The case is about a company headquartered in the USA. The company is established there as a corporation. The annual turnover in 2019 was 8.2 million US dollars. The company has 60 employees, 10 of whom work in the field. The medical product was sold in the USA via pharmacies. Last spring, the company contacted a consultant in Europe to learn more about the requirements for selling the product in Germany.
The key questions
The company would like to clarify the following questions:
- Which requirements have to be fulfilled in order to sell a medical product on the German market?
- In which legal form should the company be represented in Germany?
- How are taxable profits in Germany to be assessed, what must be taken into account in the double taxation agreement (DBA-USA)?
- How should the product be distributed in Germany?
- At what price should the product be sold?
- Is it possible to sell the product on prescription?
The company mentioned various premises that had to be fulfilled in order to enter the market:
(1) The product has already been sold in the USA through pharmacies; this distribution channel will also be maintained in Germany. 1 The investment volume for the German market in the first year is limited to 1 million euros.
- Taxation is to take place primarily in the USA.
The consulting assignment
The above-mentioned core questions had to be taken into account, taking the premises into account.
Choice of legal form
The GmbH was chosen as the simplest form of the corporation. The share capital amounts to at least 25,000 euros, of which at least 12,500 euros must be paid, the rest would have been possible, for example, in the form of contributions in kind. As there was enough capital available, the entire original capital contribution was paid in. The shareholder was the corporation from the USA. The name of the company was taken over from the USA and supplemented by the addition GmbH. Frankfurt a. Main was chosen as the seat of the company. The GmbH was also chosen as the legal form because its liability is limited.
Approval of the medical device
The device was already approved as a medical product in the USA. For the sale of medical devices within the EU, the requirements of the relevant EC directives must be met. These define three directives for medical products, which have been transposed into German law by the Medical Devices Act. Conformity is indicated by a CE mark on the medical device. The CE mark was applied for in cooperation with an external partner:
- definition of the medical device and its intended purpose for the treatment of depression
- classification of the medical device
- determination of the conformity assessment procedure
- technical documentation and quality management system
- final audit
Please refer to the certification bodies for further procedures. With the application for a PZN, the product was immediately listed in pharmacies and in the Lauer Taxe. The procedure took 8 months.
Financing and construction of the company headquarters
The capital for the construction of the site was already available, so that no financing was necessary. The company’s headquarters initially consisted of only one office with 60 sqm of space. Sales were made on a commission basis with an external medical sales company.
The premise of distribution exclusively via pharmacies did not appear to be conducive to success. A prescription was out of reach at first, as no clinical studies were available for the success of the treatment. Or at least none that could scientifically prove the requirements for proof of additional benefit. Although the therapy method is in principle also regarded as effective by some authors for the therapy of depression, see Pubmed. A pilot with a smaller health insurance company could be initiated via contacts to health insurance companies. In addition, distribution was via pharmacies as well as via the already established distribution company in Frankfurt.
Trends and developments
The current trend is towards therapy without medication. It is hardly possible to sell medical technology in Germany without the support of the established companies. Also the direct selling over Internet can be seen only as addition, never as replacement.