Medical Device Link.

MARKETPLACE

Continued sluggish home market

A recent survey of small- to medium-sized businesses (SMEs) in the United Kingdom (UK) medical device sector has confirmed fears that UK sales are sluggish compared with export activity. The SME Business Trends survey¹ by the Association of British Healthcare Industries (ABHI) and Ernst & Young reflected the results of a similar survey of large companies conducted in 2006 in showing a UK sales growth of only 2.2% compared with export growth of 10% from 2005 to 2006. A separate survey of larger companies has shown similar results.²

These results raise concerns over the continued appetite or ability of medical device manufacturers to continue to invest in the UK market, and suggest that investment is already moving elsewhere. Given the dependence of the whole UK industry on innovation fuelled by successful SMEs, this is cause for considerable disquiet. The absence of a strong and demanding domestic market will inevitably drive businesses overseas in terms of development and manufacturing jobs. It seems that rather than being a springboard for growth, the UK market is now seen as a drag on company development, which puts UK SMEs at a significant competitive disadvantage compared with their overseas peers.

Health care technologies are a significant and dynamic global industry and the UK is an important market. The UK medical device market is valued at over £7 billion (approximately e 10.5 billion) with the total value of products exported from the UK in 2003 estimated at £3.5 billion (approximately e 5 billion). Medical device companies represent a significant employment sector providing approximately 55,000 UK-based jobs.

Difficult market environment

Although the UK industry has a trade surplus and is attractive to venture capital, which reflects the success of innovative UK start-ups to attract investment, these companies then have difficulty growing because of the lack of market access in the UK. The UK market environment needs to be encouraged to allow medical technology SMEs to flourish through sensible public procurement policies and investment in research and development (R&D). The findings of the Wanless Report,³ which noted the description of the National Health Service (NHS) as a “slow and late adopter of technology,” remain relevant. Unless the NHS opens its doors to innovative new products, the repercussions will be felt not just within the industry, but also by the patient who will be denied access to the best treatments available. UK companies that are already targeting the United States and European markets will see little reason to remain based in the UK, and the delay between the creation and adoption of a new idea will grow ever wider.

Working on the solution

A potential solution to these problems already exists in the form of the Healthcare Industries Task Force (HITF) recommendations. Set up in October 2003 and jointly chaired by the then Health Minister Lord Warner (now Lord Hunt) and Chief Executive of Smith & Nephew, Sir Christopher O’Donnell, HITF has been the most important initiative to date between the UK Government and the UK medical devices industry. HITF was established to explore issues of common interest and identify opportunities for co-operation that would bring benefits for health and to social care services, patients and industry.

The Task Force published its initial report in November 2004.⁴ It focused on market access, R&D and the industrial base, regulatory issues and international trade. The emerging theme was how to stimulate innovation in the NHS and industry and how to increase adoption of new useful medical technologies. The final report on the implementation of the nine main HITF outputs, “Innovation For Health: Making a Difference,⁵ was published in March 2007. It sets out progress with accelerating the use of medical innovation more widely across the NHS for the benefit of patients. It also gives a clearer picture of what the medical device industry needs for it to grow and prosper.

Industry will be working closely with government over the coming months to ensure that the HITF recommendations on procurement and innovation are acted upon. Delivery of the recommendations will go a long way towards opening up the NHS market to small and innovative suppliers of technology. NHS procurement policy needs to refocus from cost-based to value-based priorities to ensure that patients reap the full benefit of the most modern and effective technologies, as well as allowing home grown businesses to flourish in the market place.

Information supplied by ABHI, the lead trade association for the medical devices and systems industry. For more details, tel. +44 20 7960 4360 or visit www.abhi.org.uk.