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From Idea to Market: Ep 10 - What Breaks at Scale · AHF Podcast

0:21
Joseph M. Schwab: Hello and welcome to the AHF podcast.
0:24
Joseph M. Schwab: I'm your host, Joe Schwab.
0:26
Joseph M. Schwab: From Idea to Market is a series about how medical innovation actually happens, not as a straight line from inspiration to impact, but as a sequence of thresholds that only some ideas survive.
0:41
Joseph M. Schwab: If you're just joining us, I highly recommend pausing and going back to the beginning of this series.
0:47
Joseph M. Schwab: We are 10 episodes in, and each chapter builds directly on the one before it, and this one is no exception.
0:56
Joseph M. Schwab: Up to this point, we've followed ideas as they survived early skepticism and earned funding and cleared regulatory hurdles and found a place in real-world workflows.
1:09
Joseph M. Schwab: They've scaled into reliable products and endured intense scrutiny from investors and strategics.
1:17
Joseph M. Schwab: In episode nine, we stepped into that decision room.
1:21
Joseph M. Schwab: We watched how judgment gets applied just before serious commitment is made, and we learned that the narratives that survive scrutiny are not the most optimistic.
1:34
Joseph M. Schwab: They're the most honest.
1:36
Joseph M. Schwab: Well, this episode begins after that commitment, after credibility, after momentum, after expectations have risen, and it asks a question that doesn't get nearly enough attention in med tech: what happens when a product is working and demand is building and the pressure keeps coming anyway?
2:17
Joseph M. Schwab: Well, in this episode, you're gonna hear from people who have lived through this stage from different positions.
2:23
Joseph M. Schwab: Founders who discovered that their product had to change after it reached the market, leaders who watched institutional systems push back against innovations they believed in, and people who understand the commercial and regulatory environment that now shapes which innovations actually survive scale.
2:46
Joseph M. Schwab: Rather than introducing them one by one, we want you to first hear them in their own words
2:52
Jared Foran: I'm Jared Foran.
2:54
Jared Foran: I'm an orthopedic surgeon in Denver, Colorado.
2:56
Jared Foran: I'm a hip and knee arthroplasty specialist.
2:59
Jared Foran: I'm the Chief Scientific Officer of Forcast Orthopedics, and I'm one of the co-founders.
3:05
Doug Fairbanks: My name is Doug Fairbanks.
3:06
Doug Fairbanks: I'm the president, CEO, and board member at VISIE Inc.
3:09
Charlie DeCook: My name is Charlie DeCook.
3:10
Charlie DeCook: I'm the president of Total Joint Specialists, a 17 surgeon group here in Atlanta, Georgia.
3:16
Robert Cohen: My name is Robert Cohen and I am a mechanical engineer that have worked in the med tech industry for over four decades, and I presently am the Vice President of innovation and technology for the Orthopedic Group at Stryker.
3:31
Joseph M. Schwab: Together, their stories help us understand what success actually costs and what it demands from the people who built it.
3:41
Joseph M. Schwab: In this episode, we looked for answers to three questions that define what happens when success creates new pressure.
3:50
Joseph M. Schwab: First, what does real-world use reveal that development programs cannot?
3:58
Joseph M. Schwab: Second, which structural and commercial weaknesses only surface at scale?
4:04
Joseph M. Schwab: And third, how do teams build the organizational discipline to act on what the market tells them?
4:13
Joseph M. Schwab: This is the chapter where maturity doesn't mean stability.
4:18
Joseph M. Schwab: It means a new kind of vulnerability, one created by the progress itself.
4:25
Joseph M. Schwab: This is Chapter 10: what Breaks at Scale.
4:34
Joseph M. Schwab: There's a concept in materials engineering called fatigue failure.
4:39
Joseph M. Schwab: A structure that performs perfectly under normal load can crack under repeated stress, even when no single application of that stress would have caused damage on its own.
4:51
Joseph M. Schwab: The failure isn't caused by one bad event.
4:55
Joseph M. Schwab: It's caused by the accumulation of many ordinary ones.
5:00
Joseph M. Schwab: The same principle applies in med tech after adoption accelerates.
5:04
Joseph M. Schwab: The product that performed well at 20 sites, closely monitored and supported personally, used by carefully selected early adopters, encounters very different conditions at 200 sites.
5:19
Joseph M. Schwab: More users, more clinical contexts, more edge cases, and more institutional pressure than anyone planned for.
5:28
Joseph M. Schwab: And unlike the early days when problems were private and correctable, problems at scale are visible.
5:35
Joseph M. Schwab: They happen in front of customers and partners and investors who've already made their bet.
5:43
Joseph M. Schwab: That is fundamentally a different kind of pressure, and it reveals things that small numbers never could.
5:51
Joseph M. Schwab: So let's start with the first question.
5:54
Joseph M. Schwab: What does real-world use reveal that development programs cannot?
6:04
Joseph M. Schwab: Clinical trials are designed environments.
6:07
Joseph M. Schwab: They select patient populations carefully, they standardize technique, they monitor compliance, they operate at sites that are motivated to perform well, and they're designed to answer a specific question under controlled conditions.
6:23
Joseph M. Schwab: Well, none of those conditions apply in commercial practice.
6:28
Joseph M. Schwab: In commercial practice, the device reaches hospitals that didn't participate in the trial, and it's used by surgeons who weren't trained by the founding team.
6:38
Joseph M. Schwab: It encounters a full range of anatomical variation, comorbidities, institutional workflows that a protocol was never built to capture, and it operates inside supply chains and procurement systems and care delivery structures that the development team never had to navigate directly.
7:01
Joseph M. Schwab: What flows back from those conditions isn't simply a confirmation of the trial results, it's new information, information about how the device performs at the edges of a patient population and how the procedure translates across different surgical environments, about which steps in the workflow create friction that nobody noticed when the founding team was in the room, and about which aspects of the original design, the ones that seemed obvious in development, turn out to be impractical in real world delivery.
7:40
Joseph M. Schwab: This is what post-market surveillance is designed to surface.
7:45
Joseph M. Schwab: In the United States, the FDA requires post-market surveillance for certain Class II and Class III devices under Section five twenty-two of the Federal Food, Drug, and Cosmetic Act.
7:58
Joseph M. Schwab: In the European Union, the medical device regulation requires it for every device without exception.
8:06
Joseph M. Schwab: But the distinction that matters is not whether a company runs a post-market surveillance program, it's whether the information that program generates actually changes anything.
8:18
Joseph M. Schwab: A post-market surveillance system that collects data and files reports is a compliance function.
8:25
Joseph M. Schwab: A post-market surveillance system that routes real world findings back into the product development process and the training program and the commercial strategy, well, that's a learning system, and those are different things.
8:40
Joseph M. Schwab: And the companies that treat post-market data as intelligence rather than documentation are the ones that catch product problems before they become patterns and that use clinical feedback from the field to drive the next generation of the device before the market demands it.
9:00
Joseph M. Schwab: Charlie DeCook has built and sold multiple med tech companies, and his description of what real-world exposure does to a product is one of the most direct accounts of this process that I think you'll hear.
9:14
Charlie DeCook: Oftentimes that product changes.
9:16
Charlie DeCook: We have an initial idea that's like, oh yeah, that made a heck of a lot of sense.
9:20
Charlie DeCook: And you'll see that in almost every product that comes to market, there is one or two major shifts or pivots when they realize that wasn't such a good idea.
9:32
Charlie DeCook: There's, there's one part that really makes a hell of a lot of sense, but really we're gonna have to super pivot right now and make a different product.
9:42
Joseph M. Schwab: That pivot that Charlie talks about isn't a sign of a product that was poorly designed.
9:47
Joseph M. Schwab: It's a sign of a product that has been exposed to real conditions at sufficient scale to generate real feedback.
9:56
Joseph M. Schwab: And the feedback that drives a major product pivot is almost always information that no development program could have produced in advance because the conditions that generate it, the diversity of users, the range of institutions, the breadth of patient presentation, don't exist until the product is actually on the market.
10:19
Joseph M. Schwab: This is one of the most important reframes in the entire innovation journey.
10:25
Joseph M. Schwab: The launch is not the end of the design process.
10:29
Joseph M. Schwab: It's the beginning of the most information-rich phase of it.
10:36
Joseph M. Schwab: Every complaint, every adverse event report, every surgeon who describes an unexpected case, every scrub tech who flags a step that costs more time than it should, well, those are data points that the trial never produced.
10:53
Joseph M. Schwab: The companies that build systems to capture and act on that data are the ones that sustain their clinical relevance over time.
11:02
Joseph M. Schwab: But the clinical feedback loop is only one of the things that real-world use reveals.
11:08
Joseph M. Schwab: It also reveals the commercial environment that the product has to survive, and that environment has changed pretty significantly.
11:17
Joseph M. Schwab: Doug Fairbanks describes the specific discipline that sustained commercial momentum requires and what it takes to keep moving when the system around the product isn't naturally inclined to move with you.
11:32
Doug Fairbanks: In order to keep yourself sane and to keep the company moving forward, you have to set goals for yourself.
11:38
Doug Fairbanks: Say, Hey, look, nobody's out there begging for my product.
11:41
Doug Fairbanks: I have to get them to know what my product is.
11:44
Doug Fairbanks: And in order to do that, I have to do something that's impressive.
11:47
Doug Fairbanks: And so, you know, the lessons that I've learned along my career, and, and by the way, I spent some time at Zimmer, uh, Biomet, Zimmer at the time, and, and some other companies.
11:56
Doug Fairbanks: But, but really the idea that, hey, look, you're gonna make the forward motion.
12:00
Doug Fairbanks: You have to do that, that's delivered the, the success we've had at VISIE and it was a lesson that I've, that I've picked up along the way.
12:08
Joseph M. Schwab: Nobody is out there begging for the product.
12:11
Joseph M. Schwab: That is the commercial reality that real-world launch exposes, often more starkly than founders expect.
12:19
Joseph M. Schwab: Clinical value doesn't advertise itself.
12:22
Joseph M. Schwab: Regulatory clearance doesn't generate awareness.
12:25
Joseph M. Schwab: The work of building demand is active and intentional and continuous, and at scale, when the early adopters have been converted and the broader market is still being persuaded, the forward motion Doug describes is what separates companies that sustain commercial growth from those that plateau after the initial launch enthusiasm fades.
12:52
Joseph M. Schwab: So here's our first answer.
12:54
Joseph M. Schwab: What real-world use reveals that development programs can't is both clinical and commercial.
13:03
Joseph M. Schwab: Clinically, it exposes how the device performs outside of a controlled condition of a trial across a full range of patients and surgeons and institutions that the protocol may never have anticipated.
13:17
Joseph M. Schwab: Commercially, it exposes the gap between a product that exists and a market that's aware of it and ready to use it.
13:27
Joseph M. Schwab: The companies that treat both of those signals as design information, not noise to be managed, are the ones that stay ahead.
13:38
Joseph M. Schwab: Well, once a product is in the market and real-world data is flowing back, a second category of problem tends to surface, one that has nothing to do with the device itself or the commercial momentum behind it.
13:52
Joseph M. Schwab: It comes from the environment the product has to operate inside: the reimbursement system, the institutional procurement process, the regulatory landscape that has shifted since the development program was designed.
14:09
Joseph M. Schwab: These aren't problems that post-market surveillance detects.
14:13
Joseph M. Schwab: They're structural features of the healthcare system that become visible only once a company is operating at a scale where they actually matter.
14:23
Joseph M. Schwab: And that brings us to our second question: which structural and commercial weaknesses only surface at scale?
14:36
Joseph M. Schwab: The med tech commercial environment that companies face today in 2026 is materially more difficult than the one that existed a decade ago.
14:46
Joseph M. Schwab: And understanding why requires stepping back from any individual product and looking at the structural forces that shape what is commercially viable in this industry.
15:01
Joseph M. Schwab: Reimbursement has always been one of the most complex dimensions of med tech commercialization, but it has become more constrained and more uncertain than at any recent point in history.
15:14
Joseph M. Schwab: Medicare reimbursement rates for medical devices have been under sustained pressure.
15:20
Joseph M. Schwab: Healthcare systems around the world are cutting government subsidies for technology, and the gap between FDA clearance and Medicare coverage has been documented to average nearly six years for novel technology.
15:36
Joseph M. Schwab: That gap has a name.
15:38
Joseph M. Schwab: Researchers have called it the second valley of death.
15:42
Joseph M. Schwab: The first valley of death is the gap between prototype and clearance, and we discussed that in prior episodes.
15:49
Joseph M. Schwab: But the second is the gap between clearance and commercial viability.
15:55
Joseph M. Schwab: And this is where a significant number of products that succeeded clinically have failed commercially because the payer system hasn't yet decided to cover the product at a price that sustains the company that built it.
16:12
Joseph M. Schwab: The FDA and CMS announced a new pathway in April 2026 called RAPID, Regulatory Alignment for Predictable and Immediate Device Coverage, which is designed to synchronize FDA review and Medicare coverage decisions so that evidence generated before market authorization can simultaneously support a coverage determination.
16:39
Joseph M. Schwab: It's a meaningful development for breakthrough designated devices, but it doesn't eliminate the fundamental structural misalignment between a regulatory system designed to evaluate safety and effectiveness and a reimbursement system designed to evaluate cost-effectiveness and necessity.
16:59
Joseph M. Schwab: 'Cause those are different questions answered by different agencies on different timelines using different evidence standards Well, Robert Cohen has watched this structural shift reshape the commercial calculus for med tech innovation over four decades.
17:17
Joseph M. Schwab: What he describes is a precise account of how the environment has changed, what it means for companies navigating it, and why decisions that seemed reasonable early in development can turn into structural constraints by the time a product reaches scale.
17:35
Robert Cohen: Over four decades.
17:37
Robert Cohen: I've watched, you know, 20 years ago you can get a lot more money for a new device'cause someone wanted it and you can't do that now, right?
17:45
Robert Cohen: So you have limitations, you have, uh, Medicare reimbursement changes decreasing.
17:51
Robert Cohen: You have different countries around the world that are cutting as well from government subsidies.
17:57
Robert Cohen: So the challenges now is the reimbursement.
17:59
Robert Cohen: You're not gonna impede a lot more or for a clinical benefit or anymore for a clinical benefit.
18:05
Robert Cohen: So that's number one.
18:06
Robert Cohen: And then the regulatory process is rather onerous.
18:11
Robert Cohen: And the regulatory process on some great inventions is more difficult now to get through and just quantify it as a class two.
18:20
Robert Cohen: Than you had in the years past and you had the opportunity to talk and things like that.
18:24
Robert Cohen: Now you have to go through breakthrough designations, but you may not get reimbursement for it.
18:28
Robert Cohen: You're familiar with the, you're familiar with term, the Valley of Death in Innovation in Med Tech.
18:33
Robert Cohen: Right.
18:33
Robert Cohen: So that's happening to me to a lot.
18:35
Robert Cohen: I see happening a lot of startups where you get the regulatory approval but you have no reimbursement of.
18:40
Robert Cohen: So someone thought clinical benefit, but there's no reimbursement.
18:43
Robert Cohen: So those challenges exist now in ways that we just never saw before.
18:48
Robert Cohen: So people paying for something and then the regulatory process adds a complexity.
18:55
Robert Cohen: And in fact, in many cases we may choose what product to do internally just because we know the regulatory path and time to market where there's too many unknowns in something, which may be a great project.
19:08
Joseph M. Schwab: That last sentence deserves some particular attention.
19:12
Joseph M. Schwab: Large organizations are now choosing which innovations to pursue internally based not just on the strength of the clinical idea, but on whether the regulatory and reimbursement path is clear enough to justify the investment.
19:27
Joseph M. Schwab: When the reimbursement outcome is uncertain, even a genuinely promising clinical idea may not make it off the internal prioritization list.
19:37
Joseph M. Schwab: That isn't really cynicism.
19:40
Joseph M. Schwab: It's a rational response to an environment where the cost of development is fixed and the return isn't.
19:48
Joseph M. Schwab: For smaller companies and startups, this creates a specific kind of structural vulnerability that only surfaces at scale.
19:56
Joseph M. Schwab: A commercial model built on reimbursement assumptions that were reasonable at the time the company was designed may not hold by the time the product is ready to generate revenue.
20:09
Joseph M. Schwab: The market a company planned to serve may be reimbursed differently or not reimbursed at all under the codes and coverage policies that exist when the product launches.
20:21
Joseph M. Schwab: The companies that navigate this successfully are not the ones that got lucky with reimbursement timing.
20:28
Joseph M. Schwab: They're the ones that modeled the reimbursement environment with the same rigor they applied to the regulatory strategy and built commercial models that were viable across a range of reimbursement scenarios, not just the optimistic one So here is our second answer.
20:47
Joseph M. Schwab: The structural and commercial weaknesses that surface at scale are often not internal to the company.
20:54
Joseph M. Schwab: They're features the environment the company has to operate inside.
21:00
Joseph M. Schwab: A reimbursement system under sustained pressure, a second valley of death between clearance and commercial viability, and a healthcare system that evaluates cost effectiveness and clinical benefit on entirely different timelines.
21:16
Joseph M. Schwab: The companies that survive plan for the environment from the beginning, not as an afterthought to the clinical and regulatory work, but as an integrated constraint on every commercial decision they make.
21:31
Joseph M. Schwab: Well, once a company is operating inside of all that pressure simultaneously, clinical feedback demanding product iteration or reimbursement constraints reshaping the commercial model, institutional systems moving more slowly than the timeline requires, the question shifts from what is wrong to what to do about it.
21:55
Joseph M. Schwab: And that is a different kind of challenge entirely because the freedom to respond quickly, to iterate without consequences, to pivot without stakeholder management belongs to the early stage.
22:10
Joseph M. Schwab: At scale, the same response requires organizational alignment and investor communication and a leadership culture that was built for exactly this kind of pressure before the pressure arrived.
22:24
Joseph M. Schwab: That brings us to our third question.
22:27
Joseph M. Schwab: How do teams build the organizational discipline to act on what the market tells them?
22:39
Joseph M. Schwab: There is a well-documented gap in how organizations process uncomfortable information.
22:45
Joseph M. Schwab: Researchers who study high-reliability organizations, the teams that operate effectively under sustained pressure with high consequences for failure, consistently find that the difference between teams that adapt and teams that don't isn't intelligence or resources.
23:06
Joseph M. Schwab: It is the speed and honesty with which information moves from the people who have it to the people who can act on it.
23:16
Joseph M. Schwab: In med tech at scale, that gap is structural.
23:20
Joseph M. Schwab: The people closest to the clinical feedback are often not the people making the product development decisions.
23:27
Joseph M. Schwab: The surgeons who notice a pattern in outcomes report it to a clinical specialist who files a complaint, which enters a quality system which generates a corrective action request, which eventually reaches a product team that may or may not have the authority to respond quickly.
23:47
Joseph M. Schwab: By the time that information has traveled that path, months can pass.
23:52
Joseph M. Schwab: And in a commercial environment where competitors are watching the same real-world data and where investor milestones are tied to specific timelines, months matter.
24:05
Joseph M. Schwab: The companies that build short feedback loops between the field and the decision makers are the ones that used post-market innovation as a competitive advantage rather than a compliance burden.
24:19
Joseph M. Schwab: They create direct channels between clinical advisors and product teams.
24:24
Joseph M. Schwab: They invest in structured post-market clinical follow-up, not because the regulation requires it, but because the insight it generates is irreplaceable.
24:34
Joseph M. Schwab: And they build a leadership culture where acting on inconvenient information is rewarded rather than managed.
24:44
Joseph M. Schwab: That culture is harder to build at scale than it is in a small team.
24:49
Joseph M. Schwab: In a small team, everyone is close to everything.
24:53
Joseph M. Schwab: Problems surface naturally because there aren't enough people to insulate leadership from them.
25:00
Joseph M. Schwab: At scale, the organizational structure that makes the company efficient also creates a distance that makes uncomfortable information slow to travel.
25:13
Joseph M. Schwab: Building the discipline to close that distance, to keep the feedback loops short, even as the organization grows, is one of the most consequential leadership challenges of the post-market phase.
25:27
Joseph M. Schwab: Jared Foran's reflection on what it means to learn the hard way captures the specific cost of that distance when it's allowed to grow too wide.
25:38
Jared Foran: it was interesting to see.
25:40
Jared Foran: You might have an idea that works, but is it practical?
25:44
Jared Foran: you kinda learn that the hard way.
25:47
Joseph M. Schwab: Learning the hard way in the context of a commercial product at scale means discovering a problem through its consequences rather than through early detection.
25:57
Joseph M. Schwab: It means a pattern of outcomes that a clinical advisory board flags after it has already affected enough patients to be statistically visible.
26:07
Joseph M. Schwab: It means a reimbursement assumption that turns out to be wrong at the moment the billing department processes the first claims.
26:15
Joseph M. Schwab: It means a product feature that creates friction in the workflow that nobody documented during development because the founding team was compensating for it personally every time they were in the room.
26:30
Joseph M. Schwab: The hard way is always more expensive than the alternative, not because the problem was unavoidable, but because the information that would have revealed it earlier was available and didn't move fast enough to reach the people who needed it.
26:46
Joseph M. Schwab: Research on post-market clinical follow-up under the EU Medical Device Regulation defines PMCF as a continuous process, not a periodic report.
26:58
Joseph M. Schwab: It's meant to generate ongoing clinical data from real-world use and feed that data back into the risk management system throughout the product life cycle.
27:10
Joseph M. Schwab: That continuous loop between real-world performance and design decisions is exactly what the hard way learning Jared describes is trying to avoid.
27:21
Joseph M. Schwab: The discipline to build and sustain that loop, even when the organization is under pressure to prioritize speed over process, is what separates the companies that catch their own problems from the ones that have them caught by the market So here's our third answer.
27:41
Joseph M. Schwab: The organizational discipline to act on what the market tells you is built before you need it, not assembled under pressure after the problems have already surfaced.
27:52
Joseph M. Schwab: It requires short feedback loops between clinical experience and product decisions, a leadership culture that treats post-market information as the most valuable data the company generates, as well as the structural honesty to act on uncomfortable findings before the consequences make action unavoidable.
28:16
Joseph M. Schwab: The companies that build that discipline are the ones that use scale as an advantage, the ones that don't tend to discover its costs through mechanisms they could have prevented.
28:34
Joseph M. Schwab: So let's take a step back and review what we've learned.
28:38
Joseph M. Schwab: Across all three questions today, a single idea kept coming back.
28:43
Joseph M. Schwab: Scale doesn't resolve the problems of early-stage innovation.
28:49
Joseph M. Schwab: It transforms them into versions that are harder to see, slower to admit, and more expensive to address if left unattended.
29:02
Joseph M. Schwab: In the first part, we learned that real-world use reveals what development programs can't, how a product performs outside of controlled conditions, and how much active work commercial momentum requires.
29:16
Joseph M. Schwab: The companies that treat both of those signals as design information rather than noise are the ones that stay ahead of the problems they reveal.
29:26
Joseph M. Schwab: In the second part, we learned that the structural and commercial weaknesses that surface at scale are often not internal failures.
29:35
Joseph M. Schwab: They're features of an environment that has become materially more difficult to navigate.
29:42
Joseph M. Schwab: The second valley of death between clearance and commercial viability is real, and the companies that survive it are the ones that planned for the reimbursement environment from the beginning as an integrated constraint on every commercial decision they made.
29:59
Joseph M. Schwab: And in the third part, we learned that the organizational discipline to act on what the market tells you has to be built before it is needed.
30:09
Joseph M. Schwab: Short feedback loops, a leadership culture that moves on uncomfortable information quickly, and the structural transparency to treat post-market data not as a reporting obligation, but as the most valuable intelligence the company generates And if there's one thing to carry forward from this episode, it's this.
30:32
Joseph M. Schwab: The work doesn't end at launch.
30:35
Joseph M. Schwab: The product that reaches patients is not a finished version.
30:40
Joseph M. Schwab: It's the starting point for the most consequential phase of development, the one where the real world tells you what you actually built and what it still needs to become.
30:59
Joseph M. Schwab: Here's something that the most experienced founders in this series understood long before they reached this stage.
31:07
Joseph M. Schwab: The question of what a company is ultimately built for doesn't wait for the pressure to arrive.
31:14
Joseph M. Schwab: It shapes the decisions made on day one, how the company incorporates, how agreements are written, how aggressively infrastructure gets built, how equity is structured.
31:28
Joseph M. Schwab: Every one of those choices is a vote cast towards a particular destination.
31:35
Joseph M. Schwab: And the founders who named that destination early were in a fundamentally different position than the ones who arrived at it by default.
31:44
Joseph M. Schwab: In our next episode, we'll ask that question, are you built to last or built to sell?