Aligning value proposition: From Preclinical to Market for Medical Devices

Tim Pelura, CEO, Surpass Preclinical CRO talked on how medical device companies can align their strategy, from preclinical to market, with a focus on the value proposition, at www.bio2devicegroup.org event.

We are operating under a new reality now where power has shifted to the payers and the providers, said Pelura.  Medical device companies are evaluated based on safety and procedural efficacy as well as cost and value.  Increasingly heightened regulatory scrutiny and tightening FDA regulations have led to increase in audits (which were up 40% in the last year) and warning letters are (which were up 24% over the last 2 years).  Due to regulatory and reimbursement challenges, medical device companies are focusing their R&D efforts on improving already approved devices, rather than developing innovative new products.  Meanwhile startups are finding the landscape challenging due to funding challenges and increasing costs of bringing new products to market.

Healthcare Infostep (Photo credit: Wikipedia)

Inkeeping with the reality of pressures on payers that are transmitted down, new healthcare delivery models are emerging, and therefore, patient pathways are being modified to obtain to obtain better outcomes, with less cost.  Medical device companies will need to work with new business models, that solve significant problems and reduce overall costs.  Companies seeking growth will need to expand their offerings to target underserved populations and lower socioeconomic classes.

In essence, it is about the value proposition offered by the new product or service, “what benefit you provide for who and how you do it uniquely well”, said Pelura.  He advised, these “must-haves” in a business pitch, “describe your target buyer, the problem you are seeking to solve, and why you do it better than the alternative”.

Pelura walked the audience through the process of arriving at the value proposition.  First, companies must define the problem they are seeking to solve and identify correctly the need to solve the problem.  Next, they should try to go after obvious problems, rather than aspirational or “good to solve” problems.  And finally, they should try to address acute or critical problems.

In defining a solution, they should try to generate many ideas and then measure the viability of customer adoption of each idea using gain/pain ratio; what the customer stands to gain versus the cost of adoption of the new solution.  The best solutions are those that offer game-changing benefits, with minimal modifications to the existing process or environments, said Pelura.  Go for “Disruptive Innovations, that are Non-Disruptive to Adopt”, advised Pelura.   Medical device companies must visualize the entire process or patient pathway to ensure that the new solution would cause minimal disruptions, in the whole process.

While new technologies often emerge with a focus on engineering and progress to bench testing and then plan preclinical, and clinical strategies and only then consider navigating regulatory, market, and reimbursement challenges; in actuality, they should invert the process.  They should begin with considering reimbursement challenges, analyze the competitive landscape, study the market opportunity, give thoughtful consideration to the regulatory challenges, then consider clinical and preclinical strategy, before embarking on prototype and bench testing.  Because if the value proposition is wrong then a company can end up with a product that no one wants or needs, resulting in considerable waste of precious innovation dollars and time, said Pelura.

Speaking of Surpass, Pelura shared that preclinical Contract Research Organization, Surpass is doing things differently.  While having deep expertise as a preclinical CRO in helping medical device companies with their preclinical in vivo and human cadaveric studies, Surpass also seeks to impact the system, by probing and assisting their clients with questions that go to the value proposition.  Surpass assists the clients in designing the most translatable preclinical study by understanding issues of clinical end points, product’s desired features and characteristics, all the while keeping in mind who would be operating the device, studies and activities that might need to be completed to demonstrate the products, performance, safety, and efficacy, as well as data that would be required to drive reimbursement and more.  This novel process ensures that any preclinical testing performed is aligned to the new product’s value proposition, hence helping save valuable healthcare innovation dollars.  

The session was followed by Q&A.

 

Lean LaunchPad for Life Science Entrepreneurs

Recently, Karl Handelsman, Founder, Codon Capital, talked about the Lean LaunchPad Entrepreneurship program, at www.bio2devicegroup.org event.  Handelsman, with Allan May (Managing Director at Life Science Angels), are instructors in the Lean LaunchPad for Life Sciences program at UCSF and also will be teaching at NIH, in the future.  Handelsman is the Therapeutics cohort and May is the Medical Device cohort.

It is a mistake to assume that pre-clinical programs are risky and they need to focus on easier low hanging fruit or they must take 10+ years and a billion dollars to create value, said Handelsman.  We have a duty to search for the path to unlock the value of the idea as industrially relevant innovation, and there are examples of biotech startups reaching that point in 18-30 months, said Handelsman.  Lean LaunchPad program teaches scientists and clinicians in startups to do a real world assessment of their idea or technology, before plunking down millions of dollars, in an idea.  Entrepreneurs receive training in determining their product’s market viability, regulatory risk, potential clinical utility, and also likely financing vehicles before making big dollar investments in research, design, and manufacturing.

English: Molecular graphics images were produced using the UCSF Chimera package from the Resource for Biocomputing, Visualization, and Informatics at the University of California, San Francisco (supported by NIH P41 RR001081). PDB rendering based on 1a8e. (Photo credit: Wikipedia)

Entrepreneurs need good operational models that build a context of value creation, said Handelsman.  Investors like value, not milestones.  “Investors want to invest money and they want to hear a business case, and operational milestones don’t get you there”,  stressed Handelsman.

Big things often have small beginnings and start with contributions from many small pockets.  Sharing the case of a company that started with collaboration and became the behemoth, Genentech,  Handelsman said, entrepreneurs need to start thinking about collaboration, not competition, and begin to look at models of collaboration that would create true value.  After all, strategic alliances built the Silicon Valley and there are many diverse and creative ways of creating partnerships.  Entrepreneurs need to talk with others and be really good listeners.

Successful entrepreneurs are not thoughtless risk takers, but approach problems in a disciplined way.  Value creation for therapeutics begins with thoughtful consideration of who would benefit from solving a certain problem; patients, payers, insurances companies or any other entity?  Once entrepreneurs can figure that out, they can go to a VC and explain the business case.  Value creation, after all, is not what entrepreneurs think or believe, but an idea or concept that gets external validation from the customer.  “Do not constantly worry about keeping the concept in the stealth mode, and talk to a lot of people”, advised Handelsman.  VCs do not count, they are not potential customers.  In the end, one could have a sexy product, but if it does not solve a pressing problem then it is not creating value.  Real answers to key commercialization questions, in the case of therapeutics, lie outside the lab, and entrepreneurs need to actively engage and talk with customers, partners, regulators and so on to figure out the value of their product.  Lean LaunchPad methodology therefore, helps to validate the product, before commercial strategy is considered, saving time, money, resources and in some cases, helping guide the change in the trajectory, for more meaningful outcome.

 

Evidence Based Medicine – Aligning Labs, Clinicians & Payers for Better Diagnostic Decisions

Mark Zubiller, VP of Decision Management at McKesson, talked about value based medicine by driving better diagnostic decisions through collaborative model, aligning labs, clinicians, and payers, at www.bio2devicegroup.org event.

Molecular diagnostic tests identify molecular and genetic markers for an individual patients that help determine potential benefit from a specific, targeted therapy.  Molecular diagnostic tests have become a big buzz word but the area is fraught with challenges.  There isn’t a lot of clinical evidence that support many of these tests which are often based on extreme of a diagnostic marker, so there needs to be more data churning to demonstrate clinical utility of the data.  Second, there is limited point of service information.  Only 20% of molecular diagnostic tests on the market have evidence based guidelines today, although 75% of the providers believe that patients in their practice would benefit from having a genetic test.  As new tests continue to emerge, physicians cannot keep up with information about newer tests and their efficacy.  Third, many of the tests are unidentifiable.  There is no catalogue for identifying the tests, coding information is nonspecific, and payers do not have consistent way to code and pay for these.  Payers require clinical utility for coverage.  This often leads to denials and reapplications and generates a lot of frustration for everyone involved.  Finally, this results in increased paperwork and payer scrutiny.

Currently, market does not have a way to address this challenge and it is stuck between innovation and execution.  There is a great deal of system fatigue, on account of increasing administrative burden, reform compliance etc. but while innovation is greatly needed, it would bring reimbursement shifts, additional administrative challenges, and a need for collaboration among the stakeholders.  Payers, labs, and providers essentially share the same challenge of ensuring that patients get the right care at the right cost, without increased administrative burden.  Existing traditional payer programs operate in silos and do not have a way of engaging providers.  They require expensive manual resources and are struggling with administration, transparency, and consistency.  Lack of collaboration exerts a huge financial burden on both the providers and the payers.  Providers spend $31 billion annually and payers spend $74 billion annually that could be saved, with greater collaboration.

Explaining the McKesson value based care model, Zubiller said, it means “balancing value-based reimbursement with value-based care delivery at the point of care.  As the patient care progresses from care selection to care plan to network selection to reimbursement, point of care decisions happen at each stage that impact cost, care, and value.  Earlier and better decisions would greatly reduce cost, improve care, and provide better value, said Zubiller.  A value based diagnostics strategy has to be based upon collaboration between labs, payers, and providers for identification of tests, for determination of cataloging and coverage, for consistent evidence based payer and lab policies, for decision support rules integrated into EMR, and for sophisticated performance data analytics for payment.

The talk was followed by Q&A.  Explaining the strategy, Zubiller said, McKesson is a business that works with health care stakeholders in every setting and is therefore taking the lead to chart the course towards a stronger more sustainable future, for the entire industry.  McKesson is a leading provider of enterprise information technology solutions, including software, services, automation, and consulting to hospitals, physician offices, imaging centers, home health care agencies, and payers.  With strategic use of IT solutions to bring greater connectivity in the healthcare ecosystem and by leveraging its credibility to bring the stakeholders to the table for collaborative dialog, McKesson hopes to lead implementation of value based care model that would be a win-win solution for payers, providers, labs and for patients.

English: The logo of Mckesson Corporation (Photo credit: Wikipedia)