February 4, 2010
A troubling thought: are the pro-innovation policy wonks talking to the cost-containment pencil pushers?
Doing the rounds of innovation conferences in Brussels, it’s clear that a huge section of the EU’s political and industry machinery is convinced we need to be more innovative.
The logic will be familiar to most: we can’t compete with Asia’s low cost base, so we’ll have to innovate our way into a competitive position.
We have to produce (and patent) something new and necessary which will take our industry “up the value chain”.
Listening to the logic, it’s hard not to leave these innovation sermons fully convinced.
However, I also cover health. So I find myself at conferences on healthcare, where the dominant narrative is now cost containment.
The fear – which has been with us for some time – is that medical inflation is running way ahead of economic growth. The crisis has only made matters worse, leading health ministers to devote great energy to doing things cheaper, smarter, more efficiently.
The question is whether these two wings of the policymaking machinery are taking to one another.
The EU (through the Commission and the European Investment Bank) has pumped millions into developing innovative medicines and medical devices.
That’s justifiable because it’s good for jobs and provides finance for R&D at a time when the credit well has run dry.
But what will we do when the companies we supported come back to us to sell their wares?
The public sector is the healthcare industry’s biggest client. Will we be able to afford an even more potent cancer drug? What about an even more detailed ultrasound machine?
Our Health Technology Assessment tools will come to one of two conclusions:
a) These new innovations do not add sufficient value to justify their expense because we already have pretty good ultrasound machines. Therefore it was wasteful to fund their development.
b) The latest in high-tech gadgetry and wonderdrugs will save lives and must be purchased. In that case, we pay for them twice: we pay for the R&D and we pay again for the product.
Unless we export shedloads of these products, we are paying our way to a very tricky problem. And if the EU’s innovations are of such high value that only the top tier of US and Australian hospitals can afford them, the external market is relatively small.
So, what to do?
The future of innovation must be in mass marketing mid-level technology. Super-high-tech stuff is too expensive for emerging markets, meaning we are our own main customer.
The trick will be to take the excellent medicines and technology we already have, and make them cheaper – and therefore more accessible to the billions of new Asian consumers.
Making things more cost-efficient is still innovation. It’s just that the added value is the lower cost.
That’s the economic and political argument. The question of whether it’s more ethical to sell 100,000 cheap scanners to Asia or 10,000 souped-up MRI machines to ourselves is moot.Author : Gary Finnegan