Article preview reprinted from Medtech Insight - August/September 2009
The need for a positive economic argument when introducing a new medtech product is more critical than ever. Management teams are well aware of the need to demonstrate compelling economic data, but can a product still be successful without an economic benefit in the increasingly cost-conscious health care marketplace? Overcoming negative economics means identifying a combination of positive attributes that can overcome the economic barrier, and this thought process should be conducted well before significant R&D funds are invested. Read more...
Value Proposition Is Key to New Product Success in a Cost-Conscious Medtech Market
Article preview reprinted from Medtech Insight - August/September 2009
The need for a positive economic argument when introducing a new medtech product is more critical than ever. Management teams are well aware of the need to demonstrate compelling economic data, but can a product still be successful without an economic benefit in the increasingly cost-conscious health care marketplace? After all, hospital purchasing committees supposedly evaluate and weigh a number of other product attributes, and most hospitals are not-for-profit institutions committed to their communities. But overcoming negative economics requires a combination of positive attributes. The relative strength of these attributes must be evaluated to determine if the economic barrier is, in fact, surmountable. And this thought process should be conducted well before significant R&D funds are invested.
Analyzing Positive Attributes
Numerous examples of successfully positioned products without economic advantages exist; each of these products possessed other positive attributes that outweighed the economic disadvantage. Some of these attributes, such as a strong clinical benefit or safety benefits to patients or health care workers, are compelling and well known. Others, such as offering convenience to health care workers or fueling a public relations spin, are less obvious. Appropriate planning to compile data highlighting the key benefits and positioning the product accordingly is essential to successful market launch and customer adoption.
But predicting the likelihood of product success by accurately assessing the weight of a negative economic message against positive market attributes is a difficult task. Ideally, management teams would be able to array the strength of each of these drivers on a quantitative spectrum to determine if the combined strength of the value drivers overcomes negative economics. The first example in Exhibit 1 illustrates a hypothetical product with a strong clinical value proposition that might overcome its less compelling economic argument. However, the existence of the negative economics increases the burden of proof that a significant clinical benefit truly exists. This can be difficult and/or costly to prove.
The second example in Exhibit 1 illustrates a product with a strong safety argument paired with a convenience benefit. In this case, the combination of these two attributes may not justify the poor economics and marginal clinical improvement. Which of these two hypothetical products, if either, tips the scales in favor of adoption depends upon the magnitude and relative weighting of each criterion.
In the real world of hospital purchasing, new technology is evaluated by multiple members of a purchasing committee during the decision-making process. The committee members include those evaluating the product from many different perspectives, including clinical, financial, and safety concerns. However, in order for a new product to make it through the committee process, there must be at least one strong product champion. These champions generally emerge as a result of their perceptions of the economic, clinical, safety, and/or convenience benefits of the technology. Understanding the strength of the product's attributes is critical as a sales rep nurtures the relationships with the prospective product champions. Once the product makes it to committee, the members of the committee are qualitatively ranking and weighting these attributes on their own individual scales when evaluating whether the product should be adopted into practice and increase the cost of care. The most skilled sales reps accentuate different value propositions to different committee members.
- Susan Posner is a Vice President; Jennifer Kim Cutie, MD, is an Associate; and Anna Chen is a Senior Analyst at Health Advances, a 60-person strategy consulting firm with offices in Boston and San Francisco that is focused on the successful commercialization of medical technologies. (E-Mail the authors at [email protected])
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Companies mentioned in this article:
Abbott Laboratories Inc.
St. Jude Medical Inc.
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