Conquering the German Market in Six Months

Healthcare Industry
Information is power. Let me start with some fast facts about Germany:
• 82 million people
• 3,300 private orthopaedic practices
• 36 university hospitals
• 1,200 hospitals with an orthopaedic and/or trauma department
• 80% of the hospitals are managed by purchasing groups

Germany has two types of health insurance: low-enforced (basic) public health insurance, which accounts for about 85% of the population, and private health insurance, which is used by the other 15%. Germany spent approximately 11.6% ($376 billion) of GDP on healthcare in 2012, ranking it fourth among Organization for Economic Co-operation and Development countries.

German health insurance companies have made substantial gains in the last two years and hold about $20 billion in cash. However, some health insurance companies are hostile to innovation and relentlessly request evidence-based medicine for reimbursement.

The German healthcare system operates on a Diagnostic Related Group (DRG) reimbursement system. If a surgical procedure is considered in the DRG system, the hospital will get a fixed lump sum as reimbursement for the total procedure. All medical devices, implants, disposables, drugs and fees are included in the DRG. History has shown that if a hospital starts buying less expensive goods, the DRG system will react about two years later by reducing the lump sum and reimbursement. The German DRG system is a self-learning system and detects economic changes, especially purchase prices for medical devices. The DRG system could decide to increase the reimbursement, but this never happens. It is an important milestone whether you get your own reimbursement for your device or form a strategy appropriate for the system. For example, it might be that your product fits into the existing DRG system and is listed as knee prosthesis. Welcome to the price battle. Real innovations and medical devices that bring new therapies or treatments can be offered to the potential market. If it is not reimbursed, meaning not listed, your potential customers most likely will not be interested in the product. The best strategy is to seek CE approval and apply for reimbursement at the same time. Approval and clarification of reimbursement is essential and key for selling high-tech and intellectual property successfully. It plays a major role in whether your business will be profitable or will flop.

The German medical device market enables rapid admission to the market through CE Marking. Orthopaedic device manufacturers will meet well-educated physicians and engineers, and find a high level of clinical research.

How can a manufacturer conquer the German medical device market in six months with a small budget? There are three options: 1) Use a distributor; 2) Sell direct or 3) Forget it.

No distributor is acting nationwide, yet. But there will be a nationwide medical device distributor soon. They have learned from the past not to act as a stocking distributor right from the beginning. Distributors are acting mostly locally, whether with agents or sales representatives. Sales staff mostly focus on the products that are easier to sell. Both distributors and agents will expect a binding and exclusive contract from manufacturers.

If you resign the contract, it will require compensation for at least the following 12 months. Selling devices direct requires some bureaucratic paperwork, an office and perhaps one employee. Medical device companies need their own warehouse or a third-party logistics provider. However, hospitals do not invest in instruments and implants. They purchase based on consignment, and the best service for free. Hospitals will store instruments and implants (e.g. endoprosthesis, plates, nails, screws) in consignment and pay on what they have used in the patient. The device companies have to invest for this. Your customer in Germany won’t be a stocking customer. Your customer could do it, but won’t.

Because of these business practices, distributors are no longer willing to work as stocking distributors, not even for a short timeframe. Whoever will act as the supplier for the hospital or private practice has to rely on ROI before starting the business.

At times, disposable medical devices can be sold to hospitals or private practices, providing an opportunity to prevent consignment. Don’t forget, Germany is not the easiest market for medical devices. However, it’s the largest market in Europe, and the speaking market (Germany, Austria and Switzerland) represents approximately 100 million people.

The most challenging issues for the medical device industry in the 21st century seem to be an increasing life expectancy and high activity rate, superannuation of the population, deeply indebted national budgets and empty pension funds.

The business development and market approach of today is totally different compared to the past. Visionary ideas and market- adjusted strategy are essential to survive the first three years in order to become a successful and reliable partner. Intercultural respect and understanding, as well as an ear to the experts who are familiar with the German healthcare system, will be an asset for device companies working in Germany. There is an opportunity to learn from the mistakes of others. A pre-launch to evaluate and test your product in the market, while profiling your potential customers, would give you a deeper knowledge on how to adapt your strategy. Come up with a budget and timeframe that gives you prospects for successful execution to conquer the German medical device market.

Future Trends
What are the trends, and what could they mean for the industry? Design innovations that are classified as “me too” products? Invest in real innovations that are not reimbursed by the healthcare system? The medical device industry should try to solve the problems of the surgeons and hospitals. Listen to the orthopaedic industry. Listen to internal teams. The number of product recalls and lawsuits are increasing each year. Consider that the financial piece isn’t all that is impacted in this new world order.

There are always poor business climates and opportunities to blame health insurance companies and the bureaucratic process regarding uncertainty of the future benefit assessment of medical devices. Before entering a new market, define the company’s goal: Profit or market shares? Pay to stay or merger? Germany is a $376 billion healthcare market. When medical device companies start competing and fighting in Germany’s healthcare market, they must have a strategy that is fitted to all of these peculiarities. Don’t forget it!

Stefan Pickartz, principal of COMTAIX, has a 26-year track record in healthcare industry with a focus on orthopaedic surgical implants and joint replacement, implants for trauma surgery and biomaterials. Stefan is also experienced in starting medical device and other companies from scratch. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..



For more on our Spotlight on Europe:
The Basics: A Look at France’s Medical Device Market
Three Reasons Ireland’s Orthopaedic Sector Attracts Foreign Investments