Will hospitals break a contract to adopt your technology?

Will hospitals break a contract to adopt your technology?

9 min reading time

What You Need to Understand Before You Sell That Device to My Cardiologists

A discussion between Joe Hage and Mahesh Mulumudi, MD. at the 10x Medical Device Conference – San Diego 2019

Reading Time: 9 minutes

Mahesh Mulumudi, MD was cath lab director before he became the Chief of Cardiology. Now he’s Division Chief of Medicine for Providence Regional Medical Center.

So if he likes your medical device, you’re in, right?

Not so fast. 😟

Mahesh Mulumudi, MD: The question that Joe asked is a pretty broad one: “How do you sell a device to a cardiologist?”

I’m old, but not that old yet. And even when I started practicing cardiology 2005, the dynamics of how sales forces interacted with a provider, with the cardiologist or any any surgical specialist, for example, was very different.

The olden days

They would approach us with a product, be it a new stent, or a new catheter, or new needle, or any simple things. They would approach us and they would kind of grab us between cases. We’d be in scrubs and say you want to grab a cup of coffee, and – sure – and buy me a cup of coffee, sit down, talk about the product. They will say how this is so different from the one next to you.

And then they would ask me. Your influence is basically your volume.

If you’re a high-volume operator, you got a bunch of influence in the lab. It’s ‘volume speaks.’

So I used to be a high-volume operator from the very beginning. So they would come to me even though I’m very junior member in on the team, they would ask me, How can I get the product into the lab? This is the classic thing.

Then I would approach the cath lab manager and the cath lab directors, medical director. And it used to be okay, well, let me leave you a few devices with you and wanting to give them a try. And if you like it, we’ll talk about a contract.

This was the process. This was this was true for a few years, and at the time was very, very true. And it was easy, in a way, because I felt good because I’m having some influence on what comes into the lab or doesn’t come into the lab. The sales force for the device company was feeling good, because they could approach me and get something in front of me directly, the operator.

The shift came in 2010

The shift for me, at least for my institution, started happening around 2010. There was a big shift.

And by the time I became the cath lab director, I became the chief of cardiology, I became the chief of medicine, of the entire division of medicine. So I had a little bit of a contractual influence. I started sitting at the contracting table. And the situation changed very differently.

The system started consolidating hospitals into larger entities. And these larger entities want to control the price of the product coming to them.

So they decided that reps cannot contact the providers directly.

Although people ping us and meet us and all this stuff. But most of the cardiologists today – it’s true with every specialty, by the way, this is at least I can speak for the system that I work for and work with.

I work with the Providence St. Joseph’s system, which is a pretty big system now. And Swedish is part of it so it’s a big system.

So now the concept is not one individual cardiologist trying to decide what to do with it. And all the hospitals in the system, close to 50 in my system, they come under one contract, they’re sitting at the table for one device and one product. And if it is a unique product, and nothing else in the market, kind of muscle the industry down saying that give me this price, otherwise, I wouldn’t use it concept.

And if it is multiple products and put it through a bunch of champions from different hospitals come and pitch to us as a group and pick a product and put it on the shelf.

Two major changes

This concept changed in two ways.

One is it’s good. It’s good that there’s not much noise for the cardiologists.

We could standardize the work, we could standardize what gets on the shelves in the cath lab or the or suites. And it allowed us to control the cost.

But on the downside, we started missing out on many important innovations.

And we started missing out on modifications to the competing product that is much better in many ways. Even though there are times that we kind of know that that’s a better product, since it’s coming with a large suite of other products coming in, and it made it very difficult for us to pick one out separately.

That is the biggest change that I’ve seen how the device is being bought and used by the surgical specialties, at least.

Does Mahesh still influence the decision?

Joe Hage: Let me ask. When you say it makes it difficult to pull out one because that one product replaced that one product, but that’s part of a bundle. Explain what that difficulty looks like?

Can you, as a key influencer, or perhaps even when you were younger in your career, go to the value analysis committee and say, “Hey, I found this thing I’d like you to consider. I know we buy it with this other bundle.”

Is that a thing anymore? Or is it’s just so unlikely to succeed that folks are even discouraged to independently say I read this thing, or I know this thing, or I saw this at a conference, I’d like you to consider it.

Mahesh: We can bring it up for discussion. But these are big dollars, that’s where the problem comes.

The best way to describe is with an example.

Say a manufacturer has stents they sell. They also have pacemakers and defibrillators. And say we pick one stent contract and say this is it, this is what we’re going to go with, this is the price. This is the workhorse for us. This is the volumes will promise you. And if you cross this volume, this is where the sliding scale for the price. And we can talk about all these fancy methodologies.

But in the background, there’s always this, if you do this for us, we’ll do the pacemaker at this price. If a competing product has a stent, but no pacemaker, that is a disadvantage.

Because it’s never written anywhere that this is all connected together. But that’s how it works because they go, all right, fine. So we give you a nice stent price, and we’ll give you a better price on the pacemaker also, if you do that.

That the other product, even though it can be superior, and if the superiority is not glaring, it’s very difficult for the second one to get into the lab.

Very difficult. And like I said, these we are talking big dollars, we’re talking a few million a year difference. So it makes it extremely difficult.

Joe: Does glaring mean twice as good?

Mahesh: It’s not that. What’s happening is many other products are sort of commodities now. Their performance is comparable. And again giving the example of a stent, the drug-coated stents that we have today, they have the risk of thrombosis, the clotting of the stent, and balanced against the risk of re-narrowing restenosis down the road. That’s the balance we play with all the time, if you put too much drug or kind of a drug that reduces restenosis, you increase the acute occlusion of the stent. So this is the balance that they play. And the difference, the numerical difference in these stent thrombosis rates are 0.34 versus 0.28 percent.

That’s what we’re talking about, this on a 15,000-patient trial.

These are very, very minute differences. How can you split hairs?

And of course, when sales folks come, they will show my stent is better by x percentage; that x percentage that you are talking in decimals.

And when that is there, it’s kind of a difficult sell to say that you know why, if I’m getting a better price on this, we’re getting better price on associated products with their company, we’ll go with that.

Are they commodities?

And the other thing that happens is the products have gone to a point where their physical performance characteristics a delivery of a product or the usability or any of those, they became comparable in matching. So when it is matching like that, that also makes it difficult.

The one thing I found out that is very – when I when I sit at the contracting and discussions and all that – there is one winning formula that I seem to see it’s a common trend.

I see it more now than ever before, is the product coming with not a sort of a guarantee or something but it’s more to do with associated services with it.

We’ll give you this, we’ll give you a patient monitoring system to go with it, or will give you a market outreach system that we have that we can help you with. These are the two things that I’ve seen consistently, especially a patient monitoring service.

Where’s the service?

Suppose you put the thing in and we have this extra service that we provide. The concept of SaaS, Software as a Service kind of a thing, and this SaaS thing is just is hitting everybody. It’s hitting the medical industry now. It’s coming to a point where it’s not just a device and if there is any service to go with it.

I think we need to move in that direction. That’s one thing that I realized is as, again, like I said, one of my things that I do is the medical device making. Device as a Service. I would, I call it DaaS. And this Device as a Services is going to be the next wave. I think we need to figure out how do you provide service along with the device.

I was discouraged and told Mahesh so. This was our exchange.

Joe Hage: What I’m hearing though, as a marketer, and sales strategy person is discouragement. I know that’s not your intended message.

But if I were sitting out there with my great innovation, and I’m a one product company, and I’m hearing you say, paraphrasing, it’s bundling, its pricing. And unless you are exponentially better, I don’t even know what to tell you.

Mahesh: I wouldn’t call it death of startup because – Joe knows me really well – I hustle quite a bit to keep startups alive. And I think there is value in what we do as startups and smaller device companies.

We need to find the uniqueness of the technology, at least the projection of the uniqueness of the technology. That’s where we need to struggle and try to find it.

I was pitching for my company in New York two weeks ago. We were invited to pitch at Medtech Innovators in the City. So I went up there and pitched.

And there were folks from big companies and they’re all listening to the pitch. And I came away with one, one lesson that I learned, at least for myself, and I’ll express it here.

When we create a product, when we try to create technologies, we tend to think of it as an innovative tool that we created, and we think it will solve a problem.

And we are hoping that somebody will take this precious plant and put it in their garden to grow. And what I’m figuring out is these bigger companies, and one of the exits that we look for is some big company buying this small company out, right? That’s what we all dream about.

But what it is, is they don’t see the value of this plant in their garden.

Sometimes we have to create the atmosphere our own with around our products, to let them flourish. So we have to create the ecosystem, sometimes we not only invent the device, we need to invent the business model around it.

Joe: That sounds like it requires a lot of resources. It basically sounds like you’re you’re creating a category, that’s no small feat!

Mahesh: I don’t know if I want to call it a category, it requires a little bit of a thought process to see where does the… it’s like finding the market fit. That’s one way of looking at it, just the market fit.

I believe there will be something else like the concept of Device as Service.

The DAAS kind of thing is, we need to think hard about how we can create a sort of a business model around this particular technology, how it can grow. We need to think hard about it.

And don’t take it lightly because this all looks like, you know, well, it’s a fancy talk – we all know that – but ‘how can you do it’ kind of a thing. But think hard about this and there will be gates out there.

Joe: It can make sense for anything that generates data, but I can’t sell an extra scalpel as a service, can I? (asked rhetorically)

Jon Speer felt the same.

Jon Speer: Jon Speer, Greenlight Guru. What you just shared is a little discouraging to me as a potential patient or as [someone] with loved ones that might be receiving procedures.

It doesn’t sound like the system is set up to make sure that patients are getting the best care possible. Can you comment on that?

Mahesh: I don’t, I don’t agree with that.

The reasoning is, as jaded as it sounds, there’s still some conscience left in these doctors, I can tell you that much. In almost all of them.

There’ll be some occasional outlier, but almost all of them are pretty good.

The concept of how do you directly deliver quality of care?

Sometimes simplicity is genius. Using these multiple tools during a surgery doesn’t always ensure quality; it actually induces complications. And that is where the trick comes from.

If a particular technology during a procedure or a surgery does help a lot, like really help a lot, a few degrees of standard deviation away from the norm, nobody will stop them from using it.

There’s no hospital system that will say don’t use it. No, that’s not what I’m talking about.

If it is incremental benefit, you see the benefit, but there is a complication associated with using the device, and if the balance is tight, that is where the entire trouble comes from.

So they claim anecdotally, “I can do better.” But if you look at the data, it’s not that clear.

There are enough complications going with it, then you go, why are you having complications with it?

Yes, you had good outcomes on this set. On this set, patients died.

So what you’re going to do with it? That is where the trouble comes from.

I don’t want to leave the audience here thinking that this is all a jaded system that we’re all getting, you know, screwed up in the hospitals. And it’s not.

No, that’s not my intention at all.

I’m just saying that the competing forces are such a way that it is our responsibility as as device makers and entrepreneurs to show that value, demonstrate the value properly, and that’s it.

If there’s no value, then we have to think about what we need to do next.

Editor’s Note: Mahesh seems to say if you attempt to disrupt an established market with one concept, it better be revolutionary, not incremental. Otherwise, without the help of an established partner (buying you out?), you have a tough road ahead. Let’s be careful out there.