In January, Fogarty Education was delighted to host its second half-day workshop since resuming in-person educational programming mid last year. This time the topic was commercialization and workshop organizer FI chief commercial strategy officer, Marga Ortigas-Wedekind, started out with a question. Do health technology startups need to plan for commercialization from the get-go? Or can the team limit their early focus to product development with the expectation that their company will be acquired and the acquiror will get their solution to the patients that need it?
“The answer is that more than two-thirds of private companies acquired in the last 6 years were at U.S. commercial stage,” Marga said. “Acquirors generally expect you’ve done the work to be a revenue-generating company.” She suggested that the best strategy for startups is to run their companies as if they are going it alone – and that means planning for product sales from the very beginning. “This is particularly important because the commercialization intent informs all other strategies – including product development, regulatory, clinical, and reimbursement.”
Addressing an audience of more than 90 in-person and remote attendees, Marga cited some business publications to lay out a foundation of core concepts that can help young companies plan.
Healthcare’s Complex Sale
There is a complicated landscape of stakeholders, from regulators to insurers, physicians, hospital administrators and patients – that have a say in whether or not a product succeeds in the market, and whose diverse needs the product must address. Dealing with this complexity, said Marga, requires understanding each individual stakeholder and how you can compel them to buy your product based on their “job to be done” – what each individual hopes to accomplish in a given circumstance. “You’ve got to identify what each of your customers needs to achieve and how your product helps them with their own personal and professional goals.”
Defining the Product
Developing this understanding through early market research is essential to defining the product correctly, said Marga. Once a company understands their multiple customers’ jobs to be done, they can design a “whole product.” At the time of launch, this encompasses not just the core technology but also “the expected product,” which includes everything else required so that the product effectively provides the solution that the customer is anticipating. “The expected product includes all necessary attributes – like reimbursement, seamless integration into the clinical workflow, EHR integration, clinical proof points and publications, and so on,” Marga described.
The Value Proposition
The next step is to articulate how the product helps stakeholders meet their goals. “This is the value proposition – a positioning statement that explains the problem the product solves, the value to the users, and what about this product is uniquely better than competing products,” said Marga. “Or, as Fogarty Innovation Chief Innovation Officer Mike Regan likes to say, ‘It’s the so what and who cares.’” Not surprisingly, there are generally different value propositions for different stakeholders.
Marga continued, “Because the product design decisions you make from the beginning have an impact on your future commercial success, it’s essential to target where you are going and work backwards.”
Marga also noted that most innovators end up refining their value propositions over time. “The one thing all our panelists are going to tell is you is get ready to evolve,” she said. “Because market realities change and you’re going to learn new things.” She continued, “Think about your competition and follow the money – who stands to win and who stands to lose by the presence of your product? You’ve got to consider that as you consider the forces impacting what you are going to build.”
Healthcare’s Complex Sale: Understanding your Multiple Customers and Communicating your Value Props
The first panel session was led by moderator John McCutcheon, president and CEO of EBR Systems Inc, with panelists David Stoffel, MD, chief business officer of Ceribell; Jeff Closs, president and CEO of Ancora Heart, and Matt Salkeld, chief commercial officer of Aerin Medical.
David started by sharing a framework to help entrepreneurs think about different categories of value proposition utilizing the Quadruple Aim concept from value-based care which includes the following:
- The clinical value that your product delivers to the patients – what impact does it have?
- The economic or financial value – and this includes not only reimbursement, but also ways to lower costs like shortening length of stay or lowering readmissions.
- The operational value, or physician staff satisfaction. Does your device make someone work harder, or does it eliminate a task that they dislike?
- Patient satisfaction – are you doing something to improve the patient’s experience of healthcare?
He noted that this framework is used by hospitals in decision-making, “So if you line up around this, you’re lining up with how the hospital values its choices,” David explained.
The panel noted that the importance of various stakeholders changes over time, especially as the company moves along the development pathway. Jeff offered the following example: “We are in clinical trials, so our main stakeholders are the patient, two different physicians – the heart failure specialist who sees the patient and the structural heart specialist who implants the devices, and research coordinators. But when it is time to get into hospitals and we start thinking about budgets, purchasing departments, and reimbursement, there will be new stakeholders to consider. So you need to be thoughtful about who your stakeholders are at each stage and how you are addressing their individual needs.”
The panelists also rallied around the idea of keeping the end in mind and starting early. For example, if innovators wait until they get to the end of their clinical study before focusing on reimbursement, they will confront a long arduous process. According to a recent Stanford Biodesign study, it now takes an average of eight years from FDA approval to full commercial coverage. They also discussed bringing in a chief commercial officer early – ideally before the company begins its pivotal trial, so that they become product experts, and also have the chance to talk to key opinion leaders and do extensive market research.
Society support was another area where the panelists recommended proactive outreach. Matt described a previous company that struggled with reimbursement because they had opted for a stealth approach. Learning from that experience, his current company reached out to their professional physician society early. “Because we engaged them early, they are all on board. And so as we went to get a code, they were there. And as we went to get coverage and CMS support, they were there. So think of them as allies, not adversaries or impediments and bring them on early,” he advised.
When to Pivot?
While the panelists agreed that pivots in a value proposition are common, they stressed not giving up or changing course too early. “I think probably every one of us who has done this more than once has had the experience of not starting and ending at exactly the same place,” commented Fogarty Innovation CEO Andrew Cleeland.
John agreed, “You want to run the experiment far enough to make sure that pivoting is the right thing to do. But clinging to the original hypothesis in the face of clear market shifts or a compelling dataset that draws a different conclusion is a mistake.”
Other tips included matching up the stakeholder with the value proposition they care about: “If you talk to a physician about economic value it’s game over – you want to have that conversation with the person cutting the check,” said David, and being careful not to miss less obvious, but important stakeholders, like nurse administrators and service line leaders who have consistent influence.
Claims Generation Strategies for the U.S.
The second panel was moderated by FI clinical and regulatory director Craig Straley, and featured panelists Lynn Deutsch, president and founder of Regulatory Promo, LLC; Leslie Stephens, VP of reimbursement and market access for Magnus Medical; and Heather Simonsen, president and CEO of FI company-in-residence Boomerang Medical.
“You can only make claims about your device that you can support with evidence,” said Craig. He noted that the evidence about safety and effectiveness needed for regulatory approval is just a beginning, and companies need to think about generating evidence that will support reimbursement as well as the specific marketing claims they will want to make to convince people to buy the product. “These goals may seem far in the future for companies at early stages, but you need to plan a strategy to collect the evidence needed in an efficient manner,” he said. “You don’t want to end up with extra months or years of post-approval studies to make the claims you want to make.”
Along those lines, Leslie shared a number of tips including the following:
- Understand the size of the study needed for reimbursement. Study sizes for regulatory approval may be smaller than those that payers need to make coverage decisions.
- Plan the publication strategy early. Obtaining a Category I code requires five publications from two different data sets with no overlapping patients, no overlapping authors and the majority of the patients in the US. This is a surprise to many founders.
- Collect the right data for what you want to say. If you want to claim that your product it is better and seek premium reimbursement, don’t do a non-inferiority study. “If you want to say you are clinically better, or have better quality, ease-of-use or economics, you have to prove it,” advises Leslie.
- Consider what you want to say to each customer. Often, what makes a payer happy does not always make a hospital happy. “Most of our hospitals are still paid fee for service, which means if you reduce their volume, then they’re making less money,” said Leslie. “On the other hand, if you reduce procedural volume, payers are a lot happier.”
- Thinking about who wins and who loses includes physicians. “At a prior company, we found a way to reduce a certain procedure, but that did not sit well with the physicians who were doing that procedure. I literally had a physician say, ‘I actually believe your story, but I’ve got three kids in college.’ So who wins and who loses could not be more important.”
With guidance from Lynn, the panel also covered advertising and promotion of medical devices, which includes any content used to communicate product information or to influence the purchase of company products and also includes internal sales trainings. The basic tenets are that the content must be truthful and non-misleading. Watchouts and red flags include superiority claims, social media posts about the device before the device has regulatory status, and press releases that over-inflate and hype up a product in development, even in the form of a physician quote.
Heather then took the floor to provide a step-by-step reimbursement blueprint, from assessing the landscape to completing and documenting a reimbursement plan that spells out timing and milestones for all activities that support it, including coding, advocacy, clinical trial, publications, outreach, and potential information gaps. She suggested that this plan should be completed at least one year before the pivotal trial so it can be executed as part of the study.
Defining your early commercialization strategy
The final panel of the day, led by FI director of strategic initiatives Greg Bakan, focused on key factors that can help even very early-stage companies define a go-to-market strategy. The panelists were Chad Hoskins, CEO of Axon Therapies, Natalie Shlafman, VP of marketing and commercial operations for Aerin Medical, and Ariel Sutton, general manager of the stroke business at Imperative Care.
“While stakeholders, value props, and evidence generation are the cornerstones of any commercial strategy, the commercialization strategy is also broader than that,” said Greg. “So we’re going to explore a more comprehensive set of topics that we need to consider. And we’re also going to take the perspective of a first-time CEO and talk about how you actually do all of this, especially as an early-stage seed or Series A company.”
Mindful of intimidating the audience, which included many first-time entrepreneurs, Greg offered the following liberating mindset – that when the company is first starting out and commercialization is a long time away, the only thing that is for sure is that many elements of an initial commercialization plan will be wrong. This makes it less important to get the early plan perfect, and more important to at least get the plan going and adapt to the new information that will be uncovered along the way.
Highlights from the panel include:
When does commercialization actually start?
“As soon as you’re starting to have concept conversations with physicians and KOL’s you’re setting the tone for how they’re going to perceive you, your organization, your product, and the value you are creating in the space,” said Greg.
Chad added that for a PMA product, the pivotal study is a key milestone in beginning commercialization. “Depending on the size of your study, you can have 60-80 sites and a thousand patients enrolled,” he said. “A study that big gives you the opportunity to start to build relationships, communicate your value proposition, and establish a footprint that will serve as the basis for commercialization.”
Natalie suggested that having a commercial perspective ideally starts as early as product definition and concepting. Her own experience includes being the 12th hire in a company and the first commercial person on board, and that early entrance allowed her to work cross-functionally, gather information to really understand the competitive landscape, and shape what the whole product definition should look like.
Ariel pointed out that during the planning process, it’s important to be open to learning and to change your commercial plans accordingly. “For example, your hypothesis of how a product is going to work in a patient may change when you actually start doing clinicals and see how the product performs. You have to be able to quickly respond and make sure the organization is set up to respond to that change. Commercial planning becomes an iterative process.”
What are the early commercialization objectives?
The panelists agreed that early commercialization is rarely about revenue. Chad described an experience at a company launching a product which was very different from anything else currently in the market. “We had five core objectives in our first year of launch. And only one of them was financially oriented. The other four were about proving or disproving the hypotheses we had about our value proposition, our end customer segments, how our sales team was going to operate and sell around our economic value proposition and story,” he said. “The whole organization was aligned around the proof points we needed to build – not to achieve revenue in year one, but for years two, three, four and five.”
The panelists felt that most investors are aligned with these goals, looking not for revenue, but for proof that a company can operationalize the value proposition and commercial model it has developed. “If you can do that, you can build on that success over time,” said Chad.
How fast to scale?
The panelists discussed the tension between piloting and a soft launch with the need to prove to investors that this new technology is an engine that will successfully scale.
Natalie advocated for walking before running in order to learn along the way and optimize. “You always want to be onsite asking questions, developing relationships and advocates,” she advised. “These are the people who are going to give you the best testimonials and potentially become reference sites.”
Ariel agreed, noting that when a product crosses market segments (for instance if it will be used by multiple physician types), it’s important to gain early experience in all of them to learn the product’s strengths and weaknesses and use that information to refine the commercialization plan. She added, “In the early days you can turn through your ideas and learn, but then ultimately you get to the point where you are nailing down your product and scaling it.”
There was consensus that it’s important to gain early experience across customer types, from academic medical centers to integrated delivery networks to smaller regional health systems and community systems. And while some pressure to scale is real, the possibility of failure is worse. Creating a bad impression in the marketplace triggers a cascade of events, with physicians dismissing the product and payers deciding not to cover it. Turning that around can take years.
Selling the early plan to investors
“Early on you can dream a bit,” said Greg. “But what is the balance between selling that vision in early commercial plans to your investors and your board, versus overstating and risking your credibility?”
According to the panel, the answer in part depends on whether the product is building a new market or launching into an established one. When a company is bringing a new product into an existing market there is likely clear data already available, meaning the company’s early plans will be held to higher standard of accuracy. When the product is coming into a white space, the company can focus a little more on the vision and the dream, at least in the beginning.
“I love that the answers to most of my questions today have been ‘it depends,’” said Greg. “That’s a key point we’re trying to emphasize today – there is no ‘once-size-fits-all solution’ for commercialization. Instead people need to tease out the variables and really think through what matters. Then as you move forward, always be measuring, challenging, learning and adapting.”
The expert guests in our Commercialization Workshop are extraordinarily qualified. They have worked for some of the biggest, most successful companies, have been involved with multiple startups, and have a deep and hard-earned wealth of practical experience. They are also all incredibly busy. We are grateful to all of them for making time to share their knowledge and insight with our innovation community!