US Healthcare Market: Opportunities and Challenges for International SMEs

For small-medium manufacturers it is essential to define a correct Entry Strategy

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Planning Health products SME United States of America International marketing International marketing

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This article was written in collaboration with Bruno Borganti, Expert in Market Entry Strategies at InterExprt Solutions.

The Opportunities of the US Healthcare market

In recent years Healthcare Imports from the US market have been at an all-time high, with growing importance of High and Medium-High Price Ranges.
According to ExportPlanning data (available in the Analytics section of the platform, see Ulisse Datamart), last year US Imports of Pharmaceuticals and Medical Products1 reached the record of $164bn, almost 73% of which attributable to the Premium segments (High and Medium-High price ranges).
Compared to the values recorded just five years earlier, imports grew by almost $60bn; furthermore, in 2013 the share of Premium segments was around 10 points lower than the current one.

As documented in a previous article, the first half of 20192 has confirmed a further growth for the US Healthcare Products market, with particularly positive performances by European countries (in particular Italy was the best Year-over-Year performer in H1-2019).

Moreover, according to ExportPlanning’s Forecast up to 2022 (see the Forecast Datamart), US Imports of Pharmaceuticals and Medical Products are expected to grow by nearly $53bn (CAGR: +7.3%), thus reaching the threshold of $217bn. This confirms the USA as the first import market worldwide in the Healthcare sector: think that Germany, in second place in the 2022 ranking, is expected to show a value of the sectoral imports lower than $98bn.

The Challenges of the US Healthcare market

At the same time, the US Healthcare market continues to be increasingly competitive, as a result of Integrated Delivery Organizations (IDNs) and Group Purchasing Organizations (GPOs) supply chain consolidation; Mergers and Acquisitions (M&As) as well increase the presence of barriers of entry for SME companies trying to play in this environment.
Essentially, this is a mature market that favors larger distribution organizations, capable of offering group of product lines vs single product lines, let alone single products.
US distributors are laser-focused on selling what they have and meeting their financial goals. New products are launched on websites and they are basically expected to sell on their own in this way. Marketing and promotional work is done by manufacturers; this includes marketing materials, promotions and leads generation as well as regular visits with distributor reps to key accounts. Essentially, distributors will sell what is already selling in and, in some cases, would add a new competing line in support of their existing lines as a way to offer product alternatives. Notwithstanding the above, US market is always open to new products, but an exporter should be very well prepared to make a compelling reason for its proposition; otherwise there will be no interest.
In the US market, particular attention is given to the credibility and reputation of the company: its ability to deliver quality products, in accordance with federal and state regulations, on time, on a consistent basis and for a long-term period of time is essential. If a new company is not organized accordingly the products offered will not sell, no matter the price. In essence, the product you need to sell first is your company, not just the products you offer.

For small-medium manufacturers
it is essential to define a correct Entry Strategy
for the US Healthcare market

The US Healthcare market: the key role of Entry Strategy model

So far, a few Opportunities & Challenges associated with the US Healthcare market have been highlighted. In order to deal with them, the Entry Strategy phase plays a key role for a Small Medium Enterprise. In this related article, a case study of successful Entry Strategy of a SME into the US Healthcare market is reported. In the opinion of the authors, the model applied in the case study is characterized by the following distinctive features:

  • Assessment of Company’ Strengths/Weaknesses and SWOT Analysis
  • Evaluation of Pros/Cons implicit in the different Entry Strategy options
  • Partner Selection as a relevant feature in designing the Entry Strategy
  • IT tools designed to efficiently and effectively implement the Entry Strategy.

1) For an detailed description of the various product categories within the industry under analysis, see the related classification table.
2) Data are also available in the ExportPlanning's US Trade Datamart, which contains ri-elaborations by StudiaBo on foreign trade declarations of American companies collected by the U.S. Census Bureau.