It’s Complicated: Innovation, Cost, Compliance, and the MedTech Balancing Act

00:05 Good day, everyone. My name's Rene Zochel. I'm the Global Industry Advisor MedTech at, PTC, and I'm totally thrilled to be joined today by an outstanding voice in the industry, Daniel Matlas from Axendia. Daniel, welcome to this webcast. Thank you, Rene. It's great to be here, and thank you for the opportunity. So, I have been in the life sciences industry for 35 years. I started my career at Johnson & Johnson implementing, automation, manufacturing,

00:39 advanced manufacturing technologies, connecting the shop floor to the, top floor. And, it really has given me a lot of experience, both hands-on as well as, helping additional companies implement, modern technology. So, I work for Axendia. We are an analyst firm and strategic advisory firm that focuses exclusively on the life sciences industry.

01:09 We advise both, companies, operating companies, manufacturing, companies, as well as technology and service providers, and work closely with regulators at the intersection of business, technology, and regulatory issues that impact the industry, really providing forward-thinking, insights on ways that the industry can address upcoming challenges and prevent them, so that we can ultimately improve patient outcomes.

01:41 Thank you, Dan, for the introduction. Maybe just, some words about myself and my role. So, I'm the Global Industry Advisor MedTech, at PTC, and I'm responsible for our go-to-market strategy a-across all the PTC solutions that we have and across all the regions that we are supporting. And that means helping our organization to understand the specific needs and challenges of the industry, but also, in return, formulating our offering so that it is precisely addressing those challenges and needs with a value proposition that resonates

02:15 with our clients and prospects in that very interesting market. So Daniel, let's dive a little bit into the topic about, cost pressures, and, and changes in the industry. What are the most pressing cost pressures you see, across the MedTech today? So you bring up a very important point, which is that our industry is experiencing price pressures and profitability

02:48 pressures like, we haven't seen in a very long time. Those are driven by initiative in the US, like the most favored nation pricing, where, while currently that's primarily being applied in the biopharmaceutical space, we're seeing similar issues in the medical device space with the disparity of pricing of the same device across geographic areas. That is really pushing industry, to find new ways to become more

03:23 efficient and more effective. We're also experiencing supply chain fragility. The fact that, you know, we don't know where materials are gonna be coming from, whether that's a result of continuous disruption, a result of, wars and conflicts or, natural disasters that are really impacting, how we and where we get materials from. But also being driven by tariffs, because as tariffs are being applied,

03:57 across geographical areas, across different countries, that has a significant impact on the cost of goods sold, and that's addressing it. And the final piece is that, you know, technology can really help us enable our control and can act as a lever to help us understand how should we operate in light of everything going on. So with these issues in mind, Rene, how is PTC, or what are you seeing from

04:33 your clients on how they're addressing these issues? Yeah. So first of all, I would say there's a lot of uncertainty in the industry, in how to react and when to react to those, changes. But what most of the companies have in common is that they are actually looking for technologies that help them to, you know, work on the same basis of data, and then also leveraging electronic tools to work more collaboratively, and also doing, you know,

05:07 risk assessments early in the design phase or development phase of their, of their products. Or even looking for more flexibility in the area I-in, in the boundaries of the regulatory frameworks they, they need to operate because, I mean, you know, recertifying suppliers and so on and so forth. When you think about, identifying new sources to maybe to overcome some of the tariff, regulations or requirements, that's something that requires kind of change management and a

05:37 change work in the organization because it has an impact on the medical product that they in the end want to, want to sell. And I think that's also very important topic, regulatory changes. So when you look from, from your perspective on that in-into the industry, what is dramatically changing the regulatory landscape? FDA? Is it UMDR? UDMED? It, it, it really is all of the above.

06:07 It's the fact that we are experiencing significant regulatory volatility. It's the fact that historically or traditionally, companies went to the EU to introduce new medical devices because it was a very, predictable approach to get your ISO certification and, or get your product in the market and completely understand how, when, and, and how much it's

06:43 going to cost. Now what we're seeing is, you know, that, that changing with the FDA transitioning to aligning the quality system regulations section 820 of the Code of Federal Regulations to better align with ISO 13485. Whereas the EU through EU MDR is adding complexity into the regulatory frameworks.

07:13 And there's a lot of uncertainty even with EU MDR, because recently the European Commission asked EMA to reassess and reevaluate, the impact of EU MDR on bringing new products to market in the EU and product availability. And to add to that, we also have the challenge of EUDAMED and having that system up and running.

07:43 That is really creating a lot of challenges. And what we need to do is transition from an approach where compliance was the strategic approach. We wanna make sure that we are compliant. Some of our clients had slogans that we want to be beyond compliance, and our pushback is, "Why do you wanna be beyond compliance?" You wanna improve quality. You wanna improve patient outcomes.

08:13 You wanna improve efficiency. And you wanna make sure that compliance is a benign side effect of having the right processes and executing those right processes so that you in fact have the appropriate evidence, now digital evidence, that enables you to ins- to ensure compliance without having to have it be a burden on your business. So that is really important, and that's something that we are seeing within our

08:47 clients, that transition, that transformation from that compliance approach to a quality approach and a patient outcome approach that is enabling that. So from your perspective, you know, what are, what are PTC clients doing to address these issues and challenges? You, you made a very important, point is I think the, the interesting part is unifying. Unifying the data, unifying the way how they, you know, work or gather data, manage the data,

09:23 and I would say more importantly, bringing those data to the functions that need the data. So also, you know, unifying data, but also unifying the systems and get away from those, those siloed systems that we ha- still have in most in many of our clients, right? And trying to get all the stakeholders, the product development teams, the regulatory teams, the quality teams, the manufacturing, the service teams working on the da- same s- set of data so that they can early on, consider what is necessary from their

09:59 perspective in bringing this quality, this high quality product to market, right? And not, you know, s- ver- start working when the product has been released or when the product has been is ready to be submitted to EUDAMED or to the FDA. So enabling this kind also this kind of digital traceability between the different functions and the d- different, areas that are of interest of those data from, I would say, from the early design or from the actually from capturing the voice of the patients or

10:31 the voice of the customers to the end of life of a, of a product. With And, and this, I would say this all goes hand in hand with what also what is, I think, what is the FDA is encouraging the industry. What also MDIC, for instance, is, working, working on is, you know, this term of the digital transformation and also driving life cycle visibility. I know that Axenia is working also intensively with the MDIC, and you mentioned earlier also

11:02 on the intersection between regulatory and the industry. So what do you think when we look into this term of digital transformation, what does this mean actually in the context of a med tech manufacturer or the med tech industry? Yeah. What we see is often companies are looking at technology as a problem solver, and technology is an enabler to

11:33 solve problems. It can accelerate your, your efficiency and your effectiveness. But the challenge is many companies are digitizing or digitalizing their current processes, and that's why we don't use those, those terms. Because it's What we see is we look at the technology, we focus on the technology as opposed to focusing on the people who are going to use the technology.

12:03 To your point earlier, how can we improve collaboration? Technology can enable that Can facilitate that. But if product engineering isn't talking to the clinical people and aren't talking to the regulatory people and manufacturing and so on, technology is going to be there, but it's not going to give you the benefits that you're looking for. So it's really important to transform processes first.

12:37 Identify ways-- Organizational change management is critical. It's even more important, and I'm sorry to say this to a technology company, but it's more important than the technology, right? And I, and I think you'll agree with me because when you see technology implemented properly in successful projects, what we find is you have to have great technology, but you have to have the organizational change management piece

13:08 happening first and aligning organizations and people within different departments to make that happen. So transforming the processes, we need to stop being reactive about how we implement technologies. Very often the way-- the reasons we implement is because we had a finding from a regulatory body or we had an issue and we're reactive. We're reacting to that and we're hoping technology's going to fix it.

13:38 And the other thing we need to do is stop that, what we call the shiny object approach to implementing technology, where often an executive sees an article or talks to a peer and says, "Oh, we are doing fill in the blank." AI is obviously the, the one-- the, you know, the, the new shiny object today. But it really-- We, we need to look holistically and say which tool,

14:08 technology tool is going to help us solve which problem? It's the old proverb, if the only tool you have is a hammer, then everything looks like a nail. And right now AI is the hammer and everybody wants to use AI as the hammer. So it's really important to look across the organization and find out how do I bring technologies to enable me? So PLM, doing true product life cycle management from early stage ideation,

14:38 from gathering customer requirements all the way through to post-market surveillance and ALM and IoT and integrating AI where appropriate so that we can truly have cross-c- functional collaboration. So I know you asked me about digital transformation, but the way to really transform is by focusing on the people and focusing on how can we improve patient outcomes.

15:08 What, what are you seeing, You know, how, how can PTC enable that visibility and what are some of the barriers to transformation that you're seeing and you're helping customers overcome? Yeah. So I like that, I like that picture that you just, has drawn, about the people process and the technology about this triangle and it's actually also what we want to achieve. Of course, I mean, and my response to your question is actually twofold. On the one hand, from a technol- from a technology perspective, from a solutions

15:40 perspective, it's all about, you know, enabling that, what we call the digital core or the digital backbone, which is tightly integrated or seamlessly integrated with all the different, solutions, and crossing all the different, domains that are involved in from the first ideas to actually to the end Actually I would say really to the end of life of a medical product when we also then, you know, talk about, recycling or reusability of, of components

16:15 or, or products. So in that sense we, we have the solution building blocks, I'd say, that, allow a complete, modeling of those processes in the, in the technology. But I think an very important point in the beginning is also aligning the people. Aligning the people on where are really the, where are the gaps in the, in the current way of working. So we have the concept of the digital

16:46 transformation value roadmap, which allows us to have a, have a actually a tool agnostic discussion with the stakeholders along the product life cycle about what is hindering to, to be more effective or more efficient in their processes. What informations are they lacking or what data are they lacking? What are the key KPIs they are following? So that conversation, on the different levels in an organization, which is, as said, it is

17:16 more on the people and on the process side because to your point, you're absolutely right, technology can solve so many things today, but, is the technology that someone's selecting solving the problem that is the most obvious and the most important one? That's something that needs to be find out when having conversations with, with clients. So, when we-- And, and, and I think we both agreed that people are the

17:46 maybe the most important part, when addressing the, the digital transformation. But in organizations we also need to have the, the right leadership and the right leadership capabilities. So how do you see that the leadership in the, in the organizations you work with is evolving in responding, responding to the industry disruptions? So what we're seeing is Leaders in the medical device space

18:18 recognizing the issues and the challenges that the industry is facing holistically. So working together in order to address, the issues where there isn't a competitive, situation, then collaborating. And MDIC, as you mentioned earlier, is a really good example where industry comes together and, and aligns, in order to solve problems. The other thing that we're seeing is that executives are looking inwards as

18:53 well within their organizations and trying to understand, how do we improve? How do we build resilience? Because that's what's really important. We're often asked, you know, "What is the new normal? When are we going to go back to normal?" And the answer is, that we give, is, you know, we The new normal is what we call the age of continuous disruption. We don't know what the next disruption is going to be.

19:27 We know that there isn't, there is going to be one. Now, this is not new, right? Heraclitus, 2,500 years ago, said the only constant is change. What we are experiencing though is a, the rate of that change is growing. As the rate of innovation is going, if you follow Moore's Law, it, it goes exponentially, right? How technology evolves. But we need to be a lot more resilient, and organizations are finding ways to become a lot

20:02 more resilient. And part of that is, and, and this is something executives recognize, is traditionally our history has been, our, our industry has been very rigid in the way we implement systems and we, way we implement processes and workflows because we were compliance-centric. As we are building resilience and we're more process-centric, we want to be able to have a s- a certain amount of flexibility built into our systems and into our

20:38 processes so we can change quickly to react to issues or challenges, which in fact will make us more resilient. So those are really important. And in order to do that, we need to empower teams within the organization at different levels, and we need to listen to the operator who's running that line. We need to listen to the engineer who's designing that product, and

21:09 we need to think holistically. And this is, again, something that we're seeing more from executives, where they're looking across the entire product life cycle to understand what is the impact of certain decisions. And to your point earlier, in order to achieve that, we really have, need to have data and processes that are trustworthy, and we need to be able to implement the right systems and technologies that give us visibility from raw material to

21:43 patient, and from shop floor to executive floor. And, and this is something we have been talking about as an industry for decades. What's different is the technology is mature today. The regulators are in fact removing a lot of the roadblocks that historically have existed, and they're encouraging industry to move forward. And industry leaders are, unfortunately, due to some of the price pressures that we talked

22:17 about earlier, looking for ways to become more efficient and more effective, and this is driving a different mindset that, that supports resilience as well as continuous innovation and improvement. Does that align with what you see as well? Abso- abso- absolutely. And I think maybe I just wanted to ask you also then about that before I respond to that. You said one of the frameworks that the, the regulated, regulators are changing,

22:50 specifically also maybe to support a more agile approach to using new technologies also now the, I would say the final guidance for computer system assurance, which also helps maybe organizations to adopt more frequently and maybe also more easily to, to new technologies. Would you agree? Absolutely. So we've had the privilege to work with FDA, um- since 2018 on CSA. It's been a long way, but the final guidance did, come out.

23:24 And that is really The, the intent of that guidance is to facilitate the adoption of technology- and the ability to actually support how industry innovates through the use of modern technology, reducing the burdens, the amount of documentation that needs to be produced. We talked earlier about, you know, transition and the focus from compliance to quality. Well, this is what CSA intends to do.

23:55 How are you going to improve the quality of your systems? It's not necessarily by writing more documents, but by using modern testing approaches, by using automated testing, by working with partners who can provide you the digital evidence to prove that every feature and function out of the box does what you intended it to do. And really lo-, you know, shifting the burden so that as the end customer, what you need to do is make sure that it meets your intended

24:30 use, how you plan on using that system Yeah. Yeah. And that actually also aligns, coming back to your question that you had earlier, what PTC is doing and what, what frameworks we're using. I mentioned earlier already the digital transformation value roadmap, which is for us a tool to really, you know, align with the, with the people in an organization about the priorities, the business priorities, and not looking at, you know, from at, at it from a capability perspective, but more from a process perspective and also on the, a, let's

25:01 say an, an indicator like a, a K- KPI that, helps really to align the different, the different functions on working against that, it, that, that goal. The other thing I believe is specifically when we talk about, you know, adopting to, adopting to new technologies faster, I think is, software as a service. So providing even solutions like PLM or, service related solutions in a way that

25:32 you could use them actually as a kind of plug and play, with the w- as provided in an environment that allows you to keep pace with the techno- technological advancements that are coming. I think that's another, another dimension that helps organizations to, leverage innovations much, much faster Yep, absolutely. And, and again, I mean, SaaS, you know, software as a service, having the technology

26:02 available more quickly, it's a tool Yeah And it's a tool we should take advantage of. Yeah, it is. Very often- Yeah we're, we are pushed or we're asked, when is FDA going to come up with guidance on SaaS? And our answer is, you don't want FDA to come up with more guidance Yeah. No It really is about you, how are you going to use the technology and leveraging CSA, leveraging your internal policies and procedures in order to prove with a

26:32 high degree of confidence that the software meets your intended use. That's, that, that's the bar. It's not about how much documentation we can create. And, and we are hoping that this final guidance on, on CSA will finally, drive industry to move in that direction So, this brings us actually to the end of our conversation then, but I would like to have your final thoughts on where the industry is heading So I think as an industry, we have

27:08 been always a very innovative, industry, providing very innovative products, leveraging the latest technologies. In fact, you know, there are a few hundred products currently that are leveraging AI, that have been approved or authorized for marketing by FDA, by EMA, other regulatory bodies. But the challenge is internally, we need to be able to leverage those technologies as well.

27:39 And in order to do that, we need to remember that we always need to focus on improving patient outcomes. That should be our goal. And in order to, enable that, we need to sometimes realize that the job that we are doing, while it has a really important impact, we really need to keep looking forward at how do we improve patient outcomes.

28:09 And how do we do that? We need to adopt that mindset of continuous improvement and innovation so that we are streamlining our processes, and then we find ways to apply technologies as an enabler as opposed to the solution. And as I mentioned earlier, it's extremely important that they transition our focus from compliance to quality. Because ultimately, what we want to make sure is that as an organization,

28:41 we are delivering for our patients and delivering the right technologies Yeah, absolutely. Absolutely. And, maybe just to add to that, I would say, I, I would echo what you just said, everything. Maybe just one addition to it, I would also say think about, this north star that you want to achieve as an organization and, you know, have always this patient outcome in mind and

29:11 that everything that the organization is doing has an impact on somebody's life, right? And having, having the tools that prepare you for that constant change and that constant disruptions that we are seeing so that you are more flexible in your reaction, that you do not have a lot of efforts in, in, in doing that, I think that's another, another piece. So aligning what we, what you said in the beginning, aligning your priorities with an underlying infrastructure and IT architecture that allows you to be much quicker and much

29:45 faster in your response to whatever, whatever is happens in the future Absolutely Daniel, thank you very much for your time today. I really enjoyed that conversation and I'm looking forward also to continue the, the collaboration with you. Thank you very much Absolutely. Thank you, Rene, and thanks to PTC for having me today. I really enjoyed our conversation, and look forward to, future engagements Thank you