By Joop Tanis, Director of MedTech Consulting at Health Tech Enterprise
To be successful in a new endeavour, one has to understand the terrain one is about to enter. This terrain can be strange and unusual and lead to failure unless one is adequately prepared.
Newcomers to the healthcare industry can often struggle to adjust to a market that operates so differently from everything they know. Some give up, frustrated with the amount of effort they have to put in just to get a product to market. Others embark on a quixotic quest to “revolutionise” the healthcare market. Both end up sinking a lot of money into a market access effort from which they may not see the returns as early as they had hoped for.
To explain why healthcare is so different, we have to look at what makes the interplay of demand and supply in healthcare different to any other, classically functioning market;
- Non-profit stakeholders: Many providers of healthcare services (hospitals, doctors, nursing homes) do not operate according to traditional business rules, where resources are allocated to maximise profits. Non-profit organisations play a large role in the provision of healthcare and are motivated by other outcomes than monetary gain. Gaining an understanding of the objectives and priorities of non-profit healthcare providers is key to ensuring the uptake of a new technology.
- Information: Patients may not know they are ill without the help of a doctor. Furthermore, patients often do not know what healthcare intervention they need to prevent, alleviate or cure an illness. The lack of information or the ability to understand the information and take decisions can make the user (patient) dependent on the agent (doctor) to take the decision. This requires suppliers of healthcare technologies to modulate their messages and incentives according to each of the different stakeholders.
- Funding: In most developed economies, patients do not pay directly for their healthcare, but via governmental bodies financed by taxes or insurance providers financed by premiums. This weakens the price effects that might otherwise be expected in standard markets. Furthermore, the provision of a healthcare intervention depends on whether the funding body is prepared to pay for or reimburse it. For a healthcare intervention to be successful, it is not enough for it to appeal to patients and doctors; a cost-effectiveness evaluation is required to justify the expenditure from the financing body.
- Uncertainty: Compared to consuming a cup of coffee, users of healthcare (patients and doctors) can never be entirely sure of the outcome of what they are about to use or recommend. Health interventions have a probability of working, but one cannot always predict the outcome of an individual’s treatment with certainty. Quantifying and accounting for this uncertainty, as well as collecting data to reduce it is important in convincing decision-makers.
- Regulation: The health sector is governed by a set of restrictions and regulations, which have raised barriers to entry. These include patent protections, requirements on data for claim validation, quality requirements in research and manufacture, licensure for providers and restrictions around advertising. Seeking out guidance on how to navigate this web of restrictions is key to ensuring successful market penetration.
- Equity: Health is considered a “positive right” that is essential to every individual to express themselves and improve the wellbeing of society as a whole. As such, decisions are driven, not only by the utility a purchase provides to an individual but rather by wider considerations of societal values. The role of equity in the distribution of health according to need remains a significant decision-making factor in most healthcare systems in the developed world. Businesses that understand the importance of equity in healthcare markets and weave it into their value proposition can gain advantages in convincing decision-makers.
- Public Sector and Governments: In most countries, health is considered a public good, and so national and regional governments play an important role in the provision and financing of health services. The public sector is thus an important buyer as well as supplier of healthcare. Knowing how to convince public sector purchasers is key to gaining access to healthcare markets at the national level.
Providing technologies and services into healthcare markets requires an understanding of all these fundamental differences to adjust commercial strategies accordingly and navigate the new terrain successfully for optimal market uptake.