 European Union expansion
to have tremendous impact on healthcare industry growth rate
From Frost & Sullivan
London, UK, 11 May 2004. The accession of ten more central and east
European countries to the European Union (EU) — 15 in 2004 — has created a
single European market, the largest market and trading zone for the
healthcare industry with almost 500 million consumers. The total healthcare
industry comprising pharmaceuticals and drugs, medical devices and
equipment, and health services is expected to grow at a compound annual
growth rate of 6.4% from 2003 to 2008.
With enlargement comes the concern of ensuring that products of uniform
high quality are available throughout the EU. Acceding member states are
expected to provide effective and innovative medicines to make this
possible. "This can be achieved by enforcing international standards of
intellectual property protection and a sustainable basis for the industry to
supply innovative medicines throughout the EU", states Research Analyst
Lasya M Narasimhachari from Frost & Sullivan. "The future availability of
new drugs is expected to be influenced by the radical differences in
economic and market conditions and the healthcare coverage for medicines
between the present EU-15 and the accession countries."
The need for innovative medicines apart, the huge ageing population in
Europe is also likely to drive research on more effective drugs. Low
fertility rates and increasing life expectancy have resulted in Europe
having the most number of people over 65. This can have a deep impact on the
healthcare system, especially drug development, since the over-65 age group
is the single largest user of pharmaceutical products.
While the phenomenal demand provides exciting opportunities to
pharmaceutical companies, they have also taken stock of the rising
healthcare costs for the elderly and are doing their bit to keep their
products cost-effective.
Apart from pharmaceuticals, the European market for medical devices is
also thriving, having earned USD 41.2 billion in 2002. In fact, Europe is
the second largest market for medical devices and equipment followed by the
United States and Japan. This popularity could have something to do with the
acknowledgement that prevention is just as important as therapy.
"The growth of the pharmaceuticals and drugs as well as medical devices
and equipment segments is directly linked to the health services segment,"
notes Ms. Narasimhachari. "An increase in the number of hospitals, nursing
homes, home healthcare services, dental services and laboratory services are
given high priority in national healthcare expenditure, which could help in
the growth of the three segments."
The factor that can affect all three segments is the health policies in
the EU. Public and private health insurance funds play a critical role in
drafting drug reimbursement policies. The social protection structure is
expected to undergo several changes and the resultant reforms could lead to
increased out-of-pocket expenditure.
While framing policies, regulatory bodies are likely to address concerns
of affordability and effectiveness of the healthcare system. High healthcare
spending need not necessarily mean healthier citizens. Healthcare can be
expensive due to use of sophisticated technology and the labour-intensive
nature of the industry involving high costs of training.
Countries that finance and deliver health services through the public
sector are more likely to have better control over the growth rate of costs.
Countries that depend on only the government for basic coverage spend less
on healthcare than do countries with multiple insurers. To contain costs and
spending on healthcare, governments have instituted policies to control
prices, wages, number of hospital beds and size of the healthcare workforce,
and place caps on health spending as well as shifting costs to the private
sector. While some countries impose wage controls on their public sector
healthcare workers, some others determine prices for medical services after
obtaining approval from purchasers and providers of healthcare.
While spending caps were originally intended for the hospital sector,
which was considered the costliest aspect of the healthcare system, they are
now used to contain overall public expenditure on health. Healthcare
providers are likely to respond to these controls by increasing the volume
of services or changing the service mix so as to include higher paid
consultations.
"The process of economic integration has been a catalyst to the diffusion
of health technology and opened national markets to competition, tending to
equalize prices and reduce costs", observes Ms Narasimhachari.
"Technological progress is expected to become a key factor for economic
growth and help meet the challenges posed by an ageing society."
More information
If you are interested in an analysis overview providing and introduction,
research scope and summary of major findings of the Country Industry
Forecast — European Union Healthcare Industry — send an email to Katja Feick,
Corporate Communications, at
katja.feick@frost.com 
with the following information: full name, company name, title, contact tel
number, email. Upon receipt of the above information, an overview will be
emailed to you.
Country Industry Forecast — European Union Healthcare Industry, code:
4550.
Frost & Sullivan's website:
http://healthcare.frost.com
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