1. UCSF Lean Launchpad For Life Science
and Healthcare Startups
Medical Device Track
Class 2
Customer Segments
October 8, 2013
Allan May
Chairman, Life Science Angels
amay@lifescienceangels.com
UCSF Lean Launchpad - Allan May ©

2. MEDICAL DEVICE MARKETS ARE OFTEN
- BUT NOT ALWAYS - MULTI-SIDED
MARKETS
 The patient is the beneficiary of the device or
service and must receive a clinical benefit
 The physician is the device user
 The hospital or physician practice is the
economic buyer
 Medicare or private insurance payor is the
ultimate influencer of what gets purchased
 The FDA determines what can be legally sold
 CMS determines what Medicare pays for
UCSF Lean Launchpad - Allan May ©

3. MEDICAL DEVICE CUSTOMER
SEGMENTS IN A NUTSHELL
 FOLLOW THE MONEY!!!
 Understand whether the device is reimbursed


Being covered in the hospital DRG is NOT
reimbursement, it is an expense
Unless you are replacing a device currently being used
within a DRG at a lesser cost
 Determine who the payor is
 Understand the funds flow process
 Understand who gets paid

Same physician, or shifting specialties (and so some
other physician will no longer get paid)
UCSF Lean Launchpad - Allan May ©

4. PHYSICIANS AS CUSTOMERS?
 Physicians often decide what device to use


Depends on where the physician works; how she is paid
Hospital-based physicians are influencers (at best)

The ability of physicians to influence hospital purchasing
decisions is evaporating



Novare vs. Intuitive Surgical
Same cost versus higher cost – Figure 8
Private practice physicians are purchasers
 Actually multiple physician specialties often influence the
course of therapy of a patient

EG, LCP Pacemaker - GP; cardiologist; interventional
cardiologist; electrophysiologist
 Physician turf battlers are common

E.g., cardiac surgeons versus interventional cardiologists
UCSF Lean Launchpad - Allan May ©

5. PATIENTS AS CUSTOMERS?


Competing trends are at work
Patients are far better informed and increasingly request
specific devices and procedures

Can impact where substantial data exists as to clinical outcomes
and benefits




Prostate or breast cancer therapy choices
But, the evidence requirement for new devices or procedures is
daunting
Physicians often recommend existing or standard devices and
procedures until the adverse effects of new technology (and
how to handle those effects) are well known
Out-of-pocket or self-pay usually dooms device business
models


Cosmetic versus therapeutic procedures
Check out impact of reimbursement and market size – InvisiAlign
http://provider.invisalign.com/Pages/pay.aspx
UCSF Lean Launchpad - Allan May ©

6. HOSPITALS AS CUSTOMERS?
 Hospital purchases are increasingly governed by
“New Technology Committees”, who’s purpose is
to keep new technologies out of hospitals
 Hospitals purchase devices that are reimbursed
 Hospitals will only purchase devices that claim to
lower costs where those cost benefits are proven
by hard data
 and often still require onsite trials to verify data
generated elsewhere
 Who is the Customer in the hospital?
 What exactly is the purchasing process, and who
all are involved in that process?
UCSF Lean Launchpad - Allan May ©

7. UNDERSTANDING CUSTOMERS REQUIRES
UNDERSTANDING REIMBURSEMENT
 Existing reimbursement code versus new code
versus not reimbursed
 Re-engineer your product or solution if possible to
still achieve Product Market Fit while falling under
an existing code

BTW, ditto for falling under 510k versus PMA (more later)
 Understand the length of time it takes to get a new
code and when you are able to effectively start
 Understand who owns the patient and the physician
referral process
UCSF Lean Launchpad - Allan May ©

8. INTERVIEWING PHYSICIANS
 You need to view one or more target procedures to be
effective in speaking with physicians
 Take a prototype or mockup to hand/show them

Animations and CAD CAM is good but not good enough
 Physicians are all difficult to interview effectively, but
surgeons tend to be harder than non surgeons
 Physicians are scientists and tend to answer exactly what is
asked, not interpret what you meant to ask
 Physicians often believe they are better than their peers
and so don’t experience the complications or adverse
events that others might

How do they perform the procedure? How would they do it better?
What changes would they like? Why
UCSF Lean Launchpad - Allan May ©

9. PHYSICIAN – PATIENT GAINS
 Same or better clinical outcomes in a less invasive
setting

Invasive → less invasive → non-invasive


Often involves a reduction in expense
Some procedures move out of hospital surgery to outpatient
and then back
 Opens up previously untreatable patients to therapy
 Increases procedure speed (reduces complexity or
time)

Count steps in the existing procedure versus yours
 No Harm, No Foul solutions
UCSF Lean Launchpad - Allan May ©

10. PHYSICIAN – PATIENT PAINS
 Reduces mortality
 Reduces morbidity

Complications, adverse events
 Increases durability of procedure


Balloon angioplasty → stents → Drug Eluting Stents
But re-occurrence can generate additional physician revenue
 Prevents losing patient to another specialty
UCSF Lean Launchpad - Allan May ©

11. MEDICAL DEVICE MARKET TYPES
For Physicians and Hospitals
 Existing


Better clinical outcomes; same physician
If moves procedure to new physician (cardiac surgeon to
interventional cardiologist), will provoke a turf war between
supporters and saboteurs

Carotid stenting
 Resegmented

Niche products aimed at specific patient populations have long
been successful
 New

If and when reimbursed, the solution is embraced
 Clone

Often done regarding procedures; rare in devices due to IP
UCSF Lean Launchpad - Allan May ©

12. MEDICAL DEVICE COMPANIES
AS ULTIMATE “CUSTOMERS”
 Almost all innovation in medical devices resulted in
acquisitions by major strategics

In-house R&D innovation is negligible
 Is it still possible to build a major standalone medical
device company?


Will there be another J&J, Medtronic, GE?
Manufacturing is local; marketing, sales and customer
support are global
 What pain or gain do you provide to the acquiror?

Why can’t they just do the same thing without you?
UCSF Lean Launchpad - Allan May ©

13. MEDICAL DEVICE MARKET TYPES
For Major Medical Device Companies

Existing


Better clinical outcomes; same physician
If moves procedure to new physician (cardiac surgeon to interventional
cardiologist), can fall outside of ability of major companies to leverage
existing sales and marketing infrastructure


Resegmented




This is a good place for startups
But major device companies are pretty good at this also
The key is to spot holes in their IP
New



Surgeons versus interventionalists
The Holy Grail for startups
Pioneering often requires startup to build its own sales and marketing
channel to enable the major company to enter the market
Clone

Probably not a place for startups to play
UCSF Lean Launchpad - Allan May ©

14. GAINS AND PAINS TO ACQUIRORS
 Leverage existing corporate resources and customer
call points
 Gain entry with new widget to sell rest of line
 Facilitate upselling
 Increase market size

Add to sales and profits


Don’t cannibalize existing markets
Eventually this will fail as reverse innovation becomes a
reality
 Create new markets
 Increase share relative to competitors
UCSF Lean Launchpad - Allan May ©

15. UCSF Lean Launchpad For Life Science
and Healthcare Startups
Medical Device Track
Class 2
Customer Segments
October 8, 2013
Allan May
Chairman, Life Science Angels
amay@lifescienceangels.com
UCSF Lean Launchpad - Allan May ©