Breaking into the U.S. healthcare and life sciences market, specifically as an international body, is daunting to say the least, discovers Sophia Kurz
Entering the US market for overseas companies is a difficult and complicated process, but one that can be achieved with advice and due diligence. A breakout session with US healthcare specialist Ernesto Chanona, Director of Business Development at CSSI Life Sciences, guided trade delegates through some of the footsteps and pitfalls in an extremely valuable meeting.
Non-US based companies already have a vast disadvantage breaking into the market as they potentially lack real estate, investors, and partners. For a company, particularly a small one, the key to success in the US is to start off with a strategic road map. “The road map prompts entities interested in entering US markets to narrow their plans and strategies,” said Chanona.
“The major points are to define goals and objectives, consider what the desired product attributes are that differentiate from other similar products, how you can create shareholder value, which stakeholders and market channels are important, and where the product will be marketed.”
Reasons to partner with the US specifically include incentives such as tax credits from various government bodies as well as government resources, building connections to local entrepreneurs, real estate, academic researchers, introductions to local investor groups, reimbursement, and supply chain access.
Entering the market – first steps
Research and partnerships are key in the early stages. Chanona advocates integrating with one of the many life sciences hubs across the country, where businesses will find strategic partnerships as well as real estate, talent, development incentives, introductions to stakeholders, all vital to accelerating the commercialisation of their technology.
He also stressed the importance of approaching the state government or the county government within a state where biotechnology hubs reside, as opposed to the federal government which is big and difficult to navigate.
One way for UK companies to enter the US market is by finding a US based company to represent and support them. As a result, UK companies are subjected to benefits such as Government support (which may mean funding), access to resources, US subsidiary establishment, and other assistance.
Partnerships with the service industry (such as CSSI Life Sciences) offer “established regulatory strategy for product development, whether it be MedTech or drugs, and then plug in all the CRO’s (contract research organisations) necessary for the appropriate testing for regulatory approval, and then foster those introductions to the payers and the buyers for those who are interested in those strategic assets.”
There are several other partnership options as well, such as in academia, government, and public-private partnerships, each with their own unique benefits. Along the way there is business support and funding for companies so it’s critical to be connected in this regard.
Tightening the mentor group who will help launch the technology is also a key component. “We find it’s not the technologies that fail but the founders who fail because they aren’t ready or prepared to have those conversations,” he said.
US investors like to see a commercial plan that incorporates regulatory approval in some form. CSSI takes companies to the JP Morgan Healthcare conference each January and organises partnering events that have raised more than $700m for them. “We don’t charge for taking businesses there but if they raise funds then we hope they will choose us as their regulatory partner,” he said.
It takes 10 years to commercialise a drug and around $1.4bn to achieve it, so less than 12 per cent of drugs entering Phase 1 are actually approved. Many companies fall into the ‘Valley of Death’ between discovery and pre-clinical research which is why a regulatory partner is so important.
Meetings with organisations such as the FDA are very structured and he stressed that companies should be clear on the regulation they think should sit around their product, as relevant regulation may not exist at that point. He advocated strongly having expert advice at this point, because if the FDA raise red flags it will take time and expense to overcome them and may eat up resources.
MedTech companies do not require proof of compliance at the time of regulatory submission but the FDA enforces compliance through random inspections, so again regulatory companies are invaluable to set up systems in advance. FDA fees are cheaper and approval more likely for domestic companies.
Funding and capital access
Trade organisations, biotech and tech development organisations may seem to be government institutions but are actually PPPs that handle public funds and are sheltered from the vagaries of political tides. The Maryland Technology Development Corporation is a prime example and is the venture capital part of the state. It doesn’t have the reach of VCs or private equity companies, but it invested $1700k in 2020 in six life science companies.
Such organisations also have market databases, pitch competitions, and grant labs. Academic and government labs can be found across the US and have a lot of programmes that support businesses. The NIH (National Institutes for Health) is a government organisation dedicated to turning discovery into health and has a pool of wide-ranging experts who can advise and work with new technology. They also have intellectual properties for licensing without demanding royalties, working not just with US companies but businesses all over the world.
The federal government provides funding via their SBIR programme in two phases for companies that have more than 50 per cent stock owned by a US citizen with more than 500 employees as a for-profit organisation. The Federal Lab Consortium is another group with their own funding programmes, with intellectual property available for licensing and specific lab programmes to help companies with their development. In addition, the US military has substantial budgets set aside for basic research science all the way through to the commercialisation if they are interested in purchasing it.
The US market or lack of one
Post FDA approval it’s a maze of opportunity and possibility. This is where the research comes in. “There isn’t such a thing as the US market,” Chanona says surprisingly. “Each hospital is a semi-independent universe.” For those companies engaged with the National Health Service in the UK, the concept of a fragmented health service is very familiar. “You need to look at individual regions and institutions and then grow from there,” he says.
Chanona advises researching individual institutions and gauging their needs. “If you look at Baltimore and Johns Hopkins, for example, you would need to connect with the Maryland Technology Council and the economic development corporations because they know the local market. That’s all you need to be successful.”
Dr Chanona was part of the team that signed the life sciences trade agreement between Maryland and the UK Midlands. “We were incredibly active at pairing our companies at trade delegations together,” he said. They visited several high profile events such as Arab Health in Dubai and were very proactive in putting their portfolios together to matchmake companies.
Entering the hospital supply chains
In the privatised US healthcare ecosphere, hospital systems are incredibly fragmented spaces. Departments don’t talk to each other, so sometimes it’s easier to find a physician champion and work with them to get a product or a solution considered at committee level by the hospital. Conversations with key personnel is the only way to achieve this, according to Dr Chanona.
Equally, it’s important to identify the CPT code for reimbursement even for a novel technology where possible. Reimbursement consultants are not cheap but hospitals won’t buy if they don’t know how they are going to be reimbursed, so knowing where the product or solution will fit in is vital for success. Primary care will have to code a medical device in the same way as a hospital, so again it’s important to know how reimbursement will be handled.
For small companies, keeping in contact with hospitals to know when they might need your technology is part of the process. For larger companies who can provide volume, there are distributors who will be able to help at scale.
Another key piece of advice is to establish relationships with procurement teams at government level, whether at city, county, state or federal level. Each has a procurement website with details of relevant people to create meaningful relationships.
Entering the US market could be a daunting process, but armed with knowledge and good relationships there is no reason why a company cannot navigate its way to success. There is plenty of funding available for technologies that fulfil a need, along with consultants in the regulatory and reimbursement fields to guide you through the process.