Nothing ventured, nothing gained: What do European life science companies need to do to succeed in the US?
Michael Vent (Founder and Managing Director, BEO BERLIN) talks to Mark Lesselroth (President & CEO, BioPortUSA).
Don't just look at the FDA, look at the market.
Hello Mark. We have been working with you and your company BioPortUSA for several years now when it comes to paving the way for European manufacturers to enter the USA. I have often heard you say that you don't just look at the FDA (Food and Drug Administration), look at the market. What exactly do you mean by that?
Hello Michael. Well, I'd like to expand a little to give you an idea of how we think. I was talking to a friend in Germany the other day who was raving about the benefits of a particular microstent for glaucoma patients. It's a device that, in combination with cataract surgery, can lower a glaucoma patient's eye pressure. The friend focused on the features and benefits for the patient and the doctor. In the United States, an alternative product is widely available and its stock was trading at $82.45 on 2 July. 12 days later it was down to $57.82 and another 14 days later it had fallen to $47.99. What had happened? It was rumoured that CMS (Center of Medicare and Medicaid Services) was going to cut reimbursement from $500/treatment to $20. Since both products use the same CPT billing code, it is very likely that very few doctors in the US will continue to use this product as part of their procedure since they will earn next to nothing if this CMS change goes through. In Germany, no one usually cares about the stock price or the reimbursement code! They focus on what a great technology they have and how it will help the patient.
Okay, there's certainly something to that. The technology and its potential for patients are very important to us. That's what medical technology should be all about, right?
Yes, sure, but when you're dealing with a capitalist market economy like the United States, you have to factor the importance of money into the business plan. The previous example should make it clear that America is all about the almighty dollar, even when it comes to people's health. If a European company doesn't consider the impact its technology will have on payers (insurance companies) and users (doctors), it's in for a rude awakening.
All right. The topic is not entirely foreign here. Here, too, we have often read "lowest price wins the contract", especially in tenders. All too often, unfortunately, the quality of supply suffers as a result. As a European company, how should I protect myself from these surprises? Due to their volatility, stock market prices alone cannot be the only decision criterion, can they?
No, certainly not. Another factor is risk. How much risk are you prepared to take in order to be successful! Most European life science companies are extremely risk averse, which makes it very difficult for them to realise their full potential in the United States. If they take a very pragmatic approach and do the necessary homework to see what the market looks like, what it has to offer and how much needs to be invested to reach certain sales targets, then I think it's worth taking the risk. Unfortunately, it's hard to do something that is rooted differently in your own culture, especially when it comes to money.
In America, the saying goes "if it ain't broke, don't fix it."
Well, our fear of risking something has to be reduced. Our start-ups and innovation-friendly companies also risk a lot every day by investing in new technologies. But isn't it also promising to provide something groundbreaking, to provide the American doctor and patient with something they simply haven't had before?
Over the years, I have seen all too often that a wonderful technology developed in Europe never saw the light of day in the US because it turned out to be a solution for which there was no problem. In other words, in America, the adage is "if it ain't broke, don't fix it." In Europe, scientists and engineers are constantly trying to improve technology without necessarily looking at how it affects the cost of doing business. Avoid this mistake. In America, the healthcare industry is all about money. If your product can't help anyone make or save money, you most likely won't have much success in the US.
That may sound logical, but our companies are not flying blind. We also have to ask ourselves who needs what for what? What does it cost and what are the advantages of a new development? It's not that much different on both sides of the Atlantic.
Michael, I think it's about the cultural differences between Western Europe and the USA, which often have the effect that Europeans believe too much that they know what the United States is and how it works. After all, you've been to Disney World, the Grand Canyon and New York City. The truth is, however, that most Europeans are unfamiliar with the US and are therefore lulled into a false sense of security when it comes to planning their market entry into the American healthcare sector.
One of the biggest mistakes they make is to view the healthcare industry like any other industry, be it automotive, construction or electronics. They do recognise that there is a regulatory agency called the FDA , but in many cases they believe that once they get FDA approval, which is not easy, all they have to do is find a distributor and they're on their way. If only it were that easy.
We Americans are very brand orientated.
That's where you're right. In countless conversations, the tenor is that the FDA is the first hurdle that needs to be overcome. However, it is often the first question asked in discussions with potential partners: "Do you have FDA approval?"
That may well be the case. But I think it can also be a strategy to give a rejection without being rude. Nobody likes to hear "your product has no chance". I'd rather take the help of the big authorities. However, European medical technology companies need to understand the US healthcare market if they want to be successful: It's a complicated process that involves not only regulatory approval, but also reimbursement, intellectual property, marketing, branding and customer service, just to name a few. This means that a company must be willing to take some risk, be prepared to spend at least a mid-six-figure sum on branding, and have the necessary staff on both sides of the Atlantic to ensure success. This also means that they should have a commercialisation plan for how they will bring their product to market. Part of that plan is to do market research ahead of time to see what the market looks like; find out who the competition is; make sure your intellectual property doesn't infringe on that of an American competitor; determine the best way to go to market from a distribution channel perspective; and be prepared to invest a lot of money in branding and marketing to get the attention of potential customers, key opinion leaders and distributors. We Americans are very brand orientated, and unless a foreign company decides to private label its technology, it must make an effort to build its brand so that physicians can use it and distributors can sell it. This of course costs money, usually a lot of money, which the typical European company is reluctant to spend because they don't know what they are getting out of their investment.
American companies understand that they have to invest money in expanding into foreign markets if they want to have any chance of success.
Do American companies do it differently? Do American companies care about cultural differences between Germany and France, for example?
I can imagine many people saying, "But Americans are no different when they try to enter a foreign market." There is certainly some truth to that statement, but I can confirm that American companies understand that they need to invest money in expanding into foreign markets if they want to have a chance at success.
When I sell you something, I speak your language.
So you're saying that preparing to make the move across the Atlantic, in one direction or another, has to be much more extensively planned and can't be done on the side. We have to invest a lot of time, money and understanding for foreign customs and ways of thinking.
Absolutely. Willy Brandt, the former mayor of Berlin and Chancellor of Germany, once said: "When I sell you something, I speak your language. When I buy, you have to speak German." I think his remark was indicative of the fact that companies that want to operate in a foreign market need to be aware of cultural differences in order to be successful in that market.
A nice local conclusion to which I have nothing to add. Thank you very much Mark.
Read more:
FDA changes definitions for medical devices with software
FDA- 510(k) simplifications through guidance
(No ratings yet)
Loading...
