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Medical devices should focus on transparency, austerity and wellness

The CEO of a startup credited his company's success in raising money to two factors. Human data about the dissolving stent and a tight budget. Kamal Ramzipoor of Amaranth Medical said those two accomplishments helped his company raise $20 million in a series B round.

This is the new reality for device makers, both startups and established companies. Companies will have to deal with the brutal facts of healthcare in American in 2013: transparency, austerity, and wellness. Companies that can't design a product strategy that meets all those criteria will not be around for long.

Just as hospitals are finding out that they can't hide behind confusing billing codes, device makers will have to accept a lot more transparency in pricing. People who can't fly to Europe for a cheap hip replacement will start looking for solutions in the states. That could be paying a doctor directly or using smart shopping web sites to find hospitals with competitive pricing. Hospitals will not take this price hit on their own; naturally they will start looking for better deals from device suppliers.

Earlier this year at a med tech investing conference in Minneapolis, a hospital executive explained how he had renegotiated a contract with a group of orthopedic surgeons. In their initial deal, the group had required the hospital to provide 17 hip implants. In their own practice, the surgeons offered only two options, and so were able to turn a profit. At the next contract talk, the hospital executive changed the terms of his deal to 2 implant options instead of 17. This is only one example of cost cutting. Device makers will have to look at the problems that remain to be solved in the market and build new products to fit those needs.

The goal now - for employers and payers - is not to pay for knee replacements but to help people stay healthy enough not to need them. Getting people to eat right and stay off the couch could reduce the need for all sorts of devices, from insulin pens to gastric sleeves. This is a long-term trend of course, but no less powerful than the short term forces working on the device industry.

Startups using lean business techniques and sticking to a tight budget will not only attract investment money. They will set the example of viability for the entire industry.

[Photo by - Official U.S Navy Imagery]

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