How Can Medical Device Companies Find a Distributor to Increase Sales and Growth in Latin America
Foreign manufacturers that have been involved in penetrating new overseas markets understand that finding the right distributor is a challenge. Most relationships that initially seemed promising, begin to deteriorate when the distributor doesn't meet its sales goals. In most cases, these misalignments can be avoided through careful and professional due diligence and planning. The problem is that most medical device manufacturers don't have the time or experience to do it well.
“Finding the right medical device distributor takes the skills of a chess grandmaster.”
Foreign manufacturers should research and qualify new distribution partners throughout Latin America. It is important to choose a reputable distributor when entering this market, as the wrong one can lead to missed sales opportunities, poor relationships with end users and a damaged brand name.
Successful commercialization of your medical product in a particular market depends a lot on the type of medical product distributor you choose as a partner. Once you have determined which countries best match your business goals, you should start (under your control) the process of obtaining marketing authorization for your medical product. Then, is crucial that you throughly vet and select the local distributor that best complements your sales goals.
Many foreign medical technology companies are dependent primarily on local distributors to sell into the Latin American countries. Most of these distributors are thinly capitalized; they may be good at accepting orders and service clients but are unable to invest in demand creation.
Furthermore, finding a distributor on a trade show or through LinkedIn or through referrals is usually a failed strategy. Relationships that start rosy with distributors, usually end up in disillusionment when they do not meet their sales goals at the end of the year.
Having a distributor only addresses one pillar of a successful market access plan for each country in Latin America. It is important that foreign medical device companies create a market access plan for each Latin American country it plans to enter. This market access plan should addresses several pillars: Distribution, demand generation, regulatory affairs, and reimbursement.
You should develop a clear plan of action to search, find and select the right distributor for your product. It is important to create a distributor profile and then search following the criteria on this document. You should also have a clear value proposition to present to potential distributors on the first approach, identify their strengths and weaknesses, compile evidence of their track record with products and companies similar to yours, and then assess pre-selected distributors for a final selection.
Foreign manufacturers that have been involved in penetrating new overseas markets understand that finding the right distributor is a challenge. Most relationships that initially seemed promising, begin to deteriorate when the distributor doesn't meet its sales goals. In most cases, these misalignments can be avoided through careful and professional due diligence and planning. The problem is that most biotechnology, pharmaceutical, and medical device manufacturers don't have the time or experience to do it well.
The difference between market research and a market access plan
Some companies think that by conducting some market research in a country is enough to learn about it and how to enter it. A market research project is significantly different from a market access plan. A market research project consists of just a data gathering from primary and secondary sources, and it won't tell how to successfully enter the market —you will have to analyze the data yourself and make your our decisions.
A market access plan is a set of strategies and tactics for a medical device company to successfully enter a market by generating demand for its products. Your chances of success with a market access plan are exponentially superior than with having data dump from a market research project.
Registering a medical device, obtaining market clearance, and having a distributor in a country doesn't guarantee that there will be demand for your medical devices. In order to generate demand, you have to implement the strategies and tactics outlined in your market access plan.
Many foreign medical technology companies are dependent primarily on local distributors to sell into the Latin American countries. Most of these distributors are thinly capitalized; they may be good at accepting orders and service clients but are unable to invest in demand creation.
Having a distributor only addresses one pillar of a successful market access plan for each country in Latin America. It is important that foreign medical device companies create a market access plan for each Latin American country it plans to enter. This market access plan should addresses several pillars: Distribution, demand generation, regulatory affairs, and reimbursement.
“It is strongly recommended that U.S. companies process the registration under their name and not under the local distributor’s name or else the U.S. company will not be able to change or add distributors during the lifetime of the registration, which is 10 years.”
Assessing medical product distributors
Having a clear and professional approach to identifying and evaluating medical distributors maximizes the chances of selecting the best possible partners for you. This approach concentrates in five main areas:
Finding potential local distributors
Assessing local distributors
Evaluating and qualifying potential distributors
Selecting distributor(s)
Defining working details with selected distributor(s)
Finding potential local distributors
Finding the best medical distribution partners is in many ways just as important as obtaining regulatory registration for your medical product. Before finding and screening potential distribution partners for your chosen medical products markets, you should first have a clear idea of your business development strategy.
Once this strategy has been defined the following key considerations should be utilized:
Who your current competitors in the chosen medical product markets are
Where your competitors are concentrated
How the competing products compares to those of its competitors in terms of quality and cost
Reimbursement as a possible issue in chosen markets
How well-served the chosen markets already is by products similar to yours
What the future growth trajectories for your chosen markets are
You could first use LinkedIn to filter distributors by country. If you do a LinkedIn search with the keyword "distribuidor" (Spanish for distributor) and select “Medical Device" and "Hospital & Health Care" under the industry filter, you should be able to have an updated list of potential member distributors. You then will have to go through the list and then contact each one of the candidates and promote your medical product and gauge their level of interest. This approach may not give you good results without conducting in-country due diligence on your final list of candidate distributors.
“U.S. companies consult should a local attorney to execute an agency or distribution contract and to thoroughly vet the prospective partner by conducting a background check.”
I suggest you follow the U.S. Commercial Service, International Trade Administration's recommendations for companies looking to export their products to Latin America.
It is strongly recommended that U.S. companies process the registration under their name and not under the local distributor's name or else the U.S. company will not be able to change or add distributors during the lifetime of the registration, which is 10 years.
To secure an agent, representative, or distributor the foreign company must execute a contract that meets the provisions of the Colombian Commercial Code. This contract must be registered with the chamber of commerce where the agent/representative is located.
U.S. companies consult should a local attorney to execute an agency or distribution contract and to thoroughly vet the prospective partner by conducting a background check.
U.S. suppliers should be aware, however, that their ability to compete in Colombia could be hampered by unfair business practices such as contraband, counterfeiting, intellectual property rights violations, under-invoicing, money laundering, and dumping.
Source: Export.gov
Assessing local distributors
When evaluating potential distribution partners you should be addressing the following areas for your product and market:
Characteristics of the medical product
How many regions/cities you would like to target
Type of medical product, if it’s either a new and unique product or a high-volume, low-margin product, etc.
Evaluating and qualifying potential distributors
You should create a profile in order to evaluate and qualify potential distribution partners in the chosen medical market(s). This profile should incorporate details about your medical product as well as your overall business requirements. You then match those requirements to the distributors best suited to assist you with your sales efforts.
The distributor profile should include information about your medical product such as how simple or complex it is, whether the medical product uses novel or advanced technology, among others. The distributor profile should also contain your business goals as well as identify the medical product markets in which you plan to sell your medical product.
Using the distributor profile, you then create a pre-screened list of potential medical product distribution partners. This list may vary from five to 40 distributors depending on the regional or national scope of your business development strategy. You then go through the process of qualifying the listed distributors to identify the best potential matched partners for your business.
Your qualifying process should entail contacting each distributor on the list and providing them with your product’s technical and pricing information as well as product samples if necessary. In addition, you should interview interested distributors to assess their actual capabilities and to gather details on how they would launch your product in their markets.
Selecting distributor(s)
Once you have the list of pre-screened distributors, you then proceed to coordinate more in-depth in person conversations the potential distributors.
You should now analyze additional factors about the pre-selected distributors, such as:
Personal rapport
Confidence of the distributor with your company, product, and chances for success
Financially stability
Recognized associations the distributors are linked to
The number of employees the distributors have, in particular, sales staff
Inquire with retailers, customers and other exporters about the distributors
Ensure distributors are not representing other product lines too similar to yours – avoiding
conflicts of interest and competing products
Ensure the distributors have an understanding of competitive products and prices
Network of representatives and/or contacts
How many years’ experience they have in the market sector
Knowledge of the local market and willingness to give you the benefit of his/her local market knowledge.
Distribution terms, pricing, payments preferences, etc.
Following this qualification process, the list of potential medical distribution partners will be considerably smaller—only those firms best matching the requirements set forth in your distributor profile will remain. At this point, you have information enough to make a final determination.
Defining working details with selected distributor(s)
Once the local distributor(s) has been selected, the next step is drawing up workable terms to be included in the legal agreement with the new distributor partner. Some of the issues that you should consider include exclusivity, sales regions to be served, cancellation terms, among others.
Seek the help of an experienced market access expert in Latin America
Working with experienced consultants ensures that distributors are chosen objectively and evaluated with your specific business needs in mind. Seek the advice of an experienced market access expert who is capable of conducting in-country market research and formulate winning strategies on a market access plan for you.
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About Julio G. Martinez-Clark: Julio is CEO of bioaccess.™—a US-based contract research organization (CRO), regulatory, and market access consulting company that delivers a full spectrum of offerings from bench to commercialization so that foreign medical device manufacturers can have long-term success in Colombia and the rest of Latin America.