Sales Reps Not Included: On e-Commerce Site, Device Firms Discount Routinely Used Implants

The movement toward price transparency that’s sweeping various parts of the healthcare system has now reached medical device sales via a new e-commerce startup that connects medical device companies with health systems looking to purchase stable implant technologies.

For the founders of MedPassage, it was a report issued by the Government Accountability Office in 2012 that really moved them to action. The report suggested that confidentiality clauses and a lack of price transparency in sales of implantable medical devices was driving up costs for providers.

Co-founders Mike Biselli and Gavin Fabian had met around the time of the financial collapse of 2008 while working together at medical device company NuVasive. “We saw the domino effect happening a year and a half later, where the dynamics were changing for everyone,” Biselli said. “From a physician’s perspective, reimbursement rates were falling off the table, operating costs went up and the cost of devices was through the roof.”

The pair wanted to create a solution that encouraged price transparency while also eliminating some of what they considered excess costs in the process – namely, eliminating costs associated with sales support for well-established medical devices used in routine procedures.

When they asked professional colleagues who worked in medical centers if they would forgo sales support in certain procedures in exchange for lower prices, the response was a resounding yes. In fact, some companies are now doing this on their own: Earlier this year, Wright Medical launched Wright Direct, a program that took sales reps out of the equation for a certain portion of its business.

So in 2012, Bisellie and Fabian created MedPassage. On the online platform, medical centers sign up for free and can explore member medical device companies’ products and prices by specialty.

On the other side of the platform, medical device companies list their products at discounted prices (which they set) that don’t include support services. Biselli, who’s now chief marketing officer, said he’d be the first one to tell you that this is not a place for cutting edge technologies. It’s for tried and true devices, like shoulder anchors, ACL screws and cervical cages, where physicians have performed the procedure many times and the chance of needing OR support is slim.

Some device companies offer sales support as a line item, Biselli added, or as an add-on for the first few cases of device use.

The device companies can also control which provider markets can view certain products. “If a device company has a sales rep in a certain market and doesn’t want to affect his business, they can turn off coverage there and turn on coverage where they don’t have any,” Biselli said. They also can’t see what other companies are using the platform or what they are charging for the similar products.

Devices are ordered, managed and tracked through a suite of tools within MedPassage’s platform, but the actual payment is issued directly between the medical center and device companies. When a purchase is made, MedPassage takes a commission from the device companies. Those companies can also pay small transaction fees if they want to bring existing customers onto the platform, to streamline their sales process and account management, said Product Manager Jake Sager.

It’s a similar idea employed by Pharmly, a startup MedCity News profiled last week that connects providers and pharmaceutical wholesalers, except that Pharmly facilitates bidding, rather than straight price transparency. And both companies are part of a bigger movement to use e-commerce to healthcare delivery.

As of now, the company has customers signed up on both sides of the platform. Biselli declined to name any of the medical device makers on board but said they range from small to large-size companies. It’s also continuing to modify the platform based on feedback from those initial customers. Meanwhile, the company is raising a bridge round and looking toward a proper Series A in early 2014.