United Kingdom Report







Tough times for healthcare SMEs in the UK
 



With government spending cuts across the board in the United Kingdom, including healthcare, small and medium sized enterprises in the healthcare industry are finding it increasingly difficult to sell their products in the National Health Service and are being forced to look abroad. Shaun Benton, Middle East Health’s Europe correspondent, assesses the situation.

The healthcare service in the UK, much treasured in its incarnation as the National Health Service which is far and away the biggest entity providing medical treatment in this welfare state of just over 62 million, is facing a financial squeeze from the overall government spending cuts being imposed by George Osborne, the chancellor of the coalition government that came into power in May 2010.

With cutbacks the order of the day, reduced funding to the NHS is seen as a major threat by industry observers to the well-established medical technology industry in the UK, with over three thousand companies making medical devices.

These businesses are expected to innovate: maximising the value of investment in medical devices and equipment – making do, or doing more, with less, and doing it as smartly as possible.

With less to spend – the country is seeing cuts of over £80 billion (about US$124 bn) – the health service will increasingly see patients treated at home to spare the drain on resources from hospital beds, nurses, doctors and administration staff. Almost a third of the public, according to some reports, suffer from one sort of illness or another, keeping the NHS exceptionally busy at all times.

Home care

And with a golden rule that states no one should wait more than 18 weeks for NHS treatment, the focus is heading towards home-based treatment.

So-called telemedicine and telecare point to new trajectories in healthcare in which modern IT and communications infrastructure are already changing the way things are done.

Telehealth is “the next big thing in health care”, says Clive Powell, the technical and regulatory manager at the Association of British Healthcare Industries (ABHI), which focuses on helping the thousands of UK medical technology companies, large, small and medium-sized, raise their profile in the international marketplace.

This development is partly due to leaps in technology but largely down to a more fiscally austere environment. “A lot of the costs in health care might be alleviated by having care at homes,” Powell tells Middle East Health.

In an interesting twist, the telemedicine models that have already been used in emerging markets and poorer nations are likely to be used as templates for the fiscally austere UK. If a patient in say, Kampala, Uganda, can be advised and treated by a doctor in New York, why, the thinking goes, shouldn’t the same principle be applied more locally, where an available doctor in, say, London, treats a patient in Cornwall. Or even within London itself.

There is already “a huge amount of activity” in telemedicine, says Powell, both within particular sectors of cardiac care companies as well as companies that provide a telemedicine care interface.

A key challenge here is the management of massive amounts of data. And there are some novel solutions coming to the fore. For example, Apple's iPads are increasingly popular for transferring X-rays from one site to another, saving time and expense. But this also means that a lot of companies not previously in the medicaltechnology sector are now moving in, particularly the large information and communications companies.

However, worries expressed about pending domination by big multinationals are overstated. The growth of telemedicine gives lots of room for smaller companies in software development, for example, with anything from pacemaker monitoring to healthcare “apps” for mobile smartphones.

The potential is vast, and Powell says that telemedicine is getting “political currency above where you might normally expect health issues to be discussed”, with the likes of EU Commissioner Manuel Barroso making recent pronouncements on the subject.

Small and medium-sized enterprises

This and the development of more use-athome medical devices underpin the need of a beleaguered NHS to find ways of doing more with less. At any given point, the service is treating 2.8 million people, in a country which spends an average 9.3 % of GDP on health – placing it 41st in the world in terms of percentage of GDP spent on health: one lower than Japan and slightly more than Slovenia.

Britain provides almost three doctors – many earning around £85,000 (about US$91,000) a year – for every 1,000 people, and trains doctors across the world, including thousands from countries in the Middle East, such as Qatar. But the private healthcare sector, once confined to secondary and palliative care in a country where 16.5% of the population is over the age of 65, is gradually making inroads to the broader population, with more than six million Britons now holding private medical insurance.

However, the colossal size of the NHS – started as one of the first creations of a nascent British welfare that came into being in the immediate aftermath of World War Two – can be a problem.

The ABHI, which focuses on helping the thousands of UK medical technology companies, large, small and medium-sized, raise their profile in the international marketplace, complains that is “notoriously difficult” for smaller companies to gain market access for their products with the NHS.

This has provided more impetus to the ABHI to focus on helping the more than 3,000 British medical device firms market their products abroad. A survey in Britain undertaken among small and medium-sized enterprises in the medical device sector shortly before the global financial crisis of 2007-2008 showed that these firms experienced sluggish sales in their domestic markets, compared to their exports.

And a survey of business trends among larger companies reflected similar trends, says the association. Five years ago, larger medical firms saw only 2.2% of domestic sales growth compared to export growth of 10%. One plain result of this is that these larger firms simply choose to move elsewhere.

The ABHI says that this is giving cause for “considerable disquiet”. This is especially so given what the association says is the dependence of the medical industry in the UK on innovation fuelled by successful small and mediumsized enterprises (SMEs).

“It seems that rather than being a springboard for growth, the UK market is now seen as a drag on company development which puts UK SMEs at a significant competitive disadvantage compared with their overseas peers,” says ABHI.

It argues that UK companies – especially the smaller ones – need to be encouraged by having “sensible public procurement policies”, along with more investment in research and development.

If not, UK companies will have even less reason to remain based in the country, and will eye the United States, the European mainland and the Middle Eastern markets for relocation, with negative knock-on effects in Britain, where the medical device companies provide at least 46,000 UK-based jobs, with many more in ancillary services.

The UK is already moving towards outsourcing management, with the debtridden Hinchingbrooke Hospital recently becoming one of first NHS hospitals to be taken over by the private sector, in this case Circle Health, whose chief executive, Ali Parsa, an Iranian by birth, is a former investment banker now eyeing a market for running state-owned hospitals potentially worth about £8 billion.

Pharmaceutical companies

Pharmaceutical companies, on the other hand, get a massive boost from the NHS, which takes 90% of all the medicines made by Britain’s pharma-giants, which also research and develop 90% of what they call the “current medicines pipeline”.

Grouped under the Association of the British Pharmaceutical Industry (ABPI), the firms use this government-recognised body to negotiate the pricing of branded medicines on behalf of the entire UK pharmaceutical industry which, according to a November 2011 statement by ABPI chief executive Stephen Whitehead, generates a trade surplus of £7 billion a year, and employs around 72,000 people in highlyskilled jobs.

The industry – which has been a net earner for Britain for the past 30 years – invested as much as £4.4 billion in UK research and development in 2009 alone, Whitehead says.

So large is the UK pharmaceutical industry that about a fifth of the top 100 medicines in use today originate from British research, placing the country – which hosts the headquarters of the European Medicines Agency – second in the world in this category after the United States.

This compares with the medical device market in the UK, which has been valued at around £8 billion – not as much as it could be, although it is the third-largest in Europe after Germany and France. It could be far larger, given the removal of the constraints discussed earlier in this article.

All this is in an environment where the UK’s economy was forecast by Osborne at the end of November to grow by only 0.9% in 2011, with GDP expected to be even slower in 2012, at 0.7%. His bleak announcement came on November 29, a day before as many as 260,000 NHS staffers went on strike in protest at financial cuts, particularly their pensions.

The UK is one of the leading suppliers to Saudi Arabia, which as a whole is the largest healthcare market in the Middle East, with the UK being one of the leading suppliers. But the United Arab Emirates – home to about 120,000 Britons – is the UK’s largest Middle East market and the UK's 9th largest export market overall.

Happiness

Medical technology aside, the country is grappling with an increase in – or is perhaps becoming more sensitive to – mental health problems. Along with this is a changing perspective on how to measure people’s general condition.

Now, “happiness” is to be officially regarded as a key measurement in the health index. A new report published by the Office of Health Economics and based largely on research by Paul Dolan, a professor of Behavioural Science in the Department of Social Policy at the London School of Economics and Political Science – argues that the end-point of healthcare provision should be one’s overall well-being, or “happiness”. This obviously more subjective measurement has important implications for how innovation and treatment are valued, and may point to changes in the treatment in the years to come.

Whatever the trajectories of future innovation in medical technology, they are likely to be fine-tuned under the umbrella of what are increasingly referred to as “life sciences”. And the new Office for Life Sciences (OLS), founded from a 2009 blueprint, now adds to the plethora of institutions catering to the health industry.

In an increasingly interdisciplinary environment, the OLS brings together biotechnology firms with pharmaceutical and medical-technology industries in what is seen as an important growth area, with the OLS aiming to be the future locus of R&D and manufacturing investment in the life sciences. This points to the increasing importance of the health industry in the future of the world’s knowledge economy.
 

 Date of upload: 21st Jan 2012

 

                                  
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