Patrick Trotter PhD, MBA (Techmgmt) shares his thoughts on why medical innovation fails and how to de-risk your R&D projects
A classic case of by failing to prepare you are preparing to fail
One key question that all senior management teams should ask when it comes to product development in the medical/health sector is:
“We can do this project, but should we be doing it?”
It is well documented in the literature that 80-90% of new product launches fail. What’s more, recent data from the Derwent Top 100 Global Innovator report shows that the UK does not have a single company on the list. In contrast, European competitors such as France, Germany, Switzerland and the Netherlands have all companies amongst this number. Such data implies that the ability of UK companies to launch commercially success products lags behind that of our competitors.
The medical device sector is a particularly challenging market to launch new products into, with the new Medical Device Regulation (MDR) and In vitro Diagnostic Regulations (IVDR) putting much greater emphasis on clinical evidence which will significantly increase the cost of product development.
The medical device industry is littered with market failures. Two such cautionary tales are the Pfizer Exubera Oral Insulin Delivery System and a variety of genetic testing products from Interleukin Genetics:
- The Pfizer Exubera Oral Insulin Delivery System was withdrawn from the market in 2016 due to poor sales, eventually costing Pfizer $2.8bn in pre-tax losses. This was due to a combination of not understanding the end users’ requirements and poor alignment with reimbursement systems.
- Interleukin Genetics developed a genetic test to diagnose periodontal disease. This contradicted existing clinical guidelines of the American Dental Association who stated that ‘clinical measurements remain the single best method for assessing disease’. In essence, the company was unable to articulate the benefits of the technology sufficiently enough to challenge the status quo, resulting in market failure. Ultimately, the company’s repeated failure to understand the market led to lay-offs for the majority of its staff and the search for buyers for its intellectual property.
What these two examples have in common is a fundamental lack of understanding of the market they were developing for, including the end user, the regulatory and reimbursement frameworks and an understanding of competitor capabilities.
How could these commercial disasters have been avoided?
The answer is simple. A Market Report should be conducted prior to any technical development project to help the innovating company and/or investors understand the likelihood or probability of commercial success and highlight any barriers or future problems that might need to be navigated.
These reports are best carried out by independent parties to avoid internal bias and to give greater confidence to investors in the findings.
What do market reports entail?
Independently commissioned Market Reports typically assess market opportunity for new projects, including:
- Market segmentation
- Clinical guidelines and current pathways
- Competitor analysis
- Evaluation of regulatory and reimbursement landscapes for the key market(s).
These reports answer key questions regarding the viability of an innovation project, providing evidence-based guidance on appropriate next steps.
What are the benefits of commissioning a Market Report?
The output of a Market Report can provide the rationale to kill “bad” projects early, thereby reducing future spend on doomed projects (together with the lost opportunity costs of working on innovation projects with a greater probability of commercial success). Conversely the outputs and recommendations can provide confidence in the investment but also highlight risks and areas of focus need inclusion in the research and development plan.
Market Reports provide due diligence and allow management teams to make informed decisions with respect to new product development investments.
Medilink North of England (an independent and not for profit organisation) is a specialist innovation and commercialisation consultancy in the medical technologies field and are highly experienced authors of Market Reports.
Remember: Understanding the market represents best practice to understand and manage product development risk.
For a no obligation chat about your needs for Market Report, please call 0114 232 9275 or contact us on email@example.com to discuss your requirements.