Medical Device Link.

MARKET PLACE

Market profile

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The Italian medical device market is the third largest in Europe after Germany (31%) and France (16%); with a market share of 11%, it holds joint third place with the United Kingdom.¹ Its national market of biomedical technologies, in vitro diagnostics and laboratory products is valued at more than e7 billion.² Spending by the Italian National Health Service (SSN) in 2008 is expected to be approximately e99 billion,³ equal to a per capita spend of e1650.

A difficult environment

The introduction on 1 August 2007 of the Italian Ministry of Health’s data bank of the medical devices marketed in Italy (Repertorio)⁴ and the corresponding regulations to be fulfilled are causing great concern to companies in the sector. They believe that this new classification system will make it difficult for the SSN to perceive the advantages of efficiency and performance in some medical devices.

Increasingly, prices are less profitable and are the first consideration when purchasing an ever wider range of goods and services. The fear is that in the future the only discriminating factor between products will be which has the lowest price. This would inhibit the technological content and innovation that manufacturing companies are trying to add to their products to create a competitive advantage for themselves and a benefit for the user and the patient. If a hospital concentrates too much on the purchase price of a medical device, this can result in higher hidden costs and poor quality hospital performance.

Some critical aspects for the companies operating in the sector are

• payment delays with average times of approximately 342 days⁵
• excessive bureaucracy during the supply phase of goods and services
• unreasonable and potentially anti-economic requests by hospitals such as asking companies to supply goods and services that they do not usually market, thereby expecting them to act as a “general contractor”
• the requirement in some calls for tenders to provide equipment of high technological value as a free loan in exchange for an order of undetermined value for consumable medical devices.

The increasing difficulties in operating in the sector are creating situations that nobody would have foreseen a few years ago. Important companies, even multi-nationals, that are invited to bid in calls for tenders issued by hospitals decide not to participate because the prices and conditions are considered to be unprofitable or even a potential loss.

Turnover slows

Most of the production of medical devices in Italy is concentrated in the Mirandola biomedical district in Modena, Northern Italy. More than 70 companies are located there, which employ 4300 people and have a total turnover of approximately e700 million.⁶ Those companies cover the majority of the production chain: they are manufacturers of medical devices and equipment, and components for medical devices; and subcontractors involved in the assembly of medical devices and equipment, and moulding and sterilisation services.

In the third quarter of 2007, the district has reported a considerable slowdown in growth; production has increased by 2.6% and turnover has increased by a modest 0.2%.⁷ Orders coming from the domestic and foreign markets have decreased. This is a result of a reduction in public spending and the continual strengthening of the euro against the dollar and other currencies, which makes “made in Mirandola” less competitive.

Companies are still moving labour intensive processes to countries where labour costs are lower. In June 2008, Rüsch, owned by Teleflex Medical (www.rusch.com) is moving its production plants elsewhere as the group reorganises its activities. The Mirandola district still has its own appeal, however, as a result of its abilities in technological innovations and its propensity for internationalisation. The acquisition of two local companies by foreign multinationals is in process: Bellco (www.sorin.com), an established European brand in the dialysis sector, is being purchased by Fresenius Medical Care; and Starmed (www.starmedspa.com), which operates in the breathing equipment sector, is being purchased by Intersurgical.

Future opportunities

Italy is a fertile environment and at the forefront of public and private research with a long and well established tradition of excellence in medicine, biomedical technology, machinery, robotics, microelectronics and in certain segments of optoeletronics.⁸

• Italy ranks fourth in Europe for research and development spending (approximately e15 billion) and for patent registration.
• More papers are published per researcher (47.8) than in the United Kingdom (42.8), France (26.0), Germany (24.3), the United States (20.1) and Japan (10.7).
• Italy has an international presence in research; 35% of all publications are copublished internationally.
• Forty Italian universities run specialist biotechnology degree courses.
• Several working hospitals actively engage in research and testing such us the Istituti di Ricovero e Cura a Carattere Scientifico (www.ministerosalute.it/ricsan).

The companies operating in the biomedical field in Italy, despite many difficulties on the domestic front, can still count on a productive and scientifically qualified environment to be able to advance in the development of new processes and new products.

The major activities for Italian companies in the immediate future are to

• increase the added value in own products and manufacture devices that will decrease the cost of the overall service provided by the SSN
• keep prices competitive
• consider a wider range of markets and target countries with emerging economies that are starting to ask for more sophisticated goods and services for their national health services, in response to people in those countries demanding higher standards of care.

Paolo Galavotti, Nexion srl, Via 2 Giugno 111, I-41037 Mirandola, Italy, tel. +39 0535 27880, e-mail: paolo.galavotti@nexion.ws.