Key trends impacting ESG performance in the medical device sector

All aspects of ESG are important, and in the healthcare industry, companies must excel across all three. However, the ESG performance of companies in the healthcare sector is shaped by technological advances and macro-economic factors. Here, we look at the key technology and macro-economic trends that companies should consider in order for their ESG initiatives to succeed.

Artificial Intelligence (AI)

Pharma and medical device companies are implementing AI to transform supply chains and better manage their operations. With predictive analytics, AI provides increased visibility of supply chains, improving transparency around costs, logistics, warehousing, and inventory. Data are collected from each stage and then analysed by AI algorithms to increase efficiency and productivity.

AI also speeds up the drug development process, which could translate into cheaper drugs for patients. BenevolentAI is exploring AI for disease modification across weeks rather than months. Additionally, AI can improve patient wellbeing by automating health records, predicting illness, and enhancing treatment efficiency. 

3D printing

For pharma and medical device companies, 3D printing can reduce costs, waste, and the environmental burden. Aprecia Pharmaceuticals’ Spritam, an anti-epileptic drug, is the first and only 3D-printed pharmaceutical, having received US FDA approval in 2015. While large pharma companies have been slow in this area, Merck and GSK are now using 3D printing for clinical trials and manufacturing. Orthopedic companies have been using 3D printing for their implants for years.

3D bioprinting offers an alternative to animal testing in drug development. 3D tissues provide a far more accurate representation of reality, resulting in more predictive findings for drug candidates and reduced late-stage failures. 

Cybersecurity

The healthcare industry is vulnerable to cyberattacks due to the amount of valuable and sensitive data it produces. During the pandemic, there have been numerous cyberattacks on hospitals and institutions, especially those associated with Covid-19 research. This is demanding stronger investments in cybersecurity across the industry. There is also increased risk of cybersecurity attacks since the start of the Ukraine invasion, with companies and healthcare systems on high alert. 

Telemedicine poses significant privacy and security issues. Staff must be trained on processes and systems and patients made aware of security best practices. Blockchain can mitigate cybersecurity risks by preventing unauthorised access to assets such as networks and clinical data, ensuring systems are efficient for healthcare professionals and patients.

Climate change

Healthcare has not yet come under as much environmental scrutiny as other industries. This is partly because its greenhouse (GHG) emissions are relatively low. However, they can still be significantly reduced by carefully redesigning supply chains and operations without affecting health outcomes.

In 2020, Fisher & Paykel Healthcare, a medical devices firm, made a SBTi commitment to reduce GHG emissions by 67% by 2034. Pharma giant AstraZeneca also plans to make its supply chain carbon-negative by 2030; to reduce its Scope 1 emissions by 20%, Scope 2 emissions by 95%, and Scope 3 emissions by 25% per $1m of sales by 2025. 

Access to medication

According to the World Health Organization (WHO), two billion people lack access to essential or basic drugs. Improving access could save ten million lives each year, four million in Africa and Southeast Asia. 

In 2010, only eight big pharma companies had an access strategy for low- and middle-income countries, but today, 17 of the biggest 20 companies do. For example, GSK has a business model focused on Africa and a large share of its pipeline is dedicated to relevant diseases.

In response to the Ukraine crisis, many pharma companies are ensuring a supply of essential medicine to Ukraine and surrounding countries. This includes 600,000 packs of antibiotics, painkillers, cardiovascular, and oncology treatments from Novartis, and antibiotics, asthma medication, painkillers, and essential childhood vaccines from GSK. 

Drug pricing and gouging

The pharmaceutical innovation process is complex and was developed through a system involving lengthy clinical trials and time-limited patents, which encourage research investment and enable competition to reduce prices after patents expire. Aggressive strategies to maximise profits and appease investors result in prices that are unjustifiable and unaffordable by consumers. 

Inflated drug prices are a subject of intense scrutiny and debate. However, in 2020, there was significant pushback against skyrocketing drug pricing and gouging with growing pressure on organisations, governments, and legal systems to question whether drug prices represent value for money and are accurately compensating for investment in research and development.