Globalization of the healthcare distribution market has spurred medical device and in vitro diagnostic (IVD) companies to outsource, increasing their reliance on third-party distributors. While selling in the global marketplace represents a significant opportunity, it can be challenging due to regulatory and legal complexity and nuances of local healthcare systems.
While larger organizations with existing foreign offices may opt to pursue a direct distribution model, smaller or mid-size companies generally need to turn to third-party distributors to support their global expansion plans. In this blog post, we explore 5 best practices for managing risk and optimizing the likelihood of success when using third-party distribution partners.
When evaluating potential third-party distributors, it is critical to validate that the distributor has a history of success in the market, ideally in the product type and therapeutic area of interest. It is also important that the distributor has an established network in the medical community, a deep understanding of the local and/or regional regulatory requirements, a disciplined approach to new product commercialization, and, preferably, previous experience with a similar or adjacent technology. Finally, manufacturers may benefit from confirming that the distributors under consideration have the necessary infrastructure to recruit, train, and retain a productive sales force.
Many countries require manufacturers to have in-country representatives. Device companies often hire local regulatory consultants to serve in this role but may also negotiate with their third-party distributors to take on the responsibility and cost of local registration and act as their local representative. Before engaging a distributor as a local representative, manufacturers should consider the following:
Every country is different and, as such, each third-party distribution agreement should reflect and integrate nuances of the local market and regulations. For instance, some countries have private healthcare systems and commercial payers, while others have public systems where the government is a direct buyer of medical devices. Market differences may even exist within countries, requiring distributors with regional expertise. Tax structures, for example, may vary, so manufacturers should prioritize product pricing negotiations in all distribution agreements.
Regulatory agencies consider distributors to be critical suppliers, particularly if they store product, manage product installation and servicing, and handle complaints, among other quality system-related responsibilities. Thus, any third-party distributor must be qualified under the manufacturer’s existing supplier qualification process, in accordance with the local regulatory landscape.
At Precision for Medicine, we find it useful to evaluate and qualify distributors from two different, but complementary perspectives—their regulatory competency and their quality system capabilities. It may be useful to create questionnaires to guide the qualification process. From a regulatory perspective, it is important to ask about:
Assessing a distributor’s regulatory competency has the added benefit of helping the manufacturer understand the opportunities and hurdles of entering a particular market. From the viewpoint of quality system capabilities, manufacturers should review the distributor’s quality manual and standard operating procedures (SOPs), with an emphasis on document control and distribution records. Distributors that have been certified to ISO 9000 or 9001 standards may have a competitive edge. If a medical device requires environmental controls, manufacturers should also check the distributor has appropriate storage facilities and procedures in place.
Once distributors have met the necessary regulatory and quality system criteria, it is advisable for the manufacturer to perform an audit, preferably on-site, of their SOPs and facilities prior to contracting.
It is imperative for manufacturers to carefully draft and review the language of the distribution agreement, taking into consideration that circumstances may evolve over time. Any contract should include a quality agreement that describes the distributor’s responsibilities related to registration, interaction with relevant regulatory authorities, creation of marketing collateral, and complaint handling. In addition to including provisions for quality, the agreement should outline the responsibilities of the distributor in the case of contract termination. It should also cover what happens if either the manufacturer or distributor is acquired.
Manufacturers who are considering the use of third-party distributors to access international markets must develop a deep understanding of the local market, regulatory landscape, and business practices of each country where they hope to sell their products. Developing and implementing a thorough vetting process for potential distributors helps set the stage for mutually beneficial partnerships.
To learn more about how Precision for Medicine can help manufacturers identify and qualify third-party distributors, click here.
Maham Ansari, MS, RAC is a Senior Director, IVD Regulatory Affairs. Her focus is on companion diagnostic co-development programs, where she leverages her regulatory expertise to secure approvals in the US, Europe and beyond for companion diagnostics with a specific focus on gene therapy. She brings more than 16 years of global regulatory leadership experience in the medical device and in vitro diagnostics industry, spanning major multinationals to small start-ups, including full life cycle management across all stages of product development, execution of global regulatory strategies, and post-market surveillance.
Precision for Medicine is part of the Precision Medicine Group, an integrated team of experts that extends Precision for Medicine’s therapeutic development capabilities beyond approval and into launch strategies, marketing communication, and payer insights. As one company, the Precision Medicine Group helps pharmaceutical and life-sciences clients conquer product development and commercialization challenges in a rapidly evolving environment.
