Medical Devices In EuropeMarket OverviewMassMEDICOctober 19, 2007

N. Gerard ZapiainU.S. Department of Commerce

Topics for Presentation

• What is the European Union?• Issues on entering the European Union.• Larger regional markets.• Emerging markets.

What is the European Union?

• A political and economic community composed of 27 member states

• Goal: to create a single market to guarantee freedom of movement of people goods, services, and capital between member states

• With over 492 million citizens the EU will generate an estimated GDP of$15.7 trillion in 2007

What is the European Union?

• Older members– Belgium, France, Italy, Luxembourg, Netherlands,

Germany, Demark, Ireland, United Kingdom, Greece, Portugal, Spain, Austria, Finland, Sweden

• Newer members– Cyprus, Czech Republic, Hungary, Latvia, Lithuania,

Malta, Poland, Slovakia, Slovenia, Romania, Croatia

• In accession or candidate countries– Croatia, Turkey, Macedonia, Albania, Bosnia and

Herzegovina, Montenegro, Serbia

What is the European Union?P

er C

apit

a S

ales

Time and Development

Raw Markets• Croatia• Serbia• Albania

Developing Markets• Hungary• Czech Republic• Poland

Growing Markets• Portugal• Ireland• Greece

Mature Markets• United Kingdom• Germany • France• Italy

Typical S-Curve of Expenditures

What is the European Union?

• Essentially:

– A great disparity of economic development among members of the European Union

– This contrast will continue into the foreseeable future

– This divergence presents challenges and great opportunities for U.S. exporters of medical devices to the European Union

Issues Upon Entering the European Union

• Competing goals of cost containment and improve healthcare lead to increased consideration of cost and value of technology

• Customer service increasingly important for sales of higher-technology products

• U.S. exporters must research partners with whom they choose to do business

• Electronic commerce an increasingly important factor in sales

• The number of people 65 years of age and older in Europe is projected to triple in the next generation

Issues Upon Entering the European Union

• The market for medical devices in France, Germany, Italy, Spain, and the United Kingdom estimated at $51 billion

• Market in these countries growing at 9% annually

• Leading market segments– Cardiovascular– General surgery– Imaging– In vitro diagnostics– Ophthalmology

Issues Upon Entering the European Union

• Leading market segments (cont’d)– Orthopedics– Neurology– Urology– Respiratory

Issues Upon Entering the European Union

• Factors driving powerful European Union markets– Vigorous economy– High level of healthcare spending as a

proportion of GDP– A large population– An aging population– High healthcare standards and demand for

the latest healthcare technology

Issues Upon Entering the European Union

• Competitive pressures: The cost and value of technology

• Understanding the value of technology allows full economic and health cost benefits for the medical device to be considered

• Enables competing products to be reviewed on the basis of total cost including purchase price and long-term health costs and benefits

• Ultimately improves the quality of medical care for patients

Issues Upon Entering the European Union

• Understanding the value of technology– Includes more than purchase price, and

evaluates long term health costs and benefits

– A more expensive purchase price, is often more than offset, by long-term benefits

– Considers the value of long-term health benefits

Issues Upon Entering the European Union

• Understanding the value of technology through Health Technology Assessment (HTA)

• HTA evaluates the cost and benefits of a medical technology

• Cost impact and benefit cannot always be evaluated in a pre-market setting

• Data must be collected using “real” market experience• The value of technology takes into account long-term

health benefits• In most cases, once the true value of long-term health

benefits are considered a higher technology medical device with a higher purchase price, will actually have a lower total cost

Issues Upon Entering the European Union

Treats more patients per hour or per day

Early diagnosis makes treatment less costly and more effective

Improved “quality of life”for the patient, and quicker return to work

Greater productivity and less “pain and suffering” for the patient

Eliminates the need for some medical procedures

Shorter recovery time

Common benefits of using higher medical technology

Issues Upon Entering the European Union

• The United States Commercial Service: Your foothold in the European Union– Introductions to qualified buyers and

distributors – Counseling and advocacy through every

step of the export process – World class market research – Trade events that promote your product or

service to qualified buyers

U.S. Medical Device Exports to EU 27

$3,4

66,6

91$2

,634

,470

$2,2

69,0

24$1

,301

,571

$1,193

,225

$1,0

74,4

22$6

45,2

41$6

32,2

69$3

20,6

95 $1,133

,750

$4,0

31,5

80

Germany

Netherla

nds

United Kingdom

France

Belgium

Irelan

dIta

lySpai

nSweden

Denmark

All Other

Source: U.S. ITC

U.S. Exports in Thousands of Dollars, 2006

$117,188

$62,432

$48,292

$17,454

$49,586

$125,274

Poland

Czech Republic

Hungary

Romania

Slovak

Republic

All Other

U.S. Medical Device Exports to “EasternEurope”

U.S. Exports in Thousands of Dollars, 2006

Source: U.S. ITC

Comparative Growth of Shipments of U.S. Medical Devices to EU 27 and “Eastern Europe”

• Fact: Growth of shipments from 2005 – 2006 of U.S. medical devices to EU 27 countries: 7.2%

• Fact: Growth in shipments from 2005 – 2006 of U.S. medical devices to “Eastern Europe:” 28.7%

Source: U.S. ITC

Larger Regional Markets for U.S. Exporters: Germany

• Decentralized healthcare system• German states operate within a loose federal

system• One quarter of the Western European market• Faces increasing financial challenges: potential

health reforms coming• Highly-competitive market: well-educated

healthcare professionals demand latest technology

• Looking at reuse of medical devices

Larger Regional Markets For U.S. Exporters: Netherlands

• Long history of accessible healthcare• A mandatory health insurance system• “Sneler, Beter” program to improve efficiency

in hospitals • Hopes that this system will bring downward

pressure on costs• Hospitals given grants to develop examples of

good practice• Demand for devices for minimally-invasive

surgery should increase

Larger Regional Markets For U.S. Exporters: United Kingdom

• Expectation to increase healthcare expenditures• A focus on improving efficiency• Medical devices that reduce time and overall

cost, technologically-advanced or offer overall value of great interest

• Lack of specialists: private organizations coming to manage new independent treatment centers

• Bottom line: receptive to new technology if overall savings are possible

Larger Regional Markets For U.S. Exporters: France

• Health insurance funds facing deficits, leading to cost pressures on manufacturers

• Rigid control system regulating number of high-cost devices

• Result: number of high-cost devices restricted across the country

• Lengthy bureaucratic procedures and low reimbursement levels

• Reuse of medical devices banned

Emerging European Markets For U.S. Exporters: In General

• CE Marking the requirement upon accession to European Union

• EU Medical Device Directive transposed into national law

• Streamlining of device registration makes new members of EU appealing markets

• Increased decentralization of healthcare systems replacing aging facilities and equipment

• Continued economic development should support continued demand for imports of higher medical technology

• Greatest U.S. competitor in region: Germany

Emerging European Markets For U.S. Exporters: Poland

• Among world’s top twenty markets• Imports a vast majority of its medical devices• Local production cannot meet demand• Remarkable growth in imports• Medical supplies, dental instruments,

orthopedics & prosthetics show greatest potential

Emerging European Markets For U.S. Exporters: Czech Republic

• One of the more developed former Soviet Bloc nations to join the EU

• Normalized regulations (CE Marking) with the rest of EU remarkably quickly

• “On a mission” to catch up to Germany and Austria

• Some domestic production, but not nearly enough to meet demand

• GDP growth expected to fuel continued demand for imports of higher medical technology

Emerging European Markets For U.S. Exporters: Hungary

• Largest proportion of citizens over 60 years of age in the region

• Domestic production of low-end medical products, much of which is exported

• On uphill mission to privatize healthcare facilities

• Private investment should lead to greater demand for improved medical equipment

• Continued economic development should support continued demand for imports of higher medical technology

Emerging European Markets For U.S. Exporters: Romania

• Small private health sector, but growing• Market size comparable to much larger

countries, such as Russia or Ukraine• Some minor production of medical

consumables• Its failed attempt to accede to the EU in 2004

has spurred Romania to redouble development efforts in the healthcare sector

• Private investment should lead to greater demand for improved medical equipment

In Conclusion

• The European Union provides a unique patchwork of markets and therefore challenges and possibilities for U.S. exporters of medical devices

• Use of CE Marking in newly-acceded countries simplify regional regulatory requirements

• Different conditions across the region make local intelligence of market factors key to success

• Aging population indicates direction of future medical devices market

• Vibrant economies with high levels of healthcare spending and large populations are fertile ground for medical device producers

N. Gerard Zapiain

International Trade SpecialistU.S. Department of CommerceInternational Trade Administration

Telephone: 202.482.2410Fax: 202.482.0975Email: gerry.zapiain@mail.doc.govWebsite: http://www.ita.doc.gov/td/health