Start-up nation: The Future of Medtech is underway in Israel

By Glenn Snyder, principal, MedTech Practice leader, Deloitte Consulting LLP, and Arod Balissa, manager, Deloitte Catalyst | Tel Aviv

The COVID-19 pandemic helped accelerate the adoption of digital technologies in health care.¹ But how is the medtech sector likely to fare in the post-pandemic world? The answer depends, in part, on the collective progress toward the Future of Medtech where digital transformation and radical interoperability help empower consumers take charge of their own health and well-being.

A successful transition to the Future of Medtech—a subset of the Future of Health^TM—will likely require companies to recruit new talent, adopt new technologies, and be open to new ways of thinking. During a recent conference call with investors, the CEO of a large US medtech company eloquently stated, “It's time to put the tech into medtech.”² Israel’s entrepreneurs are doing just that, and they are making substantial headway. Israel, which has been referred to as “start-up nation,” has a $6.2 billion medtech market, according to the International Trade Administration.³

What is the Future of Medtech?

We define the Future of Medtech as a new class of digitally enabled medical technologies. This includes Software as a Medical Device (SaMD), algorithms, wearables, and other connected devices. The combination of life sciences and computer science has opened the door to a bevy of new opportunities in medtech. In our vision for the Future of Health, medtech companies will leverage radically interoperable datasets and artificial intelligence (AI) to create products that provide new insights to a generation of empowered health consumers.

Deloitte recently released a paper that outlines six winning roles that will help ensure medtech companies thrive in the Future of Health.

Early signs of the Future of Medtech are already beginning to dominate the conversation within the industry. Always-on sensors, imaging-analysis algorithms, and point-of-care diagnostic tools use digital technologies; they resemble consumer-grade gadgets as much as medical devices. These innovations generate reams of data, which can be fed into neural networks and other machine-learning algorithms to provide insightful recommendations to clinicians. This is leading to increasingly more accurate diagnoses and on-the-spot results. From the retail clinic to the community center, we see the Future of Medtech as one of the key engines that will enable the Future of Health. The data created by such devices can also empower health care systems to help maintain the health and well-being of consumers.  

In our increasingly value-driven world, medtech companies should reach beyond the traditional develop/manufacture/sell business model. Companies should also emulate some features of the tech industry and assimilate behaviors that support software development. To deliver on the promise of the Future of Medtech, we believe that this transformation will require medtech companies to onboard new, AI-focused talent and integrate digital health technologies that provide value to both corporate customers and health care consumers.

Israel: Welcome to medtech nation

Over the years, Israel has become a hotbed for medical technologies, which has attracted the attention of many global leaders. The country is home to more than 350 multinational R&D centers. More than 20 of these centers are focused on medtech, representing some of the world’s leading manufacturers, distributers, and innovators.⁴ Many others are operating medtech sales and marketing businesses.

Israel has been gaining prominence globally as a leader in cybersecurity, AI, and digital health. Leveraging its elite intelligence units, leading academic institutions, and entrepreneurial workforce, the country has been building a reputation as a powerhouse in AI-related innovation and research. In 2020 alone, nearly 100 AI-focused companies were launched in Israel.^5,6

In recent years, Israel's medtech cluster has started to recover from a global lull in investments and innovation that led to increased competition, new financial pressure, and funding challenges. As AI becomes more common in health care, Israel's prowess could inspire a new wave of startups that focus on developing SaMD algorithms, connected devices, and wearables. In 2020, the total number of such companies reached 384, generating $377 million (USD).⁷

A blueprint for innovation

Israel's military (the IDF) has historically kept the country on the leading edge of technology. In 1998, for example, a group of engineers from one of the IDF's elite intelligence units left the military to launch a successful medtech company. The same technology the engineers worked on in the Army was incorporated into the new company, which was acquired 15 years later.⁸ The company’s origin story became almost legendary in Israel, but today it is far from unique. In recent years, it has become almost commonplace for people to complete their three years of mandatory military service and join the technology ecosystem in some capacity. This trend has created a constant stream of new, tech-savvy talent.

Today, intelligence units like 8200 (touted as the best tech school in the world)⁹ serve as Israel's primary pool for technology talent.

Against this backdrop, we believe that the global medtech industry should leverage technology as it expands into the digital age. Israel could be a great place for medtech companies to explore new technologies and experiment with new talent.

Getting started in Israel

Medtech companies should consider the following aspects before engaging with Israel’s digital ecosystem:

• Talent: Talent with a deep background in AI will likely be essential for any medtech company considering a digital transformation. Some of the world’s best AI engineers are in Israel, and they have the background that could help move organizations into the future. For example, Israeli engineers and AI developers could help medtech companies develop the next generation of SaMD algorithms.
• Startups: More than 7,000 startups have been born in Israel.¹⁰ Many of these companies are dedicated to leveraging AI for different medical functions, such as diagnostics, while others focus on diseases (e.g., oncology, diabetes).
• Research: Israel's digitally advanced and universal health care system provides a closed-loop environment that enables rapid cycles of R&D. Leveraging its 25+ years of highly interoperable electronic medical record (EMR) repository, medtech leaders will find an optimal environment to develop, test, and validate new technologies.

Israel's startup ecosystem contains a unique, interconnected segment dedicated to both life sciences and health care. Many venture-capital groups, academic institutions, startups, and programs are accustomed to exporting new technologies to global markets and are keen on collaboration. We refer to this as a sandbox environment. It allows companies to quickly build, deploy, test, and commercialize cycles.

The Future of Medtech is already a reality in Israel's innovation ecosystem. We believe that medtech and health care companies that work with the Israeli ecosystem could gain a sustainable competitive advantage by gaining access to superior technology in the sandbox.

Return to the Health Forward home page to discover more insights from our leaders.

Endnotes

^{1.        COVID-19: Accelerating digital transformation in healthcare,” Deloitte Centre for Health Solutions, March 2020}

^{2.        Geoff Martha, Chairman and CEO of Medtronic,  FY 2021 first-quarter earnings call, August 25, 2020}

^{3.        Medtech Nation: How Israel is changing the face of medical procedures, Entrepreneur, November 15, 2020}

^{4.        Inside Israel’s secret start-up machine, Forbes, May 31, 2016}

^{5.        IVC Data and Insights, IVC Research Center}

^{6.        Israeli AI startup funding rounds of January 2021, StartupHub.ai}

^{7.        Pitchbook, January 2021}

^{8.        Given Imaging Ltd., US Securities and Exchange Commission, Form 20-F, filed March 31, 2008}

^{9.        The best tech school on Earth is Israeli Army Unit 8200, Insider, August 13, 2013; Unit 8200: Israel’s cyber spy agency, Financial Times, July 10, 2015}

^{10.     Start-up Nation Finder­­, Start-up Nation Central}