The commercialization continuum: beyond product registrations
Your product is approved, now what?
This is a question that can bring a painful realization to medical technology manufacturers and suppliers eagerly entering a new market. The appropriate preparation (or lack thereof) to what comes after an approval can determine the long-term viability for new company entrants.
In this article, we explore some questions that should be asked from the outset to ensure you have appropriate timelines, budgets and infrastructure to successfully launch in foreign markets. In this case, we focus on the Australian market.
First question, is who is going to pay for it?
Australian reimbursement can be the differentiating factor from other top medical technology economies, where the universal healthcare system (Medicare) could be the fastest and one of the most simplified reimbursement processes in the world.
However, it is not always the case.
The Australian regulatory approval, the Australian Register of Therapeutic Goods (ARTG) certificate, allows the medical device manufacturer to market their product to the public hospitals and healthcare sector immediately after approval.
However, ability to market to the public system, which makes up roughly 70% of the $25B Medical Technology Market (according to the Medical Technology Association of Australia) can be challenging to navigate.
The Australian system operates under a state or regional competitive tender process. This means timing to competitively bid for sales, could be in a one to three year cycle forcing you to await larger contracts. Furthermore, competitive tender purchasing decisions will be made based on the clinical and economic value of the products because Australia follows strictly value-based reimbursement.
Below are three scenarios that may result in your reimbursement pathway being more challenging than you think:
1. If there is not an appropriate Medical Services Advisory Committee (MSAC) and Medical Benefit Schedule (MBS) biller code for your device’s procedure.
This will require the manufacturer/sponsor to make an MSAC application to obtain a new code. The majority of applications are made by larger and established organizations that with appropriate resources to put behind this endeavour.
You can learn more about the MSAC process by watching our webinar: MSAC What Applicants need to know.
2. If the existing MBS codes do not provide adequate reimbursement.
A more in-depth strategy will need to be developed to explore how you could achieve supplemental revenues or influence the current reimbursement system to pay more for the device by showing how and why the technology provides significantly higher value for the patient and the health care system.
3. If your device has supplemental coverage through Australia’s Prostheses List.
Unlike the name may suggest, the Prostheses List covers most implantables and high-risk devices, not just prostheses. The determination of whether your device is covered is a key step in understanding your reimbursement landscape. Through this process, high-end devices are able to supplement the public reimbursement through private insurance coverage and therefore achieve highly competitive reimbursement pricing.
All devices that are covered by the Prostheses List and wish to be eligible, need to go through the Prostheses List application process which has specific criteria for inclusion. Requirements vary depending on the nature of the device but may include clinical data that has been published in peer-reviewed journals and in some instances, two years of clinical data may be required, which is often more than any regulatory clinical requirement.
So now that we have covered reimbursement and payments, let’s look at the actual sales and marketing process.
What about your Commercial Partner?
After mapping out the reimbursement strategy, the next question is selection of the appropriate commercialization strategy. This usually concerns two options: seeking a sales-and-marketing partner versus going direct-to-market.
Going direct to market:
As with most things, this pathway has pros and cons. Typically, this route is taken when the management team and organization have a level of confidence and competence that they can penetrate the market with a direct sales force. The top reasons companies opt for this strategy include the potential to have more control over the marketing and messaging of the product, to have an incentivized sales team that focuses on selling product, and potential higher profitability.
The drawbacks of this strategy are usually that it requires significantly more investment and a higher overhead commitment from the beginning.
The vast majority of companies do not generally go direct-to-market in the beginning. The reasons primarily revolve around the business risk associated with establishing the infrastructure and the accompanying overheads for initial product launches in a market that they are still getting to understand.
Most companies will secure a partner that has an already established salesforce, knows the market and has relationships with the target physicians, clinics, and health care providers.
The Distributor search:
The first crucial step is mapping the competitive landscape and identifying the distributors/partners that can successfully commercialize your product. This requires development of an intricate understanding of the dynamics of the market and a comprehensive identification of potential partners. The inner workings of the competitive landscape will be the main determinants for the search criteria for distributors.
If a distributor is identified and the courtship is successful, the next step is the negotiation of contract terms. This may include sales forecasts, minimum marketing efforts commitments and trade terms such as consignment, stock distributorship or commission-based relationships. Each of these terms has more or less prevalence by geographies and industry sections. The lack of knowledge of which are best practices can leave an organization vulnerable during the negotiation process.
To avoid a mistake, it is critical to understand each jurisdiction’s legal framework and requirements for the holding of registrations and/or licenses.
Who should hold the license?
This question should be carefully considered!
In Australia, the regulatory system requires a local sponsor/company to be the holder of the license for any medical technology approved by the Therapeutic Goods Administration (TGA). Among the requirements to holding the ARTG license include a physical address, and a point of contact for any postmarket surveillance actions in Australia. To illustrate the complexities of this dynamic, here are some points on the different options:
1. Distributors holding licenses:
Commonly distributors will offer to register the product for free, including holding the sponsorship. This may sound like a good, efficient option and is often very appealing. However, this places the Device Manufacturer in a bind for future flexibility. Some elements to consider:
- When the distributor is the product sponsor, the distributor holds exclusivity over that license. Meaning you cannot readily explore alternative distribution options unless you parallel register the product with a different sponsor. In some instances, this can take several months.
- If the distributor is underperforming, and you would like to change distributor, or if the sales are large enough that you would like to go direct-to-market, the distributor can hold the license as a negotiating token. TGA requires a physical signature of the Sponsor in order to transfer an ARTG license. Hence, at the whim of the distributor, this transfer could become very costly or impossible to obtain. This may force you to negotiate with the distributor a settlement arrangement for the transfer or require the regulatory approval from scratch.
2. Manufacturers hold the licenses:
Larger manufacturers may be able to justify the administrative and operational overheads of opening offices which allows them to hold the licenses, however, many find this to be unnecessary for initial market entry.
3. Third Party License Holders:
Engaging a third-party sponsor, provides the manufacturer with additional peace of mind, control and flexibility. Here are some of the advantages of this option:
- Third Party License holders can assign, transfer and allow non-exclusivity for distributors at the sole discretion of the manufacturers.
- When choosing a third-party regulatory firm to hold the license, you can ensure the regulatory submission is correct and that they are transparent to the manufacturer regarding any vigilance actions.
- The third party sponsor can use their QMS (quality management system) to provide crucial post-market activities.
- Finally, the processes must be managed and conducted within the regulatory requirements specific to the jurisdiction. In some cases, this means having different labelling and marketing requirements that need to be understood.
If you are considering marketing a new product or entering Australia, reach out to us. Our comprehensive service offering ensures that you are covered for all elements in the commercialization continuum. For many years we have been managing reimbursement and regulatory processes for clients. However, more recently we have built an arm for Commercialization Assistance Services (click here to learn more). We provide independent, impartial, non-biased services to search and identify commercialization partners, support the negotiation process, hold the ARTG sponsorship, and active management of post-market activities.
Looking to fly south for warmer weather? We have the skills in all aspects of Australian regulatory and reimbursement requirements and can assist you to prepare and file regulatory submissions to TGA. We can also hold Australian licenses on behalf of international manufacturers. Talk to us today about how to leverage international reviews to achieve TGA registration. Contact us to discuss your needs and how we can help. Email [email protected] or call 1 888-271-5063 (US toll free) ♦ 400-842 7017 (Beijing – toll free) ♦ +61 2 9906 2984 (Sydney)