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Originally Published IVD Technology September 2005
Roundtable: Global Diagnostics
Selling in the global marketplace
Flexibility and patience are key for IVD companies looking to expand their reach overseas.
For U.S. diagnostics companies pursuing opportunities overseas, language is often the least obtrusive barrier in bringing a product to market. Variations in healthcare infrastructure, cultural perceptions, and disease demographics among countries mean that an IVD might enjoy acceptance in one region while encountering resistance in another. A company’s sensitivity to the regulatory and social nuances of a region is vital and serves as a prerequisite to its wider global marketing efforts.
Unfortunately, sufficient data on developing regions are in short supply. As a result, the responsibility for conducting market research often falls to IVD companies themselves.
To learn more about the issues surrounding global markets, IVD Technology invited three diagnostics sales and marketing executives to share their observations. They also offer opinions on assessing the potential of different regions, the importance of foreign thought leaders, and how to keep the promise of the Chinese market in perspective.
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| Gregory Gosch is the vice president of marketing and sales at Luminex Corp. (Austin, TX). He has previously held marketing and sales leadership positions at Nanogen, Chiron, and Bio-Rad Laboratories, with a focus on molecular diagnostics and research. He holds an MBA and a Master’s of Healthcare Administration from the University of Minnesota, and a BA in molecular, cellular, and developmental biology from the University of Colorado. | Michael Groves, PhD, has over 25 years of experience in the IVD industry, having worked for Coulter Electronics, Ortho Diagnostics, i-Stat, and Abbott Laboratories. Over 20 of these years have been spent in the area of point-of-care testing, with over 10 years involved in international sales and marketing. He is now vice president of sales and marketing at Response Biomedical Corp. (Burnaby, BC, Canada), where he is responsible for commercial operations. | Joe Henkhaus is senior director of strategic marketing for Celera Diagnostics (Alameda, CA), where he manages new product marketing and market development. His responsibilities include overseeing molecular product portfolios in the infectious diseases, genetics, and genomics areas of clinical diagnostics. |
IVD Technology: What challenges do IVD companies encounter in marketing their products overseas?
Joe Henkhaus: Each region of the world, whether it be in Europe or Asia or Latin America, is different. A lot of times, products are manufactured with the idea that “one size fits all.” Each market differs in how the products are used and how they’re reimbursed. Sometimes, competition in a particular region is local, not necessarily global. All of these can be a challenge for manufacturers.
Gregory Gosch: Regulatory policies differ from country to country, and that can makes things tricky. Distribution, particularly in Asia, can be a real challenge. How a company deals with the social issues surrounding distribution is key to its marketing plan.
Michael Groves: In addition to what has already been mentioned, probably the greatest challenge is in deciding how to set up outlets in other countries—whether you’re going to use a mixture of direct and indirect or fully indirect marketing. As Greg just mentioned, distribution in certain countries can be very difficult. China is one of those areas. In European countries, it is much easier to interface directly with customers.
In your experience, how can IVD companies address these obstacles?
Henkhaus: First of all, it’s important when designing a product to be aware that you may have something that fits a U.S. customer base quite well but could fare much worse in a place that’s highly decentralized. Sometimes, this means producing multiple products rather than trying to make one that fits all areas of the world.
For issues regarding reimbursement, regulation, and competition, you need to place a lot of that into the hands of the local marketing groups. You may have a global perspective coming out of the home office, but you have to provide local marketing groups with the proper tools. It’s important to support them with a core positioning of the product, but they must also have the freedom to produce good region-specific marketing plans.
Groves: The majority of countries outside of the United States are much more social oriented than the United States. As a result, the issues that we put in front of customers here are not necessarily the ones that customers are going to respond to in other countries.
So, indeed, having a local marketing presence, particularly one that understands the cultural nuances and the huge differences in healthcare systems for reimbursement, is critical to success in those markets.
Gosch: The U.S. perspective of healthcare tends to be that high tech and high quality are best. In a lot of other countries, the concern is more about how to provide minimal, yet adequate, healthcare for the least cost. This becomes particularly pronounced when factoring in social, governmental, and reimbursement issues specific to certain countries.
Henkhaus: To take that even a step further, lots of times a company will introduce automation to address large U.S. laboratories’ desire for labor savings. However, outside the United States, labor savings may not be the issue but instead standardization and accuracy of results. The point is, you need to be aware of all of the customers’ issues.
Is this something that goes into the calculations for entering a foreign market? That having to significantly change a product might make an overseas launch not worth it?
Henkhaus: Absolutely. You have to look at the big picture. For example, genetic screening tests for cystic fibrosis are mandated in the United States and there is a certain set of mutations that the American College of Medical Genetics (Bethesda, MD) recommends. However, if you go outside the United States, those particular genetic mutations that you would be searching for may not be as frequent. Therefore, those countries might say to you, “Well, we really need the kit or the reagents to detect our unique mutations.” From a global marketing perspective, you have to step back and consider the feasibility of the request.
It can be a difficult trade-off. Sometimes you have to decide either not to enter that market or to maybe delay entry because you’re prioritizing greater opportunities. U.S. companies have a tendency sometimes to be U.S.-centric. The IVD market in the United States is large and can be accessed fairly easily. In other markets, the cost of marketing your product may be a little higher and the opportunity may not be as great. Still, you have to create a balance if you want to be a global company.
Gosch: Continuing with the cystic fibrosis example that Joe laid out, if you go to other countries, not only are their mutations different, but the prevalence rates for the disease are a lot lower, making it a lower priority. However, there are other genetic diseases, such as alpha thalassemia or beta thalassemia, which have a much higher prevalence rate overseas than they do in the United States.
Thus, some U.S.-centric tests are not a priority for laboratories overseas while certain other tests with limited use in the United States have much more potential in other countries. As diagnostics progresses and moves to individualized testing, these regional differences in demand are going to become even more pronounced and it will become an even greater challenge to meet the needs of multiple countries.
One challenge that has been mentioned is setting up distribution outlets overseas and deciding whether to take a direct or indirect route to market. How do you make this decision?
Groves: Part of the decision-making process is figuring out the sort of margin you’re going to get out of a country, and asking yourself where you are in the business cycle within that region: For example, have you devoted enough business that you could actually take a product direct?
Another point to consider is the hospital payment cycles, which can be as long as one year. Unless a company can bankroll that, it’s much better off dealing with a distributor that is used to working in such an environment.
The Asian markets in particular pose significant challenges because of the way they conduct business. China and South Korea are countries where codes of ethics can be very different. For an ethical company in the United States or Canada, this creates significant challenges.
Gosch: A company has to address not only the decision of direct versus distribution, but also the evaluation of many different distribution options. In markets such as China or the Middle East, there are a lot of distributor options. You need to evaluate who’s going to be able to provide adequate technical support, adequate sales staff, and adequate follow-through.
Many distributors will say they’re number one for given types of products, but really drilling down to who’s the best and who can give you what you need is a major challenge.
Groves: I couldn’t agree more. It’s a huge challenge and it takes an enormous amount of work. I’ve found that one of the best ways to get through that process is to talk to customers in those countries to understand whom might they buy from, whom they trust. Being approached by the distribution companies directly makes it very difficult to sort out the wheat from the chaff.
Market Research
In analyzing overseas markets, how can IVD companies perform the necessary research and acquire relevant information?
Gosch: It’s no easy task. If you look at the companies that produce research reports on IVD markets, by far the most information is on the United States. To some degree these reports break out Europe—at least Western Europe—and Japan, but beyond that you get very, very broad brush strokes.
So, most companies have to get feet on the street overseas—to go out and leverage existing relationships, network with local experts, and triangulate the information in an effort to gauge what people are excited about, what the government is focused on, and where reimbursement is likely to follow.
Groves: One of the approaches when working with distributors is to be articulate about developing a well thought out business plan. That way, we can understand what the market is about, what’s driving it, what are the potential volumes that are available. As Greg mentioned, putting feet on the ground and visiting with distributors helps qualify the information collected from them.
Getting information from outside of the United States is difficult because such databases don’t exist. On top of that, in many of the specialty areas we’re involved in, particularly in the point-of-care area where we’re advancing a new way of testing, we find that market research companies don’t ask the right types of questions. They don’t ask process-oriented questions or questions about how we’ll be able to change a market from where it is today to where we would like it to be in the future.
You all seem to agree that conducting good research can be a difficult task. How can IVD companies then go about applying such data to their marketing efforts? And in a similar vein, how can IVD companies work with their overseas subsidiaries and partners to tackle reimbursement, regulatory, and social issues?
Henkhaus: If a company has a core position and a strategic direction in which it’s headed with its product, that’s good. However, I think that if you don’t accept local input in establishing that position, you’re setting yourself up for failure.
So, assuming that you’ve set yourself in the right direction, it’s important to support the local marketing groups and give them some leeway to challenge the core positioning of a particular product. It’s a balancing act, but overall I’m a believer that local groups should be able to respond more quickly to the market changes. The company has to make sure it provides them support and ensure at the same time that local marketing decisions will fit into the core positioning.
Groves: Related to this, it’s important to have international marketing people spend time back at the head office. Otherwise, some requests might be treated as unimportant when, in fact, they can make a huge difference in how marketing might proceed in a particular country. Familiarizing U.S. and international marketers with the psyche and culture of each country is important; otherwise, a great deal of missed communication will occur.
Gosch: I agree. The flip side is making sure that the people who are in the home-office business unit—the core marketing people or the strategic marketing people—get out and familiarize themselves as well with the key markets overseas. I’m sure we’ve all had lots of experiences with subsidiaries saying that they feel they’ve been forgotten, that they don’t get communicated with enough and that they are left out of important decisions. It takes an active effort to make sure they stay involved in an effective way.
Public Perception
From a marketing perspective, do potential IVD customers—both professionals and end-users—in overseas markets have any preconceived notions about diagnostics? Are they educated about the value of IVD products?
Groves: Being involved in the point-of-care business, there is this huge difference in perception of the value of tests—not so much of a test’s inherent value, but of the speed with which the results arrive. Some countries oppose the move to more-rapid testing results, primarily because they just don’t see the value in speeding up the process. Socialized markets are less likely to place as much value on the time of delivery, particularly because hospitals don’t get paid more money to deal with more patients.
On the other hand, Scandinavia, in general, understands the value of rapid testing. Indeed, the Scandinavian market tends to be accepting of moving testing to wherever it needs to be done in order to better serve the customer and patient.
Gosch: Some markets are very sensitive to “thought leaders”—specific people in specific hospitals who are experts on particular disease states. Those countries who have a more hierarchical structure tend to be more sensitive to thought leader input.
It seems that it would be ideal to get one of these thought leaders to endorse your products, as a sort of celebrity.
Groves: In places such as Japan it’s absolutely critical to have somebody who is extremely well recognized as a thought leader endorse your product. Without that, you won’t get any penetration into the market at all.
Henkhaus: Absolutely. This is often a key marketing strategy, having local thought leaders endorse a product. And when I say “local,” it could be related to a specific country. For example, a French thought leader may conduct a study and endorse a product, and the German market might see this and decide that it needs to conduct its own study. It could be that country-specific.
So, potential users view these approvals as a sort of gold standard and are then more likely to follow suit?
Gosch: Yes, that’s the idea. Typically, thought leaders won’t necessarily endorse your technology as the gold standard. It’s more about giving validity to your technology and having a credible voice say it’s a functional, useful product.
If certain markets don’t see the value of diagnostic advancements, such as in rapid testing, how can you go about convincing them otherwise? Such resistance seems to be more of a social issue than anything else.
Groves: I think it’s a pretty tall order to change a market’s perception of the time value of an assay. One way to do this is by conducting studies within that market. If it’s a big enough market that it’s worth pushing on, then it’s worthwhile to do outcome studies to demonstrate that improving turnaround time does make a difference to the efficiency of the process, and therefore the product is going to have an impact. These types of studies tend to take a long time and cost a lot, so you’ve got to decide carefully which markets you’re going to focus on.
Gosch: It’s less about trying to create the wave and more about trying to understand where the wave is going and to ride it. It’s important to understand what the market forces are and to jump on that as quickly as possible, before your competitors do. You’ve got to try to monitor what’s going on in different countries and leverage any trends.
Henkhaus: In many ways, the process of entering a foreign market is similar to moving into some domestic markets. If you’re going to be spending a lot of time and resources, there needs to be some benefit at the end. A company is naturally going to prioritize how to use its resources. Sometimes, however, you need to back off and wait to see where a market is headed.
What role do cultural and social attitudes issues play in your decision-making process and marketing approach toward developing markets?
Gosch: They’re critical. As you get into some of these countries, where maybe the regulatory and science issues are less clear, who you know and what they know become much more important. A lot of countries are more socially constrained than the United States, and there are formal protocols and processes. If you deviate from these, you run some risk of offending potential partners or customers. It’s important to have someone on your side who understands cultural issues.
How do IVD companies address local biases and pressures overseas to conduct business with local companies, as opposed to with companies from the United States or Canada?
Groves: In many emerging markets, people make products much more inexpensively than we can possibly make them in developed countries. This creates a tremendous competitive challenge. We need to leverage the quality and image of your product as a North American company. I find that this isn’t all that difficult. Most countries will recognize that we have a very high standard and have to go through a rigorous evaluation by the government.
Still, this is becoming less of an advantage as some markets step up their regulatory guidelines and require companies to submit documents for approval. In the past, those countries have looked to products approved by FDA as having “the Good Housekeeping stamp of approval,” and that has become a marketing advantage in itself.
Gosch: It can be difficult if a U.S. product is facing an equivalent product manufactured in a customer’s country. I was at a meeting not too long ago where a large non-Japanese company described its approach in Japan. The company actually has two vice presidents for each department in Japan. One is a Japanese national and the other comes from the European-based home office. The European person has the strategic and technical expertise and intimate knowledge of the parent company’s procedures. The Japanese vice president has local expertise and provides a local face to the customer. So, the Japanese-born executives are the ones that interface with customers in Japan and the European ones act behind the scenes. The company has found this to be an effective way to compete with their Japan-based competitors.
Market Strategy
How do IVD companies approach professional education for physicians and laboratorians in overseas markets?
Henkhaus: In the United States, it tends to be a bit easier to access clinicians if they’re the ones who are ordering the tests. I don’t think this is necessarily true in Europe. As a result, companies might approach some countries on a larger scale, be it through local, national, or international meetings. There are still local strategies that focus on the laboratorians, but in my experience you don’t encounter the same acceptance educating at the clinician level overseas as you do in the United States.
Gosch: The primary way is through peer-reviewed publications. It’s probably the best marketing tool for getting to these people. Still, it’s a long process, so companies support their publishing efforts with meeting presentations, Webcasts, and advertising.
Groves: The networking that goes on within foreign countries tends to be stronger than in the United States. Hence, it’s critical to find those thought leaders who are willing to speak for you at professional meetings. Doing so takes a lot of work because you need to develop relationships in multiple countries and have to treat each market separately.
Both Greg and Michael have spoken about distribution and other challenges in Asia, specifically China. In general, which have you found to be the most problematic and difficult overseas markets for IVD companies to deal with?
Groves: Our North American customs are based, to a large degree, on straightforward business practices. We deal with people through fairly straight and upfront discussions, we understand who is who in a meeting based upon their titles. In some countries, there are a lot of hidden rules and ways of doing business that create a challenging environment for us. China and Japan are good examples of this.
Some countries are not willing to adopt new products as rapidly as in North America. Japan, for instance, is typically very slow to adopt IVD technologies and takes a much longer perspective on life than we do. Businesses there are not interested in what’s happening this quarter so much as what’s going to happen in five years’ time. So, regearing our marketing approach to these countries is a significant challenge for all of us.
Henkhaus: Likewise, there are a number of steps you have to understand in order to bring a product to market.
And if you miss one of those steps, it’s difficult to repair the damage. You usually only have one chance to launch a product.
Future Opportunities
If I were to ask which overseas market you believe holds the most promise for the IVD industry, most of you would probably say China. What marketing challenges do you foresee there and how do you plan to approach them?
Gosch: China would have been my answer. But you can’t discount the future opportunities in countries like India, Japan, and Singapore. How do we plan to approach them? By actively assessing the trends and the potential impact of various changes, and then responding quickly to opportunities as they present themselves.
Henkhaus: I think it’s going to take a lot of local give-and-take with China. Everybody also needs to have a realistic time frame. China is seen as being an opportunity because, for one, it’s growing so quickly, and also because it has a large population. However, the infrastructure is not yet in place, and it will be a while before it’s in a position where we can move IVDs into the country as easily as into other, more-Westernized countries.
Groves: China is clearly going to be a focus for the future—and I would stress that it is for the future. The challenge now is to set up a company to take advantage of that. Young companies, such as Response Biomedical, have an especially difficult decision to make as they’re establishing themselves in different markets. Do you treat China as you treat other countries?
I believe we’ve got to be much more serious about looking at how we want to position ourselves in the next 10 years in China because that’s when the real return is going to come. It’s not going to come during the next few years. That’s the major challenge: to invest in an area and set up the right sort of organization. It takes a lot of money to do that.
Henkhaus: A significant part of how a global company positions itself in China will depend upon cooperation with the Chinese government.
There seems to be some caution in all of your answers regarding the potential of the IVD market in China. Is this because it’s still not well established? Because unlike some consumer markets, the IVD market is very specialized?
Gosch: Yes. I think we’re all observing the healthcare system to see whether it’s going to progress the way many of the other economical systems there have. If it does, then I think there’s a bright future.
Groves: To some extent. I think most companies recognize that China is a significant market for the future, but I agree that the puzzle is how we get there in the end. This is the issue that everybody is wrestling with. It’s not a matter of will we be there, or will it be a focus for us, but rather a matter of how we orchestrate ourselves to be there at the right time. We don’t want to spend too fast on it because there won’t be much return. The challenge is to move forward with the right set of expectations at the right time. But is there a market there? Will it be a significant market? Absolutely.
So, it’s just a matter of finding the right time and the right moment when to move fully into the market?
Groves: I don’t think there’s going to be a quantum leap. I believe it’s a process and that the market will be changing gradually. We’re going to have to adjust our strategies depending on how well the market is adapting to changes in the economic environment.
When you look at the Chinese market, you see a lot of doctors who are salespeople. Why? Because they pay doctors only $6000 a year and it doesn’t make much sense for them to remain as doctors. I believe this will change.
Also, in the past, healthcare has been totally government run. The Chinese government has been very strict about what healthcare is available and what’s available where. That’s changing, too. It’s becoming somewhat more consumer oriented, and the needs of these customers will start driving the market. Hospitals will have to start responding to that, but it will take time.
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