Report Predicts Continued Medtech Growth in Western Europe, Despite Current Economic Problems

Despite ongoing economic woes in Western Europe, a recent report predicts growth for medtech markets. The study was conducted by United Kingdom-based Espicom Business Intelligence, which provides data and research on the global medical devices, pharmaceutical, healthcare and therapeutics markets.

With France—the second-largest medical device market in Europe—recently slipping into its second recession since 2008-2009, many industry observers have been wondering how the medtech sector will be impacted as the country struggles to pull out of an economic slump. A recession is defined as two successive quarters of negative growth.

But France is not alone in what has become the longest recession period to hit the 17-nation euro zone since the introduction of the single currency in 2002. The zone has recorded its sixth quarter of decline, beating the 2008-2009 recession that followed the global financial meltdown in duration, but not in its depth, according to economists.

Five of the ten largest medical device markets in the world are in Western Europe: Germany, France, the United Kingdom, Italy and Spain. As is the case with most other industrial sectors, medical device markets will be impacted by the current euro-zone crisis in the short term. This is a danger for domestic manufacturing industries, especially in Germany, which rely on demand for exports of their products. 
For example, in the three-month period between August and October 2012, medical device exports increased by only 0.6 percent in Germany and fell by 4.4 percent in the United Kingdom. However, beyond the current recession, the countries of Western Europe are expected to return to growth with leading markets averaging average annual growth of 1.6 percent between 2014 and 2018.

According to the report, the mature and high-value medical device markets in Western Europe are wealthy and developed. There is a tension between attempting to contain health costs and a desire to remain at the forefront of technological innovation. Hospitals will need to invest in the provision of new medical equipment and technologies to maintain a high standard of care.

In addition, healthcare services will need to become more efficient in order to cope with financial pressures and the needs of aging populations. As part of this, there will be an increased demand for efficiencies, for example, medical devices that facilitate minimally invasive surgery, which can increase the number of operations performed in day surgery and ensure a faster turnaround of patients. Despite recessionary pressures, market growth rates over the coming years will be positive, analysts predicted.

There has been strong growth in imports across Western Europe in recent years, and imports tend to account for around 80 percent of the market, Espicom analysts noted. Most importantly, trade between European Union countries dominates the import market, and companies wanting to exploit the full potential of major European countries need to ensure an effective marketing and distribution network.

Other factors affecting the market’s growth potential include changes in the regulatory environment or government measures such as spending controls on medical devices. The significant increase in the migratory population along with an increasing and needy population of elderly people will see demand for medical devices and equipment maintained, analysts estimated.

A breakdown by country follows:

France
The French medical device market ranks among the top five largest markets in the world, and is the second largest in Europe, behind Germany. Consumption of medical equipment and supplies was valued at $13.3 billion in 2012, equal to $209 per capita. New measures recently have been taken to control spending on medical devices, similar to those already in force for pharmaceuticals. For this reason, the medical market is only likely to see moderate growth over the next five years. Medical device imports grew by 0.8 percent to $11.2 billion in 2011, although not all imported products are destined for the domestic market. In recent years, there has been a marked rise in re-exports in certain sectors, most notably pacemakers. François Hollande became France’s first left-wing president in nearly two decades when he beat Nicolas Sarkozy in the May 2012 presidential election. The Socialists also won an outright majority in the legislative elections that took place in June 2012. The new government has retained the target to reduce the general government budget deficit to 3 percent in 2013, which will require freezing the bulk of state spending in real terms next year. 

Germany
The German medical device market is the third largest in the world, ranking behind the United States and Japan. In 2012, the German medical device market was estimated at $23.3 billion, equal to $285 per capita. Although in decline, the population of Germany still accounts for around 20 percent of the total population of Western Europe with an estimated 81.8 million inhabitants in 2013. At more than 11.7 percent of gross domestic product (GDP), healthcare expenditure is at a high level but increasingly is constrained. The domestic market remains tight, with continued downward pressure on prices. Government funding of hospitals in recent years has remained static, therefore hospitals in the public sector are maintaining existing equipment rather than investing in new appliances. This has led to domestic producers becoming increasingly reliant on the export market. 

United Kingdom
The UK has one of the largest medical device markets in the world. It was valued at $8.9 billion in 2012, equal to $142 per capita and it is projected to increase by a compound annual growth rate of 6 percent until 2017. The growth of the UK market is predominantly import-led as many domestic manufacturers are not able to rapidly adjust to changes in demand. This has led to a succession of trade deficits since 2001. The import market has not been immune to the recession, however. It has faltered since mid 2008, and the U.S. dollar total in 2011 was lower than that in 2007. Health expenditure was estimated at $234 billion in 2012, equal to 9.5 percent of GDP. Healthcare spending is one of the areas that the country’s Conservative/Liberal-Democrat coalition government has been looking at to create savings and efficiencies, as it works to reduce the deficit.