In a typical first-round slate of eight, two or three candidates will open a life sciences case with a consumer-style profitability tree. I stop scoring those trees by minute three. The manufacturer is not selling to a shopper; it is selling an input into a clinical episode someone else gets paid for.
That is the thesis. Your client's ASP is a cost line on a hospital's DRG or APC, volume is gated by physicians and lab slots, and the FDA clock sets NPV more than your COGS model. After this page you should be able to order the analysis the way a partner grades it, reproduce a worked device-discount decision, and know where pharma and hospital cases start instead.
McKinsey's life sciences practice and Bain's healthcare and life sciences practice publicly describe work across pharma, medtech, and providers. The interview case you get will usually put you on the manufacturer side — device, diagnostic, or thin-pipeline biotech — and ask you to recommend a commercial or portfolio move that has to survive someone else's payment rules.
The three vetoes you map before any tree
Life sciences interviews punish the wrong protagonist. Clarify who can kill adoption before you draw boxes.
| Veto holder | What they optimize | What "yes" requires |
|---|---|---|
| Hospital / IDN finance and value analysis | Contribution per episode under a bundled payment | Device cost small enough (or paid separately) that the episode still clears |
| Implanting or ordering physician | Outcomes, ease of use, status with peers | Training, evidence, and a reason to switch from a familiar tool |
| Payer / CMS coding | Total cost of care and medical necessity | A code path that exists, or a temporary add-on; otherwise silent denial |
Patients rarely choose the catheter brand. If your structure starts with "willingness to pay," you have already misplaced the buyer. Pure drug P&L belongs on the pharma case interview. Pure bed and discharge math belongs on healthcare.
Payment first: DRG, APC, and when ASP is even a lever
Medicare does not itemize most inpatient device purchases. Under the Inpatient Prospective Payment System, CMS assigns discharges to MS-DRGs and pays a prospective amount for the stay. As of FY 2026 there are 772 MS-DRGs. Your implant or catheter usually sits inside that lump sum.
Outpatient and ASC settings use Ambulatory Payment Classifications instead. The practical interview move is simple: name the site of care, then ask whether the device is packaged or can ride a temporary add-on. For inpatient novelty, CMS's new technology add-on payment (NTAP) can pay up to the lesser of 65% of the technology's cost or 65% of the amount by which case costs exceed the standard MS-DRG (higher for certain antimicrobial products). NTAP is not a free lunch; applicants still need newness, cost, and clinical improvement (or an alternative pathway), plus FDA marketing authorization by the May 1 cutoff before the fiscal year.
Ned's scoring heuristic. If the device is already under roughly 10% of the episode payment, a list-price cut rarely creates procedures. It transfers margin. Discount only when you can name the incremental slot, the physician who will fill it, and the code that pays for it.
The regulatory clock beats your spreadsheet
The FDA classifies devices into Class I, II, and III with rising control. Most Class II devices need a 510(k) premarket notification showing substantial equivalence; most Class III devices need Premarket Approval with clinical evidence. You cannot treat a CE-marked European analog as a US launch date.
Diagnostics add a second fork. An FDA-authorized companion diagnostic is, in FDA's own framing, essential to the safe and effective use of a therapy and is generally expected to move with that therapy. A kit sold into hospitals is a different P&L from a send-out lab whose COGS is people and machines. Do not invent "FDA facts" in the room; ask whether the path is 510(k), PMA, or lab-based, and whether coverage exists independent of clinical practice guidelines.
When candidates treat regulatory delay as an opex variance, I mark them down. A year of clock slip on a Class III launch often dwarfs a 200-basis-point COGS miss.
Capital equipment versus disposable changes the same clock into a different cash story. A capital console sells once and then lives or dies on procedures per installed unit; a single-use catheter sells every case. Interviewers notice when you pitch "market share" for a capital franchise without asking utilization of the base already sitting in labs.
Worked case: ClearLine and the GPO discount that cannot create volume
Prompt. ClearLine makes a single-use peripheral IVUS catheter. Case inputs: ASP $1,850, COGS $410, US procedures 44,000. The related inpatient episode pays the hospital $22,800 under the applicable MS-DRG; ClearLine is about 8% of that payment. A national GPO offers exclusivity if ASP falls 10%, promising +5,500 incremental procedures at contracted systems. Those systems already run peripheral labs at 91% slot utilization. Do you take the deal?
Order of attack. (1) Current contribution. (2) Contract math if volume is real. (3) Whether slots and operators exist. (4) Spillover risk to the next contract.
Math you can reproduce.
Contribution today: ($1,850 − $410) × 44,000 = $63.36m.
Contract ASP = $1,665. If volume becomes 49,500: ($1,665 − $410) × 49,500 = $62.12m. You destroy about $1.24m even when every promised procedure appears.
If the +5,500 are not incremental because labs cannot add slots or operators, you have cut price on a slice of the existing book and handed the GPO a reference price for the next IDN. That is worse than the $1.24m.
Recommendation. Decline the across-the-board 10%. Offer a growth rebate paid only on procedures above a twelve-month baseline at sites that add evening capacity or a second room, and only after a six-site pilot measures true incremental volume. Risk to flag: a competitor bundles the catheter with capital imaging and hides ASP inside a capital lease. Next analytic step is utilization per lab, not another TAM slide.
If you answer ClearLine as a CPG promotion, you take the GPO deal, cut ASP, and wait for procedures that clinical capacity cannot deliver. The interviewer is not testing whether you can multiply; they are testing whether you refuse a deal whose volume assumption the clinic cannot physically honor.
Ned's rule. Never cut ASP on a device that is already a single-digit share of the episode payment unless you can name the slot, the physician, and the code that creates the extra procedure. Price without capacity is charity to the GPO.
What a generic profitability tree quietly drops
- Buyer ≠ user ≠ patient. Finance, value analysis, and the implanting physician each hold a veto.
- Elasticity is switch, not demand. Patients do not order more surgeries because your catheter is cheaper.
- Capacity is clinical. A plant can mold 10,000 extra units that no lab can schedule.
- Companion tests gate someone else's margin. A diagnostic's P&L is often a rounding error next to the drug it enables; incentives stay misaligned unless you contract for them.
- Regulatory path is a strategy input. 510(k) versus PMA is not a footnote under "risks."
How I score the first ten minutes
| Move | What it signals | Typical mark |
|---|---|---|
| Asks who pays for the episode and whether the device is packaged | You know the product lives inside CMS math | Strong |
| Separates physician adoption from hospital finance | You can run a two-sided commercial story | Strong |
| Opens with 4P / consumer WTP | Wrong market metaphor | Weak |
| Takes a volume-for-price deal without checking lab utilization | Folklore pricing | Fail the case |
| Names 510(k) vs PMA as a timeline driver | You respect the clock | Strong |
| Invents reimbursement numbers without labeling assumptions | Overconfidence | Soft fail |
Firms publish practice-area marketing, not confidential scoring sheets. The table above is how I grade candidates in the room, not a claim about any one firm's current process.
Practice this on a scored case
Pick one mixed device prompt and force yourself to write, in order: (1) episode payment owner, (2) physician bottleneck, (3) regulatory path, (4) then ASP math. Do not touch contribution until the first three have a sentence each.
On CoachNed, start with a five-minute typed rep at /start, or run the live voice case at /interview. Structure and math drills live at /drills/structure and /drills/math. Everything is open for seven days, no card; then $120 for a recruiting season or $49 a month.
Frequently asked questions
What is a life sciences consulting case interview?
It is a case where the client makes or commercializes a medical device, diagnostic, or early biotech asset that must fit inside clinical workflows and payer rules. Interviewers expect episode economics and adoption constraints, not a generic CPG launch.
How is a life sciences case different from a hospital case?
In a hospital case the client usually receives the DRG or APC. In a life sciences case your client usually sells into that payment. Same payment vocabulary; opposite side of the invoice.
Do I need a science PhD to pass these cases?
No. You need to ask clean clarifying questions about indication, site of care, coding, and regulatory path, then do accurate arithmetic. Deep science helps on specialist tracks; it does not replace structure.
What reimbursement terms should I know for medtech cases?
MS-DRG for inpatient bundles, APC for outpatient, ASP as the manufacturer's selling price, and NTAP as a temporary inpatient add-on for qualifying new technologies. Label every figure you invent as an assumption.
Should I memorize FDA device classes?
Know the ladder: Class I lightest controls, Class II often 510(k), Class III usually PMA. Use the class to discuss time-to-revenue, not to recite regulation numbers.
Sources
- About this practice | McKinsey Life Sciences — firm description of life sciences project mix and team composition. Checked 2026-09-24.
- Healthcare & Life Sciences | Bain & Company — practice coverage across pharma, medtech, payers, and providers. Checked 2026-09-24.
- Medicare Payment Systems | CMS MLN — IPPS/MS-DRG and related prospective payment mechanics; FY 2026 MS-DRG count. Checked 2026-09-24.
- New Medical Services and New Technologies | CMS — NTAP criteria and 65% payment cap under 42 CFR 412.88. Checked 2026-09-24.
- Overview of Device Regulation | FDA — Class I/II/III controls, 510(k), and PMA pathways. Checked 2026-09-24.
- In Vitro Companion Diagnostic Devices | FDA guidance — definition of companion diagnostics and contemporaneous approval expectation. Checked 2026-09-24.
CoachNed is independent and not affiliated with McKinsey, BCG, Bain, or any firm named here.