Success in today's rapidly changing and increasingly competitive device market requires two key abilities. The first is flawless execution of traditional marketing activities. The second is critical assessment of the product's clinical and economic value proposition in the context of strategic marketing.
More and more, customers are expecting improved outcomes because of medical technology advances, new drugs, and rising healthcare expenses.1 These expectations come with costs that are at or below current pricing.
Many high-tech medical device companies have excellent reputations for product innovation and superior product features. But the feature and benefit orientation of many companies is no longer sufficient to keep pace with the continually evolving expectations of cost-conscious medical customers where superior clinical and economic outcomes are required to both maintain and drive premium pricing.
While it is essential that manufacturers be technologically driven, it is the customers' understanding of greater value that ultimately leads to the successful marketing of medical products and services.2-3 Purchasing decisions are increasingly being made by non-physician—oriented health technology assessment (HTA) teams working within hospital or government structures. HTA teams are looking more and more for products that improve clinical outcomes and drive down costs within the system.3
Data-Based Decision Drivers
Evidence-based pricing is a reality for many healthcare markets. HTA programs have well-established roles in the United Kingdom and Europe and are critical to deciding effectiveness as well as pricing and reimbursement of medical devices and diagnostics by the government. The National Institute for Health and Clinical Excellence (NICE) in the U.K. oversees evaluations of new technology for its ability to drive effective use of resources within the healthcare system. NICE also provides government funding guidance for new technologies and medicines. Before offering policy-setting options, HTAs typically ask questions such as:
- When is nutritional counseling better than bariatric surgery?
- What is the best intervention for aortic aneurysm?
- Do drug-coated coronary stents offer significantly superior clinical outcomes to justify premium pricing?
HTAs make their decisions primarily by looking at the technology's effectiveness, targeted population segment, cost, and its value compared with alternatives. The use of health technology assessments is still relatively new, but it has shown remarkable growth over the last decade, having spread throughout most of the globe. HTAs seek to correlate specific evidence with decision making and thus have many similarities to evidence-based healthcare and evidence-based policy making.
The early history of HTAs reveals a period of synthesizing available evidence principally dealing with the efficacy and cost-effectiveness of healthcare interventions. This preliminary work puts HTAs in a format helpful to health policymakers, especially those in national governments.3 Most recently, administrators and clinicians have increasingly devoted HTAs to more effective dissemination and implementation of recommendations from clinical data in order to influence decision-making.4 This information is frequently shared globally, making decisions on pricing and reimbursement in one part of the world transparent in another.
While early assessments tended to focus on large, expensive technologies, the scope has gradually widened to include smaller technologies and healthcare needs such as the value of sutures versus staples in gastrointestinal surgery.
Assessments have also taken on broader issues, such as the organizational, social, and ethical implications of treatment.4 In the European Union, HTA activities are increasingly visible, and almost all now have a national focus for HTAs associated with the EU Ministry of Health or its equivalent. Central and Eastern European countries are also developing HTA activities. Most recently, HTAs have been highlighted by health policy documents from the European Commission. It seems likely that HTAs will in the future be institutionalized in some form as part of EU activities.
In an important development, clinically relevant information is being shared globally and is widely available to decision makers in every government or hospital system around the world. Globalization of information sharing through efforts such as the Cochran Collaboration (CC) has become common. A worldwide network of people critically reviews the existing literature on a wide variety of practices and interventions in order to set healthcare policy. The evolution of HTAs has seen the concurrent development and wide acceptance of evidence-based medicine (EBM) with the impact of improving the quality and effectiveness of patient healthcare. HTA, EBM, and the CC are allies and are increasingly leading the way in health policy decision making, including product pricing and reimbursement.5
During the 1990s almost all the member states in the EU developed national and regional HTA agencies and programs accountable for the review of new technologies and medicines before decisions were made on government funding or reimbursement. The explicit intent is to contain exponentially growing medical costs. Notably, new technologies are not the only ones being evaluated for significant clinical benefit. Many older technologies, such as surgical staplers and clips, also are being scrutinized on the benefit-versus-cost, or value, basis.3
In order to maintain government funding, medical device companies are finding themselves in the unenviable position of retrospectively justifying the clinical benefit associated with the cost of technologies that have been on the market for 20 years. What used to be a “build-it-and-they-will-buy-it” market has increasingly turned into a “prove-it-to-me” one. This shift in philosophy means medical device manufacturers have been driven to build a data-driven market claims strategy merely to justify holding their pricing structures. Forget about seeking a premium position.
Customers are no longer only physicians. Increasingly, they are also hospital managers and CEOs as well as HTA teams and government agencies. Each of these entities is critically evaluating the return on their investment in an environment of growing worries over fiscal solvency.
What Problem Does Your Product Solve?
Successful medical device companies are the ones that develop rigorous, multigenerational product portfolio approaches to their evidence- generation and market claims strategy. Rigorous product portfolio management is essential to a successful data-driven strategy with stratification of evidence by customer and market requirements. The ability to leverage and share relevant clinical and product data between product lines is equally critical.
A thorough understanding of the good, the bad, and the ugly positions of professional societies is also essential. Some typical questions are:
- Will certain medical societies have specific criticisms of, or support for, the new product or procedure?
- Will this vary by market space and region?
- Because past product launch trends in government reimbursement and pricing are important to understanding future policies, how are similarly developed or developing world markets reacting?
- What data already exist through the HTA network?
- What decisions have been made about similar technologies?
Critical supporting data include market research about existing technology, market price sensitivity, and the current level of healthcare. Where labor is cheap, the increased expense of a surgical stapler that shortens O.R. time may not be a winning value proposition over the use of sutures.
A clear understanding of the surgical or medical specialties using the product is essential. How will these customers use the technology? What clinical outcomes are important to them? Sometimes this differs dramatically between specialties, even with the same product.
Not All Data Are Equal in Cost
Understanding the specific clinical data that you require allows you to effectively build the research to meet that need. Often products late in their market life cycles need relatively little sales effort, low-cost engineering, and benchtop or preclinical data for competitive positioning. It is rarely cost effective late in a product life cycle to invest in expensive prospective randomized clinical studies.
Examples of data stratification that might be used in a portfolio of device product claims include:
- Competitive technical positioning around mechanical differentiation such as engineering benchtop studies, e.g., staple height, strength of staples in tissue, and force to fire.
- Competitive functional positioning using preclinical data such as effective vessel sealing and hemostasis for blood vessels of a variety of sizes and anatomic locations.
- Competitive clinical differentiation where preclinical and engineering data are used to show superiority over other products on the market for clinical endpoints. An example would be a device that provides blood vessel sealing with minimal local tissue trauma for superior wound healing over competing devices.
- Highly differentiating and unique clinical data encompassing everything from cost-effective meta-analysis of existing data to initiating a prospective randomized clinical trial required for innovative new product approval and sales.
These various claims strategies have increasing time and investment costs associated with them. A mechanical benchtop study can be highly cost effective and extremely convincing for product feature claims. As one moves into preclinical data, the strength of the competitive claim increases, as does the relative cost of achieving the supporting data. Cost of data for claims generally increases as they, one, differentiate among products in a competitive marketplace, and, two, become associated with more complex and innovative technology. Understanding the key stakeholder's position and value drivers is critical to determining the data required to make decisions about your product. Figure 1
Clinical and Health Data Are Essential
The critical first step in building an effective data-driven claims strategy is to ensure that your company has a strategic product portfolio approach to decision making. Specifically, clinical and health economic data must be integral to the strategic market plan and to key business decisions made about portfolio resources and funding. Decisions on licensing and acquisitions, product design and development, emerging market investments, and procedure development or expansion must all have clinical and health economic data assessments as part of the process.
Deploying strategic market analysis to understand key product and procedure stakeholders helps to stratify by cost and time the level of evidence and data needed.
Using multigenerational product planning is essential to better understanding of how data or evidence can be leveraged across the portfolio. It may also serve to help stratify the level of evidence or data needed for each product claim. Note that product line extensions need less costly data than innovative new technologies.
The claims strategy for the product portfolio should be reviewed and updated by senior management on a regular basis in order to test assumptions, challenge product positioning, and ensure that the data used achieve the best return on investment.
An effective approach to portfolio review and decision making is one that rigorously and regularly challenges assumptions on market analysis, product design and development, and clinical and economic data requirements. It is critical that this process includes cross-functional review.
Leverage Bench Engineering To Support Claims
It is essential to set a clear, cost-basis approach for claims development. This approach evaluates the cost of generating data versus its value in the marketplace. By leveraging bench engineering and preclinical studies to effectively support product claims, particularly for legacy products, cost- effective claims can be developed.
By initially determining the level of clinical and economic data that are needed, manufacturers frequently find that relatively few products require randomized clinical trials to support product differentiation. Be aware that clinical and economic data that are relevant in one market may be completely inappropriate in another. This is particularly true when comparing developed markets with emerging mark et strategies.
The global medical device industry is in the midst of challenging times. An aging population in developed countries combined with an economically vigorous developing market in many regions around the world point to growing demands for innovative and cost-effective medical and surgical tools. Amidst these promising market developments, the specter of rising costs and demands for affordable healthcare will put pressure on medical device companies to provide evidence of value for higher prices. In this challenging environment, understanding the clinical and health economic value of your product and embedding that proposition in your market strategy is critical to the success of your company.
Rita E. Numerof, PhD, is president of Numerof & Associates Inc (NAI). Jill E. Sackman, DVM, PhD, is a senior consultant at NAI. NAI is a strategic management consulting firm that focuses on organizations in dynamic, rapidly changing industries. For more information, visit www.nai-consulting.com
1. EJ Emanuel, VR Fuchs, and AM Garber, "Essential Elements of Technology and Outcomes Assessment Initiatives," Journal of the American Medical Association 298, no. 11 (September 19, 2007): 1323—1325.
2, SD Pearson and MD Rawlins, "Quality, Innovation, and Value for Money," Journal of the American Medical Association 294, no. 20 (2005): 2618-2622.
3. JW Rowe, DA Cortese, and JM McGinnis, "The Emerging Context for Advances in Comparative Effectiveness Assessment," Health Affairs 25, no. 6 (2006): w593—w595.
4. GR Wilensky, "Developing a Center for Comparative Effectiveness Information," Health Affairs 25, no. 6 (2006): w572—w585; available on the Internet: http://content.healthaffairs.org/cgi/content/abstract/25/6/w572.
5. M Wynia, "Cost-Effectiveness Analysis in the United States," Journal of the American Medical Association 294, no. 20 (June 21, 2006): 2722.
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