Disruptive medical devices business model? First online-only spinal implants company thinks so
A startup that bills itself as the first online-only spinal implants maker has launched its first product, a cervical cage system.
So does San Diego-based Eisertech represent a new, disruptive business model for a certain portion of the medical devices market, namely for customers and products that don’t require much in-the-field support from sales reps? Or is the company like so many other startups that begin with optimism and a hungry entrepreneur, only to fade away with nary a peep?
But Eisertech CEO Lukas Eisermann, a biomedical engineer who previously worked with NuVasive and Cleveland-based spinal implants company AcroMed, can’t worry about answering those questions, yet. At this point, Eisermann has to focus on building his recently launched company’s business and selling its $485 cervical cage system, which he designed.
“We’re at the beginning of what will probably become a trend,” Eisermann said of his company’s business model.
The impetus behind the company’s business model is obvious: cost. “We’re really in an environment where cost containment is becoming the main driver behind just about everything” in healthcare, Eisermann said.
It’s tough to argue with that. Even Medtronic’s CEO has said that simply developing newer, better medical technologies without regard for cost is no longer sustainable, while hospitals continue to see margins squeezed by reimbursement pressures from both private and public payers. In short, cost is a huge priority, concern and opportunity for nearly every player in the healthcare industry.
In contrast to traditional, full-service medical device companies, Eisertech aims to generate cost savings in two major ways: First, because sales reps will provide little in-person, hands-on product assistance, they’re free to service far more accounts. That means sales commissions from each individual deal will be much lower than in the traditional model.
Second, Eisertech is selling products directly to customers, rather than on a consignment basis, meaning the company doesn’t need to raise a huge amount of capital to build an inventory, Eisermann said.
Of course, this type of low-support model won’t work for every customer. Eisertech’s ideal customer is an ambulatory surgical center in which there’s little bureaucracy between physicians and administrators, and it’s even better if the center is owned by physicians. The logic is that physicians in those situations are likely to be more cost-conscious and less likely to need much customer support, Eisermann said.
As for products, Eisertech will limit itself to rather simple devices that don’t require training, and those that can be serviced and reordered by on-site staff without assistance from a sales rep. A cervical plate system is the next product the company plans to release.
Eisertech has already attracted attention from at least one corner of the medical devices world: sales reps on The Spine Blogger. At least one sales rep seemed a little nervous about Eisertech’s model, proclaiming, “Yes, folks, the End of Days has finally arrived.”
[Photo by flickr user AlexH2011]