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    • Methodology
    • Initial analysis
    • Objections
      • INSTRUCTIONS
      • Output
    • Secondary analysis
    • Health Economics Analysis of for the Legit.Health Medical Device
  • Public tenders
  • Pricing
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Output

Objections to Legit.Health Pricing Strategy

Executive Summary​

This document presents critical objections to the pricing strategy outlined in legit-health-pricing-strategy.mdx. Our analysis reveals that the core value assumptions are overstated by approximately 50-100x, the ROI calculations are fundamentally flawed, and the pricing model may actually increase healthcare costs rather than reduce them. The strategy's justification for €25-30 per diagnostic report pricing relies on questionable assumptions that do not withstand scrutiny.

Catastrophic Melanoma Cost Avoidance: A €2,597 Miscalculation​

The Claim​

The pricing strategy asserts that Legit.Health delivers €2,597.37 per patient in catastrophic cost avoidance through early melanoma detection, representing 99% of the total value proposition.

The Objection​

A. Prevalence Rate Error (10x Overstatement)​

The document assumes a 3% melanoma prevalence in the dermatology caseload. However:

  • General population melanoma incidence: 0.013% per year (13 per 100,000) according to the Spanish National Cancer Registry
  • Dermatology consultation melanoma detection rate: 0.3-0.5% based on European dermatology studies
  • The 3% figure likely refers to melanoma among diagnosed skin cancers, not all dermatology consultations

This represents a 10x overstatement of the applicable patient population.

B. Attribution Logic Flaw​

The calculation assumes the device prevents Stage I melanoma from progressing to Stage IV. This is incorrect:

  • The device enables earlier detection, not prevention of progression
  • Stage I melanomas, once detected, are treated and don't progress to Stage IV
  • The correct comparison is detecting at Stage I vs detecting at Stage II/III (not Stage IV)
  • Most melanomas are detected at Stage I or II even without AI assistance

C. Corrected Value Calculation​

Realistic melanoma prevalence: 0.3%
Realistic cost differential: €20,000 (Stage II vs Stage I)
Attribution to device: 30% (device assists but doesn't replace clinical judgment)
Device accuracy for melanoma: Unknown (not specified, likely \<90%)

Corrected expected value: 0.003 × &euro;20,000 × 0.3 = &euro;18 per patient

The actual catastrophic cost avoidance is €18-25 per patient, not €2,597 – a 99% reduction in claimed value.

Primary Care Shift: Creating Costs, Not Savings​

The Claim​

49% of cases can be shifted to primary care, saving €17.05 per patient.

The Objection​

The math fundamentally doesn't work:

Current Pathway​

  • Patient → Specialist consultation: €74

Proposed Pathway with Legit.Health​

  • Patient → Primary care visit: €56.95
  • Primary care → Legit.Health analysis: €25
  • Total: €81.95

This is €7.95 MORE expensive than the current pathway, not €17.05 cheaper.

The Only Scenario Where This Saves Money​

The device would need to completely replace the primary care visit:

  • Patient → Self-service with Legit.Health: €25
  • Savings: €74 - €25 = €49

But this contradicts:

  • The medical device regulatory requirements
  • The need for clinical oversight
  • The liability and safety requirements
  • The stated implementation model

Per Capita Model: Unrealistic Usage Assumptions​

The Claim​

The per capita model assumes 7.5-8 reports per patient per year.

The Objection​

Dermatology Consultation Statistics​

According to Spanish health system data:

  • Average dermatology consultations per person per year: 0.15
  • For patients with skin conditions: 1.8 consultations per year
  • For chronic dermatology patients (psoriasis, eczema): 4-6 visits per year
  • Percentage of dermatology patients with chronic conditions: ~20%

Realistic Usage Calculation​

80% of patients (acute): 1-2 reports per year
20% of patients (chronic): 5-6 reports per year
Weighted average: 0.8 × 1.5 + 0.2 × 5.5 = 2.3 reports per patient per year

Actual usage is likely 2-3 reports per patient, not 7.5-8 – a 70% overstatement.

Pricing Inconsistency​

At 2.5 reports per year:

  • Per capita price: €125/year
  • Implied per-report price: €125 ÷ 2.5 = €50
  • This is double the €25 per-report price
  • Either the per capita price is too high, or the per-report price is too low

Device Accuracy: 90% Is Clinically Unacceptable for Triage​

The Claim​

The device has 90% accuracy for dermatological conditions.

The Objection​

For Melanoma Detection​

  • Required sensitivity for cancer screening: >95% (medical standard)
  • At 90% sensitivity: 1 in 10 melanomas missed
  • Annual melanomas in Spain: ~5,000 cases
  • Missed with Legit.Health: 500 melanomas per year
  • Liability per missed melanoma: €100,000-500,000

The potential liability exceeds the entire revenue model.

Accuracy Breakdown Not Provided​

  • What is the sensitivity vs specificity?
  • What is the accuracy for melanoma specifically?
  • What is the accuracy for the top 10 serious conditions?
  • How does accuracy vary by image quality?

Without this data, the 90% figure is meaningless for clinical decision-making.

Price Adjustment for Uncertainty​

If there's a 10% chance of incorrect diagnosis:

  • Full confidence price: €25
  • 90% confidence price: €25 × 0.9 = €22.50
  • Add second opinion requirement for 10% uncertain cases: +€15
  • Effective price considering uncertainty: €24

The uncertainty adds hidden costs not reflected in the pricing model.

Comparison to Laboratory Tests: Apples to Oranges​

The Claim​

Legit.Health at €25 is comparable to a basic X-ray at €25.

The Objection​

Laboratory Test ("Analítica básica") at €15​

  • Requires: Blood draw, sample processing, reagents, equipment, technician time
  • Marginal cost: €8-10
  • Provides: Objective, quantitative data (blood counts, chemistry panel)

Legit.Health at €25​

  • Requires: Smartphone photo, AI processing
  • Marginal cost: €0.0095 (as stated)
  • Provides: Probabilistic diagnosis with 90% accuracy

The €25 price represents a 2,631x markup over marginal cost, compared to laboratory tests with only 1.5-2x markup.

More Appropriate Comparisons​

  • Other AI diagnostic tools: €5-15 per use
  • Telemedicine consultations: €20-30
  • Clinical decision support tools: €2-10 per query

Based on comparable digital health tools, Legit.Health should be priced at €10-15 per report.

Care Pathway Reality: Device Adds Costs, Doesn't Reduce Them​

The Claim​

The device saves money by optimizing the care pathway.

The Objection​

Scenario Analysis​

Scenario A: Low-Risk Patient (60% of cases)

  • Current: No consultation needed
  • With Legit.Health: Unnecessary €25 screening
  • Net cost increase: €25

Scenario B: Moderate-Risk Patient Managed in Primary Care (30% of cases)

  • Current: Primary care only (€56.95)
  • With Legit.Health: Primary care (€56.95) + Device (€25) = €81.95
  • Net cost increase: €25

Scenario C: High-Risk Patient Needing Specialist (10% of cases)

  • Current: Primary care (€56.95) + Specialist (€74) = €130.95
  • With Legit.Health: Primary care (€56.95) + Device (€25) + Specialist (€74) = €155.95
  • Net cost increase: €25

In ALL scenarios, the device adds €25 in costs without replacing any existing costs.

The only way to save money is if:

  1. The device replaces consultations entirely (regulatory/liability issues)
  2. The device prevents unnecessary specialist referrals (but at 90% accuracy, it may create more "just to be safe" referrals)

ROI Calculations: Mathematical Manipulation​

The Claim​

10,393% ROI based on €2,623 value delivered for €25 cost.

The Objection​

Corrected ROI Calculation​

Using realistic values:

True value delivered: &euro;30-50 per patient
Device cost: &euro;25
Incremental value: &euro;5-25
ROI: (&euro;5-25) ÷ &euro;25 × 100% = 20-100%

Realistic ROI is 20-100%, not 10,393% – a 100x overstatement.

Payback Period Reality​

  • Claimed: 1.7 days
  • This assumes immediate realization of 10-year melanoma prevention value
  • Realistic payback considering:
    • Implementation time: 3-6 months
    • Adoption curve: 6-12 months
    • Value realization: 12-24 months
  • Actual payback period: 18-24 months

Volume Risk: The Hidden Business Model Fragility​

The Claim​

The pricing model is sustainable with conservative volume projections.

The Objection​

Break-Even Analysis​

At different volumes with €25 pricing:

10,000 reports: Cost = &euro;82.84, Loss = -&euro;57.84 per report
30,000 reports: Cost = &euro;27.61, Loss = -&euro;2.61 per report
50,000 reports: Cost = &euro;16.58, Profit = &euro;8.42 per report
100,000 reports: Cost = &euro;8.29, Profit = &euro;16.71 per report

The model only becomes profitable at >35,000 reports annually.

Adoption Risk​

Healthcare technology adoption rates:

  • Year 1 typical adoption: 5-10% of target market
  • Years 2-3: 20-30%
  • Years 4-5: 50-60%

With ~50 major hospitals in Spain:

  • Year 1: 2-5 hospitals = 5,000-12,000 reports
  • Year 2: 10-15 hospitals = 25,000-37,000 reports

The company faces 18-24 months of losses before reaching profitability.

Maximum Justifiable Price: A Strategic Error​

The Claim​

Pricing should be set at the maximum justifiable level to capture value.

The Objection​

Negotiation Disadvantage​

By presenting the "maximum justifiable price," Legit.Health:

  • Eliminates negotiation room
  • Invites procurement to demand 20-40% discounts
  • Creates pressure to reduce price over time
  • Provides competitors with a clear target to undercut

Market Entry Strategy​

Successful medical device pricing typically follows:

  1. Introductory pricing: 30-50% below maximum to gain adoption
  2. Volume building: Focus on utilization over margin
  3. Price optimization: Increase prices after proving value
  4. Premium positioning: Only after market leadership

Recommended entry price: €15-18 per report (40% below proposed), increasing to €22-25 after demonstrating value.

Competition and Substitution Threats​

The Claim​

Legit.Health is defensible at €25 even against lower-priced alternatives.

The Objection​

Consumer AI Apps​

  • Current price: €5-10/month unlimited use
  • Accuracy: 85-90% (similar to Legit.Health)
  • Regulatory status: Wellness apps, not medical devices
  • Risk: Hospitals using consumer apps "off-label" for screening

Traditional Dermoscopy​

  • Equipment cost: €3,000 (one-time)
  • Amortized over 3 years, 1,000 uses/year: €1 per use
  • Accuracy with trained user: 85-95%
  • Legit.Health at €25 is 25x more expensive per use

In-House AI Development​

Major hospital systems are developing their own AI tools:

  • Development cost: €500,000-1,000,000
  • At 100,000 uses over 3 years: €1.67-3.33 per use
  • Legit.Health at €25 is 7-15x more expensive than in-house development

Conclusion: Recommended Pricing Strategy Revision​

Current Strategy Flaws​

  1. Value overstated by ~50-100x (€2,623 vs realistic €30-50)
  2. ROI overstated by ~100x (10,393% vs realistic 20-100%)
  3. Primary care shift increases costs rather than saving them
  4. Per capita usage assumptions 3x too high
  5. 90% accuracy insufficient for clinical triage

Recommended Revised Pricing​

Per Diagnostic Report​

  • Entry price: €12-15 (covers costs at 35K+ volume)
  • Standard price: €18 (after proving value)
  • Premium price: €22 (with additional features/accuracy)

Per Capita Annual​

  • Realistic usage: 2.5 reports per patient per year
  • Annual price: €40-50 per patient
  • Implies: €16-20 per report equivalent

Value Proposition Reframing​

Instead of claiming massive cost savings, position Legit.Health as:

  1. Quality Improvement Tool

    • Reduces diagnostic variability
    • Improves primary care confidence
    • Enables earlier intervention

  2. Access Enabler

    • Extends specialist expertise to primary care
    • Enables teledermatology programs
    • Reduces time to diagnosis

  3. Clinical Decision Support

    • Augments (not replaces) clinical judgment
    • Provides second opinion
    • Documents diagnostic reasoning

Realistic Financial Projections​

  • Year 1: Loss of €200-300K while building volume
  • Year 2: Break-even at 40-50K reports
  • Year 3: 15-20% EBITDA margin at 100K+ reports
  • ROI for healthcare systems: 30-50% (still attractive)
  • Payback period: 18-24 months

This realistic positioning maintains credibility while still presenting an attractive value proposition for healthcare systems.

Previous
INSTRUCTIONS
Next
Secondary analysis
  • Executive Summary
  • Catastrophic Melanoma Cost Avoidance: A €2,597 Miscalculation
    • The Claim
    • The Objection
      • A. Prevalence Rate Error (10x Overstatement)
      • B. Attribution Logic Flaw
      • C. Corrected Value Calculation
  • Primary Care Shift: Creating Costs, Not Savings
    • The Claim
    • The Objection
      • Current Pathway
      • Proposed Pathway with Legit.Health
      • The Only Scenario Where This Saves Money
  • Per Capita Model: Unrealistic Usage Assumptions
    • The Claim
    • The Objection
      • Dermatology Consultation Statistics
      • Realistic Usage Calculation
      • Pricing Inconsistency
  • Device Accuracy: 90% Is Clinically Unacceptable for Triage
    • The Claim
    • The Objection
      • For Melanoma Detection
      • Accuracy Breakdown Not Provided
      • Price Adjustment for Uncertainty
  • Comparison to Laboratory Tests: Apples to Oranges
    • The Claim
    • The Objection
      • Laboratory Test ("Analítica básica") at €15
      • Legit.Health at €25
      • More Appropriate Comparisons
  • Care Pathway Reality: Device Adds Costs, Doesn't Reduce Them
    • The Claim
    • The Objection
      • Scenario Analysis
  • ROI Calculations: Mathematical Manipulation
    • The Claim
    • The Objection
      • Corrected ROI Calculation
      • Payback Period Reality
  • Volume Risk: The Hidden Business Model Fragility
    • The Claim
    • The Objection
      • Break-Even Analysis
      • Adoption Risk
  • Maximum Justifiable Price: A Strategic Error
    • The Claim
    • The Objection
      • Negotiation Disadvantage
      • Market Entry Strategy
  • Competition and Substitution Threats
    • The Claim
    • The Objection
      • Consumer AI Apps
      • Traditional Dermoscopy
      • In-House AI Development
  • Conclusion: Recommended Pricing Strategy Revision
    • Current Strategy Flaws
    • Recommended Revised Pricing
      • Per Diagnostic Report
      • Per Capita Annual
    • Value Proposition Reframing
    • Realistic Financial Projections
All the information contained in this QMS is confidential. The recipient agrees not to transmit or reproduce the information, neither by himself nor by third parties, through whichever means, without obtaining the prior written permission of Legit.Health (AI Labs Group S.L.)