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Identifying and Managing Strategic Dollars in Device Development

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Developing a medical device to commercialization is a complex, multi-faceted endeavor. It’s also an expensive undertaking fraught with risk factors at each stage of development. While maintaining a meticulous attention to detail is paramount throughout the entire process, the fact of the matter is, some of the dollars you’ll be spending will inevitably be more strategic than others.

Strategic dollars drive two areas of value creation. First, strategic dollars intermediate critical risk factors from metastasizing downstream, negatively effecting the project’s potential viability and value contribution. Second, wisely investing strategic dollars accelerates market adoption and commercial traction upon launch.

To further understand this concept, we’ve parsed several historical projects into what can be described as variable costs allocation and fixed costs allocation of the device development process:

  • Feasibility Phase – Variable cost; broad flexibility in discovery and initial development.
  • Design Freeze Phase – Transition phase, variable to fixed cost; locking in the design and establishment of the Design History File and subsequent documentation.
  • Verification & Validation Phase – Fixed cost; prescribed testing/reporting for compliance.

In examining the labor hours and dollars associated with each phase, we found that, on average, 25% of labor dollars are expended in the Feasibility Phase (variable costs), 25% are expended in the Design Freeze Phase (transition from variable to fixed costs), and 50% of labor dollars are expended in the V&V Phase (fixed costs – regulatory compliance). Discovery and initial development only absorb a quarter of your development dollars, yet the manner in which this phase is conducted will have a disproportionate impact, dollar for dollar, on the success or failure of your project. This is the phase that drives the creation of intellectual property and valuable patents, too.

Let’s examine the fixed costs first. Unless you’re highly equipped with the specialty equipment necessary to conduct electromagnetic compatibility testing, biocompatibility testing or accelerated aging testing, you’ll likely be outsourcing many of your test protocols during V&V. The cost of V&V is fairly standard (as it relates to the complexity of the device under development), regardless of the setting. The results of V&V are binary; either you pass or you fail; and if you fail, you’ll be incurring the costs to correct the issue (revisiting early development, changes to your DHF) as well as the costs to repeat the test protocols. Aggressively looking to cut costs in V&V can result in problems that may not emerge until you’re audited…and possibly already in the market.

As I mentioned above, the Design Freeze Phase is a transitional one as you move from discovery to locking down your design and subsequent documentation. Again, there’s not a lot of variability here as you move through the requisite steps. It goes without saying that the quality of the work executed during the Design Freeze Phase is highly dependent on the quality of the work conducted during the Feasibility Phase. Which brings us to the concept of strategic dollars.

There’s a direct relationship between the quality and thoroughness of your discovery and development efforts during your Feasibility Phase and the efficiency and success of your V&V Phase. Much of this value is captured during Design Freeze. In addition, the quality of your Human Factor Analysis, and the clarity of the voice of your customer, both of which need to be fully addressed as you move through feasibility, will have a significant impact on early market adoption and commercial performance.

As you develop your project budgets, please keep in mind where the strategic dollars will be expended. Strategic focus should follow strategic dollars; that’s where the value is actually generated! While value can be eroded in subsequent phases of development, it can only be created during the variable expenditures of your discovery and development dollars.

Something else you may wish to keep in mind…If you’re outsourcing device development, you may wish to evaluate how the phases of development compare from one quote to another. This is especially important if you’re considering a low-cost service provider. What is the source of the cost savings? Is it in fixed costs, cutting corners with V&V? Or is it coming from your strategic dollars, either assigning low cost engineering resources to your project or cutting iterations from your discovery process? Either way, these early, apparent cost savings are illusory…the inevitable cost of quality will eventually emerge.