Originally Published MX July/August 2003
BUSINESS PLANNING & TECHNOLOGY DEVELOPMENT
Shaping the FutureWith a pocketful of ideas and a whole lot of spirit, medtech executives are remaking the future of industry.
In the medical technology industry, where innovation reigns supreme, company leaders understand the value of good ideas. Properly executed, a good idea can create a breakthrough technology, overturn
previous clinical practices, or even establish whole new markets.
Good ideas are no less valuable in the day-to-day business of operating a medtech company. Brought forward at the right time and place, good business ideas can redress company grievances, establish new models for corporate behavior, and exert a defining influence over the development of long-range planning for industry as a whole.
Yet, as historians are fond of reminding us, all ideas travel on two legs. To gain currency in industry, even the best of ideas requires a champion. In the medtech industry, such advocates often come in the form of talented executives whose achievements extend well beyond their company's walls. Sometimes prominent, but just as often unnoticed, such executives are every day helping to shape the future of the industry.
In this issue, MX profiles three such company executives whose ideas and energies are making a difference in their own companies and in other areas of industry concern. Complete versions of these profiles can be accessed via the MXWeb site at http://www.devicelink.com/mx.
Joe E. Kiani, chairman and CEO, Masimo Corp.
Joe Kiani didn't set out to overturn the applecart, but over the past couple of years his efforts have certainly resulted in a lot of applesauce.
Kiani is chairman and CEO of Masimo Corp. (Irvine, CA), positions he has held since 1989, when he founded the privately held medical technology company in order to improve the accuracy of noninvasive patient-monitoring applications. He was convinced that the use of adaptive signal processing in the measurement of physiological parameters could solve the problems of motion artifact and low signal-to-noise problems that had previously plagued in vivo monitoring—and especially pulse oximetry.
As a named inventor on more than 30 patents related to signal processing, sensors, and patient monitoring—including patents for the invention of motion-tolerant and low-perfusion-tolerant pulse oximetry—Kiani had good reason for confidence in his plan for improving noninvasive patient monitoring. Under his leadership, Masimo grew from a 'garage start-up' to a nearly 300-employee company with global technology-license and product-distribution agreements with leading companies such as Atom, Datascope, GE Medical, and Zoll.
But when the company developed its highly regarded pulse oximetry system into a unit for direct sale, it struggled to get hospitals to purchase the device. That's when Kiani discovered that a key obstacle to his company's growth lay with certain practices of hospital group purchasing organizations (GPOs), which had the effect of excluding his company's product from consideration.
In 2001, Kiani's concerns made it to the agenda of the Medical Device Manufacturers Association (MDMA; Washington, DC), where other companies had reported similar experiences in dealing with GPOs. In the spring of 2002, Masimo was included in a New York Times exposé on anticompetitive GPO practices, and Kiani testified at hearings of the Senate Judiciary Committee's subcommittee on antitrust, business rights, and competition.
In the year since the Senate hearings, the Health Industry Group Purchasing Association and many of its individual members have adopted new codes of conduct designed to minimize the use of product bundling and long-term exclusive contracts. But Kiani—as a member of MDMA's GPO task force—has remained a central figure in industry's struggle to ensure that the hospital purchasing process is open to new companies and their technologies.
"I think we passed the tipping point last year," he says. "With help from a lot of people—notably Walt Bogdanich and his team at the New York Times, Senators Herb Kohl (D–WI) and Mike DeWine (R–OH), the Federal Trade Commission, and the New York district attorney's office—there is now significant momentum toward creating a system in which there is healthy competition."
Kiani says that industry response to recent changes in the GPO system have been overwhelmingly positive. "People generally feel good about what we've done, and a lot of people have been thanking us," he says. "It's been most satisfying."
With more Senate hearings scheduled for this July, however, Kiani cautions that the struggle against anticompetitive purchasing practices is far from over. "There are still hurdles to be overcome," he advises.
Masimo has benefited from the more-open environment that Kiani has helped to create. In September 2002, Premier Inc. (San Diego), the nation's second-largest hospital GPO, awarded the company a three-year contract. The company announced similar contracts with Broadlane Inc. (San Francisco) in November 2002, and with MedAssets HCSA (St. Louis) in May of this year.
Such dramatically improved access to hospital purchasing was a major contributor to Masimo's growth in 2002. In January of this year, Kiani announced that the company's revenues nearly doubled during 2002—to more than $40 million.
Most important, Masimo reached profitability during 2002. "We've experienced phenomenal growth," says Kiani. "Two years ago our direct business was nonexistent, but now we're growing at a very fast pace."
Although he admits that his company is growing up fast, Kiani hopes the psychology of the company will always be "like that of a start-up."
Pattie Overstreet-Miller, vice president for corporate communication, Dade Behring Inc.
Handled correctly, times of corporate turmoil can sometimes produce surprisingly positive results for companies and their leaders. That has certainly been the experience of in vitro diagnostics manufacturer Dade Behring Inc. (Deerfield, IL), which last year went through a prepackaged Chapter 11 filing and emerged as a public company—all while retaining customers, gaining market share, and achieving the highest employee retention rate in industry.
In large measure, the positive outcome of the company's experience was the result of its carefully planned communications, as directed by Pattie Overstreet-Miller, the company's vice president for corporate communication, under the leadership of CEO Jim Reid-Anderson.
Despite the temptation to close off corporate communications during such a critical time, Dade Behring pursued a policy of open communications with customers and other stakeholders throughout its Chapter 11 restructuring. Overstreet-Miller credits the company's executive team with having the courage to adopt such a course. "I am very fortunate to have a CEO and a leadership team who have been willing to take the risks that are a necessary part of this kind of openness. Their leadership and direction during the period of our debt restructuring made it possible for me and my team to do our job."
Overstreet-Miller acknowledges that there were risks involved in adopting such an open communications strategy, but points to the success of the strategy as an indicator that the company made the right choices. "We knew at the time we were running a very real risk that employees, customers, and suppliers might leave us," she says. "Fortunately, they remained absolutely loyal and appreciative of the company's honesty, and our relationships now are stronger than ever. Much of that success is due to our 6000 employees across the world, who are deeply committed to the company and who played a key and active role in the communication process."
In spite of Dade Behring's success, says Overstreet-Miller, managing communications risks remains a vital task for the company. "We should never underestimate the risks inherent in transparency, or the new limitations placed on us as a public company. But we can manage those risks if we stay in close touch with our stakeholders and understand what they are thinking and how they might respond, if we remain consistent and thorough in our communication to avoid misunderstanding, and if we stay focused on doing the right thing."
Overstreet-Miller says that her background in marketing and finance has provided an essential underpinning for her role in corporate communications. "Since customers and investors are two critical audiences for a corporate communications function, I have always considered a thorough grounding in marketing and finance to be important for a communications professional," she observes. "This background has made it far easier to work effectively with these two critical and important functions in the corporation, as well as to understand and reach the two audiences.
"Those of us who work in the field of communication should be able to establish strong partnerships within the company, as well as to tie all audiences together under a single umbrella," she adds.
Overstreet-Miller sees the area of corporate communications as occupying an important place in the growing sophistication of medtech companies and the industry as a whole. "This industry, as well as other related industries, is recognizing the need to relate differently to the external world and the value of communicating consistently with all of its stakeholder groups. And that is a process of maturation," she says.
"When a company, or an industry, is able to look beyond its current boundaries, it can recognize important growth opportunities that depend on a strong external identity, focused and committed employees, and enduring relationships built on honesty and trust. Communications can play a role in creating and maintaining all of these and should be a critical tool for any visionary CEO or leadership team."
Randel E. Richner, vice president for federal affairs and reimbursement and outcomes planning, Boston Scientific Corp.
Companies that produce innovative products are also those most likely to encounter unique issues on the way to the marketplace. For many such medtech companies, finding a way to get their voice heard amid the regulatory clamor of Washington, DC, can be a key factor in market success or failure.
Pursuing such activities on behalf of Boston Scientific Corp. (BSC; Natick, MA), is the daily assignment of Randel Richner, the company's vice president for federal affairs and reimbursement and outcomes planning. Since joining the company in August 1997, Richner has built a global reimbursement and outcomes strategy for BSC's new and existing less-invasive medical technologies. And since taking on the leadership of BSC's global government affairs function, Richner has established a Washington, DC, federal affairs office to represent the company on FDA, regulatory, international trade, and payment issues.
Richner has also been a leader in policy initiatives in Congress and with the Centers for Medicare and Medicaid Services (CMS; Bethesda, MD). She recently completed a four-year term as the first industry representative to the executive committee of the Medicare Coverage Advisory Committee (MCAC), where she contributed to the development of national coverage and MCAC process guidelines.
According to Richner, BSC's federal affairs office evolved in large measure from the company's efforts to work with CMS. "In some instances, we found that it was no longer effective to work with the agency," she says. "Instead, we recognized that facilitating change meant going to Congress. And to do that, we realized we would need to develop close relations with people in the administration as well as on Capitol Hill."
Although Richner professes not to know how many medtech companies currently have policy offices in Washington, she's certain that the number is growing. "Many companies now recognize that it's necessary for them to have a direct presence in Washington, DC," she says, "especially if the company's issues are slightly different from those of industry at large."
When a company has a unique product line, it may have a perspective different from those of other companies, Richner explains. But in some instances such differences of perspective can pit manufacturers against one another, as when the makers of high-priced technologies lobby in favor of reimbursement for their products over those of companies that sell low-priced products.
"In a budget-neutral environment like Medicare, that can be a disaster for industry," says Richner. "Shifts in reimbursement policy in favor of higher-priced products can have dramatic effects on less-expensive products with better reimbursement coverage. It's important for industry to protect areas in which reimbursement is adequate."
To avoid making such mistakes, companies should seek out the assistance of trade associations such as AdvaMed or the Medical Device Manufacturers Association, says Richner. "It is worrisome when companies try to go it alone, because they can easily make mistakes that can hurt everyone."
The benefits of trade association membership are especially valuable for small companies, says Richner. "It's incredibly important that small companies join associations. The associations in Washington, DC, address most companies' issues and small companies are at a definite disadvantage if they don't join—they're missing out on some great resources. If companies leverage their associations properly, they will not be disadvantaged; instead they will have the force of numbers behind them."
Participating in organizations has the benefit of keeping Richner in touch with the activities of other companies' representatives. "There is a network of us in the policy arena," she notes, "and we all generally know and respect one another. We all have a similar understanding of what the issues are.
"But if one company were to try pursuing a hidden agenda, it would usually take only a very short time before the others would figure it out." As a result, she says, "the best solution for problems is usually for companies to work collaboratively."
Illustration by BARTON STABLER
Copyright ©2003 MX
