The Munich region is one of the most prominent medical technology locations in Germany — and what's the local digital health industry like? We surveyed Munich's startup scene about the challenges and opportunities, how the ecosystem is structured, and what tips they have for eHealth startups.
With 19,000 employees subject to social insurance contributions in 350 companies, the MedTech sector generates a total annual turnover of 4.1 billion euros ((as of 2015)At the same time, Munich's medical technology sector is a strong driver of innovation. Approximately a quarter of the companies, suppliers, and service providers operating here were founded after the turn of the millennium. How important is the digital healthcare sector in particular?
Digital Healthcare – a classification
Digital health essentially describes the use of digital technologies in healthcare, including the term telemedicine (which is popular in Germany) or eHealth. Digital health aims to improve administrative processes in the healthcare industry and the interaction between doctors and patients. The focus is on communication between them, but also on support in preventative care, diagnosis, and treatment. This applies to the healthcare system in general, medical and nursing care, as well as the pharmaceutical and insurance industries. Two key technologies are particularly in focus: Big Data and data capture, and Artificial Intelligence (AI) and data utilization.
The chances
Patients, doctors, providers, and society as a whole can benefit. The quality of healthcare could be improved, efficiency and transparency increased, and a more efficient healthcare system would also save costs. It would result in faster and more targeted treatment and more efficient administration.
"Telemedicine, in particular, has great potential to unlock significant efficiency gains in the healthcare system. This starts with faster and more transparent data transmission and ends with online consultations via chat and video."
so Dr. Thomas Rudolf, Member of the Board of Directors of Oberender AG. Teleclinic, a Munich-based startup, already offers video and chat consultations. Sebastian Hilke, Project Manager at Medical Valley EMN eV, explains:
“The opening of the so-called remote treatment ban for model projects in Baden-Württemberg and the […] nationwide relaxation of this ban by the German Medical Association are important milestones in advancing this issue.”
In addition, the planned nationwide introduction of an electronic patient record in 2021 will provide a further boost, according to the expert.
Digitalization offers immense advantages, especially for long-term illnesses whose treatment is expensive. Patients are also very open to better medical care through digitalization, especially when it comes to chronic diseases, according to Konstantin Mehl, founder of Kaia Health, an app designed to help with chronic back pain. Opportunities also arise from the changing roles of those involved, says Dr. Thomas Rudolf:
"The patient becomes more self-determined through telemedicine and eHealth. […] The doctor becomes more of a guide for the patient through the healthcare system, less of a demigod in white and the only one who knows."
At the same time, the changing market offers great potential for highly innovative startups. Jochen Hurlebaus, Project Manager and Head of Innovation & IP Management at Roche Diagnostics, says:
"The strong demand for digital health solutions and the high degree of specialization are a clear advantage: startups with the right idea and the medical or technological know-how have little to fear from competition."
Trust as a key factor
To seize the opportunities, one thing is essential, especially in the healthcare sector: trust. People must be "taken along" with the development of digital healthcare solutions. After all, society's trust in innovations, technology, and data protection is crucial for acceptance. The major challenge here: both the administration, the physician, and the patient must demonstrate this trust. This is preceded by the question of needs and discernible benefits, closely followed by the question of how society will be involved in new developments. And this also applies to those who are expected to actively use the new tools. Maria Driesel, founder and CEO of Inveox, says:
"It's often not easy to get the broad medical community excited about new, digital solutions. Therefore, innovative physicians are particularly important. As well-connected and active pioneers of 'digital healthcare transformation,' they lay important foundations for optimal patient orientation and the future viability of their institutions."
It is also helpful and important that standards for digital healthcare are set in order to establish credibility with insurance companies, patients and doctors, says Konstantin Mehl from Kaia Health, and adds:
“That’s why we are, for example, a member of the Digital Therapeutics Alliance, where we put our heads together with the leading digital health companies and consider where we want to go as an industry.”
For him, one thing is clear: digital therapies require the same clinical evidence as any other therapy. This builds trust.
Challenges such as data protection
Trust also plays a role in one of the major challenges in eHealth: data protection. Trust, data protection, and big data analytics are inseparable. Veronika Schweighart, founder of Climedo Health, gives as examples:
"The lack of IT affinity among most decision-makers in the healthcare market still means that cloud storage, despite meeting all data protection requirements, is perceived as a threat rather than a great opportunity. This is a huge hindrance to the use of AI."
The advantages of analyzing structured data are currently not being fully utilized. Dr. Dominik Pförringer sums it up like this:
"In my view, data protection protects the patient from optimal treatment. In other words, data protection primarily serves healthy people. The moment an illness or problem arises, everyone involved wants immediate access to the broadest and most in-depth treasure trove of data and thus relevant information possible."
The goal should therefore be anonymization without real names and without traceability while ensuring the highest possible data integrity.
Pitfalls: Regulation and venture capital
Everyone also agrees on the second point regarding the challenges: Agile startups and the sluggish German healthcare are currently having difficulties with each other. The regulatory framework for startups in this country is a real pain. The requirements for medical devices (keyword: CE certification) are high. A startup therefore needs a lot of patience and substantial financial reserves until approval is obtained. The sometimes difficult access to venture capital plays a role here, especially in this industry. However, in Munich, there is an association called Angels4Health, in which business angels with a focus on healthcare and life science have joined forces. Startups can meet the angels at events such as the Munich Investment Forum.
Another stumbling block is the often lacking knowledge of startups in the healthcare sector – be it regarding the ideal approval procedure or the reimbursement model of health insurance companies. Dr. Dominik Pförringer explained:
"Many innovative approaches cannot (yet) be reflected in the existing fee schedules and are therefore not adequately remunerated. The legislature is in a position to set new priorities here."
Accessing industry expertise is often the biggest challenge for startups. But Munich's eHealth industry, in particular, offers many opportunities to acquire precisely this knowledge.
Option 1 – Cooperation as a way in the German market
So, what does it take to make it easier for digital health startups to succeed in the German market? How can this transformation be shaped? Collaborations are a key buzzword here. And here, just as in other industries, silo mentality and isolated solutions should be a thing of the past. Jochen Hurlebaus, who is also a mentor in Digital Health Accelerator, says:
“In order to successfully set the course for the healthcare of tomorrow, it is important that different actors with different strengths work together.”
While established companies bring a wealth of expertise—for example, in the area of regulatory requirements—that startups lack, they, in turn, bring the dynamism and fresh ideas necessary for developing digital solutions. The agility and clear customer focus of startups bring added value here.
A focus can therefore be on more specific target groups such as hospitals or medical practices, for example, and on solutions that immediately solve problems there and immediately pay for themselves. Furthermore, due to our unique German healthcare system, more and more startups are trying to enter into partnerships with health insurance companies. Alternatively, they are focusing on corporate healthcare or offering solutions directly to end customers.
Option 2 – Networking: Munich and its eHealth scene
So how is Munich positioned in digital healthcare? 'Stronger than you think,' 'unbeatable ecosystem,' 'outstanding international reputation,' and 'growing,' said the interviewees. Dr. Dominik Pförringer even says:
"From my perspective, Munich, along with Erlangen's Medical Valley, is developing into the German stronghold for medical innovation. There's currently a veritable gold rush of optimism in the Bavarian eHealth scene."
There are several good reasons for this strength: Firstly, strong medical technology companies are concentrated here, combined with pharmaceutical companies and technology groups such as Google, Microsoft and IBM. Secondly, there are the university structures with the TU and LMU and their medical and medical-related faculties as well as the start-up support programs. At the same time, in recent years, Plant1 the Digital Health Accelerator as well as the InsurTech Accelerator formed together with the internationally renowned accelerator Plug & Play, which focuses on health and Insurance And last but not least, the companies also benefit from the Bavarian digitalization strategy and the associated support. For example, the Medical Valley Award created as a pre-start-up competition to promote the industry (Editor's note: The application deadline is November 30, 2018. The MedTech Pharma Forum also provides support and networking.
Option 3 – Learn from others: Hands-on tips
The previous paragraph highlighted ways in which, and especially where, startups can network and learn from each other. But we also want to offer concrete advice. Two startups have shared their tips. Dominik Sievert, co-founder of Inveox, cites the "Digital Health Accelerator" from Roche and Plug&Play, in which they were able to participate in the first batch. Here, the startup was able to benefit greatly from the mentoring, industry insights, and, above all, the network, says the founder:
“In the Digital Health Accelerator, selected startups receive valuable support and a wealth of business know-how.”
But also the Garching Founder and technology center gate is a particularly good location for Inveox, as there is a pleasing increase in MedTech startups such as Terraplasma, dynamify or Vision Health. The networking events of the Biotech Cluster are also helpful BioM in Martinsried, events like the Healthcare Innovation Forum or the regularly held Digital Health Entrepreneurship MeetupThe meetup is particularly good for informal exchange, because in addition to the opportunity for a short pitch, it offers the perfect opportunity for startups to exchange tips with each other or to openly engage with other stakeholders.
Dr. Johannes Kreuzer, founder of cosine, addresses the topic of 'stamina' and financing: He bridged the long time required for approval as a medical device by having his startup develop a B2C product directly while also taking on contract work for companies. His tip: business models that don't operate as medical devices. Or business models that allow you to be listed directly in the health insurance companies' medical device catalog.
In addition, Dominic Niebler, Startup Consultant at Barmer health insurance company in Munich:
"Since there are still few pathways into collective healthcare, health insurance companies can support startups with potential through individual selective contracts or joint prevention projects. We also generate evidence on the effectiveness of these applications, which helps startups further enter the market."
However, health insurance companies have limited budgets for collaborations like the one with the Munich-based startup Kaia Health. Therefore, the consultant tries to support startups with know-how to help them better navigate the regulatory jungle of the German healthcare system.
Munich: “German stronghold for medical innovation”
The digital health scene in Munich is on the rise. Networking is better than it was a few years ago, as there are now accelerators alongside informal meetups. Individual players are also becoming more visible, making it easier to reach out to supporters. And there are so many successful Munich startups in this field that we can't list them all in a single article.
So, what is needed for Munich's digital health scene to continue to grow? In addition to all the points mentioned, one thing is particularly important: cooperation between the various players and the bundling of medical expertise with knowledge from IT and digitalization. Dr. Pförringer also has a beautiful vision:
“My ideal vision is a digital medical center to promote development, teaching, spin-offs, and subsequent incubation.”
We are certainly excited to see where the Munich eHealth scene will develop in the future and which exciting new startups we will discover along the way. If you would like to gain even more insight, follow our keywords like Health, Health, eHealth or Digital Health There are many more articles on healthcare startups and relevant industry events. A "Digital Medicine" special from BayStartUP also provides further insights.
