As 2019 winds down and medtech firms begin their strategic planning for 2020, it’s important for companies to determine whether their current regulatory strategy will be a “winning” one next year. It remains to be seen whether 2020’s regulatory issues will be headwinds or tailwinds. While it certainly can be argued that regulatory issues are beyond a company’s control (due to the changing nature of governmental policies), we contend that strategizing against the competition is usually “graded on the curve.” Creating (and maintaining) international market access for products allows organizations to commercially execute their game plans. Without market access, there is no chance to compete and, therefore, no opportunity to win.
And, synergistically, good portfolio management (a topic for a future MPO column) in medtech includes a regulatory strategy that considers the impacts of all present and future products.
To begin the conversation on regulatory strategy, let’s consider some real-world challenges currently facing the medtech industry.
Global Regulatory Challenge: MDR
Possible Scenario A: A European firm with a solid product portfolio and significant sales history on the continent knows the ingredients for EU market success. Not surprisingly, each of its legacy EU products has its own CE mark; some are best sellers and some are “also-rans.” What are the strategic choices?
- Re-certify all products to the new MDR before the May 2020 deadline. Although recertification can be time consuming and create internal bandwidth challenges, it will allow the company to maintain a competitive edge with its EU product portfolio. There are risks, however. In some cases, the new MDR has re-classified some categories of products, which may impact a company’s ability to be re-certified in time. There also are fewer notified bodies now to complete the certification process.
- Use the MDR deadline as a “portfolio management” opportunity by recertifying only the best selling products and allowing the certification for “also-rans” to expire (leaving the market). Using this tactic can boost profitability through the elimination of unsuccessful items and the assurance of core product availability. Yet deciding on the SKUs to cut could be troublesome (a product might sell well in Italy, for example, but could be considered an “also-ran” in other parts of Europe). Companies executing this strategy risk upsetting customers (and sales reps), though. The menace of timely recertification also exists with this approach.
- Delay recertification to the new MDR altogether and only recertify to the existing MDD directives. While this option gives companies a four-year “breather” to maintain existing products and reassess their future portfolio strategy, rivals with MDR certification could use their compliance as a competitive advantage. One of the main risks with delaying MDR recertification is the market and customer uncertainty it likely will create.
- Launch in the United States with U.S. Food and Drug Administration (FDA) clearance. This option gives the product access to one of the world’s largest markets; however, an American debut takes significant organizational focus, which could delay introductions in other parts of the world. Moreover, FDA clearance is not a “slam dunk,” as the agency is currently under pressure to revamp its existing 510(k) predicate device allowances. Thus, a de novo pathway may be necessary, leading to new clinical requirements.
- Launch in the EU under the new MDR. Companies that achieve this regulatory milestone will have a distinct competitive advantage because it is becoming increasingly clear that many medtech firms will not meet the deadline for recertification. Nevertheless, the EU is not one market—rather, it is a collection of 27 (28 if Great Britain is counted) distinct countries, each with their own languages and cultural differences that must be considered when introducing products. As previously stated, the major risks with this strategy are finding qualified notified bodies and recertifying products before the deadline.
- Launch somewhere else in the world. Introducing a product somewhere other than America or Europe could eventually provide companies with the market and clinical data necessary for FDA and EU clearances. The major downside to this approach is that products will not be exposed to two of the world’s largest medtech markets. Companies also should keep in mind that many international markets (Japan, China, etc.) have more stringent, time-consuming requirements than the United States, thus imperilling any 2020 launch timelines.
Possible Scenario A: A company with products in the Chinese market should ideally update its portfolio to maintain its competitive advantage. However, the China NMPA (National Medical Products Administration) has replaced the former CFDA (which was previously the SFDA). Domestic companies are struggling with the requirements of the NMPA and its rules. What are the best strategic choices?
- File new product(s) with the NMPA and attempt to obtain clearance in 2020. Securing approval would provide a competitive advantage over other firms selling their wares in China (even some local companies). But such clearance is not attained easily—the NMPA requires new levels of clinical evidence that could be very costly. The main risk with this plan is IP protection—China has never really been the safest haven for proprietary technology, and with NMPA rules, companies may be required to disclose more proprietary data than which they are comfortable.
- Continue selling existing products and refresh the marketing and sales execution to maintain/grow market share. This plan allows companies to focus on their current product lines and potentially clears a path to incremental profitability next year; the only drawback lies in the innovation offered. By focusing on current products, companies are not providing Chinese customers with their best technology, and they are leaving themselves vulnerable to competitors who successfully navigate the China NMPA.
- File for NMPA clearance in 2020, thus gaining access to one of the world’s largest medtech markets. But, as previously noted, obtaining clearance in China can be complicated and costly; using resources in this way for an unknown market opportunity for products that may or may not be successful there is a risky venture.
- Enter the Chinese market at some future point. This tactic enables companies to focus on generating incremental sales and EBITDA in their core markets but locks them out of China—a risky move that can significantly hinder future growth prospects.
While this initiative sounds promising, we remain skeptical about the ability of these regulatory bodies to play nice together. For example, the steps taken in the EU (with the new MDR) and in China (with the NMPA) seem contrary to the harmonization concept.
We remain hopeful, however, that some of the players can find a way to actually harmonize their regulatory processes—i.e., creating easier international market access in the future. We’re not holding our breath but companies should stay tuned and take advantage if some positive results occur.
Given the nature of this industry, the list of potential regulatory challenges could be a book. The previously mentioned issues are some of the most significant facing global businesses in the waning months of 2019. But they are not insurmountable. With the right strategy, these regulatory challenges can easily become competitive advantages.
Florence Joffroy-Black, CM&AA, is a longtime marketing and M&A expert with significant experience in the medical technology industry, including working for multi-national corporations based in the United States, Germany, and Israel. She is currently is CEO at MedWorld Advisors and can be reached at email@example.com.
Dave Sheppard, CM&AA, is a former medical technology Fortune 500 executive and is now a Managing Director at MedWorld Advisors. He can be reached at firstname.lastname@example.org.