Asymmetric supply and demand sides, which leads to paradoxical cost/profit relations, at the expense of European hospitals and the taxpayers.

See Johnson & Johnson Q1/2021 financial results as an example:

• 22,3 bn $ sales / 7,4 bn $ operating profit (33%)
• Gross Profit 68%
• 7 bn $ production costs (31%)
• 5,4 bn $ selling, etc (24%)- almost as high as production costs. 3-5 fold more expensive than in other industries – almost twice as high as R&D spendings
• 3,2 bn $ R&D (14%) – not quite half of selling costs
• Effective Tax Rate: 16,5%

There are a lot of other markets with asymmetric supply and demand structures.

E.g. consumer electronics, sporting goods, food, toys: in these industries, a few BIG companies dominate the World / European markets.

The difference: to prevent these multinationals from dictating prices at will, there are usually Group Purchasing Organisations (GPO) read more or large retail chains that act as a corrective or regulator for the consumer.

This usually leads to fierce price competition in favour of the consumer and, as a result, to justifiable single-digit / low double-digit margins for the manufacturers.

This is not the case with medical devices and equipment. Commercial Medical GPO´s or Medical Internet Marketplaces read more get their money from the medical industry.

This leads to an absurd situation in which the higher the sales price for the industry, the higher the commission for the GPO, the Medical Market Place, and the higher the costs for the hospital.

Recurring, similar orders (80-90%) with high volumes are easy to process digitally, and hardly any products require explanation once they have been introduced

Due to extreme concentration on the supply side: similarity of products across all European countries

High gross profits (over 70-75%) mean relatively low manufacturing costs (under 25-30%).

The biggest fixed cost block is sales, which is 3-5 times higher than in other industries read more. Add to this R&D costs (40-45%).

To reduce this fixed cost block relatively, these costs have to be allocated to a single device. The percentage share then decreases with the number of units sold.

This is the reason why BIG MEDTECH is so extremely turnover-focused – or top-line oriented.

This is also the reason why distribution costs can be dramatically reduced, with Europe-wide bundling of demand.

If pure production costs were much higher, no significant price advantages could be achieved even with the Internet platform economy.

The med industry is dominated by non-EU companies. Apart from a few highly paid managers and sales people, it is not a significant EU employer. read more

However, savings would benefit millions of EU citizens, because chronically underfunded hospitals will regain more financial flexibility.
Hospitals are also the central healthcare facilities of any country. They enjoy political backing at both national and EU level, so any cost-saving initiative - while maintaining high quality - will receive considerable political support.