The United States medical market stands as a significant opportunity for international companies, given its immense size and profitability. With healthcare expenditures reaching $3.8 trillion in 2019, representing nearly half of global healthcare spending, the US market is indeed alluring. However, despite this substantial investment, the US healthcare system faces challenges in delivering quality care, with health outcomes often lagging behind those of other industrialized nations. This dynamic underscores both the promise and the complexity of entering the US market. This disparity drives the average margin for healthcare sales to over twice that of Germany – to over 70 per cent.
Entering the US medical market poses significant challenges, particularly in establishing the right sales organization. Estimates suggest that small foreign manufacturers should anticipate expenditures ranging from $2 million to $5 million over the first 36 months, highlighting the financial risks involved. Moreover, data indicates that over 80 per cent of international companies attempting to enter the US market fail to achieve profitability, emphasizing the importance of a well-thought-out strategy.
Often people consider the US regulatory landscape as the primary obstacle. While challenging, the regulatory process is predictable and not wildly different from other processes. There are thousands of very competent consultants who can achieve regulatory approval for you in a predictable timeframe and cost.
The primary hurdle, and one that is almost universally unexpected for international companies, lies in understanding the nuances of the US sales landscape. Unlike in many international markets where distributors actively sell and create demand, US distributors typically focus on order fulfillment, expecting others to generate demand. This fundamental difference can leave foreign companies perplexed, as they grapple with the need to build demand while navigating the intricacies of the market.
However, amidst these challenges lies a potential solution: the two-tiered approach to sales organization. By leveraging independent representatives for demand creation and distributors for logistics, companies can navigate the complexities of the US market more effectively.
Independent sales representatives, often referred to as reps, play a crucial role in the success of companies entering the US market. These professionals operate as contractors rather than employees, leveraging their extensive networks and industry expertise to promote and sell products on behalf of manufacturers. With established relationships across various market segments, independent reps possess invaluable insights into customer needs and preferences, enabling them to effectively communicate the value proposition of products to potential buyers. Their autonomy allows them to focus on specific territories or market segments, tailoring their sales approach to suit local preferences and market dynamics. By partnering with independent reps, companies gain access to a cost-effective and scalable sales force without the overhead costs associated with hiring and managing a direct sales team. Additionally, independent reps often bring years of experience and industry knowledge to the table, further enhancing their effectiveness in driving sales and market penetration.
In conclusion, while the US medical market presents its share of obstacles, it also offers significant potential for growth and profitability. The key to success lies in building a sales organization that can sell to the various government entities, the GPOs (that represent over 15 per cent of total buying power) as well as all the other potential customers that you face in this giant and profitable market. With careful planning and the right partners, international companies can seize the opportunities available in this dynamic market.
Zach Selch is an international sales growth leader, the Principal at Global Sales Mentor, and a trusted partner in navigating the complexities of the US medical market and achieving success in this lucrative arena. He will speak at FIME 2024 on June 20 about building a US sales organization for rapid profitable commercialization.
Sign up here to register for FIME 2024, the largest medical trade show in the US, and learn more about the latest trends disrupting the industry.
