Inverting the Medtech Value Pyramid: Business Models for the Engaged Healthcare Consumer

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Greater patient engagement and an emerging willingness to seek care alternatives as well as technology advancements are facilitating a change to a “below-the-line” business model that targets consumers directly. Medtechs that evolve to support this model could generate significant growth, ward off encroachment from nonmedtech competitors, and expand patient access to valuable medical innovations. By Ilya Trakhtenberg, Chris Holt, Yoni Krupski, and Jonas Funk.

Medtechs operate as well-oiled product development and commercialization machines, bringing a range of devices and diagnostics to market through repetition and experience. While the product may be different, from a new ultrasound device to a continuous glucose monitor, the business model and process remain largely unchanged. A lengthy design and regulatory process accumulates significant cost, which in turn, dictates a high price point and limited patient ability to pay out of pocket for the device. Medtechs must seek out reimbursement coverage through insurance to facilitate adoption.

Although this business model enables medtechs to recoup significant investment costs, it limits the reach and impact of devices and diagnostics as payors set eligibility guidelines for qualifying patients to ensure they are not paying unnecessary costs; some patients who could have had some benefit (albeit possibly less than an insurance-qualified patient) will not have access. Patients could potentially not qualify for the device if they are not sick enough, are unable to meet prior authorization requirements (e.g., physician visits), or simply have improperly completed paperwork. Given the nature of this system and the high value per patient, medtechs deploy large physician outreach teams to help ensure qualified patients who could benefit from the device are informed of its availability, adding further to the underlying cost of the devices (i.e., in SG&A). It’s just the way things are done—but should it be?


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