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In Medical Devices, Is "Good Enough" Good Enough?

Device companies have historically been rewarded for even incremental technology enhancements with premium pricing by a price-insensitive customer, all in the spirit that no improvement to the clinical episode would go unrewarded. But in a health care system that is trying to balance exploding costs and greater access, such a goal becomes simply unaffordable. Instead, payors, hospitals and even physicians, encouraged by government policy makers, will increasingly look for technology that delivers an acceptable clinical outcome at a better price.

Add to the multiple challenges that small – and large – medical device companies face today – an increasingly lengthy and expensive regulatory process, a scarcity of capital – venture and otherwise, and a constrained M&A environment – a new dynamic that could even more radically change the nature of the device industry: an insistence by payors, providers, and policy makers that the benefits (and value) of new technology lie less in its ability to enhance existing technologies or procedures, than in its ability to provide adequate clinical solutions at a reduced cost.

The idea is popping up in a number of catch phrases: "negative innovation," "reverse innovation," "good enough" technology. ( See...

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