Lowering Medical Device Costs: Q&A With Gavin Fabian of MedPassage

Gavin Fabian, CEO of MedPassage, discusses the medical device industry and trends for lowering costs in the future.

Q: Providers are feeling the pressure to lower costs associated with care in the market place today. How are device companies responding to their needs?

Gavin Fabian:
Device companies recognize their medical center customers are growing more price conscious and that growing their market share will require a strategy that focuses on offering more cost efficient solutions. This is much easier said than done, as many device companies have exorbitant operating costs that make it challenging to lower their product prices.  

If you look at the financial statements of most device companies, you would find that about 40 percent of their budgets are used to market and sell their products. These are unsustainable costs, especially in an environment that will only see continued pricing pressure. Companies that want to meet the cost conscious needs of medical centers are pursuing alternative and more efficient sales and marketing channels, among other cost cutting measures.

Q. What opportunities are available for providers looking to cut costs on commonly used implants?

GF: The majority of spine and orthopedic implants have been around for years, and surgeons are proficient at using them without a sales representative in the operating room. Medical centers can save money on these stable technologies by working with device companies that will offer their products without a sales representative in exchange for reduced pricing.

Our medtech software company, MedPassage, provides medical centers with access to these device companies in a price transparent online market. As an option, most products are offered with free clinical support for the first three cases to ensure seamless transition to stable technologies from other manufacturers. Product prices on MedPassage.com are usually 50 to 70 percent below industry averages.

Q: How can surgery centers and physicians make the transition away from having sales representatives in the OR as smoothly as possible?

It is important to first carefully define which devices can be safely utilized without a sales representative in the operating room. There is not a standardized list, as each surgeon has differing levels of expertise with different technologies.
In addition, medical centers can greatly help themselves by training their own operating room technicians and staff to become product specialists on the devices used in their facilities, rather than continue outsourcing clinical support to outside sales representatives. Many hospitals and surgery centers have begun implementing training programs around this objective, and it appears to be a growing trend.

Q: Where is there room for new products and continued innovation in this cost-conscious healthcare environment?

There will always be a market for innovative products that achieve better patient outcomes. However, in this cost conscious healthcare market, medical centers are growing skeptical of elegant marketing and a good sales pitch. It is paramount that device companies include robust clinical studies in their commercialization strategy, as medical centers increasingly demand clinical data when making purchasing choices, including analysis of cost efficiency when compared to the standard of care.

Q: Where do you see the device company sales and distribution heading in the future?

I believe we will see the device sales model move closer toward the current pharmaceutical model, where fewer sales representatives service larger territories. Pricing pressure and slower market growth simply will not allow these companies to compensate their sales forces as they have in the past. The sales people that excel at selling and bringing on new customers will be compensated well, but the days of a salesman making high six figure incomes, by spending their days inside the operating rooms of a few busy surgeons, are coming to end.

More Articles on Medical Devices:

16 Spine Devices Receive FDA 510(k) Clearance in November

Morton Hospital Purchases Robotic Orthopedic Surgery System

Max Reinhardt Named Worldwide President of DePuy Synthes Spine

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