Monday

25th Sep 2017

Column / Health Matters

Does the EU live up to its promises on life sciences?

  • Political messages often tell you how important life sciences and SMEs are. But this rhetoric needs to be put under the microscope. (Photo: Pixabay)

Nine out of ten enterprises in the EU employ fewer than 10 people, according to Eurostat.

In the field of life sciences, small and medium-sized companies (SMEs) with under 250 employees play a considerable role.

Industry association Medtech Europe highlights that 95 percent of Europe's 25,000 medical technology companies are SMEs.

Considering those statistics, it is surprising that SME policy is so low-profile.

The European Commission under president Jean-Claude Juncker intended to demonstrate that the EU contributes to jobs and growth.

This does not entirely square with the EU operating without an overarching industry strategy for two years, with the 2020 Agenda de-prioritised.

Industrial strategy

The Council of the EU, where representatives of member states sit, adopted Conclusions in May, calling upon the Commission to prepare an industrial strategy by spring 2018.

This reflects dissatisfaction that the Commission is not focused enough on jobs and growth, and has not come forward with an industrial strategy proactively.

The contribution of SMEs, start-ups, scale-ups and mid-caps to tackling societal challenges while driving growth is specifically mentioned as a priority for the Council.

Member states will expect Juncker's upcoming State of the Union address on 13 September to respond to their position.

In high-tech industries such as life sciences, policies to stimulate growth in SMEs are important because small companies are often trying to bring products to a highly regulated market. They have to compete with bigger players who have far greater resources to manage complying with legislation.

SMEs are occasionally supported by specific EU measures, such European Medicines Agency (EMA) fee waivers, which reduce the cost charged by the agency to manufacturers for making its assessment of a new medicine to be marketed in the EU.

Critics argue that sectoral legislation remains too burdensome, especially in pharmaceuticals, where partnering through licensing agreements with a multinational, or being acquired by one, remain primary routes for bringing promising products to market.

Several EU member states have tried to develop bespoke SME policies in high-tech sectors. They are usually identifiable by buzzwords - “innovation”, “accelerators” and “incubators” - meant to indicate that government speaks the language of entrepreneurs.

A clear focus for national governments is encouraging and developing clusters of companies and researchers, such as the life sciences Golden Triangle encompassing the universities of London, Oxford and Cambridge.

The programmes seek to create opportunities for researchers and entrepreneurs by connecting them with capital, scientific knowledge and business acumen.

Involvement in EU-funded programmes is often said to be too long-winded and complicated for small companies, considering there are reams of paperwork, and more pressing ways for entrepreneurs to spend their time.

Different approach

The European Institute of Innovation and Technology's (EIT's) health initiative seeks to put in place a less prescriptive approach than is usually seen in EU programs, given that the applicant can change their objectives and level of commitment during the life of the project.

It focuses on creating opportunities and contacts for entrepreneurs, and being flexible to their rapidly changing needs as growing SMEs.

In the last five years, the EIT launched numerous sector-specific Knowledge and Innovation Communities (KIC).

At the end of 2014, the EIT health network was launched with the goal of supporting start-ups with technologies that may be solutions to some of today’s biggest health concerns.

The EIT aims to support the ability to raise capital for its entrepreneurial members - both from EU funds and through opportunities to connect with venture capitalists and like-minded entrepreneurs who have faced similar challenges. Applications for funding are usually by pitch, rather than by paperwork.

Martin Kern, acting director of the EIT, said that "18 entrepreneurs from the EIT sector networks made the Forbes magazine ‘30 Under 30’ list, and there are more than 1000 products and services now available on the market".

He asserts that this is proof of concept for the EIT’s less prescriptive programs - "innovation requires flexibility," Kern added.

Ontoforce, an SME established in Gent, Belgium, in 2011, has developed a big data tool that allows the user to search for information on medicines, genetics, clinical trials and disease areas, from an array of disparate sources.

Ontoforce’s CEO and founder, Hans Constandt, said "the EIT provides experts to support us, such as an analysis of my company’s competitors undertaken by Deloitte, and brings together people who are innovating and not just talking about it".

Less talk, more action

Within six years, Ontoforce has been able to build a customer base within the pharmaceutical and biotech industry with 11 of the top 20 biotech and pharmaceutical companies on board.

A chance to pitch at the YES!Delft technology incubator proved to be a first introduction to the Dutch market for UK-based entrepreneur David Greenberg, the CEO and founder of Eartex, a hearing technology company.

Greenberg has moved from a background in understanding and treating hearing loss, to preventing it through ear defender products that protect workers from noise and improve workplace productivity.

Involvement in EIT Health has been an important part of the company’s international approach.

"I cannot afford to be fixated on the EU, because my customers are multinationals in engineering. It is just part of the picture; we need to have the same global mindset," said Greenberg.

Silicon Valley is clearly the blueprint for much of the SME innovation policy in Europe. The Californian tech hub benefits from almost fifty years of experience under its belt, and a culture that encourages disruptive innovation in a way that much of the US or EU do not.

A truly joined up approach between EU member states seems unlikely, given the need for countries to remain competitive through national policy competences - including by setting corporate tax rates.

From the EU perspective, antitrust measures challenging the dominant players in the tech field should be aligned with policies to support the smaller players.

Consistent investment, tailoring of legislation and a gradual change in culture over decades is necessary to build a truly start-up-friendly environment.

Juncker’s upcoming State of the Union speech will be closely watched by the Council, which will be looking out for specific policies that go beyond the simple rhetoric of "jobs and growth".

A specific programme to support SMEs in high-tech sectors would find few opponents.

Steve Bridges is an independent health policy adviser in Brussels. His Health Matters column takes a closer look at health-related policies, issues and trends in the EU.

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