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The New Managed-Care Environment: Can Small-Company "Plankton" Survive?

Medical Device & Diagnostic Industry Magazine
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An MD&DI April 1997 Column

It's symptomatic of the topsy-turvy new order in the U.S. health-care market that the goal of a medical device manufacturer could be to sell less. But this and similar concepts were exactly what panelists at a session of the Medical Device Executive Forum (MDEF) conference, which was held February 10­11 in Anaheim, CA, promoted to their audience.

Introducing a bewildering array of market trends and government initiatives was Susan Zagame, vice president for payment and healthcare delivery for the Health Industry Manufacturers Association. After describing a variety of cost-effectiveness approaches being pursued by managed-care organizations (MCOs), Medicare, and other payers, providers, and purchasers, she asserted that for medical device manufacturers, "It's no longer the market of 'If you build it, they will come.'"

To help companies compete in this environment, she offered the following strategies:

  • Expand markets and sell globally.
  • Partner with larger companies.
  • Eliminate the middleman by becoming a distributor.
  • Enter into cost-management with customers, with the goal of selling less, not more.
  • Make marketing messages financially rather than clinically oriented.

Another option for small companies, Zagame said, is to sell out to larger ones. Underlining the value of small companies as a source of innovation, she quoted a colleague who compared them to plankton in the food chain: "If the plankton disappear, the big guys won't have anything to eat."

Agreeing with Zagame's assessment of the marketplace was Leah Amir, manager of health-care economies for Mallinckrodt Medical (St. Louis, MO). "The path of most resistance [for traditional sales executives] seems to be where most sales opportunities are today," she said.

Amir argued that salesforces must be prepared to let customers know when their company's products may not be appropriate or cost-effective. "Say that your product is not for every patient--that's what MCOs want to hear," she said. The ultimate result of this approach, she concluded, is a long-term, committed customer, "which is what we all want."

Health-care providers today, Amir said, increasingly value the clinical and cost-effectiveness information that device companies can provide almost as much as the products. One key type of data that should be provided in the future is outcomes research, according to final panelist Bryan Luce, PhD. CEO and senior research leader of MEDTAP International (Bethesda, MD), Luce described how outcomes research until recently has been largely the province of pharmaceutical companies. The new "spark of interest among device companies" is just in time, he claimed. "Your customers are starting to understand more about outcomes research than you are," he told his audience, "and that is dangerous." The device industry, he concluded, "needs to systematically incorporate outcomes research into product development."---John Bethune

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