Medical Device Link.

Originally Published EMDM July/August 2003

Med-Tech Market Report

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Europe’s medical device industry is operating in a rapidly changing environment rife with challenges as well as opportunities. While funding and reimbursement policies continue to frustrate manufacturers, the role of medical devices in improving overall health levels, with concomitant economic and employment benefits, has been recognized by the European Commission. The regulatory climate is set to change during 2004, as the Medical Devices Directive review takes shape. And the EU expansion adds yet another dimension to the European marketplace. 

There are some 9345 medical technology companies competing for a share of the European market, which is valued at around e54.8 billion, according to Eucomed’s Industry Profile 2003. Europe holds a 30% share of the global market, which is estimated at around e184 billion. The 15 member states of the EU (prior to May 2004) account for almost 95% of the European market. (The United States represents 43% of the global medical market, while Japan has 11%.)

It is difficult to find comprehensive and reliable data on the fragmented European market. The European Commission recognized this deficit in a communication on medical devices issued in July 2003. It has decided to remedy this situation by commissioning a study from the University of Siena.

The “map” of the European market is supposed to be ready by the end of this year. Its contents will include statistics on the relative share of public health expenditures devoted to medical devices, and a review of the current state of European industry and its potential to innovate. Updating a study authored by the LEK consultancy in 1996, the report will provide a much-needed review of industry’s competitiveness in relation to the United States and Japan, as well as emerging markets such as India, China, and Latin America.

Spending Constraints

As public payers are facing increasing cost pressures, ensuring equitable access to medical technology is a key challenge for the med-tech industry. Changing demographics are driving demand for medical technology. Birth rates are falling, and the baby boomer generation is aging. The major consumers of healthcare—those 65 and older—account for an increasing share of the total population. In Germany and Italy, for instance, more than 20% of the population will fall within that group by 2008.

In the predominantly publicly funded European healthcare systems, cost-containment policies tend to focus on capping healthcare expenses as a percentage of GDP. Europe spends an average of 8.6% of GDP on health, of which 6.4% is spent on medical technology. Public expenditure on medical devices is growing; in the Netherlands, Denmark, and Sweden, it exceeds what is spent on pharmaceutical products. As medical devices gain a higher profile as a cost component, they will become an even greater target for curbing spending growth.

Healthcare reforms are having an impact on hospital purchasing decisions. A growing trend toward use of diagnosis-related group (DRG) systems for calculating hospital reimbursement will lead to more tightly controlled purchasing practices, as the administrators seek to balance budgets and operate more efficiently. Italy’s public-sector hospitals are already reimbursed for services using DRG payment methods, and Germany’s DRG system became mandatory in 2004 (see the accompanying articles).

Restricted budgets and tough reimbursement policies can be major obstacles to market development. To prevail, the medical technology industry must convince payers of the benefits in reducing overall costs and improving quality of life for patients.

Regulatory Challenges

Europe’s regulatory landscape is undergoing a period of change unprecedented since the introduction of the medical device directives. Not only are revisions to the MDD under discussion as part of a five-year review, but also the regulatory framework for new technologies that fall outside the scope of current regulations is taking shape.

In its review of the MDD, the European Commission noted that there was room for improvement in implementing the directive. It singled out the following key areas: 

• Shortcomings in the assessment of conformity of products with essential requirements must be remedied.
• Information is to be made public on conformity assessments in order to enhance transparency among authorities and among the general public on the way in which the MDD is implemented.
• Greater uniformity is needed in the level of market surveillance among member states.
• A high-level group on medical devices, comprising senior officials with responsibility for medical devices in the EU and EFTA countries, is required to assist in the consultation process among all authorities to obviate the development of divergent policies (as was the case regarding BSE).

Revisions to the MDD are envisaged in 2005. Feedback to the Commission’s communication was due to be considered at the Medical Devices Expert Group in late June 2004, with a view to submitting a Commission proposal to the European Parliament and the Council by the end of the year. 

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In the meantime, work is underway at the Commission to address specific issues through ad hoc task forces. Hip, knee, and shoulder joint replacements will be reclassified from Class IIb to Class III devices under a draft directive that is planned to enter into force in October 2004. Manufacturers will have a two-year grace period before new products are covered by the directive. 

Concerns about the robustness of clinical data for the conformity assessment process are being addressed by the Clinical Evaluation Task Force, chaired by the French competent authority, AFSSaPS. Guidelines for preclinical data requirements are being developed: AFSSaPS has circulated guidelines for coronary stents and the Swedish authority, MPA, is working on hip implants.

There is a trend among competent authorities to favour postmarket clinical follow-up for all medical devices. Under discussion by the task force is Eucomed’s proposal that postmarket clinical data should concern only high-risk devices and major innovations. The prominence given to clinical data in the medical device arena is perceived to be a reflection of changes at several agencies. The UK Medicines and Healthcare product Regulatory Agency (MHRA) and AFSSaPS have merged devices and pharmaceuticals under one roof. The agencies are headed by individuals with regulatory experience in the pharmaceutical sector.

Industry has raised concerns that unwarranted requests for clinical data could impede innovation. A survey undertaken by Sweden’s MPA of clinical investigations filed in 2001–2003 highlights a declining trend. Although the data are incomplete—national data are not available for Germany, for example, since submissions are filed at the länder levels—the overall figures for 13 countries show a drop from 359 submissions in 2001 to 293 in 2003. Of the countries with available data, France reported the highest number of clinical investigation submissions, although these declined from 81 to 64 over the three years.

Based on the limited data available, Eucomed estimates that European industry invests an average of 6.4% of turnover on R&D, compared with 12.9% in the United States and 5.8% in Japan. A lack of innovation is viewed as a key factor in stemming growth.

One example is the field of tissue-engineered products, where innovation is being thwarted by the absence of a Europe-wide regulatory framework. Differing national regulations have created trade barriers and hindered the development of allogeneic products, since the cost of developing them outweighs their commercial potential in small national markets. As a result, in contrast to the United States, predominantly autologous products have been developed.

The prospect of a regulation to address human tissue-engineered products will be welcomed by industry. A European Commission report has identified 113 companies active in tissue engineering in the 25 EU member states. Germany leads the field with 39 companies, followed by the UK with 18. A regulation was due to emerge from the Commission’s Enterprise Directorate General in June 2004; once it has been finalized, it will become effective as soon as it is published. The challenge for manufacturers will be to furnish cost-effectiveness data to convince payers to reimburse tissue-engineered products. The target market is currently the self-payer patients segment, such as aesthetic surgery.

Despite attempts to clarify the scope of a new directive relating to medicinal products for human use, the legislation remains ambiguous regarding borderline products. Devices such as wound dressings, contraceptive-coated condoms, antibiotic-coated urinary catheters, and other products that incorporate a medicinal substance are affected. The new directive includes a provision stating that, in case of doubt, pharmaceutical legislation should prevail, leaving scope for legal uncertainty.

European Enlargement

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Disparities in regulations and policies on funding and reimbursement will become more diverse in the new, expanded EU. The accession of 10 new countries on May 1, 2004, increased the EU’s population by 75 million to around 450 million. Although central and eastern European markets account for less than 3% of the total European market for medical technology, their economies are on course to expand rapidly. Average health expenditure in the accession countries is 4.9% of GDP, although there are wide-ranging differences among the 10 countries in the amount devoted to medical technology (see table).

The three largest markets—the Czech Republic, Hungary, and Poland—account for more than 60% of the region’s consumption of medical technology. While increased demand for medical technology will help drive sales, growth will start from a small base. The Czech Republic, the largest market among the new EU member states, is comparable in size to Ireland’s medical device market (e363 million). Yet, per capita spending on healthcare is a little more than one-third of what it is in Ireland.

Problems will inevitably be encountered in the initial implementation of medical device legislation in the new member states. With the notable exception of Hungary, the majority of the new members had not integrated the principle of mutual recognition in their legislation transposing the directives, although amendments to include this requirement were expected in most countries. Under a derogation to transpose the MDD granted to Poland, medical devices registered under current Polish legislation before October 2002 can be placed on the market until the end of 2005. 

Accession of these countries adds nine new languages to the current 11 national languages used. The potential trade opportunities in the enlarged European market could be limited by the need to add new languages to labels and instructions for use.

The additional costs incurred to comply with the language requirements will spur the medical device industry to lobby competent authorities to accept electronic labelling for professional use. Pilot studies undertaken by Medtronic to assess users’ experiences with CD-ROM and the Internet as an alternative to paper manuals, could help to sway some countries. Germany, Belgium, Greece, Sweden, and the Netherlands have been reluctant to support e-labelling.

Although the med-tech industry faces a rapidly changing operating environment, the European market offers significant growth potential. Despite regulatory and financial constraints, demand for medical technology will be driven by an aging population with high expectations for healthcare provision and products to assist and improve the length and quality of their lives. The European Commission has recognized industry’s contribution to the quality of healthcare. The challenge for med-tech companies will be to invest in innovation to improve that contribution and to facilitate equitable patient and clinician access to medical technology, with a view to enhancing Europe’s role in the global market.

Copyright ©2004 European Medical Device Manufacturer