[Contribution] What medical device companies need to know when entering the U.S. - FDA approval process and entry strategy

Daeryun Lee Il-hyeong, lawyer, "FDA strengthens regulations on AI and IoT-based medical devices - stricter marketing regulations"
“FDA approval process is complex, but predictable... Compliance investment is not an option, but a necessity”

The contributor and Pharmaceutical Newspaper planned a series related to “medical devices.” In this article, we will look at the legal regulations and entry strategies of domestic medical device companies when entering the U.S. market.

1. Entering

Recently, Korean medical device companies are rushing to enter the United States. This is because, following the success of K-Beauty, the possibility of K-Medical spreading globally is attracting attention. However, when we meet companies preparing to enter the U.S. market, they are often perplexed by the complexity of the FDA approval process and the variety of entry strategy options.

While conducting consultations with dozens of companies through a recent COEX consultation booth event, the contributor realized that most of the things working-level staff were curious about overlapped, and felt the need to organize key points. In this contribution, I would like to introduce content that may be helpful to practitioners, focusing on the FDA approval process and proven entry strategies.

2. FDA approval process is more difficult than expected

The U.S. FDA manages medical devices by dividing them into Class I, II, and III depending on the risk they pose to patients. Since the approval procedures required for each grade are different, the first hurdle is to accurately identify which grade your product falls into.

Class I products may seem relatively simple, but in reality, they are not. In most cases, 510(k) is exempted, but FDA facility registration and device listing are required, and quality system compliance is also required. In particular, caution is required as products that are classified as quasi-drugs or cosmetics in Korea may be treated as medical devices in the United States.

Class II products are the area that most companies are concerned about. Equivalence with existing approved products must be proven through 510(k), and the key here is finding an appropriate Predicate Device. Even for products with the same function, approval may vary depending on the selection of predicate device. The FDA review period is officially 90 days, but in reality, it usually takes 4-6 months due to requests for additional data or supplementation.

Class III products are the most challenging area. A representative example is fillers, which require large-scale clinical trial data to receive PMA (pre-market approval). The permit period can take anywhere from at least 180 days to several years, so it must be approached with sufficient time and financial margin.

3. Direct payment or direct payment, that is the question.

The biggest concern for Korean medical device companies is their entry strategy. It is largely divided into a direct payment method that sells directly to hospitals and a short payment method that uses a distributor.

The biggest attraction of direct payment is profitability. Because there are no distributor commissions, you can maximize margins and directly control brand management and customer relationships. Additionally, you can receive direct feedback from hospitals and medical staff, which is advantageous for improving products or identifying market trends.

However, the reality of direct payment is not easy. A huge initial investment is required to deploy sales personnel throughout the United States and build a logistics system. The burden of understanding and responding to different regulations in each state is also significant. One large medical device company also attempted direct sales at first, but eventually switched to partnering with partners.

On the other hand, Gannap's biggest advantage is quick market entry. The initial investment burden is low because already established distribution networks and customer relationships can be utilized, and distributors are also responsible for complex regulations and logistics procedures. However, the downside is that profitability is low due to distributor commissions and it is difficult to directly control brand management or customer relationships.

In the case of short payment, the representative method is to use GPO (Group Purchasing Organization) or Distribuotr. However, since they place great importance on price competitiveness, product competitiveness, and supply stability, having sufficient competitiveness is a priority.

4. Practical know-how found in success stories

Looking at the cases of companies consulted by the contributor, several patterns can be identified.

For products dealing with rare or unique diseases, direct delivery was advantageous. This is because a direct approach is more effective in areas where the number of patients is limited and expertise is important. On the other hand, general consumables or general-purpose medical devices were often cheaper.

A medical device company was attempting direct delivery by establishing a U.S. corporation based on its differentiated technological capabilities as the world's first developer.

On the other hand, disposable medical device manufacturers chose a strategy of gradually expanding the market, starting with government bidding. This is a method of expanding into the private market after gaining experience in the government market, where information is relatively open and barriers to entry are low.

5. Latest regulatory trends, points not to be missed

Recently, the FDA has been strengthening regulations on AI and IoT-based medical devices. In particular, AI algorithms that continuously learn are difficult to manage with the existing 510(k) system, so a new regulatory framework is being developed. Companies developing these products must carefully monitor regulatory changes.

Marketing regulations are also becoming more stringent. Advertising for uses outside of the FDA-approved indications or claiming exaggerated effects can result in severe sanctions.

UDI (Unique Device Identifier) ​​is also something that cannot be overlooked. Even Class I products often require UDI attachment and GUDID registration, so the exact requirements must be identified in advance.

6. Conclusion and Recommendations

The U.S. medical device market is certainly attractive, but thorough preparation is essential for success. Above all, it is important to accurately understand the characteristics of your products and company capabilities and then select an appropriate strategy.

The FDA approval process is complex but predictable. Trial and error can be minimized if you prepare in advance and get help from experts. Especially in recent times where the regulatory environment is rapidly changing, investing in compliance has become a necessity rather than an option.

The technological prowess of the Korean medical device industry has already reached a world-class level. Now, I am confident that if we have a systematic entry strategy and ability to respond to regulations, we will be able to succeed in the U.S. market.

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[Contribution] What medical device companies need to know when entering the U.S. - FDA approval process and entry strategy (link)