10 min reading time

Group member Mike Tipton sent in this question:

I’m working with a start up company. One of our investors asked what are the biggest threats to the medical device space in the short term, and how can you best mitigate that risk?

How would you answer?

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MEDICAL DEVICES GROUP ONLINE CHAT TODAY

The family is on vacation and I’m home alone with the dogs. Let’s try something new.

I’m hosting an online chat today. You can jump online today and we can talk about anything you like.

Tue, Aug 18, 2015 6:30 AM – 4:30 PM Pacific Daylight Time

You can join the meeting from your computer, tablet, or smartphone at http://bit.ly/MDGchat

Note: There’s a 100 guest limit at any time. If the room is full, try again later!

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HOME EQUIPMENT INDUSTRY CONFERENCE

If you’re in the durable medical equipment industry, you probably know about Medtrade (http://medgroup.biz/Medtrade-2015 Atlanta, Oct 26-29), the largest Home Medical Equipment (HME) Expo and Conference in the US.

Director Kevin Gaffney made code MTEXPO for free admission for Medical Devices Group members!

Thanks, Kevin!

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Make it a great week.

Joe Hage
Medical Devices Group Leader

P.S. If you’re an early adopter of Periscope, a new live broadcasting platform, find me at @medicalmarcom (which is also my Twitter handle).

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Joe Vosters
President at Bill-Ray Home Mobility, LLC
Had to add a mobile friendly landing page last spring because Google planned to downgrade sites not mobile friendly. We occasionally tweak our website and do Facebook postings about 3x a week. My “Friendly Beds” is a high ticket (mostly private pay) product that isn’t a impulse buy. However people need to easily find us from their phones and then do deeper research. We are often the perfect solution for their mobility problems allowing them to remain safe and at home longer.

Jerry Robinson
Consulting Designer: mHealth, IoT, Embedded Products, Wireless Commun, Consumer, and Disruptive Innovation Tech.
AH YES…..

a few years ago.. Apple was 88%+ of the profitability.. but a dramatically lower percentage of the total smart phone sales….

You have to pay attention to these things.. the same company that markets your app/device – is tuned in.. eg: which OS do you develop for first? We do Android… but think of iOS links…

Just about HAVE to…..

Burrell (Bo) Clawson
I research patents & design products to get a patented competitive position: Over 30 patents.
Just some key market factor changes in the last 4 years which affect health products product uptake in the US

Double digit DECREASE in wages over recent years: disposable income is down
Double digit or worse INCREASE in healthcare costs of all types & fewer providers
Double digit INCREASE in social media, app use & wellness program activity
Health is still the 2nd highest Internet search topic = Very Motivated Consumers

Then, for who you might target, women make the supermajority of decisions about healthcare for the family.

How people find information is through the Internet, but what do they use to buy in the mobile space? People hear about something, pull out their phone & order.

Apple’s iPhone has a wealthier group of owners. On sales sites iPhone customers offer about 20% more order value, site traffic & % of sales than Android. Do you have a compelling app to present your product and possibly order direct? You must have Apple, but can’t ignore Android.

Do you promote/list your smartphone app on your home page?

Joe Vosters
President at Bill-Ray Home Mobility, LLC
Yep- Bo knows….. (remember that line?). I just asked to connect with him. Classic marketers are not the answer. Connection requests come to me from all over the world so we are getting noticed.. You have to be creative.

Jerry Robinson
Consulting Designer: mHealth, IoT, Embedded Products, Wireless Commun, Consumer, and Disruptive Innovation Tech.
Bo targets a good approach….

I would add….

* – sustaining innovation products..

If you say “better” – than that frequently falls in the category of sustaining innovation.. BRAIN DEAD MBAs – with little success in the market – may say “be 20% less than the same thing” – or be (at a minimum) of 80% better than a current solution.. this might work for an established company.. but not for a startup… If you take this approach – then you are going to have to get creative for getting your product out there.. examples abound in Pharma….

1. – go for disruptive innovation – if it looks like you are “blocked” by established outfits.. even if they have poor solutions…

Classically, people notice Squareroot of (2) difference.. It’s how we are wired… So.. go be 2X better – and you can start to differentiate your self.. 2X is not disruptive – but it minimizes risk and at the same time differentiates from sustaining differentiation…

1. – target the world.. don’t – DO NOT LISTEN to classical business people – like MBAs – who tell you it’s too complex.. thats PURE BS and either incompetence or inexperience talking…

The US is 4.6% of the world.. we are “early adopters” – not the whole market.

UNDERSTAND how to play in the AMAZON and ALIBABA space… you will LIKE IT.. IT IS THE VERY HOT LEADING EDGE of where med tech is going.. pharma and devices….

I CANNOT EMPHASIZE THIS ENOUGH…

1. – Plan on evaluating a DIRECT TO CUSTOMER METHODOLOGY.. how do you educate? how do you train? solve the trans lingual issue…. This is really important.. you are in a GOOD spot to innovate in the US.. but think beyond.. you WILL NOT beat GE with their (a) tax free profit stream and (b) offshore manufacturing technology…..

But you you CAN win a footrace game.. and a next day delivery game..

1. – HAH! I FINALLY get to work what I have been STUDYING on for 5+ years.. BELIEVE that there is the old way of doing things.. don’t abandon them.. they talk about how 80% of what you do is “business” – the other 20% is the actual thing that you do… so there are commonalities of method… but.. times are changing.. you move in front – and in this right direction or CROAK….

That sound of change behind you… it could be A TRAIN – so get off that bridge of RISK.. it could be the sound of the biggest wave you would ever WANT to surf.. so get your board ready and catch the wave… That sound behind you could crazed maniacs at Microsoft who DO NOT know WHAT TO DO – but you MIGHT – so they will rev up their redneck truck and try to CRUSH you and all your potential… (Run little rabbit!!! aka Netscape…)

We live in exciting times.. Joe is playing the game.. Bo knows how… !!

–jerry

Joe Vosters
President at Bill-Ray Home Mobility, LLC
Aha- good point. We originally targeted HME stores as the main promoters but that changed as the govt competitive bidding program killed (or seriously wounded) them. We had been building exposure thru Facebook, LinkedIn, etc. but 1.5 years ago flipped our marketing to direct sales. People go to the internet looking for solutions to their problems, find us, and place an order. Could be the person themselves, their family/caregivers, therapists, nurses, government agencies, HME stores- the internet doesn’t care. Google pay per click costs money but is effective. Sales are growing as the word gets out but sometimes the orders aren’t immediate. For example- our “sweet spot” is rehab therapists- they love our product and will squirrel our information away and pull it out for appropriate patients.

Burrell (Bo) Clawson
I research patents & design products to get a patented competitive position: Over 30 patents.
Joe, I agree on the “can take years” … in the past era. Today, however, we have various social media to help spread the word which enhances the ‘word of mouth’ end of viral marketing. I see social media as essential to fast uptake of knowledge by the general consumer, so it doesn’t take years, as in the past, for truly innovative products.

If your product is really so much better than anything that came before, there can be a lot of chatter generated on social media spreading your product’s capabilities faster than you could do with ads.

The question in my mind is how to maximize social media interaction? A smart phone app in some products may aid in the consumer interaction along with a web site. It used to take “boots on the ground.” Today, I think it is finger tips on the key caps.

Joe Vosters
President at Bill-Ray Home Mobility, LLC
Some excellent comments above. Being new/innovative is not always a good thing. The time/money to get exposure/adopters can kill good products. First round angels got my product (“Friendly Beds”) developed and selling across the US/Canada but second round marketing money is needed to drive proper sales. Bo- I agree with you- reaching end customers is one thing but the building of referral networks and funding sources can take years before momentum takes over.

Robert Christensen
Medical Consultant
For those who don’t know my start up history of two excellent, self funded, medical device companies it was the corrupt approval process we were forced into by CDRH/FDA that cased us to have to bankrupt our one company and give away the second company in order to save it. For the first company the devices that I invented and implanted successfully for 40 years before the approval process was even called for by the FDA. that certainly can be a risk to any investor, and not likely one that most would even consider.

Robert Christensen
Medical Consultant
Well put, Mark.

David Lee Scher
Cardiologist, #DigitalHealth Consultant, Award-Winning Blogger
Adoption rate = successful funding/development (with patient/consumer advocate and clinician involvement) + efficiency, process and/or clinical outcomes data + institutional champion buy-in. Product MUST solve a pain point problem, not add on a layer of technical or workflow complexity. Tall order. Regulatory regs are the easy part.

Scott Garner
Bachelor of Arts (B.A.Sc) at California State University, Fullerton
Aaron’s comments about the importance of clinicians and key opinion leaders in the uptake of a product couldn’t be more spot on, for what it’s worth.

Burrell (Bo) Clawson
I research patents & design products to get a patented competitive position: Over 30 patents.
Aaron, so a startup absolutely must “get traction” in “the adoption rate.”

If the product is for clinicians, then you covered that. If the product is for consumers, then you need both doctor and consumer buy-in, so OTC sales must have a more complex product launch to get traction. Startups have to budget both time and money to accomplish OTC sales.

Explaining that to an investor with a rational plan is critical.

Aaron Liang
Watson Health Quality Analyst at IBM
I think perhaps the biggest obstacle medical device investors have to look at is how successfully the technology becomes adopted. As a startup company, we see many peers working on innovative ideas that have the potential to improve health outcomes. However, health care budgets across the developed world are coming under strain and we certainly can’t adopt everything that comes online as payers (insurers, governments, etc) tighten the strings. This is where I think a lot of companies will run into difficulties and investors should look hard into.

From my experience, most device companies make it through the product development and regulatory phases to produce something viable. Regardless of the steps (e.g. 510k, PMA, etc) there is generally a well defined map you can plan out for navigating regulatory pathways. The real stumbling block becomes whether or not the adoption rate in the market is a success. The factors influencing success in that scenario are much more complicated and difficult to control compared to your product development and licensing. I think one key point investors should look at with medical technology companies is their relationship with clinicians and other key opinion leaders. Given how important clinicians are to product uptake, their involvement and input with a company could be a key point of focus.

Jerry Robinson
Consulting Designer: mHealth, IoT, Embedded Products, Wireless Commun, Consumer, and Disruptive Innovation Tech.
Investors….

you might also need to know how much device funding has moved offshore. Knowing US spending is – if I might observe – a declining percentage of overall spending..

It is easy to substitute off shore spending for US development.

I would also observe – that declining US spending does not logically mean that only better projects get favored.. there are too many OTHER – larger – factors in the funding pools.. like where you are – who you know – and how to finagle funds.. Merit.. is down the list – (in my opinion) on funding criteria..

ALSO… development on alternate channels of medical devices is increasingly outside of traditional medical device business structures.. iPhone medical devices are rapidly rising in importance.. it’s a different channel…’
‘

So.. don’t just look at the traditional funding channels and methods.. they are not being replaced – just supplanted..

–jr

Dr. Anthony K.
Founder & CEO, PreMedicus LLC
I think that’s a very device dependent question. The major risk categories are technical, intellectual property, regulatory and market. I would identify the main one for investors with a plan to mitigate it.

Kent Leighty
Window and Door Consultant
Getting FDA approval can definitely be a challenge. I honestly believe the greatest challenge is getting your products into the Hospital usage pipeline.
All hospitals are now using major distribution agreements. These agreements generally state that 60% of the products used in the Hospital are Private Label Items by that distributor and 40% manufacturer. So unless you have a agreement with a major distributor that can be a major hurdle.
If you can get into the sales pipeline there are other major hurdles.
#1 Every hospital will have a evaluation schedule – so you must wait your turn to get evaluated unless you have a earth shaking product or service
#2 Every product will have to go through a Value Analysis Committee – so many issues are addressed here including:
a. What hard dollar savings will be generated with the use of the product or service
b. What soft dollar savings
c. What products can it replace and what is involved to replace – training/buyback inventory
#3 Once you go through the Value Analysis committee their will be a trial and one can be certain that the current product and their team will be trying to sabotage that trial – they are just not going to sit back and say go ahead and displace my product – my sales – my commissions – relationships count here so keep this in mind
#4 If you get your product in there – you will need to train and continue to train – this is often the downfall for many – they may think they have a great training program so bring a team in for a week with some follow up – they forget that people come and go – new products are also being introduced – by the way you have to take care of patients – hospitals will have processes that they may not have told you about that could impact your product – some people just will not want to change – change takes time – train – train – train
Hope this helps.

Hartmut Fischer
Senior Consultant
Starting in 2004, we developed the non-invasive and continuous blood glucose measurement device NIVA_B in cooperation with Universities and in participation of more than 20y. of research activities there. Special sensors and artificial neuronal network technology (for processing and visualization the individual and non-linear blood glucose function are used. Device and its functions are successfully verified by execution of preclinical and clinical Trial even by TÜV Germany. The patent was granted in 2013. Now NIVA_B (V04) is in further development process according to requ. of commercial application, e.g. Fitness Wristband, Watch, “Wearables”, “Digital Health”). Although there are manageable risks in further developments, serial production and entering markets, the engagement of Investors is less than expected.

Douglas Harding
President – Helping Combat the Opioid Epidemic
I have a start-up company that we are seeking to fund. I appreciate the earlier posts and particularly what Julie suggested. To illustrate, we have self funded the business to this point and have tried to complete all the regulatory that we can. Our company has ISO 13485 and we are just completing IEC 60601 3rd edition testing on our device preparatory to applying for the CE Mark and a 510(k). We have already created and tested production prototypes with great results and have secured a patent. And as further confirmation of her comment, we are submitting for a SBIR grant and local state grant both in September. We hope to find an investor that is interested in our business and product, not just how much money they can make and how fast. This seems to be a logical way to approach fund raising especially in such a highly regulated industry. Thank you Julie.