Originally Published MDDI July 2005
Third Parties Can Help Firms Attain Market Access
|Rick Pfahl says small companies should consider specialty distributors.|
Manufacturers' representatives and specialty distributors may be able to give small device companies access to customers that they couldn't get to otherwise, according to experts in that field. Both of these groups have long-term relationships with hospital purchasers that a start-up firm just isn't likely to have, panelists said at the annual Medical Device Manufacturers Association conference held in Washington, DC, in May.
Manufacturers' representatives are an alternative to a direct sales force, said Thomas Volmer, owner of Provision Associates (Minneapolis) and president-elect of the Health Industry Representatives Association (HIRA; Denver). They are cost-effective because they work strictly on commission, don't mark up costs, and bear their own expenses except for samples and promotional literature, he said.
“New companies tend to benefit from our previous endeavors,” he said. “We can get a product in front of the right people. That can mean immediate market access and a broader market penetration.”
Manufacturers' representatives tend to specialize by product type and by region. They typically handle a portfolio of related but noncompetitive product lines. For a relationship to work, however, the manufacturer needs to provide adequate support. That means good promotional materials, samples, and training, as well as fast delivery of product and timely payment of commissions. If a representative doesn't have confidence that it will get paid within a reasonable time by a particular firm, it is not likely to give that firm's product much priority, Volmer said.
Most importantly, though, the device company needs to provide a good product. “Our reputations are based on quality products,” Volmer explained. “We are very pragmatic and connected, but we are not miracle workers.”
HIRA has several ways to help match a manufacturer to the right representative for its market. At its annual meeting, the association arranges for firms to interview representatives so each side can decide whether they would be a good fit. It also has a matchmaking service on its Web site, and the association can also provide a standard contract. Specific details, however, should be negotiated, and the device firm should have an attorney review the contract, he said.
Specialty distributors differ from manufacturers' representatives in that they take control of inventory. They also may take an active role in mar-keting efforts.
“Building a distribution channel is expensive, and a small company that prefers to invest capital in development should consider a specialty distributor,” said Rick Pfahl, vice president of sales and marketing for acute care at Bovie/Aaron Medical Corp. (St. Peters-burg, FL). “It may also be a good option if you have an exit strategy that includes being acquired. The acquiring company may only be interested in your product and your market share, not your sales team.”
Device companies can find a specialty distributor through the Independent Medical Distributors Association (IMDA; Westmont, IL). Its Web site has a bulletin board, and its annual conference provides an opportunity to meet distributors. “The key question to ask distributors is, ‘What else do you carry?'” said Shawn Walker, vice president of Bay State Anesthesia Inc. (North Andover, MA). “If they have complementary product lines, they can offer your product as part of a total solution to the end-user.”
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