Troubleshooting U.S. Hospital Sales Results

Cracking into the huge U.S. hospital market is exceedingly difficult business for most medical device manufacturers  With the size of the market, aggressive multi-national competitors, complicated regulatory hurdles, channel options, regional differences, etc., the U.S. is an enticing but complicated market.  A critical missing element in many U.S. sales strategies relates to Group Purchasing Organization (GPO) which influence up to 80% of all hospital purchasing decisions.

The average hospital in the USA belongs to 2-4 different GPO’s and strongly relies on these organizations to help manage their supply spend.  As a result, any company, either U.S. or foreign-based, that does not have a well-planned and effective strategy to use these organizations is putting themselves at an enormous disadvantage in penetrating the U.S. market.  A GPO strategy does not replace the need for distributors or representatives to call on healthcare providers, but an integrated team working from both the ground up and the top down is the proven, most efficient way to drive sales in the largest market in the world.

IMPORTANCE OF GPO CONTRACTS TO MEDICAL DEVICE SALES

The strategy that most companies use to gain a foothold is finding a “distributor” or “multiple distributors” to cover markets either on a local, regional or national basis.  The majority of distributors in the U.S. are established organizations that use their own network of representatives and agents who specialize within local areas by establishing relationships with healthcare providers or physicians.   The effectiveness of these companies varies from organization to organization, but the very best have the expertise and contacts to gain sales and establish a foothold in a given market.  However, any company that fails to consider a national GPO/Corporate Contract strategy is ignoring a crucial aspect of their U.S. business development that can supersede any of their other investment into the market.

NATIONAL ACCOUNTS SALES STRATEGY

There is no “one size fits all” GPO and an effective strategy to approach these organizations strictly depends on a company’s own commitment to the market, resources available, corporate structure, and product portfolio.   For a small to mid-sized company, that has had little exposure to the U.S. market, gaining a GPO contract is extraordinarily valuable as it establishes instant brand awareness and confirms to the GPO’s membership product credibility.  However, a company of this size must be careful to put together an approach strategy that properly reflects the company’s current ability to service the market.  An initial approach to one of the national GPO’s, who expects established national distribution channels, US sales coverage, top level service and supply chain capability can backfire on a company that may not be ready or able to support these demands.  However, an approach to one of the many smaller or regional GPO’s may integrate perfectly with the small company’s profile, while setting it up for future approaches to the larger entities.  For larger companies, penetrating the GPO marketplace with a strong Corporate Account resource is vital for many reasons, including the ability to match direct competitors who have long established relationships and resources dedicated to maintaining those relationships.  The major GPO’s each have 1000 to 2000 active contracts in their portfolios, and for a single manufacturer to ensure that their company is being supported and represented properly by the GPO, a strong and experienced relationship management process is vital.

THE ROLE OF PRICING IN NEGOTIATIONS

It is also valuable to understand how GPO contracting decisions are made.  Depending on the type of GPO, the decision-making process varies.  Product features, clinical outcomes, supply chain ability, customer support, product price, terms, conditions and company reputation are some of the key considerations used in determining what products are accepted into a GPO portfolio.  Depending on the type of product being evaluated, the weight of the criteria can change.  Price is not at the top of most contracting decisions but is typically the last component discussed and negotiated in any contracting process.  Also, although some GPO’s award sole-source contracts for limited and selected categories (always commodity-type products), the dominant type of contract is a dual or multiple award.  For this reason, even when a contract with a GPO is gained, suppliers must always have the experienced National Accounts resource maintaining the GPO relationship and managing the contracts.

CONTACT ASIA ACTUAL

If you’re a medical device manufacturer wishing to establish or improve sales in the US market, Asia Actual, from our US headquarters has experienced professionals that can help you understand the US hospital landscape and develop successful sales strategies.  Contact Asia Actual for a free consultation to improve your US hospital sales.