Mary Lou Jepsen would like nothing more than to abolish Eroom’s Law. 

The former Facebook, Google, Intel, and Oculus executive finds nothing redemptive about the law, except perhaps its name, which is indicative of its futility: Eroom, or Moore’s Law spelled backwards.

And a backwards “law” it is—though it’s technically not a law per se, but rather an observation that drug discovery is generally slower and more expensive over time despite technological improvements (i.e., high-throughput screening, biotechnology, combinatorial chemistry, and computational drug design). As conveyed by its moniker, Eroom‘s Law is the opposite of Moore’s Law, which maintains the number of microchip transistors doubles about every two years at a minimal cost. 

“They call it Eroom’s Law because it’s exponentially more expensive and time consuming,” Jepsen, Ph.D., explained in a January online video. “A drug takes about 26 years on average and close to $3 billion just to get regulatory approval. The problem is that long timeline. There’s nothing innovative in healthcare when it’s a 40-year moat of making sure you can make the money back because it took so long.”

Innovation, however, doesn’t have to take so long. Jepsen is determined to prove as much with her nine-year-old company, Openwater, which is developing medical devices that use infrared light, ultrasound, and electromagnetics to treat hundreds of diseases. Its device to treat glioblastoma, for example, sends beams of ultrasound into the brain at levels lower than those used to image fetuses. Those ultrasound frequencies are specifically tuned to target cancer cells and destroy only those cells—in much the same way an opera singer can break a single wine glass and nothing else in a room. The ultrasound causes the cancer cells to compress and expand until they die, releasing proteins that vaccinate the surrounding tissue from the cancer but leaving healthy tissue unharmed.

Openwater’s technology also shows promise in successfully treating depression and stroke. Ten-minute ultrasound doses relieved severe depression symptoms in more than half of clinical study patients, and the technique has a better sensitivity and specificity in stroke diagnosis than any mobile device, according to data the company says it collected from severe stroke patients at the University of Pennsylvania and Brown University. 

“There’s a million papers published on using infrared light, ultrasound, and electromagnetics to treat hundreds of diseases over the last 20 years, but it’s a rounding error to zero to say how much it’s gotten into the healthcare system, and that’s because of the 13 years and $658 million [it takes to develop complex therapeutic devices],” contended Jepsen, Openwater’s founder/CEO. “We can change that if we rethink the business model and give everybody what they want. Better. Faster. Cheaper.”

The two are not mutually exclusive. Jepsen believes a better, faster, cheaper alternative to healthcare’s protracted product development moats is only viable with a business model change. And she is hoping to prove as much through her company’s open-source innovation model. 

Openwater’s “open-source, open-patent, open-clinical data, open safety-sharing” approach to innovation opens up the playing field to more potential developers. And more developers will beget more product iterations, which will beget more data and better end products.

Better. Faster. Cheaper. Courtesy of Moore’s Law (Or, Eroom’s Law reversed).

While Openwater’s business model may seem risky to investors, Jepsen claims it is actually highly profitable, asserting her company’s goal to treat millions of people for a few dollars apiece is 10 to 100 times more profitable than treating a few patients for $1 million each.

“It seems a no brainer to me. I’ve run the models, and every way I ran the model to do open source, it was a 10 to 100-times revenue and an even bigger profit,” explained Jepsen, a former engineering director at Facebook’s Oculus division, and a Time magazine 100 Most Influential People alumnus. “We put everything on github, like real open source. All 68 of our patents are free to use by anybody…except you can’t use them to sue us or a customer. Other than that, go wild. You can be in, you can go to our website, you can download our files and everything and do it yourself or you can buy the stuff that we have or whatever. There’s space for everybody, there’s so much to be done. We want everybody in.”

Even so, Openwater isn’t entirely opposed to commercializing its own devices. Interested parties can reserve one of two products—Open-Motion 3.0 and Open-LIFU 2.0 (low-intensity focused ultrasound) for $100. The real value in these products, however, is not in their revenue capacity or public exposure, but rather their potential to encourage anyone to take the next great idea from bench to bedside.

In doing so, Openwater is conducting a form of R&D outsourcing, a once rarely-used alternative that has now become standard practice among medtech companies seeking increased flexibility and a quicker path to market. Outsourcing research and development not only gives organizations access to specialized areas of expertise, it also helps them reduce costs by managing economies of scale and manage risk by sharing development burdens. Moreover, it enables the outsourcer to focus on its core competencies and avoid building an extensive in-house R&D infrastructure.

To better understand the factors driving medtech R&D outsourcing and the ways in which companies’ approaches to innovation have changed in healthcare’s new Digital Age, Medical Product Outsourcing spoke to more than a half-dozen experts over the last month and a half. Those providing feedback included:

Tom Archer, product marketing specialist, Healthcare, at international materials technology firm Lucideon. The company provides materials development, testing, and assurance to clients in various industries, including healthcare, construction, ceramics, and power engineering.

Richard Brown, vice president and principal engineer; and Victoria Trafka, president and principal engineer at Engineering & Quality Solutions Inc., a Colorado Springs, Colo.-based contract engineering and product development firm focused on orthopedic trauma and spine implants and surgical instruments.

Gina Konz, vice president of program management at Switchback Medical, a Brooklyn Park, Minn.-headquartered medical device contract design and manufacturing company.

Ross Paulson, chief technical officer at Maple Grove, Minn.-based Midwest Interventional Systems Inc., a contract design/development and contract manufacturer of minimally invasive delivery systems.

Robert Rubino, senior director, Research and Development at Integer, a medical device contract development and manufacturing organization based in Plano, Texas.

Corey Seacrist, Ph.D., manager, sales and marketing, at Poly-Med Inc., an Anderson, S.C.-based firm that designs, develops, and manufactures custom absorbable medical implants.

John Shegda, CEO of KMM Group, a precision machining and grinding company located in Hatboro, Pa.

Michael Barbella: What factors are influencing companies to outsource R&D? And by the same token, what may motivate firms to keep their R&D in-house?

Tom Archer: OEMs are focusing on what they do best—manufacturing efficiently and cost-effectively. This focus often limits their in-house R&D capabilities, creating a need to outsource this part of the process. However, concerns about protecting sensitive IP can make some hesitant. Trusted R&D partners like Lucideon mitigate this by operating under NDAs as standard, ensuring confidentiality and peace of mind for clients.

Richard Brown: Our clients tend to have very specific resource needs related to individual projects. Once the need is determined the decision to use outside resources has several factors. Does the client already have the needed people resources in-house? Do those same resources have the needed experience? Do those same resources have the needed time in their schedules to get the project done within the timeline desired? A “no” to any of those questions can result in a decision to use outside resources. There are also buy or hire decisions that some clients will need to make. Those decisions for clients revolve around whether the need is long-term enough to hire a new employee. If not, outside resources can be used to fill short-term gaps. Obviously, flip those [aforementioned] items with a lot of “yes” answers and the projects will be kept inside.

Beyond those considerations, one other very common factor for outsourcing R&D services is specifically related to the project timeline. In-house employees often work on multiple projects at once while also managing sustaining engineering issues; this means projects simply take longer to complete. Outside R&D consultants can stay focused on one project and/or add more people to a project to get it done much faster.

Gina Konz: Faster time-to-market is one of the main drivers that cause companies to outsource R&D services, as outsourcing can speed up the R&D process, allowing companies to bring products to market more quickly. This is especially true at Switchback Medical, where we have the unique ability to take concepts completely through the development cycle, including prototyping, design verification and validation to manufacturing. Switchback offers a unique ecosystem of expertise in design and development as well as laser processing, extrusions, simulated use, etc. through the ecosystem of sister companies: LightningCath, Proto Lase, BioSim, and Thor, which greatly accelerates development.

Cost reduction benefits associated with hiring specialized experts, training, and maintaining an in-house R&D team also have significant influence, allowing companies to concentrate on their core competencies and strategic goals. There are also scalability benefits to outsourcing R&D efforts, providing flexibility to scale efforts up or down based on project needs and goals.

Keeping R&D in-house is often driven by several key motivators. Companies seek to maintain control over their intellectual property (IP) and novel technologies, ensuring proprietary innovations remain secure. In-house R&D also allows for close remediation and oversight of external manufacturing processes, ensuring quality and compliance. Furthermore, it provides control over outsourced services, enabling seamless integration and alignment with company objectives. 

Ross Paulson: The decision of whether or not to outsource R&D services can be a complicated one for medtech companies, with lots of factors at play. With that being said, there are many advantages to outsourcing. 

First is the specialized expertise and core competencies that come with R&D experience. Companies such as MIS have a depth of experience in minimally invasive devices, specifically for cardiac, neuro, and peripheral applications. The staff skillset, internal knowledge base, facility, and capital are all focused on integration and delivery of these core competencies. Another advantage is the responsiveness and speed of iteration that comes with outsourcing R&D services. In alignment with the efficiencies of competencies above, a core project team can be nimble and responsive within the bounds of an agreed upon project charter and bring in SMEs without the customer needing to absorb the carrying cost of this SME for an entire program. Based on the specialization in design and materials, a number of these materials are readily available to support rapid concept ideation or a fail fast approach to ensure design outputs meet desired design inputs. 

Similarly, outsourcing a program allows a customer the ability to pause, delay, or adjust program schedules based on market feedback for the device or the overall market conditions without the same burn rate and carrying costs as staffing internally or acquiring that capital internally.

Lastly, a major advantage to outsourcing is the lack of capital investments required. There are significant labor, facility, and CapEx expenses associated with R&D activities. Outsourcing allows companies to circumvent this and instead funnel those savings into acceleration or expansion of the R&D work. 

Alternatively, depending on the program insourcing can be a more favorable option. Some customers prefer to have all accountabilities and reporting structures within a single vertical to manage the scope of a program which can feel less direct with an outsourcing partner. In addition, at the beginning of an engagement or partnership, getting versatile in each team’s SPs, QMS, and approach can have potential for initial operational inefficiencies, though the right team combinations can quickly overcome this. Protecting IP is also very important to companies, and even with NDAs, MSAs or other agreements in place, for particular technologies there may be desire to minimize any IP or property disclosure which may hinder the success of an outsource partner or lead to continued insourcing.

Outsourcing tends to be associated with higher development labor costs when compared to insourcing, however leveraging the core competencies and reduced timelines can typically offset these increased labor costs.

Robert Rubino: There are several factors we tend to see that prompt companies to outsource R&D. One consideration is when a CDMO offers novel and enabling technologies, products, or services that can help differentiate the customers products. Additional factors include when the path to high-scale manufacturing through a CDMO is faster, lower risk, or requires a lower investment than developing insourcing capabilities. For example, creating in-house development and manufacturing capabilities may be a distraction for an OEM that is focused on commercializing novel solutions in clinical end markets. These companies find value in leveraging a CDMO’s strengths and allowing internal resources to focus on clinical, regulatory, or market development activities. As the OEM grows, it can rely on the CDMO’s scalable manufacturing capabilities to meet demand. 

Corey Seacrist: Generally, medical device OEMs are consolidating their supplier networks to key partners to deepen relationships rather than expanding supplier networks with less connection points. In Poly-Med’s recent experience, medical device OEMs are also looking to develop new devices faster. To facilitate this, OEMs are outsourcing key components of the device when these items are not core competencies to their organization, while maintaining final assembly at their manufacturing facilities. If an OEM has developed proprietary materials or processing, in our experience, they will most likely keep these processes in-house to ensure trade secrets are kept that may facilitate a competitive advantage.

John Shegda: Outsourcing often comes down to capability. Companies turn to external partners when they need a specialty that’s difficult or impractical to handle in-house. While they keep manageable aspects of a project under their control, complex or highly specialized components are best left to experts. For small OEMs and startups, outsourcing is also a necessity due to financial pressure. With high burn rates, they can’t afford the time or resources to develop specialized skills internally. Every month of delay could mean losing millions, so they need quick access to expertise that they can’t just find at their local garage shop.

Barbella: How have companies’ approaches to medtech R&D changed in the wake of AI, big data, and healthcare’s digitization?

Archer: R&D is becoming increasingly reliant on computational modeling. As this technology advances and as regulatory bodies such as the FDA begin to accept computational data in place of physical testing, the development process will become faster and more efficient. Computational modeling allows companies to test multiple design variations rapidly, reducing the need for physical prototypes and testing. It also accelerates regulatory submissions by providing robust safety and efficacy data upfront. This evolution will significantly shorten development timelines while maintaining high-quality standards.

Brown: We have seen our clients starting to investigate using currently existing digital data for mining and manipulation with AI. One effort specific to this area is using the current wealth of digital images available to produce CAD models that would represent generic dysmorphic bone structures. This would then allow the R&D engineers the possibility of designing new product and adapting old ones to the newly generated generic dysmorphic bone structures rather than the generic “normal” structures most commonly used to design orthopedic products. Since a lot of orthopedic concerns are in a sense caused by the dysmorphic structures, this could help our clients’ patients get better treatments for their specific issues. 

Konz: Companies are leveraging data-driven decision-making much more often, allowing for the analysis of large amounts of information to identify trends, enhance product design, and personalize treatments. Enhanced digital collaboration tools enable better communication and teamwork, resulting in more comprehensive and innovative solutions.

Paulson: The effect of AI on medtech R&D is two-fold: focus and process. Because surgical robotics enabled by AI show great promise for patient outcomes, lots of R&D resources in the industry are being redirected towards developing surgical robotic platforms and specialized instruments for those platforms. Additionally, AI has impacted the process of R&D. Engineers now have access to tools and resources such as machine learning-enabled precision measurement tools that can greatly speed up the rate of development.

Shegda: In our experience, while emerging technologies like leveraging data to gain insights into design performance or market trends are revolutionizing healthcare, their role in R&D remains limited. R&D focuses on design feasibility, refinement ahead of DV, and preparation for FDA submission. Until a product shows clear potential for commercialization, the optimization benefits offered by big data and digitization are largely irrelevant.

Barbella: What are companies looking for in an R&D outsourcing partner?

Archer: Our clients value speed and a partnership-based approach. They want a partner they can trust to guide them through the product development process efficiently and effectively. The ultimate goal is to get products to market quickly and cost-effectively while ensuring they meet the highest standards of safety and performance.

Victoria Trafka: Customers overwhelmingly tell us they’re looking for technical competency, reliability, and responsiveness in outside R&D resources. They want partners that are experts in their field, which means engineers who can jump right into a project and product solid technical results quickly. This is important since many companies look outside when they don’t have a certain technical specialty within their in-house team and they can’t move a project forward without that special resource. They also want R&D partners that listen and respond to customers’ needs and deliver what they promised. It’s vitally important to communicate with customers regularly about progress to ensure the customer’s needs are being met; and when challenges arise, communicate those and work with the client to find solutions.

Konz: Customers seek R&D partners with specialized expertise, a proven track record, and satisfied clients. Key attributes include alignment with the client’s company culture, the ability to offer creative and innovative solutions, clear communication, scalability, and effective risk management strategies.

Paulson: The biggest thing that customers are looking for in an R&D partner is just that: a partner. Customers want an R&D company who is responsive, transparent. They want a true partner who can provide technical and program guidance. It is important that a provider of R&D services are experts in their field so that they can be a resource for their customers.

Rubino: At Integer, we find customers are seeking comprehensive capabilities from design to development to scalable manufacturing. Customers also look for a proven track record pertaining to expertise and experience, as well as product development-ready technologies, vertical integration, strong program management capabilities, established quality and product development processes, strong new product introduction and engineering capabilities, a strong grasp of industry standards and regulations, and cybersecurity expertise.

Seacrist: When customers engage Poly-Med as an R&D outsourcing partner, they look for key technical expertise and capacity in areas where their organization is not well equipped, regulatory compliance, and a collaborative approach. Poly-Med provides deep knowledge, innovative capabilities, and a proven track record in synthesizing next generation bioabsorbable materials and processing these materials into finished medical devices and components. Poly-Med’s customers also value our vertically integrated manufacturing approach that limits supply chain challenges both during development and when providing fully-traceable manufactured goods. 

Poly-Med is also able to leverage our proprietary suite of materials to develop solutions that are not accessible with other standard off the shelf absorbable polyester-based materials. Most recently, Poly-Med has developed our Photoset® polymer line that exhibits mechanical properties similar to low modulus TPU-based materials, enabling absorbable medical implants to be developed with mechanics similar silicone, such as airway stents, GI stents, and void fillers.

At Poly-Med, we view ourselves as an extension of our customer’s team, fostering open communication and aligning with shared goals to drive patient-centric innovation. Our team also integrates sustainability and ethical practices, to ensuring long-term business continuity in the competitive medtech landscape. At Poly-Med, we strive to provide the value to our customers through developing advanced biomaterials that result in medical technologies that change the treatment landscape.

Shegda: OEMs prioritize capability and speed first, favoring partners who offer comprehensive, single-source solutions. They also value transparent communication and evidence of scalability as projects transition from R&D to commercialization.

Barbella: How will approaches to R&D evolve in the future?

Archer: I believe using AI and computational modeling will make the design and development process increasingly more effective and streamlined through the reduced need for as many physical tests during the process. 

Trafka: I think AI will become more prevalent in R&D in the future. AI will likely be used to identify R&D resources such as outside design services, test labs, and prototype manufacturers, and possibly even make initial contact. AI will also likely be used in-part to design products. AI will be capable of creating design concepts from a set of design input criteria, searching current or competitive designs and identifying patents for similar products. It might also be able to compare designs to identify pros and cons or weak spots in a system. AI isn’t going to complete the full detailed design, but I believe it’s going to be a big help with the initial concept and feasibility phase and in later phases of R&D like design troubleshooting and design iterations. 

Konz: Future R&D approaches will emphasize collaborative, side-by-side partnerships, enabling clients to participate actively in the R&D process. This collaboration fosters open, data-driven discussions and shared decision-making, allowing clients to understand issues firsthand. Hiring top talent will be key, as it attracts further skilled professionals through referrals and reputation. Additionally, the ability to move quickly and efficiently will be crucial for swift decision-making. Partnering with venture wings of strategic organizations, such as Duke Rohlen’s Ajax Health model, will facilitate powerful, high-impact models that align activities, people, capital, strategy, development, and operations for successful R&D outcomes.

Paulson: As R&D continues to evolve in the medical device space, we can expect to see more white labeling and packaged solutions to accelerate development. Complex reinforced sheaths will become commoditized as the industry pushes forward to more advanced devices, and catheter technologies will become more accessible to those who are developing life-saving therapies that can be delivered intravenously.

As robotic surgical systems continue to make a larger and larger impact on the industry, technical expertise and subject matter experts in electrophysiology, electrical integration, and chip/AI technology integration will become increasingly sought after. In addition to AI’s future influence on the end devices themselves, we also expect to see the integration of AI and automation into the product development process, whether it be support on the manufacturing line, machine learning powered inspection, or impacts on other process controls to reduce time, increase precision, and cut down on cost.

Seacrist: The future of medtech R&D will be defined by innovations in artificial intelligence, digital health, personalized medicine, and patient-centric design. AI and robotics are already revolutionizing predictive analytics, device customization, and automated processes. Additionally, sustainability is quickly becoming a critical consideration for large medical device OEMs that are also currently encouraging, but not enforcing, adherence to certain initiatives due to the lack of alternative processing methods. Poly-Med anticipates patient-specific implants to become more commonplace in the future. Significant inroads have already been made in this space with the use of metal and PEEK printing by 3D printer suppliers such as 3D Systems. Our team anticipates absorbable options for these implants will follow suit in the future with the use of next-generation biomaterials that have strength profiles similar to bone.

Shegda: The pace of product development needs a significant overhaul. It still takes too long to bring new innovations to market. Society expects faster results, and cutting development timelines in half is becoming a necessity. This means we will need to adjust our systems to meet these evolving demands as they are presented. In fact, adaptability has eclipsed efficiency as the most important aspect in a CMO’s systems.