Read the Conversation
Meeting highlights:
- Improving Healthcare in Italy: It is important to reduce healthcare expenditure - but at the same time, we need to take advantage of opportunities to improve the quality of treatment and reduce waiting times. This can be achieved at the same time if the industry becomes even more of a true partner to healthcare facilities and their operators.
- Encouraging Investment Stability: Addressing the payback system’s overburden and unpredictability could unlock more opportunities for medical device investment and innovation.
- Innovating for Efficiency: B. Braun is advancing cost-effective solutions, including digital tools and AI while optimizing hospital processes to improve care and ease staff burdens.
- Addressing Talent and Demographic Challenges: By focusing on unburdening healthcare professionals and talent retention while paying more competitive salaries, Italy can strengthen its healthcare workforce despite demographic shifts.
- Strengthening Public-Private Partnerships: Enhanced collaboration between industry, government, and hospitals will drive greater efficiency, reduce costs, and improve healthcare accessibility.
EF: What are the current priorities on your agenda?
KP: Priorities are well aligned with our company vision: to protect and improve people's health. That means that we have to understand and serve our customers as well as possible as a reliable partner. It also means to further develop our business models with the targets to reduce costs, improve quality, and save time for healthcare professionals. I know it sounds like a selection of buzzwords, but it is possible if we look into complete processes with a very high level of insights we gained over decades – instead of just selling a product. To be the preferred partner, we also need to make the most out of the new technologies, such as Artificial Intelligence, which will be a game changer in many ways. To do all this, we need the best people on board, enjoying the culture of our family-owned company.
However, we have to make this work in the circumstances we have in Italy. From my standpoint, the biggest challenge we face is the extremely low healthcare spending in Italy relative to our GDP, which is a major concern not just for our company but for everyone in the sector – and finally, also for the patients.
Private healthcare spending is alarmingly high, accounting for over 25%, and it’s growing further. As someone living in Italy, I can attest that this leads to a two-tier healthcare system. The public system often involves long wait times and subpar service quality. To receive timely, adequate care, individuals must either pay out of pocket or have private insurance—something that sets Italy apart from other Western European countries. This presents a challenge not only for our company but also for the general population.
This challenge is particularly difficult for those in the South, where most industry activity is concentrated in northern Italy, and most of the top universities and hospitals are also primarily located in the North. Many people from the South travel north for proper treatment, which adds to the complexity of the healthcare situation.
Additionally, we cannot ignore the issue of Payback for medical devices, which has been a concern since 2015 and creates significant uncertainty. This uncertainty threatens many of the positive developments we want to discuss today. In the medical device sector in Italy, around 120,000 people are employed. In general, the country remains attractive for business due to its strong universities, skilled workforce, low labor costs, and strategic location within Europe.
However, when discussing potential investments within our company, the issue of payback inevitably comes up, raising questions about Italy’s overall security as an investment destination. This is troubling, as it puts the profitability of the entire sector into question and complicates discussions with our headquarters. It is a major topic that continues to cause concern and uncertainty.
To explain the Payback mechanism in a few words: This law from 2015 states that the industry has to bear 50% of the overspending exceeding the regional budget for medical devices. However, we need to offer prices in tenders and are obliged to deliver usually for 3-5 years. There is no way to foresee the regional spending, nor are the budgets communicated at that time. Even worse, the budgets for 2015 to 2018 were set retroactively in 2019
The implementation of this law is currently still the subject of a legal dispute. I sincerely hope a solution is found, as the unpredictability of the business, along with fewer investments leading to job losses, will cause significant financial harm due to fewer investments and threaten many small and medium-sized companies. In regions like Tuscany, where overspending is a significant issue, many medical devices may not be offered anymore – leading to a degradation of the healthcare service to the patients. Despite these challenges, we remain committed to supporting our customers and patients to the best of our ability.
In a country with such high public debt as Italy and where ca. 75% of hospital services are publicly funded, it’s clear that financial constraints are the core issue. This makes resolving the Payback problem from the government’s side particularly challenging. Besides Payback, the underfinanced sanitary system is facing another problem: the critical shortage of doctors and nurses due to low salaries and demographic challenges. Limited resources prevent competitive pay, leading to reliance on higher-paid temporary staff (“gettonisti”), which strains the system further. Many professionals are leaving for better opportunities abroad, while fewer young people are entering the field due to unattractive job conditions.
So, what we need is to find solutions to reduce costs while increasing the quality of care and unburdening healthcare professionals from unnecessary workloads. That sounds impossible at first, but in my opinion, there are three approaches that show how we, as a medical device company, can support mastering this challenge: focus on processes instead of products, exploiting the benefits of new technologies, and unburdening the hospital infrastructure through further outpatient treatment.
Let me start with the process approach: to focus not only on products but also on broader solutions covering entire processes – which is sometimes difficult in a tender-driven market with a high focus on product prices.
One example from our company that highlights this approach is surgical instrument management. In the past, surgical instruments were purchased by the hospital and used until they were worn out, requiring significant investment in replacements. Hospitals would have to manage the investment, sterilization, technical service and maintenance, etc., themselves.
Today, we can assist hospitals throughout the entire process. It starts with the joint definition of surgical kits, which usually significantly reduces the number of instruments in the kits, therefore decreasing the cost of sterilization. By standardizing these kits, we help reduce financial and operational burdens on hospitals.
We work very closely with our customers, particularly the surgeons, to ensure they have the instruments they truly like and trust. We take care of the entire process – everything from owning and maintaining or exchanging the instruments to ensuring 100% availability. In the end, the customer pays a fee for the service instead of bearing the investment.
This approach has evolved over more than a decade and has proven to be highly effective. It is a proven triple-win situation. The hospital benefits from lower total cost of ownership and lower effort, as they no longer have to manage or invest in the instruments themselves. The quality is also higher because we ensure that the instruments are in top condition with our experts. For the patient, this means a reduced risk of being operated on with an inappropriately maintained instrument – issues we have encountered even in countries like Germany.
This is just one example of the direction we further need to head in to reduce inefficiencies and improve outcomes for everyone involved. To make this happen, we need to foster stronger partnerships between medical device companies and hospitals. We must move beyond the traditional supplier role and work together to address these systemic issues.
The second lever is new technologies. It is definitely a plus that Italy has always been a fertile ground for innovation. The market is very receptive to new ideas.
While Italy may not be highly attractive for commodity products due to relatively low prices, there is a genuine interest in innovation and a willingness to invest in it. We see this in the technological advancements we are introducing, such as our new infusion pump Space+, which is not only connected to a central platform called OnlineSuite+, enabling nurses to monitor all pumps in the ICU remotely but can also be connected to the B. Braun HealthCloud in an end-to-end encrypted way, which in turn creates new opportunities to improve patient care and make processes more efficient. Or with AEOS, our digital surgical microscope for neurosurgery that enables neurosurgeons to operate in an upright position, viewing the procedure on a high-resolution screen while the camera stays focused and mounted on a robotic arm. A strong example of process improvement using advanced technologies is our “Onco Full Digital” approach. This includes a fully robotic and digitized system for preparing chemotherapy treatments, starting with a digital prescription sent to an admixture robot of our partner, Grifols. The entire data flow is digital, right up to the infusion pump, customized for each patient, and documented. This reduces errors and health risks while saving time for healthcare staff. We offer different setups depending on the number of cases, and it is easy to calculate a business case for our customers. This is important not only for us as a sales argument but also for us as a family-owned company; we are committed to making quality healthcare affordable for as many people in the world as possible.
These are just three examples, and we are working on many more solutions that will utilize the possibilities of artificial intelligence, virtual reality, etc.
Last but not least, I am convinced we can transfer many activities from the hospitals into the community-based setting, saving costs and increasing the life quality of patients who can stay in their home environment at the same time. This lever is also supported by the EU-funded PNRR (“Piano Nazionale di Ripresa e resilienza” – National Recovery and Resilience Plan), creating opportunities for companies like us to support this change. For us, the task is to transfer our competence in the hospital sector to the ambulatory setting in order to ensure high-quality healthcare close to the homes of the patients. In order to do so and to better understand the dynamics of this business, we acquired the home care provider “La Casa del Sole” in the Lombardy region by the beginning of this year.
Having said this, I would like to add that in our ongoing commitment to advancing healthcare in Italy, it is crucial for us, as a trusted partner, to continue supporting the clinical initiatives led by the Italian scientific community. These efforts are instrumental in developing valuable solutions for patients.
EF: How can we ensure everyone aligns to create a system that rewards innovation and promotes growth? Additionally, how is B. Braun collaborating with other stakeholders to improve the current payback policy?
KP: That is the billion-dollar question. Firstly, let me be clear: I understand the intention behind the payback system, but it is not functioning as intended. If the scheme were actually implemented in this way, it would be possible to collect money for the past few years, but this would either lead to higher prices that include the charges for payback based on estimates - or we would no longer be able to offer many products, which would inevitably lead to a deterioration in healthcare. That is not a scenario anyone wants.
We need to explore other solutions, as already stated before. What is missing is a true partnership between stakeholders. Today, oftentimes, we are limited by the tender system, focusing on specific products and oftentimes also very much with a focus solely on the price. We need to shift towards more collaborative partnerships, looking into opportunities and synergies that reduce the total cost of ownership, reduce effort for healthcare professionals, and avoid unnecessary spending.
Additionally, there is a lot of waste in the system, and we are working actively to address it. Through the German-Italian Chamber of Foreign Commerce, we have formed a group of German pharma and medtech companies in Italy, which I chair. Our goal is to have a constructive dialogue with the relevant stakeholders to further improve the healthcare system in Italy.
Reducing hospital-acquired infections (HAIs) presents a significant opportunity to lower healthcare costs. These infections not only lead to thousands of deaths annually but also result in prolonged hospital stays and increased readmissions. Despite the severity, these infections receive little public attention. In Italy, the risk of contracting an infection during hospitalization is around 6-8%, significantly impacting patients and the healthcare system as an HAI increases the cost of the treatment by ca. 60%. It is well known that proper hand hygiene can reduce these infections by ca. 50%. We are currently working on a project to demonstrate how a significant improvement can be achieved.
As an industry, we need to collaborate with the government and hospitals to secure healthcare quality while also addressing cost reduction. If we are serious about cutting costs, we must also focus on expanding ambulatory and home care services. Compared to other countries, Italy still has significant room for development in this area, but there are encouraging signs of progress with support from the EU’s Recovery Fund. For example, Lombardy has set a target to double the number of people over 65 treated in ambulatory care from 5% to 10%. To do so, for the first time in more than 10 years, they have also issued new accreditations for home care services, which is a much more cost-effective approach.
This shift benefits everyone—taking services out of hospitals is less expensive, and patients get to stay in the comfort of their own homes.
EF: Can you share how your portfolio is evolving, and how do you evaluate the receptiveness in Italy to introducing new digital solutions to the market?
KP: I have been with the company for 11 years now, and before moving to Italy, I was responsible for Strategy and Operational Excellence within the group. That experience gave me valuable insight into portfolio discussions from a headquarters point of view, and now I have a different market-driven perspective, which adds extra value to my current role.
We have a very broad portfolio, which has developed over the company's 185-year history. This can be both an advantage and a challenge due to the complexity involved. For example, our production facility in Melsungen focuses on high-volume, plastic-based consumables using automated technologies, some of which are developed in-house. Meanwhile, our headquarters in Tuttlingen is more focused on fine mechanics, like micro instruments and fully automated container lines. Managing this diverse portfolio is both fascinating and demanding.
On one hand, there is always pressure to become more focused, especially with new technologies emerging, faster development cycles, and increased competition from countries like China. Digitalization introduces different product life cycles than we are traditionally used to. On the other hand, having such a broad portfolio allows us to combine various solutions in unique ways to cover complete processes, giving us a competitive advantage.
For example, we have a strong presence in the ICU. We offer not only infusion pumps but also infusion solutions, administration sets, and venous catheters to cover the complete therapy. Additionally, we have solutions for acute dialysis and other treatments like hemoadsorption. This comprehensive offering gives us control over a patient's entire fluid management in the ICU, which is a unique advantage.
With the advancement of digitalization and artificial intelligence, the ability to generate and utilize data is an exciting area of development. A few years ago, we introduced the global role of a Chief Digital Officer to guide us in this direction, ensuring that these developments are independent of specific divisions or products. One result of this approach is the B. Braun Health Cloud, with which products like the infusion pump can connect in a secure and encrypted way, sharing data efficiently.
Looking ahead, we will still need high-quality medical devices and pharmaceutical products, but data will become increasingly critical. Imagine having access to the collective knowledge of specialists and patient data from around the world, which could enable highly personalized care with the greatest probability of success. However, in healthcare, this process is complex and requires bulletproof quality control, transparency in decision-making, and a way to handle the unstructured, inconsistent data we currently have.
One of the big challenges is standardizing data formats across different devices and providers. It is a huge task, but it is necessary, and we’re already seeing the development of a common standardized data platform at the European level - the European Health Data Space. These are crucial developments, and they certainly apply beyond just Italy.
EF: How do you work out which technologies and AIs are useful and which add value to you as a company?
KP: At the corporate level, we established a global AI hub that helps structure our activities, which is essential. With over 63,000 employees, you need some level of coordination to avoid chaos. The AI hub serves as the expert group we consult with when we have a use case that needs solving. That doesn’t mean we don’t experiment and implement AI solutions on a local level, but it is done in a coordinated and transparent way so that others can also make a profit out of solutions that were developed elsewhere.
AI will not just affect our portfolio; it will touch every part of our personal and professional lives. Earlier this year, we thought about how to make our colleagues interested and curious about how AI can make a difference for them, and just last week, we held an Artificial Intelligence Day. We offered a webinar produced by our cross-functional AI core team, which explained how the technology works and showcased what is already possible with the tools we have. Now, we are running a contest where employees develop ideas and solutions on how AI could improve their daily work.
The key is to ignite curiosity. Instead of just mandating training sessions that people attend passively, we want them to explore and experiment with these tools themselves. AI is moving so quickly that traditional methods of learning won’t keep up.
Certainly, that applies to me, so I recently completed a course on AI in healthcare to better understand how it works and what its limits are. I believe this applies to everyone — AI will impact every industry and every life. The best way to secure the position and gain an advantage is to stay ahead of these changes and learn how to harness the technology.
EF: When you reflect on the past four years, which moments stand out the most? How do you assess that time, and what achievements do you consider most significant?
KP: Since I took over responsibility for the business in Italy at the beginning of the COVID-19 pandemic, the start, in particular, was very different from what I had imagined. There has probably never been such a big challenge for the company before. Our business, which revolves around surgical interventions, was almost at a standstill, while products used in an intensive care unit, in particular, experienced extreme demand. The fact that we have mastered this time so well is certainly due, above all, to our great team - no one has been afraid to take on responsibility, and many have risen above themselves in the process. I am very proud of the fact that, despite this enormous impact and the great uncertainty, we did not lay off a single employee and have not put anyone on short-time work, which is called “cassa integrazione” in Italy. This is what characterizes a family business like B. Braun, with our strong values - and the employees have paid this back with commitment and dedication. I am convinced we can still feel the effects of that time and the solidarity we experienced there today.
I still remember one challenge very well: during the pandemic, we faced a critical shortage of a sedative pharmaceutical in Italy that was needed to ventilate COVID-19 patients in the ICU. From the plant in Germany, we swiftly coordinated the import of the product, originally produced for Australia, within 48 hours. In a normal time, this is something completely impossible. Navigating complex regulations, we secured approvals from both German and Italian authorities. Our team worked tirelessly to obtain the necessary documents to ensure the product reached Italy as soon as possible. This rapid response was absolutely crucial in addressing the shortage.
This experience instilled in us a profound sense of purpose, as we were literally saving lives. Although I have a passion for cars, the impact we achieved here far surpasses anything I experienced in the automotive industry where I previously worked. It was truly inspiring to see everyone in the company united around this common goal.
Talking about achievements, our most significant accomplishment is for sure fostering a culture of high collaboration, transcending traditional reporting lines. One key element was a reorganization that aligned marketing and sales closely with our customers while simultaneously establishing a unit dedicated to leveraging digitalization and new technologies across the organization. But beyond any organizational structure, the most crucial element, in my view, is having the right people on board and fostering an environment that enables them to excel. And for the future, I truly believe in the partnership approach with our customers. While some may argue that companies are primarily profit-driven, even cutting medical device prices in half will not resolve the core problems of the sanitary systems in the world and also not those of ours in Italy. Because if you examine a hospital's cost structure, medical device prices are just a subordinate factor. In true partnerships, we can eliminate unnecessary efforts, taking full advantage of the possibilities of new technologies and allowing HCPs to spend more time on the real essentials – time to treat and care for patients.
