This is Why a New Medical Device Can’t Win on Price Alone

Aaron Call
April 15, 2021
Why a New Medical Device Can't Win on Price Alone

Companies coming to market with a new medical device must have a clearly-articulated value proposition, not just a smaller price tag.

When executives launch a new medical device, the vast majority understand that they aren’t only building a company, they are building a brand. Like any product entering a marketplace, to be successful, medical technology needs a clear sales and marketing plan, as well as a robust brand strategy.

Yet, in our decades of working with new medical devices, we have continually come across companies that believe that a brand strategy is not necessary because their product will be cheaper than what is already in the market. Their sales strategy is simple – if their product costs less, people will buy it.

Yet, both experience and logic has shown us that, when it comes to medical devices, winning on price alone generally doesn’t cut it. The truth is that your product needs to be recognizable to stakeholders. Price alone will not make your product memorable or distinguishable from the competition. It also doesn’t protect you when another less expensive product enters the equation. And with razor-thin margins, you could be one supply chain change away from major financial issues.

In order for your product and brand to grow, you need a clearly articulated value proposition tied to a brand and product that stakeholders are willing to pay for, no matter what the price point.

Two Market Types That Influence Price for New Medical Devices

New medical device in sonography

Generally speaking, price point in MedTech is limited because products have to be reimbursable thru CMS or private insurance. At the same time, there are several elements that help companies narrow in on what the price of their technology can and should be. Some of these are production costs, regulatory requirements, and more. Price is also a function of commoditized vs niche markets.

A niche or novel market involves a product that solves a problem in a unique way. These products might not have direct competitors. In the case of niche or novel products, people will pay for them because of their unique value. These products enjoy inherent differentiation because there is nothing else like them.

A commoditized market is a competitive environment in which all the products are the same. There is no inherent differentiation because all the products are comparable.

How to Evaluate Differentiation in MedTech

When identifying a value proposition, often companies are not exactly like the competition, but they may not be creating their own unique category either. Sometimes it is a sliding scale.

Below is an overview of how product differentiation effects a new medical device’s ability to determine price and to compete.

Commoditized Product with No or Little Differentiation

Your product’s value is almost identical to competitors, so when it comes to pricing, you must be within the realm of existing allowed reimbursement. It is here that many companies try to compete on price alone, but competing on price is a race to the bottom. Simply having a lower price is not be a reliable way to secure business or build a brand in the long run.

Commoditized Product with Mild to Moderate Differentiation

If you are in a commoditized space but your product has clear differentiation from the competition, you may be able to charge a premium but will still likely have to work within existing reimbursement models. However, stakeholders, such as providers or hospitals, put immense value on products that can:

· Improve efficiencies

· Save time

· Offer better results

· Reduce the risk of complications or infection

If your product can differentiate in offering any of these benefits, they may be willing to reduce their own profits and come out of pocket to purchase your product.

Niche or Novel Product that is Radically Different or Uniquely Solves a Problem

If your product is wildly different than what is already in the market or uniquely solves a problem – like a cure for a disease, for example – it may be outside of the realm of reimbursement. If that is the case, you have the potential to define your own price and create a new reimbursement category. While this can often be a long road to traverse, it can be lucrative and should be anticipated for completely novel technologies.

How to Approach Pricing for Your New Medical Device

No matter if you are bringing a niche or commoditized product to market, the first step in understanding your market, the competition, stakeholder needs and behaviors, and determine a pricing strategy is to conduct a market opportunity analysis. This provides new medical device companies with secondary market research, a competitive analysis, primary market research in the form of stakeholder interviews, and more. Without knowing your market, you cannot determine your place within it.

For a niche or novel product, you have to hone in on what your price can be based on the payer. If you’re solving a need that no one else can, the market opportunity analysis allows you to demonstrate that people are willing to pay for it. The analysis will also serve as a foundation in crafting a value proposition that is scalable and extends across markets as your brand grows. It is this strategic planning and empirical evidence that allows you to start the work of showing payers, such as CMS and insurance, that the demand for your product can support your proposed price.

For those products in a commoditized space, you have to work within the confines of existing reimbursements. While it may be tempting to believe that you can compete with a lower price, at the end of the day, only being cheaper is not viable in the long term. A lower price is not how to build a company and will leave you financially vulnerable. You need to have something that is unique to stand out and scale. And to be recognizable, you need a recognizable brand. A commoditized product is best primed for long-term success when the company creates differentiation to stand out.

The good news is that, even if you are in a commoditized space, you can use your market analysis and work with your team to develop a clear value proposition, which then informs your brand strategy. Having a recognizable, meaningful brand will help you identify a price point within current models that allows you to maintain and grow a customer base.


At the end of the day, how you decide to price a new medical device is rooted in understanding where you stand in the marketplace. Investing in market intelligence and brand work will prime your product for long-term success, no matter your price point.

Jaunt works with MedTech executives and entrepreneurs to understand their market and craft the right value proposition so they can build memorable brands that thrive in MedTech. Have questions? Schedule your meeting with one of our consultants.

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