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Best Practices In Commercializing Diagnostics

July 3, 2019 | As an innovation economist at the Entrepreneurial Management Unit at Harvard Business School, Joshua Krieger studies the creation of new stuff, particularly in the life sciences.

"Currently, I spend a lot of my time thinking about what types of policies and what types of firm strategies lead to more novel goods and services in health care," Krieger explains. "I've been thinking about how we classify different types of drugs based on their novelty and based on their impact on health."

On behalf of Diagnostics World News, Emily Le recently interviewed Krieger, and discussed challenges and best practices in commercializing diagnostic products and what steps entrepreneurs should take as they prepare to go to market.

Editor's Note: Krieger will be leading a case study on cancer gene testing company Genomic Health at the Next-Generation Dx Summit in Washington D.C. this August. "The specifics of the Oncotype DX test are interesting—and the company and its leadership are interesting," Krieger says, "But there's a bunch of quite general questions and lessons that I think this case will help us wrestle with and discuss live."

Diagnostics World News: What makes commercializing diagnostic and other health care products different from bringing other types of technologies to the market? What are some of the main challenges?

Joshua Krieger:  When I teach MBA students, I'm teaching people who have interest in different types of technologies and different types of innovation. Often there are a lot of MBAs thinking, "How do I create a new type of consumer good?" Maybe it's a health product, but more often than not it's something like a new type of business model—something like Uber or a delivery service for food. There's a big difference between thinking about health products versus when you think of those other types of goods and services. The main one is that in health, before you can even think of getting paid, which is usually from an insurance company, you need to build an evidence base to show that your product actually works, and that it's effective and safe.

If we're talking about diagnostics, that might be showing that there's added value that helps doctors make better decisions or helps match patients to the right types of therapy. When we're talking about drugs, it's both about safety and advocacy, because you're also concerned about doing harm to patients and that creates a very different dynamic. While the advice to someone starting a new food company might be, "Just go out there and sell your product!" or if you have a new type of clothing, you just want to get people wearing your products so the word spreads quickly, you really can't do that in a lot of health technologies. You have to build the evidence base first.

When I'm writing the case studies that are used in classrooms or when I'm talking about research, I'm often thinking about that tension. Firms are trying to move quickly and get financing—get some traction—but at the same time they're trying to prove that their product is robust and works beyond what you can just see in the lab. They usually have to do this with real human patients before anyone is willing to pay them for the service or technology.

Do you have any advice for new companies who are trying to break into diagnostic market to create value?

Every company faces its own set of challenges. The generic advice that we would tell all new entrepreneurs is think about how to manage uncertainty. And find a way to start testing early and getting feedback from patients, from doctors, from insurers. Before you spend five years of your life building the perfect test, there is a way to do that earlier so you can refine your product and keep iterating.

What's interesting about the diagnostic market, in particular, is you need to provide something that really adds value in a way that you can express to all these different stakeholders: the patient, the doctors, the insurers, and the regulators. It's not a market where you can just wing it.

It's really important to take the time to write down the value to all these different players and list the different ways you could create similar value. If you can't think through at least two different options for how you might create value differently for each player within your idea, within your business model—if there aren't options—then you’re not thinking hard enough. Even within a very narrowly defined disease area or diagnostic space, there're always choices to be made. I think it's really tough sometimes for entrepreneurs who are excited about their idea to realize that there is more than one way to implement that particular idea. There's more than one way to please those different stakeholders or to create value for them.

Once you go down a few different avenues to create new captured value for each of those stakeholders, that's when you should start thinking, "How are we going to test, to understand if we want to go with option A or option B?" Maybe Option A is going for a more narrow disease area or type of patients and option B is something more mass market. Maybe it's low cost versus high cost. Maybe it's an intensive sales relationships where you're working with the customers every day versus something that's more plug and play, where you show it to the customers once and then you go away for a long time. There are always decisions like this to be made for the intensity of your business for the type of market you're going after.

I think the mistake that young entrepreneurs make, especially in the health space, is they think that they identified the one and only approach within a particular business idea and they don't leave room to adjust.