2006-07: Medical Technologies as Part of the "Competence Center for Health"
06.03.2007|
Article for Touch Briefing “Medical Device Manufacturing & Technology” 2006, by Joachim M. Schmitt, Director General & Member of the Board
BVMed – German Medical Technology Association, July 2006
Medical Technologies as Part of the "Competence Center for Health"
The health economy is at the very top of the political agenda in Germany. It is increasingly appreciated as the growth market and significant employment factor it is. The coalition agreement of the new government states: "Healthcare is a dynamic economic sector with a high degree of innovation capability and considerable economic significance for Germany as an investment and industrial location."
The health economy is becoming increasingly aware of medical technologies - a fact which can be, for instance, attributed to various studies undertaken by the Federal Ministries of Economics and Research as well as by the European Commission.
For us, the medical technology companies represented by BVMed, this is an encouraging development as it will lead to a stronger appreciation of the significance of medical technologies for high-quality patient care and an efficient and future-proof healthcare system. Most of the German parties also underscored the industrial-political impact of this sector by explicitly mentioning medical technology in their election programs.
The conditions are favorable: With its large number of well-educated and well-trained doctors, researchers and engineers and the high standard of clinical research, Germany has the best prerequisites for steering new products and procedures toward marketability.
However, there are considerable deficits in Germany when it comes to the introduction of innovations into the reimbursement systems, so that they may then reach the patients in a timely manner. We mean to rise to this challenge in a joint effort with politicians, sickness funds, hospitals and all healthcare professionals. Now, the political framework must be created so that medical technology in Germany can maintain its leading position.
From our perspective, a long-term reorientation of health policy is called for, including increased competition, more freedom of choice for the medically-insured, and less regulation for the companies, doctors and hospitals. We must bridge the gap between competition on the one side and solidarity on the other. We must improve the general conditions for research and development. Above all, we need more healthcare research. We need an altogether more innovation-oriented climate, so that innovative medical technology treatment methods and procedures get to the patients in good time.
The medical technology companies can then further improve the healthcare situation of the patients with their products and procedures, be an important driving force for the health economy and contribute to establishing Germany as a "competence center for health".
Growth Market Health Economy
Even today, the health economy is one of the biggest market segments of the German economy. A total of 4.2 million people are employed in healthcare. Thus, every tenth job in Germany is based in the health economy. Some 240 billion Euros in total are spent on health. This represents a share of more than 11 per cent of the gross domestic product, thus making healthcare an even more significant sector than, for instance, the automotive industry (9.7 per cent of GDP).
Medical Technologies in Germany
Medical technologies are a significant economic and labor market factor. The medical technology companies have a considerable share in the positive development of the health economy in Germany.
Healthcare spending in the medical devices sector in Germany amounted to more than 20 billion Euros in 2003. This was reported by the German Federal Statistical Office in its health expenditure statistics, published in the beginning of 2006. Of this amount, some 13 billion Euros account for the outpatient sector, including, for instance, medical technical aids, and 7 billion Euros for the inpatient sector. This amount does not include dental products and major medical equipment (capital goods). Further key figures of the sector: The production of medical technology in Germany comprised 14 billion Euros in 2003 (source: medical technology study of the Federal Ministry for Education and Research). In export, Germany, with a world trade share of 14.6 per cent, ranked second worldwide behind the USA (30.9 per cent) but distinctly ahead of Japan (5.5 per cent).
Employment Figures
The medical devices sector employs more than 108,000 people in some 1,100 companies (with more than 20 employees). This represents 2 per cent of all employees in the manufacturing industry. According to a new European study this figure is even higher, indicating 145,000 jobs. It is assumed that the same number of jobs in the ancillary industry depends directly on the medical devices industry. Some 6,400 people employed in the sector work in research and development.
World Market for Medical Devices
The medical technology sector is a global growth market. Progress in the field of medical technology, demographic changes with an increasing number of older people and the evolved concept of health will keep it that way. The demand for health services will continue to rise steadily. Patients are increasingly prepared to invest in their health. A study of investment banker Goldman Sachs expects an average profit growth of 13 per cent for the entire medtech sector over a term of five years (Financial Times Germany, of 15 March 2005, page 32). According to the newspaper, the sector was presently effecting 60 per cent of the pharmaceutical companies' total revenues already . "For the long run, a change in the lead is already becoming apparent", writes the Financial Times.
The world market for medical devices amounted to 184 billion Euros in 2003. The European market, estimated at 55 billion Euros, is the second biggest market in the world, following the United States at 79 billion Euros. Besides the USA and Japan, Germany is the third biggest market worldwide and by far the largest market in Europe. It is about twice as large as the French and three times as large as the Italian and British market.
Outstanding Innovative Capability
The medical technology industry is dynamic and highly innovative. Its product cycles are considerably shorter than those in the pharmaceutical industry. More than half of the turnover is effected with products less than three years old. An average 7 per cent of turnover is invested in research and development. For comparison: The share of the highly innovative chemical industry's spending on research and development amounts to 5 per cent, that of the manufacturing industry to a total of 3.8 per cent (Frankfurter Allgemeine Zeitung of 26 April 2005, page 13).
Market Conditions – The Pros
With its large number of well-educated and well-trained doctors, researchers and engineers and the high standard of clinical research, Germany has the best prospects to bring new products and procedures to the marketing stage. Owing to our university hospitals and the numerous competence centers in medical technology, the knowledge at our command is substantial. Germany's advantages also lie in shorter approval times and in its excellent and cost-effective clinical research. The cost of bringing a new idea to marketability is at around 8 to 10 million Euros on average. At some 80 million Dollars, these costs are considerably higher in the US.
Market Conditions – The Cons
There are, however, considerable challenges when it comes to introducing innovations into the reimbursement system so that they may then be made available to patients without delay. That is why market growth in Germany is not as dynamic as it is elsewhere. One example for this is the drug-eluting stent, which keeps narrow or blocked vessels permanently open. This innovation is not only established as a standard treatment in the United States, but also in most European countries, with a penetration rate of currently 75 per cent in the US, 60 per cent in the United Kingdom and even 76 per cent in Switzerland. Germany, with a rate of only 20 per cent, is lagging far behind the rest of the western industrial nations.
Utilizing the Potential of Medical Technologies as a Driving Force for Growth
In BVMed's estimation, the dynamic change of the medical possibilities must now be followed by a change of the healthcare system that is just as dynamic. We need a new health economy with more competitive elements, increased freedom of choice and more individual responsibility of patients for their own health. We must improve the general conditions for research and development. Above all, we need more healthcare research. We need an altogether more innovation-friendly climate, so that innovative medical technology treatment methods and procedures get to the patients without delay.
Thus, BVMed calls for the removal of the presently existing innovation restraints, such as the lacking transparency in the decision-making processes of the Joint Federal Committee, the imposition of sectoral budgets or the current lack of quality standards for medical treatments. We require the clear will to introduce innovations into the German healthcare system and to establish processes for their timely adoption. This can only happen if the policy-makers act accordingly - by freeing the healthcare system from excessive bureaucracy and allowing it to benefit from deregulated and liberalized healthcare markets. Medical technology innovations can then be an important driving force of the health economy and contribute to establishing Germany as a "competence center for health".
Value for the National Economy
The faster adoption of innovations also offers economic advantages: New examination and treatment methods lead to a reduction of sick days, shorten the patients' recovery times and thus enable them to return to their social activities and their jobs more quickly. This also constitutes a benefit for the national economy as a whole. Benefit and effectiveness considerations – and thus also cost-saving potentials – of medical technologies must be put on the front burner. They must be considered an investment in people's health and productive efficiency as they establish a new understanding of healthcare through improved treatment possibilities, shorter length of hospital stays and a reduced number of sick days.
BVMed's Activities in Health Policy
In the run-up to the elections in September 2005, BVMed presented an "Agenda for Innovation in Medical Technology" to the political parties in order to promote innovation and to maintain the currently high level of healthcare in Germany. In this agenda, BVMed expressed concrete recommendations for action that were to be considered in the drafting of the parties' election programmes. BVMed is pressing for more healthcare research in order to comprehensively portray the total costs of a therapy as well as its benefits to the patients and the economy.
Other suggestions are aimed at the new hospital reimbursement system, which must be open to new methods of treatment, as well as at the Joint Federal Committee's procedures for technology assessment, which must be clear and transparent, concluded in a more timely fashion and harmonized across Europe. All in all, the value of innovative medical technologies must be more strongly appreciated. A first achievement of BVMed's efforts in this area is that the significance of medical technologies for an efficient and future-proof healthcare system has been increasingly acknowledged in the past months. Most parties explicitly and quite favorably mentioned the field "medical technology" in their election programs.
Joachim M. Schmitt has been Director General of the Berlin-based German Medical Technology Association, BVMed, since 1990 and member of its board since 2002. The association represents over 200 manufacturers and trade companies. In addition, he has been Director General of MedInform, a Conference and Seminar Services for the Medical Devices Industry, since its founding in 1992. He was born in 1951 and is a graduate of economic and social sciences. He was scientific staff member at Deutscher Industrie- und Handelstag (DIHT), Bonn, a scientific staff member of the German-Swiss Chamber of Industry, Zürich, and member of the management of the German-Tunisian Chamber of Industry and Commerce, Tunis.
