Critical Success Factors for a Medical Device Company


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Outline of critieria for success as a medical device company

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Critical Success Factors for a Medical Device Company

  1. 1. Critical Success Factors <ul><li>For A Medical Device Company </li></ul>
  2. 2. Critical Success Factors <ul><li>Product idea </li></ul><ul><li>Business plan </li></ul><ul><li>Funding </li></ul><ul><li>Personal factors </li></ul><ul><li>People </li></ul><ul><li>Product development </li></ul><ul><li>FDA approval </li></ul><ul><li>Reimbursement </li></ul><ul><li>Product champions </li></ul><ul><li>Financial performance </li></ul><ul><li>Free “stuff” </li></ul><ul><li>Business protection </li></ul><ul><li>Stark law </li></ul>
  3. 3. Business Plan <ul><li>Explains business vision. How you envision the company in 3-5 years. </li></ul><ul><li>Need to understand market. Product need, market size, competition, technology application and differentiation. </li></ul><ul><li>Business plan should address all functional areas and fit them all together. Include financial plan-P/L, cash flow, balance sheet. </li></ul><ul><li>Understand the risks and how to manage them. </li></ul><ul><li>Enables review and evaluation of concept. </li></ul><ul><li>Update strategy to reflect changing conditions. Adapt and be creative. </li></ul><ul><li>. </li></ul>
  4. 4. Funding <ul><li>The best source of funding is $ not spent unnecessarily. Manage the cash. </li></ul><ul><li>Idea –sweat equity/angel funding </li></ul><ul><li>Product development and marketing-venture capital/government grants </li></ul><ul><li>Company growth-venture capital and foreign market IPO </li></ul><ul><li>Investor exit strategy-IPO or sale of company </li></ul><ul><li>Mature product-R&D and acquisitions </li></ul>
  5. 5. Personal Factors <ul><li>Emotional intelligence </li></ul><ul><li>Family support </li></ul><ul><li>Leadership skills/make tough decisions </li></ul><ul><li>Functional, few negative distractions </li></ul><ul><li>Value relationships/ maintain network </li></ul><ul><li>Determination </li></ul><ul><li>Personal ethics </li></ul><ul><li>Ability to communicate </li></ul><ul><li>Ability to execute/project management </li></ul>
  6. 6. People <ul><li>Need for domain experience </li></ul><ul><li>Product champion/scientist </li></ul><ul><li>Medical advisory board </li></ul><ul><li>Board of directors </li></ul><ul><ul><li>Advisors </li></ul></ul><ul><ul><li>Corporate governance </li></ul></ul><ul><li>Product development/ engineering </li></ul><ul><li>Process development/FDA approval/quality </li></ul><ul><li>Sales and marketing </li></ul><ul><li>Clinical </li></ul><ul><li>Funding/financial </li></ul><ul><li>Legal-patent, regulatory, corporate </li></ul>
  7. 7. Product Development <ul><li>Engineering </li></ul><ul><li>Clinical trials/PMA </li></ul><ul><li>Subsequent changes </li></ul><ul><ul><li>510k process </li></ul></ul><ul><ul><li>Letters to file </li></ul></ul>
  8. 8. FDA Approval <ul><li>Europe vs. USA </li></ul><ul><li>Product approval-510k process </li></ul><ul><li>Manufacturing process approval </li></ul><ul><ul><li>June 15, 2006 update by FDA </li></ul></ul><ul><li>Quality control process approval </li></ul><ul><li>Marketing restrictions--off-label use </li></ul>
  9. 9. Product Champions <ul><li>Doctors, doctors, doctors </li></ul><ul><li>Hospital </li></ul><ul><li>Other medical professionals </li></ul><ul><li>Nurses </li></ul><ul><li>Professional papers </li></ul><ul><li>Speeches </li></ul><ul><li>Conferences </li></ul><ul><li>News releases </li></ul>
  10. 10. Need for Reimbursement <ul><li>Hospitals need to be paid </li></ul><ul><li>Doctors need to be paid </li></ul><ul><li>Medical device company needs to be paid </li></ul><ul><li>Increasingly tight reimbursement policies </li></ul><ul><li>Best options from an investors perspective: </li></ul><ul><ul><li>Product category is already approved for reimbursement </li></ul></ul><ul><ul><li>Breakthrough must offer such compelling clinical benefits and cost reduction that the reimbursement process will be as smooth as possible. </li></ul></ul>
  11. 11. Reimbursement in Business Plan <ul><li>Begin planning for reimbursement strategy at the earliest stages of the company formation; it should be a fundamental part of the business plan. </li></ul><ul><li>Consider the data requirements for supporting a reimbursement submission when formulating clinical trials. The data to support reimbursement may be significantly different than the clinical data. </li></ul><ul><li>Work with an expert on reimbursement strategy: </li></ul><ul><ul><li>Regulations are extremely complex </li></ul></ul><ul><ul><li>Rules and winning strategies change frequently </li></ul></ul><ul><ul><li>Must stay abreast of best practices </li></ul></ul><ul><ul><li>Focus is on economics of a procedure, not just clinical outcome. </li></ul></ul>
  12. 12. Reimbursement Cycle <ul><li>Detailed understanding of process is needed. </li></ul><ul><li>DRG’s/CPT’s established to provide for reimbursement </li></ul><ul><li>Can device company provide guidance on DRG and CPT to be used? </li></ul>Payment For Medical Device CPT for Doctor’s Services DRG For Hospital
  13. 13. What Are DRG’s/CPT’s? <ul><li>DRG </li></ul><ul><ul><li>Diagnosis Related Group </li></ul></ul><ul><ul><li>Developed by CMS </li></ul></ul><ul><ul><li>CMS=Centers for Medicare & Medicaid Services </li></ul></ul><ul><ul><li>Reevaluation/new rules currently underway-October 2006 </li></ul></ul><ul><li>CPT Code </li></ul><ul><ul><li>Current Procedural Terminology </li></ul></ul><ul><ul><li>Developed by American Medical Association </li></ul></ul><ul><ul><li>Requests for changes presented to committee </li></ul></ul><ul><li>Payments based on what is “normal, customary and reasonable” as determined by CMS or insurance provider. </li></ul><ul><li>Frequently also used by private insurers for reimbursement. </li></ul>
  14. 14. Financial Performance <ul><li>Cash flow. Cash is king!! </li></ul><ul><li>Market penetration = revenue growth </li></ul><ul><li>Salespersons – feet on the street to grow revenue </li></ul><ul><li>Revenue growth vs. income-sometime contradictory!! </li></ul><ul><li>R&D expense-how much is being invested and in what? </li></ul>
  15. 15. “ Free” Stuff <ul><li>Web sites and news releases of competitors </li></ul><ul><li>Analyst reports on industry and competitors </li></ul><ul><li>Web sites of regulatory agencies and trade associations </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul>
  16. 16. Business Protection <ul><li>Patents </li></ul><ul><li>Trade secrets </li></ul><ul><li>Trademarks </li></ul><ul><li>Noncompete agreements </li></ul><ul><li>Nondisclosure agreements </li></ul><ul><li>Code of ethics </li></ul>
  17. 17. Sales, Marketing and Clinical <ul><li>Sales vs. clinical </li></ul><ul><li>Is marketing necessary? </li></ul><ul><li>Who does a doctor want to talk to? </li></ul><ul><li>Relationship building </li></ul>
  18. 18. Stark Laws <ul><li>Address consulting and professional relationships between doctors and companies. </li></ul><ul><li>Example of risk-U.S. Department of Justice subpoenas issued to orthopedic companies. </li></ul>Hospital Doctor Device Company
  19. 19. Stark Law’s Basic Prohibitions <ul><li>A physician cannot: </li></ul><ul><li>Make a referral </li></ul><ul><li>To an entity </li></ul><ul><li>For the furnishing of “designated health services” </li></ul><ul><li>The may be payable by Medicare or Medicaid (or insurance companies in some states) </li></ul><ul><li>If the physician (or the immediate family member of the physician) </li></ul><ul><li>Has a direct or indirect financial relationship with the entity </li></ul><ul><li>Unless an exception to the Stark laws applies </li></ul>
  20. 20. Ten Perceptions That Can Kill A Company <ul><li>You have a great idea and raising money will not be a problem. </li></ul><ul><li>You can get it done quickly and at a low cost. </li></ul><ul><li>Dilution is a bad thing. </li></ul><ul><li>You have the best talent on the street. </li></ul><ul><li>You do not need patent protection, the trade secrets are significant. </li></ul><ul><li>“ Build it and they will come.” Success in the market is totally based upon technology superiority. </li></ul><ul><li>It is a low risk and expedited regulatory pathway. </li></ul><ul><li>Scientific founders should continue as CEO forever. </li></ul><ul><li>Management and boards are strategically aligned. </li></ul><ul><li>Venture capitalists like risk and have unlimited funding. </li></ul>
  21. 21. Success