Medsider: Learn from Medtech and Healthtech Founders and CEOs - Can Medical Device Companies Increase Sales and Reduce Costs at the Same Time?

Episode Date: July 22, 2013

What do Stryker, Biomet, Medtronic, and Boston Scientific all have in common? Yes, they all manufacture medical devices. But more specifically, all four of these medtech companies have implantable device divisions. And from 2005 – 2011, the implantable device segment has been the most consistent top performer relative to other categories including: in vitro diagnostics...[read more]Related StoriesSocial Media Best Practices for Marketing Medical DevicesAre Medical Device Models the Key to Building a Lean Medtech Startup?Can Nurep Solve the Inefficiency Problem in Medical Device Sales? 

Welcome to Medsider, where you can learn from experienced medical device and med tech experts through uncut and unedited interviews. Now, here's your host, Scott Nelson. What do Stryker, Biomet, Medtronic, and Boston Scientific all have in common? Yes, they all manufacture medical devices, but more specifically, all four of these medtech companies have implantable device divisions. And from 2005 through 2011, the implantable devices segment has been the most consistent top performer relative to other categories, including in vitro diagnostics, medical consumables, medical equipment, and diversified life sciences. But the times are quickly changing. Why? Well, the implantable devices segment has the highest SG&A expenses in comparison to the other previously mentioned categories.

In fact, it's estimated that orthopedic medical device companies spend 35. billion dollars per year on sales support, perhaps bloated is the best word to describe this situation. But it's not just the implantable devices segment that may be in for a rude awakening. Many MedTech companies spend anywhere from 200 to 500% more on SG&A versus comparable high-tech firms. And as gross margins for medical devices continue to be squeezed, all MedTech companies, regardless of the specific product segment, will need to re-evaluate their SG&A spend. One tool that may help in this process is Med Passage. In this interview with Gavin Fabian, co-founder and CEO, we learn how Med Passage is trying to build a more efficient MedTech market through e-commerce and collaboration technologies. Here's some of the points we're going to cover.

What is Med Passage and how does this platform work? Can Med Passage be considered the anti-GPO? How have hospitals, surgery centers, and other health care providers responded to Med Passage? And what has been the response been from medical device companies? What cost savings do health care providers experience through the network? And how is med passage different than services like Wright Medical Direct and Novation Abtitude? Of course, there's a lot more we're going to cover in this interview. But before we dig in, listen to this brief message.

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That way, all the new episodes will automatically download to your iTunes account. It's super easy. Also, if you like the podcast, don't forget to rate it. That really helps us out. Okay, for you ambitious doers, here's your program. Hello, hello, everyone. It's Scott Nelson and welcome to another edition of MedSider, the place where you can learn from proven and experienced med tech and medical device thought leaders.

And on today's program, we've got Gavin Fabian, who is the co-founder and chief executive officer of MedPassage. He co-founded MedP passage with the vision of creating a smarter med tech market, where device companies and medical centers could collaborate and exchange products more efficiently than ever before. Gavin graduated from Princeton University in 2007, and he's held various product management positions at NuVasive and Spineworks prior to co-founding MedPasage. So without further ado, welcome to the program, Gavin. Yeah, thank you, Scott. Appreciate it. Thanks for having me. Absolutely. So let's first start out with what Med Passage is. You can provide a little bit of an overview there and what you're trying to do. And then we'll dig into how this idea was born

and then as well as some further detailed questions in regards to what your experience has been as you've launched this platform. So let's start there. Sure. Sure. You know, the concept was really to create a more efficient way to market and sell medical technology. So, you know, we were looking at the market and seeing more and more pricing pressure coming down from the hospitals and we felt that for device companies to maintain margins and be successful moving forward, they're going to have to figure out more efficient ways to sell their products. And currently, just to market it and sell a product, you know, you're looking at salaries for salespeople and then commission rates on top of that.

If you can't afford salespeople, it was, you know, 30 to 50 percentage points to get the product out. And when you're in a price-conscious market, increasingly price-conscious, you have to be able to commercialize your product more efficiently to be able to meet those pricing needs. So that's really where the concept came out of, it was just, hey, let's get a product out using e-commerce and networking technology that allows these device companies to communicate the value proposition of their products and transact business in lower costs.

Gotcha. Okay, so that's the thesis. Now, give us a brief overview of what the, platform actually is without going into too much detail because we'll circle back around and dig into it but give us a little bit of your overview of what this kind of looks like from a layman's perspective sure layman's perspective it's Amazon for implants that's really it and it's custom built Amazon to process medical device transactions so if you look at you know a lot of these implants

that are ordered you know it's not like you're ordering you know, one implant, oftentimes you're ordering 50 implants and you're not sure which one you're going to put in until you've actually cut the patient open. So you've got trays and some of the trays are on loaner. Some of them are consigned. And so there's a lot of nuances to an implant deal. And so we've customized Amazon to meet the needs of implant transactions. And that's really it. It's Amazon for implants. Got it. So you're looking at what Amazon is doing for for consumers and how consumers interact with that platform and buy products or purchase products, et cetera, and you're basically trying to adapt that same sort of concept to medical device

transactions. Yeah, I mean, you've seen it happen in a ton of industries over the year. So, you know, brokers years ago used to make $79 a transaction. Now you go on e-trading it's $7 a transaction. You used to have to go to a car lot to get a car and get sold on a non-transparent price, and now you can go to CarMax, and there's no price negotiation. The car's right there, and it's simple. So we're really just trying to repurpose technology that's done wonders in other industries

and just apply it to medical. But medical is probably the most complex market of those, so we've really tried to make sure that we are aware of the, nuances of applying this technology to the medical space. So we have physicians and nurses and OAR staff that are guiding the software construction so that what we actually have meets their needs. Okay. Okay. So that's a great overview. And like I just said, we'll dig into more specific and detailed questions in a little bit. But I'd like to first understand how the idea for this platform was born. And I mentioned sort of in the intro that you spent some time at, I think, microvention,

which is a Turomo subsidiary. You spent some time at Newvasive, which is a spine device company, for those who aren't familiar with Newvasive. Talk to me a little bit about how this idea came to be and what it looked like while you were sort of trying to put it together while at the, I'm not sure if you're, you know, if you were still at Spineworks at the time, but let's, let's start there. Yeah, sure. No, I, you know, I was at Newvasive when I really started to understand the device industry. And, you know, Newvasive had resources that when I went to a smaller company, I realized

they didn't have. So New Basin could spend quite a bit of money marketing their products, getting the biggest trade show booth. at the shows, you know, huge travel budgets, and they could hire the best salespeople in the industry and cover the entire country. And they did that and were able to get their products to market quickly, not cost efficiently, but quickly.

And at a smaller device company, that's not really an option. And so we felt, let's create a platform, level the playing field, and let the physicians decide what's valuable to them. If it's valuable for them to do business with a brand-name company, then they'll pay a little extra for it. But if they just want a quality FDA-approved lower-priced generic, then they can choose that. And so we really wanted to put just level the playing field

and allow the physicians to make purchasing decisions based on their own value equation. And in the market right now, prices aren't transparent, and most medical centers don't know about a lot of, of these smaller companies. So our platform really levels the playing field so that everyone has a chance to compete. And what we found is that, you know, when we put out our site that as much as it was designed for the device companies, the buyers love it because they get a one-stop shopping for implants.

It's simple. It's price transparent. They don't have to do a ton of contract work negotiations. It's really as simple as Amazon. If they like a product, they buy it. if they don't want to buy anything, they're not forced into buying anything. So that was really the concept. We had experience working with big and small device companies,

and just both Mike and I, my co-founder, felt that as a team we could build a more efficient way to get these products out. So my background is a product manager, you know, working on developing the product and commercializing it, and then Mike sold it. And so Mike understands the buyer side pretty well, and I understand the device company side. And so we use those strengths to build this company. Okay. And so were you at Spineworks then when this idea,

when you begin to formulate an actual plan for the Med Passage platform? No, I actually left Spineworks, and really didn't start Med Passage for, about six to eight months after that. Okay. And really during that six to eight months, met with industry folks and people who knew the market and physicians and made sure that if I was spending my time and risking my savings on this concept,

there was actually some meat behind it. And so we got some, we developed a prototype, for about $10,000 we went out and we showed this prototype which wasn't a working platform but it could demonstrate what we were trying to accomplish and we showed it to some angel investors some device companies

and they said yeah this solves a need we would use it and the investor said hey we'll put some money into it so that really allowed us to build a team around this concept once we closed that funding and then allowed us to commercialize a true working beta, which is what we have now.

And we have physicians and device companies doing business on this platform right now and really taking their feedback and refining this thing. But it was a gradual process that's kind of validating the market at each point where we chose to spend more money building a business. Got it. And so this was 2012 when you decided to build out like a prototype platform. to begin to show to health system buyers as well as medical device companies, physicians, etc.

That's correct. Whether or not this idea was sticky. Okay. Yep. So you felt strong enough about the idea that you wouldn't have left your gig at Spineworks to pursue this. I actually had some consulting work in between Spineworks that was not device related. So I, yeah, I've done.

Essentially, I left having stable income to do this. Yeah. So my wife and I burned through quite a bit of our savings in the process of getting us going. And we are very happy when we were able to get some investment money so that I didn't have to continue doing that. Got it, got it. And when did that initial, I'm not sure if you're considered, if you would consider it an angel round per se, but when did that initial investment money came in in 2012 as well? Yeah, it came in mid to late 2012.

Okay, okay. And the reason I'm asking these questions I want... Mid to late 2012. I just want to give the audience a little bit of a time frame as to how this, when you have the original idea, when you and Mike begin to formulate a plan and build up those prototypes. So, no, that's a great story. So you're obviously building out.

a platform a product that has two sides right and so you're going to face the chicken you know the classic chicken and the egg sort of problem where from the from the buyers perspective or the hospital's perspective they want to be able to log on and see a wide variety of products so they can potentially purchase but you've also got to you know go to the the device manufacturers and in sort of sell them on the idea as well so let's let's dig into that and how you've how you've approach that chicken and egg problem? Yeah, absolutely. That was a big concern of ours when we got going.

And what we found most effective was just totally reducing the barriers to entry for both the buyers and the sellers. So on the buyer side, we don't charge surgery centers anything ever. So we don't, surgery centers in hospitals are actually starting to refer to us as the anti-GPO because we, we don't. We have no compliance requirements, no long-term contracts, and they don't have to pay us any, ever. And so the surgery centers and hospitals love the idea

that they can buy in that type of environment with transparent prices. And then on the device company side, we basically said, we're not going to get paid until you get paid. You know, we're confident enough that we can create an effective market where your products will sell. and if we don't generate sales for you, then we don't get paid. And so we've really created a situation or tried to create a situation where there's a no-lose environment where we're just out there to prove that we're going to do what we say we're going to do.

And until we do that, we're not going to charge you anything. Got it. I love the fact that you brought up the anti-GPO because from a device sales perspective, and I can speak to this directly, and so can you because you've seen it firsthand. And a lot of the times when I'm negotiating with a particular hospital health system, I almost prefer to work off the GPO because I can offer better pricing. And so I love the fact that you brought the anti-GPO because sometimes I wonder, like what is the real value that hospitals have with GPs like Premier and Innovation and HPG,

especially the GPs that really don't drive compliance. It's sometimes been made for interesting conversations. So you've tried to reduce as much friction as possible. So let's talk about how surgery centers and hospitals have responded to this platform. And then as a follow-up, I'd like to ask you, what's the response been from medical device companies? Yeah, absolutely. So the first question would be how are the device companies responding or how are the buyers responding? Let's start with the buyers because, I mean, it's a nice segue talking about sort of the network effect,

the chicken and the egg problem. You've had to obviously go to both the buyers, the hospital surgery centers and the product side, the medical device manufacturer. So what, you mentioned that you've tried to make it very easy for surgery centers and hospitals, reduce as much friction as possible. So I presume the response has been good. Have there been any issues that have come up and what challenges have you had to overcome in respect to hospitals and getting hospitals and surgery centers on board? Yeah. You know, if there's, if, we haven't gotten many knows.

We've gotten, hey, this, we've got a lot of things on our plate, but we'd like to continue discussions, but we're not ready to shine up at this point. And a lot of that is because hospitals are focusing on EMR implementation for the meaningful use requirements, and they just got enough on their plate right now. But as that requirement gets fulfilled by the end of 2013, we can talk to those hospitals in 2014. What we've really targeted is the surgery center market. The surgery centers, 90% of them out there are physician-owned or have physician ownership. And our model really works when there's physician alignment with cost savings.

A lot of doctors in hospitals, they have no idea what the product costs. and there's really no incentive for them to get a more cost-effective product. And so there will eventually be incentives for doctors and hospitals, and you're seeing more and more of that. But the surgery center market's right for this right now, and we've had a lot of traction. I mean, you know, like take Medicare patients, for example, a lot of Medicare patients are declined at surgery centers

because the cost of the implants make it a net law. to do that surgery because the Medicare payment is just a lump sum payment versus cost plus reimbursement from a private pair. So if the guy can do a knee replacement and the Medicare payment is $10,000, if that doctor spends over $10,000 in that surgery, it's taken out of his pocket. And so this platform, and most products on our platform are selling at 40 to 60% off of standard industry selling prices, not list prices, but selling prices. And these doctors look at this and they're like, man, I can take these patients. I don't need to deny them anymore. I can take these patients for a rotator cuff repair.

And I can use five anchors and I'm not going to be in the red. So a lot of surgery centers we're working with are adopting this and right out of the gate using it for their Medicare patients. Got it. And so that's been kind of the reception. I think that the hospitals are interested, but we don't have the sales horse power to really go after hospitals. It's going to be a much longer sales cycle, and there's going to be a lot more bureaucracy, and there's less alignment with the physicians and the management's goals.

Right. Those are some really fantastic points, and really two that stand out to me, and they're fairly similar, really, in that you mentioned the idea that healthcare is moving more towards a, moving more towards metrics around price and how efficacious these devices are in terms of cost and reducing the cost of health care. And it almost seems like a platform like this would help, almost help push that forward. And a lot of it has to do with the fact that because you're targeting surgery centers and there's more natural alignment because physicians typically have ownership,

they recognize the cost savings that a platform like this would provide. Versus in the hospital setting, most physicians are, like you said earlier, are completely unaware of how much, they may be aware of the effort to reduce costs, but they have no idea how much, you know, one implant costs versus another. They may have general idea, but there's absolutely no transparency. So those are some fantastic points, though. And something I didn't realize in doing the research for this interview until you brought that up. But those are great points.

Yeah, I agree with what you said. So the response overwhelmingly on the buyer side, I guess, on the health care provider side has been positive. Other than maybe the cycle, the onboarding time might be a little bit long because of other items on their plate. I guess, for lack of a better description. But talk to me now a little bit about the response on the medical device side and what that's been like as you've approached medical device companies about the MedPasage platform. Sure.

I think there's – well, I guess I'd start with – it's been positive. So device companies, most of them see the Surgery Center market is a difficult market to address. stress. And so our platform has a captive audience of surgery center buyers. And so in general, there's a lot of interest. Like, can these guys help you get to those buyers at lower costs? I think that there's concern about having prices that are transparent out there. This is an industry where there's been not a whole lot of transparency on a lot of fronts. And some people don't want to be the first to step in and be the one to be transparent.

So that's, you know, that's a challenge. Absolutely. I think that this market has to become more transparent. So it's going to happen. And we're seeing companies do it without us, too. I mean, there's tons, I shouldn't say tons. There's many small companies now that are creating their own website and selling their products totally transparent.

And those companies, I mean, it's no braider. They come on our platform, but very quickly. Another technology that we built to protect the device companies from, you know, we would go to some small device companies and they say, this is awesome. You know, I have 0.1% of the market, and you can help me address the other 99%. But if I lose this, if I go with the transparent price and I lose that first customer I have because I'm selling on MedPatch, it's for $1,000, but I charge it. that customer I have $5,000

and they see that price, then the revenue I have coming in and the profit that's paying the bills goes away. So how can I protect the business that I have that is at high margins? And so basically what we've done is we've created technology that we call exposure controls.

And the exposure controls allow device companies to go in and pick and choose the buyers within our network that they want to do business with. And by default, all the buyers are blocked. So if someone comes in and creates an account to sell their product, no one can see their products,

and they'll go into these exposure controls and pick the ones that they want to sell to and not sell to. So let's say they have great pricing in California, and they don't want to lose that, and they have a great distributor in California. Well, they can just never turn California on, but turn on the Midwest and the Northeast. And they can get as granular as the actual center.

So that's really something that is, and it sounds like a small technology, but those exposure controls have opened up a ton of doors for us because it truly creates a no-lose situation because all we're doing is we're saying, hey, we don't want to interfere with existing business. If you have great distributors in certain areas, use them totally fine. But if there's any part of the market you don't have coverage of, we can do that for you.

And all the revenue at that point is just increasing. incremental. So you have to offer a lower price. You know, if the screw costs you $50 to make and you can sell it for $200 instead of $400, I mean, it's revenue and it's not revenue you were getting before. And so that's really been what's opened up the eyes of some of these device companies and got them interested is the idea for incremental revenue gains with very little risk with interfering with their existing business. So that's kind of a broad picture of, you know,

we've experienced with the device companies. That's, and is that, is that, that component of your system, the, the, the, the, the, the, the, the, the, the, the, the, the exposure component. Uh, was that something that you had built in when you initially launched, or is that something, uh, that you built in after the fact, uh, because, due to, uh, due to responses that you were getting from medical device company. So you sort of had, not necessarily iterate per se, but add that as a core feature because of the, uh, feedback that you, you were receiving. Yeah, exactly. So, core tenant of our business is that, you sort of, is that, you sort of,

if you're going to sell a product on our site, every buyer deserves the right to the same price. And we get buyers because they love that. So we can't compromise on that. But what we did say is, look, if you don't want to expose your product at all on that passage to this buyer, you don't have to. But if you are going to have a sale with one of our buyers, it's always going to be at a price that's available to all our buyers. Okay. But yes, we were getting certain device companies who are like, look, the risk of being transparent is me losing margins on some of my high-paying customers.

And so we came back to them after we built the technology, and they said, okay, I'm ready to go. Because now that's not a concern. And the technology literally cuts off that concern, because now they don't even need to expose themselves to those buyers. Got it. Does that make sense? It does.

It does. It does. It makes a ton of sense. and it's a brilliant, it's a brilliant sort of feature to your, to your platform, because I got to think most device companies are concerned, not only with, with price exposure, but if they have, like, and you mentioned this earlier, you kind of called this point out, if they have an existing rep or distributor in place in a certain geography, and business is doing well there, why, why fix what's not, or why try to fix what's not broken? Exactly. Exactly. So, no, that's a great, that's, it would seem like there's not a lot of holes in that, in that particular, you know, feature set for device companies anyway. Now, how do you respond to the buyer, or what's your response been to the, to the, to the idea that if you make this, if I'm a medical device company and I, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, what are. It's got to be, is that my price has got to be the same to be the same to all buyers. Well, what if a buyer in rural Midwest doesn't do as much volume as a center in Metro Chicago or something along those lines?

Pick your city, I guess, of choice. How do you respond to that? The different volumes that different centers do and the fact that maybe some surgery centers should or deserve lower pricing based on their volume? Yeah. So currently, you know, the top process here. is that, let's say you get a membership to Costco, right? You pay 50 bucks, you get your card. You're familiar with Costco, right, Scott?

Right. Okay, so you get a card to Costco. And you go into Costco, well, I have a Costco card, and I don't buy a ton of groceries. You know, it's just my wife and her. But when I go to Costco, I'm in there with restaurant owners who are buying loads and loads of food. and I'm getting the same price as those guys.

But the interesting thing is the prices are so good and the buying environment is so refreshing that those restaurant owners are still in the buying the product. It's just easy, it's great prices, good quality, good service. And so that's really the model on our platform. It's, look, let's not complicate things. You know, we're already giving you a 60% discount. Maybe it'd be five.

I mean, the prices are so low at this point, I mean, it's like we could create an option where you could offer a 5% additional discount, but what we found is that even the large hospitals and the surgery centers are all happy with the prices, and that hasn't been an issue. Now, if we ever developed something like that where there were volume-based discounts, it would just be along the same lines where you have to be transparent about your volume-based discount. So if you're going to make a volume-based discount applicable to Dr. Joe in New York, you have to make it available to Dr. John in Kansas.

Gotcha. But today, it really hasn't been an issue. The prices are really good, and, you know, people have been pretty happy with it. Gotcha. And in regards to pricing, you mentioned earlier that a lot of times you're able to reduce pricing anywhere from 40 to 60%, 40 to 60%, not off list pricing, but off the ASP,

that seems like a, I mean, that seems like an enormous reduction. Is that really legit? Those sort of discounts? Yes. Yeah, absolutely. I mean, if you look at a cervical cage,

for example, um, average list price with your top four industry players is 2750. the average selling price is $1,250. And buyers are very aware that list price doesn't mean anything. Right.

It's just a starting point so that the device company can market a big discount. And so at $1,250 being the average selling price, our prices on our platform are between $500 and $900 on our platform. So the $500 brand is going to be a smaller company, and then the $900 brand tends to be a more name brand that the doctors are familiar with. And then there's options in between. And that trend is pretty applicable throughout our various product categories

in spying and ortho and disposables. Okay. Wow, that's a significant discount. And as a salesperson, that tells me, that I either need to bring a lot more value to my customers or I'm not, you know, I don't know if there's an alternative, you know, if you want to maintain those sort of margins. But let's talk about... You know, actually, we actually had been approached by distributors and have accounts for distributors.

So distributors, you know, we're just responding to a market need. We're not driving prices down. we are just, I mean, we're just responding to what the market wants. And the market has had price and pressure long before we came into distance. And distributors out there have been watching this happen. And if they're, you know, used to get $2,000 for that implant, now they're getting $800, all of a sudden that two, three hours are spending in the operating room is not a very good use of their time.

You know, if you're making $80 to stand in an OR for three or four hours, you know, distributors are looking for ways to automate that. So distributors have approached us and they said, look, can I put my product lines on your platform? And for the surgeries when I don't need to be in the OR, I can train my physician staff how to order through this and replenish their sets and do these types of things. And that way I can spend more of my time hunting

and sitting in the OR for, you know, four hours making $80. bucks. Now I can just automate that and I can go out and get new business. I think that's really, that was an unexpected market for us. Yeah. Distributors. Yeah. I can see how that would be the case because that's surprising to hear that. But after your explanation, it does make a ton of sense. And if you've ever been in the shoes of a salesperson, I mean, a lot of times being in those case, you almost feel like you have to be in those procedures

and you're not necessarily delivering a lot of value. And maybe the physician is probably thinking the same thing. It's just sort of you're there out of routine. Yeah, it's a courtesy, yeah. Yeah, yeah. You know, from the physician's perspective, they maybe could very well do this case all on their own, and they would like the idea that they can save some money,

especially if there's natural alignment through some sort of ownership. And, you know, from the rep standpoint, you're thinking, well, yeah, I mean, I don't necessarily need to be here. I'd rather be out, you know, trying to find new business. or convert new business. So that makes a ton of sense. Let's segue into products. And I presume that you started off in the spine market just because that's what you're familiar with. But can you give me a little bit of an overview of what products are being purchased through the Med Passage platform? Sure. Yeah. So we have a variety of spine orthopedic disposable products.

We also have some soft goods with braces, although that's not really a big focus of ours, but we do have soft goods there, and we're just starting to get into the bascule market. Okay. So coils and stents and catheters. But if you look at spine, you know, we have your cervical cages, cervical plates, biologics,

pedical screws, a lot of inner-body cages. is we basically have everything except for the very service technical intensive products. So we would advise a device company to not put a motion preservation device on our platform at this point or a procedure that is very new because our platform is really built to automate the sale and transactional process of what we call routine surgeries. so we will not have like dynamic stabilization and all the, you know, the investigational stuff, we won't have those products on our platform.

And that same trend applies in orthopedics. You know, we'll have all the platings of distro radius plates, small and large frag sets, shoulder acres, ACL graphs, tendons. But anything that's, you know, you know, very technically intensive. We do not provide in our platform. Okay, okay.

So really, it's either commoditized products or products that are sort of on the downward slope of the bell curve, basically. You know, I actually wouldn't say that. You know, we just say their product where the technique is stable. So let's take, for example, like an electric golf club, right? Like, if you go to Gulfsmith, you'll see $400 drivers,

and then you'll see, like, the $50 drivers. And they look very similar, and you swing them the same way. But the $400 drivers are a lot better. It has better alloys. It has more research behind it. The shafts better. But at the end of the day, the technique is stable. So what we say is, we don't want to insult the device companies

because we think we have great products on our site, and some of them are totally cutting edge, but the technique is stable. So when I say we won't have, you know, investigational products on our site, I'm primarily focusing on the ones that have techniques where a sales rep absolutely has to be there to walk the doctors through that case.

I mean, if you think about, like, an excellent that I used to be a product manager for it in a business, like that would not be something you'd want to put on this platform. you know, you really need a lot of support, and that's just not a market that we are addressing with this. They've got primarily routine surgeries. Got it. And speaking of support for cases, I think I read this in a previous piece in doing some

research for this interview, that you mentioned that device companies have the option of using service and support as a line item charge for the. that particular order. So as an example, if someone's ordering, and my wheelhouse is more of the vascular space, so I'm a little bit unfamiliar with spine, but if someone is ordering some spine products for a particular case, and they actually want to have the rep come for support, that particular physician prefers that, that rep support, that device company can add that in as a sort of a line item charge. Am I understanding that, correct? That's correct. And the device company can dictate the charge of that. So let's say that if that support is,

$1,500, then they can list that line out of them. It's $1,500. If it's $500, it's $500. And then the buyer can choose if they want that service or not. Okay. Okay. That makes sense. And then in regards to the onboarding process for medical device companies

or what it takes for them to kind of get on the platform, in my experience anyway, a lot of large strategics, the Medtronics, the Boston Scientifics, the Cavendions of the World, have pretty archaic back-in systems. So I would guess, or I would assume that it would be somewhat difficult to sort of create almost an API between Med Passage's platform and that device company.

Am I assuming wrong? Or can you talk a little bit more about that? Yeah, we don't do the onboarding process by integrating with other people's systems. We literally have a Dropbox. where we have a packet that they need to fill out. So there's a spreadsheet with all their part numbers, product descriptions, prices, and then we get all the images, the video files, the marketing literature, FDA documentation,

everything we need to create their product advertisements. And we get that in a drop box, and then we take that information, and we do all the product uploading. So the device company is not becoming a specialist in our software. We make it very simple. So we do all the onboarding. We create all their advertisements. We set up their account.

We even create a private account for them so that they can send their buyers directly to their products. And it's branded like if it was Medtronic, it would be Medtronic powered by MedPasage. And it's just totally their site, even with their own URL. So we really do a lot of work setting them up for success, and we don't demand much from them. So we set up the account usually takes about two weeks, and then we allow another two weeks for feedback and further improvements. So let's say, you know, I turn an account over to Scott. Scott can go through it, check it out, but he sees some issues with it.

Like the products aren't marketed, right, or you'd like something structured differently. we take two weeks and we make sure that we need your needs, and then you go live, and then you choose which centers in our network you want to start with, and that's really it. So it's really a low – we call it White Glove e-commerce. So it's not like you're doing everything yourself. We really handhold these device companies through it.

Got it. Okay. That's a great little tagline, white-glove e-commerce. I like that. And so in terms of a business model, you mentioned that you don't charge – you don't charge anything to buyers or healthcare providers. I presume you then take a cut of whatever sold

on the, you know, through the Med Passage platform. Okay. And is that very, does that vary depending on the particular product or how much margin is built in? Or what does that look like? No, you know, we speak to that at all, I guess. Yeah, so we applied the same rules that we demand the sellers. You know, we ask the sellers to give transparency on their prices to the buyers. and we did the same thing with them. So, you know, our commission rate is 10%.

We charge 10% if it's a buyer that we've brought into the platform. And if it's existing business for that seller that they want to run through Med Passage because they see some efficiency in it, it's 1 to 3% based on transactional volume. Okay, so explain that a little bit for it. It's easy to think of the 10%, but you said for add-on business, can you give an example? Well, maybe. Well, what happened is we started working with device companies that were selling to some of our buyers, and they're like, man, this system is awesome.

I love the way that I can market my products through this. The way the transactions flow is really smooth that the value add to my customers, can I bring some of my own customers in? You know? And we were like, well, sure, that's no problem. And they were like, well, I'm uncomfortable paying 10% though because, you know, you. you're not doing any selling at this point. You're really just offering me the software.

So, you're right. So what would be a rate that would make sense? And what we've really determined is that 1% to 3% for that type of business makes sense. And it drops from 3 to 1 as the volume increases. Okay, okay. Yeah, I know that helps me understand a lot better. Okay, very cool. And then, you know, as we reach towards a, I can.

conclusion because we're approaching, you know, I don't know, what is it, 45 minutes, maybe on the 40, 45 minutes, something like that. It's been an very interesting, interesting conversation. But what is your take on, on what I would perceive as competitors to the Med Passage platform? For example, right medical, even though I think they recently sold off their, I think I just read that they sold their hip and knee business, but I've recently read a piece about Wright Medical going direct to consumers through, I think they're referring to as Right Medical Direct. the Novation

Apptitude platform which I don't know a lot of details other than Novation and GPO's kind of come out with some sort of

platform that would maybe resemble this Can you speak to a couple of those different avenues and what your take?

I'd love to get your take on Yeah Well first of all I mean it's a 40 the U.S. implant market

is $43 billion so it's not it's not like one of of these competitors you mentioned is going to take all $43 billion. And the way we view it is these type of models are validating that the way we look at the market is pretty accurate, that the buyers want more value, more cost efficiency, and they're willing to forego the in-person service for products that don't require it.

And so really for us, it's validation that we're doing the right things, and we just believe that the way we're doing it is a little bit better. And so the models you mentioned, like, right, Medical Direct, I mean, there's a lot of device companies that are going direct and have their websites while they'll sell direct. And actually, we welcome those companies to come into our platform. I mean, there's no reason these companies can't have their own website and then also offer the products through ours.

And we've actually seen that happen where device companies that have their own direct model will also use us. And then your GPO's, I mean, the whole Nobation aptitude launched, my understanding of that from our buyers that we have on our platform, get our customers in innovation, essentially tell us that it's just a more efficient way to run the GPO model. And we're very different than a GPL. But I think that, you know, there's a lot of focus around delivering cost

efficiencies on the implant side. And we view these as validation that we're doing the right thing. I mean, it's so early on that I think the more and more physicians and device companies that see models like this coming about, it just helps our cause when we introduce our concept. Got it. That makes sense. That makes a ton of sense. Okay. Cool. Anything else, before I ask you this last question, which is more of a personal question, where would you, if folks listening to this want to learn more about Med Passage or reach out to you, where would you direct them before I ask you this last question?

Yeah, I mean, they, so they can go to a website and sign up, and the sign-up process is just an opportunity to connect over a conference call. Or they can email me directly. I mean, we're not a huge company. We operate like a start. So my email is Gavin. Fabian at Medpassage.com. And that's the fun thing about having a startup is we're very close to all our customers and we're very approachable.

So I think that anyone that wanted to get a hold of us would have no problem. Got it. And for those listening, you can read the transcript, of course, to get that link, but also in the show notes for this particular episode, I will link up to Med Passage, of course, but it's M-E-D-P-A-S-S-A-G-E-Badpassage.com for those listening. And then my last question, like I said, is more of a personal one. You went to Princeton, correct, Gavin? Yep. Obviously, had some quality experience at NuV-V-A-Sive, at Spine Works, etc.

what, you know, what would appear to be on it, you, you looked like you were on a good, you know, a nice little career trajectory within a, you know, within a large device company. Why did you, why did you, why did you pursue the entrepreneurial adventure? And then as a, as a follow-up question, I guess, what would you say has been, has been the biggest thing that you now know, that you wish you knew maybe back in 2011 or 2012 when you were thinking about this idea. Yeah, sure. I think, you know, you really want to be doing whatever you're doing you want to be passionate

about. And I'm really passionate about making health care more efficient and helping our health care system be the best in the world. And I felt that there was a real lack in our ability to deliver. products efficiently. And so I guess I decided to do this just because I saw an opportunity and I wanted to make something better and I get it. I mean, I like to disrupt and kind of be a renegade and go after things that I think are real.

And so we validated this market and we were all fired up about it. And I, you know, I don't have kids or, you know, an expensive lifestyle, so I was able to do this. Now, if this was, you know, five years from now, that might be a different story. But I was at a place in my life where I had enough industry experience where I felt like I understood this market and had some ideas and how we can make it better. And, you know, I really just enjoy the process of working with a small team to, to, to, make something better. And we're all really passionate by what we're doing.

I don't know if you guys have seen, Scott, if you've seen the TED Talks Why video, like why? Like ask the question why? Yeah, like it's like when you're selling a product or you're starting a business,

what's more important to your customers is the why than the what. And so we always focus on selling the why, you know, that we want to make health care better and deliver high-quality products more efficiently and really focus on the why rather than the what, like rather than say, you know,

we have an e-commerce platform for medical devices because that's not that exciting. What's really exciting is that there's some young guys who are aggressively trying to make something better and we're really passionate about our business. And so that, I think that, you know, that's what drives us, the whole Y statement. And then your last question was...

Was what... If there's one... No, go ahead. I've heard about those... Is it a series of TEDx talks? I've heard about that one particular. I have yet to watch it, but yet it's another reminder for me to check it out, I guess. But my other question was, and you someone answered it already, but if there's...

Is there one thing that sticks out that you know, now that you wish you knew maybe two years ago when you were first sort of launching into this endeavor? Yeah, in general, I think that there's a lot of great ideas out there. But what really makes a great idea come to life is execution. And getting a startup off the ground is not simple, and it's really tough. I mean, you've got to make sure that your market actually wants what you have, that they're willing to pay for it. You have to segment your market so you don't waste your time selling with the wrong people.

You need to make sure you're capitalized so that you can actually execute your plan and have the resources to do it. And then you need a really good team around you. And those are all things that when I got started, I didn't really understand. You know, I just had a concept that people in the industry, validated and I just went after it. And if I understood those things down at the gate, I probably would have been a whole lot more efficient in the way I'd raised money, the way we brought on customers and targeted customers.

I mean, it was only until the last four months when we decided we're only going to focus on surgery centers. If we had made that decision a year ago, we would have probably saved a ton of time and money. So I think just in general, some of these problems are unavoidable. It's like a catch-22. You have to do it to come learn these things. But there's some great books out there for anyone that's getting a startup going

that they should read before they try to execute their plan. And one of them is The Art of the Start by Guy Kawasaki. It's a phenomenal book. Another book's Crossing the Chasm. Talks about kind of how you flow through your market segments. And then Blue Ocean Strategy is another one. So I guess just general education. When I got started, I was just a guy that was excited about a concept,

and there's a lot that goes into it beyond just having passion. Got it. Great, great books. No, no, it does. It does a lot. And I'm always, you know, back to the point you made earlier about the fact that ideas are sort of a dime that does, and it's really all about execution. That's so, so important.

It always amazes me how many people want. an NDA, you know, someone to sign an NDA or not a disclosure agreement and it's a, it's almost foolish. Yeah, exactly. I remember, I remember the first time I brought an NDA to a B.C. And they just laughed. They're like, come on, I can't sign that. And, you know, I think, you know, you mentioned competition and, and, and I think you asked

a question on a previous conversation we had, like, why, why can't someone else go out and do it? And I would say that, you know, the idea of having Amazon for implants, I mean, although I'd like to create credit for a great idea, I mean, I'm sure hundreds of people have had that idea. But it's all about execution. And so what keeps us up late at night is are we going to execute better than anyone else who wants to do this? And I think that's really what it takes to get most ideas off the ground. I mean, rarely do you have IP that can't be skirted. I mean, I know it in the device world, we were always looking at IP and then finding just little nifty ways to get around it, basically compete in their space.

So it's just all about execution, in my opinion. Right, right. No, that's great. Great stuff. And anyone that was listening or want some book recommendations while we're on that topic, I recently just finished a book called Running Lane. I'm not sure if you've heard of it. It's by Ash.

I don't pronounce his last name, Ash Moria. That's next on my list. I actually just got that. It's a fantastic book. It's like most people have heard of the lean startup, but it's more tactical approach, sort of more tactics versus theory in terms of kind of the lean startup movement. But that's a great book.

So let's go ahead. I mean, anything else you want to add before we go and finish this up? No, other than I just appreciate the opportunity to, to have the conversation with you and be a part of your program. I really appreciate it. Absolutely. I really enjoyed the conversation. I think it was great.

And for those listening that have stuck with us for the course of this 45 minutes or so, thanks for your listening attention. Remember, you can subscribe to the, if you're listening to this audio podcast or this audio episode, you can always subscribe to the MedSider podcast for free. Just do a search on Medsider or Stitcher Radio or Downcast. whatever app you prefer, do a search for medical device or Medsider. It'll come up and you can subscribe for free or jump on the website and subscribe to the email list

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