Fragmentation, regulations pose unique challenges for Europe's digital health market

This week at the EIT Health Summit in Paris entrepreneurs, industry players, regulators and investors came together to discuss the future of health innovation in Europe, and its relationship to the US market.
By Laura Lovett
12:51 pm

Digital health has gone global. On both sides of the Atlantic, healthcare stakeholders are evaluating these new tools, while innovators are navigating the pathways to implementation. It’s clear that while the North American markets and the European markets each have their own challenges, the industries also share plenty of universal opportunities and obstacles. 

This week at the European Institute for Innovation & Technology (EIT) Health Summit in Paris, entrepreneurs, industry players, regulators and investors came together to discuss the future of health innovation in Europe and how it will fit into the broader global market. 

Two paths diverge 

It’s no secret digital health products look different than traditional healthcare tools. They also iterate faster than drugs and traditional medical devices. This has led EIT, an EU-backed healthcare collaboration network, to create a taskforce to evaluate pathways for new startups in Europe. 

“One observation is developing cycles in digital health technologies are much shorter than what is known for medical devices,” Dr. Finn Boerlum Kristensen, chairman of the EIT Health Think Tank, said during a panel session. “Already, medical devices compared to drugs have a much faster cycle. Here we see even shorter cycles. This is a challenge for regulatory processes because there is no need to do a lot of work if you already have an outdated version when you get the regulatory approval. So that is something that is going forward as a challenge.”

Now regulatory bodies are hammering out the best ways to monitor and approve these tools.

“Technologies that are involved in digital health are often pretty straightforward, so in that case the pathways are much simpler [than med tech]. But if you think about the market pathways and who is going to pay for this it is very complicated,” Dr. John Collins, COO at Consortia for Improving Medicine with Innovation & Technology, said during a panel. “The regulatory issue is much more complicated, and clinical adoption and bringing things to work flow are more integrated. The nice thing in the US [is that it] has recognized the complications and that they do need to look at digital differently.”

America’s FDA is currently piloting a pathway called the Precertification Program, which will focus not on particular products but on firms and developers. If the FDA is satisfied that the firm is responsible and safe in its development, then it won't need to regulate each product from that firm.

However, the FDA's initiatives have not been without controversy. Last month three US senators sent the agency a letter expressing concern over the agency’s ability to monitor the tools over time and how the companies would be appraised in the first place. 

On the other side, the EU is rolling out the Medical Device Regulation (MDR), which is set to include digital health, in May. However, the industry is still figuring out exactly what this will look like. A survey from the Regulatory Affairs Professionals Society (RAPS) and US tax, audit and advisory firm KPMG found that only 27% of 230 medical device surveyed are expected to be in compliant with the regulations by the time they go into effect. 

Kristensen said his committee also had questions about the role of clinical evidence in the regulations. 

“The new medical device regulation that would start implementation next year is asking for strict clinical evidence ... for clinical technologies," Kristensen said. "Our impression from the discussions from the roundtables is we are not ready to say how these evaluations should be done. I think it is coming up strongly that there is again a multi-stakeholder need to discuss which methods should be applied, eventually going into the needs that will be expressed by the notified bodies and competent authorities.”

Navigating a fragmented market  

While the EU is creating more regulation around MedTech, it also faces additional hurdles to implementation on a country-to-country basis. Similar to the US, startups in Europe build at a regional level before expanding. 

“You often develop your solution in a local setting that is good for the development in its first phases,” Kristensen said. “Launching it another country is another challenge because systems differ — there are not really issues of language translation, but a fitting into what are the requirement … So again this is something that you need in the long term.” 

Meanwhile, the size and uniformity of the US market eases the burden for young digital health startups.

“I think the huge difference here is the size of the US market. … There are differences but there are many more similarities than differences,” Collins said. "On the development side, the investor network, the suppliers, the other groups are much more familiar [with the systems], so you can get things done more rapidly in the stages because the resources and expertise are also significantly larger, which does make it easier.”

Setting up shop in a new EU country poses not just regulatory barriers but also logistical ones, such as infrastructure. However, some organizations like EIT are working to improve collaborations by connecting startups in different parts of Europe with industry stakeholders across the continent.

“So [we work with] government investors startups, industry, research, academia and healthcare providers,” Jan-Philip Beck, CEO of EIT Health, told MobiHealthNews. “We have connected those where we see a lot of innovation happening and capability. There is also an outreach dimension. Europe is a big place. We also want to connect to the more upcoming market. There are great opportunities.”

Beck said he views central and eastern Europe in particular as prime markets because of the need for digital tools and their history of innovation. 

Finding funding in Europe, US 

Another major factor for innovators to navigate is funding. Much like regulation and infrastructure, venture is somewhat splintered across the EU. 

“I would say overall we see a relatively fragmented landscape,” Beck said. “So we have a few public funds — Germany, for example, and Portugal — that make early-stage investments. You do have VCs overall in Europe with that landscape. I think we can do relatively well in financing seed stage and early rounds. There is the money there and expertise and accessibility.”

The US and EU markets are also very much entwined in this space. A number of Europe-grown startups have sought out funding from US backers, those names include Swedish startup Flow and Finnish company Meru

"Europe is a very fragmented market still, so if you put your product on the market in Portugal, it doesn’t really give you a head start to the market entry in the UK. That is tricky,” Beck said. “That is why the US is attractive and of course there is more investment there.” 

European companies are able to squeeze the dollar — or euro in this case — further than their peers across the Atlantic, according to Tomasz Kozlowski, head of the European Investment Fund 's Innovation & Alternative Financing Division. 

“Data shows that out of the single euro on the pre-money valuation in the US, European startups are valued at 70 cents,” Kozlowski said. "European companies are more efficient or more effective in terms of capital. [For each] euro of capital, European companies do much more with it than Asian companies or American companies, and this is something we need to capitalize. It is amazing that investors not fully are seeing that.”

EIT has also announced a new program aiming to better connect EU investors with startups across the continent. Dubbed the Venture Centre of Excellence programme, it's slated for rollout sometime in 2020. 

As we enter the next decade there are still a lot of unknowns about what healthcare will look and who will fund innovation. As for Europe many are seeing digital as an opportunity for the coming years. 

“I think digital solutions are pervasively going into healthcare, and moving ahead [with these] is moving healthcare ahead. ... This may be an opportunity in Europe because Europe is much more 'top-down,' and so legislation, initiatives, strategies can actually be a way forward,” Kristensen said. “We’ll see how the new commission deals with health. ... I think the European citizens would like to see common solutions for the benefit of the patients. Let’s see how this develops.” 

Editor's note: This story is part of our coverage of EIT Summit. Conference organizers invited MobiHealthNews to the event and partially paid for travel and accommodations. As always, MobiHealthNews maintains its editorial independence and made no promises to organizers, including about the content or quantity of coverage.


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