Innovation in Vascular Access: Growth by Acquisition

Spencer Jones, Registered Nurse and CEO/Founder of Lineus Medical

Spencer Jones, Registered Nurse and CEO/Founder of Lineus Medical

 

Despite the the large amount of money, expertise, time and effort it takes to bring a medical product to market, new devices are cleared for use by the FDA every day. If you look at 510(k) clearances across the board, the FDA approves about six products every day. A small percentage of those are vascular access products, with a new IV access related product being cleared every eight days. To better understand the innovation in vascular access, I built a database of every 510(k) clearance over the past ten years and its associated company, filtering for the five most common vascular access codes that cover the following:

510(k) Vascular Access Clearance list.png

•        FPA – Intravascular administration set

•        FOZ – Catheter, Intravascular, Therapeutic, Short-Term Less Than 30 Days

•       LJS – Catheter, Intravascular, Therapeutic, Long-Term Greater Than 30 Days (CVC)

•       LJT – Subcutaneous, implanted, intravascular infusion port and catheter

•        PND – Midline Catheter, less than 28 days

 Large, familiar companies top the list, with publicly traded companies occupying five of the top six spots. You might think that most new products come from these massive companies, but the data shows that not to be the case. Only 34% of new vascular access clearances came from these eleven companies over the past ten years. The vast majority of these clearances were scattered across smaller companies, and firms that only obtained one or two over the ten-year period.

 

By cross sectioning the 510(k) clearances by the individual product codes, we get to see a clearer picture of activity in the space. C.R. Bard and Teleflex continue to compete in the PICC and CVC space without much challenge from the other large companies (as can be seen in column 4 of the chart below), while there is diverse competition amongst the more active peripheral IV and administration set categories (as seen in columns X and Y).

 

Product Code Breakdown of top Vascular Access Companies

Product Code Breakdown of top Vascular Access Companies

With the high merger and acquisition activity in the healthcare space, I needed to document each company’s acquisitions over the same time to get a full picture of their innovation strategy. The graph below juxtaposes the number of 510(k) cleared products with the number of companies acquired. Companies that experienced higher market cap growth on average had more acquisitions, with companies like BD and ICU Medical utilizing acquisitions, it appears, as the dominate feature of their innovation strategy. Further validating this point is that some companies list In-Process Acquisitions as an R&D expense, reinforcing that acquisitions are a concrete part of their innovation strategy as well.

R&D Budget, 510(k) Clearances, Acquisitions: Vascular Access

R&D Budget, 510(k) Clearances, Acquisitions: Vascular Access

Another interesting point, is the lack of correlation between these companies’ Research and Development budgets, and their number of product clearances. As you can see from the table on the right, there is little to no statistical association between the amount of money spent on R&D, and the number of vascular access product clearances. There are several factors that go into an R&D budget, and not all cleared products equate to success. One thing that is clear from this data, is that you don’t have to have the largest war chest to innovate effectively. 

There was very low activity in the Midline catheter space, with C.R. Bard representing one third of those product clearances. Over the past four years, impregnated and/or coated products were developed as these vendors search for ways to reduce their impact on CLABSIs.

Market Cap Growth

 There is more than one way to innovate successfully if growth is your goal, as you can see from the graph to the right. Strong growth can be seen across the board regardless of innovation strategy. Something that a static data report cannot adequately depict is the constant absorption of small companies/products that has happened over the past ten years. With further research, it would be possible to list the number of 510(k)s that each acquired company owned at that time. With so many company acquisitions, I suspect this would show the number of 510(k)s acquired to dwarf the number of 510(k)s from internal innovation. Even more accurate comparisons could be made if the number of patents assigned to each company were researched and their original inventors’/assignees’ companies determined.    

Vascular access innovation is alive and well, though it has evolved in its appearance over these past ten years. More difficult to track is the number of small investments and licensing agreements that these companies partcipate in, both of which are productive forms of innovation as well. A personal theory for this shift towards acquisitions is that as companies grow larger, they move away from the clinical setting into a corporate setting. Doctors, nurses and patients are the ones innovating, as they touch these problems every day and ideate new products to solve them. It’s difficult to adequately address a problem that you’re only hearing about second hand or in clinical papers, so acquiring the technology once it’s been validated by a clinician inventor is much easier. Medical device companies should and do proactively listen to clinicians and actively involve them in product development efforts. There are well founded restrictions on device company sales representatives being in hospitals, but there are no rules prohibiting doctors and nurses from being asked about the clinical problems they experience. In the general medical device space, doctors are more frequently tapped for these collaborations than nurses. For vascular access companies to innovate, it’s especially important to involve and engage nurses as clinical advisors on product development teams, in product workshops, focus groups, and surveys. Regardless of whether it is internal innovation or acquisition innovation, nurses are the front line of healthcare in vascular access and critical to the future innovation of the space.