Health Economics

Health Economics

Why health economics matters in Europe – Part I: Mapping a complex landscape



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It can seem like an endless maze. The complexities related to health economics in Europe mean that medtech companies find themselves facing an array of challenges. In the first of two articles on the topic, Sue Montgomery takes a look at why health economics in the region matters – and starts by mapping this complex landscape.

health economics

Defining the sector

To provide a foundation for the discussion, we’ll draw on a definition from Eucomed:

‘Health economics is the method of examining how much value for money any particular type of healthcare provision delivers. Given the finite resources available to healthcare systems, health economics can help to inform and improve the allocation of those resources to deliver the best return; in short, how to provide cost-effective healthcare. Health economics is a valuable approach to informed decision-making about what healthcare providers should buy and what prices are acceptable.

‘However, health economics can never be an exact science. There are a great number of parameters that need to be considered; it is not as simple as looking at the cost of a particular health technology and deciding whether or not it is too expensive. Any true assessment of healthcare needs to look not only at the cost, but at the benefits delivered, to the patient, the healthcare system, to society and to the wider economy.’

Technology has been touted on opposite ends of the health economics spectrum – both as providing potential savings in overall healthcare costs and as one of the reasons they have become so high. This is the very reason that the Health Technology Assessment (HTA) is part of the overall European Union strategy on innovation and why it has become increasingly important in determining which medical technologies are made available to patients throughout Europe – to better define whether such expenses are really ‘worth it’.

Defining the maze

Health economics in Europe is influenced by a variety of factors including an ageing population, and health inequalities and social determinants, which affect many areas around the world. Additional factors include geography, regulations, politics, currency and the state of the economy, which are summed up nicely in a statement in a University College London report, The Future of Healthcare in Europe:

‘While states remain the main actors in healthcare policy in Europe, EU policies and law can influence healthcare delivery, particularly when considered in terms of the interrelation between health and other sectors. While internal market rules ensuring the free movement of people and services can challenge domestic health sectors, there are also tangible benefits and opportunities of collaborating at EU level, not least the potential for co-ordinated policy.’

It would be nice to be able to define each influencing factor individually but, in reality, they all overlap and impact on one another. Here we’ll provide a broad overview, starting with geography and politics, both of which have a significant impact on how medtech industry regulations are both created and enforced.

The basics

The European Union comprises 28 member states – which are sovereign, independent countries – but have also pooled some of that sovereignty for benefits in terms of size and strength for various purposes. This means that the member states have delegated some of their decision-making powers to the shared institutions they have created, ‘so that decisions on specific matters of joint interest can be made democratically at European level’. This dynamic complicates the regulatory process for the medical device industry, because the states have different levels of authority for specific device certification needs.

Member States of the European Union

Although the EU and its various institutions set health policy and implement it through the Health Strategy for Europe, it’s up to national governments to organise their healthcare and ensure that it is provided. In addition, the EU has a specific system for medical devices, grounded in the Medical Device Directives (currently being revised).

The global recession and austerity measures throughout Europe have had a significant impact on the healthcare sector, as governments continue to implement a wide range of belt-tightening measures. Prof Dr Sweder van Wijnbergen from the Amsterdam School of Economics, and Anna Lefevre Skjöldebrand, President and CEO of Swedish Medtech, say the depressed economy has greatly affected spending in the industry:

Navigating the complexities

Health economics in Europe is a complex and seemingly endless maze. Check out part II of the series, which examines what strategies may be most effective to help navigate these complexities.

READ PART II

Forms of currency also complicate the health economics of Europe, as only 19 EU member states are currently part of the euro area. All of these factors converge to influence health economics in the region, and one entrepreneur, David Braga Malta, founder and President of Cell2B in Portugal, sums up the challenges medtech companies face: ‘In Europe, we have free circulation of people and goods within the Schengen space, but this doesn’t mean that you can actually sell freely across this space. If you are in Boston, you can sell in Chicago, Miami, Salt Lake City or even in Toronto. But if you start a company in Lisbon and are selling in Portugal, the barriers to get to Berlin are incredible.

‘First you have language – there are 24 official languages in Europe, which means you need to prepare your product to be sold in all these languages. You also have 27 constitutions, and the myriad of laws and regulations that are country-specific, which creates a regulatory nightmare for a small company; in some cases, you even have loopholes that are used by copycats to ignore EU and intellectual property regulations,’ he explains. ‘Europe even has a multitude of different electrical systems, so if you make electrical products, you need to make multiple plug versions to sell across the region. Only when Europe has a real unified market will European companies be able to scale up sales before leaving their home country.’

No easy answers

lorena mabnaughtan

Lorena Macnaughtan

To dig in further, I asked two leaders in this field for their perspectives – one an academic, the other an entrepreneur working with companies in this sector. Lorena Macnaughtan MBA is a PhD researcher with the Horizon Digital Economy Research Institute, University of Nottingham, and Martin Kelly is the co-founder and CEO of HealthXL, a medtech matchmaking community based in Dublin, Ireland.

Referencing a recent article, Cancer economics, policy and politics: What informs the debate? Perspectives from the EU, Canada and US, Macnaughtan says that the diverse environments across the region feed the challenges. ‘The complexities of Europe’s health economics are the consequence of a diversified landscape. Some relevant factors for health economics are: policies, health expenditures, human and technological capital, private-versus-public penetration, health service use, income, demographics and preventative efforts. Such factors are to be found in any country, and their combination results in differences that are difficult to pinpoint with certainty, even for very well-defined instances. The takeaway for Europe is that each country is still a completely different ball game, with the exception of some clusters – such as the Nordic countries.’

‘We know we need innovation, we know we can’t afford the systems we have, but we haven’t figured out how to bring the buyers and sellers together in an effective manner.’

martin kelly

Martin Kelly

Kelly agrees that the picture is complex. When asked to identify specific factors, he says: ‘I’m not sure where to even start. I spent a lot of my career selling into the industry, and things that made logical sense didn’t make sense in the real world, because tight budgets are allocated, etc. I think the reason it’s important, though, is that we can’t afford the health systems that we have.

‘I think the real issue is that you have lots of entrepreneurs building great things, but at the end of the day somebody has to pay for them, and you need to understand who that’s going to be. In many cases, it will be a very big and complex national health system, and startups just don’t have the time to wait three years to get reimbursement,’ Kelly continues. ‘So we have all of this innovation that’s just going to wither and die because we can’t figure out how to bring those different groups together. I think that’s why it matters. We know we need innovation, we know we can’t afford the systems we have, but we haven’t figured out how to bring the buyers and sellers together in an effective manner.’

Health economics in Europe is indeed a complex and seemingly endless maze. Now that we’ve mapped a bird’s-eye view of what it looks like, in the next article (to be published Wednesday 20 January) we’ll examine what strategies may be most effective to help navigate these complexities.

About the author

Sue Montgomery has been a registered nurse for thirty-one years in various settings and roles—from staff nurse to administrator in critical care, hospice, and the health insurance industry. She’s been involved with digital health for over 20 years. As a communications consultant, Sue writes, edits and develops content products in a variety of formats to support client needs for training, education, and content marketing. In addition, with her end-of-life expertise, she helps to train healthcare professionals to engage in difficult discussions with patients and families about end-of-life issues, advance directives, and end-of-life care.

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