Many types of medical devices (e.g., orthopedic implants, stents, and pacemakers) have significantly higher costs and more frequent product innovations than commodity items. These physician preference items (PPI) are procured through a unique supply chain, in which physicians select which products updates to adopt, based upon clinical preference. PPI manufacturers are motivated to update products frequently to remain competitive and enhance revenues by incorporating new product features embedded in the PPI. Due to the PPI updates, physicians must progress through a learning curve after adopting a new product generation. Often, manufacturers will employ sales representatives to assist physicians with PPI learning. However, hospitals are left to address the increasing costs associated with the new product generation.

This work uses a game-theoretic approach to understand how an average physician's learning curve affects the manufacturer's optimal product update pace. Additionally, the impacts of sales representatives and hospital cost control efforts are studied. Results indicate that not only is the manufacturer's product update pace dependent upon physician learning, but also both the manufacturer and the physician benefit when a new PPI product generation requires a shorter amount of time to be mastered. Finally, we see that a hospital's PPI cost control strategy may need to vary for different devices, based upon their objectives as either a value-focused or research-focused hospital.