In a guest post, Eric Olson, CEO of Babson Diagnostics, provides the top ten takeaways from a workshop organized by the Health Product Innovation team at Dell Medical School — the first in a series of events to catalyze health care entrepreneurship in Austin and strengthen the innovation pipeline.
I had the pleasure of participating in “Developing Diagnostics: Navigating the Path from Concept to Commercialization,” an all-day workshop hosted by UT Austin’s Dell Medical School in collaboration with Michael Best & Friedrich LLP.
Major trends in health care such as genomics, precision medicine, digital health and big data have initiated an era of innovation for medical diagnostics. While several new opportunities continue to emerge in this field, changes in the clinical, intellectual property (IP), regulatory and reimbursement landscapes can create several hurdles along the way. Entrepreneurs, patent attorneys, clinical leaders and investors addressed these challenges and provided actionable insights for successful commercialization of diagnostic products. Clinicians from Dell Med introduced the topic by sharing unmet needs in the space and factors diagnostics developers must consider for successful adoption.
See my top takeaways from the workshop:
Deliver value to patients, providers and payers.
Health care services are predominately three-way transactions between patients, providers and payers. To make a real impact in health care, your product needs to have a clear value proposition for all three parties in the transaction. If a diagnostic product or service is only compelling to one, or even two out of three, there is a significant risk that it won’t earn market adoption.
Grants aren’t free money; maintain your focus.
Funding the development of your core technologies and products using grants is a terrific way to grow your business without dilution. But don’t be fooled into thinking it’s free money — they come at the cost of applications and reporting that sap your time. Always evaluate the degree to which the aims of the grant align with your core business plan.
Build a culture that emphasizes IP.
IP mistakes often happen early in a company’s existence, so it’s important to have your whole team thinking about IP from the start. Get your employment and consulting agreements right and avoid contamination. Some less-enlightened technology commercialization offices may seek to strap researchers and their companies with unfavorable IP license terms, so stay alert.
Envy is stronger than greed.
When pitching a diagnostic product to a large in vitro diagnostic device manufacturer, 95 percent of startups focus on the revenue potential. But the smartest five percent will play to envy, not greed. The fear of losing deals to a competitor due to a perceived portfolio gap is what keeps executives up at night in this platform-oriented business. Take the time to understand each manufacturer’s competitive position and demonstrate how you fill a portfolio gap to stand out from the crowd.
Network with investors outside of capital raises.
Venture capital firms, private equity firms, angels and other investors each have their own investment thesis and they each focus on companies at differing stages of development. But their openness to collaborate with companies outside of these parameters seems particularly high in the Austin ecosystem. So get out there and network with investors regardless of stage — you may get some great advice or make a new friend.
Selling diagnostics requires an internal champion.
To succeed, you’re going to have to sell your diagnostic product to a lot of different parties, and one common thread is the need for a champion. Selling into a health system or group purchasing organization often requires two champions — one on the clinical side and one on the business side. To sign a meaningful partnership with a large diagnostics manufacturer you’ll need to find at least one influential individual inside the company who’s deeply compelled by your idea.
Get your regulatory approach right from the start.
Regulatory requirements such as design controls are critical to a startup’s success, yet they are among the least favorite activities of the visionaries and inventors developing novel diagnostics. Success with the FDA depends on embracing regulatory compliance early on and then using the pre-sub process judiciously to maximize your probability of success.
Cost is still king in today’s health care market.
It is possible to sell a high-cost diagnostic tool by articulating the downstream cost savings, but this is a tough road to travel. Given that diagnostics comprises 10 percent of health care spending (imaging and lab) and there is tremendous downward pressure, selling is far easier if you have a low-cost diagnostic tool.
One particularly poignant example was the adoption of a high-cost point-of-care technology at a health system. The clinicians loved it at first, but when the health system’s diagnostics budget became overwhelmed with the incremental cost, the POC devices were quickly mothballed.
Your product can diagnose a disease…so what?
A diagnostic tool without an endgame is at best worthless, and may increase downstream costs due to overdiagnosis. Whether you’re selling to a health system, finding a partner or raising money, you need to understand how your product changes the clinical pathway, improves outcomes and lowers costs. Make sure your business plan reflects the work needed to demonstrate analytical validity, clinical validity, clinical utility and economic utility.
Iterate relentlessly, because startups are messy.
If you’re doing a startup right, things won’t end up the way you planned them. Whether you’re designing your business plan or product, it’s important to begin with clarity of purpose, test the market, iterate the design and repeat. Things are going to get ugly, so the key is to be persistent in the face of adversity. Colin Hill, Senior Vice President of Commercial Operations at Asuragen, shared this Winston Churchill quote to encourage diagnostics entrepreneurs:
Success consists of going from failure to failure without loss of enthusiasm.
Eric Olson is CEO of Babson Diagnostics, a health care technology company that is reimagining the blood test from the consumer’s perspective. Eric is a diagnostics industry veteran, with 16 years of experience with Siemens Healthineers as a business, marketing and R&D leader. At Siemens, he served as vice president of portfolio and product management for the global clinical laboratory business. He also led Siemens’ global clinical laboratory automation and IT business to No. 1 in worldwide market share. Eric has a bachelor’s degree in biology from MIT and a master’s degree in technology management from the University of Pennsylvania.