Manufacturers entering a new region with molecular diagnostics platforms face a structural choice: build a direct commercial organisation or contract a distributor. The decision is frequently made on instinct or on the strength of an inbound partnership enquiry, yet it shapes registration ownership, pricing power, service quality, and exit costs for a decade. This article lays out a decision framework for distributors, manufacturers, and the procurement teams that sit on the receiving end of both channel models.
The four variables that decide it
Channel strategy for in-vitro diagnostics reduces to a small number of load-bearing variables. The first is regulatory ownership: in many markets the party that holds the registration carries multi-year liability, quality-system obligations, and the cost of maintaining it, and registrations are not always transferable at contract termination. The second is service intensity — a sample-to-answer cartridge platform with a field service network is very different from an open system that demands applications support. The third is pricing control: distributors compress margins and set their own street pricing, which matters where public tenders benchmark historical prices. The fourth is tender access: many public procurement regimes require local presence, local language documentation, or locally held regulatory responsibility, which effectively decides the question on its own.
When distribution is the stronger channel
- Geography is fragmented across many small accounts that no direct team could cover economically
- Importation, licensing, and registration administration is complex and the distributor already holds that competence
- The platform is serviceable through a certified third-party engineer network rather than daily applications work
- Market size does not yet justify fixed costs of a direct organisation, or the entry is deliberately low-commitment
- Existing distributor relationships carry the clinical credibility that a new entrant lacks
When direct presence pays for itself
A direct team earns its cost structure in the opposite conditions: a small number of large reference laboratories and hospital groups where contract terms and pricing must be negotiated centrally; platforms whose workflows demand sustained clinical application support; markets where reference accounts anchor credibility for the whole region; and situations where the manufacturer wants first-party control of complaint handling and vigilance reporting. Direct entry also keeps the installed-base data — instrument placements, utilisation, reagent pull-through — inside the manufacturer, which matters for long-range planning and for tender responses that require documented local experience.
Structuring the agreement
Whichever direction the framework points, the agreement determines whether the model works in year four, not year one. Address exclusivity explicitly — territory-wide exclusivity in exchange for minimum purchase commitments, with a review gate — and decide registration ownership in writing, including what happens to the registration if the relationship ends. Set service-level commitments with measurable response times, define who funds training and demo inventory, and agree how tenders are priced and who leads them. Termination and step-down clauses deserve the most lawyer time: they are the difference between an amicable transition and a stranded installed base. Hybrid models, with regional distributors alongside direct key-account coverage, are increasingly the pragmatic answer for molecular IVD, provided territory rules are drawn to prevent channel conflict rather than merely to paper over it.