Strategy for healthcare industry (Executive summary)

POSITION | HEALTHCARE | STRATEGY

Strategy for healthcare industry Executive summary

March 2021 März 2021 Healthcare industry as a key industry The healthcare industry has been a key industry in the German economy for many years. The label “Made in Germany” means proven quality worldwide for diagnostics, medical products, pharmaceuticals, biotechnology and information and communication technology (ICT). Healthcare industry is internationally competitive and has long been making a positive contribution to the German trade balance. Recent months have shown how rapidly the theme of health can become the absolute focal point of our political and economic action.

Healthcare industry is in a position unmatched by any other industry to chart a route for Germany out of the economic crisis. As a crucial driver of growth and engine for jobs, it is the key industry of the 21 st century: with its offer of stability, it is critical for the success of Germany as a business location. It is now essential to create framework conditions which durably enhance the innovative strength of healthcare industry and enable it to play this role to the full. Hence, the health sector must be accorded the priority which corresponds to the de facto significance of this industrial sector. Whereas the value of progress in other sectors in Germany is also discussed in terms of economic and societal policy, this important discussion is only just beginning in the health sector. The understanding of health as a “cost driver” in welfare provision is outdated: rather, these costs must be regarded as investments in our health and accordingly not only an added value for individual wellbeing but also as the backbone of a stable economy and our social harmony. This change of perception is necessary in order for investments in health to continue to be made in Germany into the future, and not only against the background of increasingly fierce international competition on global markets outside Germany and Europe. A public and open assessment which is clearly flanked by concrete measures is indispensable so that healthcare industry can continue to develop its full innovative strength in Germany and in Europe. It is of decisive importance that European innovative strength and existing added value chains are protected and promoted.

Because a stable economy and functioning healthcare also require an intact healthcare industry.

Michaela Hempel | Health Industry | T: +49 30 2028-1493 | m.hempel@bdi.eu | www.bdi.eu

Strategy for healthcare industry

Healthcare industry in figures (situation in 2019) Gross added value in 2019: 81.2 billion Euro Around one Euro in five of gross added value in the wider health sector is generated in healthcare industry In addition, gross added value of 53.8 billion Euro is created by demand for goods and services along supply chains in Germany

4.1% growth (reference period: 2007 to 2018) as compared with 3.3% growth in the wider economy

Around 1 million employees This makes healthcare industry one of the largest employers in Germany 210,000 new jobs since 2010 One job in healthcare industry is linked to one further employment relationship in the wider economy 55,000 employees in R&D (5.3% of all healthcare industry employees) Direct employment of two people in healthcare industry R&D underpins around three jobs in the wider economy By comparison: mechanical engineering 50,202 / electrical-electronics industry 23,849 15% R&D intensity1 Exceeds the “Europe 2020 strategy” objective of 3% of EU GDP for R&D by a factor of five By comparison: mechanical engineering 6.9% / electrical-electronics industry 6.0% At 48.4 billion Euro, the export volume of healthcare industry has increased by a factor of 1.7 times since 2010 More than 90% of the health sector’s exports are accounted for by healthcare industry 7.5% share of healthcare industry exports in the wider economy in Germany

Sources: ▪ Federal Ministry for Economic Affairs and Energy (BMWi) (2020): Gesundheitswirtschaft – Fakten & Zahlen. Ergebnisse der Gesundheitswirtschaftlichen Gesamtrechnung, Ausgabe 2019.

▪ WifOR Institute: Bedeutung von Forschungs- & Entwicklungsinvestitionen der industriellen Gesundheitswirtschaft, Analyse des F&E-Fußabdrucks der industriellen Gesundheitswirtschaft im Auftrag des Bundesverbands der Deutschen Industrie e.V. (BDI), November 2020.

Definition of R&D intensity: describes research expenditure as a share of the sector’s gross added value. The greater the R&D intensity, the stronger the focus of the sector on securing its innovation capacity.

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Strategy for healthcare industry

Security of supply

Supply chains and production conditions ▪ The globalised economy with diversified supply chains needs to be further strengthened . It is the foundation for prosperity in an export-oriented country such as Germany. Stable international private health research and production networks are indispensable for progress. A strengthening along the entire value creation chain within Europe can make an important contribution to greater continuity of supply.

▪ Framework conditions in Germany and Europe must be configured in such a way that it is increasingly attractive for enterprises to relocate their production capacities to Europe or leave them here. The focus should be placed primarily on production processes which exhibit demonstrable comparative advantages over the rest of the world assuming comparable requirements, e.g. environmental and social standards.

▪ In order to enhance security of supply in Germany and Europe, it may be necessary to modify existing tendering rules for rebate contracts to make them not pr otectionist but more competitionfriendly.

Market access and reimbursement ▪ To promote innovative technologies and medicines, such as highly developed imaging and surgery systems as well as cell and gene technology in Germany and the EU, health systems must dismantle obstacles in market access and reimbursement, be open to innovative reimbursement models and incorporate digital care solutions.

▪ AMNOG (law on reorganisation of the pharmaceutical market) must move away from the current “one size fits all” approach in order to become even more innovation-friendly and keep up with the latest developments. This presupposes a general opening of the system to further scientifically accepted end points and study designs (e.g. real-world data studies).

▪ A transparent and more flexible procedure for new examinations and treatments (NUB) should be introduced for inpatient reimbursement. Instead of bureaucratic evaluations of individual cases by health insurance funds, in order to create financial security, off-budget supplements should be organised for hospitals to make allowance for innovative pharmaceuticals entering the market.

▪ A uniform, Europe-wide procedure for assessing documented evidence on pharmaceuticals, the socalled EU-HTA (EU Health Technology Assessment), has the potential to reduce double work at national level. To this end, an appropriate modification of national legislation is also necessary in order to minimise the risk of duplication and competence disputes .

▪ The questions which are still open with the postponed entry into force of MDR (European medical devices regulation) until May 2021 must be clarified promptly and the system of notified bodies rendered functional.

▪ Prices which reflect purchasing power are the key to the best possible access to medical innovation around the world. Conversely, efforts to introduce supranational price-setting as well as further

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international price referencing in the field of pharmaceuticals and medical products are leading to a downward price spiral which is slowing down high investments in research & development and future innovations.

EU in-vitro diagnostics regulation (IVDR) ▪ In-vitro diagnostics (IVD) are medical products which are used as reagents or control materials for the examination of human tests including blood and tissue samples . Among other things, the new EU regulation has introduced a new classification structure with risk classes A -D. Incorporation of IVD in the new legislative framework by the end of May 2022 has led to additional requirements for the approval of new and existing IVD as well as markedly stricter requirements in the framework of technical documentation and clinical studies.

▪ There are currently just four out of the present total of more than 20 official authorities (known as notified bodies) across Europe which can perform certification – and hence authorisation. In future, around 90% of all in-vitro diagnostics will have to be certified by a notified body, as compared wit h 15% now. It is therefore essential to implement an adequate infrastructure of notified bodies for certification.

▪ In light of the difficulties set out here and the fact that many IVD manufacturers and developers are currently heavily involved in Corona diagnostics, the transition period must be extended by at least one year to 2023.

Global health ▪ In a globalised world, global health must be brought into closer focus and the requisite framework conditions put in place as well as financial resources made available. With the Federal Government’s global health strategy adopted in October 2020, an important stimulus has been given for the development of the global health architecture.

▪ The healthcare industry must be involved in determining the objectives of the Federal Government’s global health strategy and in measuring progress towards these objectives in the second half of 2025. Only in this way can the perspective of industry be incorporated and the partnership approach described in SDG 17 be genuinely implemented.

▪ To achieve the health-related objectives of the UN SDGs, national, multilateral and bilateral efforts must complement each other. Germany and the EU should assume a leading role by working for these objectives together in WHO (World Health Organisation), G20 and WTO (World Trade Organisation). Moreover, health-policy themes should be given a high-ranking position in important bilateral relations. Furthermore, they should give high priority to their positioning on health-policy themes in important bilateral relations.

▪ Effective pandemic prevention and reaction as well as containment strategy can only be planned and coordinated internationally. The new European authority HERA (Health Emergency Response Authority) as well as the legislative proposals already on the table for a strengthening of the European Medicines Agency (EMA) and the European Centre for Disease Prevention and Control (ECDC) can together and in interaction reinforce European crisis prevention and reaction in a

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coordinated manner. At global level, G20 and WHO are the key to promotion of coordinated pandemic control.

Research and innovation

Clinical research ▪ It must be the shared goal of politics and business to make Germany once more the number one location in Europe for studies and research.

▪ Accordingly, permitting authorities must be given more human resources in order further to reduce waiting times for consultation appointments and study authorisations.

▪ Disjointed requirements regarding data protection complicate not only applications for clinical trials in Germany but also approval by the ethics committee. Countrywide medical data protection legislation is needed here.

▪ Germany currently lags well behind other locations in the EU in terms of patient numbers, despite the large number of clinical trials. Further increasing willingness to take part in clinical trials should be understood and addressed as a shared task of policy-makers, patient associations and enterprises which carry out research in the healthcare sector.

The system’s openness to innovation ▪ To improve innovation capacity, the framework conditions must be adapted in such a way as to ensure rapid large-scale rollout of innovations.

▪ Existing and future regulation should be verified using an innovation check in order not to impede or even prevent innovations.

▪ Excellent basic research is essential for the healthcare industry and in particular for the chemical/pharmaceutical and biotechnological industry. Universities should therefore be given more financial resources, the possibilities for qualified training of active professionals should be expanded and entrepreneurship should be incorporated in school and university education.

Protection of intellectual property ▪ Preservation of robust and dependable protection of intellectual property rights is essential in order to promote research, development and production in Germany and Europe, and to maintain competitiveness worldwide. Only in this way can innovative therapy offers also continue to reach patients.

▪ All restrictions on data exclusivity (regulatory data protection, RDP) in the area of orphan drugs (pharmaceuticals against rare diseases) or pharmaceuticals authorised specially for children

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weaken location Europe and only lead to a further relocation of research and development to other countries.

The European legislative framework for intellectual property should be supplemented by a uniform Europe-wide supplementary protection certificate (uniform SPC). Uniform SPC would eliminate current legal uncertainties as well as reduce the necessary bureaucratic effort and costs and resources.

Patent law infringements must be consistently prevented in Germany through regulatory measures .

For example, the substitution provision in § 129.1 SGB V (German social code) results in practice in existing use patents being hollowed out and drugs being substituted in patent-protected indications.

The duration of procedures before the Federal patent court (BPatG) must be accelerated. It must be ensured in this regard that the substantive quality of procedures does not suffer.

The bilateral dialogue on intellectual property must also have a central significance at European level. In addition, the Federal Government and the EU should advocate consistently for protection of intellectual property in multilateral forums such as WTO and WIPO (World Intellectual Property Organisation).

Innovation promotion ▪ We need an innovation ecosystem: public research and industry should work together even more intensively, for example in joint research projects which are given targeted support and further developed through application-oriented and non-bureaucratic award procedures.

▪ It is important to establish local value creation and to strengthen technology transfer in order to benefit as a location from excellent basic research in Germany and Europe .

▪ Promotion procedures must be organised more efficiently, applicants better prepared and the promotion procedures of the various government departments harmonised so that projects deserving support do not fail because of technicalities.

▪ Along the lines of DKFZ (German cancer research centre), an excellence institute and research centre should be established which promotes a comprehensive examination of medical, production and social issues linked to new forms of therapy such as gene and cell therapies and acts as a scouting agency/accelerator for start-ups in this area.

▪ Research promotion on the one hand must not be cancelled out by so-called “cost compression” laws on the other hand (e.g. compulsory rebates and price moratorium for pharmaceuticals or tapered fixed-cost reductions for medical products). Enterprises need financial leeway for innovations.

Access to the capital market ▪ Germany must become more attractive as an investment location for venture capital with which innovations and creation of industrial enterprises can be brought forward successfully .

▪ In this regard, we can learn from other countries (e.g. the USA, China or Israel). In addition, partnerships between cities and health, biotechnology and digitisation clusters are also an important area for thinking and learning.

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Strategy for healthcare industry

▪ Creation of suitable capital muster points (e.g. the planned future fund).

▪ Introduction of advisory service offers to provide start-ups with a sustainable business model.

▪ The framework conditions for venture capital need to be further improved so as to retain capital intensive spin-offs and start-ups especially in life sciences in Germany, also in the subsequent scale-up phase. In addition, the long-term opportunities of investments in start-ups need to be recognised and communicated.

Cooperation in the area of research and development ▪ Targeted transmission of knowledge from university and non-university research in the healthcare sector is a precondition for a sustained increase in the growth and innovation potential of industrial location Germany. Accordingly, cooperation between research and academia, also in the framework of PPPs, is indispensable. It is therefore time for Germany also to explore the issue of PPP in the healthcare sector and to put in place the corresponding framework conditions in coordination with the healthcare industry.

▪ Matching between different research disciplines from private and public spheres should receive stronger State support.

▪ So that university and non-university research does not focus only on established enterprises, new support instruments and structures should be created to promote technology transfer and the entrepreneurial spirit in the research community and beyond.

Digitisation of healthcare sector

Degree of digitisation ▪ Digitisation holds major opportunities: better, more rapid, individual, flexible and at the same time affordable care. Innovation potential can be discerned in particular in the fields of precision medicine and in the associated use of all available data sources in the various phases of a patient’s illness.

It can also be seen in the use of artificial intelligence and digital assistance systems for more efficient diagnostics, therapy and research. Moreover, digitisation also offers the possibility of coming to grips with shortages of skilled workers and doctors in rural areas. Digital health solutions enable sustainable and cross-sectoral care. The value added by the use of digital applications for monitoring and combating a pandemic is clear.

▪ Policy-makers should understand and address communication and wider acquisition of digital skills as a strategic task. Thought could be given here to a campaign with the Federal central office for health education (BZgA) as well as further roadshow formats along the lines of the “DVG Startup Roadshow” of the Health Innovation Hub (hih). Skills for health using digital tools should be strengthened and promoted starting in the school classroom.

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Strategy for healthcare industry

▪ End users such as patients and doctors should be involved in the development of partial strategies as well as digital applications and processes with a view to fostering acceptance in political and industrial circles.

▪ Current remuneration structures should be reviewed to verify whether they need to be adapted regarding the profile of digital and intersectoral processes. In addition, consideration could be given to the creation of adequate reimbursement options for digital diagnosis support within the outpatient and inpatient standard service package.

Use of health data ▪ Access to aggregate health data for industry must be improved. This demand is supported inter alia by the data ethics committee. It is of decisive importance for private research to have equal access to research data via the research data centre (§303 d SGB V).

▪ Establishment of a countrywide coordination concept bringing together all state data protection authorities and involving supervisory authorities and the ethics committees’ working group as well as harmonisation of today’s 16 state hospital and state data protection laws is urgently recommended. This needs consistent, countrywide uniform implementation of § 287a SGB V in state legislation.

▪ Existing best practice models for data access and data use in other European countries (e.g.

Finland, Denmark, Estonia) should be consulted and analysed, and the possibility of transposing them to Germany should be examined.

▪ Skills development for working with data should be strengthened in schools, apprenticeships, vocational education and other forms of training.

European health data space ▪ A common European health data space strengthens the EU and facilitates care. It must be possible to collate and analyse the data (semantic interoperability). For this, we need international standards, a common European procedure for collection and storage of data and not, as at present, many different federal and regional rules which stand in the way of data collation .

▪ The joint action group on development of a code of conduct for the European health data space called into existence during the German EU Presidency must ensure synchronisation of heterogeneous data protection rules at national level with the involvement of all players (policymakers, health sector and industry) and make GDPR (European general data protection regulation) reliably operational.

▪ What are needed are politically promoted flagship projects such as the EU Beating Cancer Plan and the development of data registers (e.g. tumour register, spinal column register).

▪ A standardised, multilayer and patient-centred consent procedure for data release creates legal certainty. Alongside the technical infrastructure (e.g. on the basis of GAIA-X), a European health data space also needs an economic infrastructure which supports the development of data -driven business models, but is still regulated such that fair and broad access to data is possible under economically reasonable conditions.

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Strategy for healthcare industry

Ecological and economic framework conditions

Economic policy climate ▪ Healthcare industry needs dependable innovation-oriented framework conditions. This applies in particular in competition with other providers in a globalised world market and taking the framework conditions of a united Europe into account. There must be a public and visible political consensus on the high regard accorded to this point so that the healthcare industry can also continue to make its full innovative strength available in Germany.

▪ Healthcare industry enterprises and their professional associations would like to see a clear acknowledgement by German policy-makers of the key role played by the industrial health sector through the introduction of a Federal Government coordinator for the sector, for example as is the case in the shipbuilding industry and aeronautical sector.

▪ Extension and continuation of dialogue formats at regional and federal level is recommended. An orientation is provided by the forums, dialogues and round tables initiated in Baden-Württemberg, Bavaria and Hesse. Of decisive importance is a broad political basis involving all relevant ministries (health, economy and research).

▪ Establishment of a healthcare industry expert group, along the lines of the expert group for assessment of development in the healthcare sector, is encouraged. This should look especially at themes such as legislation affecting Healthcare industry and whose findings are taken into account, and which evaluates both German and European framework conditions .

Trade agreements ▪ A rejection of global trade and a European policy of self-sufficiency in the healthcare sector is dangerous, since it could restrict security of supply in periods of crisis . Free movement of goods, open borders and solidarity are of decisive importance.

▪ BDI calls on all States to eliminate customs duties on pharmaceutical products and intermediate products as well as medical products non-bureaucratically, comprehensively and durably. This would facilitate the struggle against worldwide health emergencies and pandemics . Germany and the EU should advocate for this position at G20, WTO and WHO level.

▪ Standards for clinical studies and market approval – actionable – should also be enshrined in trade agreements. Agreements on membership and compliance with obligations arising from international harmonisation conferences such as the International Conference on Harmonization (ICH) should also find their way into trade agreements in order to bring the regulatory frame work conditions for clinical studies and market approval up to a high standard worldwide.

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Strategy for healthcare industry

Level of taxes and expenditures ▪ A concept for a future-oriented tax policy is urgently necessary in order to strengthen the international competitive of all European enterprises. This is the case irrespective of whether it relates to SMEs, family-owned businesses or listed companies.

▪ In light of an average corporate tax burden in OECD of around 25% and in EU Member States of just under 21%, the tax burden in Germany should fall to no more than 25% in the medium to long term (it is currently around 31%). Such an internationally competitive tax burden is of central importance and would mean a strengthening of business location Germany . Fundamental structural measures in the area of corporate tax law is necessary for this to come about .

▪ The move into tax promotion of research and development (research grant) is an important step towards enabling Germany to compete with other locations for research, development and innovation, and must be further developed. To this end, the limitation of “associated businesses” needs to be adjusted, the assessment base widened and the subsidy rate increased .

▪ The rate of turnover tax on medical products should be charged uniformly at 7%. It is difficult to understand the distinction whereby some implants and prosthetic care attract a levy of 7% whereas the rate for all other medical products is 19%.

Workers ▪ Skilled workers make an essential contribution to the success of highly specialised healthcare industry enterprises. Inadequate qualification, especially in the area of production, often goes hand in hand with long and intensive training and qualification activities. The increasing shortage of skilled workers is a bottleneck factor for the sector.

▪ Increasing specialisation make it necessary to improve specialist and cross -sectoral education and training of doctors, pharmacists, scientists and technicians in healthcare as well as to keep related care workers and other medical practitioners at the forefront of scientific knowledge . In the area of education and training, it is also very important to dismantle rigid professional demarcations . Giving medical personnel a digital training ensures that they are in a position to apply the new technologies vis-à-vis patients.

▪ Scientific courses must be made more attractive. Scientific and practical STEM learning (science, technology, electronics and mathematics) should be improved, starting in schools. In addition, better conditions should be created for attractive scientific education and for entrepreneurship.

▪ Attracting skilled workers at home and from abroad must be placed on a permanent footing and immigration of foreign scientists and students should be facilitated .

▪ The understanding between academia, industry and venture capitalists (VCs) should be further improved, for example through exchange programmes between the academic world and industry.

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Approval procedures for new industrial installations ▪ An acceleration of approval procedures for the construction and operation of healthcare industry installations is urgently needed, e.g. through comprehensive digitisation of administrative procedures, since long planning and approval procedures are an extreme locational disadvantage for Germany.

▪ For the approval of production installations for medical products and pharmaceuticals, special knowledge is needed which local authorities cannot always have on hand. A bundling of necessary competences at regional level could be helpful here in order to organise the approval process efficiently and in an investment- and innovation-friendly way.

▪ For certain installations and processes, procedural facilitations should be discussed with a view to certain installation types being exempt from the approval obligation under the federal emission protection law. Alternatively, thought could be given to prioritising installations for research and production of pharmaceuticals and vaccines to combat the Covid-19 pandemic via special approvals and waivers.

Ecological and economic sustainability ▪ In view of the long development cycles of healthcare industry products, clear milestones, achievable objectives and sufficiently long transition periods are essential along the road to a climate -neutral Europe by 2050 so that process changes can be made without negative consequences for consumers and in particular the supply of pharmaceuticals and medical products to patients is maintained.

▪ Incentive-oriented sustainability promotion – for example taking into account the award criteria for tender procedures, simplified approval procedures and tax breaks – can contribute to locational strength.

▪ Enterprises in the healthcare industry sector support measures and initiatives which are conducive for climate protection.

▪ Industrial health enterprises often qualify for exemption from the EEG levy (charged under Germany’s renewable energies law) even though they produce system-relevant products. Support due to system relevance (not because of the Covid crisis) would be helpful here in order to support production in Germany, not least with a view to security of supply .

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Strategy for healthcare industry

Imprint Bundesverband der Deutschen Industrie e.V. (BDI) BDI – Federation of German Industries Breite Straße 29, 10178 Berlin www.bdi.eu T: +49 30 2028-0

Author Michaela Hempel Deputy Head Health Industry T: +49 30 2028-1493 m.hempel@bdi.eu

With the support of Bayer AG B. Braun SE BIO Deutschland e. V. - Biotechnologie-Industrie-Organisation Deutschland e.V. Boehringer Ingelheim Corporate Center GmbH Brainlab AG Bristol-Myers Squibb GmbH & Co. KGaA BPI - Bundesverband der Pharmazeutischen Industrie e.V. BVMed - Bundesverband Medizintechnologie e.V. DIB - Deutsche Industrievereinigung Biotechnologie / VCI Fresenius SE & Co. KGaA GlaxoSmithKline GmbH & Co. KG IHO - Industrieverband Hygiene und Oberflächenschutz Johnson & Johnson Medical GmbH Lilly Deutschland GmbH Medtronic GmbH Merck Serono GmbH Novartis Deutschland GmbH Pfizer Deutschland GmbH G. Pohl-Boskamp GmbH & Co. KG RetroBrain R&D GmbH Roche Pharma AG Sanofi-Aventis Deutschland GmbH SAP Health Siemens Healthineers AG T-Systems International GmbH VCI - Verband der Chemischen Industrie e.V. VDDI - Verband der Deutschen Dental-Industrie e.V. VdTÜV - Verband der TÜV e.V. vfa - Verband Forschender Arzneimittelhersteller e.V. ZVEI - Zentralverband Elektrotechnik- und Elektronikindustrie e. V. BDI document number: D 1354

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