In all the talk about EU innovation, one crucial area is often overlooked in the policy arena for health and care systems – and that is the role of small and medium-sized enterprises (SMEs) . For our purposes, the term “health and care systems” implies a broader notion than “health systems” or “healthcare systems,” notably encompassing public health and social care . SMEs operate mainly at Member State level, as relatively few engage in cross-border business within the EU . Independently of their operational activities, SMEs are increasingly affected by EU legislation in various fields, such as taxation (Articles 110–113 of the Treaty on the Functioning of the European Union [TFEU]), competition (Articles 101–109 of the TFEU) and company law (right of establishment – Articles 49–54 of the TFEU) .
The 7th Framework Programme for research and technological development (FP7) pays special attention to SMEs through its different programmes: “Co-operation” (circa EUR 32.3 billion), “Ideas” (circa EUR 7.5 billion), “People” (circa EUR 4.7 billion) and “Capacities” (circa EUR 4 billion) .
The healthcare sector encompasses several categories of interest to present and future SMEs deciding whether to enter the healthcare services and product market. This includes medical equipment, instruments and services as well as biotechnology, diagnostic laboratories and substances, primary prevention sensors (i.e. wearable health systems based on wireless body sensor networks) plus medicine development and delivery. With respect to innovative medical devices in the personalised medicine era, the possibilities are huge in diagnosis, therapy and business e.g. from diagnostics, therapy, companion diagnostics and monitoring to commodities suitable to more general healthcare provision.
People, as well as new technology, drive innovation. Europe needs a new mindset, and quickly. In a 2017 Eurobarometer poll that addressed topics such as the European political situation, the economy and European citizenship, health is mentioned by 23% of Europeans, in second place behind unemployment, and in first place in nine EU Member States (up from eight in autumn 2017), with the highest scores in the Netherlands (49%), Sweden (48%) and Finland (47%) . According to a Eurobarometer poll that focused on the added value of EU actions, when it comes to health and social security, 70% of people would like the EU to intervene more, while 49% feel current EU action is insufficient . Accordingly, there is a growing chorus from EU citizens that the EU should develop and support interventions to tackle the health challenge so that solutions can be developed for today’s future diseases to ensure delivery of healthcare services .
The burgeoning ageing population means that treating diseases of elderly people has unique challenges that cannot be overcome solely by increasing healthcare budgets .
While positive signs have emerged, the EU has not yet overcome the effects of the 2008 economic crisis. Although the Commission’s political agenda has focused on strengthening EU competitiveness, by stimulating public and private investment, there needs to be an increased focus on SMEs in the healthcare arena, who can adapt more quickly than multinational companies, understand the local context and be understood by the local administration, and fill the gaps and opportunities . Of course, there are challenges, and these should not be underestimated. The variety of SMEs in the EU is considerable. Different Member States and regions have different types of SMEs, depending on the business model, size, stage of evolution, financial structure and legal form .
Furthermore, country-specific factors including the economic environment, structural factors such as the legal framework, and cultural norms have a strong influence on success and failure. All of this affects the productivity, profitability and risk profile of SMEs . This heterogeneity also means a high complexity of SME financing and regulatory hurdles . Given these labyrinthine factors, it is difficult to find a single solution. This is reflected in the varied policy measures that have being developed and are discussed below.
Above all factors, access to funding is a key enabler . A recent study estimates that a 1% increase in R&D spending can grow the economy by 0.61% . Whilst innovation constantly re-shapes the global economy, new markets emerge – as illustrated by the eco-innovation market, for instance, which amounts to EUR 225 billion . By correlation, investment in SMEs in the healthcare arena can have the same impact with the development of innovative healthcare services and products that will impact on citizens’ quality of life . Taking this into account, a recent announcement by the Commission is encouraging, with the EU considering a EUR 9.2 billion budget to boost tech innovation over the next decade .
This policy message was reaffirmed tangibly, with a recent loan announced on 27 July 2018, providing finances for research and development to SMEs for innovative cancer treatments . This loan agreement came following the confirmation that the Juncker Plan’s European Fund for Strategic Investments (EFSI) has mobilised EUR 335 billion in additional investment since July 2015, exceeding the initial target of EUR 315 billion .
Therefore, the EUR 9.2 billion proposed budget to boost the EU’s technology and health innovation economy, which is complemented by the regulatory efforts to transform the healthcare arena with the revision of the GDPR (General Data Protection Regulation), provides the correct signals for SMEs considering entering the healthcare market . The Commission’s hope is that such fiscal stimuli could tackle Europe’s innovation deficit and, at the same time, ensure that “European citizens will stay at the heart of this programme” (European Commissioner for Digital Economy and Society Mariya Gabriel) .
This policy paper addresses five dimensions which encompass barriers and enablers, heterogeneity and regional diversity, small enterprises in large EU frameworks, EU policy frameworks, and proposed policy recommendations. It discusses the underlying factors which create challenges to SMEs trying to capitalise on opportunities in the healthcare sphere. We group these factors into policy/regulatory and investment factors. After the discussion of the factors, the policy paper provides a number of recommendations. The paper has the goal of giving policy makers and researchers an overview of challenges and opportunities and provides avenues for uptake and refining of policy.
SMEs in Numbers and Barriers
There were more than 22.3 million SMEs operating in a range of sectors including healthcare in the EU in 2015, employing some 90 million people, across the bloc . These enterprises generated around 58% of the total added value (EUR 3.9 trillion), created some 85% of new jobs and around two-thirds of total private sector employment . After declining for a number of years following the 2008/2009 economic and financial crisis, EU-28 SME employment has picked up and outshone the economy as a whole .
EU-28 SME employment grew by 5.2% from 2013 to 2016, almost 50% faster than overall employment over the same period . There are many areas in which SMEs can and do have a major role to play, not least that of personal healthcare, including personalised medicine. One-tenth of the EU’s GDP is spent on healthcare and the sector employs roughly 15 million people .
Healthcare is a unique area for innovation, and often health means wealth – whether that be driving economic growth and creating jobs or reducing costs across increasingly cash-strapped healthcare systems dealing with ageing populations and the attendant increases in co-morbidities and chronic diseases . Furthermore, 110 European regions have identified active and healthy ageing as a smart specialisation priority . SMEs have a major part to play, but there need to be tailored initiatives to support them for cross-border enterprise, at EU level and internationally, such as procurement initiatives which will increase incentives for the EU’s trading partners to open up their public procurement markets .
Until recently, SMEs that have emerged have not been scaling up to become major employers and market leaders, which has been equated to a EUR 1 billion evaluation . This is demonstrated by the number of young companies that have reached a market valuation of over EUR 1 billion, with the EU home to 19 unicorns (e.g. BlaBlaCar, Rocket Internet and TransferWise), compared to over 100 in the USA (e.g. Facebook, Google and Amazon) .
Additionally, European unicorns are smaller – their combined value comes in at less than half the current market value of Facebook . According to the 2016 start-up and scale-up public consultation, securing finance for expansion is the main obstacle to start-ups’ growth, followed closely by obstacles related to regulations . Other areas include a business environment that is receptive to SMEs, technology diffusion, management capabilities and access to existing and future markets. These factors will ensure that SMEs can stay innovative and flexible to adapt to market conditions in the interim if they do reach the heights of transitioning from an SME to a multi-national company and/or developing spin-off SMEs that can take on this innovative role.
However, as a result, there are glimmers of a silver lining for SMEs. This year has seen a series of billion-dollar European companies which have staged successful IPOs. Since January 2018, 27 IPOs totalling USD 32.5 billion have been launched in Europe, eclipsing the 57 listings worth USD 8.28 billion last year . This includes Spotify, a Swedish music streaming company, listing in April with a share offering valued at USD 29 billion; Avast, a Czech cybersecurity group, with a valuation of USD 2.7 billion; and another Swedish SME, iZettle, focused on digital payment, with an offer of USD 2.2 billion . While these IPOs provide hope, it is clearly of vital importance that research and innovation-based SMEs should be prioritised in Member State and EU budgets. Because despite all of Europe’s quality innovation, wonderful research and great science, the EU performance gap with respect to Japan and South Korea is expected to increase, and the performance lead over China is expected to decrease . While existing EU, Member State and regional systems were designed and developed to support innovation and access for patients to innovative medicines and treatment, these systems are falling short and need to be reassessed .
Essentially, and demonstrably, Europe has been slow in adopting emerging health technologies into its healthcare systems . When looking ahead to the future of Europe in a globalised world or a Trump de-globalised world, the contrast is striking between Europe’s comparative advantage in producing knowledge and its comparative disadvantage in turning it into innovation and growth .
The rate of health technological and economic change and the urgency of global challenges continue to outpace Europe’s response and reforms . The key innovators need support to succeed, and this includes SMEs.
Figures have revealed that fewer than 5% of European SMEs conduct cross-border business in the EU . This can be down to any of several aspects: national and regional legislation, EU legislation (including taxation and financing rules), law (common and civil law) and competition, among others . And it is a startling fact that, each year, some 200,000 SMEs go bankrupt, which required the EU to develop a new approach on business failure and insolvency .
During the financial crisis, and specifically from 2008 to 2014, some 20 Member States reported net employment reductions among SMEs, and 8 said that these losses were double-digit .
A survey of 12 National Industry Associations (including all the major medical technology exporters) across Europe identified almost 7,000 SMEs that design and manufacture medical devices and diagnostic products. These companies face significant barriers that prevent them from reaching their potential. Specifically, the Commission has found that SMEs have difficulty with product registration, reimbursement, procurement, distribution channels, health technology assessment and access to R&D incentives .
The EU Is at a Tipping Point: Heterogeneity and Regional Diversity
With 6.9% of the world’s population and 24% of the global GDP, the EU suffers from a growth and SME success deficit compared to other economies . Europe has not capitalised enough on the knowledge it has and produces. The European economic structure is mainly based on SMEs as a motor of Europe’s economy .
As stated, the EU’s SME landscape is not homogeneous. SMEs are a heterogeneous group. Despite internal market rules, important divergences across the EU persist in terms of the SME regulatory framework, in particular regarding its stability and certainty level .
While in stable economies, growth is generated on the basis of efficient interaction between SMEs and big companies, in many southern and eastern Member States, difficult economic circumstances have stifling effects on SMEs’ development . Moreover, in the economies focused on attracting foreign investment, business representatives report discriminatory attitudes towards micro and small enterprises from public authorities, in particular at fiscal and judicial levels .
SME representative organisations and networks are generally less developed in new Member States and their position vis-à-vis the national administration and financial institutions is weak . A lack of macroeconomic stability, as well as of predictable and transparent regulations, results in the fact that SMEs in many post-2004 enlargement and Eurozone crisis countries suffer from unfavourable development conditions .
Issues Arising: Small Enterprises in a Large Europe
Financing SMEs: Mind the Gap
Many SMEs have failed by overextending themselves across multiple EU markets. Sometimes, they miss opportunities to leverage local funding sources to augment commercialisation . The reliance of SMEs on bank lending and the deleveraging of banks triggered by the economic crisis have contributed to their failure . Access to financing for SMEs was restricted compared to larger companies during that time .
Accordingly, the Capital Markets Union (CMU) initiative, which is to be completed by 2019, made the diversification of and access to funding options for SMEs one of its main priorities . Bank lending still constitutes the most important source of funding for SMEs. Lending to an SME is often built on a long-term relationship .
Banks with regional and local knowledge can adapt to the specific funding needs of the diverse SMEs in the best way. Banks have expertise in assessing the credit risk and can build their assessment on the credit history . Therefore, there is a need to underline that addressing and fostering the bank lending channel is the most effective way to ensure and improve access to finance for SMEs in the health innovation arena .
Filling the Gap: Non-Profit Activities and SMEs to the Rescue
Gaps in public health services have often been filled by non-profit organisations and charities . Despite the existence of healthcare systems, non-profit organisations such as in the area of cancer have propped up care for decades, plugging gaps in home care, travel costs, research funding and palliative care, as well as helping patients navigate the complexities of the health system itself . Furthermore, non-profit patient organisations in the rare disease area have been financially supporting work led by medical professionals and donating specimens required for undertaking such work, as well as shaping research agendas , study designs to reflect their own perspectives and the development of orphan drugs. In one case, this resulted in founding a start-up company to develop a promising line of treatment, in another in the initiation of clinical trials of a drug that has shown some evidence of efficacy .
The reliance on charities and use of crowdfunding represent failures in publicly funded healthcare systems . Crowdfunding is an alternative channel for financing a project that uses an online platform to solicit generally small contributions from numerous participants . While crowdfunding and non-profit organisations can support the healthcare system, there needs to be improved integration with SMEs to spur innovation, which in turn will ensure efficient hospital discharge, outpatient management, and long-term care .
Certainty and Collaborative Framework
There are potential public and private funding opportunities that are often available, although there are risks and benefits in pursuing them . In healthcare, the long-term plans of many SMEs include either collaboration with or acquisition by pharmaceutical or large device companies. Successfully identifying a pharmaceutical partner can transform a company and allow it to achieve its corporate objectives faster .
On the other hand, many partnerships can end poorly if there is a lack of alignment on objectives. SMEs should balance the trade-offs. Meanwhile, many new products are being introduced which do not clearly fit the current regulatory framework, so a dialogue with the right regulatory agencies can accelerate the time to market. Companies need to consider not only current regulations but also future regulations going to be initiated in the next 5 years or so . Public-private partnerships are seen as growing driving forces in the quest for the development of innovative healthcare both in the USA and the EU. Through the Innovative Medicine Initiative in the EU and the Critical Path Initiative in the USA, they have facilitated the emergence of innovative medicines by developing new tools for drug discovery, new indicators for drug efficacy or safety, and new approaches to patient stratification .
Market Authorisation and Regulatory Pathways
SME executives need to pay close attention to regulations that go beyond marketing authorisation and consider topics such as national and EU data privacy laws. Yet, in contrast to regulatory processes which mostly happen at EU level, harmonisation of reimbursement pathways across Europe is limited .
This situation can be challenging for large pharmaceutical companies but can be devastating for small companies unable to generate the revenue to support commercial activities. Not understanding legislative changes can severely hamper SMEs, which end up wasting time and resources .
Take Health Technology Assessment agencies. While they are attempting to coordinate their review processes, these efforts are at a preliminary stage, and most companies need to engage with each reimbursement agency . Engaging each local authority can be particularly challenging especially for diagnostic and digital health companies, where defined pathways often do not exist. While the task of gaining reimbursement can seem daunting, companies can often engage some local reimbursement agencies in advance to gain feedback on evidence requirements .
Also, there are many bridging programmes available which can help companies in accessing funding ahead of reimbursement. In the modern EU, each healthcare market is configured to meet the needs of each country’s interest and that of its citizens .
Therefore, SMEs marketing products in Estonia, Germany or Greece, for example, need to adapt their approaches to each individual local market. SMEs are often forced to prioritise markets and tend to focus their efforts on the “Big Five” (Germany, France, UK, Italy and Spain) . Other considerations for companies are whether they should commercialise their products directly or through a distributor. Additionally, there are products such as complex diagnostics or gene therapy products that require centralised processing, and the location of these facilities can lead to downstream issues .
On top of this, some companies are leveraging technology to provide centralised solutions that are delivered locally. Unfortunately, some SME healthcare executives lack the context to conceptualise which questions should be asked in new markets. There are a range of topics that may be unanticipated when commercialising a pharmaceutical or diagnostic. Being exposed to new topics could open the door to opportunities or could help avoid costly missteps. The topics may be related to conducting clinical trials, interacting with patients or building the right team.
MEGA – Genomes as a Driver of Innovation
One upcoming initiative that may help to involve SMEs involves transparency and the greater sharing of data – the MEGA project (Million European Genomes Alliance). In April, at the European Commission’s Digital Day 2018, 16 countries signed a Joint Declaration to collaborate on a groundbreaking 1-million genomes project. In front of high-level stakeholders in the fields of digital technology and telecommunication, representatives of the Member States co-signed the Declaration indicating political support for linking existing and future genomic databanks .
This will work on a voluntary basis with the goal of making a cohort of 1 million sequenced genomes accessible in the EU by 2022, linking genetics across borders.
It will involve the collection of large amounts of “healthy” and “diseased” genomes in a similar way to the 100,000 Genomes Project in the UK, and former President Obama’s Precision Medicine Initiative in the USA. The Declaration was and is a watershed moment for European health research and clinical practice: sharing more genomic data that complement other health data sets will improve understanding and prevention of disease, allowing for more personalised treatments (including targeted drug prescription).
The countries which signed the declaration are the Czech Republic, Cyprus, Estonia, Finland, Italy, Lithuania, Luxembourg, Malta, Portugal, Slovenia, Spain, Sweden, the UK, Bulgaria, Croatia and Greece, and there is ongoing interest from other countries (France) and regions (North Rhine-Westphalia in Germany).
The signatory Member States commit to collaborating on secure and authorised access to national and regional banks of genetic data and other data relevant to health.
This alliance has the potential to form a unique data resource (due to the heterogeneity of populations) by leveraging and maximising the investments already made by Member States at national and EU level, particularly in sequencing, biobanking and data infrastructure.
There is a commitment to develop policies that “define a governance model of the cooperation, particularly concerning the terms and conditions for distributed access to genomic data across-borders, usage of the data and others.”
MEGA will support a mechanism for optimal public/private cooperation around the sharing of health data . It is in line with the European Commission’s Digital Single Market mid-term review priorities, including the goal of “supporting the establishment of a secure health data infrastructure at EU level, to advance research and personalised medicine” . Furthermore, the declaration is pursuant to the Commission Communication of 25 April 2018 including, inter alia, “supporting data infrastructure, to advance research, disease prevention and personalised health and care in key areas including rare, infectious and complex diseases” .
An initiative as challenging and complex as MEGA requires a truly collaborative approach to catalyse health improvement, research advances, commercial success, and public engagement with genomics, research and their own health . Although the public sector will be fundamental for health, academia for research, companies for commercial success, and policy makers and the third sector for public engagement, all partners will contribute to success in each area . This will, of course, include SMEs.
From the cancer perspective, existing views like those of the EAPM White Papers on lung cancer , melanoma  and pancreatic cancer  in Europe (but also lessons learned from the Cancer Moonshot initiative in the USA and others) could be used as real-life examples.
EU Policy: Evolution, Not Revolution
EU in Action
Since 2011, a number of EU measures have been adopted that will support the development of a personalised medicine policy framework as well as SMEs entering the area. These include
the Clinical Trial Regulation, which will facilitate the conduct of clinical trials in the EU ;
the GDPR, which makes the legal framework in this area fit for the digital age ; and
the in vitro diagnostic and medical device legislation, which aims to adapt EU legislation to technological and scientific progress .
The Directive on patients’ rights in cross-border healthcare  established the eHealth Network to advance the interoperability of eHealth solutions. Cooperation structures have also been developed; for example, the European Innovation Partnership on Active and Healthy Ageing , the Active and Assisted Living Joint Programme  and public-private partnerships such as the Innovative Medicines Initiative .
Regional and national smart specialisation strategies also play a central role in the development of stronger regional ecosystems around the SME domain and healthcare professionals .
Since 2004, two eHealth Action Plans have provided a framework for policy action for the Member States and the Commission, and the eHealth Stakeholder Group has played an important role stimulating SMEs in the digital area .
Under the Luxembourg presidency of the EU (July to December 2015), European Health Ministers adopted Council conclusions on personalised medicine . The Council conclusions from the Bulgarian presidency were endorsed by all Member States on 28 June 2018. The European Council confirmed the set-up of a European Innovation Council for market-creating innovation under the next long-term budget. The Council also invited the Commission to launch a pilot initiative on breakthrough innovation within the remaining time of Horizon 2020. The Bulgarian Council conclusions prioritise the need for “a stronger, inclusive innovation ecosystem to foster breakthrough and market-creating innovation and provide comprehensive support for businesses, including SMEs” .
Research infrastructures (RIs), as set out in the ESFRI (European Strategy Forum for Research Infrastructures) roadmap, provide an interdisciplinary, innovative environment in the field of life sciences and health research where world-leading investigators conduct pioneering research using open access to cutting-edge technologies and scientific data .
According to the EU, such RIs will play a key role in closely linking basic research to medical application, providing services, training and access to technology for scientists in academia as well as SMEs . The Biobanking and Biomolecular Resources Research Infrastructure (BBMRI), the European Advanced Translational Research Infrastructure in Medicine (EATRIS) and the European Clinical Research Infrastructures Network (ECRIN) were awarded the ERIC (European Research Infrastructures Consortium) status .
These RIs throughout Europe are expected to strengthen the scientific competitiveness of SMEs, as well as to encourage them to enter the market, by producing accessible high-quality instruments and providing access to resources developed by European countries (healthcare databases, genetic databases, etc.) .
Such frameworks that encourage a climate of collaboration, sharing and exchange of knowledge can further strengthen the European position of developing an active SME industry in the healthcare arena.
Such policy initiatives are echoed at Member State level, such as those carried out by the UK Academy of Medical Sciences , the German Academy of Sciences Leopoldina , the German Personalized Medicine Action Plan  or the Genomic Medicine France 2025 plan .
Jean-Claude Juncker previously set out guidelines that include helping SMEs, mainly from the point of view of lowering regulatory and administrative burdens, making it easier and cheaper to raise capital, boosting investment in new technologies and bumping up skill sets .
The Berlaymont’s European Fund for Strategic Investments, its single-market strategy and the emerging digital single market are theoretically geared, in part, to help Europe’s SMEs. Other initiatives exist that would be able to help, including the late-2016 start-up and scale-up initiative, which is designed to break down barriers faced by start-ups trying to grow in the single market.
This, linked to increasing the financial literacy of SMEs, is therefore a prerequisite to creating a capital market culture with entrepreneurs willing to consider the use of capital market solutions .
Markets outside the EU for SMEs
Ninety percent of market growth over the next decade is expected to be outside Europe . European SMEs need to gain more knowledge from international markets, participate in new value chains and reap greater benefits from these growing markets. Of course, different business approaches will need to be taken by these SMEs, such as debt and equity financing, with low- and middle-income countries. This would notably involve international cooperation on innovation activities such as large-scale trials or demonstrations and would result in enhanced competitiveness .
The aim is to create better partnership opportunities, commercial opportunities and skill development while providing better access to finance. It is geared towards removing many of the problems faced by Europe’s SMEs. Juncker’s Commission is also seeking to avoid creating more regulatory barriers than already exist in innovation and other areas, and it has gone some way to addressing this through changes to Horizon 2020 . This must continue into the next Commission, especially in the healthcare arena.
Meanwhile, the Commission strategy should help the EU’s competitiveness by boosting start-ups, SMEs and companies that use data for research and development with innovation as a key goal.
Digitising the European Industry
In a recent 2017 European Commission Special Eurobarometer survey entitled “Citizens’ Attitudes towards the Impact of Digitisation and Automation on Our Daily Lives,” the survey indicated that two-thirds of Europeans think that the most recent digital technologies have a positive impact on society, the economy and their own lives. Furthermore, a majority of respondents were of the opinion from this survey that the EU, Member States’ authorities and companies need to take action to address the issues raised around digitisation . SMEs can develop needed actions to create digital solutions to these unmet health needs.
The data-driven economy policy has always been intended to benefit SMEs as part of its added value. As such, it is envisioned that digital innovation hubs will give SMEs better access to information and, indeed, even up-to-the-minute testing facilities .
Cloud-based high-performance computing resources, applications and analytic tools should become more readily available too. Innovation hubs available for SMEs should become mainstream, allowing great opportunities for them to develop creatively innovative solutions. This year the Commission published a report on research and innovation performance in the EU .
Two specific areas in which the EU has developed policies that can propel SMEs in the area are:
Open Science Cloud: deriving from the ongoing integration and consolidation effort supported under the “e-Infrastructures” priority of Horizon 2020, it aims to develop a trusted, open environment for the scientific community for storing, sharing and re-using scientific data and results . This was stated in the Commission’s “Communication: European Cloud Initiative – Building a Competitive Data and Knowledge Economy in Europe” . In October 2016, the High Level Expert Group’s report on the European Open Science Cloud  comprised a number of recommendations to the Commission on a preparatory phase for the Cloud that included (1) designing appropriate incentives and developing common standards for data sharing, and promoting data literacy, (2) facilitating greater access to publicly funded scientific publications and (3) promoting “living labs” demonstration projects engaging all relevant stakeholders in action research activities demonstrating solutions to challenges
Open Science Policy Platform: this will co-shape the policy. There are eight priority topics for action: Rewards, Altmetrics, Open Science Cloud, The Future of Scholarly Publishing, Research Integrity, Citizen Science, Open Education and Skills, and FAIR Open Data. The Council conclusions of May 2016 underlined that: “[o]pen access to scientific publications and optimal reuse of research data are of utmost importance for the development of open science. The Council agrees to further promote the mainstreaming of open access to scientific publications by continuing to support a transition to immediate open access as the default by 2020” 
Personalised medicine, with its use of new technology and goal of giving the right intervention to the right patient at the right time, can be a great unifier between that digital technology and “the physical world,” not least through harnessing research data and genomics to improve the lives of patients and enhance society . SMEs must be involved at all levels of the process, and Europe as a whole must work harder to put them at the forefront as drivers of innovation.
Regional Policies to Take Account of SME Differences and Unfair Competition from Multinational Companies
There is a need to ensure a level playing field for SMEs regarding their competitive position compared with large corporations . Small and local business is particularly disadvantaged in overregulated and bureaucratised administrative systems, as they induce higher fixed costs for enterprises . In some cases, EU competition policy results in privileging big operators characterised by better economic efficiency than SMEs . There is an increased need for specific SME measures in order to curb their market diseconomies, enabling SMEs’ internationalisation and boosting their job creation potential.
When shaping the EU’s regulatory framework, policy impact analysis should make a difference between multinational companies and SMEs. At the same time, the strong regional differentiation among Member States should be given more consideration when assessing and measuring EU policy results. In light of divergent barriers to job creation, the principle of “one size fits all” is discriminatory for the SME sector.
There is a need for a stable regulatory environment, plus improved regulation quality and enforcement, to lower SMEs’ burdens, including labour costs . In this context, particular attention must be paid to specific measures needed to improve SMEs’ access to skills. There is a need for further development of vocational education training that facilitates work-based learning and apprenticeships.
Above all, Member States should implement the “Think Small First” principle and provide favourable legislative frameworks for newly created SMEs .
Spotlight on Rare Diseases and Role of SMEs
In the EU, a disease is defined as rare if it is life-threatening or chronically debilitating and if no more than 1 in 2,000 people has it .
Ten years ago, the EU adopted a Communication setting out how it would support Member States in diagnosing, treating and caring for citizens with rare diseases . The strategy’s third pillar was to strengthen cooperation and coordination for rare disease research. Challenges are numerous due to the low prevalence, and research work is limited and scattered across laboratories and clinics. This scarcity of expertise and practice translates into delayed diagnosis, few medicinal products and difficult access to care .
Therefore, this is a prime example of having an EU strategy to encourage SMEs to develop and take on this challenge. The rewards for SMEs are substantial, with authorised orphan medicines benefiting from 10 years’ protection from market competition once approved. This period of protection is extended by 2 years for medicines that have complied with an agreed paediatric investigation plan granted at the time of review of the orphan medicine designation . This will require a new pricing and reimbursement model with coordinating assessments that will incentivise innovation across all disease areas where unmet medical needs exist, and not only in the areas where innovation and added value are most easily achieved and demonstrated .
Funding in the Rare Disease Area and Opportunities for SMEs
The EU has put much effort into funding rare disease research, encouraging national funding organisations to collaborate in the E-Rare programme .
Co-ordination of the activities between funding agencies, regulatory bodies, civil society organisations and partnerships with, for example, EU RIs maximises the impact of global investments for SMEs .
Benefits for Society
Between 2000 and September 2015, the EMA received 2,302 applications for designation, of which the Commission approved 1,544. Of these, 1,227 are currently active. Up to February 2016, the Commission authorised 119 products, of which 84% are new active substances . Such activities contribute to accelerating the development of innovative therapeutic approaches. Without such incentives in the system there would be a lack of willingness by SMEs to enter this area.
Conclusions and Policy Recommendations
While cooperation between EU health systems is complex, the EU has all the necessary ingredients to shape a prosperous and safe future for SMEs . An illustration of this is the research field, where there are 1.8 million researchers working at thousands of universities and research centres, as well as in world-leading manufacturing industries, a suite of increasingly interconnected research infrastructures, a thriving ecosystem and an increasing number of hotspots for start-ups . Information exchange in the field offers the potential to both increase the efficiency of cross-border cooperation and reduce information gaps . Such enhanced information exchange between research is vital to promote a knowledge transfer between regions and can support SMEs .
However, the issue of supporting SMEs in the health innovation sphere has no one-size-fits-all solution. Healthcare systems can act as closed systems in which service delivery, service use and financing take place within the national territory following the territory principle. Of course, lessons can be learnt from the research community and the structures that they have developed to tackle the thorny issues of stakeholders’ motivations and interests to engage in cross-border cooperation . A key rationale for cooperation is to provide benefits by translating the broad ideals and values of science and technology into concrete advantages for EU citizens .
Many new SMEs are active as a result of crowdfunding, and new entrepreneurial financing instruments have been introduced. These instruments are supporting SMEs that faced difficulties in the early stages of their development .
EU and Member State policies should support SMEs’ scale-up by fostering a dynamic business environment that facilitates entrepreneurship and enables firms of all sizes to reach their full potential, including through better integration in regional, EU and global markets and value chains .
Tailored policies can ease access to, and effective use of, strategic resources by growth-oriented entrepreneurs and SMEs, including finance, skills, technology and knowledge. These policies must take place against the backdrop of sound framework conditions, including the institutional and regulatory framework enshrined in the single market, in order to ensure certainty and to incentivise experimentation by entrepreneurs.
Policies for Inclusive SME Health Entrepreneurship
On the basis of engagement with national and EU policy-makers, politicians and policy experts, a summary has been made of the recommendations.
Policy Option to Facilitate SMEs as Drivers of Health Innovation
1 Frameworks to Support SMEs
Providing forms of support for the generational transfer of businesses: in Europe, there are many SMEs which are family businesses that have existed for more than 75 years. For these SMEs, there is a need to find ways to commercialise new and emerging technologies or apply existing technologies to new settings like healthcare; therefore, a transition framework needs to be put in place for scale-up and consolidation
Reinforcing the EU Entrepreneurship 2020 Action Plan with budget lines after 2020 that can
(a) strengthen framework conditions for entrepreneurs by removing existing structural barriers,
(b) support entrepreneurs in crucial phases of the business life cycle and
(c) spread the culture of entrepreneurship in Europe in order to nurture a new generation of entrepreneurs in the healthcare area
Medical technology SMEs are investing heavily to comply with new in vitro diagnostic regulations. However, the industry’s ability to keep products on the market, beyond the 26 May 2020 and 26 May 2022 deadlines, could be jeopardised by the slow progress in putting into place the critical infrastructure that will enable the new regulatory systems to work. As such, these deadlines should be extended by 2 years
Providing specific forms of support for healthcare-focused SMEs in the framework of funding policies with the inclusion of genomics and data sharing in the criteria at the beginning so the inclusion of proposals such as MEGA is more logical at the end for funding
Implementing an “SME test” so that every healthcare-related legislative provision is accompanied by an impact assessment of the costs, ensuring a corresponding reduction of other charges, applying the principle of proportionality and specificity, and postponing compliance obligations:
(a) Ensuring that recommendations developed by the “EU Task force on subsidiarity, proportionality and doing less more efficiently” facilitate rather than hinder SME development
Favouring the participation of SMEs in the health sector in the planning of initiatives and the reviewing of tools for internationalisation
Implementing the Small Buisness Act (SBA) Action Plan recommendation that the cost of setting up a company be reduced to EUR 50 and the time required reduced to 2 days by 2020, and also implementing the SBA Action Plan recommendation by 2020 for rehabilitation and liquidation of the bankruptcy debts of honest business entrepreneurs to 1 year
The EU supporting system of businesses and banks and other international forums should make sure that the roll-out of “Basel 3” capital adequacy rules does not hinder credit to SMEs and adversely affect the GDP 
A greater percentage of Horizon Europe should be allocated to support SME innovation:
(a) Increased business innovation grants for feasibility assessment: EUR 250,000 (lump sum) per project (75% of total cost of the project)
(b) Business innovation grants for innovation development and demonstration purposes (an amount in the indicative range between EUR 500,000 and EUR 2.5 million [75% of total cost of the project] as a general rule)
(c) Define market access pathways to successfully support SMEs who obtain grants under (a) and (b) to ensure further development and marketability of new innovations
Supporting coordination between authorities to implement the secure exchange of genomic and other health data in order to advance research and personalised medicine
Ensuring European standards, guidelines and interoperability are in place for the healthcare ecosystem which are implemented and assessment is undertaken on a 3-year basis for review and update, taking into account the evolution of innovation. Standards should help reduce technical barriers to healthcare transactions, reduce costs and facilitate SMEs’ access to markets 
4 Market Access
With more than 430 million consumers (minus the UK after Brexit), the European single market for healthcare products and services provides many opportunities for intra-EU trade for SMEs. The Commission’s objective should ensure a stable regulatory framework to foster free movement of healthcare products and to ensure frameworks can facilitate their adoption in the healthcare setting
Reinforcing regulatory frameworks such as the Orphan Regulation for Rare Disease that can support SMEs and can ensure equality of access for all 
5 Access to Information
– a database containing quality-checked researchers and SMEs acting in the life sciences sector and
– advice on all aspects related to EU-funded research projects, such as first orientation, strategy development, proposal preparation, implementation, exploitation and promotion
Enterprise Europe Network: a tailored section that facilitates SMEs active in health innovation to get access to market information, overcome legal obstacles and find potential business partners across Europe
Internationalisation of Clusters in the health sphere: this initiative should promote international cluster cooperation and collaboration by intensifying cluster and business network opportunities across borders and sectoral boundaries within and beyond Europe
Interactive Summary of the SME Recommendations (Table 1)
S.A.M. is 100% employed by the VU University Medical Center Amsterdam, and the Maastricht University Medical Center is involved in SMEs as a co-founder and CSO (Microbiome) and CEO (TubaScan) in spin-off companies of the VU University Medical Center Amsterdam, The Netherlands. H.J.v.K. has a 4-h-per-week appointment at TubaScan to accommodate his IPHG position. D.H. has no conflicts of interest to declare.