Kirk Zeller , DBA

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European Medical Device Industry
The EU medical device industry is highly fragmented consisting of numerous niche product lines most of relatively modest market size (Commission 1996). The European medical device industry employs approximately 350,000 people and there are approximately 7,000 European medical device companies (Eucomed 2004). Around 94% of European medical device companies are small with less than 250 employees and 70% of them have less than 50 employees (Atun 2002). The majority of European medical device companies have an annual turnover of less than 7 million euros. Production of medical devices in Europe is growing at annual rate of around 5-8% (Eucomed 2004). There are as many as 400,000 products and 10,000 product types that could be defined as medical devices (COM 2003, Review 2003). The UK has the most companies, however, Germany has the largest medical device industry (Eucomed 2004).

European manufacturers of medical devices enjoy a much better market share in Europe than they do in the US. European manufacturers enjoy more than 75% market share in parts of Europe, but only about 7% share of the US market according to a study conducted by the LEK Conseil at the request of the European Commission (Sparrow 1997). The LEK Conseil study entitled, “The Global Competitiveness of the European Medical Device Industry,” evaluated the global competitiveness of the European medical device industry. Another finding of the study was that at the time of the study the EU average spending on medical device R&D was only 5% of sales. The study identified the shortage of venture capital as being a significant reason for less R&D and subsequently less innovation in the European medical device sector. Another observation of the study was that while the EU has many public funding programs to encourage innovation these programs are often focused on research, not development. It is often difficult to secure development funding in Europe. The study also noted that many EU based medical device companies are ultimately acquired by US based medical device companies which further widens the gap between the US and EU medical device industries.

European vs US Medical Device Industries
The US and European medical device industries have similar levels of employment both employing over 300,000 people, the EU medical device industry is focused on lower tech, lower margin products that are less likely to have reimbursement. The US medical device industry tends to be focused on innovative, high margin therapeutic devices which are much more likely to have reimbursement. The United States has venture capital firms specializing in medical device investing, a risk culture, entrepreneurial physicians, efficient industry concentration in four main areas with high concentration of labor with industry specific skills, large investment in R&D, immediate access to the world’s largest market and market with some of the highest reimbursement rates all contribute to the success of US based medical device companies. The EU member states lack the above and in addition many of the medical device innovations which are developed in Europe are developed in universities many of which are strong in research, but not development and consequently few of the technologies reach the market. In addition to lack of capital, lack of management and engineering expertise are also often quoted as reason stifling the development of a venture financed medical device industry which is capable of producing leading edge technologies. US also has the advantage of a large domestic market with some of the world’s best reimbursement, while EU countries have very limited domestic market opportunity and exporting is critical. US exports only around 25% of its production (Commission 1996).

Europe’s lack of a medical device industry which develops high end medical devices for life critical therapies leaves many opportunities for US based venture capital financed medical device companies which focus on developing these types of technologies. The EU’s member state specific reimbursement and healthcare systems makes this a challenging endeavour for US based medical device companies.

Copyright © 2004 Kirk Zeller, All rights reserved