On June 25th, OBIO hosted 'Is the Price Right? Pricing Your Innovative Healthcare Product' which featured a presentation by Amy Siegel (C-Founder, S2N Health).
Amy began with an overview of the healthcare pricing environment in the United States. She noted that federal, state and local governments were responsible for paying 35% of healthcare costs (primarily via Medicare and Medicaid) and that households paid 28% (of which out-of-pocket spending was 10%). Further, she noted that the Centres for Medicare and Medicaid Services (CMS) have created programs to share both savings and financial risk with providers in an effort to control the growth of healthcare spending. This has meant that many health systems are at risk for at least some portion of their patient’s healthcare costs - resulting in a number of hospitals funding innovations to improve care management. In response to these changes and the growth of new technologies, companies are beginning to introduce more complex pricing models.
Amy summarized common pricing models, ranging from simple to complex, including:
Line-Item Pricing (pay for product)
Bundled Pricing (pay for set of products with discounting)
Pay Per Use (pay per test or per report)
Subscription/SaaS (including device rentals, software services)
Risk/Upside Sharing (pay for predetermined outcomes or savings)
Amy emphasized that prior to determining pricing, companies must understand their product, their customer & key stakeholders, and the economics (including direct cost & workflow impact, facility impact, clinician impact, and payer impact).
From this, ‘Delivered Value’ is determined, for example:
Clinical - outcomes & safety
Workflow Benefits - procedure time, reduced skill required
Economic Value - direct cost savings, (replacing drugs, devices), downstream savings (reduced re-admissions) etc.
Companies can then monetize this value over a clear timeline.
Amy then walked through nine case studies covering an acute care drug, medical devices, health IT products, a digital therapeutic, a wearable, and a companion diagnostic. One case study featured a medical device company with the foresight to design its clinical studies to measure how they created value, facilitating the pricing process.
If you missed this valuable OBIO workshop, the recorded webinar of the presentation is now available on the OBIO Member Portal.
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