NEW YORK – The German Diagnostics Industry Association (VDGH) recently published its annual review of 2023 and outlook for the current year, including survey data collected from its more than 100 member firms.
While 2023 saw sales decline across the industry by more than a third to €2.3 billion ($2.1 billion), mostly because of a drop-off in SARS-CoV-2 testing, VDGH believes that the industry is undergoing changes that will set it on a path toward steady growth.
Reasons for optimism include survey data indicating that most German in vitro diagnostics manufacturers expect sales to grow this year, and three quarters of polled VDGH members said they plan to launch new tests. VDGH also believes that the increased adoption of AI, as well as digitalization efforts around healthcare in Germany, will support the development of new tests.
According to VDGH Chairman Ulrich Schmid, the industry is grappling with a number of issues, including regulatory changes, sustainability, and shortages in the labor market that could constrain future growth if unaddressed.
In particular he called the EU's In Vitro Diagnostic Regulation (IVDR), which came into effect in May 2022, "one of the most important topics for our industry, as regulatory requirements increase and our members and customers demand support and a clear positioning."
The IVDR created a new set of requirements for IVD makers and has been an added burden for all firms, in particular smaller diagnostics companies. Issues related to implementation have resulted in extended transitional periods for certain classes of devices. A recent proposal to extend these grace periods even further is an idea that VDGH has welcomed to avoid any shortages in test availability.
Schmid noted that these issues were likely not limited to Germany and were also affecting large adjacent markets like France and Italy.
"Germany is the largest IVD market in Europe," he said. "However, all regulatory and market access aspects are decided at the European level." The main difference lies in the different reimbursement systems between countries, he added.
To address these issues, Schmid said the association is "working on strategies and related activities to meet the [IVDR] requirements." He noted that VDGH believes a "fundamental revision of the legal framework" for the approval of IVDs is needed, and that the association published a white paper with the German Medical Technology Association about this last year.
Separately, Schmid noted that VDGH has implemented a new sustainability department, as there is a desire to reduce plastic waste created by the industry by improving packaging recycling and low-emission fleet management.
There is also the issue of a lack of skilled workers, a problem not only in Germany but also in other countries, including the US. Almost all members surveyed by VDGH – 94 percent – reported a shortage in skilled labor, up from just 35 percent a decade ago. When asked for the reason for the shortage, Schmid noted that the German population is aging, and the ratio of working to retired people is shifting. "The baby boomers of the post-war period are gradually retiring, while significantly fewer young people are following them," he said.
To address this, Schmid said that more measures are needed to promote education and training, as well as to attract and retain staff.
VDGH was founded in 1977 to represent the interests of German in vitro diagnostics firms that manufacture or sell products for diagnostics and life science research. It now has more than 100 members, including some big international players like Abbott, Beckman Coulter, Bio-Rad Laboratories, DiaSorin, Cepheid, Illumina, Qiagen, Merck, Roche, Siemens Healthineers, and Sysmex. Schmid is also the general manager of Menarini Diagnostics Germany, which is headquartered in Berlin.
VDGH's membership has swelled by about 50 percent in recent years, he said, thanks to the association's lobbying efforts. Since 2004, VDGH has carried out market surveys among its members such as the annual survey it published late last month.
As noted in the latest survey, sales were down in 2023, both because of waning SARS-CoV-2 test sales and because the equipment market had become saturated during the pandemic, when many labs bought new instruments. Reagent sales improved modestly, though, in areas like microbiology, Schmid pointed out, as "classic infections" picked up.
The market for diabetes self-management tests also changed in recent years, he noted, as patients moved to sensor-based glucose measurement methods, instead of blood sugar test strips.
German firms seem to have mixed ideas about what the future will bring. –A total of 46 percent rated the economic situation for 2024 as "good or very good," 35 percent as "satisfactory," and 19 percent as "bad or very bad." But 58 percent forecast sales growth for 2024, while 27 percent predicted sales would be about the same, and just 16 percent anticipated a decline. Three quarters of companies plan to launch new tests this year.
Due to competitive concerns, companies did not state in the survey what kinds of tests they plan to launch this year but VDGH believes new tests will be launched "in many indications covering personalized medicine and/or cell and gene therapy," Schmid said. In addition, VDGH believes that point-of-care tests will become increasingly important.
VDGH is encouraged by the role that AI will play in diagnostics, as well as by Germany's recent digitalization efforts within its healthcare system . "This will not only increase the efficiency and accuracy of the tests but will also make it possible to perform tests with more compact equipment and in more remote locations," Schmid predicted.
At the start of the year, the German federal council, the legislative chamber representing Germany's 16 states, approved the Law to Accelerate Digitalization in the Health Sector as well as the Law to Improve the Use of Health Data, which went into effect in late March.
The first makes the use of e-prescriptions mandatory and supports the use of health applications and telemedicine. The second supports the use of health data for research purposes, establishing a central data repository through which researchers can access information pooled from state-level cancer registries and health insurance data.
This anonymized healthcare data could benefit IVD makers as they seek to develop new tests.
"Considering that industry covers 80 percent of all R&D [diagnostics] activities in Germany, these new possibilities will ease on the one hand the access to anonymized patient data and accelerate the time to market of new diagnostic tests," predicted Schmid.
It is precisely here where AI could play an important role. "It will take a few years to explore this huge amount of data," he said. "Of course, this data is also a fundamental source for new AI-based instruments."
Yet the EU's AI Act and IVDR are not yet aligned, Schmid pointed out, and might have contradictory demands that could delay innovation for patients, while increasing costs for companies. The same notified bodies charged with assessing new IVDs under the IVDR, for example, will require additional certification to evaluate AI-based tests under the AI Act, creating a new layer of certification for NBs and longer roads to market for manufacturers.
But should these obstacles be overcome, the combination of new tests, AI, and a digitalized healthcare system should "help to strengthen Germany as an attractive location for medical innovations," said Schmid, as well as increase the competitiveness of the global diagnostics industry.