Going generic: Should medical device companies ditch the incremental upgrades?

Premier CEO Susan DeVore ruffled a few audience feathers at this week’s AdvaMed conference in Chicago when she said that innovation done on an incremental basis drives costs up – so medical device companies should just go generic. It’ll level the playing field, she argued, and then companies can direct their dollars to hit upon a technology that’s […]

Premier CEO Susan DeVore ruffled a few audience feathers at this week’s AdvaMed conference in Chicago when she said that innovation done on an incremental basis drives costs up – so medical device companies should just go generic. It’ll level the playing field, she argued, and then companies can direct their dollars to hit upon a technology that’s transformative.

“I know that’s not going to be a popular comment,” she said. And DeVore was right: There was a collective audience eye roll at her statement. In the current regulatory environment, it’s tough to be transformative.

DeVore focuses at Premier on improving community health by finding ways to reduce health care costs while improving safety and affordability. She finds that there’s a lot of wasted money resulting from the incremental device innovation out there, since companies step-by-step roll out improvements to their products – and charge a premium for the upgrades.

“Incremental innovation is a lot harder to prove a business case for, and a clinical case for,” she said. The transformational innovation she’s referring to is technology that can get patients out of acute care settings, keeps them at home, is connected to other devices and business intelligence – and is a “business case that’s a lot easier.”

Her solution: Defeature devices. Make them more generic. Make the overall cost go down. Providers are dealing with enormous financial pressure – so if there’s a simplified version of a device that can still lead to equal clinical outcomes, she argued, why not go with that?

It was an interesting argument, given the context: An Ernst&Young report released this week at AdvaMed outlined that one of the biggest recent trends in medtech is a shift toward commoditization – which is exactly what DeVore’s advocating for. While it doesn’t use jargon like “transformational” versus “incremental” innovation, the EY report basically advises companies to differentiate, mix up their product offerings.

“As purchasing decisions become increasingly centralized and influence shifts from physicians to hospital administrators and managers,” report author Glen Giovannetti said, “the historical value drivers for purchasing a device – brand, quality and design – will lessen, leaving price the main consideration.”

But the actual device-makers in the audience seemed none too pleased with DeVore’s statement. This is likely because medical device companies find themselves strapped in a regulatory system where incremental improvements get the Food and Drug Administration nods. “Transformational technology” tends to be a riskier bet that just isn’t a viable option for many device companies.

“Incremental innovation is what’s required, because transformational innovation gets completely stopped in its tracks,” the CEO of a fast-growing midsize device company told me. “The idea of transformational technology across the board is great in theory, but it requires such large clinical study – and so much money – that it’s just not going to get through the regulatory process.”