THE GERMAN HEALTHCARE MARKET

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1 THE GERMAN HEALTHCARE MARKET JULY 2018 Dr. Marcus C. Schmidt Director Chemicals & Healthcare

2 Healthcare Market Germany One of Germany s largest growth markets at a glance: 3.7% size of China Hamburg Bremen Schwerin Potsdam Magdeburg Berlin 4% of Chinese population (82 million) 374B (CNY 2.800B) healthcare market Düsseldorf Wiesbaden Erfurt Dresden 3.8% CAGR past 11 years Mainz 7 million+ employed in healthcare sector Stuttgart München nearly 2000 hospitals with 500,000 beds Germany Trade & Invest 2

3 Health Insurance Germany achieves almost universal health insurance coverage Types of health insurance in Germany Private health insurance 8.8 million 10.7% Public health insurance 70.7 million 86.1% 82.2 million inhabitants Other 2.7 million 3.2% Voluntarily insured 5.9 million Pensioners 16.7 million Family members of insured 15.6 million Mandatorily insured 32.5 million Health insurance coverage is mandatory in Germany. Both publicly and privately insured can choose their provider. Number of health insurance companies (2017): - 44 private public Source: Verband der Ersatzkassen e. V. (vdek) 2017 Germany Trade & Invest 3

The German Hospital Sector The share of privately owned hospitals continues to rise Number of hospitals and ownership 2016 Share of hospital ownership 1996-2016 public 29.2% private 36.

4 The German Hospital Sector The share of privately owned hospitals continues to rise Number of hospitals and ownership 2016 Share of hospital ownership public 29.2% private 36.2% 45% 40% 35% 30% 25% 41.8% 40.6% 1,951 20% Hospitals 17.6% 15% 10% 35.8% 34.7% 29.5% charity based 34.6% 5% 0% private charity based public Source: German Hospital Federation 2017 Source: German Hospital Federation 2017 Germany Trade & Invest 4

5 The German Hospital Sector Germany largest private and public hospital groups Top 5 largest private hospital groups in Germany 2016 Hospital Group Helios Kliniken Sales in EUR million Hospitals Beds 5, ,000 Asklepios 3, ,690 Sana Kliniken 2, ,056 Rhön Kliniken 1, ,348 Schön Kliniken ,200 The largest municipal hospital group is Vivantes Network for Health GmbH in Berlin, with more than 100 hospitals and a total of about 5,500 hospital beds in Hospital ownership in Germany s 16 federal states (share in percent 2016) North-Rhine Westphalia Rheinland- Pfalz Saarland Bremen Schleswig- Holstein Hamburg Niedersachsen Hessen Baden- Württemberg Thuringia Saxony- Anhalt Bavaria Mecklenburg- Vorpommern Berlin Brandenburg Saxony Public Private Charity based Source: helios-kliniken.de, asklepios.com, rhoen-klinikum-ag.com, sana.de, schoen-kliniken.de, Vivantes Netzwerk für Gesundheit GmbH 2017, Grunddaten der Krankenhäuser 2017 Germany Trade & Invest 5

6 Market Drivers Demographic change has a significant impact on healthcare demand and solutions in Germany Aging Society 2035: 24 million people aged 65 years or older (31 percent of the population) Care Dependency 2020: 2.5 to 3 million 2050: 3.25 to 4 million Chronic Diseases Chronic and long-term diseases account for about 80 percent of German healthcare spending (EUR 200 billion) Within 14 years the number of people with diabetes mellitus has risen from 5.8 to 7.2 million people Source: DB Research 2010, Statista 2014, Statistische Bundesamt 2014 Germany Trade & Invest 6

7 Market Drivers As many other industries, the healthcare sector is rapidly changing due to new technology New Materials New Production Methods / Industrie 4.0 Digitalization & Interconnectivity Germany Trade & Invest 7

5 billion (+4% vs. LYP) Pharmaceuticals 34 billion (+3% vs.

8 Market Opportunities Many healthcare segments in Germany continue to be very attractive 11.2 billion non-prescription drugs 6.8 billion Preventive Healthcare Self- Medication 67.4 billion Care 39.5 billion (+4% vs. LYP) Pharmaceuticals 34 billion (+3% vs. LYP) Medical Devices Medical and Technical Aids E-Health 6.5 billion 18.8 billion (+4% vs. LYP) Source: Statistisches Bundesamt, BVMed, 2017, Statista, 2017 Germany Trade & Invest 8

Medical Technology Market Medical devices made in Germany are in high demand both at home and around the globe Expenses and Production 40 35 34 billion 30 25

9 Medical Technology Market Medical devices made in Germany are in high demand both at home and around the globe Expenses and Production billion billion Sold in Germany Exports 5 0 German Market Size German Production Germany Trade & Invest Source: BVMED Branchenbericht

10 Medical Technology Market Despite a competitive domestic medical device industry, Germany is a significant importer German Medical Technology imports account for over 15 billion per annum Ranking of Products Made in Germany 4% 1% 18,9% 29,5% EU North America Middle- and South America Rest of World 32% 14,2% Rest of Europe Asia Middle East X-Ray and other radio active apparatus 30% Devices and Materials for Dental 17% Prostheses and artificial joint implants 10% Endoscopes and surgical instruments 8% Orthopaedic apparatus 6% EEG and other electrical diagnostic apps 5% Transfusion and Infusion 5% Disposables 5% Medical needs furniture 4% Artificial kidneys 4% Apparatus for anaesthetics/breathing 3% Ophthalmic segment 2% Wheel chairs 1% Source: Statista 2017 Source: SPECTARIS Jahrbuch Medizintechnik 2014/2015 Germany Trade & Invest 10

Medical Technology Industry Germany is home to more than 12,000

11,300 companies < 20 employees Total: ~ 81,000 employees > 500

manufacturers > 20 employees Total: ~ 133,000 employees Source:

11 Medical Technology Industry Germany is home to more than 12,000 medical technology companies with about 210,000 employees ~ 11,300 companies < 20 employees Total: ~ 81,000 employees > 500 employees employees < 100 employees 3% 11% 86% ~ 1,250 manufacturers > 20 employees Total: ~ 133,000 employees Source: BVMed Annual Report 2016/17 Germany Trade & Invest 11

12 Moving Forward Pilot projects for Germany's healthcare system Remote treatment eprescriptions Electronic Doctors Notes Germany Trade & Invest 12 suedhang_gettyimages.com

E-Health Act 2016 Secure Digital Communication and Applications in Healthcare 2016 The E-Health Act became effective January 1st. From October on, patients are entitled to receive a medication plan.

2018 The medication plan will be accessible electronically through the Electronic Health Card. Emergency data can be stored on Electronic Health Card. Patients can store their own data (e.g. fitness data) in a patient file.

13 E-Health Act 2016 Secure Digital Communication and Applications in Healthcare 2016 The E-Health Act became effective January 1st. From October on, patients are entitled to receive a medication plan A reimbursement scheme will be introduced for tele-consulted X-ray diagnosis (from April on) and video consultation (from July on) The medication plan will be accessible electronically through the Electronic Health Card. Emergency data can be stored on Electronic Health Card. Patients can store their own data (e.g. fitness data) in a patient file. Gematik has to lay the foundation for the usage of the patient file with the Electronic Health Card to ensure that patient can access their data also outside of the doctor s office. Source: Bundesverband Gesundheits-IT bvitg e.v. 2016, gematik GmbH 2016 Germany Trade & Invest 13

14 Smart Solutions for Diabetes Management The German market for diabetes solutions will continue to grow by 27% through 2022 Revenue forecast for digital diabetes solutions (in EUR million) Apps Telemedicine Solutions Connected Devices Source: Statista Digital Market Outlook 2017 Germany Trade & Invest 14

15 Smart Solutions for Heart Failure Management The German market for heart failure solutions will grow by 16% through 2022 Revenue forecast for digital heart failure solutions (in EUR million) Apps Telemedicine Solutions Connected Devices Source: Statista Digital Market Outlook 2017 Germany Trade & Invest 15

16 Telemedicine The German market for telemedicine will grow by 41% through 2022 Revenue forecast for telemedicine used to manage high blood pressure (in EUR million) Apps Connected Devices Telemedicine Services Source: Statista Digital Market Outlook 2017 Germany Trade & Invest 16

17 Ambient Assisted Living The German market for AAL solutions will grow by 66% through 2021 Revenue forecast for AAL solutions (in EUR million) Source: Statista Digital Market Outlook 2016 Germany Trade & Invest 17

Telemedicine Networks in Germany Germany has a dense network of certified stroke units and tele-stroke units Certified stroke units Telemedicine networks There are about 276 hospitals with certified

18 Telemedicine Networks in Germany Germany has a dense network of certified stroke units and tele-stroke units Certified stroke units Telemedicine networks There are about 276 hospitals with certified stroke unites. Telemedicine enables the connection of local hospitals and bigger hospitals with strokes units. Tele-stroke units complement high quality and comprehensive medical care of stroke cases in rural areas. Source: DGTelemed 2015 Germany Trade & Invest 18

19 Market Access Germany offers a lucrative, but also demanding healthcare market Keys to Success: Quality Product Safety Innovation Added Benefits Cost Reimbursement Reliability Customer Relationship Germany Trade & Invest 19

Regulatory and Reimbursement Revision of the European Medical Device

MDD Start in 2012: 2014: 06/2015: Concluded 05/2016: 05/2017: 05/2020:

First Reading Trialogue Published, 3-year transition Conclusion: Revision

20 Regulatory and Reimbursement Revision of the European Medical Device Regulation 2017 (MDR) Revision Timeline and Involved Bodies: MDR to replace MDD Start in 2012: 2014: 06/2015: Concluded 05/2016: 05/2017: 05/2020: European Commission Proposal European Parliament First Reading EU Council First Reading Trialogue Published, 3-year transition Conclusion: Revision effective 2024: Latest expiry of CE-Marks under present regime (MDD) Germany Trade & Invest 20

21 Market Access Buyers and Sales Channels Multiple Buyer Options Hospitals Purchasing Groups Tenders Medical practices Care facilities and providers Homecare medical supply stores Private consumers / out of pocket market Direct Sales Preferred Digital Sales Distributors : License out to Manufacturers Fee-For-Service Sales Teams Agents/Sales Reps Wholesalers Consultants Direct Sales: Subsidiary Germany Trade & Invest 21

22 Market Access Successful market penetration in many cases requires setting up a local subsidiary in Germany The need for a subsidiary depends on the product to be sold F(x) = Need for own subsidiary in Germany 1 I IIa IIb III X = Risk class Liability Margin Training Service Regulatory Germany Trade & Invest 22

Innovation German companies maintain their competitive advantage by putting a lot of emphasis on product development 1 in 3 products sold in Germany less than 3 years old 9% of

23 Innovation German companies maintain their competitive advantage by putting a lot of emphasis on product development 1 in 3 products sold in Germany less than 3 years old 9% of revenue spent on R&D 15% of employees work in R&D Public funding for R&D projects R&D Regulatory Sourcing Production Marketing Sales Service Germany Trade & Invest 23

Facilities Cooperation & Partnering R&D Funding R&D Regulatory

24 Innovation Technology clusters provide benefits throughout the entire value chain Education & Training Labs, Incubators & Shared Facilities Cooperation & Partnering R&D Funding R&D Regulatory Sourcing Production Marketing Sales Service Germany Trade & Invest 24

Innovation The German Medical Technology Clusters play a central role in Germany s med tech innovation landscape German Medical Technology Clusters More than 30 specialized cluster networks focusing

25 Innovation The German Medical Technology Clusters play a central role in Germany s med tech innovation landscape German Medical Technology Clusters More than 30 specialized cluster networks focusing on medical technology. Goal: connecting companies, hospitals, universities, and other research institutions support continuous innovation in R&D help obtain funding for joint R&D projects provide shared facilities organize educational training programs Germany Trade & Invest 25

Medical Technology Clusters Manufacturing and innovation clusters can be found in many parts of Germany 11,000 medical technology companies 1,250 medical device

26 Medical Technology Clusters Manufacturing and innovation clusters can be found in many parts of Germany 11,000 medical technology companies 1,250 medical device manufacturers 30+ medical device clusters 426 institutions of higher education 33 university hospitals Cash grants for manufacturing and R&D Germany Trade & Invest 26

information Funding and financing Partnering Site selection All

27 Our Services Publications and other information Individual Consulting Market and industry reports Market entry analyses Tax and legal information Funding and financing Partnering Site selection All publications and all our services are free of charge Germany Trade & Invest 27

28 Contact Us Germany Trade & Invest is the economic development agency of the Federal Republic of Germany. The company helps create and secure extra employment opportunities, strengthening Germany as a business location. With more than 50 offices in Germany and abroad and its network of partners throughout the world, Germany Trade & Invest supports German companies setting up in foreign markets, promotes Germany as a business location and assists foreign companies setting up in Germany. Contact Berlin Bonn Dr. Marcus Schmidt Friedrichstraße 60 Villemombler Straße 76 T: +49 (0) Berlin Bonn Marcus.Schmidt@gtai.com Supported by the Federal Ministry for Economic Affairs and Energy on the basis of a decision by the German Bundestag. Germany Trade & Invest All market data provided is based on the most current market information available at the time of publication. Germany Trade & Invest accepts no liability for the actuality, accuracy, or completeness of the information provided. 28

GERMANY S DIGITAL HEALTHCARE MARKET

GERMANY S DIGITAL HEALTHCARE MARKET MEDICA 2017 Julia Pietsch Manager Healthcare www.gtai.com Who we are Foreign trade and inward investment agency of the Federal Republic of Germany Shareholder Germany