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Medical Technology: "Innovations must also make economic sense."
Bernd Bienzeisler; © Fraunhofer-IAO
Due to an ever growing demand, the market for medical technology is an attractive one. At the same time, such innovations become increasingly complex, and their marketing is tied to the consent of medical insurance companies to cover the costs. A recent study describes the behaviour of medical technology companies in regards to innovations.
Bernd Bienzeisler is a member of staff at the Fraunhofer-IAO in Stuttgart and author of the study „Innovations and System-Leadership in Medical Technology.” In an interview with MEDICA.de, he tells about accreditation procedures and cost absorption of innovations in medical technology as well as the innovation capability of suppliers.
MEDICA.de: Mr. Bienzeisler, how is the current state of the behaviour of medical technology companies in regards to innovations?
Bernd Bienzeisler: In principle, the current state is fine. German medical technology companies are without doubt among the global leaders in cutting-edge technology. In 2006, this sector alone accounted for 15,000 applications for letters of patent in Europe. About a third of the sector’s revenue in Germany is generated through the marketing of products that are less than three years old. This serves as evidence to the relatively high dynamics in the sector.
In addition, this sector is less affected by the present economic crisis. First of all, people are reluctant to save money when it comes to healthcare. Secondly, the demographic developments in industrial nations will lead to an increasing need for medical technology. Furthermore, there are great export opportunities, because the so called emerging countries are building up their health care systems.
The high quality training standards for skilled employees in Germany are also a reason for the industry’s innovative strength. Additionally, regional clusters of companies have a positive effect on the ability to innovate. In these regional clusters, the best example being the region around Tuttlingen, scientific knowledge is networked. In this network, the different fields of study interface in such a way that promotes the advancement of innovations in medical technology.
MEDICA.de: How did you examine the behaviour in regards to innovation?
Bernd Bienzeisler: First of all, we evaluated the existing studies. In preparation for our quantitative survey, we then conducted ten interviews with experts. In these interviews, we put the focus on system-leadership in medical technology, in particular in the area of electromedicine. Our thesis assuming an existing trend towards system-leadership was confirmed through our evaluation. Due to the growing complexity of products, the value added chain is subject to a restructuring process in which some suppliers of partial or singular product solutions become suppliers of integrated package product solutions, therefore taking over a system-leadership.
We then sent questionnaires to all of the approximately 1,300 medical technology companies in Germany. 170 questionnaires, predominantly filled out by the respective executives, were returned to us. We consider this a good rate of response.
MEDICA.de: Who mandated you to conduct this study?
Bernd Bienzeisler: The study was part of the project „systemedic“, which was supported by the Federal Ministry of Education and Research.
MEDICA.de: You mentioned the complexity of the products. Is the complexity comparable to that of other sectors, e.g. the automotive industry?
Bernd Bienzeisler: The medical technology sector is even more complex, because it acts upon a market, which actually does not constitute a real market as such, but is rather driven by social and healthcare policies and considerations. Specific characteristics such as the reimbursement of benefits, or the time-consuming accreditation formalities, cannot be found in the automotive industry. For all intents and purposes, medical technology products are only marketable in Germany if they are reimbursable, thus if the healthcare insurances absorb the costs.
Secondly, health is a commodity like no other. When mentioned in terms of products and value added chain, many people feel alarmed. Therefore, the marketing of medical technology products is rather difficult.
The third factor, which causes a higher complexity, is the fact that research has dramatically accelerated over the last few years. Medical technology innovations increasingly emerge at the many interfaces to other fields of study and research, such as information technology, bio technology, moleculisation or microsystem technology.
MEDICA.de: Are there differences for the medical technology industry in other countries?
Bernd Bienzeisler: Yes, the market operates differently in every country. Within Europe, markets are relatively homogeneous, because the accreditation procedures are comparable and relatively straight-forward. In simple terms, a CE-Certificate is sufficient for an accreditation, although an accredited product can only be marketed after the cost absorption has been agreed to by the medical insurance companies. In the U.S., it is arranged differently. There, the accreditation procedure and the acceptance of cost absorption do not necessitate two separate actions. However, the accreditation process in the U.S. is more difficult, because first, proof of the effectiveness of the product is required. Also, e.g. for the accreditation of an ultrasound device, it must be demonstrated, that the device is more economic and renders better therapeutical results than the already existing devices on the market. After the accreditation though, the company can immediately proceed to distribute the product on the biggest health care market worldwide. In individual cases, this can cause U.S. manufacturers to conduct the tests of the effectiveness of their medical products in German hospitals in order to gain the required proof for their domestic accreditation.
MEDICA.de: How quickly can physicians and patients benefit from innovations in medical technology?
Bernd Bienzeisler: In order to answer this question, one must know that in Germany there is a distinction between in-patient and ambulatory care. In the course of in-patient care, everything can be tried which is not explicitly prohibited. However, during ambulatory care everything included in the treatment of the patient must actually be accredited. Through the declaration of a procedure as a „clinical study“, new medication as well as medical devices can be tried without an extensive accreditation process. This is not possible in the area of ambulatory care. Therefore, practically all innovations in Germany originate from in-patient care. In ambulatory care, which is actually more important to the general population, innovations usually do not come into use until later. This is a structural problem.
Comment of the Editor: The joint federal board of statutory health insurance companies is aware of this problem. In the beginning of 2010, it has for the first time parted with the principle of separation between in-patient and ambulatory care with the approval of a so called cross-sector evidence study for the medical innovation of brachytherapy. Brachytherapy is used in cases of locally confined carcinomas of the prostate gland as an alternative to surgical removal.
MEDICA.de: Which recommendations for medical technology companies were you able to derive from the study and the project „systemedic“?
Bernd Bienzeisler: The companies should be prepared for a continuously increasing complexity of the accreditation procedures. Due to cost pressures in the health care system, innovations will also have to make sense economically and must not lead to further inflation of the cost structure. This is already a widespread issue in the United Kingdom, where extensive studies in regards to the microeconomic and macroeconomic benefits of medical technology innovations are required. This can relatively quickly overstrain small companies.
Furthermore, the necessity for networking is growing, because the market is dominated by small and medium sized businesses. At the same time, the complexity of the products is increasing due to the above mentioned interfaces with other fields of study and research. Medical technology, for example, cannot do without information technology. There is no more clear division between these two fields of research.
In addition, there is a trend towards system-leadership. The demand for integrated package solutions by the recipients of such products, e.g. hospitals, is growing stronger. An operating room is not purchased in separate parts anymore. Instead, a company will receive an order to carry out the complete construction, from the planning and conception phases right down to the installations and the warranty. This creates a need for system-suppliers who can manage the value added process in its entirety.
Finally, the establishment and demand for regional clusters will gain in importance in the future. Closely related to this development is the companies’ demand for good training programs in order to ensure the high quality of skilled employees. Therefore, study paths and degree programs are partly defined by companies in the industry. The networking with universities and other educational establishments will become more important. Tuttlingen is an excellent example for a well functioning regional cluster in the area of precision surgical devices.
MEDICA.de: Which recommendations are directed at other institutions in the health care system?
Bernd Bienzeisler: The recommendation of lowering and reducing the barriers for innovations is directed at the institutions in charge of health care policy and regulation. In particular, the processes should be accelerated. Furthermore, medical technology research often concludes with the creation of a prototype. At that point, however, the companies’ real problems are just beginning, because clinical studies and an analysis of the effectiveness of the product have to be conducted. To date, these procedures are not part of the research funded by the federal government or other supporting organizations. Research funding should strike a new path and consider including the accreditation process.
Our recommendation proposing a greater degree of market forces in health care aims to provide hospitals, physicians and patients with financial incentives to utilize innovations in medical technology. This, though, must be addressed and solved in the course of the general discussion on the health care system.
The interview was conducted by Dietmar Köthner MEDICA.de
More information to the study „Innovationen und Systemführerschaften in der Medizintechnik“ can be found only in German at the homepage of Fraunhofer-IAO.