Could a wave of populism undo decades of European cooperation? As voters go to the polls in France – and with elections on the horizon in Germany, Italy and Ireland – the industry looks on nervously, as Gary Finnegan explains
First Trump, then Brexit. Next stop, Frexit and Grexit? With one of the leading candidates in the French Presidential Election threatening to leave the eurozone, commentators warn of major turbulence ahead.
In addition to broad worries about economic and currency stability, medtech companies have reason to fear that years of painstaking negotiation on revamping EU regulations could unravel if disgruntled voters in France – or Germany or Italy – elect anti-Europe populists.
Robert Madelin, formerly a top EU official who had headed up the European Commission’s health and digital directorates, says Brexit shows how carefully crafted structures can be destroyed. ‘Delicate human creations can be trashed more quickly than they can be created,’ he says. ‘The global populist trend comes with ill-founded hostility to the Bretton Woods system that has stood for open, rules-based economies since the middle of the 20th century.’
Madelin, now Chief Strategist at Fipra International, says Europe must respond by making progress more quickly, but he points to several immediate threats posed by rising nationalism. ‘The implementation of new EU rules on medical devices depends on national governments to legislate for what was negotiated rather than trying to twist those words to fit another agenda,’ he says. ‘The application of complicated legislation on cross-border data sharing will affect those operating in digital health, and the prospect of European cooperation on health technology assessment could be influenced by the German election in September.’
Add to that the broader anti-capitalist backlash – in which health companies are sometimes treated with the same disdain as big banks – and there’s not much for the industry to cheer about.
Let’s look at the key battlegrounds that will decide Europe’s fate.
All eyes are on France where polls suggest (at time of going to press) that the National Front, led by Marine Le Pen, is on course to make the final run-off in the two-step election process. Le Pen has made steady progress in casting her party as a more palatable version of the right-wing party her father led for 40 years. Along the way, she has enjoyed success in local and European elections, helping to normalise a party once seen as extreme.
Her plan to introduce a new French currency would, if it came to fruition, trump all other policy priorities. However, taking the optimistic view that power would temper Le Pen’s fervour, the FN leader does have some proposals designed to help innovative companies and is committed to preserving the public health system. She also wants to expand the research budget by 30 per cent, cut corporation tax for SMEs, and support startups.
There are also downsides for medtech companies, large and small. Barriers to hiring non-French employees would be a pain for global firms, and a plan to abandon a raft of free trade agreements would usher in an era of French isolationism.
Perhaps the most striking fine print in the National Front Manifesto is a commitment to prevent French SMEs that benefit from state support from being sold to non-French companies for a period of 10 years. Many young companies begin life in the university sector or tap into government enterprise schemes. If this meant medtech entrepreneurs were unable to sell to a German or US giant it could render France a much less appealing place to start a company.
‘This is particularly dangerous for medical device and biotech startups where product lifecycles are short,’ says Myra Daridan, General Manager of Clinical Research Consultants in Paris. ‘Many startups sell as soon as a CE-mark is obtained for an initial iteration of their product. If this were impossible, they may choose to locate their business elsewhere.’
She says the general trend towards protectionism would breed uncertainty for decision makers at multinational businesses who would expect turmoil in how their industry is regulated.
While Le Pen has dominated the headlines, particularly in the international press, there are 10 other contenders for the crown. Leading the field is Emmanuel Macron – a centrist who has a slim lead over Le Pen in most polls.
He has committed to providing an additional €5 billion euro for hospital and medical innovation over his five-year term, and promised to invest in preventive health. Macron has also spoken about accelerating the shift from hospital-based care to community care – an area where many medtech firms have developed innovative telemedicine products. In addition, he has specifically pledged to fully reimburse spectacles, hearing aids and dental prostheses by 2022.
Macron is viewed – by fans and detractors alike – as a business-friendly globalist. His taxation policies are favourable to startups and young innovative companies, and his election would be a salve to worried markets. Yet his critics say this tendency to preserve the status quo is out of tune with a restless electorate inclined to overthrow the establishment. Could it prove his undoing?
One-time frontrunner François Fillon of the centre-right Republican party (think Nicholas Sakozy with less bombast) is battling to save his candidacy after a string of controversies involving payments to his wife. His plan to shed thousands of jobs in the health sector and to embrace digital tools and outsourcing are welcomed by some in the health industry who see the health service as antiquated. Telemedicine solutions would be available to all within five years, according to Fillon’s manifesto.
‘Fillon proposes rapid availability of innovative treatments, with continued assessment after they are made available,’ says Daridan. ‘But this is unlikely to be possible in view of safety constraints and the reluctance of health authorities to take on this increased responsibility.’ In any case, the chances of his election – and successful implementation of his policies – seem slim given his failure to introduce such policies during his time as Prime Minister.
The field gets quite colourful as you move down the ticket. Perhaps the most plausible ‘surprise’ candidate would be Jean-Luc Melenchon, a leftist who makes a virtue out of industry bashing. He would hit companies with new taxes, targeting senior executives paid with share options and slapping a 100 per cent tax on earnings in excess of 20 times the median net income. By some estimates, this would effectively cap pay around the €360,000 mark – a handsome salary for sure but critics say it would make France unappealing as a European HQ for big companies in high-tech and financial sectors.
Melenchon is still a long-shot (around 10/1 by most estimates) but the bookmakers and pollsters were wrong before. The conventional wisdom is that the second-round runoff will pit Le Pen against Macron with the latter attracting the broad coalition of reluctant voters needed to catapult him to the Élysée Palace. But the mainstream consensus expected Hilary Clinton and David Cameron to be in power in the US, and UK respectively – and we all know how that panned out.
For its part, SNITEM – the French medtech trade association – has published a detailed 12-point plan that they hope the next President will embrace. They call for better patient access to innovative products, increased use of imaging technologies, an embrace of e-Health, and a shake-up of how medical products are procured.
For all the turmoil and uncertainty witnessed in recent times, there has been one ever-present force: German Chancellor Angela Merkel. While her opponents criticise her approach to the eurozone and migration crises, supporters portray her as the steady, sober figure who has kept her head while all around were losing theirs.
But September’s federal elections in Germany will be a major test. State elections have already seen gains for Alternative for Germany (AfD) – a new far-right populist movement bent on breaking up the eurozone and stopping immigration. They also want to introduce military conscription, ban same-sex marriage and deny human involvement in climate change.
The latest polls suggest AfD will win seats but fall well short of what would be required to make them serious coalition contenders. A more credible challenge to Merkel’s re-election bid comes from social democrat leader Martin Schulz. A former European Parliament President, Schulz has heaped criticism on the incumbent and would bring about a change in domestic policy without threatening to sever links with the EU.
Whoever wins will be met with a laundry list of problems that includes a serious demographic challenge. Germans are getting older and living longer. The demand for health services is rising while the working-age population is slowly shrinking. This has sparked tensions between those who want to balance the budget by pushing down prices and companies with technologies they believe will help deliver efficiency.
BVMed, the German medtech industry group, wants the next government to embrace innovation to meet the needs of older people and those with multiple chronic conditions. ‘We need a culture of innovation,’ says BVMed CEO Joachim M. Schmitt. ‘State-of-the-art medical technologies or telemedicine applications should be promoted and implemented in a timely manner.’
He says that policymakers should use the next legislative period to introduce a ‘progress acceleration law’. This would encourage better translation of healthcare research results, more active involvement of interest groups and patient associations in the innovation process, and better use of healthcare data. The industry group complains that authorities have pushed for ever-higher levels of evidence to support medtech innovation instead of sitting down with doctors, patients and manufacturers to come up with ways of making the system efficient and sustainable.
Medium-sized companies – Germany’s famous Mittlestand – are the cornerstone of the domestic economy, and make a strong contribution to the medtech sector. BVMed is calling on policymakers to pay special attention to maintaining and strengthening this sector.
All things considered, despite the rise in new nationalist groups, the chance of a major upset in Germany is seen as lower than in France – or Italy.
The situation in Italy is volatile. Growth is sluggish, banks remain on the ropes and disillusionment with politics is the order of the day.
The Five-Star Movement, led by blogger and comedian Beppe Grillo, has been a thorn in the side of the establishment since it was founded 2009. Its progress since has been meteoric. While an election is not due until next year, Grillo’s populist and Eurosceptic policies are real contenders to lead the next government.
Luigi Boggio, President of ASSOBIOMEDICA, the Italian medtech industry body, says Italian companies fret about the uncertainty that lies ahead at home and abroad. ‘We benefit from free trade and the common European market, governed by common regulations,’ he said. ‘A victory for any party in Europe that is against these principles is negative for us. We have the same concerns when we hear some in the US speak about making imports more expensive.’
He says new EU medtech regulations cover the entire bloc and, while these can be cumbersome, companies prefer the clarity and relative simplicity of operating in the single European market.
What impact does Boggio think a government led by the Five Star Movement would have on the sector? ‘Honestly, we don’t know their exact intentions in healthcare so it’s a question mark – which is not good.’ He says Grillo’s party speaks favourably of the public health service but observers want a more detailed vision from all players about how the system can be put on a sustainable footing. ‘Innovation is perceived by some as a cost despite bringing improvements for patients and producing savings,’ Boggio said. ‘We need to change that perception and highlight the role medtech plays in creating jobs and boosting exports.’
The next government will inherit a fragmented health system run by 20 regional authorities and a national life expectancy that has recently fallen for the first time. There is no shortage of problems to fix.
Just as the years since the 2008 financial crisis were characterised by economic uncertainty, elections and populism promise to make this a volatile period in Europe.
Ireland, a country with a large medtech sector, is expected to have a new leader this summer. This may prompt an election but, in a country where far-right insurgents are notable by their absence, the biggest threat to Ireland’s eurozone membership comes from Brexit. Even the euro-critical Sinn Fein party was pro-EU when it came to the crunch, urging its Northern Ireland voters to reject Brexit last year.
Elsewhere, anti-EU parties of various hues are gaining ground. A far-right party came within a whisker of winning last year’s Presidential Election in Austria; nationalists are in power in Hungary and Poland; Finland, Denmark and others have seen a rise in populist parties at every election.
Yet, in all of this there are plenty of reasons to think that this is not the end of the world as we know it. Early this year, pollsters and commentators talked up the chances of Gert Wilders winning the Dutch election – only for the voters to quietly endorse the incumbent. Jean-Marie Le Pen – Marine’s father – made it to the final two in the 2002 French Presidential Election, where he was trounced by sitting President Jacque Chirac.
And despite many predictions that the eurozone would collapse or that Greece would be ejected from the EU, the centre (just about) held together and Europe returned to modest economic growth.
The story is far from straightforward or predictable. All we know is that the next chapter will be written by the French people.
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