EU’s Medical Device Regulation: What’s the effect on pricing?

In 2020, all medical device companies will have completed the implementation of the new medical device regulation. Reading European Union (EU) Regulation 2017/745 of the European Parliament and of the Council of 5 April 2017 on Medical Devices[1], it sounds like many new data requirements.

In brief, there’s a lot of work for your clinical team, but what effect will it have on your pricing strategy? Can we expect to change the approach to pricing? Short answer: Yes. Let me explain.

The regulation’s four dimensions

The regulation essentially has four key dimensions:

  • Numerous devices will be up-classified.
  • Increase in the requirements for equivalence.
  • Importance of clinical benefit within the trial design. This is discussed in article 62 of the new regulation, “To establish and verify the clinical benefits of a device as specified by its manufacturer.
  • Class 1 devices will require post-marketing surveillance report, per article 85 of the new regulation, “Manufacturers of class I devices shall prepare a post-market surveillance report.

The first two dimensions lead to additional trial and data gathering. Understanding that these efforts have an associated cost, we could expect an increase in prices to compensate for the additional costs. In cases where manufacturers do not comply with the regulation, it would lead to a market withdrawal, not a decrease in prices. Therefore, we can conclude that the regulatory provisions will lead to a price increase in the short-term.

The clinical benefit is perhaps the most interesting. In fact, as there will be a systematic assessment of the clinical benefit to the patient, we foresee prices being linked to the clinical results. So, for game changing devices, we will see a price increase based on the value provided to the patient, and therefore to society as a whole, which seems a fair benefit. The great thing is that the benefit would potentially go in both directions with devices having less value being cheaper ultimately, market rules at its best.

The second aspect links to post market surveillance. Manufacturers are obligated to have a strategy to monitor their devices in real world settings. This could potentially lead to prices decreasing faster over time, if the clinical value is not proven. Ultimately, it would represent savings for the system. We do not see justification for price increases based on real world evidence. In the long run, once society is accustomed to the data points, it will become a reality but in the current market, solely price decreases are possible.

Outcome-based contracting

More than simply a price increase or decrease, the last two provisions (clinical benefit and post-marketing surveillance) are creating an eco-system favorable to outcome-based contracting. We could see pay for performance become the norm for a class 1 product as data is collected and payers keep the benefit to patients in mind throughout the investigational trials. Data may still be a challenge to collect technically, but regulations should ease the implementation of the required tools.


[1] https://eur-lex.europa.eu/eli/reg/2017/745/oj