Economic Research Working Paper No. 45 Abstract This paper analyzes the recent economic and innovation trends of the health industries in Poland. The health industries have observed remarkable growth since entering into the EU. While the pharmaceutical industry faces some economic slowdown since 2011, the medtech industry shows substantial dynamism for its small size. The Polish health industry has still much to do to improve its innovation status. However, the observed trend of the innovation dynamics is cause for optimism. Polish firms in the health industries are increasingly innovating and extracting economic results from these innovations. Table of Contents 01 | METHODOLOGY AND DATA SOURCES 5 03 | INNOVATION IN THE POLISH HEALTH INDUSTRIES 22 05 | REFERENCES 36 ’ ’ gical innovations. Following the Oslo Manual, we will consider a product innovation as the new or significantly improved products already launched onto the market, and a process innovation as the new process already being used in the firm’s operations. In Poland, the CIS surveys are part of the national statistics research program, Innovations in the Industry, which covered all enterprises employing 50 and more people as well as a representative sample of 25 per-cent of businesses employing from 10 to 49 people. For this paper, we made use of the microdata col-lected by the Central Statistical Office of Poland for four CIS cycles: 2006–2008, 2008–2010, 2010–2012 and 2012–2014. Using microdata allowed us to extend the previous industry scope by including those Polish entities sub-mitting patent applications to the Polish Patent Office (PPO) for pharmaceutical or medical technologies in the years 2006-2014. In concrete terms, we included those firms filing patents with the following IPC symbols: A61B-C, A61F-H, A61J-N, A61P, C07H21, C12Q1/68, C12N15/11, G01N33/50 (with dependencies), H05G, C12Q1/68, C07H21, and C12N15/11. The sample of health-related firms covered by the four CIS cycles is highly representative of the whole health industry. However, in view of the relatively small number of firms surveyed, the analysis of the main features of the innovation activities in Poland are presented jointly for the pharmaceutical and medtech industries. 2.1Consolidated pharmaceutical industry Poland’s pharmaceutical industry has undergone nu-merous profound changes in the past 25 years. The changes affected the ownership structure of the sector’s entities, the regulations applicable to commercializing medicines, and the administration of the public health system. Four years before Poland’s entry into the EU, the market for pharmaceutical products had a stable rate of growth in both the pharmacy and hospital segments (Table 1).1 In 2003, the market for pharmaceutical products totaled 13,086 million zlotys. This is a 30.6 percent increase from its value in 2000 in nominal terms and a 20.5 per-cent increase if measured at 2000’s prices. The same pattern is observed for both the pharma-cy and hospital segments, which remained equally distributed along those years. The pharmacy segment is predominant, representing around 88 percent of the market value. Most of the products sold are pharmaceutical preparations (98.6 percent of total sales), while basic pharmaceutical products represent the remaining portion (1.4 percent). Sulfonamides and packed pharmaceutical herbs are the most important product groupings among all pharmaceutical pro-ducts sold. Table 1. Market for pharmaceutical products in Poland (in producer’s prices*, in million zlotys). total 10,020 11,088 11,566 13,086 pharmacy market 8,853 9,745 10,135 11,557 hospital market 1,167 1,343 1,431 1,529 Notes: (*) Producer’s price is defined as the value of sold production per unit of product (excluding value added tax, rebates and deductions, and including excise tax if applicable). Source: INFARMA (2004) During the period after the entry to the EU, the pharmaceutical sector has observed an overall increase in most economic indicators. However, most of the increase occurred prior to 2010, and some negative trends have been observed since then. Pharmaceutical output increased since entry, but la-tely it has followed an erratic path. By 2014, the pro-duction of pharmaceutical products constituted 1.1 percent of the global output of the manufacturing sector in Poland. In constant prices, this output was 32 percent higher than 2005, but 4.5 percent lower than 2010. The entry of new firms partially explains the overall output increase since 2005. The number of pharmaceutical firms was 62 percent higher than 2005. By 2014, there were 343 firms manufacturing pharmaceuticals products, of which 58 percent were firms employing less than 10 people. The entry of smaller companies and the economic downturn correlates with lower employment rates in the pharmaceutical industry. Since 2010, the industry has reduced by 2,000 posts – an 8 percent decrease – to 21,900 employees by 2014. Still, the average mon-thly gross wages increased 8.3 percent from 2010 to 2014. These opposite trends are reflected in the industry’s relatively stable cost, which oscillated between 89.3 and 89.9 from 2010 to 2014. Since 2010, the productivity and profitability of the in-dustry has decreased, as has investment. In 2014, the gross value added per employee was 6 percent lower than 2010, while the sold output per employee was 1.4 percent lower. Both gross and net profit margins were at their lowest since 2005, registering 10 and 8.5 percent, respectively. Investments have been decreasing since 2005. Investment outlays were 9.2 percent lower in 2010 and 12.3 percent in 2014 than the 511.6 million zlotys reached in 2005. 1 Poland’s official entry date to the EU is May 1, 2004. ’ – The EU is not only the main origin of the pharmaceutical imports but also the main destination of Polish exports. In 2014, 71.6 percent of Polish pharmaceutical exports went to the EU, while other developed economies only accounted for 8.2 percent. Indeed, the latter represented less than the exports to other CEE markets (11.7 percent) and the rest of the world (8.5percent). Generic medicines represent a considerable share of the Polish medicine market. These drugs constitute half of all pharmaceuticals included in drug reimbursement registers. The national government spends about 30 percent of its drug reimbursement budget on such generic drugs. In 2014, medicines produced domestically – which are mostly generic and branded generic – represent more than half of the units and a third of their value sold in Poland (Figure 1). Nevertheless, these shares have been falling since 2005. In a decade, the market share dropped from 65 percent to 53 percent in terms of units and from 35 percent to 30 percent in terms of value. The difference in the units and price falls indicates that the average relative price of the domestically produced medicines and the imported ones have converged to some extent. The price per unit of domestically produced medicine went from 29 percent of imported medicine in 2005 to 38 percent in 2014. By 2014, the average price for a generic medicine in Poland was three euros (INFARMA, 2015). Figure 1. Market share of medicines manufactured domestically (net producer prices). 70% 60% 50% 40% 30% 20% 10% 0% Source: INFARMA (2015). How does the Polish pharmaceutical industry compare with other CEE countries? We now benchmark the previous economic findings for the Polish pharmaceutical industry with those of other CEE countries. The increase in number of pharmaceutical firms is also present in most of CEE countries (see Figure 2). Bulgaria and the Czech Republic are the main exceptions to this pattern. All reporting CEE countries show a higher number of firms manufacturing pharmaceutical preparations than those manufacturing ba-sic pharmaceutical products (Figure 3). However, the distribution between these is not equivalent. Poland (30 percent) has the highest proportion of firms ma-nufacturing basic pharmaceutical products among CEE economies. Bulgaria and Estonia (both at 8 per-cent) have the lowest. Relative to the population, Latvia had the largest number of pharmaceutical firms manufacturing basic pharmaceutical products and pharmaceutical preparations among CEE economies in 2014 (Figure 4). In 2012, Poland was ranked first in firms manufacturing basic pharmaceutical products, while penultimate for those manufacturing pharmaceutical preparations. By 2014, Poland was second for the basic pharmaceutical segment, but managed to overtake Czech Republic, Bulgaria and Hungary in the pharmaceuti-cal preparations segment. The latter is explained not only by the increase in the number of Polish firms in those two years, but also by the decrease in the number of firms in Czech Republic and Bulgaria. Overall, these trends suggest different specialization patterns arising in the region. Figure 4. Number of pharmaceutical firms per 1 million inhabitants, selected CEE countries. (a)Basic pharmaceutical products LATVIA POLAND HUNGARY CZECH REPUBLIC ROMANIA SLOVENIA ESTONIA BULGARIA 1.6 1.7 1.6 1.0 1.0 1.5 0.8 0.8 0.8 0.8 0.5 0.6 (b)Pharmaceutical preparations 10.3 10.4 2.0 3.0 LATVIA 9.1 9.2 8.3 7.6 8.4 7.0 6.7 8.2 5.7 4.5 4.9 5 5.9 6.2 5.9 6.0 6.2 7.9 7.1 6.1 6.2 6.2 6.0 .3 11.5 3.0 2.2 11.0 CROATIA 10.8 2.8 10.2 2.7 SLOVENIA 2.0 10.7 2.1 2.4 ESTONIA 2.2 2.0 LITHUANIA 1.9 POLAND HUNGARY BULGARIA CZECH REPUBLIC ROMANIA 0 1 2 3 024681012 2012 2013 2014 Source: Eurostat (2017a). Figure 5. Number of employees in the pharmaceutical industry per 10,000 employed workers in the economy, selected CEE countries. (a)Basic pharmaceutical products ROMANIA CZECH REPUBLIC HUNGARY POLAND LATVIA 2.5 1.8 1.8 1.7 1.4 1.2 1.2 1.2 0.9 1.0 (b)Pharmaceutical preparations 3.1 HUNGARY 3.2 3.0 CROATIA 3.0 3.0 LATVIA CZECH REPUBLIC POLAND ROMANIA LITHUANIA 28.4 22.0 22.5 22.8 17.4 17.3 17.0 13.1 12.9 12.7 8.0 7.9 8.2 5.0 5.5 5.4 31.2 31.5 42.4 42.5 41.5 0 1 2 3 0102030 40 2012 2013 2014 Source: Eurostat (2017a). Poland has high productivity in basic pharmaceutical products but lags in pharmaceutical preparations. In 2014, the ratio of value added at factor cost to number of employees for the firms manufacturing basic pharmaceutical products in the region ranged from 10,000 to 40,000 euros per employee (€/emp). The Czech Republic (40,000 €/emp) and Poland (35,000 €/emp) led the region, followed by Romania (26,000 €/emp) and Hungary (10,000 €/emp). Using the same ratio, Lithuania (89,000 €/emp) and Hungary (71,000 €/emp) had the highest levels of productivity in the manufacture of pharmaceutical preparations in 2014. These were followed by Croatia (57,000 €/emp), Po-land (48,000 €/emp), the Czech Republic (45,000 €/ emp) and Romania (34,000 €/emp). Hungary is the leader of pharmaceutical exports among the CEE economies (Figure 7). Poland, Slove- Figure 7. Pharmaceutical exports, selected CEE countries. (a) in billion euros 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 nia and the Czech Republic follow it. All these countries report high export growth rates. However, Poland’s growth from 2010 to 2014 was higher than the other CEE countries, increasing at the average annual rate of approximately 27 percent (DELab UW, PZPPF, 2015, p. 9). In 2004, Poland’s pharmaceutical exports were below those of Slovenia and the Czech Repu-blic; by 2014, they were only below those of Hungary. Poland’s pharmaceutical exports are worth 2.7 billion euros, which constitutes 1 percent of the total exports of the EU 28 countries. Despite increasing exports, the persistent high import rate means that Poland is among the most import-dependent EU countries, along with Portugal and Spain. In the region, Hungary and Slovenia have the highest trade surpluses, which are around 1 bil-lion euros (DELab UW, PZPPF, 2015, p. 9). 2004 2005 2006 2007 2008 2009 2010 2011 HUNGARY POLAND SLOVENIA CZECH REP. ROMANIA (b) as a share of CEE exports 100% 80% 60% 40% 20% 0% 2004 2005 2006 2007 2008 2009 2010 2011 HUNGARY POLAND SLOVENIA CZECH REP. ROMANIA 2012 2013 2014 BULGARIA SLOVAKIA 2012 2013 2014 BULGARIA SLOVAKIA Source: DELab UW, PZPPF (2015) ’ 2.2The new and vibrant medical technologies industry The medical technologies (medtech) industry is developing particularly quickly in highly industrialized countries with competitive economies and high values of GDP per capita. The use of state-of-the-art technologies characterizes the medtech industry. This section explores the recent evolution of the Polish medtech in-dustry. The Polish medtech industry includes approximately 90 large and small business entities manufacturing medi-cal devices and the consumables indispensable for their operation, such as electrodes, catheters, infusion sets, etc. Typically, these are small and medium-sized firms. In 2014, the medtech annual value of production output amounted to about five million zlotys. The technologi-cal and manufacturing potential is diversified, but it is not too high (MedicaSILESIA, 2015). The same applies to the competitiveness of the Polish medtech industry. There are few medtech companies with more than nine employees (Table 4). Nevertheless, these medtech firms have been growing at a steady pace. From 2011 to 2014, the medtech firms increased in number (15 per-cent), employment (27 percent), salaries (13 percent), capitalization (76 percent) and output (65 percent). The industry’s capitalization and output have observed rapid growth, which contrasts with the declining values ob-served for the pharmaceutical industry in section 2.1. By 2014, there were 46 medtech firms employing 11,000 workers, having 1.6 billion zlotys in fixed assets and pro-ducing 3.1 billion zlotys. Including the self-employed and micro companies, the value of medtech products sold in Poland exceeded 6.5 billion zlotys in 2013, a significant increase on the 3.9 billion zlotys achieved in 2010. Table 4. Basic economic indicators of the medtech indu-stry. 2011 40 8.6 3429.8 886.9 2012 42 9.3 3634.6 993.7 2013 45 10.6 3741.2 1398.3 2014 46 10.9 3889.9 1563.8 Source: Central Statistical Office (2012, 2013, 2014 and 2015). Includes only firms of the manufacture of medical and dental instruments and supplies sector employing more than nine persons. Gross value of fixed assets expressed in current bookkeeping prices. In terms of market size, the main segment of the medtech industry is the manufacturing of medical and dental instruments and supplies. Firms manufacturing medical equipment accounted for less than 4 percent of the total value of the sold production in 2014 (Table 5). Table 5. Value of sold production of the medtech industry (producer prices, million zlotys). Manufacture of medical and den-tal instruments and supplies 1783.5 2323.3 2546.7 2957.1 Manufacture of irradiation, electromedical and electrotherapeutic equipment 76.6 88.8 94.9 117.5 Total medtech 1860.1 2412.1 2641.6 3074.6 Source: Central Statistical Office (2012, 2013, 2014 and 2015). Includes only firms employing more than nine persons. One of the drivers of higher medtech sales is exports, which reached 2.5 billion zlotys in 2014. Poland’s medtech exports increased rapidly, more than tripling over the past few years (MedicaSILESIA, 2015). The EU is the main destination of Poland medtech exports, with Germany, Denmark and France accounting for 60 percent of all exports. The main exported products are hospital furniture, precision surgery tools, medi-cal consumables and implants. This can also be ob-served in the increasing presence of Polish medtech firms at the Dusseldorf’s Medica Trade Fair. Many of these firms have benefited from public support for their participation. The funds available under the European Cohesion Policy and Regional Operational Program – of which Poland is a major beneficiary – constitute another explanation for the growing demand for medical tools, devices, equipment, software and consumables. Relative to the population, the Czech Republic had ranked fourth, and very close to Slovenia in third. the largest number of medtech firms manufacturing Hungary ranks first in firms manufacturing irradiation, medical and dental instruments and supplies among electromedical and electrotherapeutic equipment the CEE economies (Figure 11). In 2014, Poland was per million people. Figure 11. Number of medtech firms per 1 million inhabitants, selected CEE countries. (a) Medical instruments and supplies CZECH REPUBLIC SLOVAKIA SLOVENIA POLAND HUNGARY LITHUANIA BULGARIA ESTONIA CROATIA ROMANIA LATVIA 93 98 106 82 85 88 55 58 62 48 46 47 38 41 45 35 36 41 0 50 100150200250 0 2 4 6 8 10 218 226 233 202 189 180 149 153 161 144 149 160 162 153 150 2012 2013 2014 Source: Eurostat (2017a). (b) Medical equipment HUNGARY CZECH REPUBLIC ESTONIA POLAND CROATIA ROMANIA LITHUANIA SLOVAKIA SLOVENIA BULGARIA 9.9 8.8 9.2 4.2 4.6 5.0 4.5 3.8 3.0 2.2 2.4 2.4 2.1 2.3 2.4 2.2 2.2 2.2 2.0 2.0 1.7 1.3 1.7 1.7 1.0 1.5 1.5 1.1 1.1 1.4 Figure 13. Value added at factor cost (in million euros), medtech industry, selected CEE countries. (a) Medical instruments and supplies (b) Medical equipment 67.3 71.6 54.9 53.1 57.4 30.1 36.3 55.2 302.1 297.4 291.1 243.0 276.6 260.6 289.1 20. 25.6 20.9 20.4 2 7.0 8.4 0 50 100150200250300350400 0 5 10 15 20 25 POLAND CZECH REPUBLIC HUNGARY SLOVAKIA SLOVENIA ROMANIA CROATIA ESTONIA LATVIA 335.8 391.0 BULGARIA HUNGARY POLAND CZECH REPUBLIC ROMANIA ESTONIA CROATIA SLOVAKIA 19.4 23.8 22.8 15.9 16.3 14.7 9.6 8.7 12.6 11.1 9.8 9.8 6.8 7.1 2.8 3.1 2.4 2.3 1.1 0.9 1.9 Source: Eurostat (2017a). In 2014, Poland had the largest medtech industry in terms of value added at factor cost among the CEE countries (Figure 13). Poland’s value added totaled 403.6 million euros, which is followed by the Czech Republic (300.9 million euros) and Hungary (275.3 million euros). However, Poland lags in productivity among the CEE countries. The average productivity for firms ma-nufacturing medical and dental instruments and supplies ranged from 25,000 euros per employee (€/ emp) in Slovenia to 16,000 €/emp in Croatia. Within this range, Slovenia was followed by Slovakia (22,000 €/emp), Hungary (21,000 €/emp), the Czech Republic (19,000 €/emp), Latvia (18,000 €/emp) and Poland (17,000 €/emp). In the case of firms manufacturing irradiation, electromedical and electrotherapeutic equipment, the range of productivity values was even narrower, ranging approximately from 21,000 €/emp in the Czech Republic, Croatia, Hungary and Poland to 18,000 €/emp in Estonia. This section aims to highlight the innovation dyna-This section focuses on investment in innovation ac-mics of the Polish health industries. Innovations in the tivities and the innovation outcomes. It also addres health sector are related mainly to new or improved medical technologies, therapeutic methods, and me-dical products. However, innovation activities occur also wherever the effective management of the he-alth sector and medical institutions is combined with the efficient organization of service provision systems oriented towards achieving high levels of both custo-mer satisfaction and cost performance. 3.1 Investing in innovation In order to achieve new or significantly improved products or processes, firms can invest in innovation through different innovation activities. Firms can invest in internal R&D activities or acquire it from out-side. Firms can invest in innovation by acquiring technology through licensing in external knowledge, purchasing software or training personnel, and also by purchasing capital goods – i.e. machinery and equipment – with embedded technology. Firms can also potentiate innovation by investing in marketing new or significantly improved products and processes. Health-related industries are among the top innovation expending sectors. In Poland, expenditures on innovation activities in the health industries have in-creased by 51 percent between 2008 and 2014. The total innovation expenditure was 581 million zlotys in 2008, 562 million zlotys in 2010, 564 million zlotys in 2012, and 876 million zlotys in 2014. In 2014, the share of firms investing in innovation ac-tivities in the health industries was much higher than the share observed for the whole economy. The sha-re for the pharmaceutical industries was 51 percent. Similarly, the share for medtech technologies was 42.4 percent for the devices segment and 28.8 per-cent for medical instruments. Nevertheless, all these shares were among the lowest values across all EU countries. R&D expenditures represent the largest share of in-novation expenditures (Figure 14). From 2008 to 2014, the R&D expenditures share in total innovation expenditures was 46 percent, of which 37 percent was performed in-house and 9 percent outsourced. The pharmaceutical industry accounts for a large ses how innovation is created, acquired or co-created through cooperation. A final subsection explores the main barriers to innovation in Poland. portion of these R&D expenditures (Table 6).1 The R&D expenditures of the pharmaceutical industries have increased by an average annual rate of 11.4 percent since 2011. In 2014, these expenditures amounted to 268.9 million zlotys, which constituted 1.7 percent of Poland’s gross expenditure on R&D (GERD)2. In com-parison to 2011, these expenditures grew by 74.6 mil-lion zlotys, but their share in Poland’s GERD remains unchanged. The health industries invested 143 million zlotys in capital goods with embedded technology in 2014 (Fi-gure 14).3 Similarly, the health industries invested 228 million zlotys in marketing related to the launch of new or significantly improved products in 2014. The-se two types of investments have observed an erratic path from 2008 to 2014. Capital and marketing innovation investments accounted for 20.4 percent and 19.2 percent, respectively, of total innovation expenditures from 2008 to 2014. The remaining innovation activities – namely, training, purchasing software and purchasing external technology – constituted around 13 percent of the total expenditures. 1 Comparison of figures in Table 6 and Figure 14 is limited as their sampling coverage differ. 2 Gross domestic expenditure on R&D (GERD) includes expenditure on research and development by business enterprises, higher education institutions, as well as government and private non-profit organizations. 3 These exclude investments in R&D related assets. Firms in the health industry could count on various forms of public support. The most important institution providing support for innovation activities was the European Cohesion Policy and Regional Opera-tional Program from the European Commission. This program pursues policy objectives at the regional level providing support for innovation activities con-ducted by firms in the health sector. The main areas of support were investment on fixed assets (50 percent), R&D activities (40 percent) and exports (28 percent). Support at the national level was also more frequently used for investment in fixed assets (17 percent) and R&D activities (21 percent). Support for the co-operation between academia and business was the only program where national support (7 percent) was higher than European support (4 percent). Local support programs were less frequently used. The most used local support was for investment on fixed assets (4 percent). Figure 15. Firms benefiting from public support by program, 2012-2014. 50.0% Investment support R&D support Export support Other types of programs Support for cooperation between science and business Raising professional qualifications International cooperation support National, regional and cluster cooperation support 16.7% 4.2% 40.3% 20.8% 27.8% 2.8% 1.4% 5.6% 2.8% 1.4% 4.2% 6.9% 4.2% 2.8% 1.4% 1.4% 1.4% 0 1020304050 European Union National Local Source: Central Statistical Office (2017). 3.2 Innovation outcomes In order to improve its productivity and profitability, a firm can introduce many changes in its operating me-thods, the manner of utilizing its means of production or the types of manufactured products. These tech-nological innovations can be new for the entire world, a region or just the country where the firm operates. In general, innovation outcomes are relatively less frequent in Poland than in other EU countries. In 2014, the share of firms innovating their product or services was 16 percent in Poland, far below the highest share in the EU of 55 percent (Germany). Poland’s share is similar to other CEE countries, such as Estonia, Bul-garia, Hungary, Latvia and Romania, which also rank among the lowest in EU. In 2014, the share of innovative firms in CEE economies ranged from 12.8 percent in Romania to 26.5 percent in Estonia. Poland’s share was 21 percent in the same year, which was 7 percentage points down from 2008. Table 7. Innovation related revenues of the health industry. All innovations 7.3 7.8 3.9 11.1 New to the market in which the enterprise operates 1.9 2.3 1.6 4.1 Only new to the firm 5.4 5.5 2.3 7.0 Source: Central Statistical Office (2017). How do firms in the health industry protect their in-novations? The majority of firms in the health industry indicated the complexity of their products (56 percent), secrecy (52 percent) and lead-time advantage (45 percent) as effective mechanisms to maintain or improve com-petitiveness in their markets (Figure 17). About one third of companies indicated trademarks (32 percent) and industrial designs (29 percent) as an important mechanism, which is in line with an industry where generic and branded generics dominate. Only 23 percent of firms considered patents an effective mechanism to maintain or improve competitive-ness in their markets. However, this number is not as low as it may appear, as only 35 percent of firms claimed to achieve a product innovation. Moreover, most of these were not eligible for patent protection as 78 percent of these were not new even in Poland. In 2014, health-related patent applications accounted for 9 percent of all domestic applications. This share is much higher than the equivalent share of health--related R&D expenditures. Nevertheless, academic institutions were responsible for a large portion of these patent applications, while firms hold relatively small patent portfolios (Gołacki et al, 2018).6 Figure 17. Appropriation of innovation outcomes, 2012-2014. Secrecy Complexity Lead advantage Trademarks Copyright Industrial design Patents Very effective Effective Less effective Insignifcant Source: Central Statistical Office (2017). 6Only two companies have filed more than 30 patent applications in the period analyzed. As with the whole country, the firms in the health in-dustry acquire more technology than they transfer out (Figure 19). In the last CIS survey, more firms in-dicated purchasing production processes automation systems (12 percent), but those acquiring consulting services (9.6 percent), licenses (9.5 percent) and R&D (9.4 percent) were also significant. In the same period, only 2.1 percent of firms indicated selling R&D, 1.3 per-cent granted licenses, 0.8 precent provided consulting services, and 0.3 percent sold production processes automation systems. Figure 19. Purchasing and selling new technologies. (a) Purchase LICENSES 9.9% 9.9% 9.3% 9.5% R&D 6.0% 7.3% 5.3% 9.4% AUTOMATION 5.9% 8.0% 13.2% 11.7% CONSULTING 7.2% 6.3% 9.6% 13.2% OTHER 0.6% 2.3% 4.1% 8.0% 0 2 4 6 810 1214 2006 - 2008 2008 - 2010 2010 - 2012 2012 - 2014 Source: Central Statistical Office (2017). Cooperating with other firms and stakeholders con-stitutes an important element of innovative business practices. Cooperation in the area of innovation acti-vities entails the active participation in joint projects with other firms and non-commercial institutions seeking to share experience and knowledge. The Polish government provides financial and institutional support to increase collaboration in the health industries. One of the main initiatives is the STRATEG-Most surveyed firms purchased or sold new techno-logies in Poland. In the case of foreign transactions, most of these were with partners in the EU area. Po-lish firms rarely source the remaining European countries or the United States (US) for new technological solutions. Polish technologies are also sold mainly in the domestic and EU markets. In all CIS surveys, firms in the health industry indicated granting 96 licenses in total, all of them to European countries. (b) Sale 3.0% 2.2% LICENSES 2.4% 1.3% 4.2% 1.1% R&D 2.4% 2.1% 1.6% 0.4% AUTOMATION 0.0% 0.3% 2.0% 0.0% CONSULTING 2.8% 0.8% 0.4% 0.0% OTHER 0.3% 2.4% 0 123 45 MED framework managed by the National Centre for Research and Development (NCBR), which focuses on “prevention practices and treatment of civilization diseases”.7 This initiative considers civilization diseases to be short-term hazards to the population and a result of aging population, the exposure to adverse environmental conditions and negative changes in li-festyles (NCBR, 2012). STRATEGMED’s main objective is to stimulate collaboration between research en-tities and entrepreneurs to improve innovation and 7 The National Research Program. Guidelines for the country’s policies concerning science, technology and innovativeness – Enclosure to resolution no. 164/2011 of the Council of Ministers of 16 August 2011 ’ 0% 5% 10% 15% 20% 25% 2006 - 2008 2008 - 2010 2010 - 2012 2012 - 2014 Source: Central Statistical Office (2017). With the exception of the last period, about a quar-ter of cooperating health industry firms considered customers to be their most beneficial partner (Figure 20a). This trend hides a steep decreasing trend with regard to the relevance of customers of the private sector (Figure 20b). The positive trend of the customers from the public sector compensated this fall until the period from 2010 to 2012. The falloff in the relevance of collaborations with suppliers followed a similar path to customers of the private sector. Contrary to attitudes to suppliers and customers, firms steadily consider cooperation within the business group to be beneficial to achieving innovation. However, collaborations within the business group remain increasingly constrained within Poland or the EU (Figure 21). Cooperation with partners of the same group from outside Europe constitutes a clear mino-rity. market dominant position of another firm (42 percent) prevents them from taking risks. Lack of highly qualified personnel, information on existing technologies, demand, or partners for cooperation were indicated by approximately one third of the firms. When asked to identify the main reasons for the poor development of innovations, 74 percent of health in-dustry firms indicated a lack of convincing arguments for implementing innovations. The other firms did con-sider implementing innovations but concluded that the identified barriers would prevent their success. The analysis of selected economic and innovation aspects of the Polish health industries – namely, the pharmaceutical and the medtech industries – allow us to derive some general conclusions. Generic medicines represent a considerable share of the Polish market of medicines and the price of pharmaceuticals is among the lowest in Europe. The share of public expenditures in the medicine costs incur-red by patients in Poland is one of the lowest among the OECD countries. The Polish pharmaceutical indu-stry observed a remarkable growth after joining the EU but has faced a severe slump since 2011. Similar to most CEE countries, Poland has observed an in-crease in number of pharmaceutical firms. The entry of smaller companies and the economic downturn correlates to employment reduction, which is also observed in other CEE countries. Still, Poland has the larger pharmaceutical workforce in the region. The manufacture of pharmaceutical preparations is the largest segment of the pharmaceutical industry for all CEE economies. Poland has the largest basic pharmaceutical products segment within the region and has improved its position in the pharmaceutical preparations segment. Since 2010, the productivity and profitability of the Polish pharmaceutical indu-stry decreased, as has investment. Poland still has the highest productivity in the basic pharmaceutical products segment among CEE countries, but lags in the pharmaceutical preparations segment. The medtech industry has grown steadily since 2011 but it is still a small industry in terms of firms and output. The Polish medtech industry includes ap-proximately 100 large and small business entities manufacturing medical technologies. However, the-se have been growing at a steady pace, which is also the case for most of the CEE region. Poland has also observed increasing medtech sales, which is par-tially due to exports and public support through the European Cohesion Policy. Poland also observed the largest increase in medtech employment, which re-mained stable in most CEE countries. Poland has the largest medtech industry among the CEE countries, but it lags in productivity. In all CEE economies, the manufacturing of medical and dental instruments and supplies is by far the main medtech segment, but Poland had the lowest proportion of firms manufacturing medical equipment. The Polish health industry has still much to do to im-prove its innovation status. However, the observed trend of the innovation dynamics is cause for optimism. Polish firms in the health industries are increasingly innovating and extracting economic results from these innovations. Health-related industries are among the top innovation expending sectors in Poland. R&D expenditures represent the largest share of innovation expenditu-res, followed by investments in capital goods with embedded technology and in marketing related to the launch of new or significantly improved products. The Polish health industry has made use of various forms of public support to finance innovation. The most used source of funding was the European Commission. Support for the cooperation between academia and business was the only program where the natio-nal support was greater than European support. The local support programs were less frequently used to a significant degree. The Polish health industry has innovated more than the national average, but it is still far from EU levels. Most of the product and process innovations were new only to the firm and only a quarter were new in Poland. However, these innovations have increasingly contributed to the revenue of the health industry. Within the innovative sales, the larger share relates to innovations that are new to the firm but not the market. The health industry relies on complexity of their products, secrecy and lead-time advantage to maintain or improve competitiveness in their markets. Being a market dominated by generic and branded generics, less than a third relied on trademarks and industrial designs to maintain competitiveness. About a quarter relied on patents, which is in line with few novel product and process innovations being introduced to the Polish market. Most Polish innovating firms in the health industry re-lied on information sourced internally and almost half relied on customers or suppliers. The health industry also relied extensively in academic and specialized soft sources – i.e. publications and meetings – but academic institutions were among the least popular sources. Half of the industry’s innovative firms have cooperated to achieve innovation, which is double the national average. The proportion of firms considering cooperation with academic institutions as fruitful for innovation has increased greatly, which contrasts with the drop in collaborations with suppliers and customers in the private sector. The health industry considers high innovation costs, lack of financial resources and market conditions to be important bar-riers to innovation. Baczko, T. (ed.), 2012, Report on Innovativeness of the He-alth Sector in Poland in 2012, Institute of Economics, Po-lish Academy of Sciences, Warsaw. Central Statistical Office (2012), Statistical Yearbook of Industry, Warsaw, Poland. Central Statistical Office (2013), Statistical Yearbook of Industry, Warsaw, Poland. 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Innovativeness in the Po-lish Health Protection Sector – Challenges, Barriers, Pro-blems and Recommendations, The Institute of the Innovative Economy, Warsaw, Poland. The method of treating large bone tissue defects in oncological patients with the use of in vivo tissue 1. engineering 2. The personalization of the treatment of acute lymphoblastic leukemia in children in Poland A new model of medical care with the use of the modern methods of non-invasive clinical assessment and 3. telemedicine in patients with cardiac insufficiency 4. New anti-neoplastic compounds disturbing the functions of telomeres 3D bioprinting of scaffolding with the use of live pancreatic islets or insulin-producing cells for the purpose of 5. creating a bionic pancreas 6. Diagnostics of gliomas on the basis of the free-circulating tumor DNA The application of the new methods of diagnosing and treating epilepsy and neurodevelopmental disorders in 7. children on the basis of the clinical and cellular model of mTOR pathway dependent epilepsy Developing optimized methods of treating tissue damage on the basis of innovative composites and 8. mesenchymal stem cells and their derivatives in patients with civilization diseases 9. A virtual clinic of balance 10. A new therapy of psychotic disorders and the Huntington disease with particular emphasis on cognitive deficits 11. Developing new therapies based on the stimulation of antineoplastic action of the immune system An innovative technet (99Mo/99mTc) generator with a chitosan-based microporous sorbent using molybdenum 12. 99Mo, for applications in isotopic diagnostics Developing and assessing comprehensively a biodegradable and flexible intravascular balloon expandable 13. stent based on thin and highly resistant struts Developing a reference model of Personalized Neoplastic Tumors Diagnostics based on tumor heterogeneity 14. analysis with the use of genome biomarkers, transcriptome and metabolome as well as PET/MRI imaging as a tool for implementing and monitoring individualized therapies 15. Non-invasive monitoring in the early diagnosing of atrial fibrillation (AF) 16. Developing an innovative technology of producing laser micro-probes to be used in neoplastic diagnostics New tools of molecular diagnostics and imagining in individualized breast, thyroid, and prostatic carcinoma 17. therapies 18. An integrated system for transcatheter closure of paravalvular leaks Pre-clinical and clinical studies on antineoplastic action of a new TRAIL-derivative molecule oriented towards 19. signaling cell death – establishing a national center for early phase clinical oncological studies Regeneration of ischemic injuries of the cardio-vascular system with the use of Wharton jelly as an unlimited 20. therapeutic source of stem cells Mesenchymal stromal cells and a scaffold enriched with such cells as an alternative therapy for patients with 21. cardiac insufficiency Therapeutic potential of mesenchymal stem cells tested in clinical trials and in vitro – a justification for banking 22. characterized cells 23. An innovative system for diagnosing and treating disequilibrium A bio-cybernetic system for predicting and monitoring organ complications resulting from hypertension with the 24. use of non-invasive diagnostic methods and wireless cardiovascular system sensors 25. Developing modern biomarkers and an innovative FGFR kinase inhibitor used in antineoplasmic therapies Introducing an original Polish implantable rotary heart assist pump and a remote monitoring and rehabilitation 26. system for patients with heart assist devices Using modern telemedical technologies in an innovative optimum cardiac rehabilitation program in patients 27. after coronary revascularization Developing an innovative method of treating Epidermolysis Bullosa and chronic wounds of other origin by 28. means of biological dressing made of human material 29. Using the regenerative potential of mesenchymal stem cells Using medical data teletransmission for improving quality of life in patients with cardiac insufficiency and 30. reducing costs of treatment