Future of healthcare technology on agenda at European MedTech Forum 2014

The future of the healthcare technology industry is wrought with a sense of uncertainty. Governments around the world still struggling to balance their books have been looking to make cutbacks wherever they can, leading to politicians slashing healthcare budgets. But this tough choice could not have happened at a worse time, with many countries facing the challenge of an ageing population. The sector has struggled to keep pace with rising patient demand only to have its funding dramatically reduced.

The slump in government funds has made competition in the marketplace even fiercer, with fears about whether the healthcare technology industry can keep pace in this rapidly changing sector. These concerns were echoed loudest at the European MedTech Forum 2014 in Brussels, where discussions centred on whether the industry was up to the task of adapting to the rapidly changing healthcare sector.

If it can’t prove value, MedTech will be seen as a gadget industry, not a solutions provider

“[The] industry has not always done the best job demonstrating value”, said MedTech Europe CEO Serge Bernasconi. “We must show technology has a positive impact on patients and healthcare.” He went on to say the current economic trend across the European Union would see the region’s healthcare pot run dry, and pushed for a serious debate on how Europe was going to pay for everything moving forwards.

As a consequence of the cuts, medical professionals with whom the industry has cultivated strong, long-lasting relationships over the years, have seen their roles as financial decision-makers forced to take a back seat, with payers’ and patients’ concerns taking priority. Payers in particular have become more demanding as a result of tighter budgets, wishing to be shown exactly what it is they are getting for their money before parting with it. Patients, on the other hand, require easier, more manageable, systems and treatments.

“If it can’t prove value, medtech will be seen as a gadget industry, not a solutions provider”, said Rob ten Hoedt, Chairman of Eucomed, speaking at the European MedTech Forum 2014. “We have to adapt. But if we can do that in a smart way, we can totally transform the industry, and I find that very exciting.”

It might sound like a big task – and that’s because it is. But the healthcare technology industry is more than capable of meeting what is demanded of it. The real challenge will be shifting the industry’s focus. It will need to find the right balance between offering innovative, quality products, but at more reasonable costs, in order to ensure value for hospitals struggling to balance their budgets.

The severity of the financial constraints placed on medical institutions were stressed by Jürgen Schulze, President of the European Diagnostic Manufacturers Association, who pointed out the effect they were having on every part of the healthcare chain. “The environment is changing. Budgets are limited today. For example, people are questioning whether training is necessary”, he said. “We have an extremely high innovation rate but we are not so good at translating this into useful products for patients.”

The circular economy
What is needed to rectify the problem is a change of sales model, claims the Boston Consulting Group. “We need a pricing structure that is leaner”, says the group’s Partner and Managing Director, Götz Gerecke. “We need to reinvent the high-cost commercial model.”

One company that may have the answer to the industry’s problems is Dutch electronics company Philips, which has an extremely profitable health tech division. By applying principles of the circular economy to the company’s sales and service models, offering leasing contracts with healthcare providers for equipment, the company has revolutionised how it meets the demands of the healthcare sector.

However, the company’s CEO, François van Houten, admits it has been a struggle to convince the industry of his vision, with many initially hesitant at the concept of having what they see as second-hand products circulating around hospitals and other institutions. “We still have much more to do given the size of the market, but, as we work with hospitals and establish ourselves as technology partners and not just sellers of a ‘box’, we can more easily convince customers of the mutual benefits of circular-economy principles”, he said at the forum.

Meeting the innovators
Whatever the industry does to reinvent its high-cost commercial model, it had better do it quickly. Competition from companies such as Google and Apple is on the way, with both tech giants planning to take the plunge into healthcare technology.

Despite the threat, the existing industry appears ready, welcoming the possibility of new entrants. “New tech companies will help us bridge the gap with patients. They will take things one step further”, said the President of Covidien Europe, Cristiano Franzi. “If these companies come in with their innovation and agility, it could be an opportunity. I’m confident: the new technologies will improve the ways we can deliver healthcare.”

It appears the industry is ready to meet the demands from payers and patients, and the increased pressure from new entrants into the market, embracing the latter as a wake-up call rather than something worthy of fear. It is time for the industry to reimagine how it looks at healthcare: seeing it as an ongoing service, not just a one-off piece of equipment.

Companies in the industry have expressed their willingness to join forces with the new tech companies hoping to stake their claims in the sector. Ciro Römer, who serves as Company Group Chairman, Global Orthopedics Group International at Johnson & Johnson, expressed his belief the new entrants will eventually realise marketing to consumers is much easier than developing a medical device, with all the regulatory hurdles they have to overcome.

The medical technology industry has a long road ahead if it is to make the changes necessary to succeed in this highly competitive market. But – luckily for all involved – it looks like the industry is prepared to meet the challenges head on, choosing to adapt, not die.