As Costs Increase for Healthcare, Justifying Change Requires Clinical Evidence.
Looking back on 2013, we saw a year of volitility for VC investment in the medical device industry. The first quarter of 2013 saw a 20% drop in venture deal valuation and 10% reduction in number
of new deals compared to the previous quarter, according to PWC capital association and the National Venture Capital Association. This is part of a longer story concerning a downward trend in VC funding for medical device companies since its peak in 2007; overall invested capital per year is down for the period by 32%.
While the amount of invested venture capital has increased since the beginning of 2013 slightly, innovations are being put to the test to a greater and greater degree for one big reason: the institutions to be their eventual buyers are doing the same.
In the not too distant past, it was much easier for a medical device company to have their new, innovative device considered by hospitals and physicians. As the individuals most responsible for bringing in the business for hospitals, doctors had significant influence over what is carried in a hospital’s inventory. While this influence still exists, these days it is more and more challenging to wield that influence.
Claims for Improved Outcomes aren’t Always Enough
Doctors and surgeons who are interested in trying new technologies are increasingly met with questions from hospital staff and even physician group members regarding proof concerning the advances they are wishing to use or even trial. Offering a 510(k) driven data set that corroborates better outcomes compared to an existing standard is a consideration, however, the data seldom adequately addresses all of the value propositions offered by device companies following their introduction. As hospitals and physicians receive less in reimbursement for procedures, these institutions are watching their costs more and more.
More Clinical Value Data is Necessary
Many more forward thinking venture funds and medical device companies are building the acquisition of clinical value or clinical utility data into their business and marketing and sales plans. Clinical utility studies offer many of the benefits available through a full randomized clinical trial at a fraction of the cost.
This process involves the clarification of the specific value to be quantified through the study, the development of a protocol and its submission to an institutional review board and a rigorous execution of the study to insure usable results.
Based on current trends, the requests for actual proof of better outcomes at the same or even lower cost are only bound to increase for new product evaluations. Companies who are proactive in identifying their data needs and securing the means to acquire it will be the winners in the year ahead.
