Succeed in your international launch!
At Future4care, our vocation is to become the European reference ecosystem in digital health.
Our primary and essential objective is to bring together, get people talking and collaborate with all the players in the health and digital system. With this in mind, we interviewed the law firm L.co
At Future4care, our vocation is to become the European reference ecosystem in digital health.
Our primary and essential objective is to bring together, get people talking and collaborate with all the players in the health and digital system. Manufacturers, entrepreneurs, specialized or general experts, healthcare professionals, patients, all stakeholders playing a decisive role in advancing digital health.
With this in mind, we interviewed the law firm L.co, represented by Anne-Laure Girin, business lawyer and founder of the firm, Clarisse Riot, HealthTech and e-health lawyer, and Constance Guiraud, tax lawyer, to offer you an analysis of a key issue for entrepreneurs: internationalization.
This is an even more topical issue as the remote cardiac monitoring platform Implicity, announced in a press release on April 27 that it had finalized a €21 million fundraising round to finance its expansion into Europe and the United States.
What strategy should be used to identify the States and/or territories in which to expand an e-health activity?
Any decision to open up internationally is preceded by a study designed to plan the envisaged growth pattern.
In the context of this study, the following questions should be asked:
- Is there a demand on the spot?
- Does the market already exist?
- What is the competitive environment?
- What is the added value compared to existing offers?
For some activities, the key may lie in contracts with local hospitals and health care providers.
To complete this study, the entrepreneur must also measure the extent of his "strike force" based on the means he has at his disposal at the time and, if necessary, establish an evaluation of his needs to organize the extension towards the targeted country or territory.
The human and financial investments are obviously not the same if you wish to offer your services in another Member State of the European Union or outside the European Union for example.
For the most advanced structures, the strategy can be doubled. It may be possible to flatten 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 main players in the Italian market.
It is also important to understand the market figures: Europe is the second largest pharmaceutical market in the world, accounting for 22% of global pharmaceutical sales, while the US market remains the largest, accounting for nearly 46% of global sales (source: IQVIA - 2020).
The nuance to be made in the health sector obviously concerns the regulatory aspects: it remains easier to expand into a country with a health system close to one's country of origin.
Europe is a market, based on common regulations with regard to the member states of the European Union: in the area of personal data, all member states are subject to the well-known General Data Protection Regulation (EU Regulation 2016/679). In the 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 (Regulation EU 2017/745).
On the other hand, even within a zone such as Europe, the systems vary in some respects. Furthermore, the United States is a market that can be unavoidable for a healthcare entrepreneur. However, entering this territory implies a significant investment, even if there is a strong appetite for digital health. During the health crisis, institutions have indeed favored e- health solutions, even reducing certain restrictions that were previously applicable to facilitate access to care. This is particularly the case for 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 health system, it is also necessary to be very aware of the reimbursement processes for the target country: if the solution cannot be reimbursed in the end, the whole access to the market may be compromised.
Healthcare systems and their actors are very different from one country to another, both operationally and culturally. How do you deal with this when opening a new market?
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 health care costs are covered.
However, this is not the only difference. Some countries, although culturally close to France, have their own specificities.
To take the example of Germany, which is a federal country, the opportunities and institutional interlocutors can be different 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 difference in approach to digital technology depending on the population. Some countries have been accustomed to digital technology for several years, while others are still in the transition phase. This is necessarily felt when it comes to offering an e-health solution to health professionals or hospitals.
Regulatory and operational:
Today, the regulation applicable to medical devices concerns all the Member States of the European Union (the EU Regulation 2017/745 mentioned above).
The manufacturer must therefore choose a body authorized to issue the CE marking, this choice being made based on a list of notified bodies available and updated on the NANDO (New Approach Notified and Designated Organisations) database accessible via the European Commission's website.
However, the regime is different in the United States: medical devices (and by extension, digital DMs) must go through a notification stage with the FDA, commonly called "510(k)" (premarket notification). In some cases, another procedure is applicable: the "PMA" (premarket approval), concerning the riskiest medical devices.
Beyond the differences in procedure, it is first necessary to ensure the correct qualification of its digital solution: it does not systematically fall under the medical device regime depending on the regulation envisaged. A product considered as a medical device in the United States could have a different qualification in Europe and vice versa.
Indeed, in the European legislation a software can be considered as a medical device if the three following criteria are met:
The software is intended to be used for medical purposes and provides, for example, diagnosis, diagnostic support, treatment or treatment support;
The software gives a clean result for the benefit of a single patient;
The software performs an action on the 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, without using these criteria.
It is therefore necessary to consider each solution on a case-by-case basis and to verify its qualification and, if applicable, the risk class applicable to it.
How to structure its establishment abroad?
Once the first test phase has been validated, the question arises of creating a legal structure directly in the State concerned.
The technical aspects are obviously left to the law firms and ad hoc service providers. It is indeed necessary to properly structure the company and to ensure that potential financial flows between a foreign structure and the French head office comply with the regulations.
Each country has its own access barriers, even in the European Union.
In practice, it is difficult to port employees from one country to another, even if this is obviously possible. Other alternatives must be considered.
Two cases must be distinguished.
The first is the willingness of the company itself to approach another country, for considerations specific to the startup's business model.
In this case, it is indeed necessary to rely on local experts, but also to deploy internal resources locally.
The second case is based on the request of a client in France for its teams or a subsidiary abroad.
Since cultures can be radically different from one area to another, you must know how to juggle this and choose the right options. Work with local actors? Deploy a team on site? Mixing the two? It's all a question of analyzing the local culture, but also the internal, financial and human resources.
In all cases, it is essential to have an on-site representation of the entity, whether outsourced or not, for the strategy to come to life. It is impossible to manage solely from a distance.
Moreover, some requests come directly from the head office and not from the local level. It is more important in these cases to go to the site and analyze the real local need, in order to put in place, the right strategy. If the local issues are not respected, both parties will lose out.
It is very difficult to standardize international development, as each project is different.
To summarize, a distinction should be made between:
- Legal issues related to the activity in question (here e-health);
- The legal and fiscal issues related to the structuring of the activity (here the constitution of a private entity with the search for profits).
In the first category, we note in particular :
- Topics related to health data, concerning the identification of data controllers and processors, and the existence or not of data transfers to and/or from outside the European Union;
- Subjects relating to the regulations applicable to medical device software outside the European Union, such as the so-called "510(k)" procedure in the United States, regulated by the Federal Drug Administration (FDA);
- Topics relating to possible ethical aspects, linked to the health professionals involved in the project: if it is planned to involve doctors on site for example, a good knowledge of their status in the country concerned is essential.
In the second category, we identify all matters relating to the creation of a company or establishment abroad, and its links with the parent company in its home state.
We note in particular:
The applicability of tax treaties for the elimination of double taxation;
The transfer pricing regime, where services are provided between entities in the same group; and
The possible impacts on VAT.
If the company plans to raise funds, part of which will be used to finance its international expansion, this structuring should be considered from the very first discussions with investors: as with any operation, it is necessary to have a well-defined roadmap for the project!
Public policies in the field of health are increasingly seeking to include project leaders, especially in e-health. How do you perceive these initiatives? More generally, what improvements would you like to make to the current system?
Some entrepreneurs still consider that the proposed measures are difficult to access, both because of the technical prerequisites and their actual implementation. Moreover, there is not always the enthusiasm that entrepreneurs had hoped for when faced with the opportunities put in place by the public authorities in the health sector.
Any initiative should be welcomed, however, as it is proof 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 patient needs. If they themselves do not master the subjects, they will not be able to take part in the change that must take place for digital health to progress.
A last word to the entrepreneurs who will read this?
SURROUND YOURSELF WELL
Internationalization should not be done alone: you must know how to surround yourself and take advantage of the partnerships that are offered to you.
Like networks such as Future4care with experts and R&D and export aid via Bpifrance among others.
ANTICIPATE FINANCING CYCLES
The ideal is to think about the entry into the capital of both European and American investors for the American market. In any case, there is an appetite on the part of European funds for American investments.
The funds in general will be able to support you in your international development.
Beware, depending on the territory considered, the financing cycles may be longer (e.g. American market).
SEIZING OPPORTUNITIES / MASTERING THREATS
The new regulation of medical devices in Europe can have a significant impact on the development strategy (leads to longer lead times), this must be considered.
In addition to the European and American markets, we must also look at other markets that could be sensitive to the planned activity.
Finally, we must take advantage of the initiatives put in place by the public authorities (e.g. MA SANTE 2022, announcement of €400M investment in the DM and IVD sector as part of the 2030 plan). Obviously, an electoral context must also be considered when making strategic decisions.
Thank you to Lco for bringing its insights on this crucial subject of international business. Do not hesitate to write to us, to push us subjects which you would like to see being treated.
For More information on Future4care, visit www.future4care.com
For more information on L.co , https://lco.legal/