Valued at about $95bn in 2009, the European medical devices market is expected to grow at a compound annual growth rate (CAGR) of about 7% from 2009-2016, and is expected to exceed $150bn by 2016.
The major challenge for this sizeable market over the next half decade will be to ride a wave of changes in the regulatory and reimbursement environment. An absence of a uniform reimbursement model for the whole of Europe has adversely affected revenue prospects in the past decade and in the light of continuing fragmentation and the imposition of stringent regulatory directives, the European medical device industry might well witness a tough climate ahead.
Substantial government debts have also instigated austerity programmes in several European nations, which are also expected to act as an additional deterrent to the growth of this market.
In spite of the tougher environment, however, a large patient pool, rapidly aging populations and a comparatively faster regulatory approval process could provide a silver lining, ensuring the continued interest of manufacturers in this market.
According to GlobalData's 'European Medical Devices Industry: An Impact Analysis of the Changing Regulatory and Health Economics Scenarios' report, substantial efforts by the health ministries of the European nations and the European Commission to improve the regulatory and reimbursement environment and create an appropriate cost-benefit based healthcare system can also be expected to offset the short-term deterrents and offer a favourable opportunity for the medical device market in the long term.
Impact of regulatory and reimbursement trends
Regulatory changes such as the new Medical Device Directive and reimbursement changes in the form of diagnostic-related groups and health technology assessment practices are the major regulatory hurdles affecting the current European medical device industry.
The European regulatory environment for the medical devices industry has seen a few changes in the past two years. While the whole regulatory system saw a shift to the new 2007/47/EC Medical Device Directive, there were simultaneous efforts to set forth a common European regulatory regime for borderline devices such as tissue re-engineered products or drug-device combinations. Certain post amendments into the 2007/47/EC MDD are also in process which may significantly impact the regulatory environment for medical devices in Europe.
Any device entering the European market has to be processed through regulatory compliance requirements before it is launched. The Medical Device Directive sets out the regulatory criteria before a medical device gets CE mark approval to be launched in the EU. Unlike pharmaceutical drugs, which require additional national regulatory compliance before market launch, medical devices are generally licensed to be commercialised in all EU member states once they have achieved CE mark approval.
The new 2007/47/EC Medical Device Directive was approved in September 2007 and put into effect in March 2010. The shift from the old directives was required to be carried out by all member states.
Among the changes in the new directive is the inclusion of stricter norms for presenting clinical performance data for evaluation of the device before approval. Manufacturers of high-risk devices, who would previously get CE mark approval by exhibiting similarity of their product to currently marketed products and by presenting clinical data from previous clinical trials, will have to invest resources in conducting separate clinical trials for their devices.
While all high-risk devices newly introduced into the market will have to undergo rigorous clinical trials, manufacturers of currently marketed products that achieved approval through subsequent similarity will have to present more substantial clinical evidence for their products. Small or medium-sized medical device firms will struggle to get through the new directives since such clinical trials would require expertise as well as investments.
This might lead to increased consolidation activity in the future aimed at bringing novel products into the market. Newer technologies, which traditionally entered into the European market faster than the US market, will also be delayed due to the tightened norms. Though the new criteria is unexpected to demand multicenter randomized clinical trials of patient sizes as large as those required under the US Food and Drug Administration, it will still affect manufacturers' profit margins and may lead to a rise in average selling prices.
In addition, the newer directive has added an additional post-marketing surveillance system to be complied by the manufacturers of medical devices. This will include regular evaluation of clinical performance and a quality check of parameters of marketed devices. Though this process is expected to require additional investments by device firms, it will positively shield these firms from large-scale losses through device recalls or manufacturing alterations. Besides, post-marketing surveillance data will allow monitoring of the effectiveness of a product in its approved clinical care setting, which in turn will enable efficient adoption of health technologies in the future.
Health technology assessment practices
The European medical device market is significantly influenced by the increasing focus on health technology assessment practices and related bodies in health policy making and implementation.
The importance of evaluating new technologies, based on their clinical performance, safety and their relevance in different care settings, is evident by the fact that adoption of several novel technologies has tended to be slower in Europe. This evaluation can also measure the cost-effectiveness of new technologies and assist in allocating appropriate reimbursement coverage.
Since the reimbursement environment is specific to each country, the structure of health technology assessment agencies and their working also differs accordingly. Substantial efforts in health technology assessment practices and structure over the years have led to the formation of a European network for health technology assessment project.
This project was initiated to emphasise the importance of inter-networking and collaboration among health technology assessment agencies across Europe. Sharing of technology assessment information among such agencies and academic institutions, as well as the ministries of public health organisations, is expected to lead to a sustainable network for health technology assessment within the EU and improve delivery of healthcare while minimising costs for medical device manufacturers.
Austerity programmes across Europe
Rising healthcare costs and simultaneous limitations on government spending owing to austerity measures is adversely affecting the European healthcare industry.
Austerity programmes to reduce budget deficits and high levels of debt have been proposed or are already underway in most of the countries in the European Union.
While these programmes primarily shape up in the form of higher taxes, cuts in government wages and consumer spending, a part may come from reduced government spending in public investments and increased taxes on company profits.
Though austerity programmes will revive the overall European economy in the long term, lower government healthcare spending and higher taxes in the next four to five years will limit the average selling prices of medical devices, encourage tougher negotiation from hospitals and impose more stringent reimbursement policies.
Adoption of newer technologies which incur higher initial costs but ensure better clinical outcomes, and reduced hospitalisation might be negatively affected. The European medical device industry, despite its complexities in the reimbursement process, offers a favourable opportunity for manufacturers. Opportunities in this market will be restricted by several deterrents in terms of the ongoing austerity measures and the fragmented reimbursement policies.
Decentralisation of the regulatory approval process for high-risk devices will also impose severe limitations to profit margins of several manufacturers. Given the current scenario, it may be important for medical device firms to build their network early and devise careful strategies to tackle complexities in the reimbursement environment.
Substantial efforts at aligning reimbursement practices, such as health technology assessment and diagnostic-related groups, are under way throughout the EU. In the long term, economic recovery and the centralisation of regulatory and reimbursement environments in Europe can be expected to offer significant leverage to medical device firms.
More Details on the Full GlobalData report.
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