Much more about the regulation and the conformity process will be discussed in the next chapter, Chapter 4 Specific articles and paragraphs will be referred to, however the regulation starts with a summation of points structured in parentheses, which

This chapter describes the Dutch (consumer) healthcare market from a business perspective. The Dutch healthcare market has always been focused on the private provision of services and the financing of the system through social insurance (Kroneman et al., 2016). Which “created a healthcare sector that is dominated by many mutually dependent actors with different backgrounds” as well as different aims for participating in the healthcare system (Kroneman et al., 2016). As we know all involved stakeholders, it is now necessary to specify to possible entries and what is necessary to be allowed onto the medical device market. First, the ‘managed competition’ system is described and analysed. Managed competition should reduce the costs of the DHCS and was introduced after the 2006 reform. However, this system is not without its shortcomings. Second, a look is taken at relevant payment streams to understand how stakeholders receive payment and thus, how the financial dependency is organized. So, an analysis is possible to assess if the solution will become a threat to any of the relevant stakeholders. Third, a look is taken at the acceptance that must be generated among stakeholders for a solution to be allowed onto the market. More specifically, the ‘acceptance hierarchy’ is determined and so it can be assessed which stakeholder is essential in becoming accepted and thus must be convinced. Fourth, a description is provided on the regulations concerning the (consumer) medical device market. The conditions to which the solution must oblige are described which are essential for the upcoming implementation of the solution. Last, the possible entry routes to the market are described and discussed. In the implementation part (Part IV), the chosen route is described. Which is a combination of the presented possibilities.

4.1 MANAGED COMPETITION

First, in the Dutch healthcare system three markets exist. The market between the insured and insurers called the health insurance market, the market between the insured and the healthcare providers called the healthcare provision market, and the market between insurers and providers, which is called the health purchasing market (Kroneman et al., 2016). These three markets (for insurance, provision, purchasing) have become the core of the in 2006 reformed system. Furthermore, this bond between these three actors has only been strengthened since the government took on a more distant and supervising role (Van der Grinten, 2006). Managed competition occurs on all three markets. On each of the three markets, negotiations take place on the volume, quality, and price of the provided care. Health insurers negotiate with healthcare providers on the delivery of care of their insured. The insured pay a premium as an addition to their basic health package and in doing so, the provided healthcare is financed. Care for which negotiation is not feasible (around 30% of hospital care), “such as emergency care (not planable) or organ transplantation (too few providers)” is the responsibility of the Dutch Healthcare Authority which establishes maximum prices. Important to notice is, that quality is not yet the “leading principle” in the purchasing process (Kroneman et al., 2016). Price and volume are the most predominant factors leading a negotiation on care. Quality is becoming more and more important, yet proper quality indicators for each type of care do not exist yet but are in development.

Second, the aim of managed competition and the negotiating of healthcare is that this may lead to more “demand-driven care and care that is tailored to the needs of the target group of the collective” (Groenewegen & de Jong, 2007). However, not every actor in the Dutch healthcare system has the same negotiating power. In 2015, 69% of insured negotiated through participation in a collective insurance policy (Vektis, 2015). The main four insurers (representing 90% of the insured (Dutch Healthcare Authority, 2014b)) have to negotiate with individual healthcare providers. Hospitals started to merge after the reform to increase their negotiating power, however, smaller healthcare providers (including GPs) where prohibited by the ACM to combine forces and have the GP associations negotiate on their behalf (Van der Bom, 2014). The ACM argued that GPs should compete with each other. Since 2015 cooperation among smaller healthcare providers is allowed in the negotiations on the condition that it is in the benefit of the healthcare user (Consumers and Markets Authority, 2015). However, the question remains if this has strengthened the position of, predominantly, GPs. Currently, GPs agree on a contract with the preferred health insurer and ask other insurers to use the same contract [0021]. These contracts include fee-for- service and capitation elements and as of 2015, pay-per-performance elements have been included. However, these financial elements are still new and thus not fully developed (Consumers and Markets Authority, 2015). Insurers may contract specific healthcare providers (= selective contracting) to compete with other insurers. However, that should always oblige to the duty to offer adequate care (Kroneman et al., 2016).

4.2 FINANCIAL MANAGEMENT AND PAYMENT STRUCTURES

Every actor in the healthcare system receives payment in a different way. To understand the differences, two systems must be explained: the DBC system and the insurance package system.

4.2.1 The DBC-system

In the healthcare purchasing market, the Diagnose-Treatment Combination-system (Diagnose-Behandeling Combinatie, DBC) is used to negotiate and communicate on provided care. This system attaches codes and a price to medical treatments. The prices are established by the NZa. The codes are communicated between insurers and providers, so that it is clear which medical treatment at what price has been executed. The DBC-system should increase the efficiency of the hospital care sector. The Ministry of Health, Welfare and Sport together with insurers, hospitals and relevant medical specialists have established this system and defined the treatment options with the associated costs (Kroneman et al., 2016). Since 2012, the DBC’s have been changed to DOT’s (DBC onder weg naar transparantie), reducing the total number of combinations from well over 30,000 to just 4,400 (Kroneman et al., 2016). Hospital care providers have an obligation to provide their DBC data to the DBC system. Healthcare specialists (under departments of hospitals) receive payment through this system.

4.2.2 Basic health insurance package, voluntary health insurance

In 2015 about half (48%) of Dutch citizens had an in-kind policy, approximately a quarter (23%) had a restitution policy, about a fifth (21%) had a combination policy and 7% had a selective policy (Kroneman et al., 2016).

In 2006, the Health Insurance Act (Zvw) was introduced, changing the health system drastically as well as introduce the basic healthcare insurance package (Kroneman et al., 2016). This basic package covers “GP care, maternity care, hospital care, home nursing care, pharmaceutical care and mental healthcare”. The first €385 (in 2016) should be payed out-of-the-pocket (OOP, eigen risico), additional expenditures are covered by the insurance. GP consultations, maternity care, home nursing care and care for children under the age of 18 are excluded from the OOP. The contents of the basic health insurance package are fixed through government legislation, but insurers can compete and negotiate on the price and quality of the provided care. It is not allowed by insurers to vary the premium based on health risks of their insured. Additionally, it is also not allowed to refuse specific people based on their health risks, which is monitored by the NZa.

Insurers are free to define the content and the risks they cover, and the volume and price of the complementary voluntary health insurance (VHI). The VHI is a complementary package which provides coverage for health services that are excluded or not fully covered by the basic package and the Zvw. Adults pay a community-rated premium directly to their insurer as well as an income-dependent premium to a central fund, which redistributes this amongst insurers based on risk-adjustment (Kroneman et al., 2016). Most insurers deliberately make it unattractive to have a VHI without a basic insurance by increasing the price of a VHI if not purchased in combination with the basic healthcare insurance package (Kroneman et al., 2016). In 2015, 84% of insured people purchased the complementary VHI. The VHI coverage is decreasing over the years, as 93% of the insured purchased a VHI in 2006 [0043,23]. Children are offered a free VHI by most insurers.

4.3 REGULATORY CHALLENGES

In 2017, Regulation (EU) 2017/746 of the European Parliament and of the Council on in vitro diagnostic medical devices was appealed. This directive repealed the previous Directive 98/79/EC and the Commission Decision 2010/227/EU. The IVDR is a comprehensive (although substantial: 113 articles over 477 pages) guide to aid the legal manufacturer of the product with achieving mandatory compliance. The IVDR describes how an in vitro diagnostic medical device can achieve conformity and enter the European market. The main goal of these medical device regulations is to ensure that the device does not compromise the clinical condition or safety of patients and its users (healthcare professionals or

lay persons (Article 2 Paragraph 30 & 31). Medical device developers need to eliminate or reduce as much as possible the risk associate with the device [7]. The product (or product-service system) and the development process must be evaluated to determine if health, safety, and environmental standards have been met (Whitmore, 2004; Zenios et al., 2010; Ogrodnik, 2013; Privitera et al., 2017).

“This Regulation aims to ensure the smooth functioning of the internal market as regards in vitro diagnostic medical devices, taking as a base a high level of protection of health for patients and users, and taking into account the small and medium-sized enterprises that are active in this sector. At the same time, this Regulation sets high standards of quality and safety for in vitro diagnostic medical devices in order to meet common safety concerns as regards such products. [...] As regards Article 168(4)(c) TFEU, this Regulation sets high standards of quality and safety for in vitro diagnostic medical devices by ensuring, among other things, that data generated in performance studies are reliable and robust and that the safety of subjects participating in performance studies is protected” (IVDR).

When the evaluation shows conformity, the manufacturer of the product is allowed to sell it on the extended Single Market of the European Economic Area (EEA). Additionally, a mark (Conformité Européenne, CE mark) is affixed to the product to signify the conformity. The legal manufacturer (LM) declares, through affixing the mark, that all legal requirements have been met. Important to notice is, that products can be manufactured outside of the EU, but have to meet EU regulation before they can be sold in the EEA (European Commission, 2017). The CE marking offers two benefits. First, businesses know that products bearing the CE mark can be traded in the EEA without restrictions. Second, consumers know that all products with the CE mark are deemed safe24 _{to use through the evaluation of safety,}

health, and environmental protection standards.

4.3.2 The effect of the regulatory process on new innovations

In light of the development process, however, these regulations might be hinder-some (Pietzsch et al., 2009). These regulations, standards and guidelines are able to speed up the development process for incremental innovations (devices and systems that improve slightly from previous versions), as well as prevent unnecessary design mistakes as the Regulation can be seen as design support. Yet they can obstruct radical innovations (revolutionary product development): devices that are new and try to be something completely new. Therefore, Pietzsch et al. (2009) stress that a perfect balance must be found between organizational efficiency and regulated processes, and creative freedom and innovative ideas. From a business perspective, it has been found that in a highly regulated sector companies can only compete on development process effectiveness. This is caused by the fact that the product concept effectiveness is predetermined by the set regulations, to a great extent (Pullen et al., 2010). Therefore, understanding the conformity process is vital the success of the solution and the company.

4.3.3 The general process

In order to obtain CE certification, the following has to be defined/performed: (1) The intended use of the product must be described which can help identify the user of the system (de Ana et al., 2013; Privitera et al., 2017) (3) The Primary Mode of Action (= the means by which a product achieves its intended effect or action (Amor, 2016)) must be described as well as (4) what the product claims to do. (5) The appropriate risk category must be classified25 _{and (6) the Conformity Assessment route must}

be defined describing which party must perform which test to determine if the product complies to the regulation. When that has been done, (7) the Declaration of Conformity must be published, (8) Technical Documentation must be supplied to the database and stored at the company, and (9) a Quality Management System (QMS) must be implemented.

24 _{The EU stresses that a product with CE marking does not mean that the product is inherently safe, but that the product meets}