Tag Archives: Reimbursement

How Do You Respond to Market Uncertainty? Five Suggestions

Situation: Many industries face uncertainty due to potential changes in reimbursement and shifts in regulation. How does this impact strategy for an early stage company or the introduction of a new product? How do you respond to market uncertainty?

Advice of the CEOs:

  • First and foremost put a premium on focus, particularly in markets dominated by large incumbents. Past practice we would have blanketed the market to maximize early market share. Current practice focuses on being much more selective in terms of where to compete and putting more effort into targeting geographies.
  • This focus is accompanied by more caution and control of spending. Only hire a new sales rep, for example, if there is assurance that there is a significant customer base in the market that the new rep will serve.
  • Similarly, be more cautious in capital equipment decisions. In parallel, if an employee leaves do not automatically replace that individual unless there is market potential in the market served by that employee.
  • In terms of price planning, where in the past it was possible to count on annual price increases, plan for the potential of prices decreasing over time to reflect new pressure on reimbursement and cost containment. As another example, if there is a pending tax change on the products produced assume that this will reduce margins where in the past the additional cost might have been passed it on to the buyer. Reduced margins will also impact new product selection and investment strategy.
  • The big change in long-range planning is that many companies are focused on slow, sustainable growth – maintaining both gross and net margins and profitability. This is a major change from several years ago when the focus was on maximizing rapid market penetration for new products. Focus on being self-sufficient financially and thus avoid having to rely upon future fund-raising rounds.

Our thanks to Ken Purfey for his contribution to this article.

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How do you Respond Strategically to Market Uncertainty?

Interview with Kevin Moser, CEO, Dfine, inc.

Situation: The medical device industry faces uncertainty due to potential changes in reimbursement, increased regulation accompanying health care reform, longer FDA approval timelines and the economy. How does this impact strategy for an early stage medical device company?

Advice:

  • First and foremost it puts a premium on focus. We compete in a market dominated by large incumbents. When introducing new products in the past we would have blanketed the market to maximize early market share. Now we are being much more selective in terms of where we compete and putting more effort into targeted geographies.
  • This focus is accompanied by more caution and control of spending. We will only hire a new sales rep, for example, if we are assured that there is a significant customer base in the market that rep will serve.
  • Similarly, we are being much more cautious in our capital equipment decisions, and if an employee leaves we do not automatically replace that individual.
  • In terms of price planning, where in the past we would have counted on annual price increases, we now plan for the potential of prices decreasing over time to reflect new pressure on reimbursement and cost containment. As another example, in 2012 there will be a new tax on medical device companies. We assume that this will reduce our margins where in the past we might have passed it on to the buyer. Reduced margins will also impact our new product investment strategy.
  • The big change in long-range planning is that we are focused on slow, sustainable growth – maintaining both gross and net margins and profitability. This is a major change from five years ago when our focus was on maximizing rapid market penetration for new products. We want to be self-sufficient financially and thus avoid having to rely upon future fund-raising rounds.

You can contact Kevin at kevinm@dfineinc.com

Key Words: Medical, Device, Reimbursement, Regulation, Health Care Reform, FDA, Focus, Product Introduction, Spending Control, Hiring, Pricing, Growth  [like]