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Europe and the Americas: differences in
the orthopaedic market Many have sat
in meetings and listened to or used phrases like ‘The Big Picture’ and ‘The
Global View’. Yet how much do we really understand about our partners and
colleagues on either side of Atlantic? It is clear
from both product and company market share segmentation that there are some
very strong marketing messages to decipher when a company is acting outside
of its home base continent. And
yet, companies do not seem to read the messages conveyed by the successes and
failures of product launches and corporate activities in Europe and the US. Orthopaedic
surgeons are of a similar nature and quality in both continents. The level of GDP spent on health is
8.6% in the EU and 14.5% in the US (The Economist). Although health care systems differ,
care at the point of delivery is excellent in both continents. The surgeons
read the same journals, attend the same meetings and join the same debates. This article
presents a European perspective to this conundrum, based on history, and on
examining the geographical, and political barriers and alliances that exist
in Europe. The Global
Market Europe
represents 27% of the global figure, and due to emerging markets such as the
former Eastern European countries, and less regulation for product
introduction, represents a significantly higher proportion of the marketing
opportunity. For example many companies introducing ortho-biologic products
have chosen to launch their products first in Europe. Average
prices for implants can differ significantly between the US and Europe. The
average price for a cementless total hip (stem/head/cup/insert) is around
$5,500 in the US, but $2,250 in Europe. Specific examples of European or US strength not yet being translated into the transatlantic territory can be seen with companies such as Sulzer, who have an enviable market share in the European reconstruction market, but a much smaller share of the US market, and Biomet who have seen great success in the US with their trauma portfolio, yet to be achieved in Europe. The European
Market It is a
mistake to look at Europe as a homogenous single market. Specific strategies
are required to address each natural grouping of countries taking account of
culture, language, regulatory and health service environment, market
influences and surgical discipline dynamics. There are 17
countries in Europe, which means at least 17 languages, cultures, sets of
historical alliances, regulatory environments and despite the introduction of
the Euro, still a variety of currencies. Influences in
orthopaedic surgery are often assumed to be either US led, or UK led.
However, the biggest influence in Europe has been Germany, the largest
European market at around $420m in 2001. Products of German or Swiss origin
dominate the German market, with surgeons such as Müller, Wagner and
Zweymüller having had huge influence in surgical training and prosthesis
design. The pricing situation in Germany is however, difficult. Germany has
introduced regulatory and pricing controls which now make it one of the
lowest margin countries in the world. Other
countries such as Italy and Spain have been more influenced by the US. When looking
at a particular business segment in Europe it is possible to misread an
opportunity due to inaccurate or shallow data. An example of this is the
emerging market for Vertebroplasty. Though growing fast, there were around
1,000 vertebroplasty procedures performed in Europe in 2000, 65% of business
was in France – the toughest market to enter in Europe. The French market,
second largest in Europe (43,000 knees replacements in 2001) is particularly
focussed on home grown products and companies, has some of the toughest price
controls, and is highly regulated. Many of the
emerging markets in Europe, such as Czech Republic and Turkey present
outstanding opportunities for growing unit market share. However, prices are
under high pressure and payment terms can be difficult. A long-term strategy
is required. This
diversity in Europe demonstrates how very different sales and marketing
strategies are required either side of the Atlantic. Sales People
Relationship and Role The Sales
Person’s role in Europe is slightly different from the US. In a study
conducted by Joint Solutions in the UK, surgeons were asked what was the most
important aspect of the service they receive from their sales person. The
response was that they wanted knowledge of company communications and
systems, and they wanted access to the ‘sales grapevine’, in other words to
know what their peers and colleagues were using or doing. ‘In-theatre’
assistance hardly even registered. In the US the
sales person’s role has developed into a much more technical role. Product
Development Many is the
product manager who has nearly died trying to achieve development consensus
between transatlantic surgeons, and many a Salesforce has died waiting for
their product! European surgeons tend to spend more time on broader aspects
of development, whilst their US colleagues tend to agonise endlessly over
0.1µm! The solution?
Keep marketing close to product development, keep product managers close to
designer surgeons, and recognise that there are very few global brands in
orthopaedics that succeed globally, and even fewer were designed by
transatlantic committee. Distribution
issues In recent
years our industry has undergone massive change. There is a focus on
economies of scale in manufacturing and distribution, an increase in
outsourcing of non-core activities, and a move away from indirect sales
people globally. Of course all
of this makes sense on the balance sheet. But look at the ground level:
orthopaedics is essentially a relationship business, built on excellent and
knowledgeable sales people, and on market knowledge built from the bottom up.
Dismantling an established distributor network can provide a wealth of good
people for your competitors, and a loss of local surgeon champions; year one
and two figures may look good during a transition, but year four and five are
likely to look poor. Issues such
as local taxes, union/employment laws (particularly strong in France and
Belgium) and product reimbursement are, nine times out of ten, best dealt
with through local experience, unless large central resources are available
and mobile. Biomet Inc.
has taken the approach of maintaining the identity and organisation of new
acquisitions globally, and ‘plugging’ them into its core organisation through
its Joint Venture approach. Other companies such as Stryker and J&J have
adopted a more integral approach. Both approaches may succeed; it is the
tactics under the strategies that will dictate success or failure. Similarly in
the US, success has been seen with direct and indirect product introductions;
it is the willingness to learn and adapt strategies tactically that produces
success. The
Regulatory Environment CE marking in
Europe has been the most significant legislation introduced of late, and
whilst it has brought patient and quality benefits, it has increased the
lead-time and documentation for new product development. Evidence-based
medicine has begun to be increasingly applied across all medical sectors in
Europe. In the orthopaedic sector this has been galvanised by the results
published with the various Scandinavian Hip registers, and the media
attention to episodes such as the Capital Hip experience in the UK. The UK
National Institute For Clinical Excellence (NICE) is an independent
organisation examining evidence of medical practice and making
recommendations to the healthcare community on best practice. Similar organisations are developing
in other European countries, such as AFSAPS in France and Reform 2000 in
Germany. In the medium
term a “European FDA” is on the cards, but European-wide regulatory approval
for new products, and less-stringent documentation requirements mean that
some products can still be approved in Europe years before the USA. Summary –
Crossing Continents §
Get the data right – use local
knowledge, and be sceptical of very broad reports §
Know the regulatory & health
service framework that you plan to operate in §
Model/benchmark the successful products
and companies and use the results §
Be prepared to change quickly, learn
and adapt, you cannot force new philosophies into new markets quickly §
Find the product and philosophy
champions §
Consider the distribution options with a
long term view to customer relationships and the competitive environment;
make the most of existing expertise §
Utilise local expertise and knowledge
in every way possible §
Don’t try to force a global brand into
a market, the cost may outweigh the profit §
Get central marketing closer to the
customer §
‘Staying power’ is probably as
important as anything else – be in for the long haul §
Be aware of cultural and historical
alliances §
Orthopaedic products are not Coca Cola
or McDonalds! Global strategy must always be inextricably linked with local
tactics For more information about the
orthopaedic market in Europe, please contact: Joint Solutions Ltd Longdene House Hedgehog Lane Haslemere Surrey, GU27 2PH Ph. 01428 656 099
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