The Product Works. Insurance Will Not Pay for It Yet.

The most dangerous moment in a medical company's life is the one after the regulator says yes and before the payer does. I fund the step in between.

There is a moment in the life of a medical device, a diagnostic, or a treatment that almost nobody outside the industry understands, and it kills more good companies than any failed trial.

The regulator has said yes. The product is cleared or approved. Physicians who use it like it. Patients do better on it. The founder has spent ten years and most of a fortune getting here, and the company is finally allowed to sell.

And almost nobody buys it. Not because it does not work. Because no one gets paid to use it.

Clearance is permission. Coverage is money.

A hospital or a clinic does not buy a product because it is cleared. It buys a product because it can bill for it. Billing requires two things the regulator does not provide: a procedure code that describes the service, and a coverage decision from the payers that says they will reimburse that code.

Neither one comes automatically. The code process wants evidence that the procedure is in real clinical use across the country and supported by published, peer-reviewed literature. Medicare and the commercial payers want evidence that the product improves outcomes for their patients, not just that it is safe. That evidence usually means one more clinical study, designed around the questions the payers actually ask, with results in a journal they read.

So the company that has already proven the science is now asked to prove it again, in a different language, to a different audience, at a cost of several million dollars and two or three years. Its regulatory milestone has been reached, so the venture investors who funded it to that point consider their job done. Its revenue is small, because no one can bill, so the growth investors who would fund the next stage will not touch it yet. It is stuck between the two.

Where the good companies die

I have watched proven products spend years in this gap. The founder keeps the lights on with bridge rounds at worse and worse terms. The sales team sells to the handful of cash-pay customers who exist. The study that would unlock everything keeps getting postponed, because the study is the one thing the company cannot afford. Eventually the money runs out, the patents get sold for parts, and a treatment that helped patients disappears.

Nothing about that failure is scientific. The product worked. The company simply could not afford the last step.

What I fund

I fund that step. When a company has a patented, proven, late-stage product, a clean regulatory clearance, and a clear path to a code and a coverage decision, I put my own capital and my partners' capital into the study that produces the evidence the payers need. I structure it around the outcome, usually a note with an equity component, a board seat, and a paid role for the duration of the work, so that I am paid when the coverage lands and the revenue follows, and not before.

I invest only where the patents exist and hold, because in this industry the patents are the company. I invest only in products that help patients live longer, live better, or have a better experience of their own care, because those are the products the payers eventually have to cover. And I invest only at the last step, because that is where a modest amount of capital and a clear plan change the whole outcome.

How to recognize the gap

If you are a founder, you are in it when your product is cleared, your clinicians are happy, and your revenue is flat. If you are an investor, you are looking at it when a pitch deck spends thirty slides on the science and one slide on who pays for the procedure. Ask about the code. Ask about the coverage policy. Ask what study the payers have said they need, and who is paying for it.

I do not chase deals. Founders, physicians, and the people who fund them bring me the companies that are one study short of being paid. That is the only stage I invest at, and it is the one where a good product most often dies for no good reason.

Benoit Lapointe invests in healthcare and real estate. He is the principal of Meridian in Newport Beach and spent years in the broker's chair before becoming a principal. benoitlapointe.com