Why Your Medical Device Company Needs Different Value Props For Different Stakeholders: Interview With Steve Anderson, Co-Founder and CEO of Preceptis Medical

The story of how Steve Anderson co-founded Preceptis Medical is both a typical homemade startup tale, and a deeply personal one.

In 2010, Steve was President of Acorn Cardiovascular, a medtech company founded in 1997. He’d also spent a lot of time in hospitals while off the clock: His son, Noah, was born with special needs, and has had about 25 surgeries.

Combining his professional and personal experiences, Steve observed that there hadn’t been much evolution in the pediatric medical device space. That was partly because the market is smaller, and partly because the regulatory, clinical, and commercial requirements are higher than devices aimed for adults.

While chatting about this with a neighbor one night over beers, Steve started to think seriously about making a pediatric medical device himself. That same neighbor happened to be Dr. Michael Loushin, a pediatric anesthesiologist, who agreed with Steve’s observation.

Dr. Loushin introduced Steve to mechanical engineer and designer, Keith Leland. Between the three of them, they honed in on creating a device that would allow a doctor to insert a tiny tube into a young patient’s ear in the medical office, rather than putting them under general anesthesia for surgery in the operating room.

A few months after shutting down Acorn Cardiovascular in late 2010, Steve became CEO of Preceptis Medical. The company’s Hummingbird device received FDA clearance in June 2020, and Preceptis is currently running a pilot study.

In this episode of Medsider, Steve explains why your value proposition needs to be front of mind from the start, why having someone who’s been there and done it before can help you navigate the process of getting to market, and writing a study protocol that shows regulators exactly what they need to see.

Guest

Steve Anderson

CEO of Preceptis Medical

While getting his BS in mechanical engineering, Steve Anderson got a job with medical device company Medtronic. His interest in failure analysis ultimately led him down the path of writing detailed reports to regulatory organizations. At his next stop with St. Jude Medical, he quickly transitioned from development to the regulatory side.

Steve’s engineering and regulatory experience made him an ideal candidate for medtech startups. While serving as CEO of Acorn Cardiovascular, he and a neighbor came up with the idea of creating a device that could help doctors insert atube in children’s ears in the doctor’s office instead of the operating room. They ended up starting Preceptis Medical in 2011, and in 2020, their Hummingbird device received clearance from the FDA.

Listen to the Interview with Steve Anderson

Key Insights from Steve Anderson, CEO of Preceptis Medical

  • Medical device companies have to please multiple stakeholders with varied interests. You need to have a clear idea of your value proposition to each party, and how to present it to them in a way that wins them over.
  • Startups may only have one shot at big clinical trials. Make sure you design the study protocols to collect the data you need. And when it comes to regulators, remember these organizations are pickier now than in the past.
  • Find consultants and advisors who have either successfully taken a medical device to market, have experience on the financial side, or used to work for a regulator or payer. They have insights into the process that can help you navigate the nuances.

Identify Different Value Propositions For Different Stakeholders

Medical device companies have to win over multiple parties with different interests. That includes healthcare networks, providers within those networks, regulators, payers, and investors. That’s why Steve’s top advice is to analyze your value proposition for each of these parties early in your process.

“You have to understand the incentives of your stakeholders,” he says. “What it gets down to is having a very clear idea of what your value proposition is, and how [your device] is going to provide value to the stakeholders.”

This will be easier for some than others. “Whenever there's change in the healthcare system, there are winners and losers,” Steve says. “You have to understand who the winners are, who the losers are, and what your story is for both.”

Let’s focus on the most overlooked party: the payers. Your ability to convince these organizations that your device merits reimbursement can be the difference between making it to market or not. If payers are not prepared to cover your device, hospitals will not buy it.

Typically, payers are most interested in the economic benefits of a medical device.

For example, Preceptis’ Hummingbird device moves the process of inserting an ear tube for a child from the operating room to an office. To a payer, that means not having to cover a surgeon, anesthesiologist, inpatient recovery time, etc.

The type of device you’re selling can also affect your path to reimbursement.

Steve explains that payers are sometimes more inclined to take risks on devices that provide life-saving care, especially ones designed for inpatient treatments. Companies making non-life-saving devices designed for outpatient procedures or home use typically run into more hurdles when it comes to getting reimbursement.

Prepare Your Data — and Your Trials — Thoroughly

Another key stakeholder you need to bring on board are the regulators, notably the Food and Drug Administration (FDA). This is never as simple as being handed a checklist and working through it. And if you’re a startup and you do it wrong, you may not have the resources to give it another shot.

Steve recommends doing your research to find out what regulators are looking for. Review the data collected by companies with devices that have been approved or cleared already in order to get a benchmark. Keep in mind that the FDA often requires more,and higher quality, data now than it did 20 or 25 years ago.

“Back then, you'd collect the data, and the advisory committees would always say, That's pretty good data, let's go ahead,” Steve says. “That doesn't work that well today: They're going to look for holes and for risks that may have not been covered.”

Design your study protocols in a way that ensures you’re gathering data that can prove the value propositions you’re pitching. Take your time to get it right: Steve says that he can’t think of a single study protocol he hasn’t come back to a year later, and immediately recognized opportunities for improvement.

Find Advisors Who Have Done It

You don’t have to rely on a crystal ball to read the minds of different stakeholders — but a medium might be helpful.

Consult with someone who’s succeeded in getting a medical device to market, or who was once on the other side of the desk at the FDA, investment firm, or payer organization. They’re the ones who can give you the deep level of detail you need to prove your value to those stakeholders.

For example, sometimes the FDA will ask a device company to provide metrics that have never been used in clinical trials. Not only could you never have predicted these based on your own research, but you won’t know until you’re allowed to push back. That’s right: You can argue with the FDA — but you have to be strategic.

“It is not the job of companies to develop new clinical endpoints, or to come up with a new evaluation methodology: That is the job of the societies [evaluating devices],” Steve says. A consultant who previously worked at the FDA will know which demands you can push back on, and which ones you have to meet.

Don’t think this means passing all the work off to someone else.

The process of getting a regulatory rubber stamp varies greatly depending on the type of device you’re presenting. Consultants bring knowledge of the system, you bring your knowledge of your device, and you work together to find the path that best fits your particular needs.

“A collaborative process yields the best results: You have to work together and rely on the expertise of both parties,” Steve says.

Another area in which a voice of experience can be key is when you’re signing investment deals. Steve recommends hiring a finance team with experience raising capital, and general counsel who has worked on term sheets. “You're looking for every bit of information you can get, especially if you haven't been through it before,” he says.

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