 1.4
Innovation resources Financial incentives
Healthcare Commercial Community Need Demand Legal Approval Output Resources Market
Regulatory environment
Overall score
Price insensitive Investment
normalized the data for each of the
chosen metrics on a scale from 1 to
9. Results were then compared with
the 2010 dimension scores. Given the
difference, an adjustment factor was
applied to the 2010 score to determine
the 2020 outlook.
Key metrics by dimension for
creating the future scenario:
Market incentive: GDP growth
Health incentive: Consumer-class
healthcare spend
Innovative resources: Number of
researchers
Innovative output: Medical tech-
nology patent applications
Regulatory approval process: PwC
interview data
Legal environment and impact
on business: Intellectual property
protection
Demand and pricing factors: PwC
interview data
Needs and infrastructure:
Physicians per capita
Investment environment: Venture
capital investment
Medical technology commercializa-
tion: Medical device exports
41 Appendix
Pillar 1: Powerful fnancial
incentives dimensions and
measures
Market incentives dimension
Average GDP growth (2000-2007)
Government procurement of
advanced technologies (World
Economic Forum [WEF] survey)
Tariff rates
Prevalence of trade barriers
Business impact of foreign direct
investment (WEF survey)
Extent and effect on taxation (WEF
survey)
Total tax rate
Healthcare incentives
dimension
Health expenditures per capita
Primary hospital cost per bed day
Healthcare costs: Scans and
imaging (four procedures)
Total hospital and physician costs
Reimbursement approval cost (PwC
survey)
Population covered by private
health insurance
Consumer class health expendi-
ture (weighted 50percent in this
dimension)
Pillar 2: Leading resources
for innovation dimensions
and measures
Innovative resources dimension
Researchers per million inhabitants
Expenditures on R&D
Universities in ranking of Top 500
World Universities
Brain drain (WEF survey)
International Internet bandwidth
Total fxed broadband subscribers
per capita
Internet users per capita
Mobile telephone subscribers per
capita
Availability of latest technologies
(WEF survey)
Policies to increase employment,
R&D, production, and overall
growth in the medical device
industry (PwC survey)
Innovative output dimension
Labor productivity: GDP growth
per person employed
Number of utility patents (patents
for invention)
Triadic patent families
Medical technology patents per
capita
Quality of scientifc research
institutions
Quality of math and science
education
Annual publications as share of
world output
Capacity for innovation (WEF
survey)
Pillar 3: Supportive regula-
tory systems dimensions
and measures
Regulatory approval process
dimension
Premarket approval fees for MRI
(dollars)
Premarket approval time for MRI
(months)
Regulatory approval costs (PwC
survey)
Regulatory approval time (PwC
survey)
Ease of regulatory approval process
(PwC survey)
Number of regulatory approvals
granted (PwC survey)
Duration of product registration
(years)
Number of clinical trials
Legal environment and impact
on business dimension
Intellectual property protection
(WEF survey)
Software piracy rate
Ease of doing business
Corruption perception index score
Burden of government regulation
Transparency of government
policymaking
Laws relating to information
technology
43 Appendix
Pillar 4: Demanding and
price-insensitive patients
dimensions and measures
Demand for healthcare
dimension
Health expenditures as percent of
GDP (weighted 50percent in this
dimension)
Medical device revenues per capita
Government expenditure on health
(percent of total government
expenditure)
Out-of-pocket expenditure on
health (percent of private expendi-
ture on health)
Ease of reimbursement ranking
(PwC survey)
Number of home healthcare
companies
Medical technology intensity:
availability
Medical technology intensity: labor
versus technology
Medical technology intensity:
investment
Needs and infrastructure
dimension
Life expectancy at birth
Age-standardized mortality rates by
cardiovascular diseases
diabetes mellitus
malignant neoplasms (cancers)
Age-standardized, disability-
adjusted life years by musculoskel-
etal diseases
Age-standardized, disability-
adjusted life years by unintentional
injuries
Infant mortality rate
Physicians per capita (weighted
16.7percent in this dimension)
Hospital beds per capita (weighted
16.7percent in this dimension)
Nurses per capita (weighted
16.7percent in this dimension
(Last three measures collec-
tively weighted 50percent in this
dimension)
investment community
dimensions and measures
Investment environment
dimension
Venture capital investment (as
percent of GDP)
Venture capital private equity
country attractiveness index
Private foreign direct investment
(as percent of GDP)
Royalty and license fee receipts (as
percent of GDP)
University-industry collaboration in
R&D (WEF survey)
Firm-level technology absorption
(WEF survey)
Early-stage entrepreneurial activity
New business density
Medical technology
commercialization dimension
Medical device exports (weighted
50percent in this dimension)
Number of medical device
companies
Number of medical device
employees (PwC survey)
Number of medical device facilities
(PwC survey)
Number of new product categories
launched after reimbursement and
regulatory approval (PwC survey)
Ease of medical technology ability
and willingness to pay (PwC
survey)
Overall risk-adjusted commercial
opportunity (PwC survey)
Market technology commercializa-
tion: market access (PwC survey)
Historical scores
Kingdom
United
States
Overall score 2.3 2.9 5.0 5.6 2.3 4.7 5.1 5.5 7.4
Powerful nancial incentives 2.0 4.2 3.9 4.2 3.1 4.1 3.6 5.2 7.1
Leading resources for
innovation
1.5 2.2 4.6 5.0 2.0 5.2 6.4 5.4 7.2
Supportive regulatory system 2.8 2.1 6.0 6.3 3.2 5.2 4.3 6.0 7.2
Demanding and price-
insensitive patients
3.1 2.6 6.8 6.9 1.6 5.1 6.2 5.6 7.3
Supportive investment
community
2.2 3.1 3.6 5.6 1.8 3.7 5.2 5.3 8.2
Market incentives 2.7 6.5 4.2 4.7 4.9 5.6 3.3 7.1 5.3
Healthcare incentives 1.2 1.8 3.6 3.7 1.2 2.6 3.9 3.3 8.9
Innovative resources 1.8 1.8 4.6 5.3 1.0 5.8 6.2 6.9 7.5
Innovative output 1.1 2.7 4.5 4.8 3.0 4.5 6.6 4.0 6.9
Regulatory approval process 3.5 1.0 4.6 4.6 3.1 5.1 2.5 3.5 6.4
Legal environment and
impact on business
2.0 3.3 7.5 8.0 3.3 5.3 6.1 8.6 8.0
Demand for healthcare 3.3 2.0 6.7 6.7 1.1 3.7 4.9 4.6 8.9
Needs and infrastructure 2.9 3.2 6.8 7.1 2.1 6.5 7.5 6.6 5.8
Investment environment 3.3 3.3 3.7 5.9 2.5 5.8 5.1 6.7 7.5
Medical technology
commercialization
1.1 2.9 3.5 5.4 1.1 1.7 5.3 3.9 9.0
Compare scores
To compare country scores, visit
pwc.com/InnovationScorecard. The
interactive charts on this website will
allow you to compare countries scores
for specifc measures.
45 Appendix
Current scores
Kingdom
United
States
Overall score 2.7 3.4 5.0 5.4 2.7 4.6 4.8 5.4 7.1
Powerful nancial incentives 2.1 4.2 4.2 4.3 3.0 4.1 3.0 4.7 7.2
Leading resources for
innovation
2.4 2.8 4.5 5.4 2.2 4.6 6.0 5.4 7.3
Supportive regulatory system 3.5 4.9 6.6 7.2 4.5 5.5 5.8 6.8 6.8
Demanding and price-
insensitive patients
3.1 2.4 6.0 5.8 1.8 5.1 5.7 5.6 7.1
Supportive investment
community
2.4 2.9 3.7 4.4 2.2 3.8 3.6 4.5 7.2
Market incentives 2.8 6.8 5.2 5.1 5.0 6.0 3.1 6.5 5.5
Healthcare incentives 1.4 1.6 3.2 3.4 1.0 2.3 2.9 2.9 9.0
Innovative resources 3.2 2.0 5.6 6.0 1.8 5.0 6.2 6.3 6.8
Innovative output 1.7 3.5 3.5 4.9 2.5 4.1 5.9 4.4 7.7
Regulatory approval process 5.3 5.7 6.5 6.5 5.8 6.2 3.7 6.0 5.3
Legal environment and
impact on business
1.8 4.0 6.8 7.9 3.2 4.7 7.9 7.5 8.3
Demand for healthcare 3.2 1.6 5.1 4.7 1.4 3.6 3.7 4.7 8.3
Needs and infrastructure 3.1 3.2 7.0 6.9 2.2 6.5 7.7 6.5 5.9
Investment environment 2.9 3.2 3.9 3.5 2.9 5.6 4.0 5.4 5.8
Medical technology
commercialization
1.9 2.7 3.4 5.3 1.4 2.0 3.2 3.7 8.5
Innovation cycle
Innovation emerges from the process
the Austrian economist Joseph
Schumpeter called creative destruc-
tion, which PwC represents as the
innovation cycle that progresses
as follows: failure pain tension
innovation growth. In this
cycle, tension represents the energy
source that drives the innovation
process. Without tension in a system,
you cant have innovation. The most
successful innovators are those
individuals and organizations that
most effectively transform tensions
to harness their energy and drive
innovation and growth.
In what way does the idea affect:
The quality of the product or service?
The quantity of resources needed to create that
product or perform that service, or the number of
products or service providers needed to supply that
offering?
Where the product or service is offered?
The time to reach the desired outcome? For example,
does the idea remove the constraint of available clinic
hours, or reduce time to diagnosis, or reduce the
duration of patient hospitalizations?
The price of the product or service?
Will the implementation of the idea:
Reduce cost for the patient or healthcare provider?
Increase convenience for the patient and the clinician
or doctor?
Increase the confdence of the doctor, clinician, and
patient in the accuracy, effcacy, or durability of a
product or service?
Increase compensation for the provider, doctor, or
clinician?
How to measure the value of an innovation
PwC has devised a value-creation matrix to measure the degree of innovation,
as shown in the illustration below.
New value creation matrix
New value proposition
Growth Failure
Innovation
Tension
Innovation cycle
Pain
Remove Reduce Retain Reform Replace
Quality
Quantity
Location
Time
Price

Cost
Convenience
Condence
Compensation
47 Appendix
About PwCs Pharmaceuticals, Medical Device and Life Sciences
Industry Group
PwCs Pharmaceuticals, Medical Device and Life Sciences Industry Group (www.pwc.
com/us/pharma and www.pwc.com/us/medtech) is dedicated to delivering effec-
tive solutions to the complex strategic, operational and fnancial challenges facing
pharmaceutical, biotechnology and medical device companies. We provide industry-
focused assurance, tax and advisory services to build public trust and enhance value
for our clients and their stakeholders. More than 163,000 people in 151 countries
across our network share their thinking, experience and solutions to develop fresh
perspectives and practical advice.
Country Contact name Telephone number Email address
Brazil Eliane Kihara
Rodrigo Vinau
+55 11 3674 2455
+55 11 3674 2000
[email protected]
[email protected]
China Mark Gilbraith
David Wood
Jia X Xu
+86 21 2323 2898
+86 10 6533 5335
+86 10 6533 7734
[email protected]
[email protected]
[email protected]
France Philippe Nguyen +33 1 56 57 7769 [email protected]
Germany Volker Fitzner
Martin Schloh
Zun-Gon Kim
+49 69 9585 5602
+49 89 5790 5102
+49 89 5790 6245
[email protected]
[email protected]
[email protected]
India Sujay Shetty +91 22 6669 1305 [email protected]
Israel Claudio Yarza +972 3 795 4 590 [email protected]
Japan Kenichiro Abe
Kensuke K Koda
Mie M Onodera
Kaoru K Sato
+81 80 3158 5929
+81 90 6514 8101
+81 03 5251 2791
+81 80 3317 6957
[email protected]
[email protected]
[email protected]
[email protected]
United Kingdom Jo Pisani +44 207 804 3744 [email protected]
United States Tracy Lefteroff
Christopher Wasden
+1 408 817 4176
+1 646 471 6090
[email protected]
[email protected]
Innovation Scorecard Global Contacts
2011 PwC. All rights reserved.PwC and PwC US refers to PricewaterhouseCoopers LLP, a Delaware limited liability partnership, which is a member rm of
PricewaterhouseCoopers International Limited, each member rm of which is a separate legal entity. This document is for general information purposes only, and
should not be used as a substitute for consultation with professional advisors. NY-11-0034
This publication is printed on Finch Premium Blend. It is a
Forest Stewardship Council (FSC) certied stock using
30% post consumer waste (PCW) ber and manufactured
with 66% renewable energy.
To have a deeper conversation about how this subject may affect your
business, please contact:
www.pwc.com/InnovationScorecard
www.pwc.com/us/pharma
www.pwc.com/us/medtech
www.pwc.com/healthindustries
twitter.com/PwCHealth
Michael Swanick
US Pharmaceuticals, Medical Device
and Life Sciences Industry Leader
+1 267 330 6060
[email protected]
David Levy
Global Healthcare Industry Leader
+1 646 471 1070
[email protected]

Tracy Lefteroff
National Life Sciences Partner
+1 408 817 4176
[email protected]
Attila Karacsony
Marketing Director
+1 973 236 5640
[email protected]
Simon Friend
Global Pharmaceuticals, Medical Device
and Life Sciences Industry Leader
+44 207 213 4875
[email protected]
Steve Arlington
Global Pharmaceuticals, Medical Device
and Life Sciences Industry Advisory
Services Leader
+44 207 804 3997
[email protected]
Christopher Wasden
Strategy and Innovation Practice
Managing Director
+1 646 471 6090
[email protected]
Marina Bello Valcarce
Marketing Manager
+44 207 212 8642
[email protected]

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January 2011

The PwC Medical

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