Will Kaiser pay for this?
Kirk Nielsen of Versant Ventures said that has become the litmus test for healthcare investing in the new world of healthcare reform.
An “early stage vs. late stage” panel at today’s MedTech Investing conference in Minneapolis showed how venture capitalists of all types are changing their evaluation process as healthcare reform and the universal push to cut costs gain more influence.
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Neilsen’s comment was one of two that showed how governments, C-suite executives and payers are guiding investment decisions in the medtech world.
Josh Baltzell of Split Rock Partners said that one of his portfolio companies is selling into the C-suite, not to doctors. RF Surgical makes RFID tags for gauze pads and sponges used in surgeries.
“Let’s face it, doctors are having less and less to say about what happens in the hospital with the patient,” Baltzell said.
Guido Neels, a managing director at Essex Woodlands, pointed out that while reimbursement issues are a global phenomenon, the definition of value is different in each country.
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“Diseases are universal, but governments deal with value and cost differently in every country, so it’s much harder to pinpoint what you are going to work on,” Neels said.
He said this has led Essex Woodlands to back management teams that have global experience and who understand global markets.
Neels also said that the strong influence of payers has meant that companies have to turn the product development process upside down. “First you have to ask, ‘Can I make this cheaper, sell it cheaper and will the payers embrace my idea? Then you develop the clinical process,” he said.
Michael Wasserman of H.I.G. BioVenture said his firm has added a “better for the system” requirement to the existing “better for the patient”and “better for the doctor.”
“It makes it more complex in terms of what needs to be done within the time frame of the investment,” he said.