understanding the US medical market and how to thrive in it

Welcome to the Global Sales Mentor Podcast for conversations that drive growth. When you are ready to grow your international sales, join the conversation with your host, Zach Selch. Okay. I think I'm going to get started now. Thank you all for joining. My name is Zach and I'm just going to jump into this to let you know a few housekeeping things. If you have any questions, please shoot me a question either through the chat Or through Q&A, and I will address questions towards the end. I'll make sure to spend some time on questions. I'm going to jump into this. I don't want to go through a big introduction or anything like that. The other thing that I will say is I'm going to make this available as a recording. So if you want to watch it again or listen to it or check something out or anything like that, it will be available. So Thank you very much for joining. My name is Zach, like I said, and we are going to talk today about selling your medical or healthcare product into the biggest and most confusing market in the world, the United States. So first of all, there is simply no other market as lucrative to be in as the United States. Okay. When you take a look at this, this is a $4 trillion market. Okay. With about $11K spending per capita in a 350 million person market. Okay. There's no other market quite like it, just in terms of how much money is involved. Okay. There's 6,000 hospitals, about 800,000 beds. Wow. This is a fantastic market to be in. So if you are a manufacturer of medical equipment and you are not in the US market, you're probably missing something out. On the other hand, this is by far the most complicated and confusing market in the world to sell to. Okay? If you are selling into markets like Germany or Egypt, or Israel. These are markets that all fundamentally work in a similar way. Okay? There are a couple of outliers, like say Japan is a little complex. Brazil could be a little bit complex. China can be complex that don't exactly follow the standard patterns. But America is an entirely different story in terms of how complex and difficult and different it is. The healthcare system in the United States operates in a way that no other healthcare system in the world works. And we're going to sort of take a dive into that. But the relationship between the manufacturers and how products get sold and how the regulatory is done and who buys and who pays for things is really, really confusing. And we're going to talk a little bit about that today and hopefully get a little bit of clarity on that today. Okay? So let's talk a little bit about the main characteristics of the American healthcare market. Okay? First of all, very, very high per capita and absolute expenditure. Okay? This is a giant market. I mean, a lot of money is being spent. The per capita spend, which is something I always look at whenever I'm looking at a different market, okay? The per capita spend is about, is close to twice what some similar markets are. And if you take a look at the chart at the top of the page and you take a look at countries that could be considered similar to the United States, They're all bunched together in terms of their per capita percentage of GDP healthcare spend. And the United States is much higher than that. It's very close to 20% of every dollar made in the United States is being spent in some way or another on healthcare. Okay? From an absolute perspective, the United States is spending A great deal of money. Almost twice as much as comparable country average and significantly more than countries like Germany or Switzerland where prices of labor are high, where technology is expensive, where healthcare is really, really good. Okay. But still, the United States is spending significantly more money than anybody else. Okay? On top of that, and this is the other main characteristic you have to keep in mind about the US market, it is the worst performing healthcare market in an industrial nation by most standards. Okay? When you take a look at how people are getting treatment in the United States, it's typically not very good. Now, I have to clarify what that really means. If you are middle class or upper middle class or rich, you get fantastic healthcare in the United States. Some of the best in the world, if not, probably I wouldn't classify it as the best, but some of the best. The worst before— it's the worst performing market in the industrial world. Okay. Thanks a lot, Chad. I appreciate that. It's the worst performing market, healthcare market in industrialized nation. When we take a look at things like even the equity, especially who gets care, how many people don't get healthcare, things like infant mortality is really huge in the United States. Things like the average Age, life expectancy of the United States is something like 3 years less than you would expect from some of the other countries. Our infant mortality is twice as much as some other industrialized countries. Okay? Now, how would you interpret this if you were looking at another market? Okay? What this really indicates to me is that the United States medical and healthcare market is really heavily divided between products that are essentially being sold to more affluent people, people who can pay for it. And then a great deal of people are simply not getting good healthcare or they're not getting any healthcare. Okay? And I think this is what you have to consider with the United States market. You have 350 million people. Of those people, a fair number are getting excellent healthcare. The absolute highest quality, and then a fair number are not getting good healthcare. Okay? And as a company that wants to get into the US market, understanding this is very important. When you think about a country like getting into India, for instance, a tiny fraction of the population is getting excellent healthcare, but that tiny fraction of the population is as big as the population of France. So it is still a very good market to go into when you consider that, or you're looking at it and saying, I have something that is a good match for the middle class or for the lower class in a country like that. In the United States, the numbers are a little bit different, but you have to realize that there is a significant portion of the American healthcare market that is almost like selling into a developing nation, right? Because they're dealing with extreme poverty situations in terms of healthcare. So you have the very, very high-end products and then the low-end products that are both— there are markets for both of them. I just want to clarify, this is a major thing to understand about the US market. Another major characteristic is there are a lot of uninsured people in the United States. Okay? Typically there is no standard government system for giving healthcare. And I say this, I know there are people on the call understand more about the US market in there, but this is really aimed for people who are looking at how to get in and want to understand more about something they don't really know. So we are, in most countries, there are different mechanisms where the government gets involved in making sure that people have healthcare. In the United States, that isn't exactly so. I'll go into how that works, but there are a lot of people here who do not have access to insurance. Okay? When they don't have access to insurance, they're typically not getting healthcare. So we have to understand that this is something that you want to be working around and you want to be considering. When you enter the United States market. Now it's gotten better. The percentage of people who have absolutely no insurance is now in the low teens. It was much higher when I was a kid. Okay? When I was a kid, I didn't have health insurance and my family was essentially middle class or lower middle class, right? A lot of people didn't have health insurance in the '70s and '80s. Nowadays, more people have health insurance. But it's still, you know, there are still a lot of people who don't have health insurance. Okay. Who pays for healthcare in the United States is extremely fragmented and confusing. Okay. And when I go into any market, I want to understand who's going to pay for what I have. Okay. Because it's really important to understand the payment Of this. The employer group insurance is the single biggest piece of this pie. What do I mean? In America, typically when you work, you get insurance, health insurance through your employer. You still have to pay for it, but it gives you access to a group insurance buy. which gives you a pretty good pricing for your insurance package. Okay. And about 60% of the people in the population are getting their payments through their insurance through this. About between about 15%, slightly less than 15% is getting their insurance not through groups. They're doing it for some reason. They're either independents, they're small business owners. They have some other type of insurance. Okay. Medicaid and Medicare, I'll talk about in a little bit when I talk about the government, but these are essentially government forms of insurance and payment. Medicaid is— sorry, Medicare is for the elderly Americans over the age of 65. Medicaid are for people who are extremely poor. You really have to be very poor to Qualified for that. Then there's military veterans who are paid for by part of their services, and their medical care is paid for by the American government. And then something between 15% and 20% have absolutely no coverage or insurance. And those type of people, if they want to get some type of medical care, they literally either are going to have to walk into a charity hospital, Or they're going to have to pay for it out of pocket in cash. Okay. A lot of the money in the United States is spent in hospitals. And I like to say that because different markets spend their money in different ways. Okay. But hospital care is the single biggest, biggest place we're spending our money. Now, it's really interesting. The hospitals here have an interesting structure. And I like to think about things like number of doctors per population and so on. So there are about 3 hospital beds per 1,000 population in the United States, 2.7 doctors and 18 nurses. This is a pretty interesting number for a Western industrialized country, a lot more nurses. Now, what There are also in the United States a great deal of what we would call technicians who are not, they don't have a 4-year degree, but they're doing some type of patient-facing care in the hospital. Okay? So a lot of times when you go into a hospital or even a doctor's office, you're dealing with a physician's assistant who has a less than 4-year degree. They're basically, they're sort of like a nurse, but not quite a nurse. And they're giving a lot of the care that patients are getting before the doctor comes into the room or in addition to the doctor or that kind of thing. So a lot of money is spent in hospitals. A lot of this money also is spent in the last year, about 10% of the money being spent. in healthcare in the United States is being spent in the last year of a patient's life. Okay? So America does a very bad job of preventive care. Very few people are involved in preventive care in the way that they might be in other parts of the world. There's very little government participation in preventive care, that kind of thing. On the other hand, where people are spending their money, where hospitals are spending their money is in the The last year of life. Okay. And this is something I, you know, again, when you're thinking about what you can sell and how you sell it, you know, this is going to shape this. The government's part in healthcare is confusing and it's really unlike any other country in the world. Okay. We don't have a Ministry of Health. We have a Department of Health. We don't have a Minister of Health. There is no centralized body that is responsible in the United States for providing health or even supervising the health To the country, right? We saw how chaotic this could be during COVID Most countries in the world have more centralized healthcare organization than the United States. So I know I go into most countries, the first person I'm going to talk to is somebody in the Ministry of Health. And I know that the Ministry of Health will typically, in terms of healthcare products, be one of our biggest buyers in most parts of the world. In the United States, that just isn't the case. Okay? The government does buy a little bit of stuff, but they only run about 200 hospitals. The federal government runs 200 hospitals. Overall, governments run about 1,000 hospitals, which means about 3% of hospitals in the country are federal and about 15% are government in some way. And by that, I mean they could belong to a city, a municipal government, the county government, the state government, that kind of thing. On the other hand, and this is very important to keep in mind, typically when you get reimbursement for any type of service by an insurance company, if Medicare and Medicaid reimburse, the insurance companies will reimburse. If Medicaid and Medicare don't reimburse for that service or product, There's a good chance the insurance companies won't. Okay? So it is vital to get reimbursement approval from the federal government to sell in the United States. That said, it isn't necessary. You probably won't be selling very much to the federal government. Medicaid doesn't buy from you. Medicare doesn't buy from you. The hospitals will buy from you, or the doctor's offices will buy from you, but they will only buy from you if they know that they will get reimbursed by the federal government or by the insurance company, which is looking to the federal government for clues. Okay? So it's very, very confusing how the government operates with the healthcare market. Distributors don't really sell and reps cover limited territories. This is one of the more confusing things because you basically say, if I were going into France, I would say, okay, I'm going into France. I'm going to talk to the Ministry of Health. I'm going to find myself a distributor. In the United States, there are 5 big distribution companies, one of which focuses more on medical offices and the others on hospitals, but they all sell to medical offices and hospitals. They will put your product in a catalog, but they have no sales assets. They will not have people going out and talking to customers and selling your product. So what we would typically think of as a distributor is not what we would call a distributor in the United States. What you need in the United States to work with your distributors are reps, independent representatives, And these typically cover very, very small territories. They're the equivalent of a distributor in other parts of the world, but typically they're covering a very small territory. They're a one-man shop, or maybe they're a person with somebody working in the back office. Sometimes they band together to form a cooperative of 20 people or so, but typically they're very small and they cover very small areas. So what that means is You might find yourself working with a distributor and 20, 25 reps just to cover geographic territory in the United States, okay? So it's a very, very confusing situation and unlike any other market, like I've mentioned. Another characteristic, which I think is very positive for the people on this call, about 40% of all medical device purchases are for non-US designed and manufactured products, Americans do not shy away in the year 2022 from buying imported or foreign products. There are Czech-made beds, there are Chinese-made monitors, there are Pakistani-made surgical equipment in the markets, right? People will buy stuff from other places. They've gotten very used to it. You also, If you haven't been in a US hospital, you might not believe how many members of the hospital staff are immigrants, right? They're people who come from Pakistan, India, Vietnam, other parts of the world, Latin America. So the country is full of, you know, the hospitals are full of immigrants and they are comfortable buying imported products. Okay. 20 or 30 years ago, this was not the case. It was very difficult to get in with an Israeli or a Korean or an Indian-made product, whereas today it's a lot easier. So this is a great time to be selling import European or Asian or other products into the United States. Okay, so that was a little bit of a summary about what you're going to find in the United States. Now let's just take a quick peek at what you're really interested in is how can you succeed in the US market? So step 1, you need an entity in the United States. If you are a company in Europe or in Asia and you want to be selling in the United States, it is virtually impossible to do so without an entity, without a business corporation. Now, I sell in countries all over the world. I very seldomly set up an entity in any country. I typically go in, find a distributor myself, But most hospitals, while they're very comfortable buying a product made in the Czech Republic or Slovenia or India or wherever, they will not issue a purchase order and send money to a company that doesn't— isn't based in the US. So you need an entity in the US. Now that said, it's very easy to set up a corporation in the United States. Okay? But you need an entity, you need a bank account, and you need to get all of that stuff set up so that you are an American company or an American fully owned subsidiary of a foreign company working and selling in the United States. You need FDA and possibly other regulatory approval. And I say possibly other because when I talk to people on these type of webinars, There are people from all sorts of different areas selling into the hospital, and there might be other types of approval you need. Now, the United States is set up really to streamline this compared to most countries in the world. If you have CE mark, it's typically easy to get FDA. If you have, you know, various other major certifications, the Japanese certification, the Australian certification, typically getting FDA is much easier and much faster. We're not looking at years. We're probably looking at a 6-month to a year timeframe for virtually anything that has certification in its local market. But you do need to get regulatory approval or you're not going to be able to sell in the United States. You can start talking to people. You can get here, set up an entity, start the FDA approval process, and in parallel start talking to potential clients, potential customers, start finding distributors, that kind of thing. But you really have to start that process early on and make sure that you have it before you're looking at even issuing a formal offer to somebody. You need to figure out how you're going to get paid. And I know this sounds a little funny, but if you can't get reimbursement approval typically from Medicare, you are going to have trouble working in the United States. Okay? People come in and they have, you know, fantastic products and they think this is going to go great for them. They might be very well, but working solely on out-of-pocket expenses, people going into a hospital and saying, yes, I would like this procedure that isn't covered. Buy my insurance and I'll pay for it out of pocket. It's virtually impossible to survive selling in the United States that way. Okay? Now the exception is if you're talking about a health supplement or if you have some type of a, you know, the type of thing that might get sold through a pharmaceutical chain or through television or something like that, something that's direct to consumers. That's a different story. And there's a, I can talk to you about that offline about how you would navigate that because it's a different pathway. But if you're selling a product that you intend to get sold in a doctor's, be used there in a doctor's office or in a hospital, really reimbursement is extremely important. Now, that said, this isn't magic here or brain surgery, right? There are ways of doing this. There are people who do this for you, and you just have to make sure that you get through the process of making sure that there is reimbursement for your product. Once you get the federal government to approve that they will reimburse for the use of your product, then the insurance companies will do so. And that, that way you've set up how you are going to get paid. And then Once the customers know that they will get reimbursed for using your product, they are willing to buy your product. Till then, they will be very hesitant to buy your product or your solution. Okay. So figuring out how you're going to get paid in the United States was actually a pretty important step in this whole process of making it work for you. To get in. And like I said, that's going to include a federal government policy because the first step is making sure that Medicare will reimburse for the use of your solution. Now, step 4 is the one that, again, it's very confusing. It's very important because without it, you're not going to be able to work here, is setting up a 4-tiered distribution organization. Okay. Very often people come in and they go to a trade show and they say, okay, I'll find— in the same way you might do if you were going into Spain, you go to a trade show, you talk to some people and you say, great, would you like to be my distributor? In the United States, there's virtually no reputable person, one-person organization where you can find somebody and say, hey, would you be my distributor? In the United States, they take distribution And they can cover the United States for you in a reputable way. I can't, I've never met an organization like that, to be perfectly blunt. Okay? So typically what you need is you need a national distributor. Okay? And that distributor, interestingly enough, you don't necessarily need one. You can work with all 5. Or you can work with some, you know, 4 out of 5, 3 out of 5, et cetera. But what you're going to need are multiple distributors that put you in their catalog. You have to be in somebody's catalog because typically the way hospitals and/or doctors organizations will buy is they will buy, they'll go to the catalog and they'll, they'll, they'll, you know, check, check catalog if you're available now. Keep in mind, let's say you're dealing with something like a stethoscope, right? There might be 200 different models of stethoscopes from 40 different brands available in this catalog. You have to be in the catalog, but that doesn't mean that the, that the customer, the client, the customers in the end, the people who are buying are going to You know, going to be able to see or going to be able to buy from you or going to want to buy from you because they're going to be looking at this and not know what the difference is between your product and other products, right? So getting into the distributor catalog is sort of what we would, what we would call the ticket to the dance. You simply can't work without being in a distributor's catalog. But you can't expect that this is enough to get you where you want to go. Okay? So then what you need is you need regional reps, and those are the people who are actually going to go out and sell your product. Now, the distributor, the catalog is going to take a piece of the pie and the reps are going to take a piece of the pie. The reps are going to be going out And doing the heavy lifting. They're going to be doing presentations and demos depending on your product. They're going to be talking to people. They're the ones who are going to be actually going into doctors' offices and hospitals and talking to people and doing most of the sales work. Okay? And you might find yourself with 15 of these. You might find yourself with 40 of these. I've set up organizations that had 40 reps. To get a good regional representation around the country. And these guys have typically really, really good relationships with their customers, the clients that are, who are buying from them. They know them, they handle a lot of different products, and you're finding the right ones is really Key to your success in the United States and your ability to be selling. Okay. You're also going to need somebody who handles what's called group purchasing organization sales. Okay. GPO sales. Remember that about 60% of the purchasing or the patients go through large group insurance organizations right now. A lot of these insurance organizations work with hospital groups that work with doctors' practice groups, and then they have what they would call a network where if you are an insured person and you want to get treatment, you have to go to a specific network. You have to go to a specific hospital, you have to go to a specific doctor's office, and these offices have also banded together to purchase together, which means that a great deal of the money spent in the United States on healthcare is going through group purchasing. So 30 years ago, you could go into a doctor's office and that doctor might come out, you know, between patients and go through your cat, you know, go through your thing, watch a demo and make a buy. You could go into a small hospital and there would be somebody there who was responsible for all the purchasing. Today, for more than half of the doctors' offices and hospitals around the country, this purchasing is being done in a centralized way. So you need somebody who is very good at interacting with these centralized offices, and you might find yourself with 2. One, very often in Tennessee, there are a lot of these offices in Tennessee, and there are a lot of them in California. There are other places in the country, but what you might find yourself with is 1 or 2 different reps who are focused on the GPO sales. And then you need somebody for federal sales. Okay? And again, this is really key. This is almost like a lobbyist to make sure that you're able to deal with the reimbursement issue, but also to get, you know, selling to the veterans hospitals and the other types of federal So essentially these are the elements that you're going to put together to build up your sales organization. Okay? And putting together this type of sales organization is really going to be critical to cover the United States and to succeed in the United States in the most valuable, most lucrative market in the world for healthcare products. Okay. So this pretty much pulls us to the end of what, um, what we were doing today. If anybody has questions, I'm happy to take any questions. And what I'm going to say is, this is what I do. So if you are looking for help getting into the United States, okay, reach out. I'm happy to do a free consultation. We can talk about this. I don't, there's no obligation to talk to me, reach out to me on LinkedIn. I'm happy to set an appointment. We can talk about this. I can get you a little bit of information, but we can do every part of this process for you at a set reasonable fee and get you selling into the United States market quickly and without a headache with an excellent sales organization in place. Okay. Would anybody like to ask any questions? Or would anybody like to— feel free to make any questions, or if you'd like, that's pretty much what I had. We ran a pretty reasonable amount of time today. All right. So thank you very much. I will let you all get back to your day and I will get back to my day. I will You know, be perfectly happy to hear from you if you want to reach out with any questions going forward. If you want to set up a meeting, please feel free to do so. Thank you very much for your attention today.