Europe Begins to Mirror the U.S. as the Region Starts to Take a More Systematic Approach to Healthcare

NEW YORK, NY--(Marketwired - November 29, 2016) - In the past, healthcare stakeholders viewed the U.S. and Europe as very different markets. By all appearances, the U.S. had gone much further than continental Europe in developing larger, management-led healthcare organizations that rely on standard protocols for patient care. Meanwhile, Europe was seen as more advanced than the U.S. in many areas, including cost controls, likely driven by Europe's history of managing healthcare costs via administrators and government. Yet, recent research from Bain & Company finds that while there are still some key differences between these two regions, they have rapidly converged, albeit with some stark differences among countries in Europe. On average, more than 50 percent of physicians in both regions now feel a responsibility to control costs, which has impacted how they view their organizations, the level of care they provide, and their independence in prescribing and treatment decisions.

"Up until a few years ago, healthcare in Europe looked markedly different than that in the U.S. However, as Europe continues to systematize -- even though some countries are not as far along in the process as others -- we're beginning to see similarities emerge," said Tim van Biesen, who leads Bain's Healthcare Practice in the Americas. "In both regions, the industry's focus is turning more to outcomes and economics, which will have a measurable impact on patient care. Further down the value chain, that shift will also significantly alter the competitive landscape for medical device and pharmaceutical manufacturers."

According to Bain's research, physicians in the U.S. play a more direct role in managing costs than their counterparts in Europe. More than 80 percent of U.S. physicians surveyed said they feel responsible to control costs, compared with just 44 percent in Germany -- the lowest in cost-consciousness among the four European countries surveyed (UK, Germany, France, Italy). This is likely due to its policy-led management of reimbursement pricing and other cost controls, which have helped to keep many costs in Germany well below those in the U.S.

In both regions, procurement officers have had a strong and growing role in purchasing decisions. According to its survey of nearly 1,200 physicians and almost 170 hospital procurement administrators in the U.K., Germany, France and Italy, Bain found the percentage of surgeons reporting that their procurement departments set direction or even lead the decision making for the purchase of tools and devices has risen to 35 percent, up from 23 percent three years ago. Procurements' influence was greatest in the U.K. and France and lowest in Germany at only about 20 percent -- a slight uptick from 2013.

The trajectory in the U.S. is similar -- albeit ahead of Europe. As Bain reported in its 2015 study, more than half of respondents indicated that procurement led their organization's purchasing decisions -- up from just 29 percent three years prior.

Similarly, physicians in the U.S. and Europe report they are using more metrics and clinical tools. Bain's research found that use of electronic medical records among U.S. physicians has nearly tripled and use of treatment protocols has more than doubled over the last two years. European physicians increasingly are using standardized treatment protocols and electronic medical records as well as more objective metrics for measuring clinical performance -- in the last two years, use of these tools has more than doubled.

The convergence of these trends across both markets is a result of increased systemization. Although the U.S. is currently more systematized, Europe has started down the path of consolidating and professionalizing its care organizations. However, different regions are evolving at different rates. The U.K. looks similar to the U.S. in terms of systemization, predominantly driven by its single public payer and provider healthcare system. In contrast, Germany and France lag as their health systems are less centralized and offer more flexibility for physicians to decide independently on patient care.

As Europe's healthcare systems continue to evolve, a large percentage of physicians consider their organizations and themselves to be ill prepared to address the shifts ahead. Less than one-third of hospital physicians in Europe believe their organizations have the right structures in place, versus more than half of physicians in the U.S. Overall, Bain's research finds that as much as 80 percent of physicians working in management-led organizations in Europe would not recommend their organization to someone else as a place to work or receive care, compared to about 50 percent in the U.S.

The systematization of healthcare in Europe will eventually have a direct impact on pharma and medtech manufacturers as changes cascade down the value chain, much as it has in the U.S. Currently, however, the pharma and medtech sectors in these regions look quite different from each other.

U.S. surgeons and procurement officers say lowering costs is their top priority. By contrast, their European counterparts identify clinical innovation as their greatest unmet need.

"Although their influence in the U.S. has declined in recent years, sales representatives continue to play a significant role in Europe, providing invaluable input to the surgical teams using their devices," said Michael Kunst, head of Bain's Healthcare Practice in Europe, the Middle East and Africa. "As the demand for data to prove clinical and economic outcomes grow, medtech companies will need to enhance their ability to gather the data that support claims of efficacy and efficiency. This means sales reps will need more tools and training to address the total cost of ownership and enhance their role as educators."

The divide in the pharmaceutical sector in both the U.S. and Europe reveals that, in the former, physicians feel they have discretion over prescriptions. But, that discretion is diminishing: 65 percent say patient formularies limit their prescribing decisions, and 53 percent feel formularies limit their ability to provide quality care. By comparison, European physicians still perceive a relatively high degree of independence in prescribing decisions. For example, in France a full 80 percent still feel empowered to decide which drug to prescribe.

Bain anticipates that as systematized care spreads in Europe and continues in the U.S., pharma and medtech companies may find that these regions begin to look more similar to each other than they have in the past. Procurement officers and other new stakeholders will gain influence over medical device vendors and prescribing decisions. Further, pharma and medtech companies will face increasing demand for proof of incremental value. Those that can demonstrate new and meaningful sources of medical and economic value for their products will have an edge over their competitors. Already, European physicians rank safety, real-world evidence and patient outcomes data as the most important criteria when prescribing drugs, mirroring Bain's U.S. research.

"As a metric, patient outcomes are on the rise relative to price, mirroring the evolution in the U.S.," said Kunst. "Looking ahead, we anticipate a sharp rise in the use of digital devices, tools and metrics within many European healthcare systems, which will reinforce physicians' growing focus on patient-generated data and real-world data."

Winning in this environment requires pharma and medtech players to build a category leader position -- one with clear depth in the largest categories in which they operate rather than breadth across multiple categories without clear leadership positions. Additionally, sharing best practices and key learnings across regions can benefit their businesses in both markets. Providers in Europe may also want to look at their U.S. peers for key learnings on systematizing and building physician engagement.

"Success in healthcare -- whether it's in the U.S. or Europe -- requires a deep understanding of the competitive landscape and the ability to adapt to the different ways that physicians and procurement officers are now addressing purchasing decisions," said van Biesen.

Editor's Note: To schedule an interview for Mr. van Biesen or Mr. Kunst, please contact:

• U.S/International media: Dan Pinkney at dan.pinkney@bain.com or +1 646-562-8102
• European media: Aliza Medina at aliza.medina@bain.com or +44 20-7969-6480

About Bain & Company
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