Changing the game, …changing the players, … different outcomes

In two previous articles we have described and commented on two major influences on today’s Medical Device market in Europe. In this blog article, Helgert Van Raamt reflects upon the impact of regulation and new economical realities on medical devices innovation and pricing.

The new EU Medical Device Regulations may slow down obtaining CE-marking, but the good news is that it may stop the cowboys and low priced competition bringing in products that fail to meet market requirements.

In “European Medical Device Markets – New Obstacles – Changing Developments” we have pointed out that, contrary to wide spread opinion, the DRG system in all European countries has become the paramount tool to optimize the delivery of healthcare and contain costs. In combination with a rapidly increasing selection criteria like the “Evidence based” requirement in Health Technology Assessments, it looks like the influence may shift to interventions that are short, ambulatory and at the expense of stationary therapies that still keep patients in bed longer than maybe necessary. It may also create a shift in medical professionals to Nurse Practitioners, more often outside the hospital.

The developments and selection criteria may also have an effect on the range of available equipment (manufacturers) with a distinctive and decisive difference in performance. Less choice at declining prices.

All of the above developments and changes are taking place at the very beginning of the grey wave, with its vast number of chronic patients and an ever increasing introduction of new techniques and therapies, more effective and taking a larger share of available funds in (national) healthcare budgets. An increasing number of revolutionary and breakthrough technologies are developed to fulfill unmet clinical needs and to achieve vastly improved patient outcomes. Mind you, we are not only talking about technologies that replace current practice. In a substantial number of cases we are looking at therapies and technologies that keep patients alive, longer than today.
We are inviting people to the dinner table with a marginal increase in food and only a limited number of additional chairs …….

I wonder if the motto “it is more fun to compete” ever took into consideration the way that the game develops, in particular in the Medical Device arena.

  • It is definitely a challenge to a new category of low priced competition that is able to generate a healthy (?) profit on the basis of a favorable home-market position and enter traditional markets with prices that are barely at – or below the cost of the goods of “other” manufacturers.
  • It has long been hindered, avoided or at least slowed down, but it seems that in most countries, in some segments the trend is to generously allow low price competitors to enter. The recent developments have been moving away from “price” and towards “cost of ownership”, but with a decision making unit that shifts towards economical arguments and away from medical arguments. Some companies have difficulties in “making the difference” by extensive clinical support. With limited budgets and increasing patient volumes, providers would like to make another choice but capacity in some case beats quality. “Where not is- even the emperor looses his right” is the non-translatable expression in Dutch.

With a market that is slowly recovering from the economical crisis like Western Europe the trend is towards seeking accelerated growth in emerging markets, BRICS and the “Goldman Sachs next eleven”. Even countries like Brazil and Indonesia, long time qualified champions in the “sure emerging but not yet” game.

These countries operate under complex dynamics, with pockets of similarities, especially in the private healthcare segment.

The term “emerging markets” suggests a certain homogeneity, but in general we are talking about countries that from a regulatory process, Technology Assessment system and from a payer and insurance system point of view, are very different. They require an approach that is country specific and takes market specifics and local cultural elements into account.

Until these countries have reached a level of predictability somewhat in the range of more traditional, mature countries, most business is opportunistic.

The challenge for the next couple of years is also in an environment of declining margins and funds for technology development will be limited.

It is indicative that a publication that is about 5 years old, like “WHO, Barriers to innovation in the field of medical devicesis still largely valid and a mandatory literature for industry professionals with a sense of perspective.

I am just curious if there will still be an opportunity for the industry to provide guidance and direction by developing new technologies or will the Health Care provider/payer/regulator – community, set the stage and specify the requirements of the “solutions needed”.

About Helgert Van Raamt

Helgert van Raamt has 35 years of experience in running and setting up companies, big and small, in EMEA (and beyond). After his senior marketing positions with Organon Teknika and Abbott Labs and four years in Venture Capital as an investment manager for US, UK and NL based funds, he joined Nellcor Europe in 1989 and has lead this company through two consecutive M&A’s (Puritan Bennett and Mallinckrodt). The acquisition by Mallinckrodt for 2.7 Billion made Nellcor the most successful Medic venture after the Second World War. He left to set up the International Operation of Aspect Medical Systems and brought that to success. In three years it reached a revenue level of $10 million and was profitable two months after the start of the operation. Since then (2003) he has successfully advised numerous companies about setting up internationally or cleaning up an existing international operation, both independently and as a partner for TforG Group.