Diagnostics and Devices different arena By Elisabeth Pena With smaller marketing budgets and a more focused, cost-conscious audience, the device and diagnostic sectors face challenges that require different strategies from their pharmaceutical counterparts. A number of world events bode well for the future of medical devices. According to Kalorama Information, a division of MarketResearch.com, an aging worldwide population – an increasing number number of people between the ages of 45 and 75 years in the industrialized world who consume more healthcare services such as heart and cancer tests – and new hospitals in developing countries such as Asia, Latin America, and South America – which are being built as these countries continue their economic expansion – to name two, are opening up more markets for device manufacturers. According to Kalorama, the world market for diagnostics is estimated to grow 6% annually to $28.63 billion by 2005. This includes all laboratory and hospital-based products, not including over-the-counter product sales. This growth is being sparked by increased health consciousness among consumers and demands from healthcare practitioners for quality medical-care products that range from stents, to hip replacements, to vision correction lasers, to spine fixation products, to in vitro diagnostics. More than 130,000 types of medical devices, including in vitro diagnostics, are used in hospitals, outpatient facilities, clinics, physician practices, and other sites. For medical device and diagnostic manufacturers, these new opportunities mean overcoming marketing challenges, which are quite different from those that their pharmaceutical peers face: smaller salesforces, products that often are viewed as commodities, greater product parity in some instances, and intense focus on cost vs. value. “The diagnostics industry suffers from several limitations, the largest being dollars,” says Shara Rosen, senior consultant at Stratcom. “This is a much smaller industry with much smaller revenue and margins than the pharmaceutical industry.” Frank Fasano, president of Cummins, MacFail & Nutry, agrees that market size plays a factor in device marketing. “A major player in catheters, orthopedics, or cardiac care might have yearly sales of $400 million,” he says. “Last year, there were probably 150 or more individual drugs that hit that sales figure.” The salesforce Device and diagnostic salesforces run into the same difficulties that their pharmaceutical counterparts face when trying to get an audience with a busy physician, with the added challenges of having fewer bodies in the field and the need to provide detailed education to healthcare providers. “The salesforce is critically important in device marketing, so companies need to put effective detail pieces and leave behinds in the hands of their people,” Mr. Fasano says. “Doctors involved in the device sector tend to develop a comfort level with certain products that they use time and time again. Part of the job our agency does for clients is to go beyond features and benefits and demonstrate to doctors the advantages to them and their patients when they make a change. We have to persuade physicians that there is an irresistible need to make a change in their current behavior.” According to Ken Ribotsky, president of Ribotsky Worldwide, device manufacturers need focused marketing strategies that provide physicians with solutions beyond promoting the features and benefits of a new product. “Often marketers talk about the unique selling proposition of a product when they communicate with their customers,” he says. “Device marketers should look at selling products from a solutions-based perspective and provide customers with unique buy-in propositions.” Nino Pionati, VP of global marketing, research and development, at ConvaTec, agrees that solving customer problems is one way marketers can build traction for their brands. “When a product solves a combination of problems for customers, it makes it easier for them to do their job, and the company is delivering a great solution for the patient,” he says. “This is how innovation can really differentiate a company.” Because the marketing budgets for devices are typically smaller than those for pharmaceutical products, targeting the right audience for the right message is crucial. “Device marketers can’t ‘blow out’ a message across a vast audience, for example primary-care physicians, since this segment is so large,” says Patricia Malone, principal and creative director at Stratagem Healthcare Communications. “Marketing device and diagnostic products requires a strong foundation, a solid, strategic marketing communications plan, and impactful and creative brand development.” Devices and diagnostics are specialized products that require marketers to promote the value of their product as well as provide extensive education. Physicians working with a new device or diagnostic may require education not only on what conditions the new product will diagnose or treat, but in many cases training on how to use the product. “A lot of training and education of physicians is required with devices; and adopting a new technique or a new approach takes time,” says Heather Ready, global director of marketing for VISX Inc. “As a device manufacturer, part of our relationship with our customers is to train them and help them to implement and integrate new products into their practice.” Information about how a device or diagnostic can work with a related pharmaceutical product is another form of brand support that can create value for a product. “To market our new hepatitis C test we worked with our pharmaceutical salesforce to help the reps understand how the test is used, what the test results mean, and how to market the test with Pegasys, Roche’s pegylated interferon product,” says Dick Aderman, senior VP, general manager, at Roche Centralized and Molecular Diagnostics. “Likewise, we worked with our device force and educated the reps on how the new drug works and how they should be interacting with their physician customers. As a company, we are taking a broader view than just selling a test; we are selling an asset.” More than a commodity Taking a broader view and considering whether a company has complimentary pharmaceutical and device products is the first step to overcome internal and external perceptions that devices and diagnostics are commodities. “It is very important that device manufacturers view themselves and their products more as a brand and less as a commodity,” Mr. Ribotsky says. “It is crucial that a device company attach the attributes of the corporation to the products that it makes, which will help to allow the products to be evaluated by customers on more than just a strictly feature-and-cost basis. When device manufacturers view themselves strictly as providers of commodities, their brands are compromised from the outset.” Part of this commodity perception is that many device/diagnostic products in a particular category have similar attributes. In these cases, the manufacturer’s brand becomes more important than the product’s brand identity. “Physicians aren’t going to differentiate CBC tests between companies, for example, because as far as they are concerned there is no difference; it is like buying milk,” Ms. Rosen says. Ms. Malone agrees that one of the main challenges in marketing devices and diagnostics is getting noticed. “So many companies are emerging that have products that either initially seem like a commodity or are so new and groundbreaking that they change the way a professional works or thinks,” Ms. Malone says. “It’s even harder to convey the message if the product requires medical professionals to change the practices they learned in school.” “Optimally a company should have a good solid corporate brand and presence that acts as an umbrella and adds value to all its products,” Mr. Ribotsky says. Mr. Pionati agrees that a company brand is a critical factor in influencing customers’ decisions. “Establishing a strong corporate brand image helps a company introduce other products to the market,” he says. Mr. Aderman believes that the corporate brand is an important marketing component for many of the products Roche offers, but, for some of the company’s tests, such as its Accu-Chek diabetes products, developing brand loyalty is key. “Patients know Accu-Chek meters and strips, but there also is an association with Roche,” he says. “In this case, Accu-Chek is the bigger brand, but patients do know that Roche is part of that brand.” According to Mr. Pionati, brand loyalty results from people using a product and believing in what the product does. “Companies have to constantly reinforce that the product that physicians and nurses are using is the right product for their purposes,” he says. Another important factor in gaining brand loyalty is reliability of not just the product, but the company, Ms. Malone says. “Customer service in devices and diagnostics is key, and how the healthcare audience is addressed beyond just the technology is very important,” she says. “We have about 65 full-time people in the field keeping our instrumentation up and running,” Ms. Ready says. “Our devices are extremely reliable, but if customers can’t use our product, they can’t do a procedure, they can’t take care of the patient, they can’t generate revenue. Consequently, they are out of business if our machine isn’t working.” Cost versus value The development of device and diagnostic product choices has been a boon for medical care. But it also puts a great deal of pressure on physicians to make the right choices and for payers to pay for new technologies that may still be unproven. According to Kalorama, as an aging society begins to use more healthcare services, cost efficiency imperatives continue to put pressure on payers, providers, and suppliers. As a result, healthcare organizations have developed strict cost/performance and care guideline directives. One of the ways to achieve these directives is to use medical and financial data to evaluate and prescribe the use of medical devices. According Kalorama analysts, companies will need to produce data, data, and more data to evaluate the medical usefulness and necessity of using a specific device. Medical-device usage will be based on performance data, contribution to patient outcome, and a cost/benefit analysis. Mr. Pionati believes that producing clinical data – good clinical information about a company’s product – is a challenge facing the device sector. “A lot of medical-device companies are not used to doing the right types of clinical studies, and clinical studies are expensive,” he says. “This business has predominantly used case studies as opposed to clinical studies.” Because device and diagnostic products often are channeled through hospital settings where portfolios tend to be bundled from a selling perspective, experts say inevitably products can be devalued. “Reimbursement is a big issue,” Mr. Aderman says. “Diagnostics provide about 70% of a patient’s information and yet account for less than 3.8% of the total cost of healthcare in the United States. Diagnostics provide a huge value but aren’t necessarily recognized as such in the marketplace.” “Device marketers definitely get very involved in trying to present a cost-value story, more so than pharmaceutical marketers,” Mr. Ribotsky says. “Experience shows that most physicians don’t even know what the costs are of the drugs they prescribe; physicians are looking for an outcome. In a device situation, it is oftentimes difficult to claim the outcome is a result of a device, so cost comes much more into play. We may know that a device is good and that it performs well, but when it is one part of five-therapy regimen, for example, it is very hard to isolate the efficacy of that specific device.” Device manufacturers generally target products to physicians and lab technicians at a practice or medical institution, but often because of the similarity among products, these efforts can be difficult. “The doctor orders a test; it is not the same as when he or she writes a prescription for a specific drug,” Ms. Rosen says. Until recently, the component missing from diagnostic/device marketing has been the consumer. Because many devices are used in an acute setting, there has been minimal patient involvement in the buying decision. “When a product is part of a procedure, the product is typically invisible to the patient, for example a heart-lung machine used during coronary artery bypass grafting surgery or an electrocautery device used during a hysterectomy,” says Ron Marrocco, a consultant to the medical-device industry. “As a result, the value of marketing to the consumer is constrained.” This is beginning to change, however, as consumers continue to become more educated about their health and more involved in healthcare decisions. There are more medical technologies today that involve the patient than ever before and therefore device manufacturers are beginning to exploit situations where they can reach the patient to effect choice in their own care. “Medical-device manufacturers are beginning to consider more consumer-oriented marketing initiatives than they have in previous years,” Mr. Marrocco says. “For example, Inamed Health has had success in its marketing efforts for its anti-obesity BioEnterics Lap-Band System, a minimally invasive surgical solution that uses an adjustable gastric band for long-term significant weight loss. And, Medtronic Sofamor Danek has begun to use consumer marketing to promote InFuse, a bone morphogenic protein that eliminates the need for a second surgery to obtain autologous bone for spinal fusion surgery.” Ms. Malone agrees that device and diagnostic marketers are making the move to consumer-oriented efforts. “Women go to their gynecologist and ask for the ThinPrep Test,” she says. “Patients and families know which blood-glucose monitor they want, and in some cases people even know what ultrasound machine they want.” The market for specialized and over-the-counter testing products also is helping device and diagnostic manufacturers to move into consumer marketing. According to estimates by Kalorama Information analysts, the worldwide OTC self-test market, excluding blood-glucose monitoring products, generated sales of more than $3 billion in 2001 and is growing at a rate of 10% to 12% annually. According to Mr. Aderman, as consumers become more educated about their health and want to know their “numbers,” marketing to consumers becomes a viable tactic. “OTC tests, such as those for cholesterol, urinary tract infections, or diabetes are areas where manufacturers have latitude, a reason to go to the consumer,” Ms. Rosen says. “With these types of tests, consumers are involved in making a choice.” There has been particular growth in marketing diabetes management tools to consumers, according to experts. “DTC opportunities could become more prevalent in the diabetes area, where there is a large amount of emphasis on all fronts,” Mr. Pionati says. “Diabetics, besides having the need for insulin, also suffer from diabetic wounds, and they often don’t know how to manage those wounds. It could be a very natural route for a device manufacturer to launch a DTC effort to inform these patients about proper wound-management regimens.” Despite the emergence of consumer interest, Mr. Fasano doesn’t believe that DTC is an area where device manufacturers will focus a great deal of attention. “There are so man places where device companies have to make budget choices, DTC advertising would be a luxury,” he says. “In addition, aside from something such as sports-medicine bracing, patients are not going to go in and ask their doctor to prescribe a particular intramedullary-nail or spinal-fixation system.” Some device-marketing tactics employ a twist on the traditional pharmaceutical DTC model. For some devices, marketing is not done by the manufacturer, but by the physician or practice using the device. For VISX’s laser-vision correction products, Ms. Ready says marketing is done at the practice level and is focused more on the procedure and end result, rather than the brand. “From a consumer’s perspective, for our products the most important brand is the doctor and his or her practice,” she says. “We don’t encourage them to lead their practice advertisements with VISX laser information. The fact that they use a VISX laser is a subpoint to the services these physicians provide.” F PharmaVoice welcomes comments about this article. E-mail us at [email protected]. Ken Ribotsky We propose that device and diagnostic manufacturers make sure their product is directed at solving a need and is focused on that need as opposed to being focused on the functional aspect of the technology because if the product doesn’t solve a problem, the technology is worthless. DIAGNOSTIC and device marketing Dick Aderman Diagnostics provide about 70% of a patient’s information and yet account for less than 3.8% of the total cost of healthcare in the United States. Diagnostics provide a huge value but aren’t necessarily recognized as such. Nino Pionati The AdvaMed code of ethics was a great industry effort. We are highly supportive of it. Competition should be on the basis of the product and its efficacy and not on gizmos and gadgets. Following PhRMA’s Lead: AdvaMed’s Code of Ethics Ethical standards and compliance with applicable laws are critical to the medical-device industry’s ability to continue its collaboration with healthcare professionals. As such, the Advanced Medical Technology Association (AdvaMed) released a revised voluntary code of ethics to facilitate ethical interactions with healthcare providers (HCPs), or “those individuals or entities that purchase, lease, recommend, use, arrange for the purchase or lease of, or prescribe members’ medical technology products in the United States.” “We are keeping pace with the most current thinking on manufacturers’ interactions with healthcare professionals who help develop and use lifesaving, life-improving medical innovations,” says AdvaMed President Pamela G. Bailey. “This voluntary code provides companies with information to facilitate ethical interactions with their partners in the healthcare community.” Ensuring that advanced medical technologies are used safely and effectively often requires close interaction between manufacturers and physicians and other healthcare professionals. Interactions addressed by the code include members’ activities to educate and train healthcare professionals in the use of medical technology, as well as sales and promotional meetings, gifts to healthcare professionals, members’ arrangements with consultants, and education on reimbursement for new medical technologies. AdvaMed’s code reflects the unique interactions between medical technology companies and healthcare professionals, just as the PhRMA code reflects the nature of interactions between pharmaceutical companies and healthcare professionals. Distinguishing features in AdvaMed’s code arise primarily from the fact that members interact with healthcare professionals because of the complexity of medical technology and the importance of having healthcare professionals understand how to use the technology safely and effectively. In other ways, however, AdvaMed’s revised code of ethics reflects similarities in the interactions between healthcare professionals and medical technology companies as compared with other elements of the healthcare industry. AdvaMed is undertaking an extensive effort to distribute the revised code to national, regional, and state physicians groups, as well as various hospitals and hospital organizations and trade associations. The association also is providing materials to its members so they may communicate the code’s principles to their employees, agents, dealers, and distributors. Source: AdvaMed, the Advanced Medical Technology Association, Washington, D.C. For more information, visit advamed.org. The revised voluntary code went into effect in January 2004. The world market for diagnostics is estimated to grow 6% annually to $28.63 billion by 2005. OTC test products are helping device and diagnostic manufacturers move into consumer marketing. Experts on this topic Dick Aderman. Senior VP, general manager, Roche Centralized and Molecular Diagnostics, Indianapolis; Roche Diagnostics offers an extensive product line, which includes predisposition screening, targeted monitoring, prevention, diagnosis, therapy, and therapy monitoring systems. For more information, visit roche-diagnostics.us. Frank Fasano. President, Cummins, MacFail & Nutry Inc., Somerville, N.J.; Cummins, MacFail & Nutry is a medical-device agency. For more information, e-mail [email protected]. Patricia Malone. Principal, creative director, Stratagem Healthcare Communications, San Francisco; Stratagem is an independent, full-service ad agency serving the pharmaceutical, diagnostic, device, and consumer healthcare industries. For more information, visit stratagem-hc.com. Ron Marrocco. Independent consultant, Boston; Mr. Marrocco’s consulting practice is dedicated to the marketing and distribution challenges of the medical-device industry. For more information, visit ronmarrocco.com. Nino Pionati. VP, global marketing, research and development, ConvaTec, Skillman, N.J.; ConvaTec, a unit of Bristol-Myers Squibb, extends and enhances human life by providing ostomy care and wound therapeutics. For more information, visit convatec.com. Heather Ready. Director, global marketing, VISX Inc., Santa Clara, Calif.; VISX designs, manufactures, and markets proprietary laser-vision correction technologies. For more information, visit visx.com. Ken Ribotsky. President, Ribotsky Worldwide Inc., Somerset, N.J.; Ribotsky is a full-service healthcare communications agency providing marketing strategies as well as advertising, promotion programs, medical education, and public relations. For more information, visit ribotsky.com. Shara Rosen, MBA. Senior consultant, Stratcom, Montreal; Stratcom provides marketing information services to the diagnostics and medical biotechnology industries. For more information, visit pagebleu.com/stratcom. Ron Marrocco Brand loyalty can be built through educational programs when a company is training a clinician on a new technique or on the modification of a well-established technique where even a slight change is perceived to be daunting. Frank Fasano Surgeons employ devices that they have confidence in. To get them to use something different seems to me a tougher sell than influencing a GP to prescribe one cholesterol drug over another. Heather Ready A lot of training and education of physicians is required with devices; adopting a new technique or a new approach takes time. Patricia Malone Many times devices are not coming from large companies that carry weight just by their names, such as in the pharma world. Device and diagnostic companies do not have the luxury of name recognition. Shara Rosen When patients go to have a blood test it makes no difference to them if the lab is using a kit from Abbott, Beckman, or Roche. Because of this, marketing efforts should be directed to the labs.

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