Procurement: The Cornerstone of Market Access in Europe

www.medtecheurope.org 1
Yves Verboven
Director, Market Access & Economic Policies
Procurement, “the” cornerstone to
access to novel Medical Technology in Europe.

MedTech Industry Association
Alliance
Medical Devices
In-Vitro Diagnostics
MedTech Europe

THE EUROPEAN MEDTECH
INDUSTRY IN FIGURES
2014
www.medtecheurope.org

European MedTech Imports, Exports & Trade balance
Medical devices and Imaging excluding in-vitro diagnostics. Europe refers to EU (excluding Cyprus, Luxembourg, Malta) +
Norway, Switzerland.
Data related to total exports and total imports include EU intra-trade. Trade balance refers to external trade balance.
Source: Espicom, Eucomed calculations.
6.0
7.1 8.0 7.3
13.2
14.6 15.8 15.2
55
58
63 64
74
78
84
80
49
51
55 57
61
64
68
65
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
2006 2007 2008 2009 2010 2011 2012 2013
billionEUR
Trade balance
Exports
Imports

Employment comparison
575,000
520,000
675,000
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
European MedTech industry US MedTech industry European pharmaceutical
industry
numberofpeopleemployed
Europe refers to EU + Norway, Switzerland. Latest year available.
Source: Eurostat, Eucomed calculations based on the data obtained from National Associations of 15 countries. Countries with
(partially) provided data: Belgium, Czech Republic, Denmark, France, Germany, Greece, Ireland, Italy, Netherlands, Poland,
Portugal, Spain, Sweden, UK, Switzerland.
EFPIA – The Pharmaceutical Industry in Figures. Key Data 2013.
S. Tripp, M. Grueber, R. Helwig - The Economic Impact of the U.S. Advanced Medical Technology Industry, Battelle Technology
Partnership Practice, March 2012.

Number of people employed in the MedTech industry
per 10,000 inhabitants
Source: Eurostat, Eucomed calculations based on the data obtained from National Associations.
USA data source: S. Tripp, M. Grueber, R. Helwig - The Economic Impact of the U.S. Advanced Medical Technology Industry,
Battelle Technology Partnership Practice, March 2012.

Trade
Europe’s MedTech trade surplus in 2013 is estimated at €15 billion,
more than a twofold increase since 2006.
Countries with the highest trade surplus* are Germany, Ireland and Switzerland
*including EU intra-trade
Medical technology excluding in vitro diagnostics. Europe refers to EU (excluding Cyprus, Luxembourg, Malta) + Norway, Switzerland.
Source: Espicom, Eucomed calculations.

MedTech Industry - A Diverse Sector
There are more than 500,000 medical technologies registered ,
ranging from syringes, bandages, In-vitro diagnostics to eye
implants and artificial limbs (20,000 generic groups)
Source: Global Medical Devices Nomenclature (GMDN) Agency, 2010

Diversity and classification of medical technology
1The classification of medical devices is a ‘risk based’ system based on the vulnerability of the human body taking account of the
potential risks associated with the devices. The classification rules are based on different criteria such as the duration of contact with the
patient, the degree of invasiveness and the part of the body affected by the use of the device.
2IVD classification is based on the degree of health risk posed to an individual and public, and is related to the risk of an incorrect result
arising from the use of the IVD.
Source: European Commission.

Medical technology market estimates by area and sales growth
World, 2013-2020
Source: World Preview 2013, Outlook to 2018: The Future of Medtech, EvaluateMedTech™, September 2013.

INNOVATION

Top technical fields in patent applications
Analysis based on European patent applications filed with the EPO in 2013 (Direct European applications filed in 2013 and
International (PCT) applications entering the European phase in 2013), including divisional applications filed during the year.
Based on the WIPO IPC-Technology concordance as revised in January 2013.
Source: European Patent Office
Number of patent applications filed, by field, 2013
41%
39%
20%

Evolution of European patent applications by technical field
2004-2013
Analysis based on European patent applications filed with the EPO from 2004 to 2013 (Direct European applications filed and
International (PCT) applications entering the European phase in these years), including divisional applications filed during the year.
Based on the WIPO IPC-Technology concordance as revised in January 2013.
Source: European Patent Office
0
2 000
4 000
6 000
8 000
10 000
12 000
NumberofpatentapplicationsfiledwithEPO
Medical technology Pharmaceuticals Biotechnology

MedTech Companies in Europe
almost 25,000
medical technology companies
Europe refers to EU + Norway, Switzerland. An enterprise is considered to be an SME if it employs fewer than 250 persons and has
an annual turnover not exceeding €50 million.
Source: Eucomed calculations based on the data obtained from National Associations of 15 countries for the latest year available.
Countries with (partially) provided data: Belgium, Czech Republic, Denmark, France, Germany, Greece, Ireland, Italy, Netherlands,
Poland, Portugal, Spain, Sweden, UK, Switzerland.

European MedTech market
Is estimated at roughly
Europe refers to EU + Norway, Switzerland. Market size refers to the total annual value of products sold in Europe in the final
purchaser’s prices, i.e. the total amount spent from public and private sources on medical technology.
Source: WHO Global Health Expenditure Database, Eurostat, Eucomed calculations based on the data obtained from National
Associations of 15 countries for the latest year available. Countries with (partially) provided data: Belgium, Czech Republic,
Denmark, France, Germany, Greece, Ireland, Italy, Netherlands, Poland, Portugal, Spain, Sweden, UK, Switzerland.

Breakdown of total healthcare expenditure in Europe
Europe refers to EU + Switzerland, Norway. MedTech data – latest year available, healthcare expenditure data – 2010.
Source: WHO, Eurostat, EFPIA, EDMA, Eucomed calculations.

Per capita investment in various fields in Europe
in EUR, latest year available
Weighted European average. Europe refers to EU + Norway, Switzerland.
Source: WHO Global Health Expenditure Database, Eurostat, Eucomed calculations based on the data obtained from National
Associations.

PROCUREMENT
FIRST ENTRY POINT
TO MARKET
Estimated
70% procured

Hospital
Reimbursement
Funding
DRG*
Fee for Service
Global Budget
Innovation, Innovation ?
What is Value of innovation, for whom, patient, institution, hospital, government, society ?
What incentives in place to obtain reimbursement, funding for innovation?
This process is country specific, limited consideration of “value”
Payer
Insurer / NHS DRG*/device tariff and positive
list/Special Payment/ physician
and procedure fee Manufacturer
Innovation
Funding, Reimbursement
Community
* Diagnostic Related Groups
Procurement
Hospital HTA

Procurement of medtech innovations
Impact of procurement in the EU on the innovation
strength of the medical technology sector
Joint study, University of Twente and Simon-Kucher &
Partners commissioned by Eucomed

innovations are differentiated according to three key dimensions
Definitions
Number of substitutes
 Signifies a market/product category dimension
 Number of interchangeable products in the market
Level of clinician influence
 Signifies a stakeholder dimension
 Degree of influence of clinicians on product selection
and procurement
 Influence depends on the therapeutic specialty, the
unmet need and the perceived improvement of
patient outcomes
Product conformity
 Signifies a process dimension
 High product conformity, i.e. fit with existing
procurement processes and demand specifications
 Low product conformity, i.e. requires time and effort to
learn and process/specification adaptations and
developments on the procurement side
Low
Levelofclinicianinfluence
High
Low
Innovation classification cube

61 interviews with procurement bodies and industry reps were held and
systematic literature research was done
Source: Simon-Kucher & Partners; *Spain was excluded due to major changes in the healthcare system and a strong focus on cost reductions, Switzerland as a non-EU country
was included due to market relevance
30 interviews with:
 Regional procurement bodies
 GPOs
 Individual (university) hospitals
Countries* and procurement
bodies
Sweden
Switzerland
Austria Czech Rep
Netherlands
UK
France
Poland
ItalyGermany
31 interviews with:
 Major medical device
companies
 SMEs
 Eucomed SME expert
Medtech industry
representatives
 Scopus and Pubmed
databases
 General studies on
procurement centralization
 Product specific procurement
studies for selected products
 Cost-effectiveness studies for
selected studies
Systematic literature research

A total of 11 medtech case studies were selected and analyzed which
covered all areas of the innovation classification cube
High Number of substitutes
Levelofclinicianinfluence
Low product conformity
High product conformity
High
1
4
11
9
8
7
10b2a2b
2c 3 6
Low
1 Customized OR procedure trays
2
Drug-eluting
stents
a) 1st generation
b) 2nd generation
c) 3rd generation
3
Endoprosthetics – Mobile-bearing knee
implants
4 High-end radiology equipment
5 Incontinence pants
6 Insulin pumps with CGM
7 Integrated patient monitoring systems
8 Negative pressure wound therapy
9 Safety medical devices
10
Spinal
implants
a) Cervical plates
b) Artificial disc replacement
11 Transcatheter aortic valve implantation
10a
5
Low
Moderate
Innovation classification “cube”*

Innovations
Hypotheses
DES 3rd generation  
Endoprosthetics: MB knee implants*  
Spinal implants: Cervical plates  
High-end radiology equipment -- 
Customized OR procedure trays () 
Incontinence pants () 
Integrated patient monitoring systems () 
Safety medical devices () 
DES 1st / 2nd generation -- / ** -- / **
Insulin pumps with CGM  
Negative pressure wound therapy  
Spinal implants: Artificial disc replacement -- --
Transcatheter aortic valve implants --*** --***
Case study analysis reveals that the impact of procurement varies
29
*Latest generation **1st gen: not applicable, 2nd gen: no impact ***Predominantly not purchased through centralized/coop. procurement
 Confirmed () Partly confirmed  Not confirmed -- No exposure to PC
Group 1:
impact
Group 2:
Impact
depends
Group 3:
No
exposure
Increasing
procurement
centralization
Reduced short-
term price level
Reduced
innovation
adoption
Increasing
procurement
centralization
Reduced
innovation
adoption

implications of Procurement on adoption and price
level of product categories were assessed
Source: Simon-Kucher & Partners
Subject
to PC?
Insights and impact
Drug-eluting
stents 3rd
generation

 Procurement centralization of DES started in 2004/2005
 This and other factors such as increasing competition and a study revealing
potential safety issues of DES in 2007, drove price erosion in the DES market
 Today, 2nd-generation products are often considered “sufficient”. Centralized and
cooperative procurement bodies often use them as their standard products
 In addition, PC’s strong focus on price leads to further price erosion and limited
opportunities to achieve price premiums for next-generation products
Endopros-
thetics: MB
knee implants

 PC of mobile-bearing knee implants started in ~2002
 PC drove price erosion of fixed-bearing implants and made it impossible to sustain
a price premium for mobile bearing implants, despite regular launch of new
products/next-generation products
 This has led to reduced adoption of next-generation MB implants priced at a
premium over FB implants
Spinal
implants:
Cervical plates

 PC of cervical plates started in ~2002/2003
 Today, PC limits adoption and price potential of next-generation cervical plates due
to strong demand standardization
High-end
radiology
equipment
~
 High-end equipment not yet in the focus of centralized procurement
 PC (among other factors such as increasing competition) drives price erosion in
low- to mid-end radiology equipment thereby increasing the price differential to
high-end equipment
 This affects adoption of high-end equipment indirectly as price premiums vs. low-
to mid-end equipment can get prohibitively high
 yes ~ to limited extent  no

Expenditure on MedTech
It is estimated that only around 7.5 % of
total European healthcare expenditure
is attributed to MedTech.
Procurement - >
Price only not the solution as MedTech not “the” cost-driver
Source: WHO, Eurostat, EFPIA, EDMA, Eucomed calculations,

EU Semester – FISCAL STABILITY
Source: European Commission

5.4
6.0
7.3
2.4
6.0
4.9
1.8
4.1
3.3
4.1 3.9
3.5
4.7
2.2
7.1
2.0
4.0
1.5
6.9
2.1
3.4
4.0
5.6
11.2
7.3
3.3
8.6
7.4
3.4
-11.6
-4.4
-6.5
-2.8
-4.6
-0.8
1.0
-0.1
-2.3
-0.6
-2.3
-1.0
-0.5
0.5 0.4
2.4
0.1
2.1
-3.7
0.7
1.3
0.5
2.6 2.4
-5.0
2.9
4.5
5.9
4.8
-11.0
-0.6
1.7
-1.4
0.9
-2.7
-4.1
-1.5
0.8
-0.7
1.3 0.6
0.1
-0.7
-0.4
-1.3
1.3
-0.6
5.2
0.9
0.5
1.4
-0.6
0.2
8.1
2.0
0.6
0.2
4.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2000-2009 2010 2011
Austerity
Annual average growth rate in health expenditure per capita, in real terms, 2000 to 2011
Source: WHO Global Health Expenditure Database, Eurostat, Eucomed calculations.

A changing environment ….
Non Communicable – Chronic Disease
Ageing
Demographic
Austerity – reduced per capita
Or Healthcare System Reform
And Investment in Health, in Medtech

Ageing … Other factors
Public healthcare expenditure projections
35
AWG - Ageing Working Group of Economic Policy Committee
Source: European Commission, The 2012 Ageing Report Economic and budgetary projections for the 27 EU Member States (2010-2060)
8.3%
8.9%

The burden of chronic diseases in Europe
Source: European Chronic Disease Alliance

Demographics Driving Demand for Healthcare
1.7
1.8
1.8
2.2
1.7
2.3
2.1
2.0
1,9
2.1
1.7
2.3
1.5
1.8
2.4
1.8
1.7
1.7
1.8
2.1
1.8
1.8
1.5
2.2
1.5
2.1
2.7
1.6
3.2
3.2
3.5
3.6
3.7
3.8
3.8
3.8
3.8
3.9
3.9
4.0
4.0
4.0
4.0
4.0
4.1
4.2
4.3
4.3
4.6
4.6
4.7
4.9
5.3
5.3
5.8
5.9
0.0 2.0 4.0 6.0
Germany
Italy
Greece
Sweden
Portugal
Belgium
Finland
Austria
EU27
France
Bulgaria
Denmark
Latvia
Estonia
UK
Spain
Hungary
Slovenia
Lithuania
Netherlands
Czech Republik
Malta
Romania
Luxembourg
Poland
Cyprus
Ireland
Slovakia
2060 ← 2010
2060
Difference 2010-2060
Weighted EU average.
Source: European Commission Services, Eurostat, EUROPOP2010.
Old age support ratio 2010 and 2060 (projections):
Number of people working age (15-64)
per person of pension age (65+)

Economic Growth Health Care Expenditure
Evolution of GDP vs. HC expenditure - EU28, 1995-2011
Source: WHO Global Health Expenditure Database, Eurostat, Eucomed calculations
1.0
1.2
1.4
1.6
1.8
2.0
2.2
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
index
Healthcare
expenditure
GDP
8.8%
10.4%
% - the percentage of
GDP spent on healthcare

.
More sustainable health system
Health as human capital
Reducing Inequalities
COST -> ”INVESTING IN HEALTH”
Health a Value in itself
Health a pre-requisite for economic growth
Improving cost efficiency and reconciling fiscal consolidation targets with
the continued provision of sufficient levels of public services
improving the health of the population in general and reinforcing
employability, thus making active employment policies more effective,
helping to secure adequate livelihoods and contributing to growth.
contributing to social cohesion and breaking the vicious spiral of
poor health contributing to, and resulting from, poverty and
exclusion.
EU Public Health Strategy

40
MEDTECH – TIME TO CHANGE HOW TO DO BUSINESS
CONTRACT FOR A
HEALTHY FUTURE

M
The role of medical technology in steering
healthcare system onto a sustainable path
5 year Strategy
1 - Build and engage stakeholder networks to collectively
establish the opportunity and value of medical technology
and innovation
2 - Collect, develop and share, evidence-based cases of
medical technology supporting effective personalised care, a
sustainable healthcare system and healthy ageing
3 - – Demonstrate cost-effectiveness incl. cost-
containment, Tx lifelong cost-saving, lifecycle cost
(product), and the (socio-)economic value for patient,
healthcare system and society of medical technology,
while improving healt and economic outcomes and quality of
care
4 – Enable care processes to address labour shortages
HEALTH
ECONOMIC
VALUE

Mid-to-late 1700s. Dr. Benjamin Rush, a
“founding father” of American medicine,
believed in direct, drastic intervention.
“Do everything you can, anything is
possible.”
Mid-to-late 1800s, early 1900s. a more
nihilistic philosophy:
“Do nothing because doctors do
more harm than good.”
Circa World War II, therapeutic explosion
erases notion of physician as passive
observer. We return to Rush’s view:
“Do everything you can, anything is
possible.”
1980s. Dr. David L. Sackett:
Do everything that does more good
than harm (based on critical appraisal
of research evidence) i.e.
“Evidence based medicine”.
Historically … Western medical practice has been guided by
experience, pathophysiologic mechanisms, and unproven theories
Most Economic Advantageous Tendering
Value based Health Care

Cost - Containment
• Avoid disease progression
• Avoid hospitalizations
• Avoid disease
• Avoid complication
• Avoid waste
• Avoid costly set-up of Tx
• Optimize most costly resources
• Product life-cycle cost
• Offer Procurement Innovation –
“Solutions”
• => “ Bleu Economy “

European Semester
the growing importance of health care and long-term care
The CSRs are related to the need to improve the fiscal
sustainability of healthcare and/or long-term care
systems:
BE, DE, ES, FR, MT, NL, AT, PL, PT, SI, SK;
…the need to increase their (cost-)efficiency and/or
(cost-)effectiveness:
BE, BG, CZ, DE, IE, ES, HR, LV, MT, AT, PL, PT, RO,
SK, FI ;
…and more specific recommendations in the areas of…
44
6
15
19
15
7
2012 2013 2014 Health
care
Long-
term
care
Graph, Table: Number of EU Member
States with country-specific
recommendations in
healthcare/long-term care
Enable Reforms

VALUE OF INVESTING IN MEDTECH
Healthcare systems
Efficient & effective
contribute to fiscal
stability and “Bleu
Economy
“Economic”
Advantageous
Patient’s/ Citizen
Income reduces
inequality
(wealth <-> health)
(Economic Growth)
Silver Economy
(Economic Growth)
Productivity
(workforce, carers)
( Economic Growth)

Public Procurement : From Cost to Value & Investment
Tender preparation : Preliminary Market Consultation, Prior
involvement of candidates or tenderers, labels
Flexible procedures : Choice of procedures, Open
procedure, competitive procedure with negotiation,
competitive dialogue, innovation partnership
Art. 67: Contract Award Criteria
Most Economic Advantageous Tendering
Art. 68 : Life Cycle cost, Cost-Effectiveness
(incl. environmental, social, economic) – method tbd

47
MEDTECH
CONTRACT FOR A
HEALTHY FUTURE
MOST ECONOMIC
ADVANTAGEOUS
TENDERING

Y.Verboven@medtecheurope.eu
Procurement, “the” cornerstone to
access to novel Medical Technology in Europe.

Procurement: The Cornerstone of Market Access in Europe

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