Healthcare innovation: The cost killer?
Healthcare innovations such as eHealth and telemedicine offer new prospects for cost savings and improved quality of care, but expensive new technologies are also driving medical inflation and the benefits may not always be distributed equally.
Innovation is now at the heart of EU policymaking and the health sector is no exception. As part of a drive to create growth and jobs, it is one of the industries identified as capable of delivering the kind of knowledge-based economy described in the EU 2020 strategy.
These include eHealth, which is seen as having "huge potential" according to the EU executive's plan for economic recovery. eHealth is also one of Europe's six lead market initiatives. eHealth and telemedicine offer innovative products and new ways of organising the health system, although the market for this sector is primarily in countries with developed health services.
One major industry which has proven relatively resilient in the face of the economic crisis is the pharmaceutical sector. New medicines have helped create considerable wealth in Europe in recent decades and the EU is investing heavily in the Innovative Medicines Initiative to ensure that this trend continues.
Drug development and clinical trials bring together highly-skilled workers from the public and private sectors, something policymakers are keen to protect in an increasingly competitive global environment.
Similarly, the medical devices sector is a significant source of new high-end products which can help improve the safety and efficiency of healthcare. Diagnostics and imaging technologies, as well as surgical devices, provide around 435,000 jobs in Europe. Unlike the innovative medicines sector, medical devices are more commonly developed by small and medium-sized companies rather than blue-chip multinationals.
Innovations in how health and social services are delivered are also gaining prominence, not least because rethinking the traditional business model has the potential to deliver savings to public authorities. Treating more people in their homes rather than in hospitals will be a major feature of future health services, enabled by telemedicine, remote monitoring devices and technology that improves patient-compliance with medicines.
The major drawback to encouraging innovation is that it drives up the cost of providing healthcare. Medical inflation has been running well ahead of all other sectors, even at a time of economic hardship. Reconciling the need to have an innovative healthcare sector while health ministers are battling to control spending will be a major challenge.
Public authorities are concerned that public demand for the newest medicines and latest high-tech devices will send costs soaring, while the industry complains that investment in research and development is futile if there is no market for their innovative products.
This feeds into the wider question of equality and access to innovative healthcare. Globally, the gap between those who struggle to have their basic health needs met and the developed world, where some patients have ready access to life-saving medication and state-of-the-art preventative technologies, is growing.
Within EU member states, disparities are also opening up between the rich and the poor. In some countries, those who can pay for the best available care – either from their own pocket or through expensive private health insurance – have major advantage over those who cannot.
For publicly-funded universal health systems, the challenge is how to balance rising demand for costly new procedures for the few with the fundamental commitment to provide care for the many.
Innovation in healthcare - including pharmaceutical research - is one of the sectors expected to benefit from the Commmission's eighth research framework programme, called Horizon 2020. The estimated €85 billion programme - to be negotiated during 2013 - will not all go to healthcare, but 'societal challenges', such as the ageing demographic, and the need to keep people in employment for longer, are all key to the programme, and medicines that can assist in these aims will likely find favour and attract project funding.
The pharmaceutical sector
Europe's innovative pharmaceutical industry is a key plank of EU industrial policy due to the jobs and knowledge it creates. Several policy initiatives have demonstrated Brussels' support for the sector at a time when some in the industry are concerned by the shortage of new medicines in the research pipeline.
Innovation in healthcare - including pharmaceutical research - is one of the sectors expected to benefit from the Commission's eighth research framework programme, called Horizon 2020. The estimated €85 billion programme - to be negotiated during 2013 - will not all go to healthcare, but 'societal challenges', such as the ageing demographic, and the need to keep people in employment for longer, are all key to the programme, and medicines that can assist in these aims will likely find favour and attract project funding.
One of the industry's strategies is to move away from the era of big-selling "blockbuster drugs" for common conditions like high cholesterol towards the use of a single molecule to treat a range of rarer illnesses.
In 2007, the EU agreed to launch the Innovative Medicines Initiative (IMI), a public-private partnership between the EU and the European Federation of Pharmaceutical Industries and Associations (EFPIA). IMI now runs a €2 billion research programme aimed at speeding up the discovery and development of safer and more effective drugs for patients.
The initiative is not focused solely on creating new molecules per se. It supports projects in the areas of drug safety, knowledge management and education and training.
The European Commission has also joined forces with the European Biopharmaceutical Enterprises group to look at ways of boosting SME involvement in the sector. Smaller biopharma firms have found it particularly difficult to access funding since the outbreak of the credit crunch.
An EU-funded study has highlighted the need for venture capital in order to keep high risk/high reward research alive. The industry and the EU is looking at ways to use the European Investment Bank (EIB) and European Investment Fund (EIF) as a potential source of venture funding.
Another option biotech industry groups such as Europabio are advocating is the creation of a special tax category for young, research-intensive start-ups. The European Medicines Agency has also been praised for its efforts to make life easier for SMEs involved in drug development.
However, despite being broadly supportive of the industry, the EU executive has come under fire when it comes to clinical trials – a crucial step in getting new medicinal products to market. Academic trials have been particularly hard hit due to increased bureaucracy which was designed to improve good practice and accountability in medical research. Critics have claimed that over-regulation in this area is making Europe less attractive to commercial trials, but others welcome the fact that the EU has the highest standards in the world.
Europe's medical devices sector is a multi-billion euro business employing more than 500,000 people. The sector is seen as a highly innovative player in the European economy and improves health care through new technology which helps diagnose, prevent and treat diseases.
However, it has run into difficulties in recent times due to the growing trend of late payments by public sector clients. This reflects the cash crisis in health ministries across Europe and is putting serious pressure on smaller companies.
While the pharma sector is dominated by large multinationals, the medical devices industry is made up of hundreds of smaller players with niche products.
The challenge for research-based medical device companies is that their tried and tested model of incremental innovation could prove unsustainable in the new era of cost-conscious public sectors.
Developing ever more sophisticated – and expensive – imaging technology and surgical implants is leading governments to question whether improved versions of existing technology add enough value to warrant their price tag.
It has been suggested that rather than targeting small numbers of patients in developed countries with state-of-the-art devices, making more affordable versions of existing technology and selling to large emerging markets.
Nonetheless, the EU has shown its support for the medical device industry through the European Investment Bank's Risk-Sharing Finance Facility (RSFF), which supports R&D projects by innovative companies in the sector.
The EIB's Medinvest project has put €30 million into research projects as part of a total €230 million investment package into developing new technologies for conditions such as cardiovascular disease, cancer, diabetes and obesity.
The EIB has also provided support for the industry by linking up with large companies such as Philips in a ten-year €200 million project to turn Eindhoven into a science and technology hub, centred on medical technologies.
A separate loan of €50 was given to Belgian firm Ion Beam Applications for its research into cancer diagnosis and therapy.
Similarly, among the SMEs that have benefited from EIB support programmes are knowledge-intensive healthcare firms.
eHealth and telemedicine
eHealth is one of the priorities of the EU's i2010 programme, which aims to provide user-friendly and interoperable information systems for patients and health professionals across Europe.
The European Commission named eHealth as one of the EU's six Lead Market Initiatives, making it a strategic priority. The size of the market and the scope for innovation were cited as reasons for its selection. In addition, the opportunities for SMEs tapping into the various sub-sectors of eHealth were highlighted.
The Commission published an Action Plan for eHealth at the end of 2007, pledging to assess the possibility of adopting a legal initiative for eHealth and telemedicine. It also noted the need for common standards in eHealth and the importance of interoperability.
A mid-term progress report, published in September 2009, said the eHealth Lead Market Initiative (LMI) was still at an early phase of implementation. It said the LMI can stimulate demand-side measures in EU member states but the real impact cannot be expected for another five to ten years.
In December 2009, health ministers agreed to press ahead with creating an environment where the promise of eHealth can be embraced and the Spanish EU Presidency has said it will be a "top priority" for 2010.
However, there remain a range of barriers to the widespread use of eHealth technologies, including interoperability between IT systems. This has hampered the development of national health infrastructure and delayed the exchange of health information across borders.
Working out how to safely handle data generated in the health system and as part of electronic healthcare records will be essential to public buy-in.
The potential of telemedicine to reduce healthcare costs by treating and monitoring patients in their own homes is something cash-strapped governments have become increasingly interested in.
Ambient Assisted Living (AAS) can help preserve patient autonomy and reduce demand for expensive specialist hospital care. It also has a key role in preventative medicine, which is seen as another tool for keeping people healthier for longer.
Balancing innovation with cost containment
While policymakers on the supply side of industrial policy have talked up the need for innovation, those charged with getting value for taxpayers' money have been concerned for some time about the rising cost of new medicines and technology.
Double-digit medical inflation is unsustainable under any circumstances but the deep public deficits amassed during the economic crisis mean the most expensive health innovations will be difficult to justify in a decade of sluggish growth.
To prove their worth, innovations will be subject to rigorous Health Technology Assessment (HTA). This process is the evaluation of a health intervention using a range of evidence on safety, efficacy, cost-effectiveness and budgetary impact. Social, legal and ethical implications can also be considered.
Innovative companies argue that their products help add to quality of life and Healthy Life Years (HLY), which ultimately reduces the burden on government budgets.
The European Commission is working on an initiative to strengthen HTA at national level. The aim is to avoid duplication and share expertise and develop common tools for assessment. €6 million has been earmarked for joint action in 2010 and 2012 involving 24 EU member states as well as Norway and Switzerland.
The proportion of health spending devoted to HTA is likely to increase in the coming decade in the interests of securing value for money.
As the narrative of the innovation debate widens to include advances in cost containment, some firms see an opportunity to offer cheaper medicines to health authorities. The use of generic medicines is commonly put forward as a means of delivering low-cost effective treatments. However, the innovation-based pharma sector argues that reducing the market for new patented medicines will affect the industry's long-term viability.
Others look to innovative work practices and smarter service delivery models as a means of securing progress and economic savings. Treating patients at home and improving the accuracy of drug delivery systems, as well as better use of medical manpower, are likely to be part of the 21st century health system.
Similarly, finding the most cost-efficient funding model for insuring the public and funding the system will increasingly be part of the debate on health services.
Equality of access and global imbalances
Socially-minded policymakers have become conscious of the need for innovations to be available to large numbers of citizens. Indeed, some companies have taken the same view in the interests of capturing larger markets.
In terms of social equality, the state of the United States' health service is often cited as an example of how a system can be highly innovative and soak up an growing proportion of public and private spending, but provide access for only better-off members of society.
On a global scale, the disparity between health care in the developed and developing worlds could grow in line with advances in technology and medicines. However, as financial restraints take their toll on Western coffers, making existing technologies available to billions of middle-income countries could become an alternative to the traditional growth model.
In Europe, differences in levels of access to the latest innovations have arisen between member states. This has caused political difficulties in instances where the authorities in one country deem a new medicine or device to be too expensive while those in another agree to pay for the drug.
Indeed, the cross-border healthcare directive arose from a series of cases taken by patients, including one where a UK citizen won the right to travel to France where a high-tech cancer treatment had been made available.
For this reason, some health advocates want to see more joined-up thinking on how governments approach HTA and urge the EU to take a stronger coordination role. Brussels is keen to facilitate communication in this area but remains conscious of subsidiarity rules, which ensure that member states are responsible for health care.
John Bowis, a former MEP who is now Honorary President of Health First Europe (an NGO), said there is a need for a collaborative approach that strikes a balance between the needs of patients and those who develop, market and use technologies and increasingly scarce resources to fund health.
"Health First Europe believes that innovation is an essential element for the coherent and effective development of health systems throughout Europe. It is important for both patients and clinicians to have equitable access to modern, innovative and reliable technology," he said.
Bowis, who wrote a landmark report on cross-border healthcare during his time in the European Parliament, stressed that innovation is about "imaginative administration and clinical practice" as well as new science and technology.
"It is essential that the European Union works on developing and implementing legislation that allows for and encourages innovation in health. The member states and the institutions need to cooperate in health and acknowledge its relevance for a wealthy and competitive Europe."
Craig Mundie, chief research and strategy officer at Microsoft, has called for a rethink of how companies approach innovation. He believes the current model of "incremental innovation" – whereby industry strives to make ever-more sophisticated health technology – is not sustainable.
In the face of a growing global population, he has suggested researching ways to make existing technologies accessible to larger numbers of people. This would require considerable innovation in order to make products such as ultra sounds machines cheaper and more mobile.
"In the future, we have to be able to do a better job for more people for less money. And technology is the answer," said Mundie.
He also advocates using ICT to get health information to remote areas of the developing world where "trained manpower" is in short supply.
"One of the areas we are looking at is robotics. We're developing a robotic triage doctor, capable of learning and reasoning, which projects an avatar of itself onto a screen. It listens to patients and can make a diagnosis and recommend a course of treatment," he told EurActiv.
Michel Goldman, executive director of the Innovative Medicines Initiative, said pooling resources can help deliver progress in research and development. He said the IMI, which is the largest public-private partnership of its kind, aims to create a research environment in Europe that will deliver better and safer medicines to patients in a faster way.
"IMI offers researchers from universities, small and medium-sized companies, research organisations, regulatory authorities, patient organisations and large pharmaceutical companies a unique opportunity to work together. By pooling their resources, IMI project partners will gain a critical mass of knowledge and expertise, giving them a competitive advantage in the international playing field. Only by joining forces will the sector be able to restore European leadership in biopharmaceutical research," Goldman said.
The World Health Organisation (WHO) has established an Expert Working Group to look at the "persistent and growing concern that the benefits of the advances in health technology are not reaching the poor". It notes that the emphasis of the developed world is naturally on resolving problems that predominantly affect developed countries themselves.
"This is in spite of the evidence of the heavy burden of disease on the poor, which in addition to being one of the more egregious manifestations of inequity, could undoubtedly affect overall global stability," it says.
The WHO says the relationship between intellectual property rights, innovation and public health is being examined in light of growing inequality. The lack of access to the benefits of innovation for people in the developing world is of major concern, it says.
Eucomed, in response to an EU consultation process on innovation policy in November 2009, put the focus on the sustainability of Europe's health service.
"The sustainability of our EU healthcare systems is a major socio-economic challenge facing Europe in the next 20 years and should be a priority. If we do not act now and innovate they are in danger of collapse," according to the medical devices group.
It predicts that by 2025 the OECD will have over 240 million people aged over 65 years. This compares with 98 million older people in 1980.
"Tax increases required to protect current health benefit levels in 2030 will equate to 140% in Italy and 90% in Germany. This is unsustainable. We have to change and to innovate if we are to face this challenge and keep our European health and values," according to the Eucomed submission.
- 18 Dec. 2007: European Council establishes Joint Technology Initiative on Innovative Medicines.
- 21 Dec. 2007: Commission adopts Communication on the lead market initiative for Europe, with eHealth as one of the first six markets. An action plan annexed to the Communication details action for the coming years.
- 7 Jan. 2008: eHealth named as one of the first six Lead Market Initiatives
- April 2008: First Ambient Assisted Living (AAL) Joint Programme call for proposals.
- 2 July 2008: Large-scale EU pilot project (S.O.S.) on interoperable EHR (Electronic Health Records) and ePrescriptions launched.
- 4 Nov. 2008: Commission adopts Communication on Telemedicine for the Benefit of Patients, Healthcare Systems and Society.
- 12 Oct. 2009: Commission announces plans for eHealth Week 2010 to coincide with 'The World of IT' conference and exhibition in Barcelona in March 2010.
- 24 Nov. 2009: EU launches €63 million research projects as part of FP7, aimed at creating 'virtual physiological human'.
- 1 Dec. 2009: EU health ministers publish conclusions on eHealth, calling for action on building "an ehealth area for European citizens".
- January 2010: The Spanish EU Presidency lists "innovation in healthcare" among its priorities, promising to focus on solutions to Europe's ageing population, chronic diseases and ehealth.
- 16 Apr. 2010: Innovation Commissioner Máire Geoghegan-Quinn tells a meeting in the European Parliament that healthcare innovation, particularly in ageing research, will help address the "grand challenges" facing Europe.
- 25 May 2010: A European Commission conference hears how European biotech companies are looking to the US for venture capital to fund innovation
- 9 Feb. 2011: Commission launches consultation on revision of the Clinical Trials Directive 2001/20/EC
- 28 March 2011-30 May 2011: consultation on revision of the Directive on the transparency of measures regulating the pricing and reimbursement of medicines (89/105/EEC)
- Second quarter 2012: draft revision of Clinical Trials directive expected
- Fourth quarter 2012: draft revision of Transparency in Pricing Directive expected
- 2012/2013: Ongoing negotiation of the Horizon 2020 research framework programme in the context of the Multi-annual Financial Framework