Medical technology has been, and continues to be, a highly successful industry sector. The heart and soul of this success has been continuous innovation and a dedication to research and development. The sector is consistently in the top tier in Europe for R&D spend, investing around 8% of annual sales. A key driver for this innovation is the exceptionally short lifecycles within the sector. Once a breakthrough technology has been established, improvements are made continuously. Each superseding improvement usually arrives within 18 to 24 months. Therefore, to survive and prosper, manufacturers must continue to innovate. This competitive environment is helping the European medical technology sector in remaining the second largest medtech market globally.
This innovation should be good news for under-pressure European healthcare systems. There is clear evidence that more effective treatments are capable of delivering clear benefits; reduced hospital stays (with an associated reduction in cost of treatment); better outcomes, and faster rehabilitation and return to society. Given the financial challenges currently facing policymakers, these are important benefits which help to reduce costs, increase efficiency and create sustainable healthcare systems and healthcare delivery.
Despite these benefits to society, Europe still lags behind the US and Japanese markets both in terms of overall investment in R&D and for patient access to the outputs of this research. Yet perversely, as national cost containment measures begin to bite, access to innovative medical technology is slowing down. The risk is that in their attempts to pursue policies geared at short-term savings, policymakers are creating a disincentive for further investment in R&D. This could compromise the long term prospects for the sector in Europe, and place a brake on the innovation healthcare systems will need in future.
Unfortunately, medical technology is being considered as a driver of cost, when in reality it provides value and a foundation for delivering sustainable healthcare. Such an approach will stifle future investment and future innovation. The irony is that healthcare systems desperately need this innovation to be able to deliver efficiency and sustainability in the future.
Europe’s economy desperately needs the inventiveness of the medical technology industry; it cannot compete on cost and therefore needs to be built on innovation. However, to reap the benefits of innovation, policymakers need to understand the wider, more holistic value that medical technology delivers. At the same time, they also need to examine the potentially detrimental long-term impact of short-term pricing and reimbursement measures. In return, manufacturers must ensure that what they choose to innovate goes beyond research and delivers saving and solutions which are beneficial to society at large.
To the medical technology industry, where product lifecycles are almost as short as those in the information technology and semiconductor industries, research and development are crucially important. The industry invests an average of 8% of annual sales back into product research and development. This places the sector in the top tier of research investment in the EU.
This commitment to continual research brings benefits to citizens and governments alike. Citizens benefit from improved quality of life, better medical outcomes and the opportunity to remain contributing members of society for longer. Since 1986, constant investments in medical technology have contributed significantly to:
At the same time, research is delivering better care at lower costs, helping to create sustainable healthcare systems. It also makes the industry a vital component in the EU’s push to be one of the leading global knowledge economies in the world.
Medical technology in Europe is a substantial industry, with a market size that is estimated at roughly € 100 billion(2) and employing more than 575,000 people(3). Yet it is an industry built upon Small and Medium Sized enterprises (SMEs). There are almost 25,000(3) medtech companies in Europe; of these some 95%(3) are SMEs employing less than 250 people. In fact, there are around 18,000 of these companies in Europe, more than half of which employ ten people or less.
One of the reasons that SMEs are so important to medical technology is due to the particular nature of research and development within the industry. Innovation often emerges from intimate collaborations between health professionals, academia and the manufacturers - an approach to which small businesses are particularly suited. Developments often arise in direct response to particular needs, and result in the rapid innovation which characterises the industry.
As well as the obvious health benefits of such innovation - improving the lives of citizens and the efficiency of healthcare systems - SMEs serve another crucial function. Their pivotal role in developing novel technology puts them at the hub of competitiveness, growth and future prosperity, not only for the healthcare sector but also for the EU’s competiveness as a whole. Indeed, the European Commission noted, in its report ‘Exploratory process on the future of the medical devices sector’ that: ”SMEs are also important to Europe in that they can act as a barometer for EU competitiveness and innovativeness.”
However, a successful SME sector needs to be nurtured and have its specific needs recognised. Indeed, in the same report, the Commission noted that the sector faces “Challenges of national, European and international dimensions that may have an impact on their innovation capacity and their competitiveness. These difficulties might have consequences on the health of European citizens.” For the medical technology industry, these difficulties include dealing with product registration, obtaining reimbursement, dealing with procurement processes, accessing distribution channels and accessing R&D incentives. Increasingly, the industry now has to factor in the cost impact of Health Technology Assessment (HTA). Many of these challenges are highly bureaucratic and time-intensive, demanding resources that are in short supply within SMEs.
Another difficulty, in part a consequence of the economic downturn, is dealing with late payment. SMEs as a rule have lower cash flows than large businesses, and are therefore less equipped than large companies to deal with outstanding invoices. It is vital for the survival of companies that customers – including governments - pay bills promptly and predictably.
If SMEs are to be truly encouraged, then both the EU and national governments in the member states need to help create the appropriate business conditions. This includes providing incentives for innovation in public sector procurement, making it easier to defend intellectual property, and generally reducing red tape.