Planning for profitable medtech

Australia has a world class history of medical device innovation. From the bionic ear to ultrasound, leave-in contact lenses to spray on skin, Australian innovators have enjoyed great success as world leaders in advancing medical technology (medtech). The Australian government predicts growth in the Australian medical devices and diagnostics sector of more than five per cent per annum to 2015 and beyond.1 The following points are made to assist medical device innovators to maximise the value they derive from their IP.

Interdisciplinary innovation and mitigating risk

It is often at the interface between traditional disciplines such as engineering, chemistry, ICT and medicine, that we see the most exciting advancements in medical technology innovation. A collaborative partnership can bring together diverse thinkers, who together can expedite problem solving and identify commercial potential. However, these individuals often have different expectations about the demands, performance and longevity of the collaboration, raising the risk profile of the venture. To mitigate these risks, we recommend early agreement on fundamental values and objectives for the collaboration, including:

(i) who is responsible for decision making and finance
(ii) ownership of assets (including IP) brought into and born out of the collaboration
(iii) performance expectations and conditions for sanctions/ejection from the venture
(iv) commercial objectives and performance milestones, and
(v) exit strategy.

IP strategy

Patent positioning is acknowledged by existing medtech companies as a key factor in securing competitive advantage and profitability. However, it is a vexed issue for startups who may lack the funds to independently commercialise, but are reluctant to commit to an IP budget when confronted with so many unknowns. Experience tells us that a medtech startup needs registered IP rights to attract investment. The risks associated with the opportunity can be reduced by:

(i) controlling confidential information and trade secrets
(ii) managing contracts including confidentiality agreements and NDAs, licenses, employment/consultancy contracts, invention assignments and the like
(iii) assessing the risks to market entry (freedom to operate), and
(iv) monitoring competitors and new market entrants for infringement.


Healthcare economics

Governments and private insurers are often prepared to contribute to the cost of medical products and services when these technologies meet the requirements for reimbursement approval. These requirements vary between governments and insurers.

Having a reimbursement strategy that takes into account the evidence required to demonstrate:

(i) clinical benefit
(ii) added value, and
(iii) ultimately, relevant reimbursement codes should be part of the early stage development process.

A startup that focuses their market research on the patient or doctor as the consumer may be seeing only part of the picture. It is the payer who has the real power to decide whether or not a technology will be accepted in the market. Moreover, if a similar product has prior approval for reimbursement, a startup should seriously consider how it can realistically and profitably compete.

Regulatory pathways

For therapeutic goods, regulatory approval is required before the product can be supplied or exported from Australia. Other countries have similar rules, although they vary from country to country. Delays in obtaining regulatory approval can prematurely age a technology, while failure to secure regulatory approval is an obvious sign of peril. With this in mind, regulatory pathways should be considered early and inform product design and manufacturing processes which can, in turn, have an impact on IP strategy.

Generally, the fundamental characteristics of the patent system apply equally to medical devices as they do to other technologies. A notable exception is methods of medical treatment which are not considered patentable subject matter in most countries, with the exception of the USA and Australia. For example, the European Patent Convention states:

European patents shall not be granted in respect of … methods for treatment of the human or animal body by surgery or therapy and diagnostic methods practised on the human or animal body …

This exclusion is problematic where a new therapeutic effect is achieved by using a known product in a new way. For instance, a new use of ultrasound to treat migraines would not be patentable where the invention resides solely in the manner in which the ultrasound device (which is unchanged from the known apparatus) is used. Whereas a second or subsequent use of a known drug composition may be protected by adopting Swiss-style patent claims (e.g. “Use of a substance or composition X for the manufacture of a medicament for therapeutic application Z”), there is no equivalent tactic for protecting a second or subsequent use of a known medical device.

To further complicate matters, even when the method is not performed on the human or animal subject per se, problems can arise if the method is implemented in software which is not patentable in countries such as Europe, China, Japan or India unless strict requirements are met relating to the technical benefit achieved by operating the software.

Claim drafting is an art that should anticipate the evolution of the product from development to manufacture, distribution and servicing. This is to ensure that component parts, unique packaging and other protectable aspects are all covered to the fullest extent possible, while balancing broad protection with claim features that can distinguish the invention from the prior art.

Opportunity knocks

Although there are challenges that are unique to the sector, there remains great opportunity for medical technology innovators. Despite downward pressure on pricing, medical devices continue to enjoy a price premium compared to consumer products utilising similar internal components. Therefore, the right team combined with the right technology and the right market can lead to profitable opportunities.

In developed economies, there has been a noticeable change in focus from healthcare to wellness. This opens opportunities for medtech innovators to offset the higher risk associated with clinical projects by also developing products and services aimed at the growing middle class of consumers who are prepared to pay for products that help them to live better and longer.

If you would like more information about this subject, please email Alyssa Grabb.


BSc BEng(Biomed)(Hons) GDipIPLaw FIPTA

With a Bachelor of Science and Bachelor of Engineering (Biomedical) from Flinders University of South Australia, Alyssa has a background in electronics, control systems, physiology and anatomy, neuroscience and medical physics. She is also the practice team leader of POF’s Electronics, Physics and IT (EPIT) team and a POF Board member since 2022.