Medical Device Link.

Originally Published MDDI May 2004

NEWSTRENDS

Table I. Finland, Sweden, Denmark, and The Netherlands have the highest score as the most attractive countries for investments in industrial facilities for medical devices. For medical devices, Hungary is the most attractive country of all the new EU countries,  followed by the Czech Republic. Source: Cap Gemini Ernst & Young (Click to enlarge).

Norbert Sparrow

Ten central and eastern European countries have joined the European Union (EU), creating the largest economic area in the world. However, of the new member states, only Hungary and the Czech Republic appear to be comparable to Western Europe as viable locations for medical device manufacturing. 

The new EU member states are the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia, and Cyprus. Only the Greek-controlled part of the island was granted EU membership. The addition of these nations in May 2004 is the largest expansion in the history of the EU, which now comprises 25 member states.

A recent report assessed how the expanded EU may affect the life sciences industry. The report, “EU Enlargement–—Driving Change in the European Life Sciences Industries,” divides those industries into pharmaceuticals, biotechnology, and medical devices. The report, authored by international consultancy Cap Gemini Ernst & Young (Utrecht, The Netherlands), was published in March. The report focuses primarily on the pharmaceutical industry; however, some findings are equally germane to the medtech sector. 

Healthcare spending among most of the new member states is well below the EU average, notes the report. Only the Czech Republic, Hungary, and Slovenia have healthcare budgets approaching those in the western EU countries. In addition, many of the acceding countries, as they are officially called, are plagued by opaque reimbursement systems. The report finds, however, that the new members are committed to healthcare reform. Poland is the most advanced in this regard.

A substantial section of the report is devoted to ranking EU member states as desirable locations for a life sciences facility. The countries are measured against a set of criteria weighted differently for the pharmaceutical, biotechnology, and medical device subsectors. For the medtech industry, the report ranks the quality of the labor force, regulatory climate, insurance costs, and patent protection as the most important criteria.

A region’s “innovation index,” its proximity to airports, and political stability are identified as second-tier considerations. Relocation incentives, corporate tax rates, the cost of labor and utilities, and quality of life issues are weighted toward the middle. Based on these criteria, Hungary emerged as the “most attractive of the 2004 EU accession countries” for medical device OEMs. 

Hungary and the Czech Republic generally scored near the middle of the pack in most of the location decision criteria (see Table I for rankings). With low wages and a relatively well-educated workforce, Hungary took a solid lead. The Czech Republic is the most generous of all EU countries when considering relocation incentives, according to the report.

Both countries scored very high for their transportation infrastructure, with Hungary placing third after The Netherlands and Belgium. Air travel is a different matter, however; Hungary is last based on proximity to main airports. Although device manufacturers involved in site selection would be well advised to factor in Hungary and the Czech Republic, it should be noted that they are still works in progress.

Given the complex nature of the life sciences industries, the report does not anticipate a rapid move toward the new EU countries in the near future. “The necessary FDA and CGMP certification of manufacturing processes leads to high costs in establishing . . . facilities. It is often easier and cheaper to invest in expansion of current facilities,” the report concludes.

Copyright ©2004 Medical Device & Diagnostic Industry