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Why It Takes So Long to Develop a Medical Technology (Part 9)

Written by Mark Carol, MD
Published:

Commercialization

The NOMOS Peacock IMRT system was commercialized in a remarkably short period of time. Conceptualized in 1992, NOMOS submitted a 510(k) application to the US Food and Drug Administration (FDA) in August 1996, and received clearance in December. The first commercial systems were sold before the end of the year, although research systems had been sold as early as 1994 under an FDA rule that allowed manufacturers to sell preauthorization devices for clinical testing if there was no gross profit realized on each sale.

Around that time, NOMOS (which manufactured its software and beam modulation technology at its own facility) had to decide whether to continue to commercialize the Peacock system on its own or partner with an established player in the field. The Peacock modulation delivery system was designed to mount on linear accelerators (linacs). As such, the Peacock hardware and its dedicated treatment planning system was attractive to linac manufacturers – Varian, Siemens, Elekta (the “Big Three”) – as a stopgap means of providing their customers with intensity-modulated radiation therapy (IMRT) capability while they developed their own hardware and software capabilities. NOMOS also had to decide whether to adapt its planning system to work with other manufacturer’s modulating hardware or keep the planning system exclusive to its own hardware. Since the linac manufacturers could void warranties if the customer mounted an unauthorized device on the linac, NOMOS was forced to play ball with its future competitors and adapted its software to work with linac hardware independent of its own modulation hardware. While this proved beneficial in the short term, resulting in hundreds of planning system placements, it ultimately killed the attractiveness of the complete “software-plus-hardware” Peacock system. By the early 2000s, after Varian, Siemens, and Elekta had commercialized their own software for creating and delivering plans specific to their hardware, the market for Peacock had shrunk considerably.

Over the years, NOMOS explored various ways of selling its Peacock product, as well as other technologies it had developed in the treatment planning and image-guided treatment delivery spaces. It considered and nearly entered into a distribution agreement at one point with each of the Big Three. It also hired its own sales force to provide coverage across the entire country. Being a capital sales technology, the timeline for a sale was quite lengthy, even though the price tag was a fraction of the technology being sold by the Big Three. Administrators were remarkably reticent when considering the argument that a Peacock system would save them hundreds, if not millions, of dollars, perhaps due to the influence of the linac manufacturers. Linacs cost millions of dollars, have optional equipment worth additional hundreds of thousands of dollars, and require yearly service contracts to preserve the value of the initial investment that runs six figures. Discounting, “free upgrades,” and voiced concern about jumping into a new market too soon before the clinical value of the approach had been proven made it possible for them to squash potential interest in Peacock on the part of their radiation oncologists regardless of its NOMOS-argued favorable cost-benefit ratio.

Recognizing the limited opportunities for its Peacock system, in 1999 NOMOS began growing its business through other means. It purchased a treatment planning company so it could offer its customers an option for conventional planning; it licensed advanced planning technology in other arenas it felt it was positioned to commercialize; and it signed a joint marketing agreement with a company in the imaging space.

Introduction

Commercialization is the process of taking a prototype through its transfer to manufacturing and then to sales. While appearing straightforward, there are several land mines along the path that can destroy a new company. These are related mostly to questions of timing.

  • When should money be spent on a quality management system (QMS), and what does that system look like?
  • Should the ramp up of manufacturing – with the necessary increase in personnel, inventory, and expenses – occur before or after there is demand?
  • Should sales and marketing personnel hiring occur before or after regulatory authorization? What about before or after reliable reimbursement coverage is in place?
  • Is it better to raise money in one lump sum at the start when it is most expensive or piecemeal it based on milestones?
  • How should the product be priced, especially if there is a decision to be made between a capital and a per-use pricing structure?

Each of these decisions carries implications for time to market and cash flow. Pulling the trigger on any of them too early can result in millions of dollars of wasted expense. If you wait too long, you risk millions of dollars of lost opportunity. While fundraising and pricing will be covered in a later blog on Financial Challenges, several other very important topics are explored in the following sections. There are, however, many more branch and decision points during a company’s development than those listed that will impact how long it will take, how much it will cost, and whether there is an opportunity for gain once the end is reached.

QMSs

A solid QMS is essential when putting a high-quality medical product in the marketplace. A QMS is a structured framework for documenting the procedures and processes implemented throughout the lifecycle of a medical device. It covers medical device design, manufacturing processes, supplier management, product labeling, storage and distribution, clinical data, risk management, and complaint handling. QMS standards are enforced in many of the world’s markets through vehicles like “ISO 13485: Quality Management System for Medical Devices,” and the “US FDA QSR: Quality System Regulation for Medical Devices.” Many companies develop a QMS too early or too late during the development process. This can result in a lack of funds available for other activities, a need to raise additional money late in the commercialization process to implement a QMS, or a multitude of manufacturing issues that arise due to a lack of a QMS when it was needed.

It is expensive and takes considerable time and thought to develop and deploy a comprehensive QMS. Medical device startups have many things to address early in their existence but likely do not have the money required to address every need at the same time. Because of this, a QMS often gets pushed to the back burner in favor of activities that are both more visible to investors and the outside world and are perceived to add more value and meaning to the startup early in its life. However, ignoring a quality system entirely until after development is complete and the product is ready to be launched is not a good idea. It will most likely lead to a device that cannot be manufactured reliably and may even need to be totally redesigned to be producible in large quantities, adding years to the commercialization process. Even worse, it can result in a device that proves to be unreliable – or even harmful – and not serviceable in the field. In these cases, devices may have to be recalled which can irreparably damage the company’s reputation and prospects.

It is well appreciated that most QMS systems are not conducive to the rapid prototyping and design changes that are part of the early development process. It therefore can be difficult to know when to implement a QMS and how large of a system to implement. The FDA has no formal requirements for a QMS during the design and development stage of a device. Research and development (R&D) systems are just that, systems designed to research and develop the ultimate product. These systems are designed to be used by engineers to test concepts and principles or to identify means for addressing problems that arise during development. There will be hundreds of on-the-fly modifications and changes made to hardware and software as the concept is molded into a workable solution. An R&D department would become nonfunctional if every one of those changes had to be documented fully in the manner required by a mature QMS system.

Since R&D devices are not meant to manufactured, and since the R&D version of the technology will never be sold, a full QMS system is not required at this stage. A basic, bare bones system can be used to track design changes so, when it comes time to finalize the design, there will be a history that can be referenced to guide the final design process. Adequate controls and documentation would exist from the start, creating a quality-oriented culture early in the company’s history and reducing the difficulty of implementing a full QMS in the future.

After it is time to move from R&D to developing a manufacturable system, and when there is secure financial support from investors for bringing the product to market, it will be time to effectively start over. Companies will use everything learned during the R&D phase to build a manufacturable system that is reproducible and documentable. This is when a full QMS needs to be in place, both to ensure a high quality manufacturable and serviceable product and to meet FDA requirements.

This staged implementation approach to a QMS will save the company time and angst during the development period. It will also demonstrate to governing bodies that from the beginning controls were in place for developing the version of the device that is to be sold and used on patients. A semblance of records will be available early in the R&D process that can be used to answer any regulatory body challenges to the device regulatory submission dossier. It will also result in a product that is reliably manufacturable and serviceable in the field and one that will be safe to use on patients, while allocating capital and personnel only when required.

Manufacturing

New medical devices generally require significant engineering support as they transition from R&D to manufacturing. This can push a company to release an early version of the product for the purposes of testing and preclinical evaluation. Producing a version of the product for preclinical testing purposes can prove critical at the development stage where the design has not been finalized but core device functionality has been implemented. The focus at this stage is on proving and refining device efficacy and usability. An interim product can generate safety data for a 510(K) submission or laboratory data used to support ongoing development in preparation for a formal clinical trial. Depending on how close it is to the final product, it may even be suitable for a clinical trial itself. However, the assumption must be front and center that this version is not the product that will be manufactured in volume. The device will be redesigned from the ground up to be mass produced in a consistent and reliable manner and will be sold in quantity.

Keep in mind that the less effort put into the preclinical product and the farther away it is from existing in a design for manufacture (DFM) state, the greater number of changes will be required to produce a manufacturable product. There will also be added cost and time due to the need for the revised version to be reviewed for regulatory impact including validation of reprocessing.

Jumping to the commercial stage of manufacturing – which may require third-party contract manufacturing firms or expensive molds and forms – should not be undertaken until the product design is finalized and frozen. Producing a commercial product means building a 20th unit that functions the same as the 500th. This takes a considerable amount of effort and knowhow that often goes underestimated. While it can be difficult to make a first-of-its-kind new device, making 100 devices exactly the same presents an entirely different set of problems. A good QMS system, along with proper application of design principles, is essential.

By the time hundreds of devices have been built, tools to support large-scale manufacturing will have been purchased and implemented. Making a change at this point in the manufacturing process – one that requires new tools, molds, and jigs – is extremely expensive. This is one reason the interim step of a preclinical testing system often is used. This phased approach may save time and money during the development process, bringing the company to the point of regulatory authorization and down the path of reimbursement coverage much sooner than might otherwise be possible. It also can ensure that the company and the market are ready for the large investment required to manufacture in volume. This approach will work only if the plan is mapped out ahead of time, capturing the R&D knowledge acquired along the way, so that it can be used to shape the design destined to be manufactured.

After the design is stable and the product is in its final form ready to be produced, the question of how fast to produce devices must be answered. Many entrepreneurs do not spend enough thought timing a ramp up of medical device manufacturing to the actual state of the company and needs of the market. They almost always overestimate how quickly they are going to require high volumes and underestimate the likelihood and expense of design changes.

To paraphrase the movie “Field of Dreams,” founders, investors, the Board, and most employees of a startup assume, “If we build it, they will buy it.” Unfortunately, this is often not the case. A technology may be better and cheaper, but it will take years for others to come to the same conclusion. Each interested party – patient, user, provider, payor – has its own vested interests in the status quo that will hinder the speed of adoption of any new medical technology no matter how great it is. As explored in other installments in this series, new technologies require physicians to learn new techniques and ways of looking at disease that may impact their bank account. Providers need to come to grips with the cost of new technology. Payors need to determine whether it is worthwhile to upset the near-term status quo they have quantified and mapped into their cost-benefit analyses. Finally, patients need to get comfortable with therapies that may not have the long-term follow-up of other treatments.

It should be assumed that it will take at least a good five years from general commercial introduction for a technology to begin to achieve the level of market penetration required to demonstrate success. This extended timeline impacts all facets of corporate planning but especially the timing of a ramp up of the sales force and manufacturing capacity. Real market demand does not occur until and if there are favorable coverage decisions. Spending investor dollars early on to build inventory may not be the best use of funds, especially if it will take years before that inventory is needed. That said, should a market demand go unfilled, it leaves a vacuum that a follow-on competitor may fill.

How these opposing viewpoints play out over time in the specific targeted market will go a long way toward determining the near-term success of the company, its need to go back to investors for additional funds, and how the product is perceived in the marketplace.

Thinking Long Term: Reprocessing of Medical Devices

Many devices include components that are reused and need to be cleaned and/or reprocessed after each use or prior to the next use. Any form of regulatory submission will require evidence of adequate reprocessing of these components. Large pieces of hardware, like consoles or robots, may only require establishment and validation documentation of cleaning procedures. For medical devices that have a single use component, sterilization validation that includes support for the claimed shelf life of the component is required by the FDA as part of the regulatory submission. These reprocessing and/or sterilization validations must be repeated each time a change is made to any component or packaging or if the FDA questions the validity of presented data in a submission.

The testing times and costs required for sterilization validation, environmental testing, aging, and biocompatibility studies often are not understood when management is creating a development timeline to be presented to investors. The initial focus of the management team is usually on the immediate creation of technology and market definition rather than on the entire life cycle of the technology. However, failure to consider reprocessing and sterilization can cause significant delays in achieving regulatory authorization and in satisfying customer demand once the product is ready for introduction in the clinic.

Having to rerun sterilization validation when a change is made to a disposable or reprocessing validation on a piece of hardware can add six months or more to the timeline for product release or update. This is another reason why moving to manufacturing too soon before a working and customer validated design is frozen can delay getting the technology in the hands of the users. This delay adds to the cost and to the amount of money that must be raised and increases customer frustration.

Relying on a single firm for validation, or even a single firm to process the product, can present challenges as well if the facility were to be shut down for an extended period (such as occurred during the COVID-19 pandemic). This may make it difficult to provide disposables to customers, test a product design change, or validate a change in packaging. While the likelihood of each of these may be small, taken together they can result in a significant probability of an impact on customer satisfaction and the revenue stream.

As an added complication, customers may require the manufacturer’s validated means for reprocessing meet its facility’s requirements for reprocessing. It behooves a company to survey the intended market before finalizing its approach to reprocessing, determine the distribution of reprocessing technologies that exist in that market, and ensure that the reprocessing path they choose for the technology is compatible with those technologies. Otherwise, sales may be made that cannot be fulfilled without expensive redesigns, additional reprocessing testing, and resubmissions of regulatory documents.

Go-to-Market (GTM) Strategy

Executing a strong GTM strategy, one that reduces cost and risk, is essential for a company that wants to achieve a successful product launch. A GTM strategy is not just about selling the product. At its core, a GTM strategy is the way a company aligns itself to the needs of its customers. It is the game plan that drives the actions of the marketing, sales, and support teams. It integrates the voice of the customer, product features and benefits, competitive analysis, pricing, value proposition, competitive landscape, sales training, marketing collateral, and many other factors in a comprehensive, integrated action plan.

Creating and implementing a well-defined plan can take 6 to 24 months. The timeline may be shorter for an add-on product sold into an existing market segment. High cost capital equipment and paradigm-shifting technologies will land at the upper end of the range. Getting it right the first time will keep the timeline within this range. Getting it wrong – or not putting in the time upfront to develop the right GTM plan – can lengthen or even double the timeline.

At a minimum, an effective GTM plan needs to address the following questions:

  1. What is the target market and who are the target customers?
  2. What features matter to the target customers (i.e., price, quality, speed, outcomes)?
  3. By what means (sales channel) will targeted customers be accessed?
  4. What is the unique value proposition of the technology that makes it attractive to each target customer in each market segment?
  5. How will potential customers learn about the existence of the technology and how will they be educated on the value of the technology?
  6. Does marketing messaging convey the value proposition?
  7. Are there direct and indirect competitors and how will they respond?
  8. How will customers be supported after the sale?

A key factor to consider in all of this is the sales channel, the way product will be sold to the customer. Many medical device companies get to the end of the commercialization process and then decide to go directly to doctors with their product without serious consideration given to other approaches. The potential ways are numerous and varied, ranging from a direct sales force, the use of distributors, direct-to-consumer selling via the internet, or combinations of the above. Each approach has a unique set of challenges and approaches. The product, market, and technology differentiating factors will determine which strategy will be best for a given situation.

Depending on the technology and the application, medical technology purchases may be up to the physician, the CEO/CFO/head of purchasing, central processing, or nursing. Each type of customer may make their decision based on different values, and each plays a greater or lesser role depending on the structure of the organization. The value proposition messaging needs to be tailored to each intended audience(s). This means engaging with potential customers in a dialogue during the development of a GTM strategy to understand what truly resonates with them. This will help improve the language and delivery of the value proposition and determine what approach is best when it comes time to sell.

While a startup must have the right product at the right time to succeed, it also must have the right people selling it. The total mix of time, product, and people is key. It may be attractive early on to sell through distributors or a national third-party sales force, because this significantly reduces costs associated with establishing an in-house sales force. If the product is a replacement for or alternative to an established technology, or if it essentially is a commodity, like a better biopsy needle or catheter, then distributors and third-party salesforces may be optimal. This is especially true if those parties already have relationships with the target customers. If using a distributor is a good fit, selecting the right distributor should be approached like a job interview. It should take a methodical selection process for a distributor to get an interview; then the distributor only moves forward if it is a good match and all parties come to agreeable terms.

Some products, specifically capital equipment medical devices or paradigm-shifting technologies, require a lot of touch points. The sale is often technical in nature, requiring a familiarity with the language on the part of the salesperson and the customer. The customer must be educated as to why the technology represents an advancement over existing approaches, how they will use the technology, how they will sell the technology to patients, and how they will get paid for using it.

Great products can languish in a distributors’ catalog because a sale takes longer and requires too much time for the distributor to learn the technology. Sales reps from third parties, especially those with their own product lines, may get compensated more when selling their own line of products, and therefore will not put the time required into the sale. They may not be willing, despite the best intentions of their management team who negotiated the deal, to put in the time to be trained so that they know your product inside and out.

One solution to this problem is to use an in-house sales team, one that exclusively sells the company’s product. This approach provides the greatest amount of control over messaging and time commitment. However, it also requires the most upfront capital to establish, especially if the goal is to target all regions of the country at the same time. The timing is also essential. If you develop the sales force too late, sales opportunities are lost. But, if you develop it too early, the expensive sales force may be sitting with nothing to do if there are manufacturing or regulatory or reimbursement delays.

A functional alternative, at least at the beginning when funds are scarce, may be to combine distributors with direct technical field sales support from the manufacturer. The distributor can establish the sales process, qualify leads, and create the follow up patterns required for each qualified opportunities, while a small number of field support persons provide the technical knowledge required to educate and convince the customer to acquire the technology and train new users.

Whatever the end decision, it is a mistake to take a wild stab in the dark or to do what everyone else is doing just because it seems like a good idea. Given the importance that selecting the right approach to sales will have as the lynchpin of the GTM strategy, time must be dedicated to discussions with customers, potential third-party partners, advisory boards, governance boards, and consultants to select the best path forward given the product, the end user, and the financial constraints that exist.

Mark Carol, MD, is a senior consultant at the Focused Ultrasound Foundation.

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