A successful international launch!
At Future4care, our calling is to become Europe's benchmark e-health ecosystem.
In order to achieve this, our primary and essential purpose is to congregate, get people talking and collaborate with all the players in the healthcare and digital systems. With this in mind, we interviewed the law firm L.co
Published on June 08th, 2022 at 08:51 am
At Future4care, our calling is to become Europe's benchmark e-health ecosystem.
To achieve this, our primary and essential purpose is to congregate, get people talking and collaborate with all the players in the healthcare and digital systems. Manufacturers, entrepreneurs, specialized or general experts, healthcare professionals, patients - all the stakeholders who play a decisive role in advancing digital healthcare.
With this in mind, we asked the L.co law firm, represented by Anne-Laure Girin, business lawyer and founder of the firm, Clarisse Riot, HealthTech and e-health lawyer, and Constance Guiraud, tax lawyer, for an analysis of a key issue for entrepreneurs: internationalization.
This subject is all the more relevant given that Implicity, the remote cardiac monitoring platform, announced in a press release on April 27th that it had finalized a €21 million fund-raising round to finance its expansion into Europe and the United States.
What is the best strategy to identify countries and/or territories in which to expand an e-health business?
As a general rule, any decision to expand internationally is preceded by a study designed to plan the intended growth path .
As part of this study, the following questions should be asked:
Is there local demand?
Does the market already exist?
What is the competitive environment?
What added value do you offer in relation to existing products and services?
For some activities, the key may lie in contracts with local hospitals and healthcare providers.
To complete this study, the entrepreneur must also measure the extent of his "firepower", based on the resources at his disposal at any given moment, and, if necessary, establish an assessment of his needs to organize the extension to the target country or territory.
Clearly, the human and financial investments required are not the same whether you want to offer your services in another EU member state or outside the EU, for instance.
For the most advanced structures, with greater resources at their disposal, the strategy may be twofold. The goal may be to smooth out the competitive environment and take advantage of demand in the target market. This is the case, for example, of DOCTOLIB, which, after expanding in Germany, last year acquired DOTTORI.IT, one of the leading players in the Italian market.
It's also important to master the market figures: Europe is the world's second-largest pharmaceutical market, accounting for 22% of global pharmaceutical sales, while the US market remains the largest, accounting for almost 46% of global sales (source: IQVIA - 2020).
The nuance in the healthcare sector obviously concerns regulatory aspects: it remains easier to expand into a country with a healthcare system close to one's own.
Europe is a market in its own right, based on common regulations for the member states of the European Union: in the field of personal data, all member states are subject to the famous General Data Protection Regulation (EU Regulation 2016/679). In the particular sector of medical devices, there is also the new regulation applicable to medical devices - including connected medical devices, for which the applicable regime has been significantly modified, in view of their risk class (EU Regulation 2017/745).
On the other hand, even within a zone like Europe, systems vary in certain respects. Furthermore, the United States is a market that may be unavoidable for a healthcare entrepreneur. However, entering this territory implies a significant investment, even if there is a strong appetite for e-health. During the health crisis, institutions favored e-health solutions, even reducing certain restrictions that had previously applied to facilitate access to care. This is particularly true of telehealth, whose use cases in the United States have also been extended under the aegis of the FDA.
If the costs of the solution need to be covered by the healthcare system, you also need to be fully aware of the reimbursement processes for the country in question: if the solution cannot ultimately be reimbursed, your entire access to the market may be compromised.
Healthcare systems and their players greatly vary from one country to another, both operationally and culturally. How do we deal with this when opening up a new market?
Culture:
When it comes to healthcare, the first opposition that comes to mind is often that between France and the United States, mainly because of the difference in the way healthcare costs are covered.But this is not the only difference. Some countries, though culturally close to France, have their own specificities.
To take the example of Germany, which is a federal country, opportunities and institutional interlocutors may differ from one region to another: faced with this type of situation, it is then necessary to adapt not to a country, but to a region, and to move forward as we go along.
Regarding acculturation, we can also mention the different approaches to digital technology in different populations. Some countries have been accustomed to all-digital technology for several years, while others are still in the transition phase. This is necessarily felt when it comes to offering e-health solutions to healthcare professionals or hospitals.Regulations and operational
Today, the regulations applicable to medical devices concern all the EU Member States (EU regulation 2017/745 cited above).
Manufacturers must therefore choose an organization authorized to issue CE certification, based on a list of notified bodies available and updated on the NANDO (New Approach Notified and Designated Organizations) database accessible via the European Commission website.
In the USA, on the other hand, medical devices (and, by extension, digital medical devices) must go through a notification stage with the FDA, commonly known as "510(k)" (premarket notification). In certain cases, another procedure is applicable: "PMA" (premarket approval), for high-risk medical devices.
Over and above the differences in procedures, it is important to ensure that your digital solution is properly qualified: depending on the regulations in question, it may not be covered by the medical device regime. A product considered to be a medical device in the United States could be classified differently in Europe, and vice versa.
In fact, under European legislation, software can be considered a medical device if the following three criteria are met:The software is intended for use for medical purposes and enables, for example, diagnosis, diagnostic support, treatment or treatment support;
The software provides a specific result for the benefit of a single patient;
The software performs an action on incoming data, such as an analysis, to provide new medical information.
For its part, the FDA has published several guides for manufacturers, proposing a more diffuse definition of the devices under its authority, not including these criteria.
Each solution must therefore be considered on a case-by-case basis, and its qualification and, where applicable, the risk class applicable to it, must be verified.
How do you structure your international presence?
Once the initial test phase has been validated, the question arises of setting up a legal structure directly in the country concerned.
The technical aspects are obviously left to law firms and ad hoc service providers. It is essential to ensure that the structure is properly framed, and that potential financial flows between a foreign structure and the French head office comply with regulations.
Every country has its own access barriers, even within the European Union.
In practice, it's tricky to port employees from one country to another, even if this obviously is possible. Other alternatives must be considered.
There are two main situations.
The first is when the company itself wishes to approach another country, for reasons specific to the startup's business model.
In this case, it's best to call on local experts, but also to locally deploy internal resources.
The second scenario is based on a request from a customer in France for its teams or a subsidiary abroad.
As cultures can be radically different from one place to another, you need to know how to juggle with this and choose the right options. Work with local players? Deploy a team on site? Mix the two? It's all a question of analyzing the local culture, as well as internal financial and human resources.
In all cases, it's essential to have the entity represented on site, whether outsourced or not, for the strategy to come to life. It's impossible to manage from a distance.
What's more, some requests come directly from head office rather than locally. In such cases, it's all the more important to visit the site and analyze the real local needs, in order to implement the right strategy. If local issues are not respected, both parties will lose out.
It's very difficult to standardize international development, as every project is different.
To summarize, we need to distinguish between:
Legal issues relating to the targeted activity (in this case, e-health);
Legal and tax issues related to the structuring of the activity (in this case, the creation of a private entity with the aim of generating profits).
In the first category, we note in particular :
Issues relating to health data, notably the identification of data controllers and subcontractors, and the existence or otherwise of international data transfers to and/or from outside the European Union;
Issues relating to the regulations applicable to medical device software outside the European Union, such as the "510(k)" procedure in the United States, governed by the Federal Drug Administration (FDA);
Topics relating to possible ethical aspects, linked to the healthcare professionals involved in the project: if it is planned to involve doctors on site, for example, a good knowledge of their status in the designated country is essential.
In the second category, we identify all issues relating to the creation of a company or establishment abroad, and its links with the parent company in its home country.
In particular, we note :
The applicability of tax treaties eliminating double taxation;
transfer pricing, in the case of services rendered between entities of the same group; and
VAT implications.
If the company is planning to raise capital, part of which will be used to finance its international expansion, this structuring should be considered from the outset in discussions with investors: as with any operation, it is essential to have a well-defined roadmap for the project!
Public policies in the healthcare field are increasingly seeking to include project developers, especially in e-health. How do you perceive these initiatives? More generally, what improvements would you like to see made to the current system?
Some entrepreneurs still consider the measures proposed to be difficult to access, both in terms of technical prerequisites and actual implementation. Moreover, entrepreneurs are not always as enthusiastic about the opportunities offered by public authorities in the healthcare sector.
However, every initiative should be welcomed, as it shows that healthcare startups have an increasingly privileged position in the healthcare system!
Today, the efforts made in the healthcare system, both in France and abroad, are welcomed by many players. However, we must remain alert to the need to make healthcare professionals even more aware of these new regulations and developments. They are the prescribers, based on patients' needs. If they don't master the issues themselves, they won't be able to play their part in the change that needs to take place if digital healthcare is to progress.
A final word to the entrepreneurs who will be reading this?
SURROUND YOURSELF WITH THE RIGHT PEOPLE
You can't go international on your own: you need to surround yourself with people and take advantage of the partnerships available to you.
For example, networks like Future4care, with its experts, and R&D and export aid via Bpifrance, among others.ANTICIPATE FINANCING CYCLES
Ideally, you should consider bringing in both European and American investors for the American market. European funds are certainly keen to invest in the US.
Funds in general can support your international development.
Note, however, that depending on the territory, financing cycles may be longer (e.g. the US market).SEIZING OPPORTUNITIES / MASTERING THREATS
The new regulations governing medical devices in Europe may have a major impact on development strategy (leading to longer lead times), this should be kept in mind.In addition to the European and American markets, it is also necessary to take an interest in other markets that could be sensitive to the planned activity.
Last but not least, the initiatives put in place by the public authorities (e.g. MA SANTE 2022, the announcement of a €400 million investment in the DM and IVD sector as part of the 2030 plan) should be taken advantage of. Of course, the electoral context also needs to be taken into account when setting strategic orientations.
Thank you to Lco for shedding light on this crucial international topic.
Don't hesitate to drop us a line, and let us know if there's anything you'd like to see covered.
For more information on Future4care, visit www.future4care.com
For more information on L.co , https://lco.legal/
