The forces shaping the decade: Where can Europe win in healthcare? 

China’s rise as a healthcare innovator, changing pricing dynamics in the US and growing pressure on European healthcare budgets are reshaping the global market. This disruption is creating opportunity for agile European businesses.

Healthcare is entering an era in which the dynamics of its three major markets are becoming increasingly distinct. China has become a major source of innovation, US pricing is under pressure, and Europe is (still) facing constrained healthcare budgets alongside changing regulation.

There are reasons for optimism. Valerio Di Filippo, Partner at Bain & Company, shared findings from recent Bain research showing that a group of European mid-cap pharmaceutical companies had significantly outperformed the wider market over the past decade, aided by international expansion, increased exposure to the US and a focus on areas such as specialty and rare diseases.

“We are progressively entering an era of multiple markets, where each geography can represent a different opportunity,” said Valerio. Chairing a panel at Inflexion’s inaugural Healthcare Symposium, he explained that these shifts are already changing how healthcare businesses think about innovation, market access and where to launch products.

What forces are having the greatest impact on healthcare today?

John DiGiovanni, Inflexion Partner and Head of Healthcare: Regulatory runs through a lot of this. You have Most Favoured Nation (MFN) pricing and the Inflation Reduction Act in the US and Joint Clinical Assessments in Europe potentially affecting relationships with China.

That complexity is a headache for a lot of companies, but also an opportunity for whoever can help them navigate it. Europe should also benefit from some of the friction between the US and China. China is accelerating its innovation enormously and there is an opportunity for European businesses to harness some of that.

Robert Kettell, Partner, Newmarket Strategy: Sluggish economic growth across much of Europe combined with fiscal pressure will affect how innovation will be valued.

We’re starting to see countries respond in interesting ways, including greater interest in incentives for inward investment and potentially linking investment more closely with what a healthcare system is willing to pay.

We're also seeing a broader definition of value emerge. Innovations that can demonstrate not only better patient outcomes, but improvements in broader economic outcomes such as labour market productivity could have an advantage. But relatively few companies are building that evidence into their plans early enough.

Erin Federman, CNX Therapeutics Non-executive Director: The economics are moving upstream in both medtech and pharma. Decisions that might have been made after Phase III increasingly need to happen much earlier. The launch needs to start in the lab.

Historically, we’ve judged assets primarily on their clinical data. The realities of healthcare today, mean that the bar now needs to include their broader economic impact, including effects on people’s ability to work and participate in society. That means rethinking what ‘good’ looks like from the outset.

China is now a major source of healthcare innovation. Threat or opportunity?

Hannah Hans, Head of Pharma Strategic Intelligence, GlobalData: China is no longer a fast-follower market. It is a primary source of innovation, and pharma companies are treating it that way.  In GlobalData's survey this year, 65% of pharma companies said China could form part of their strategy, including as a source of business development and pipeline opportunities.

The deal flow backs this up. Around a third of licensing deals last year originated in China. It is a structural shift in where big pharma sources its pipeline. Now we are seeing genuinely differentiated assets alongside faster development timelines, and that combination is hard to compete with. For most companies, the real risk is not engaging with China. It is being late to it.

Erin: Rather than simply being concerned about China's advantages, the question should be: what can we learn? Why aren't we moving as quickly, and where could partnership accelerate innovation for European patients?

China has resources and substantial government investment, but there is also an ability to learn, iterate and move quickly.

Europe has something very different: established regulatory systems, trusted medicines and deep experience in evaluating products. Imagine combining that expertise with some of China's speed, agility and scientific innovation. That could be incredibly powerful.

Robert: A question is whether European regulators take a protectionist approach or embrace opportunities to work with Chinese innovators.

How that develops, whether through conventional transactions and partnerships or changes in the regulatory relationship between Europe and China, remains uncertain.

John: From an investment perspective, we're trying to harness some of that innovation while being mindful of the sensitivities involved. We've looked at areas including market access and clinical trials and are assessing where we can learn from what is happening in China, replicate elements organically or potentially use M&A.

So where does Europe have a right to win?

Erin: The right to win sits in one of the things European businesses can do particularly well: adapt. Mid-sized organisations can lean into their agility and recognise that the decisions determining the eventual value of an innovation start long before it reaches a regulator.

We also need to challenge how we define value and make better use of the data we have. We have data showing how consumer behaviour and expectations are evolving, but I'm not sure we're capitalising on it sufficiently.

The old playbooks won't necessarily get us where we need to go. We shouldn't discard what works, but we should be willing to rethink how products reach patients and how value is demonstrated.

Hannah: Europe has huge amounts of data at its disposal,  but too little of it is being turned into evidence that supports pricing and access decisions. There are also regulatory changes creating opportunities in areas such as rare diseases, where mid-sized companies can think differently about how they advance products and address significant unmet need.

Whether the innovation comes from China or elsewhere, European businesses need to look beyond their traditional models and markets.

John: I would push back on the idea that Europe's advantage is defensive. Getting a product reimbursed across a dozen different systems, each with its own evidence bar and its own politics, is genuinely hard and even harder to scale from the US or China. That is a huge European moat and it’s the kind of moat that produces durable mid-market businesses which we are interested in partnering with.

Robert: European businesses have real experience operating across multiple reimbursement and health technology assessment systems, and this complexity can become an advantage.

For agile European mid-caps, that expertise may become more valuable rather than less as global pricing dynamics continue to change and US prices become increasingly linked to those in ex-US HTA markets.

Does Europe need a new healthcare playbook?

Nobody on the panel thinks Europe needs to throw out what it does well — the regulation, the science, the data. The real challenge is to move faster with what it's already got. As Valerio put it, "a lot of things that didn't happen in the past can happen now" — and for European healthcare, that's an opening.

Ambitious businesses can grow faster with the right capital and expertise, with Inflexion’s flexible funding offering minority or majority capital and access to a sizeable team to accelerate growth. The Inflexion team has significant experience in supporting the growth of a number of healthcare companies of different sizes, including CNX Therapeutics, Ensera, GlobalData Healthcare, Primed, Proteros, Rosemont and Upperton Pharma. All have access to Inflexion’s value acceleration strategies of M&A, digital enhancement, international expansion, talent management, commercial effectiveness, and sustainability.