Navigating the Path to Success in Medical Devices: Strategy, Reimbursement, and Competition  

There is no common journey for a medical device start-up. Most fail, and for those that succeed follow unique paths shaped by market forces, regulatory challenges, and competitive pressures. Bringing a new device into the market is often filled with twists and turns, requiring adaptability, strategic thinking, and a deep understanding of market dynamics. 

One fundamental lesson for startups is to follow the money. Many early-stage ventures focus heavily on technology or product development without a clear plan for how they will be paid at a valuation that justifies their forecasts. The misalignment is especially common in medical device companies that position their products as clinically superior but pursue regulatory approval through pathways that classify them as equivalent to existing technologies. 

While this approach avoids the cost, time, and risk of a de novo 510(k) or PMA, it creates a fundamental pricing challenge – insurers see those products as “me-too” devices, making premium pricing difficult to justify. Many companies hope to generate clinical trial evidence post-launch to support premium pricing, yet few have a credible strategy to change payer policies, underestimate the time required, or fail to account for this risk of rejection. Without a clear reimbursement strategy, even the most innovative technologies struggle to gain traction. 

Utilizing existing payment structures can provide significant advantages when they align with a sustainable business model. For example, payment levels for bone growth stimulation are sufficient to build a thriving business if there is a competitive edge. However, the entry cost in terms of clinical trials can be daunting for investors; and studies carry significant risks of failure. Research has shown that a number of pivotal studies fall short of meeting their primary endpoints. The main reasons identified were under-estimating the success of the control group, or over-estimating the success of the active group, often because there was no pilot study carried out to gain the appropriate estimates of effect and variance, or simply under-powering the studies. While these are understandable decisions based on cash availability, it is also self-defeating.

Beyond reimbursement, a strategic approach to competition is crucial. Aside from understanding your customer value proposition, you must assess how you compare to competitors across all aspects of your business – manufacturing, culture, service, and beyond. Most importantly, it requires deliberate thinking about where (scarce) investment needs to be focused. The process requires significant competitive insight which can come from experience in the market. Some key strategic considerations for startups can include: 

• Do we need to build an internal product development capability or partner with experts on a project basis?
• How much do we need to invest in Quality Management Systems?
• How would we become an accredited and proficient DME provider – build or acquire?
• How do we build a capability in insurance contracting, to go along with established coding and coverage?
• Should “box-build” be something we set up internally, or with an external partner?
• What skills did we need to bring in-house to navigate the novel regulatory approval pathway?
• What culture did we need to build both internally, but more importantly, externally, customer facing?
• To deliver our competitive advantages, did we need a direct, distributor or hybrid salesforce?
• Where can we afford not to invest, or make minimal investment?

The answers to these questions vary for each start-up and the answers may not be clear. That is why a learning organization must stay aware, remain fluid and adapt. Remember that success can be driven by mindset over skills. The keys to being a learning organization are establishing a culture that applauds ideas and learns from “failures” rather than seeking to place blame, recognizing that the best ideas can come from any source, and benefiting from cross-functional discussion and challenge.

Unexpected disruptions, such as supply chain crises or regulatory hurdles, can test a medical device startup’s availability to adapt. Success depends on the ability to assess challenges quickly, focus on core value propositions, and adjust strategies without compromising commitment to customers and stakeholders.

Photo: Bulat Silvia, Getty Images

Richard Pearce is currently the COO and VP R&D of Theragen, Inc. For the last 25 years, Mr. Pearce has worked on bringing therapeutic orthopedic medical devices to market and building fast-growing, commercially successful enterprises. This experience has taught Mr. Pearce that the most sustainably successful products are those that can be proven to deliver meaningful clinical patient outcomes, and significant cost benefits to the system – and that the most sustainably successful companies are those that are laser-focused on serving the patients and healthcare providers.

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