Medtech funding is down. Regulatory approval time is up. And innovation has been "dampened." So what's a device maker to do? According to Ernst & Young Medtech Leader for the Americas John Babitt and Northeast Life Sciences Leader Dave DeMarco, it's best to embrace "the new normal" and seize the opportunities that come with it.

Babitt and DeMarco presented findings from Ernst & Young's "Pulse of the Industry" 2011 medical technology report. The fact that 510(k)s and PMAs are down, approval times are up, and VC funding is flat should come as no surprise. Still, the numbers are sobering:

• 510(k)s in 2010 totaled 2,778, accounting for a 400-plus decrease from the 2006 total.
• PMAs in 2010 totaled 20, down from 39 in 2006.
• VC funding for all sectors, including medical, dropped from $31.2 billion in 2007 to $12.3 billion in 2010. Medtech funding has remained flat at about $4 billion for the past two years. And early-stage technologies continue to migrate to Europe where regulatory approval is faster and less expensive than in the US.

Another telling statistic according to the E&Y report is that for medtech companies with sales of greater than $1 billion, EPS (earnings per share) increased 362% from 2001-2010, while P/E (price-earnings) ratio dropped 37%. Why the disparity? According to Babbitt, it "demonstrates uncertainty for the industry, primarily related to pricing headwinds and regulatory uncertainty" and signals investors are expecting lower earnings growth in the future.

Compounding the challenges represented by the numbers above is the reality that payers are pressuring medtech companies to show how their products improve health outcomes, with more attention being paid to post-marketing data. Meanwhile, unlike years past, when medtech companies needed to just convince physicians and surgeons that their product was best, hospitals are stepping in with technology assessment committees and group purchasing organizations designed to help cut costs.

As challenging as these trends are, other trends point to real opportunities for medtech companies. "Technology is coming to our industry in a bigger way than ever before," said E&Y's DeMarco during an AdvaMed press briefing. E&Y’s Babitt agreed, adding, "Medtech companies have the opportunity to move closer to the payers and providers. Now we're seeing companies execute services and opportunities as opposed to just products being taken to market."

Illustrating DeMarco's and Babbitt's points are these examples found in the report:

• Medtronic's CareLink Pro 3.0 therapy management software, which provides advanced decision support to healthcare professionals managing diabetes.
• Stryker's partnership with Capsule, a provider of medical device connectivity, which connects patient data from Stryker smart beds to hospital EMRs.
• GE Healthcare's Qualibria software, in collaboration with Utah-based Intermountain Healthcare, which centralizes patient data and allows providers access to real-time information.

And then there's the potential represented by the alternative-site point-of-care market— primarily home and urgent care centers, and not hospitals. "In that space," said Babitt, "it's still the 'Wild Wild West,' providing medtech with a unique opportunity."

Boston Scientific seized such an opportunity with its Latitude wireless remote patient monitoring system, which enables patients to have remote follow-ups and to have their heart and cardiac device status monitored while at home.

Looking ahead, Babbitt predicted, "As we move forward with healthcare reform, we're likely to see consumers bearing a larger portion of overall healthcare responsibility. With that will come new market opportunities for medtech to tap."