Medical Device Reimbursement - Lean Startup Methodology

www.mediclever.com
UK: 27 Old Gloucester St.,
London WC1N 3AX
: uk@mediclever.com
: +44.208.099.7435
US: 616 Corporate Way, Suite 2-4683,
Valley Cottage, NY 10989
: us@mediclever.com
: +1.845.570.2910
Israel: 6 Te’ena St.,
Modiin 71799
: il@mediclever.com
: +972.50.837.1711
Medical Device Reimbursement
Lean Startup Implementation
A lot has been written about how Lean Startup methodology might
help entrepreneurs build commercially successful products. In this
article we provide a real-life example from one of our clients, which
failed to develop a commercially successful product, and show how
implementing Lean Startup methodology may decrease the
likelihood of such failures.
To get a broad understanding of Lean Startup, interested readers
may access the website of Eric Ries, one of the originators of the
Lean Startup methodology, at http://theleanstartup.com/.
1. The Problem
Over the last seven years, we provided consulting services to more
than 150 different medical device startups. The sad truth is that
most of them failed.
They failed because they did not manage to bring to market a
commercially successful product before running out of money.
Note they succeeded in bringing to market all sorts of very
sophisticated products, but such that nobody was willing to pay for.
We believe they did not manage to bring to market a commercially
successful product because instead of developing one, they spent
time and money on developing ‘waste’. ‘Waste’ is defined as a
product which may perfectly meet specification or demonstrate an
engineering breakthrough, but still cannot be sold.
2. A Real Life Example
One of our clients developed an innovative product, which consisted of an array of
electronic stethoscopes that passively monitor vibration energy from the lungs. The
product enabled clinicians to monitor sites of airway obstruction without exposing the
patient to radiation or invasive procedures. The company conducted a clinical study that
demonstrated the accuracy of its system and received the FDA’s clearance with the
intended use of “monitoring lung sounds”. At this point they approached us to help them
develop their reimbursement strategy and implement it in the US.
After doing some homework we interviewed a couple of US payor
representatives who immediately told us: “It is going to be a cold
day in hell before we pay for this technology!” Had the product
helped clinicians differentiate between Asthma and Chronic
Obstructive Pulmonary Disease (COPD), they would consider it,
Develop ‘waste’
Unable to bring
to market a
commercially
successful
product before
running out of
money
Most fail

Medical Device Reimbursement Page 2/3
www.mediclever.com
London WC1N 3AX
: +44.208.099.7435
: +1.845.570.2910
Modiin 71799
: +972.50.837.1711
but since they don’t see what different clinical decisions could be
made by “monitoring lung sounds”, they won’t pay for it. Such a
product is an example of ‘waste’.
Apparently, a lot of management and engineering time and efforts
were spent on making decisions, designing, developing and testing
features that one of their stakeholders (payors) was not willing to
pay for. Developing a new version that differentiates between
Asthma and COPD meant discarding a large chunk of the work
they have already done, not to mention conducting a new clinical
study and applying for a new FDA clearance.
Lean Startup calls this change in the design and the goals of the
product a ‘Pivot’. If we position this ‘Pivot’ on the company’s burn
rate graph, we could see how little money was left to support this
change at such a late stage. Consequently, at this point, no one
was willing to invest anymore money and the company shut down.
3. Implementing Lean Startup Methodology
Lean Startup offers a few basic tools to prevent such a
miscarriage, one of which suggests building a product
incrementally and iteratively. Accordingly, instead of developing,
testing, obtaining FDA clearance and only then obtaining payors’
feedback, the company above should have sought payors’
feedback a lot earlier.
But how could anyone obtain a payor’s feedback before the
product is complete? This is where Lean Startup introduces the
concept of a Minimum Viable Product (MVP). A MVP is the
version of a new product, which allows to collect of stakeholders’
feedback with the least effort and as quickly as possible.
MVP Product
We call the MVP that we develop for our clients a ‘Pseudo
Dossier’. This ‘Pseudo Dossier’ includes most of the
documentation the company expects to obtain in the future, once
the product is fully developed and cleared/approved for marketing.
However, it is based on the company’s estimations, not actual
data. The included pseudo data may indicate estimated clinical
trial results, product price, etc.
Following the development of this ‘Pseudo Dossier’, the
manufacturer can approach payors at an early stage and ask them
to comment on the ‘Pseudo Dossier’, as if it was based on actual
data (expected only within a year or two). Their feedback may be
used to ‘Pivot’, i.e. make changes to the company’s product,
application or clinical plan at a very early stage, minimizing
creation of waste and increasing the chances of developing a
commercially successful product before running out of money.
Time
$
Pivot
Time
$
Pivot

Medical Device Reimbursement Page 3/3
www.mediclever.com
London WC1N 3AX
: +44.208.099.7435
: +1.845.570.2910
Modiin 71799
: +972.50.837.1711
4. Developing a ‘Pseudo Dossier’
When we develop a ‘Pseudo Dossier’, we typically take the following
steps:
1) Draft a Value Story, indicating specific claims that explain how the
use of the new device provides clinical and economic benefits
compared to the existing alternatives.
2) Develop an economic model, quantifying the economic benefits
and allowing for sensitivity analysis.
3) Verify that existing clinical data supports the clinical and economic
claims in the Value Story and economic model or add
reimbursement related aspects to any planned clinical study
protocol, along with the company’s estimated results.
The above Value Story, economic model and existing/planned clinical
data (including the estimated results) are presented to relevant
physicians and payors, seeking their feedback as if the product is
complete and the estimated clinical study results represent the actual
results that may be obtained within a year or two.
The completion of such a ‘Pseudo Dossier’ can be achieved within a
couple of months, early enough to impact the product’s specification,
planned applications and clinical studies. In case of negative
feedback the company should consider changing the Value Story,
economic model, clinical data or the product’s features and then
seek payors’ feedback again until receiving positive feedback. Only
upon receipt of positive feedback, it would make sense to continue
with the development work and clinical studies. Otherwise, it is just
an expensive gamble which may lead to the company’s failure.
5. Summary
We have been implementing Lean Startup methodologies, including
the development of MVPs (in our case ‘Pseudo Dossiers’) and using
them for early validation with payors for more than 5 years. This
process was proven to be a success. It minimized the creation of
waste and increased our clients’ ability to bring to market a
commercially successful product.
Amir Inbar is CEO, Mediclever Reimbursement Consultants, 27 Old Gloucester St., London, WC1N
3AX, UK; tel. +44 20 8099 7435.
With a chain of 30 experts throughout the world, and more than 150 clients
(www.mediclever.com/clients.htm), Mediclever assumes full responsibility for the reimbursement of pharma
and medical technology products - from reimbursement strategy development, through the organization of
local physician and payer interviews and focus groups, to the establishment of specific codes, payment rates
and favorable coverage policies.
Value Story
Article also
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