Healthcare systems must pay for the medical technology bill – but they should do it smartly, so that therapies, used in the right way with the right patients, can help save costs, MedTech’s chief executives believe.
Serge Bernasconi is CEO of MedTech Europe, EDMA and Eucomed. Rob ten Hoedt is Chairman of MedTech Europe and Eucomed, and Executive Vice President & President EMEA at Medtronic. Dr Jürgen Schulze is Vice Chair of MedTech Europe and President of EDMA, and CEO and President of SYSMEX Europe, Middle East and Africa, and Executive Officer of SYSMEX CORP Japan. MedTech Europe is an Alliance of European medical technology industry associations. The Alliance was founded in October 2012 and currently has two members, EDMA, representing the European in vitro diagnostic industry, and Eucomed, representing the European medical devices industry.
Healthcare and technology are increasingly intertwined. What are today the latest trends impacting on the industry in Europe?
Serge Bernasconi: For me there are two. First, it is about connectivity of healthcare with apps, wearables and sensors being the talk of the town. The second is about patient-oriented applications of medical technologies that give more power to patients in making crucial healthcare related decisions.
Rob ten Hoedt: I see three key trends that are now impacting the industry. The first is the power of data, which helps us understand more about conditions and demonstrate patient outcomes. The second is our ability to manage patients remotely and assure optimal care through communication technologies. The third is the change of focus in the healthcare debate, which is now on outcomes rather than on procedures. This focus on outcomes is made possible thanks to technology in general, but more particularly thanks to medical technologies that have developed therapies for complex pathologies through minimally invasive interventions.
Jürgen Schulze: The top three trends that I see are: first, the very high pace of innovation in the diagnostics sector with molecular testing and Next Generation Sequencing. This technology is already today a key driver for improving treatment of patients. It will also be a key driver to further develop companion diagnostics and personalised medicine. Second, market access for medical technologies is becoming more and more challenging in the EU. SMEs in particular are struggling, as we have an EU-wide approach for market access, but not for reimbursement. This turns the EU into a real jungle for SMEs, with very different approaches depending on the country. Third, the new Health Technology Assessment and clinical evidence requirements for diagnostics are likely to make things even more complex.
How is the medtech industry currently coping with the fast pace of change?
Serge Bernasconi: I believe this is the other way around. The medtech industry is one of the key drivers that set the fast pace for change in the healthcare sector by coming up with new technologies, not the new entrants. MedTech companies are already working closely together with SMEs and with other players (like Microsoft, Google or Orange) in getting the best technologies.
Rob ten Hoedt: Our industry is used to the fast pace of change, coming up with innovation all the time. Product life cycles are much shorter and therapies evolve much faster than in many other industries. This means that we are used to the fast pace of change. It is not so much about the industry coping with the pace of change. The question is are we able to drive change impactful enough to improve the delivery of healthcare and help optimize the efficiency and effectiveness of our healthcare care systems?
Jürgen Schulze: In the diagnostics sector, we cope with the fast pace of change by keeping our focus on the expertise of SMEs. We are continuously investing in value-based innovation with the aim of helping healthcare systems become more sustainable.
The last year was a banner year for M&A in medical technology. Accelerating the med-tech consolidation trend were three of the largest six deals ever announced: Medtronic & Covidien, at $43 billion; Zimmer & Biomet, $13 billion; and Becton Dickinson & CareFusion, $12 billion. Is it ‘The end of the MedTech industry’ as we know it?
Serge Bernasconi: No, this is not the end of MedTech as we know it. We are still a segmented industry with over 25,000 companies across the Europe. Sure, there will be more mergers, but let’s not forget that the basis of our innovation model is typically a merger between big buying small, and that will not change.
Rob ten Hoedt: Not at all. Certainly this year we have seen a number of mergers but besides this, the fact remains that a very large number of SMEs are joining the medical technology sector. Where mergers have happened, it allows the combined strength of the new entities to achieve a more widespread adoption of therapies on a global scale and further drive innovation in the medical technology industry.
?Jürgen Schulze: Mergers and acquisitions have always been part of our business model, either for big companies or SMEs. What we now see are more and more SMEs and start-ups focusing on both new technologies and diagnostics. SMEs and start-ups invest a lot in R&D. The critical issue that forces them to merge with each other or with bigger players is the long way to reimbursement, which varies significantly across the EU.
With declining budgets, healthcare is deeply affected. Who will be paying the medtech bill?
Serge Bernasconi: Healthcare systems must pay for the medtech bill, but they should do it smartly. Healthcare authorities must understand the importance of investing in medical technology, knowing that this is a long term investment. There is a need for a basic change of mindset: medical technologies need to be used to replace less effective therapies and to fix inefficiencies, rather than adding up to existing structures that are not up to date.
Rob ten Hoedt: First of all, the budgets are not shrinking. Everywhere healthcare budgets are increasing year-over-year. It is true that this growth is unsustainable and we need to become more efficient in the way care is being delivered if we want to keep our very good healthcare systems alive. This is also a responsibility of the medical technology industry. The issue in healthcare is that cost and value are disconnected. That is why discussions on outcomes and value based healthcare are important changes. We know that most of our therapies, used in the right way with the right patients, can help save costs to the healthcare system. If they don’t, they should not be used and prescribed. It is our responsibility as an industry to demonstrate this, together with healthcare systems. The medical device industry is indeed part of the solution of healthcare delivery in the future.
Jürgen Schulze: Even though budget pressures are a reality, total healthcare spending for diagnostics is low (2 to 3 %) and it hasn’t increased in the EU for several years. This shows that our industry has been able to continuously deliver new tests and technologies without incremental costs, and despite the growing demand for diagnostic tests or monitoring from people affected by chronic conditions. Going forward, I am convinced that empowered and informed patients will request from healthcare systems more meaningful, efficient and economically viable treatment based on a state-of-art diagnosis. Patients might even be willing to go outside the healthcare system to get a particular treatment if they see a real added value.
Three years after the Commission first came out with proposals to update the EU’s rules on medical devices and in vitro diagnostic medical devices, the Council agreed on the substance of its negotiating stance, so now the negotiations have started and are underway. Do you think industry, but also national regulators and patients, are ready for implementation?
Serge Bernasconi: I am not in a position to answer this question, as the text is currently still under discussion and we still do not know what will be the final measures to implement. What we know is that the industry will have to invest more. As an industry, we understand this well and we are ready to make the adequate changes and investments to make sure the regulation is respected and supported, as long it improves patient welfare.
Rob ten Hoedt: We welcome the clarity that the long-awaited implementation of the MDD framework will bring. It is critical to reach a final text that allows industry and regulators to operate in a system which guarantees patient safety, innovation and timely patient access to new therapies. However, unless some changes are made during the trilogue, the new measures risk missing these shared objectives.
Jürgen Schulze: We do not know yet all the details of the IVD regulation, but again I believe SMEs will have the most challenges to implement this new framework. For example, the three-year implementation period proposed by the European Parliament (as opposed to five years by the Commission) will without a doubt be challenging for our industry, and particularly SMEs. The same is true for regulators. They will not easily find all needed additional experts to do the work.
What is the impact of these new regulations on innovation, and on how it could change the landscape for the medtech sector (which is made up of 95% SMEs)?
Serge Bernasconi: One thing is certain: it will cost more, it will take more time and the whole process will be more complicated. Policymakers need to ensure that the regulation will lead to improved patient safety, whilst sustaining an environment more conducive for innovation. If they do not work this out properly, we could end up with a system which is detrimental for SMEs – and hence for innovation – in Europe in the long run.
Rob ten Hoedt: With a total European market of around €100 billion the medical technology sector provides a substantial contribution to Europe’s economy, growth and employment. We need to strike the right balance between good and stringent regulations without paralyzing the power of innovation. We need to keep in mind that a lot – if not most – of the medical device innovation is developed in Europe. We need to make sure that we can keep this pace of innovation for our industry in Europe and not let it slow down.
Jürgen Schulze: This is a particular concern for diagnostics. Bigger companies will adjust and change their way of working in the R&D phase. But start-ups and also SMEs may need to reconsider their business model. For example, is an early partnering or even a merger needed because of the new and more complex regulatory framework? We may see more M&As of start-ups and SMEs in an early stage of the development of real innovation. This is already a reality today in some areas.
Can the regulatory ecosystem in Europe allow the industry to thrive and compete with America’s tech giants?
Serge Bernasconi: With the current framework, the EU regulation is better fit for the industry than the US. It is faster to get a product on the market in Europe than in the US, often three years before, without jeopardising patient safety. However, depending on the finalisation of the regulation, the situation may be different and may complicate the lives of the European companies. This could make Europe less attractive as a market.
Rob ten Hoedt: Europe currently has already a world class regulatory system that ensures safe and early patient access to innovative therapies. There are always areas for improvement and industry supports measures that will increase the quality of the product reviews and transparency of the process both pre and post market. The correct regulatory structure can allow us to further capitalise on this.
Jürgen Schulze: The advantage of a US-headquartered company is that it has to deal with one regulatory system (FDA) followed by a clear market access and reimbursement system. A European headquartered company doesn’t find this environment. Regulatory is EU-wide, but there are many national barriers to access and reimbursement due to all the different procedures at Member-State level. The advantage for an EU-headquartered company, however, is that we know how to manage this EU diversity. This know-how allows EU based companies to be better prepared for exporting successfully to many other countries outside the EU with country-specific requirements.