Healthcare provision in times of austerity

Since the early 1960s health care expenditures have been rising faster than inflation, and they now cost +/- 10% of GDP across Europe. On average, about 75% of the budget is spent on inpatient and outpatient care while the remaining 25% goes towards biopharmaceuticals and medical technology . One of the reasons of course, is that Europe has an ageing population to look after and this means there are a rising number of chronic diseases. However, increasing expectations about healthcare quality, and expensive medical technology are other factors increasing the cost of healthcare expenditure.

It was just after World War II that politicians, with the public’s blessing, created a specific funding scheme based on solidarity between the healthy population and society’s citizens confronted with health issues. The question now though is whether future generations will still be able to guarantee this societal scheme, underpinning as it does, one of society’s most cherished values: universal healthcare.

Everyone is thinking about, and working out what they need to do. For medical technology companies for example, there needs to be the right balance between business value and societal value; in management terms, this calls for a so-called “non-market-strategy” that recognizes “the public good” as one of society’s basic social values. Such an approach beaches the old antithesis between authorities and regulators on one side, and manufacturers on the other side. In the past, this inspired an opposition between the healthcare sector that naturally qualified itself as “not for profit”, and medical technology sectors seen as “for profit”.


While the future is surely with wet technology (that is, within the body), it does take significantly more time to get them approved by the regulatory authorities. It is natural therefore that we hear more – at least for now – of non-wet technologies such as mobile interfaces, “wearables”, and the Internet of things containing sensors.  

For medical innovation to thrive, life science businesses need to better appreciate their contribution to society, with the new paradox lying in genuinely collaborative schemes between health insurers, payers and enterprises. With austerity ruling the roost, most often amongst healthcare payers, the challenge for medical technology manufacturers is to provide specific evidence that their potentially life-saving but high-cost targeted therapeutics actually work in real life, in the actual patient population.

It’s a Catch 22 situation: often the overall evidence base available at registration is insufficient to accurately estimate the real-life clinical effectiveness of a drug in practice or its budget impact in real life. This uncertainty, due to this lack of information on effectiveness, may delay reimbursement decisions and patient access and lead to delays and the threat of non-inclusion in positive lists. This eventually will lead to a dis-incentivised industry from investing in high-risk (but highly needed) diseases with low market potential.

There is a clear opportunity here for medical innovators to establish formal arrangements between regulators, payers and manufacturers and share the financial risks if these new medical technologies are to be developed and introduced in order to enable access to new medical treatments, particularly so in these days of austerity.


What we consume in terms of food and drink is of obvious importance to everyone concerned about their health, and this fact has obviously not been lost on the food and pharmaceutical companies. Some food suppliers – like Nestlé – have seized the opportunity and are working hard at delivering positive benefit foods, while others are shying away from nutraceuticals. Interestingly, many pharma companies are developing their own “effective” foods, particularly in areas requiring special diets and treatments.

Healthcare provision in times of austerity

& Rankings

Equis Association of MBAs AACSB Financial Times