The US market has long been the ‘Holy Grail’ for European HealthTech companies. What should they know before taking the plunge? Cristian Owen, Our lead Digital Health Consultant, investigates in this article.
The enormous market and single regulatory space still appeal
Speaking with several European founders recently and in the aftermath of HLTH Europe, I noticed each was intrigued by my experience in helping digital health companies expand into the US healthcare market. Typically, after Series A, for myriad reasons, European HealthTech companies look across the Atlantic. As such, I thought I should pull together a mini guide to help future founders.
I’ve worked with and seen numerous companies across the continent who are drawn to the enormity of the US market, and the advantages of a single regulatory space, as opposed to the much more fragmented, country-by-country approach needed in Europe.
However, without experience of dealing with the US market – not least the complex documentation and trial processes necessary for launches – European companies that are successful domestically often struggle across the pond. So, what should businesses looking for a move stateside watch out for?
Think about the value proposition and patient journey
Bernhard Gilbey, a leading specialist consultant in this space, believes that serious consideration about financials is needed when looking at US expansion. ‘As a European company, you really have to think about how the value proposition lands,’ he explains. ‘It’s not a copy-and-paste exercise. The patient journey is different; reimbursement is different.’
This is where the US’ reliance on medical insurers (payers) comes into play, providing a very distinct proposition to the dominance of public healthcare systems in Europe. Furthermore, you may need to prepare customer satisfaction data, regardless of whether you are selling into hospitals or healthcare payers and providers; the competitive landscape and marketisation of healthcare in the US means that patients will take their custom elsewhere if your product doesn’t meet their expectations.
What can you bring to the table?
There may not be a ‘perfect moment’ for US expansion, but once you identify a gap in the market – and start planning for growth – it sends a message to people who might be able to help you to get this venture off the ground. Bernhard tells me that ‘to be credible with US investors, you must understand how your offering translates in the US space.’ Who are your customers, and what can you do differently for them? Selling your company’s purpose and mission – and having the right talent to translate that vision compellingly – is key.
Meanwhile, Robert Mollen, a corporate lawyer at Fried Frank and Co-Lead at Tech London Advocates, stresses the need for a clear understanding of where you are going to fit. ‘Understanding who the decision-makers are, based on geography, and how effectively your product or service is likely to get marketed in the US is all part of actually understanding product-market-fit’ – that is, ‘whether what you’ve developed is going to fit into a care pathway in the US.’
FDA approval remains challenging, though by no means impossible
It would be remiss of me not to mention the complex regulatory approval process among the many challenges European companies must navigate stateside. The Food and Drug Administration (FDA) controls this, and to get the all-clear you will need to provide, among other proof, strong evidence of your product’s efficacy and demonstrations of its safety, with a heavy emphasis on clinical data.
This is a time- and cost-intensive process, and US payers are generally strict about using locally conducted research – even if you have data to show from your home market. ‘Research done in Europe is not valued as much as if you would have done it in the US,’ Vitala co-founder Petter Aasa told Sifted. ‘We are now investing again in collecting clinical data with partners in the US, just to prove these things.’
Taking advantage of the FDA’s Pre-Submission Program can certainly help to demystify the application process. Even items as straightforward as electric toothbrushes need FDA approval, and I’ve certainly seen clients with complex devices go through this process (though it is more relevant for devices and digital therapeutics than software). Taking on the services of a specialised medical law firm may be the best option for European companies looking to manage FDA clearance.
What do these obstacles mean for your talent strategy?
Although the market is much larger, with that often comes additional obstacles. ‘With the US healthcare market, there is good news and bad news,’ Koa Health CEO Oliver Harrison tells me. ‘The good news is there is a significant opportunity and, in many cases, a playbook to follow. The bad news is there is a lot of competition and a lot of noise to cut through.’
Over the last few years, I’ve helped European companies scale in the US – and typically this means hiring commercial leaders. Danish company Corti AI, whose autopilot with voice recognition for emergency triage needed commercial scaling for US expansion. Former Chief Revenue Officer Christian Borelli-Sejersen tells me that an important part of building a US presence is to move ‘a founder (or senior member of the team) from Europe to the US for an extended period of time. It will help in making those critical first US hires and bridge the gap culturally. You want to make sure it’s one team.’
However, in my experience, if a member of the founding European team moves to the US, ideally (and there are exceptions to this) they shouldn’t lead the commercial efforts. Often, companies will send a representative without the requisite knowledge, expertise – and, perhaps most importantly, rolodex – to make the desired impact in the US. Furthermore, European companies should be advised that interpersonal qualities and communication styles that might work well domestically may not translate for their commercial talent stateside. By the time you identify the mismatch, it may already be too late to rectify the situation.
In summary, moving out a European founder to keep the company culture, alongside hiring a US-based commercial lead to navigate the market effectively, is the most effective way to scale stateside.
Hire on the ground – and use trusted headhunters!
Of course – and I am biased here – I would advise companies seeking to branch out to do their research and hire talent locally with help from a headhunter with expert knowledge – especially when hiring commercial talent. It may cost more, but the investment is worth it. ‘Put simply, winning in the US market takes significant time and significant resources,’ Oliver Harrison notes.