Germany is one of the world’s leading medical technology markets: the revenue potential for companies is high and exports are strong. This is why it is a key market for foreign medical technology companies, with a myriad of opportunities.
The robot gripping arm from the Canadian company Kinova Robotics is a boon for wheelchair users who have little or no movement in their arms. With the arm, they could, for example, open the refrigerator, take out a bottle, pour a glass and drink something without assistance.
Headquartered in Quebec, Kinova is one of the most successful growth companies in the medical technology (med tech) industry in Canada. After operating in Germany for several years, the firm opened a sales department there at the start of 2017. “Germany is the leading market in Europe,” says Peter Fröhlingsdorf, MD of Kinova Europe in Bonn. “The revenue potential is great and the customers more demanding than elsewhere. If the Germans are impressed by a product, that is a good argument for sales in other countries.”
Fröhlingsdorf sells the robotic arms to specialized medical centers, whose technicians adapt the product to their customers’ wheelchairs. “We get a lot of feedback and are in close contact with the retailers. This cooperation with the technicians is by no means as common in other countries as it is in Germany. It requires effort. On the other hand, it allows us to make our products the very best they can be.”
An important test market
There are several factors that make Germany highly attractive to foreign medical technology companies. The country’s healthcare market is one of the largest in the world, worth €337bn. Its med tech market is the largest in Europe. Furthermore, many well-trained physicians work in some 2,000 hospitals nationwide, as well as in university clinics and research institutes.
Meanwhile, highly-qualified researchers and engineers are driving innovation in the industry. The German market thus offers a good basis for developing and launching new products and processes. “Germany is regarded as an important reference market for the introduction of innovative technologies,” says Joachim Schmitt, MD of the med tech industry’s association (BVMed).
Germany is a reference market for the introduction of innovative technologies.
At the moment, the German healthcare market is growing by almost four per cent per year, which is stronger than the German economy as a whole. Many factors are responsible for this growth: for example, the number of elderly people has dramatically increased and is expected to reach 10 per cent of the total population by 2020, with up to 3m people needing care – rising to more than 4m by 2050.
The demand for nursing technology is correspondingly high. Digitization has also spurred growth: an electronic health card has been recently introduced and patients are more open to using e-health services. According to the IT industry association Bitkom, 90 per cent of Germans already use health apps or would do so in the future and 75 per cent would like to receive test results in digital form. The German market for mobile health was valued at €3bn this year.
Cinematic Volume Rendering Technique (VRT): a research visualization technology that here enables a hight-resolution, anatomical image of the brain, merged with colorful tractography data.
© Max Planck Institute, Leipzig
Medical technology is one of the most important sub-sectors of the German healthcare market. Med tech imports have risen from €9.5bn in 2005 to more than €15bn per year. Most med tech companies in Germany are SMEs employing less than 250 employees; a large proportion are internationally successful and the average export rate is 64 per cent.
But if you want to gain a foothold in the German market, you need to adapt to the country’s complex healthcare system. In Germany, most citizens have some form of statutory health insurance (GKV), which covers more than 70m Germans. Most of the remaining 12m Germans have a private health insurance. The GKV’s medical service checks whether a new product fulfills certain criteria before offering cover. “At any rate, you need someone here in Germany who is very familiar with the system,” says Kinova Germany’s MD Fröhlingsdorf.
The Federal Joint Committee (GBA) also plays a key role for med tech companies: it defines the principles according to which the statutory health insurance funds provide medical cover to their members and is involved in the practical implementation of legal regulations on medical technology. Recently, European legislators have revised the requirements for new medical products: manufacturers of high-risk products in particular will have to demonstrate more clearly the extent to which they are generating a greater benefit or lower cost than conventional technology before the health insurance funds will cover the costs.
Facts & Figures
people are employed in the German medical technology industry
of sales in medical technology products in Germany comes from products that are less than three years old
people in Germany work in the health care sector – 1m more then 12 years ago
of Germany’s gross domestic product is provides by health care – last year, the figure was €337bn
is the health care industry’s annual growht rate in Germany
Med tech ecosystem
“How exactly this new process of testing will look in practice is still to be seen,” says Sebastian Gaiser from the American medical and pharmaceutical group Johnson & Johnson, which operates several production plants in Germany. “It is therefore even more important for med tech companies to get involved in the process and to establish a dialogue with the investigating bodies. This applies irrespective of the size of the company.” It is particularly helpful for newly-established medium-sized companies to be located in one of the many med tech clusters around the country, as private and state funding is relatively easy to obtain where companies, research institutes and clinics work closely.
The density of high-caliber research institutes in Germany is an important draw for foreign companies. The institutes are familiar with local conditions and can support partners in R&D. The Fraunhofer Institute for Production Technology and Automation (Fraunhofer IPA) in Stuttgart is one of the largest, with around 1,000 employees, including some 80 med tech specialists.
»If the Germans are impressed by a product, that is a good argument for sales in other countries.«
Peter Fröhlingsdorf, Kinova Europe
The experts are primarily engaged in the field of orthopedics and laboratory/clinical automation and cooperate with 30 other Fraunhofer institutes. “In this way, we get expertise at the highest level on many special topics where there are intersections to other research areas,” says Urs Schneider, who is responsible for medical engineering at Fraunhofer IPA. In addition, the researchers work closely with university hospitals across Germany and abroad, especially in the U.S. market.
“Medical technology is a global industry, so we are also doing research globally,” says Schneider. In addition to their technical expertise, Schneider and his colleagues know the regulations in their home country, with all their specialties and ongoing changes: “You need both in medical technology research and development: know-how at the highest international level and at the same time knowledge about the situation in the local market.”
Academic research is key
The medical engineering department of Fraunhofer IPA works largely on behalf of industrial companies. The researchers create feasibility studies, build and test complete prototypes of medical devices such as prostheses and implants or machines on test stands and assist companies in the evaluation of benefit calculations, taking account of Germany’s regulatory requirements.
“Much of this is secret contract research, which we do not discuss with third parties for competitive reasons,” says Schneider. “This is a difference, especially to the U.S., where companies either do research alone or publicly collaborate with universities or institutes.” Finally, the institute has supported a foreign company to develop a machine for the fully automated examination of blood bags for the German market, which makes the error–prone manual examination superfluous. “Until now there was no such machine on the German market,” says Schneider. “It’s a completely new development.”
Share of worldwide production of medical technology
In addition to such commissioned projects, the Fraunhofer institute is developing its own innovations that med tech companies can use under license. Recently, a group of bionics experts and medical technicians have developed a tool that can be used to drill not only round but also square holes for non-slip anchors. The technology is interesting for all types of anchors, regardless of the industry, but especially for the medical sector. A company is already testing the now patented technology for use with artificial hip joints. A special drill could hollow out a patient’s thigh bone in order to optimally anchor the shaft of an artificial hip joint.
The French knee and hip prosthesis manufacturer Amplitude is familiar with the German research landscape. Since the introduction of the endoprosthesis registry five years ago, for example, all details of knee and hip operations are documented, especially after what time period a prosthesis breaks and has to be replaced.
To date, around 500,000 implants have been recorded and the number of participating clinics is growing. “The register is very interesting for us as a manufacturer of high-quality implants,” says Thomas Krause, managing director of Amplitude’s German subsidiary. “Our distribution works on a scientific basis, and the vastness of the database of the German registry is an exception in a global comparison.”
»The reputation of the German market is high: whoever makes it here can make it everywhere«
Thomas Krause, MD of Amplitude Germanay
Operating in Germany
Amplitude employs 260 people worldwide and is the number two for hip and knee implants in France. Its German sales and marketing subsidiary employs nine people. The local market is one of the most important worldwide, and is vital to the company’s plans for growth. “The German market is highly competitive and the price level for our products is at the bottom in an international comparison,” says Krause. The reason for this is that health insurance companies pay a fixed amount of money to hospitals for operations such as hip replacement. Thus hospitals have an incentive to buy the cheapest devices available.
“Nevertheless, the reputation of the German market is high; whoever makes it here can make it anywhere,” Krause adds. International customers are looking for industrial partners with concepts that are not only economical but offer the best possible solution for patients. Amplitude’s customers are individual clinics and purchasing groups that bundle purchasing for several hospitals and according to great market power – this is a peculiarity of the German market. “Such a structure does not exist in the French home market,” says Krause.
Operation robots in action at Brainlab, a Munich-based medical software compny at the cutting edge of med tech. The robot is connecte to a neuro navigation system and allows the precise, automated placement of surgical instruments, while the robotic arm can opreate in a restricted space so it does not interfere with the surgeon’s work. | © picture alliance/Matthias Balk/dpa
He also keeps an eye on the evolving regulatory framework. For instance, the GBA has announced the testing of so-called quality contracts for prostheses. In future, prostheses need no longer be judged purely on cost but also by utility: for example, does the patient need fewer painkillers after surgery and are they recovering faster than with other products?
All of this could play a greater role in the assessment of prostheses in future. “I am hoping that such a swing away from the pure price competition for prostheses would confirm our business strategy with high quality standards of the products,” Krause says. In any case, the GBA’s advances underscore the fact that the search for optimum conditions in the German medical technology market continues. Companies are incentivized to push ahead with innovative developments.
Top 5 growth areas
The world market for medical technology will grow from €370bn in 2017 to €530bn in 2022, according to the latest projections from Institut EvaluateMedTech. The German medical technology industry is likely to benefit significantly from its high export share of more than 60 per cent. One of the strongest growth areas is endoscopy, where experts predict an average growth of more than 6.5 per cent a year by 2022. The cardiology, ophthalmology, dental and in-vitro diagnostics sectors are also experiencing strong growth, at a rate of 5.5 to 6 per cent a year.