Increasing competition and budgetary pressure on the provider side are the biggest challenges facing the medical technology industry in Europe. Joerg Kruetten and Carlos Meca discuss the findings of a new industry survey.

Nobody would dispute that the medtech industry is a bastion of strength compared to many other industry sectors in the current economic turmoil. With an ageing population and an increasing prevalence of chronic and prosperity-related diseases, the EU market for medical technology products is and will continue to be a key place for the industry, with growing demand for efficacious and efficient prevention, diagnosis and treatment methods. The industry’s overall business expectations for 2011 are positive.

Rising pressure

However, a second and deeper look at the EU markets shows that the environment has become significantly more challenging in recent years. Stricter reimbursement controls by payers, which increasingly often are bound up with health technology assessments and/or case-based funding across the EU, are putting significant budgetary pressure on caregiver institutions. In response to cost pressures, many caregivers are focusing on the procurement side as a comparatively easy area to cut operating costs. This has increased the influence of procurement departments and reduced the influence of clinical staff on product and therapy choice.

In recent years, the focus on cutting procurement costs has also led to a high and growing prevalence of different forms of pooled purchasing in the EU member states through private provider chains, group purchasing organisations, national or regional public tenders or international distributors.

As a result of these developments, the industry is facing increasing price pressure and business risks as well as decreasing customer commitment and room for competitive differentiation. The impact of these procurement trends, however, largely varies with the complexity and maturity of a product or product category. Whereas purchasing department influence and pooled purchasing are very common for simple medical supplies, they are less prevalent with new and complex surgical procedures or capital equipment, where the purchasing/adoption decision is still predominantly influenced by the clinical and technical staff at the institution level.

Low-cost competitors

A second unfavorable trend for established industry players is the emergence of new low-cost competitors, threatening their market position with good-quality and predominantly me-too products at very attractive price points. These low-cost companies strongly embark on the trend of caregiver institutions focusing on cutting procurement costs. Compared to established players that are driven strongly by innovation and have high R&D as well as sales and marketing expenditures, the new competitors follow different business models. Three types of new low-cost competition can be observed in the EU marketplace:

• Asian ‘broad liners’ who are still focused on R&D but benefit from lower personnel costs, scale on the procurement side, favorable currency fluctuations and lean sales and service models.

• ‘Copycats’ who are copying established products by intelligently circumventing existing patents, and are comparatively small in size and lean on the administration and sales side.

• ‘One-stop-shop’ distributors who benefit from procurement and sales scale and offer their own private label products in addition to established brands.

Besides these new competitors, further low-price competition can be found among established players who offer basic and/or mature products at high discounts to protect the remaining part of their business or offer a low-price product/brand alternative to their premium product by keeping an old-generation product on the market.

Major firms face trouble

These market trends were largely confirmed by the MedTech Barometer 2011, an industry survey conducted by global strategy and marketing consultancy Simon-Kucher & Partners. More than half of the 70 respondents, who are senior decision makers in globally leading medical technology companies with European business responsibility, stated that tight budgets on the customer side and increasing price competition are the biggest commercial challenges they currently face in the European marketplace.

The respondents saw a clear mid-term trend in Europe of increasing competitor price aggression in the fight for higher market shares. On the customer side, there is a clear expectation that purchasing department influence and the pooling of purchasing power will strengthen in the coming years.

60% of the respondents expect a ‘tighter to much tighter’ reimbursement and funding environment in the future, driven by the uncertain fiscal climate and forecasted revisions of reimbursement prices and rates in the EU member states. Close to 60% expect overall market prices to be ‘worse or much worse’ in the near future.

In response to these unfavorable commercial trends, the surveyed managers give first priority to increasing sales force effectiveness in order to deal with consolidation of buying centers and non-clinical procurement stakeholders. The second stated priority is the launch of new and enhanced products and services to increase competitive differentiation. In terms of other business goals, winning competitor accounts and increasing market share were prioritised over raising prices or slowing down price erosion.

50–60% of the respondents mentioned that they already face strong pressure from low-cost competitors and that this pressure is expected to increase in most sectors. The diagnostics sector in particular has been heavily exposed to low-cost competition: all respondents representing this sector have already been affected. Whereas the equipment and supplies sectors expect pressure from low-cost competition to increase, the device side expects the pressure to remain significant but stable.

Increasing innovation, enhancing customer service and processes, and better customer segmentation and prioritisation are believed to be the most effective responses to low-cost competition. Very few respondents believe that trying to match the price points of these competitors by reducing their own prices or introducing low-cost offers/brands is a commercially viable option.

Ready for the fight

In summary, the political framework and the demographic developments will continue to make Europe an important, growing and innovation-friendly market environment for medical technology products in the foreseeable future, despite the ongoing economic turmoil. However, the market climate for established industry players has and will continue to deteriorate due to stricter reimbursement controls and increasing purchasing professionalism and power on the customer side coupled with consistently strong and increasing competitive dynamics.

Despite the commercial challenges that established players in Europe are facing, the business outlook for the coming year remains positive. The respondents across the different sectors expect their operations to grow by 5–10% in terms of revenue, with device and diagnostics companies expecting the highest growth rates. At the same time, the surveyed companies expect to increase their market shares moderately in the area of 3%. The companies’ average selling prices are expected to remain stable. In essence, new product launches are compensating for price erosion among established products.

With increasing budgetary pressure at the payer level and economic uncertainty in the EU member states, it is however very likely that the commercial climate in the medical technology sector will deteriorate further. Stricter reimbursement controls, health technology assessments and cost-cutting pressure on the provider side, combined with strong competitive dynamics, will further increase pressure on prices and margins; the adoption of new products and technologies is likely to slow down. The automatism of continuously compensating for negative developments among established products with new product launches may come to an end at some point.

A lot will depend on maintaining innovation, and the European market is sure to remain an innovation-friendly environment. Companies that launch true innovations with convincing clinical and/or health economic benefits will continue to have great market opportunities. Still, the vulnerability of companies that only launch regular gradual improvements of existing products and companies with a high exposure to very mature product categories will continue to increase. The long-term success of established players in the European marketplace will largely depend on having a strong innovation pipeline and controlling the price erosion of established products.

Strategies for success

Long-term business success in Europe will thus require strategic and tactical adaptations by established firms. European medtech companies are still in general very R&D-orientated. Successful innovation will be key to developing competitive differentiation and limiting the exposure to increasing price pressure. However, European companies – which are often extremely good at selling technical and clinical benefits to clinical users and technicians – need to become better at selling clinical and health economic benefits to commercially-driven purchasers.

This means focusing primarily on the following areas:

• Prioritising and steering R&D projects early on according to reimbursement and price potential.

• Producing better clinical and/or health economic evidence to support positive reimbursement and adoption decisions when launching new products.

• Resources, skills and engagement models for interacting effectively with national or regional payers, as well as procurement managers and financial administrators.

• Balancing market share and profitability goals, differentiated by business area and according to a product’s life cycle stage and the level of competition.

• Offering service support areas to payers and providers that measurably help to drive their organisational efficiency beyond simple price cuts.

• Offering new and intelligent contract models to providers that limit upfront investment burden or ensure budget compliance while securing customer commitment.

• Pursuing a structured and defendable pricing policy rather than making opportunistic and spontaneous pricing decisions.

A management summary of the MedTech Barometer 2011 is available on request. Please contact Claudia Schulz at Simon-Kucher & Partners: claudia.schulz@simon-kucher.com, tel. +49 228 98 43 372.

Joerg Kruetten is Executive Vice-President at Simon-Kucher & Partners, a global consulting firm focused on Smart Profit Growth, and is head of the company’s international medical technology competence center. Dr. Carlos Meca is a senior consultant at Simon-Kucher & Partners.

As the PCTs form clusters from which the Clinical Commissioning Groups will hatch, a new generation of NHS commissioners is being born. Thoreya Swage examines how medtech can help these new customers to redesign services.

Irrespective of the progress of the Health and Social Care Bill currently going through the House of Lords, the momentum of reform of the NHS in England continues to gather pace.

Following a four-month hiatus while the wise and the good of the NHS Future Forum pondered and produced recommendations for the adjustment of the Bill, the Department of Health published further guidance on the developing role of the PCT Clusters. Although the 151 Primary Care Trusts have been squeezed into 51 PCT clusters in preparation for their demise in April 2013, it appears that they have a vital part to play in the development of the emerging Clinical Commissioning Groups (CCGs).

The guidance or ‘shared operating model’ for PCT clusters has been produced by the mandarins at the DH to ensure that the commissioning landscape is as consistent and smooth as possible in time for the takeover by the CCGs. This is to ensure that the nascent NHS Commissioning Board inherits a robust enough system to take charge of further developments and improvements in healthcare in early 2013.

The shared operating model identifies six main functions or ways of working, where consistency of approach is considered to be important. They are listed as commissioning development, financial and operational issues, ensuring quality, emergency planning, development of providers as Foundation Trusts and communications.

CCG commissioning development

The most important function of the PCT clusters is the preparation of CCGs for authorisation as soon as possible following the successful passage of the Health Bill through Parliament. The process of authorisation to become fully-fledged commissioners is due to begin in the second half of 2012. Although this is a year away, CCGs can commence their preparations now using a self-diagnostic tool: an interactive computer-based assessment that helps them to determine their capabilities and identify their development needs. The areas covered include:

• A clear clinical focus for the CCG commissioning plans to include tackling health inequalities and improving primary care.

• Demonstration of meaningful involvement of patients and the wider community.

• A plan for development that is clear and credible and that, in particular, delivers the QIPP (quality, innovation, productivity and prevention) agenda.

• Capacity and capability of the CCG, i.e. robust constitutional and governance arrangements that enable the CCG to commission care effectively and ensure financial control.

• Collaborative arrangements for working with other CCGs, local authorities and the NHS Commissioning Board.

• Capacity and capability of the CCG leadership, which ensures effective working.

The tool helps the CCGs to identify priority development areas, which form the basis of the developmental plan paving the way to full authorisation.

To support all this work, CCGs will receive £2 per head from the PCT clusters, as well as extra management resources to help the groups hone their commissioning skills and capabilities.

CCGs experiencing difficulty in defining their boundaries will have guidance from PCT clusters on how to resolve this. PCT clusters also have the unenviable task of engaging the reluctant practices that so far have not participated in their local CCG discussions, with the aim of making them part of a viable CCG by October this year.

Separation of functions

Through the last quarter of this year, a detailed exercise is being carried out by the PCT clusters to identify and segregate the service areas that CCGs and NHS Commissioning Board will be responsible for.

Although the CCGs will be commissioning acute, mental health, community and ambulance care, other services that PCTs currently commission will need to be transferred to the umbrella of the NHS Commissioning Board:

• GP and other primary care contractor groups (primary care dental, pharmacy and optical services)

• secondary dental care

• prison, specialised and military health services.

Even though the contracts for GP services are held by another body, the CCGs are expected to have an input into primary care development and improvement.

Quality assurance

A vital component of the commissioning process is ensuring the quality of healthcare. Practices may have been involved to a greater or lesser degree in various quality assurance processes in the past; however, CCGs are required to take these responsibilities seriously on board.

There is a whole raft of procedures and measures including delivery of better health outcomes for patients, meeting the Care Quality Commission (CQC) requirements for safety and quality of services, standard contracts, the NHS Operating Framework, professional guidance and other relevant requirements that CCGs need to get to grips with.

This could potentially be a vulnerable time for the development of the CCGs if attention wanders and serious patient safety incidents are not acted on promptly. Clinical governance processes must therefore be extra-secure.

Budgets and responsibilities

Over the next year or so, there will be a period of dual functioning and handover as the CCGs mature and the PCT clusters delegate more and more responsibilities until April 2013. The handing over of the baton has started now, with PCT clusters having identified a ‘clear percentage of budgets’ to CCG pioneers or pathfinders in August and set plans for future delegation of budgets in October.

Sandwiched in between these two was the agreement in September on which mental health and community services will be subject to ‘Any Qualified Provider’ (AQP). This policy is set to be implemented from April 2012, when GPs can refer to providers of certain services eligible for AQP from a list of approved organisations, including private sector companies, drawn up by the DH.

A review of the commissioning support required by CCGs was undertaken in July, with clear arrangements to be agreed by the end of this year.

In March 2012, CCGs will be required to enable the development of the local health and wellbeing boards (the mechanism for joint health and social care planning and local commissioning) supported by their PCT clusters.

Meanwhile, individual PCTs will continue to carry out their statutory functions through the PCT clusters until their abolition in April 2013. The statutory functions include contract monitoring, ensuring that providers meet their QIPP obligations, and other statutory requirements such as safeguarding children and vulnerable adults.

The big challenge for CCGs begins when they are required to lead the next planning round for 2012/13. This will start towards the end of this year, and is a function previously undertaken by the PCTs. It involves doing a needs analysis, identifying local inequalities, understanding demand and resources for local services, negotiating and setting priorities with partners, and developing a local strategic vision. Handover of commissioning functions will continue, with CCGs being an active participant in the subsequent contract negotiations and agreements.

How medtech fits in

It is apparent that despite the pause for reflection on the proposed changes in the English health service earlier this year, the momentum of dissolving and restructuring healthcare organisations continues. The picture remains a little confusing, however, as CCGs are in varying stages of development and maturity and it is not clear that all are now truly viable although the October deadline has passed.

What is clear is that that the work of commissioning and delivering healthcare has to go on, and now is a good time to find out who the key movers are within the CCGs. At this point the developmental needs of CCGs are uppermost, and it is here that medtech companies can provide some input. Skills and knowledge in leadership development and highlighting evidence-based medical technologies that really make a difference are two key areas of potential input.

CCGs will be keen to redesign services in order to make patient pathways across primary and secondary care more consistent and to move more care into the community setting. It is here that telehealth and telecare will come into their own as a means to facilitate the transition.

Demonstrating the effectiveness of home monitoring of blood pressure, supporting community services such as HIV or stoma care, and promoting medical devices that offer continuous subcutaneous infusion of insulin are examples of technology implementation where a vital case can be made to these prospective healthcare commissioners. CCGs will also look favourably on management of their patients in the surgery with video links to consultants for advice, rather than sending them to outpatient services.

Clinical services that utilise new or different medical technologies will require staff who are appropriately trained and have the skills and competencies to use the equipment. This training can be provided by the medtech industry.

As ever, good information forms the basis of good commissioning and the demonstration of successful patient outcomes. Data systems in the community setting have always lagged behind their counterparts in the acute setting. Given that CCGS will need to develop services in the community, new and better IT systems will be required.

Get ready!

The next few months will be busy while the NHS sorts itself out at a structural level. Once the picture begins to clear, the medtech industry will need to engage with the new clinically skilled commissioners who now have the financial responsibility for making decisions about healthcare.

Dr Thoreya Swage was formerly an NHS clinician and a senior manager in various NHS organisations covering acute and primary care. She has expertise in commissioning health services and is currently working for a number of NHS organisations, including DH agencies, to develop a more commercial approach to the commissioning of healthcare.

New research shows that SME growth provides the best prospect for economic recovery in the UK. But, as private equity firm ECI notes, finding the cash to reach out to global partners and markets can be a critical hurdle.

With continued pressure on governments across the Western world to reduce their expenditure, together with sustained macro-economic uncertainty and a tightening of bank funding, times are not necessarily easy for the average healthcare company – which often relies on the public purse for reimbursement and debt funding for growth. One might therefore expect the short-term outlook for growth to be somewhat muted, despite the backdrop of positive longer-term demographic drivers of demand.

Hence it is interesting that a recent survey of UK SME businesses by ECI Partners, a UK-based midmarket private equity firm, has found executives to be generally positive about growth prospects over the next 12 months, with 74% of respondents anticipating headcount growth and 60% expecting double-digit turnover growth.

The results met with a warm response from the Government, with Mark Prisk, Minister of State for Business and Enterprise, saying: “It’s good news that despite a tough few months, nearly three-quarters of the SMEs surveyed by ECI are looking to recruit over the next year and half expect to see substantial profit growth in that period. Up and down the country, it is Britain’s SMEs that are driving our economic recovery.”

Reaching out

This year, the survey conducted each summer by ECI Partners gained responses from a total of 246 chief executives from UK growth companies from a range of sectors with turnover between £10m and £200m. The results paint a positive picture against the gloomy economic backdrop of the Eurozone crisis and sluggish UK economy, and suggest that there remains growth potential amongst SME businesses – which account for around a third of UK private sector employment.

Steve Tudge, a Managing Director of ECI, commented: “Despite the barriers to growth, which are principally cited as a weaker macro-environment and funding constraints, we continue to be optimistic about the prospects for good mid-market companies.”

Executives see the key growth drivers to be increasing international sales – with Europe and the USA remaining the dominant international markets, though India and China are becoming more important – and organic growth through investment in sales and marketing and new product development. Over 40% of companies are also planning to increase their use of overseas suppliers to improve their margins.

Internal cash flows are viewed as the most likely source of funding for this growth, though around half of respondents say they are likely to seek bank debt within the next 12 months (despite continued complaints about its cost and due diligence requirements) and around 40% are also likely to look at private equity backing. Fewer than 10% of companies see the public markets as accessible, perhaps reflecting the recent volatility and liquidity issues associated with the AIM market.

Healthcare respondents are less bullish about high growth than their peers in other sectors, and are noticeably less positive about growth than they were last year. This no doubt reflects, in part, the political uncertainty surrounding the current UK healthcare reforms and the public sector spending constraints that are impacting on the health and social care sectors.

Despite this, companies remain more confident of raising growth financing – and of raising it from private equity firms, with over 50% saying that was a likely consideration over the next year.

Financing growth

What does all this mean for SME healthcare businesses in the UK? The sector certainly faces challenges in responding to Government spending cuts, which are tending to put pressure on margins if not always on volumes.

However, opportunities for growth remain amidst these challenges, particularly for companies who are able and willing to venture beyond the UK in order to seek new customers and cheaper suppliers.

Of course, this internationalisation can put a strain on smaller businesses, which may lack the scale to fully support an international infrastructure. Private equity groups with experience and expertise in this process can potentially offer support to management teams in this position – whether by making introductions, sharing best practice or simply financing the required infrastructure.

There are significant sums of capital available for investment from the UK private equity industry, and there remains an appetite to invest in market-leading healthcare businesses. Thus private equity should be considered seriously as an option by management teams in the healthcare industry who are looking to fund growth to help their companies succeed in the current economic environment.

ECI is a private equity group that has been investing in mid-market growth businesses for over 35 years. It invests across sectors, with a focus on UK and Irish companies. Healthcare companies in its current portfolio include a primary care provider (Harmoni), assisted living specialists (Premier Bathrooms, DLP) and medical software companies (Clinisys, Ascribe).

What level of medical device failure is acceptable? Brad Abbey argues that the industry needs to arm itself against the threat of litigation – not with lawyers, but with the right kind of evidence.

I was somewhat taken aback by a letter in the British Medical Journal last December, where under the unlikely-sounding title ‘FDA is gold standard of review’, Mark B. Leahy, president and CEO of the US Medical Device Manufacturers Association, while singing the praises of the industry, said that a recent study of FDA-approved medical devices from the past 5 years showed that fewer than 1% had been recalled.

Most recalls, he said, were due to manufacturing and design problems in a post-marketing setting. This was in response to an article that had been highly critical of the safety surveillance of medical devices in the US and the low hurdles that have to be jumped to get a device approved (seemingly true on both sides of the Atlantic).

I am a generalist in the healthcare industry, mainly involved with medicines, but to say I was surprised by that figure is an understatement. I realise that the number of car recalls may be higher – but with a surgically implanted device, the owner cannot check it in at the service centre and pick it up at the end of the day.

I know that MHRA gives daily warnings about medical devices, from wheelchairs to drug-eluting stents; but given that the level of adverse event risk that is acceptable to the public for a medicine is somewhere between 1 in 10,000 and 1 in 100,000, the 1% risk seems difficult to accept.

A lead article in the May 2011 BMJ, by Peter Wilmshurst of STARFlex fame, opened with the comment that the regulation of medical devices is (in his opinion) unsatisfactory, unscientific and in need of a major overhaul. Pretty damning stuff.

 

Duty of care

The registration of medicines requires data on the safety, efficacy and quality of products, and the numbers of patients needed to demonstrate an acceptable risk/benefit profile can be dauntingly high. The same level of scrutiny does not happen in Europe for medical devices, where a single approval can trigger cross-community acceptance.

With the increasing complexity of devices and the high levels of patient expectation, it is hardly surprising that when seemingly good devices go wrong the patients want compensation – and, where there is a suitable arena, for punishment to be meted out.

In the US, where many complex medical devices are developed and initially marketed, the ‘learned intermediary’ doctrine has been used by healthcare product manufacturers in recent times to protect themselves in the event of something going wrong. This doctrine, used in the US legal system, states that the manufacturer of a product has fulfilled their duty of care when they provide all the necessary information to a ‘learned intermediary’, who then interacts with the consumer.

This doctrine has been used primarily by pharmaceutical and medical device manufacturers in defence against tort suits. In a majority of American states, the courts have accepted this as a liability shield for pharmaceutical companies.

However, drug and medical device manufacturers sustained an unexpected blow in August 2008 in Rimbert v Eli Lilly and Company: in a federal court decision, for the first time, there was a rejection of the learned intermediary doctrine in its entirety. The decision rejected the notion that the manufacturers of drugs and medical devices do not have to make the patient fully aware of the risks associated with them and that this can be delegated to the prescriber.

The idea underlying the ‘learned intermediary’ doctrine is that the prescriber, who has expert knowledge and skill, should make the decision about risk. But changes in the consumer environment whereby prescription products can be advertised directly to potential patients have rendered this justification obsolete, and so it was predictable that for medical devices – some of them traditionally never coming ‘into the hands’ of the patient – the risk scenario would be influenced by the lesser amount of risk/benefit information needed before approval for marketing. While the doctrine has not been used in Europe, the risk information relating to devices is lagging behind that for medicines.

In order to be vigilant about the risks of medical devices, companies will be best served by surveillance systems that monitor the risk/benefit profile of products from the moment they are first evaluated (even if that takes place in animal models). This is not always easy.

A letter in the BMJ (in the same issue as Leahy’s letter) from a Welsh group of doctors highlights the problems of post-marketing surveillance for medical instruments, and in particular the use of single-use devices for tonsillectomy from 2001 in the wake of the variant Creuzfeldt-Jakob disease that followed the ‘mad cow’ scare of the 1990s.

Widespread adverse events were associated with these non-reusable instruments despite their CE marking, and they were deemed not fit for purpose. The case for reform of medical device regulation therefore seems a given.

 

Hip or lame?

In the meantime it seems that the visible portion of the iceberg of device regulation-related problems is giving rise to a stream of litigation that could possibly become a tide. Recent Medtech Business news reports have followed the fate of orthopaedic company DePuy and its ASR hip replacement.

Hip replacement is one of the clinical successes of the marriage between orthopaedic surgeons and the medical device industry, and it was estimated (before this year’s NHS rationing) that about 70,000 patients were undergoing total hip replacement each year in the UK.

I remember metal-on-metal hip replacements from the 1970s (I have one in a drawer at home that came to me as a result of its breaking), and they became popular again in the 1990s. However, the most recent generation have not fared so well, with higher than expected rates of failure and concerns about excessive levels of metal ions (cobalt and chromium) in the blood of patients.

According to 2010 data from the National Joint Registry of England and Wales, the DePuy ASR Hip Resurfacing System has a revision rate of 12% at 5 years after surgery and the DePuy ASR XL Acetabular System has a revision rate of 13%.

That means that during the first 5 years after a hip replacement with the DePuy ASR hip, at least 1 in 8 patients will experience hip failure requiring painful and expensive revision surgery. With more than 90,000 DePuy ASR hips in patients worldwide, over 11,000 people could require additional surgery due to the defective design of this implant and DePuy’s failure to remove it from the market earlier.

One of the questions that remains unanswered was whether there were potential conflicts of interest between the supplier and the healthcare professionals who developed and were involved in promoting these devices. The key issue in litigants’ minds is that the device did not perform as well as such a device might be expected to, and it seems that the device’s registration in the US was obtained without clinical trials to prove its long-term safety and efficacy. In a litigious society such as the US, where someone must pay for any mistake, the supplier appears to have suffered with the rolling of heads and the decision to remove the offending brand from the market.

Don’t get the idea that this case is a one-off: the recent history of medical devices suggests that arrivals on the market may sometimes be premature, as real risks may not have become apparent. Whether this is related to inappropriate endorsements from the medical profession is difficult to judge, but there are known examples of high-level payments to medical inventors who ‘sell’ their developments to industry and subsequently endorse them.

On the other hand, everyone is aware of what happened to Peter Wilmshurst when he took the opposite stance against a device manufacturer: there was a serious attempt to punish his critical views (which seemed to be well founded) and personally break him through the English court system.

 

Evidence is strength

Litigation against medical device companies is nothing new. However, in an age when people with problems can readily find lawyers willing to take on their problems, and some lawyers (particularly in the US) go looking for people who did not even know they had problems, access to litigation seems to be easier – and it is oiled by the possibility of compensation (which may be deserved when devices turn out to be inadequate or unsafe).

A Google search for the term ‘medical device litigation’ returned 640,000 hits; most of the leading ones were to do with lawyers offering their services in the pursuit of such litigation, or training sessions for lawyers who want to become involved in such cases, or training for companies who want to avoid them. I don’t believe a wake-up call about the risks of being sued is necessary, but what is well worth thinking about is the possible root causes of the current danger, which can ruin a company that believed it had a good product.

The message I am offering is consistent. The products of the healthcare industry must be subject to close and continuous scrutiny for their risk/benefit profile, and this should be done prior to marketing and continue in a structured manner post-marketing. NICE advisory policy on the best devices to use is still in its early stages.

There seems to be a raft of opinion supporting the idea that the regulation of medical devices (in Europe, and probably also in the US) needs to be overhauled to eliminate the placing of devices on the market with inadequate safety and efficacy monitoring.

Rather than finding ways of avoiding expenditure during a product’s development and launch by minimising the collection of such data, companies need to embrace the need for resilient data sets and continual risk/benefit signal monitoring. The competent authorities will wake up to this need, and those with effective systems in place will withstand the culture change best.

Brad Abbey is an industry observer, or the pen-name of an industry observer. The views expressed in this article are those of Brad Abbey, and do not necessarily reflect the views of Medtech Business.

France is Europe’s biggest importer and exporter of medical devices. However, current reforms are driving cost reduction and efficiencies. Medtech Business in association with Espicom takes a look at the French market for medical technologies.

France is one of the top five medical device markets in the world, accounting for around 3.9% of the global market.* Within Europe, the market ranks behind Germany and is a similar size to that of the UK.

The country has a well-developed healthcare system, combining public hospitals with commercial clinics that are the main providers of elective surgical treatment. While the public sector is the largest purchaser of most diagnostic and therapeutic equipment, the private sector is the dominant purchaser of surgical equipment and supplies.

The high level of healthcare expenditure (11.8% of GDP) and the substantial health deficit are major concerns that have prompted various reform programmes aimed at curtailing costs and improving efficiency in the healthcare system. For this reason, the medical market is only likely to see moderate growth, rising from US$8.3 billion in 2011 to US$9.8 billion by 2016.

Despite several high-profile investment programmes, France continues to lag behind its European neighbours in some high-technology fields, most notably imaging and radiotherapy equipment. A second five-year cancer plan has now been launched which aims to increase the numbers of scanners.

With flagging domestic production in several sectors the French medical device market is increasingly reliant upon imports, which now account for around 80% of consumption. However, many imported products are re-exported to other countries.

 

The market in 2011

In 2011, the French medical device market (see Figure 1) is valued at US$8,280 million. Consumables is the largest product category, accounting for 20.9% of the overall market, followed by diagnostic imaging (19.8%).

Espicom estimates that the medical device market will grow at an average annual growth rate of 3.5% between 2011 and 2016 – bringing the total market value to US$9.8 billion by 2016.

Orthopaedic and prosthetic devices are expected to continue to be the most dynamic sector of the market, with growth forecast to be more than double the rate for the overall market. Conversely, diagnostic imaging is forecast to have the lowest growth during the 2011–16 period.

 

Predictions for market segments

Figure 2 shows Espicom’s predictions for the major segments of the medical device market.

1. Consumables. The market for medical consumables is estimated at US$1,729 million. The consumables market grew at an annual rate of 5.1% in US dollar terms between 2006 and 2010. Imports supply the greater part of the market. Espicom estimates the consumables market will continue to grow by an average of 3.5% over the next few years.

The wound care products market is forecast to grow at an average annual rate of 2.9% in US dollar terms during the 2011–16 period. Syringes, needles & catheters has been the fastest growing sector of the consumables market and will continue to be, with a CAGR of 4.1% to 2016.

2. Diagnostic imaging apparatus. The market for diagnostic imaging is estimated at US$1,636 million. The market grew at an annual rate of 2.8% between 2006 and 2010. France lags behind its European neighbours in the diagnostic imaging field, though the second cancer plan aims to increase provision of MRI, CT and PET scanners.

Imports supply the greater part of the market, though their market share is lower for radiation apparatus due to the strength of the domestic manufacturing industry. The USA and Germany are the major sources of supply. Espicom estimates that the imaging market will grow by an average of 2.1% between 2011 and 2016.

3. Dental products. The market for dental products is estimated at US$859 million, equal to 10.4% of the total medical device market. The dental products market grew at an annual rate of 4.2% between 2006 and 2010. It is forecast to grow at an annual rate of 3.5% over the next few years, taking the total to US$1,020 million by 2016.

4. Orthopaedic & prosthetic devices. The market for orthopaedic & prosthetic devices is estimated at US$1,336 million, equal to 16.1% of the total medical device market. The orthopaedic & prosthetic devices market grew at an annual rate of 9.2% between 2006 and 2010.

Imports have seen particularly high growth in recent years, though a corresponding increase in exports in this sector indicates that not all imported products are destined for the domestic market. The majority of orthopaedic imports are supplied by Switzerland and the USA.

The orthopaedic & prosthetic devices market is forecast to grow at an annual rate of 6.1% in US dollars over the next few years, taking the total to US$1,794 million by 2016.

5. Patient aids. The market for patient aids is estimated at US$1,131 million, equal to 13.7% of the total medical device market. The patient aids market grew at an annual rate of 4.5% between 2006 and 2010.

French imports of patient aids far exceed the value of the domestic market due to a high level of re-export activity, particularly for pacemakers. Switzerland and the USA are the leading suppliers of portable aids, whilst the USA and China are the major sources of supply for therapeutic appliances.

The patient aids market is forecast to grow at an annual rate of 3.9% over the next few years, taking the total to US$1,367 million by 2016.

 

Imports

The value of French medical device imports has recorded a steady rise over the past decade, reaching US$10.4 billion in 2008 before falling back to US$10.3 billion in 2009.

Imports of consumable items amounted to US$1,780.6 million in 2009. Imports fell by 1.0% over 2008 in US dollar terms (though they increased in euro terms). Syringes, needles, catheters & cannulae are the largest subcategory.

Diagnostic imaging imports totalled US$1,564.0 million in 2009, equal to 15.2% of the total. This was the weakest performing category in 2009, with a fall of 16.4%.

Imports of orthopaedic & prosthetic devices were worth US$1,549.1 million in 2009, equal to 15.1% of total medical device imports. This was the fastest growing category in 2009, with a rise of 26.6%. All three subcategories – artificial joints, orthopaedic appliances and other artificial body parts – recorded strong growth.

Patient aids are the largest import category, with imports worth US$2,624.1 million in 2009, equal to 25.5% of total medical device imports. Pacemakers accounted for 54.7% of imports in this category in 2009, but also accounted for more than half of patient aid exports.

The leading suppliers of French medical imports in 2009 were the USA, Switzerland and Belgium, with the UK ranking eighth as a supplier with imports worth US$288,964 (2.8% of the total).

 

Exports

In 2009, medical device exports registered a 3.0% fall in value to US$9.2 billion, having recorded steady growth in previous years with a CAGR of 6.8% for the 2005–2009 period.

In 2009, 69.5% of all French medical device exports were sent to the rest of the EU, with the Netherlands taking a 17.6% share, followed by Germany with 14.4%. The UK took 6.6% of French medical device exports.

Outside Europe, the leading destination is the USA, which accounted for 9.1% of exports. The USA is the leading destination for French exports of diagnostic imaging apparatus.

Next month, Medtech Business will look at the medical technologies market in Germany.

This article is based on information from Medical Market Outlook reports published quarterly by Espicom Business Intelligence. *All figures are in US $. For further details of the 66 markets covered, please visit www.espicom.com/outlookm1

The idea that ‘any qualified provider’ can deliver NHS services may be contentious, but it has roots in existing policy. Thoreya Swage examines the opportunities for industry in the changing health provider landscape.

Successive governments have tried in recent years to shake up the healthcare system in the UK, with England probably being subject to the greatest number of changes. A key element of these shake-ups has been various attempts to expand the healthcare market in order to include the private or independent sector.

This widening of the doorway started in earnest with the deployment of the waiting list initiative in the 1990s, using the spare capacity of independent hospitals to reduce the queues for elective procedures that had built up in the NHS.

The baton was then taken up by the independent sector treatment programme under the last administration: the range of work done by private providers expanded to diagnostic procedures and screening programmes, as well as the construction of bespoke independent hospitals to take on hip, knee and cataract operations from the NHS.

It was at this stage that the concept of patients choosing which healthcare institution to go to for treatment or diagnostic procedures started to take off, with some of those options being in the independent sector. The idea of an ‘any willing provider’ began to take shape, with NHS care being delivered by any appropriate healthcare body as long as it had reached identified quality and safety standards.

However, before the recent change of government this initiative began to cool under external political pressure and at one time even seemed likely to fade away.

What AQP means

Despite opposition, the coalition Government has renewed the ‘any willing provider’ policy, calling it this time ‘any qualified provider’. In July of this year the Department of Health in England issued ‘operational guidance’ to the NHS providing further details to PCT clusters and the emerging Clinical Commissioning Groups (CCGs) – the renamed, modified GP consortia.

This policy has come under the guise of improving the quality of care by widening patient choice for specific services.

The intention is to permit the patient to choose from a list of qualified providers when they require a referral for a specific community or mental health service. To meet the ‘any qualified provider’ (AQP) requirement, a healthcare organisation needs to fulfil the quality, price and contractual obligations for NHS services. This process, as we have seen, is already in place for elective care.

The guidance states that the implementation of AQP will be conducted in phases from April next year. However, some work needs to be done before that. PCT clusters and their associated CCGs need to have decided which community or mental health services they wish to identify for the implementation of AQP locally by October, so that their patients can begin to have access to that care between April and September next year. Three or more services from the following list, drawn up by the DH in conjunction with patient groups, should be identified:

• musculo-skeletal services (neck and back pain)
• audiology services in the community (adults)
• continence care (adults and children)
• diagnostic services (e.g. imaging and heart and lung investigations)
• wheelchair services (children)
• podiatry services
• wound healing and management of leg ulcers
• primary care psychological therapies (adults).

The guidance also says that PCT clusters and CCGs can choose alternative services for AQP in different priority areas if these are supported by local patients – for example, as identified through the shadow health and wellbeing boards (the new joint health and social care joint commissioning boards) – and effective gains in quality and access can be made by doing so.

Getting involved

How can independent provider organisations participate in this process? The principles of the AQP approach are as follows:

• Organisations can qualify and register to provide NHS services as long as they meet NHS assurance requirements.
• Referral pathways and protocols set by CCGs must be accepted by the providers wishing to be on the AQP list.
• Patients are offered a choice of services from the list of qualified providers.
• There will be a fixed price based on a national or local tariff, to ensure that the provider is chosen by quality.

A national qualification process for all AQP providers is currently being developed by the DH in order to minimise bureaucracy and reduce transaction costs. The proposed principles for qualification are that providers:

• must be registered with the Care Quality Commission to demonstrate that they meet the essential standards for quality and safety (or equivalent assurance requirements if providing services not covered by CQC registration)
• are licensed by Monitor (from 2013) so that they are authorised to deliver NHS care
• can meet the terms and conditions of the NHS Standard Contract, including having regard for the NHS Constitution, appropriate guidance and legal obligations
• deliver care at NHS prices
• can meet the service specifications developed by commissioners and comply with referral protocols
• agree with the commissioners on any supporting schedules to the NHS Standard Contract, e.g. on activity levels.

More details of the qualification process will be published this autumn.

The providers that have successfully achieved the national qualification process will be listed in a directory available to GPs later this year.

By November 2011, lead PCT clusters will have produced detailed implementation packs for each service on the AQP list that will include service specifications, contract currencies, tariffs and information models.

It is anticipated that AQP for the services identified above will begin to be implemented from April 2012, with all CCGs having this in place for their patients by September 2012.

What happens next?

AQP will continue to expand: for 2013/14 a further list of services has been identified by the DH for discussion with commissioners, patient groups and providers. The list is not finalised, but will probably include:

• maternity care, e.g. antenatal education and support for breastfeeding
• speech and language therapy
• supporting patients to self-manage long-term conditions
• chemotherapy in the community setting and at home
• primary care psychological therapies for children and adolescents
• wheelchair services (adults).

Opportunities for medtech

The most obvious opportunity for medtech in relation to AQP is in the sphere of direct access diagnostic services, where many investigations such as non-obstetric ultrasound, echocardiography, cardiac physiology, MRI, X-ray, endoscopy and phlebotomy can be provided in the community setting, as indeed some already are (e.g. via Inhealth). These direct referrals can enable GPs to obtain rapid investigations and help to manage their patients in primary care, without having to refer to a hospital consultant.

Another key area is adult hearing services, including audiology and hearing aid fitting. Telehealth and telecare also have a part to play in supporting some of these services by monitoring people with long-term conditions at home. The services identified for the initial phase of AQP have traditionally had poor information systems. Better data collection on activity and health outcomes will be vital for the success of the providers delivering services under this initiative.

The key challenge for medtech companies is to get onto the recognised list of AQP that the DH is drawing up, or to work with partners who will be applying to go onto the list. Rather than regarding independent providers simply as customers, medtech suppliers can work with them to achieve AQP success.

Potential providers need to get up to speed on a number of areas, such as ensuring that they are registered with the CQC, have a good understanding of the standard NHS contract, offer services in keeping with the CCGs’ requirements and can manage within NHS financial envelopes.

The aim should be to identify the lead commissioner(s) within the local PCT cluster and associated CCGs and find out which community services they are planning to include on their local AQP. Alternatively, contacting the local shadow health and wellbeing board (if it is sufficiently developed) may indicate other priority areas for AQP. This is an opportunity for marketing medtech services that can be shown to improve patient care and are aligned with the local health economy’s priorities.

Medtech providers should also be clear about whether they can meet (or help their partner organisations meet) the qualification requirements for AQP. They should look closely at the details of these when they are published by the DH later this year.

Companies should also start doing their homework now on pricing and the care outcomes that can be achieved through their services, bearing in mind that the NHS commissioners will be looking at how the five high-level domains of the NHS Outcomes Framework will be achieved.

Another key milestone to look out for is the implementation packs due in November on service specifications, contract currencies, tariffs and information models. These will require close examination by potential providers seeking to ensure that they are fully prepared for AQP.

Although this initiative seems small in scale it looks set to grow in the future, and further opportunities will present themselves for 2013 and beyond as AQP continues to expand. For more information, visit the Department of Health website.

Dr Thoreya Swage was formerly an NHS clinician and a senior manager in various NHS organisations covering acute and primary care. She has expertise in commissioning health services and is currently working for a number of NHS organisations, including DH agencies, to develop a more commercial approach to the commissioning of healthcare.

Nanotechnology holds the key to a new generation of medical devices and diagnostics. Mike Fisher of the Nanotechnology KTN looks at how miniaturisation is changing the face of healthcare.

Over the past decade there has been significant interest in the promise that micro and nanotechnology holds for life sciences.

An estimated 40% of US nanotechnology venture capital is being allocated to life science start-ups – and over 2008 and 2009, according to a study carried out by Lux Research, healthcare and the life sciences saw an increase in investment of 42%, while other areas such as manufacturing and materials saw a decline.

Europe has a number of leading biotechnology companies, as well as world-renowned R&D facilities. Traditionally the emphasis of these companies has been exclusively on biotechnology – but more recently the lines between biotechnology and the electronics industries have become blurred, creating a new and exciting field of new applications and markets using techniques acquired in the semiconductor world.

The electronics industry has been transformed by the strategy that ‘smaller is better’, and using these same techniques and applying them in medical and pharmaceutical contexts has opened exciting new market opportunities. The next level of miniaturisation, into nanoscale dimensions, is a booming area of R&D with significant funding being invested worldwide.

Mobile diagnostics

Using miniaturisation, medical diagnosis equipment can now be used outside of the lab: in doctor’s surgeries, remotely, and even on mobile phones. The applications are endless.

Imagine a world where all you need is your smart phone to detect any disease through blood analysis, without the need for costly and lengthy analysis in the lab. That could be real in five or ten years’ time.

Ten years ago the ‘lab-on-chip’ was a concept without a viable market entry point, but now point-of-care diagnostic systems are starting to show clear benefits in disease detection and cancer therapy.

By using these applications to analyse samples of blood, interstitial fluid, urine and saliva, medics are able to use minimally invasive techniques to obtain quick results that are easily collected, with minimal stress and discomfort to patients.

Using miniaturisation in diagnosis means that the size and cost of equipment can be reduced dramatically. Sensors can be made available at the point of care, in many cases providing a diagnosis while the patient is with the doctor. Providing early diagnosis means that the right treatment can be given early, avoiding complications caused by delays.

Micro and nano diagnostic devices can also provide closed-loop systems that continuously monitor patients and respond immediately to physiological changes. This is particularly important in the intensive care unit, where simple parameters such as oxygen levels can be critical.

In the future, as medical systems become fully integrated with semiconductor technology, we can expect lab-on-chip devices that measure information on disease markers, cell count or DNA-RNA from a very small quantity of blood or other biological fluid sampled by pain-free needles, and ways to receive and transmit real-time information from sensors located inside the human body.

With applications such as point-of-care diagnostics already emerging with huge benefits to patients, there is no doubt that the next generation of healthcare technology will be enabled by the use of miniaturisation.

Taking a simple and effective concept from the semiconductor world has already delivered a dramatic effect on medical diagnostics and is now moving into drug discovery, creating new and exciting applications across a wide variety of markets.

Chain reaction

Getting these applications to market has been hindered by a lack of potential investors and early adopters willing to take a leap of faith. However, there are now a significant number of international companies developing these new application technologies, as they have begun to see the clinical effectiveness offered by nanotechnology and miniaturisation.

The current interest in the use of miniaturisation in the life sciences has been driven by the many advances this new concept promises. Individuals, companies and funding bodies are looking for ways to invest in this newly commercialised technology. To ensure success, nano-companies need to secure support from venture capitalists and other funding bodies, which can be difficult in the current economic climate.

However, despite the advanced developments in miniaturisation in the life sciences, the industry is still relatively new and there are a number of gaps in the supply chain that prohibit products from getting to market in an effective manner. It is crucial with any new technology to ensure that all parts of the supply chain interact and keep each other informed of developments and capabilities.

One of the Nanotechnology KTN’s main remits is to analyse this supply chain, determine where the gaps are and encourage companies to recognise the commercial gains that can be reaped from bridging them.

Connecting members of the supply chain with one another means that academics, research specialists, industrial practitioners and funding sources can meet to discuss ideas and business opportunities, thus ensuring the developments in this application of nanotechnology continue.

Clearly, many of the applications in these new markets are novel and as a result have yet to be fully developed and become economically viable. In the quest to make these technologies and applications available to a wider market, clinical efficacy and value to the healthcare payer are ultimately the deciding factors.

Increasingly, products need to be cost-effective – and the materials used to produce each device represent a significant part of the cost. It can be expected that as the use of miniaturisation in life sciences becomes more widespread, the associated costs will reduce and the applications will expand much more widely.

Given the economic benefits it promises, it is inevitable that the use of miniaturisation in the life sciences will continue to be adopted and supported.

Mike Fisher, PhD, is Theme Manager – Life Sciences & Healthcare at the Nanotechnology Knowledge Transfer Network (KTN).

The diversity of wounds and the wounded means that the evidence base for wound care therapies is a complex issue. Professor Richard White of the University of Worcester and Wound Care Alliance UK looks at how companies can best establish the case for their products.

The current situation regarding issues of product evidence and product availability in wound care has been discussed in Medtech Business (May and June 2010). Therapies affected by these issues include silver and other modern wound treatments, such as moist wound healing dressings and topical negative pressure (TNP) devices, which have attracted the scrutiny of those who conduct systematic evidence reviews. Following those commentaries, this article offers some proposals for a way forward.

Therapies on trial

The modern age in wound care, dating from around 1970, has seen a variety of new medical devices come to market – many of which have achieved ‘standard of care’ status. For example, elastic and non-elastic compression bandaging; hydrocolloid, alginate, foam and film dressings; honey as a CE Marked product and many others have become established in the clinical armamentarium.

Countless clinicians, many of them acknowledged experts, have come to rely on these products, knowing that when they are correctly used they work well. This steady supply of products has come from an innovative, dynamic industry that works closely with the clinician.

However, the evidence gathered to support these products does not satisfy the various groups who insist on the Cochrane-style analysis of randomised clinical trials (RCTs). Recent publications have criticised the evidence for moist wound healing, antiseptic dressings and TNP. This criticism, published in the medical literature and the national press, has led to restrictions on product availability.

The key priority, in my view, should be to maintain a regular flow of safe and effective innovations, supported by sufficient evidence for regulatory purposes and for informing the clinician. The introduction of such products should, of necessity, be followed by the ongoing collection and publication of clinical evidence.

Innovation is vital to wound care, as the steady flow of new and improved products leads directly to better patient care. The discipline is still in its infancy – a stage when developments are frequent. The industry is populated by a broad mix of large, established companies and smaller companies, many of them start-up ventures. This affects the level of investment available for expensive RCTs.

Should trials be left to the wealthy companies alone? Or can other, more economical forms of clinical evidence be gathered instead? That would offer the smaller, less affluent companies greater opportunity to develop products, gather evidence and take their treatments to market – and in the past, that has been a significant feature of wound care in the UK.

There is no doubt that evidence in one form or another is essential for the development of wound care – so open discussion of the issues around what makes for effective evidence is needed. In addition, some proactive action on the part of the wound care sector is also essential: companies must, to my mind, take action before further restrictions in product availability are foisted upon them.

Finding the facts

There is a strong case for looking more carefully at what evidence is already available in the public domain. Cochrane analyses have been justly criticised for not taking all of the available evidence into consideration. A preferable method of analysis, with recommendations, is the GRADE system. This well-known and respected system, in my opinion, should be employed to assess the evidence for a number of existing products.

With regard to the ‘quality’ of different types of evidence, the European Wound Management Association (EWMA) has published guidelines for the conduct of RCTs in the May 2011 issue of the Journal of Wound Care.

If a company decides that an RCT is the most appropriate means of gathering clinical evidence, it is important that they avoid the pitfalls which have blighted many previous trials. The Cochrane reviews list the numerous shortcomings in trials, mainly methodological errors, which form grounds for disqualification. These can be avoided!

• At the planning stage, trials should be configured with purchasers in mind: as well as gathering clinical information, the trial should take account of economic factors and quality of life instruments.
• Once the data are published, these should enhance the chances of product uptake or changes in clinical practice. Quality data will make counter-arguments difficult and merit publication in quality journals, and so garner support from opinion leaders.

Case studies are frequently used to provide support for products. However, it is an unfortunate fact that many, probably most, of these studies are of very little value. This is due to their planning and objectives, as well as the information provided. When case study posters and journal reports make products appear to be panaceas, it is no wonder that the whole exercise becomes devalued.

Cohort studies, when properly conducted, can be valuable in many ways. Their merit has been extolled by many influential figures. The GRADE system of analysis gives reasonable weighting to such studies, whereas Cochrane analyses ignore them completely. Their format is less clear than that of RCTs – but when they are conducted in a multicentre setting, with clear objectives and endpoints such as clinical goals, economic factors and quality of life issues, they provide useful data.

Post-marketing surveillance studies, conducted long-term in the ‘real world’ of routine clinical practice, are under-used and under-estimated in wound care. As far as I am aware, they are mandatory in Germany and some quality data have been published from these studies.

Audit of clinical practice is as ‘real world’ as we can get when it comes to clinical (and hopefully financial) data. Efficient clinical settings can audit their practice for long-term outcomes in treatment of wounds. Such studies can provide the most meaningful evidence.

Value and cost

Cost-effectiveness, or health economics, has been a high priority in healthcare for many years, yet it does not figure in enough wound studies. Rather naively, claims of ‘cost-effective’ based on the unit price of a product still appear.

Health economics is a defined and refined science and must be recognised, and used, as such. In this respect there is vast room for improvement in company-sponsored wound treatment studies.

For the future, it is important that the evidence for wound care therapies is of better quality than it generally has been over recent decades. This is achievable through awareness of the literature and close liaison with experts – it does not necessarily need to incur substantially greater costs!

The whole dynamic of selling has changed over the past twenty years. No longer is it sufficient to demonstrate the product to a nurse or doctor and wait for the orders to flow in. Other key groups are now involved, and liaison with them to facilitate product uptake has become essential.

Everyone involved in wound care in the UK must now be aware of, and recognise the important role of, pharmacists, medicines management, formulary committees etc. Companies must do more to involve these groups.

The transition or evolution of standards for medical devices from the days of the first modern ‘moist wound dressings’ is remarkable. Following the enactment of the Medical Device Directives in the mid-1990s, the system has become more ordered and bureaucratic.

However, this process is far from complete. The recent furore over failing hip implants has shown that the current regulations are not adequate to prevent major clinical catastrophes involving medical devices. In the USA, the FDA is taking a very close look at device regulation.

As the standards for evidence become more sophisticated, better reflecting the realities of clinical practice, the medical device industry – and in particular, the sector supplying wound dressings and associated products – has the opportunity to address the need for change and adapt accordingly.

 

 

Richard White is Professor of Tissue Viability at the University of Worcester.

A highly-skilled workforce is a must in today’s competitive business environment. But as many companies slash their budgets in the relentless pursuit of efficiencies, is employee training becoming yet another victim of austerity?

Companies that fail to invest in talent will undoubtedly learn the hard way that this is a short cut to failure. Chris Ross presents a crash course in the current market for training and development.

There are mixed views on whether companies’ training and development activities are taking a hit in the current global economy. Recent mid-year analysis in the US revealed that global spend on training this year has been around 7–9% higher than in 2010. But Training 2011, a study by UK market intelligence company Key Note, presents a different trend.

The report estimates that spending on off-the-job training by UK private and public sector employees fell by 3.2% in the year to April 2010 – and that spending on external trainers dropped by around 17% in the same period. The study reports that training investment most likely dropped further by around 2.5% up to April 2011, but forecasts a slight recovery of 1.5% by April 2012. These are worrying times.

Companies are desperately seeking to increase their capabilities as the markets in which they operate are changing; but to drive real growth, continued investment in talent is essential. The Chartered Institute of Personnel and Development (CIPD) says that whilst organisations will undoubtedly expect people to do more with less, they should not expect employees “to want to do more with less learning and talent development.”

Learning and Talent Development 2011, the CIPD’s annual survey report, revealed that resources and budgets for learning and development had decreased in two-fifths of organisations in the past year, whilst a third of companies had reduced their headcount.

The study showed that although most businesses have a training budget, in most cases these have not only suffered cutbacks, but are also expected to cover a broad range of activities and costs. Unsurprisingly, the majority of budgets cover items such as external courses and conferences (93%), hiring external consultants and trainers (83%) and books/training manuals (81%).

But for two-fifths of the organisations surveyed, the training budget is also expected to cover fixed costs and salaries for in-house trainers. Clearly, the battle to upskill the workforce is being played out in the most testing of circumstances.

 

The employment market

The employment market is certainly creating challenges for employers and candidates alike. Unemployment is rising as organisations continue to reduce their workforces – but those companies that are hiring are finding that many job applicants are not sufficiently skilled and are therefore unsuitable for employment.

Conversely, in a stagnant job market, those who are in employment appear reluctant to move. Talented individuals are staying put. But is enough being done to nurture and develop them? Or are they too likely to stagnate as opportunities fail to emerge?

Likewise, less talented but generally reliable employees –the ‘safe pairs of hands’ that populate every organisation – are in many industries failing to receive adequate skills development, leading to an uncomfortable paradox: they are safe in their roles, but as their markets evolve they are not ‘fit for purpose’ to perform them.

In difficult times, the need for increased investment in human capital is significant. Training and talent development is a major priority for businesses large and small. In a market characterised by growing shareholder expectations and shrinking operational budgets, what are the options for training and developing the workforce?

Learning and Talent Development 2011 says that most companies are continuing the 2010 policy of “switching to more cost-effective development practices”. This has seen organisations reduce their use of external training service providers and instead increase in-house development programmes, internal knowledge-sharing events and coaching by line managers. In addition, the use of e-learning solutions continues to grow.

Technology-led learning tools are becoming increasingly popular across Europe. Training today, training tomorrow, a present-day analysis of learning trends across Europe by Cegos Group, says that uptake of solutions such as ‘serious games’, mobile learning and online learning has grown considerably. This, it says, is driven by an emerging younger demographic in the workplace, and widespread corporate objectives to reduce costs yet maintain productivity.

Learning solutions that are delivered in a medium that is more familiar to this emerging user-group, and that mirror the new “social, global and mobile environment”, are not only easier to integrate into employees’ daily activities, but are also considered more engaging and effective. According to Cegos Group’s 2011 survey, half of those trained in Europe have used informal learning tools such as videoconferencing, wikis, blogs, forums and podcasts.

 

Old school still rules

So the rise of e-based learning solutions is tipped to continue. But, despite rhetoric to the contrary, not at the expense of traditional learning tools. Face-to-face training remains popular – external courses, seminars and conferences continue to play a valuable educational role.

In heavily knowledge-based and technical industries such as life sciences, traditional methodologies remain both popular and effective. In medical markets, despite the obvious growth of e-learning tools, tried-and-tested lecture-style learning still appears to be the preferred option, with many participants choosing it as their favoured route for CPD.

The CIPD study shows that external conferences and events are rated as being among the most effective learning methods for leaders, potential leaders and middle management. Despite this, more than a third of companies (34%) have reduced their use of external events in the past year.

In other areas, classroom-style lectures are being replaced by individual one-to-one sessions that enable more individualised, targeted training. There has been significant growth in activities such as coaching and mentoring, which are being recognised as important tools to encourage individual accountability and nurture talent.

According to the CIPD survey, coaching takes place in more than four-fifths (86%) of companies polled, with its main objectives being to support performance management, prepare people for leadership roles and assist learning and development.

A third of companies employ coaches, while two-fifths hand responsibility for it to line managers. Only one-fifth use external consultants for coaching. Group training – such as team coaching sessions and collaborative workshops – is evolving to become more interactive, customised and flexible – giving facilitators the opportunity to adapt training quickly, based on employee feedback and needs.

 

The need for speed

Speed is emerging as a key consideration in companies’ training and development strategies. Businesses are becoming more impatient. They want their employees to develop quicker and to become more proficient and productive faster than ever before. Such corporate impatience is, in fact, often mirrored by learners themselves. Employees want the fast track to success and, where it exists, will choose the crash course over longer-term learning.

As a result, multimedia and web-based training tools have seen a real surge in uptake. The benefits are clear, but the approach is not without its challenges. The dropout rate in self-monitored online training is apparently high, with too many participants failing to complete courses.

Developers need to work hard to ensure that online courses are engaging and exploit the opportunities for interactivity and connectivity that the medium provides. Critics claim that too many courses appear little more than traditional training manuals that have been uploaded to an online format.

Clearly, as the global business environment continues to evolve in challenging times, training models and methodologies are having to adapt to meet changing needs. The emergence of collaborative, interactive and dynamic learning tools, enabled by rapid advances in technology, have opened up new opportunities for training and development – but it only really completes the circle of learning solutions available to the market.

Training is, after all, demand-driven and should be designed to meet the varying, and often individual, needs and tastes of its end users. As such, training managers should continue to consider the full suite of learning tools open to them – in dialogue with learners and their line managers, to find the most effective solutions to meet organisations’ and individuals’ objectives.

Undoubtedly, however, the biggest demand from a business perspective is to nurture a skilled, talented and engaged workforce. To do this, companies must continue to invest in training and development, rather than chip away at training budgets for short-term efficiency gains.

The potential long-term impact of that approach is a disengaged, unmotivated and unproductive workforce that is not fit for purpose. And that really would be learning the hard way.

Data in this article have been sourced from Learning and Talent Development 2011, the Chartered Institute of Personnel and Development’s annual survey report. This is available for download from the CIPD website. Training today, training tomorrow, an analysis of learning trends across Europe and global comparisons, is available for download from the Cegos website.

The UK medical device market is one of the biggest in the world, with growth relying predominantly on imports. But it is also a significant exporter of medical technologies. In the second of two articles looking at the domestic market, Medtech Business in association with Espicom takes a look at the UK medtech export market.

The UK is a significant global exporter of medical devices (including medical equipment and medical supplies) and remains among the world’s top 10. But the sector has faltered in recent years. Exports peaked in 2006 at US$7,238.5 million, but have fallen every year since then. In 2009, exports dropped to US$5,394.4 million – roughly the same level seen in 2005. The orthopaedic sector was hit especially hard in 2009. (For more details, see Figures 1–3.)

Consumables

Medical consumables were the largest individual export area in 2009, valued at $1,140.0 million,* or 21.1% of total exports. This was a fall of 3.8% compared with 2008, with a 2005–09 Compound Annual Growth Rate (CAGR) of –1.8%.

Consumables are defined as wound care products (medical dressings, sutures, sterile, surgical and dental goods), syringes, needles and catheters. Within this category, catheters and cannulae amounted to $279.7 million, virtually unchanged from 2008, but significantly lower than the 2005 level of $410.6 million. Exports of medical dressings amounted to $503.7 million, a fall of 8.3% compared with 2008.

Diagnostic imaging

Diagnostic imaging is not historically one of the UK’s stronger sectors. In 2009, UK exports of diagnostic imaging apparatus amounted to $1,131.3 million – 21.0% of the country’s total export market. In recent years, the electrodiagnostic sector has been its biggest source of growth. The 2009 total showed a fall of 0.1% compared with 2008, with a CAGR for 2005–09 of 5.4%.

Electrodiagnostic imaging exports amounted to $575.1 million, a rise of 23.4% over 2008 due largely to a big rise in MRI exports. Radiation apparatus exports were far lower at $83.4 million, although this too represented a strong increase of 28.2% on 2008 figures. Exports of imaging parts and accessories fell sharply in 2009, by 21.4% to $472.9 million.

Orthopaedic products

Exports of orthopaedic and prosthetic products saw a sharp fall in 2009. Exports totaled $1,231.5 million in 2008, but fell by 46.7% the following year to reach $656.2 million. Artificial joints fell by 67.1% to $71.5 million, while other orthopaedic/fracture appliances fell by 49.8% to $445.2 million.

As outlined in Medtech Business’s first UK market article (July 2011), imports in this sector also saw a sharp fall in 2009. Espicom suspects that much of the reduction is due to a change or relocation of multinational manufacturing and repackaging activities.

Patient aids

Exports of patient aids amounted to $1,054.5 million in 2009, a fall of 5.2% compared with 2008.

Portable aids fell by 8.0% to $762.1 million, while therapeutic appliances rose by 2.9% to $292.4 million.

Dental products

Exports of dental products reached US$148.2 million in 2009 – 2.7% of the total. This is an increase of 4.1% over 2008; the total fell sharply in 2007, but has since recovered a little.

Dental cements amounted to US$70.2 million in 2009, a rise of 17.7% over 2008.

Leading destinations

In 2009, the single leading destination for UK exports was the US, with $768.1 million (4.2%) of total exports. The largest shipments to the US were diagnostic imaging products, which amounted to $188.8 million, 16.7% of exports in this sector. This was followed by consumables, which amounted to $136.5 million, 12.0% of exports in this product area. The US also received 31.7% of dental product exports, valued at $47.0 million. (See Figures 4 and 5 for more details.)

More than half of UK exports went to the EU-27 countries. Shipments totaling $3,016.7 million (55.9% of total exports) left the UK for the EU-27. The principal recipient within the EU was Germany, accounting for 13.4% of exports, valued at $720.6 million. Almost a quarter (22.3%) of diagnostic imaging apparatus exports went to Germany. Belgium was the single biggest importer of UK consumables (18.6%) and UK orthopaedic and prosthetic products (17.2%) – in both cases outstripping the US. Other leading destinations within the EU were France, Ireland and the Netherlands.

Next month, Medtech Business will look at the medical technologies market in France.

This article is based on information from Medical Market Outlook reports published quarterly by Espicom Business Intelligence.
*All figures are in US $. For further details of the 63 markets covered, please visit www.espicom.com/outlookm1