medical business planning in europe - massmedic.com · bci global, 2011 4 typical questions we help...
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Medical business planning in Europe Reimbursement, market-entry & location hotspots
MassMedic seminar, Boston
Johan Beukema
Partner Healthcare
September 16th, 2011
Buck Consultants International
Kerkenbos 10-31
6546 BB Nijmegen, The Netherlands
P: +31 24 3790222
M: +31 6 51100938
BCI Global, 2011 1
Contents
1 Introduction to BCI Global
2 Medical Technology market in Europe
3 Reimbursement Landscape in Europe
4 Market-entry strategies
5 Location hotspots
6 Q&A
BCI Global, 2011 2
1 Introduction to BCI Global
Areas of activity for
Corporate clients Route to market strategy
Regulatory assessments
Supply chain strategy development
Supply chain optimization
Inventory analysis and optimization
Transport & carrier optimization
Logistic outsourcing
Site selection
Public clients Transport, logistics and infrastructure projects
Regional economic development
Programs and strategies to attract foreign
enterprises
Profile Established in Nijmegen, the Netherlands in 1985
Employs 70 full-time professionals
Performed projects in more than 30 European countries
Global network covering EMEA, APAC, LATAM
Paris
Madrid
London
BrusselsFrankfurt
Milan
The Hague
Nijmegen, HQ
Paris
Madrid
London
BrusselsFrankfurt
Milan
The Hague
Nijmegen, HQ
Paris
Madrid
London
BrusselsFrankfurt
Milan
The Hague
Nijmegen, HQ
Paris
Madrid
London
BrusselsFrankfurt
Milan
The Hague
Nijmegen, HQ
Paris
Madrid
London
BrusselsFrankfurt
Milan
The Hague
Nijmegen, HQ
Paris
Madrid
London
BrusselsFrankfurt
Milan
The Hague
Nijmegen, HQ
Paris
Madrid
London
BrusselsFrankfurt
Milan
The Hague
Nijmegen, HQ
Paris
Madrid
London
BrusselsFrankfurt
Milan
The Hague
Nijmegen, HQ
In Europe:
In US: Chicago, IL
BCI Global, 2011 3
Some of our clients in Europe
Healthcare Logistics
Services Other industries
BCI Global, 2011 4
Typical questions we help our clients with
What opportunities does the European market offer?
Countries, market size, GDP developments, healthcare systems, etc.
What is the optimal route to market for us in Europe?
Entry strategies, indirect vs direct models, etc.
What impact do the regulatory aspects in Europe have on our
business model and development?
Reimbursement, country-specific regulations, import restrictions, etc.
What supply chain/distribution structure is optimal for bringing our
product to the market?
Own vs outsourced, stock locations, transport strategies, etc.
What partners are available in Europe to help us sell and distribute the
product?
BCI Global, 2011 5
2 Medical technology market in Europe
9
-0.2%
5.5%
4.1%
$2.8
548
18.6
28
20
40
6.6%
8.7%
8.7%
$9.5
3700
24.5
20
44
20
2.1%
4.7%
5.9%
$1.1
900
30.2
45
53Countries 1 48 17
Currencies 1 15 14
Territory (million km2) 9.6 10.3 2.2
Population (million) 299 708 150
GDP (trillion) $12.3 $13.1 $2.8
2009 economic growth1
2010 economic growth1
2011 economic growth1
-2.4%
3.1%
2.6%
-4.1%
1%
1.5%
2.4%
4.5%
4.8%
# Languages 1 24 119
-0.2%
5.5%
4.1%
$2.8
548
18.6
28
20
40
6.6%
8.7%
8.7%
$9.5
3700
24.5
20
44
20
2.1%
4.7%
5.9%
$1.1
900
30.2
45
53Countries 1 48 17
Currencies 1 15 14
Territory (million km2) 9.6 10.3 2.2
Population (million) 299 708 150
GDP (trillion) $12.3 $13.1 $2.8
2009 economic growth1
2010 economic growth1
2011 economic growth1
-2.4%
3.1%
2.6%
-4.1%
1%
1.5%
2.4%
4.5%
4.8%
# Languages 1 24 11
United States Europe Latin America Asia Pacific Africa Middle East
1 Based on IMF World Economic outlook April 2010
Europe is the world’s largest market
Factor Europe USA
# countries 48 1
Languages >24 1
Healthcare expenditure (%GDP) 8-12 15.3
% government spending in hc 76 46
# hospital beds per 10.000 inhab. 30-80 31
# healthcare systems 80+ 1
Source: WHO data
BCI Global, 2011 6
The PPP (purchasing power parity) equalizes the purchasing power
of different currencies in their home countries for a given basket of
goods. It takes into account the relative cost of living and the inflation
rates of different countries, rather than just a nominal gross domestic
product (GDP) comparison
Source: Eurostat, 2010
LU
BE
NL
DE
GB
IRL
FR
PT
ES
IT
SI
GR
BG
RO HU AT
SK
CZ
PL
SE
FI
EE
LV
LT DK
The European Union consists of 27 member states, varying in size and purchasing power
EU27 Country Population (mln) Gross Domestic
Product (bln €) PPP (€) DE Germany 82.3 2,423 28,600
GB United Kingdom 60.8 2,049 29,700
FR France 63.4 1,892 27,200 IT Italy 59.1 1,545 25,400 ES Spain 44.5 1,051 26,200 NL Netherlands 16.4 567 32,600 BE Belgium 10.6 335 29,400 SE Sweden 9.1 331 30,400 PL Poland 38.1 311 13,400 AT Austria 8.3 271 30,800 GR Greece 11.2 228 23,600 DK Denmark 5.4 227 29,900 IRL Ireland 4.3 191 37,400 FI Finland 5.3 180 28,800 PT Portugal 10.6 163 19,000 CZ Czech Republic 10.3 127 20,000 RO Romania 21.6 124 10,500 HU Hungary 10.1 101 15,600 SK Slovakia 5.4 55 16,700 LU Luxembourg 0.5 36 66,300 SI Slovenia 2.0 34 22,200 BG Bulgaria 7.7 29 9,300 LT Lithuania 3.4 28 14,800 LV Latvia 2.3 21 14,400 CY Cyprus 0.8 16 22,600 EE Estonia 1.3 15 16,900 MT Malta 0,4 5 19,300
BCI Global, 2011 7
Europe, a promising medtech market
43%
33%
22%
1%
1%
US
Europe
Rest of world
Japan
China
124,74
98,01
66,53
3,92
3,80
Estimated
Sales in 2010
(in bln $)
Source: Eucomed, 2008, Buck Consultants International 2009
Europe is the 2nd largest medtech market worldwide
United Kingdom:
20 bln
Spain: 5,5 bln
France: 10 bln
Italy: 7 bln
Germany: 20bln
Est. Medtech spend 2010 Top-5
countries (Euro bln)
Total medtech expenditure approximately 100 bln USD
6.5 % of total healthcare spending is in medical technology, compared to
5,5% in the United States
The industry grows on average with 5-6% per year
3.8 bln Euros per year invested in R&D by medtech companies in Europe
Approximately 435,000 people are employed in the European medtech
industry
80% of the industry consists of small and medium-sized companies
Germany is both the biggest exporter (€14 bln) and the biggest importer
(€9.2 bln)
In terms of exports, Germany is followed by France, the UK and Ireland
The biggest importers (after Germany) are France, Italy, the UK and
Spain
Germany, the UK, Ireland, Sweden, Denmark and Finland have trade
surpluses in medical technology. All other countries have trade deficits
Key facts and figures for Europe
BCI Global, 2011 8
Europe is not an easy place to do business
Various differences exist between European countries (even within the EU)
Economics
Market size
Buying power
Growth/
outlook
Innovation
Etc.
Finance
Corporate taxation
Currencies
Subsidies/
incentives
Etc.
Legislation
Labor laws
Intellectual property
Patents
Export/import
Etc.
Culture
Language
International
orientation
Business practices
Etc.
From international companies this requires:
Awareness and taking into account implications of national differences
Willingness to commit resources to obtain local market expertise
A differentiated European market strategy and a dedicated business plan
9 BCI Global, 2011
Key success factors for entry to the EU
medical devices market
Understanding the market, e.g.:
Market size
Market structure
Country differences & cultures
Language implications
Understanding the regulatory environment, e.g.:
Understanding of regulatory approval process
Understanding of country specific reimbursement situation
Setting a clear business strategy
Sales plan
Route to market & sales channels
Developing a flexible, but efficient operational structure
Distributors
Logistics service providers
Own organization
Etc.
10 BCI Global, 2011
3 European reimbursement landscape
Some statements from our clients:
“Reimbursement, and the way a company plans and organizes it, can
make or break a successful market-entry in Europe”
“The European Union is great for many things, but reimbursement
absolutely still requires a country-by-country assessment, process and
decision”
“Although official documents may show differently, arranging
reimbursement in some cases can really take years, so starting early in the
process is essential”
“Reimbursement systems in European countries are becoming easier,
faster and more standardized, but this development is very slow”
11 BCI Global, 2011
Past Present
Healthcare costs Containable Soaring
Following FDA/CE Reimbursement is
„given‟
Reimbursement only if
there‟s clinical +
economic value
Decision makers of
a market launch
Healthcare providers Healthcare providers +
payers
Reimbursement
strategy
Not important Required by investors,
inc. resources and
timelines
Planning of
reimbursement
Just prior to launch At an early stage
Source: www.mediclever.com
Things are changing, general shift of focus
on EU level…
12 BCI Global, 2011
Change is difficult and slow: a complex environment,
dozens of organizations & institutions….
EUCOMED : Trade association
representing the medical technology
industry
EDMA : European Diagnostic
Manufacturers Association
COCIR : European Coordination
Committee of the Radiological,
Electromedical and
Healthcare IT Industry
EUROM I : European Optical
Industry committee
EUROM VI : European Industrial
Federation committee on Medical
Technology
EHIMA : European Hearing
Instrument Manufacturers
Association
EUROMCONTACT : European
contact lens and lens care industry's
association
FIDE : The Federation of the
European Dental Industry
CPME : The Standing Committee of
European Doctors
EMS : European Union of Medical
Specialists
ESC : European Society of
Cardiology
EFORT : The European Federation
of National Association of
Orthopaedics and
Traumatology
ESR : European Society of Radiology
HOPE : The European Hospital and
Healthcare Federation EPF : The European Patient's Forum
BEUC : The European Consumers'
Organization
ESIP : The European Social
Insurance Platform
AIM : Association Internationale de la
Mutualité
PGEU : Pharmaceutical Group of the
European Union
EFCC : European Federation of
Clinical Chemistry and Laboratory
Medicine
CED : Council of European Dentists
EAHP: European Association of
Hospital Pharmacists
Source: Exploratory Process on the Future of the Medical Devices, Brussels
28 January 2010
13 BCI Global, 2011
Recent developments on European level
affecting the medical industry…
Shift to the new 2007/47/EC Directive in 2010
Significant impact on products under the „old‟ Directives 90/385 and 93/42
Developments towards a common European framework for e.g. tissue
reengineered products or drug/device combinations
Amendments to 2007/47/EC still in process with potential significant
further impact
Increasing focus on Health Technology Assessment Practices
Source: European Medical Devices Industry report, GlobalData 2011 / BCI interviews 2011
14 BCI Global, 2011
The new Medical Device Directive has
significant impact overall…
Stricter requirements for clinical performance data as input for the
approval process
Reduced similarity mechanisms for high risk devices
Reduced re-use of previous clinical trial data
Also applies for some already approved products
Expected delays in bringing newer technologies to the market
Potential impact on manufacturer margins
Potential impact on Average Selling Prices
Source: European Medical Devices Industry report, GlobalData 2011 / BCI interviews 2011 / European Commission documents
15 BCI Global, 2011
The new Medical Device Directive has significant
impact for the classification of products…
Software systems now need to be approved (CE-mark) before
marketing
Some class 1 / 2 devices are re-classified to the high risk class 3
And in addition more focus is put on post-marketing surveillance
Regular performance evaluation
Source: European Medical Devices Industry report, GlobalData 2011 / BCI interviews 2011 / European Commission documents
16 BCI Global, 2011
Invasive?
Term?
Not
invasive
Short Term
Invasive
Long Term
Invasive
Class I Low Risk
Class IIa Moderate
Risk
Class IIb High Risk Risk?
Critical Risk Class III
Medical device classification tree
General classification of medical devices according to the Medical Devices Directive:
17 BCI Global, 2011
General process for organizing reimbursement
CE mark Coverage Reimbursement
45 – 90 days
Highly unpredictable –months to 5 years for new
technology depending on impact and country
At one of +/- 50 Notified
Bodies (comparable to
FDA/CDRH)
Valid for whole of EU
Country-specific process, with country-specific organizational
structure and requirements and guidelines
A positive evaluation in one country has limited influence in other
countries
High degree of flexibility in reimbursement system and therefore
room for industry lobbying
Benefit packages and reimbursement amounts differ between
member states
A B C
18 BCI Global, 2011
CE-mark process: notified bodies on national level
CE-mark
The CE marking certifies that a product has met EU consumer safety, health or environmental
requirements.
CE stands for Conformité Européenne, "European conformity" in French.
Required to be allowed to bring a product to the European market
Medical manufacturers need to establish an EC authorized representative for their product line(s).
The name of the representative must be mentioned on the products.
There are many service providers in the European market offering CE-marking services to US
companies, also specialized in the medical devices industry, such as Emergo Group, Obelis and
Qserve
Notified Bodies involved: nationally accredited bodies that examine the conformity evaluation of the
production process completed on behalf of the manufacturers, such as Kema (NL), TÜV (GE),
BSI(UK)
Differences between Europe and US regulatory approval process
Notified bodies (NBs) issue CE mark required for access to EU market. NBs are comparable to
FDA/CDRH, but are (semi-)commercial organizations. More than 50 are active within Europe
Criteria for approval is easier for EU market. Company has to demonstrate that the device is safe and
that it performs in a manner consistent with the manufacturer‟s intention
In general, European new product introduction can be 1-3 years faster in European than in the US
19 BCI Global, 2011
Reimbursement decision…
… depends on product characteristics
Location of usage
In-patient care, refers to care to hospitalized patients
Out-patient care, also called “ambulatory care”, refers to care to non-
hospitalized patients
Category
Medical aids
Implants and other artificial body parts
Technical equipment for professional
Therapy/treatment
Therapy covered by existing therapy reimbursement decision
New therapy more expansive or innovative (no comparable therapy exists)
20 BCI Global, 2011
Country comparisons
Coverage and reimbursement decision timelines vary per
country, product type, notified body, etc.:
Germany : month to several years
France : 1 to 3 years
Italy : months to 2 years
UK : weeks to 2 years
Spain : months to 2 years
Netherlands : 1 to 3 years
Belgium : 1 to 2 years
Sweden : weeks to 2 years
Note that formally stated periods do not always include the time needed
for political decisions.
Source: Ausmedtech seminar package, BCI 2011 company interviews
21 BCI Global, 2011
Increased focus on HTA practices in Europe,
but still different approaches per country…
Overall there is an increasing focus on HTA practices
HTA exists in Europe already 30+ years and can now be observed in almost all countries
The importance is increasing due to the growing focus on evidence-based approval of devices in the market
The set-up per country differs highly
Actions are ongoing to exchange technology assessment information between organizations and countries
Source: European Medical Devices Industry report, GlobalData 2011 / BCI interviews 2011
22 BCI Global, 2011
The general HTA structure in Europe, a mix
of science, economics and politics…
Source: Synergus 2010
Topic selection Decision makers Appraisal/Review
Ministry, autonomous
bodies, providers,
payers, etc.
e.g. IQWiG, HAS, NICE,
DACHETE or by
independent reviewers-
research groups,
Universities, etc.
Supervision
Government
Parliament
Politicians
Policy
recommendation
bodies
Final decision
Manufacturer‟s
submission
With some exceptions,
assessment and
appraisal are
conducted following a
manufacturer‟s
application
European Observatory for
Health Policy
23 BCI Global, 2011
Country-specific actors and characteristics HTA-
reimbursement environment – some highlights…
Country
Main
reimbursement
institution
Main HTA
agencies Specifications
UK NHS NICE NICE evaluates based on technology , clinical efficiency
and appropriateness for specific care settings
NHS then allocates reimbursement coverage in different
care settings
Most hospitals are coveraged according to the Payment
by Results Systems and Healthcare Related Groups
2009 study (YHEC) showed that technology adaption in
the UK is slower than the rest of Europe
DE Federal G-BA Bfarm,
DAHTA
In patient care reimbursed based in DRGs
Outpatient care reimbursed based in evidence-based
criteria, six product groups and referent pricing
Specific product groups are reimbursed based in
competitive bidding
Since 2010 the IQWIG institute is focussing on a
structured cost/benefit analyses, rather than need and
efficiency
24 BCI Global, 2011
Country
Main
reimbursement
institution
Main HTA
agencies Specifications
F UNCAM HAS,
AFSSAPS
Strong focus on showing cost effectiveness
Significant impact of lobbying/political influence in HTA
practices
Ongoing restructuring process of NTA agencies
I AGENAS +
regional authorities
AGENAS +
21 regional
agencies
Fragmented, regionalized structure
Complexity through combinations of national and regional
additional payments to hospitals
Long-term centralization is expected by some; which
would increase the attractiveness of the Italian market
ES AETS+
7 regional
authorities
AETS+
7 regional
agencies
Fragmented, regionalized structure
No formal national standard, so each regional agency
has its own regulatory framework
Coverage/adaptation of products differs per region, e.g.
based on economical disparities
NL CFH
ZonHw
and many other
organisations
CvZ, CFH,
Ministry of
Health
Whole system consists of interdependent mix of public
and private initiatives
The central government (Department of Health)
coordinates
Source: Ensuring Value for Money in Healthcare report, 2011
25 BCI Global, 2011
From global budgets to activity-based
costing: DRG-system…
The current DRG system varies highly among member states
The aim is to align the required treatment for the patient and the required efficiency of the budget allocation system
Current systems bring multiple issues, e.g. “up-coding” of patients to ensure higher reimbursement
All countries are working on clearer definitions and better alignment between care requirements and budget allocations
Source: European Medical Devices Industry report, GlobalData 2011 / BCI interviews 2011 / Synergus 2010
List of Services
• List of clinical
procedures connected
with diseases (DRG‟s)
• Definition • Procedures
• Inpatient/Outpatient
• Length of stay
• Complications
• Values of how the
hospitals are paid for
these activities
Hospitals will be paid for procedures
on the service list
The values for procedures are
based on historical cost-data
Each activity carried out by the
hospital will be at profit/loss
Shift to financial decision making
New procedures/products (more
expensive..)
New DRG
Adjust value of current DRG
26 BCI Global, 2011
DRG systems in different countries
Source: European Medical Devices Industry report, GlobalData 2011
27 BCI Global, 2011
Example development in The Netherlands
Current situation
DRG-based system
>30.000 DRGs formally
Complex and not transparent
No standardized registration of care
activities:
Endoscopic versus traditional knee surgery
3 echoscopes vs 1 in one care situation
New situation: starting 2012
DRG-based system
Updated following DOT plan (“DRGs
towards transparency”)
Specifically defined group of 3000
care products:
Improved medical recognition
More cost homogeneous
Straightforward registration
Cross-medical functions
2012 as transition year, 2013 new
system fully in place
Source: www.dbconderhoud.nl / BCI interviews
Results:
Similar care delivered to patient = similar declaration of care products =
transparency on quality, care process and prices
28 BCI Global, 2011
Hurdles to reimbursement…
Often heard hurdles in the reimbursement development process for
companies in Europe:
Local decision-making (e.g. Italy, Spain)
Unclear time path difficult to plan
Innovative new products difficult to prove
Longer-term: change is going on in the healthcare
systems, but the direction is not always clear
Internal: lack of focus on reimbursement in early
phases of market-entry planning
29 BCI Global, 2011
Concluding on reimbursement…
The standardization / simplification process on EU and national levels will proceed, but
only slowly
Health Technology Assessment bodies will be playing an increasing role in
reimbursement and pricing decisions
E.g. Germany (IQWIG) and UK (NICE) influence on product adoption
Countries are increasingly introducing supplementary/additional fees for complex,
innovative solutions
E.g. “NUB” in Germany
Mix of centralized (e.g. NL) versus decentralized (UK) systems will remain, but overall
there is a tendency towards centralization:
E.g. alignment between regional NHS trusts in UK
E.g. National guidelines in Italy incl. reference pricing
Purchasing groups at hospitals get increasing power in some countries, e.g. Germany,
The Netherlands
Conflict between economic factors (e.g. single sourcing for medical aid products) and
medical quality and innovation (allowing variety on the market) will remain in all
countries.
See current single source practices in Italy and UK for medical aid products
Source: European Health Technology Institute 2011 / BCI
BCI Global, 2011 30
Reimbursement strategies will generally be developed in
close alignment with the overall market-entry strategy
4 Market-entry strategies
Key challenge: how to
start-up and accelerate
business development in
Europe?
Start-up- European
presence
phase
Growth
phase
Maturity
phase
Revival
phase
European
presence
The European market challenge is relevant when new companies are entering the
European market as well as when existing companies bring new products to Europe
BCI Global, 2011 31
Typical questions that call for an answer in
realizing the European market challenge:
Sales &
Marketing
Logistics &
Distribution
Technology &
Product
development
Is there a market for our products/services in Europe?
What are the most attractive places to do business?
Do we need to use agents/distributors or we better appoint own
sales reps?
Who is doing the technical support or repair?
Where do we keep stock? Who will take care of the physical
distribution?
What is the most efficient way to get our products to our
customers?
Which are the best logistics services providers to work with?
Does our technology comply with EU legislation?
Can we sell our products on a pan-European base or is
localization/adaptation necessary?
Whom can we collaborate with in product development?
BCI Global, 2011 32
Identification and selection of the right European
sales & marketing solution. Examples of options:
Establish own sales offices in Top-X target
countries and focus on building up market
share
Sales will be realised through an international
network of partners and third parties (agents,
distributors, resellers)
Appoint sales reps in country A, B & C and
work with agents/distributors/resellers in
country D, E & F
Team up with a single pan-European market
entity (e.g. strategic partner or
agent/distributor)
1 Market focus
2 Multiple-vehicle coverage
3 Country-by-country approach
4 Pan-European alliance
BCI Global, 2011 33
Identification and selection of the right distribution/-
logistics solutions in Europe. Examples of options:
Working via a network of stock keeping
agents or distributors (per country or multiple
country)
Using a central depot for key sales areas
plus stock keeping distributors in other
markets
Pan-European approach via logistics service
provider (3PL) who takes care of
warehousing & distribution
Establishment of an own account, European
Distribution Center (EDC) to serve all
European clients
1 Agents/distributors network
2 Own depot plus distributors
3 3PL solution
4 EDC own account
BCI Global, 2011 34
Country-by-country Region-by-region Market
approach
Sales channels
Country A
Country B
Country C Group of countries
Pan- European
Offices
Direct
Own account Sales reps
JVs
Strategic partners Alliance
Agents
Resellers
Third parties
Distributors
Indirect
Internet Website
Market approach and channel choice
BCI Global, 2011 35 BCI Global, 2011 35
BCI Global’s roadmap into Europe
C Assessment of start-up/expansion scenarios
Results: Market based and tailor-made advice on the most effective and efficient
way to practically implement and expand your business in Europe
D European Business Plan
B Market analysis and competitive environment
Results: ● Identification of the most promising target markets in Europe (year 1 to 3)
● Advice on how to best position your product/services for different clients
(product-market combinations)
Go
A Strategic scan of business opportunities
Results: ● Clear view on the right decision for Europe (go/no-go)
● Sound base for future business development
No Go
BCI Global, 2011 36
5 Location hotspots
US companies entering the European market use a mix of “stepping stone” locations for
expanding their sales and presence:
European Sales Organizations/HQs
Switzerland tax, business climate, medtech HQ clusters
Netherlands/Belgium “gateway to Europe”, attached to e.g. logistics operation
UK language, historic relationships, market access
Logistics operations
Netherlands/Belgium tax/VAT, logistics infrastructure, availability of providers, international
business climate, center of gravity
Germany large market, logistics infrastructure, availability of providers, center of gravity
UK historical relationships, if UK is first large market entered
(Contract) manufacturing
A mix of locations is utilized, for different reasons, such as e.g. Germany, The Netherlands,
Switzerland, UK and increasingly Central and Eastern Europe
BCI Global, 2011 37
6 Q&A
Global Headquarters
Nijmegen, The Netherlands
Johan Beukema
Partner Healthcare
+31 24 3790222 / +31 6 51100938
North-America office
Wilmette, IL
Martijn Bouwman
Director North-America
+1 847-728-0591
Thank you for your attention!
Any questions, now or in the future?