The Space Between Manufacturing & Market Article # 4: Why Reimbursement Can Determine Success Before a Product Ever Launches

One of the biggest misconceptions in healthcare innovation is the belief that a great product will naturally succeed once it reaches the market. It sounds logical on the surface. If a medical device improves outcomes, solves a problem, or introduces a better way of doing something, it should gain traction. But in reality, healthcare does not operate like most other industries. In many cases, a product’s success is determined long before launch day ever arrives. That decision often comes down to reimbursement.

For people outside the healthcare and manufacturing world, reimbursement can sound like a complicated financial topic buried somewhere between insurance companies, billing codes, and hospital accounting departments. But reimbursement is much bigger than that. It influences whether hospitals adopt a product, whether physicians are willing to use it, whether patients can realistically access it, and whether healthcare systems can financially justify integrating it into their operations.

A product can be clinically impressive and still struggle commercially if there is no clear reimbursement pathway behind it. This is one of the areas where the gap between innovation and market reality becomes very visible. Teams may spend years focused on engineering, manufacturing readiness, regulatory strategy, testing, and product quality while assuming reimbursement discussions can happen later. But by the time “later” arrives, major obstacles may already exist that are difficult or expensive to solve.

In healthcare, reimbursement is often tied to coding, coverage, and payment structures already established within the system. If a new product does not fit cleanly into those structures, organizations may hesitate to adopt it, even if they believe the technology itself has value. Hospitals and providers operate under financial pressures too, and introducing a new device without a predictable reimbursement model can create uncertainty they may not be willing to absorb. This creates a difficult reality for many innovators. Clinical success and commercial success are not always the same thing.

A company might develop a product that performs exceptionally well in testing and receives positive feedback from clinicians, only to discover that providers are unsure how to bill for it, insurance coverage is unclear, or reimbursement levels are too low to justify widespread adoption. At that point, the conversation shifts away from whether the product works and toward whether the healthcare system can financially support its use. That shift can completely change a product’s future.

This is also where communication breakdowns sometimes occur between development teams, manufacturers, commercial teams, and market strategy groups. Different parts of the organization may be focused on different definitions of success. Engineering teams may focus on performance and functionality. Manufacturing may focus on scalability, quality, and compliance. Regulatory groups focus on approvals and documentation. Meanwhile, reimbursement specialists and commercial teams may already be asking a different question entirely: “How will healthcare organizations get paid to use this product?”

That question may not sound exciting compared to product innovation, but it can become one of the most important questions in the entire commercialization process. In some situations, reimbursement challenges are not discovered until very late in development. By then, organizations may have already invested enormous amounts of time and money into the product. Adjusting strategy at that stage can delay launches, increase costs, or require additional studies and evidence to demonstrate economic value rather than just clinical performance.

This is why many organizations now attempt to integrate reimbursement strategy much earlier in the product lifecycle. Instead of treating reimbursement as a downstream business issue, they evaluate it alongside product development itself. They examine whether existing reimbursement pathways already exist, whether new coding may be required, how competitors are positioned, and whether providers will realistically be able to absorb the cost of implementation.

In many ways, reimbursement becomes part of the product design conversation even though it is not physically part of the device. This topic also highlights something broader about healthcare innovation that is often overlooked from the outside. Bringing a product to market is not only about creating something functional. It is about fitting into a much larger ecosystem that includes regulators, providers, insurers, healthcare systems, supply chains, manufacturing operations, and patient access models. A product may technically be “ready,” but the market around it may not be prepared to support it yet.

That is part of what makes the space between manufacturing and market so complex. A successful launch is rarely determined by one factor alone. It is usually the result of alignment between technical capability, regulatory readiness, operational execution, market demand, and financial viability. When one of those areas is missing, even strong products can struggle to gain traction.

Reimbursement may not always be the most visible part of healthcare innovation, but it can quietly shape the outcome of a product before the first commercial unit is ever shipped. And in many cases, understanding that reality early may be the difference between a product that reaches patients successfully and one that never fully gains momentum at all.

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Katie Casteel works in a regulated medical device environment and is currently pursuing a PhD in Information Technology with a cyber engineering focus. Her research interests include IT governance, cybersecurity, and organizational risk management.

This article is part of The Space Between Manufacturing & Market series, which explores the gap between building compliant, high-quality products and achieving real-world success in the market.