Irish medtech scales on American money. Ireland needs to start putting up some of its own

A wearable sensor designed in Dublin is now in use in 20 clinics across 11 American states. It was built by Vertigenius, a Trinity College Dublin spin-out. The sensor lets clinicians monitor vertigo patients remotely, and it completed its United States Food and Drug Administration (FDA) registration last October. When the company raised €2.55 million in April, part of the money went towards a sales team in America.

Plenty of Irish medtech companies have gone the same way. The customers are elsewhere, and so is the capital. In the first three months of this year, international investors provided 85 per cent of all the venture capital raised by Irish companies, and Irish investors the rest. A few years ago that split was closer to half and half.

Medtech is slow money

Medtech is one of Ireland's industrial success stories. The sector employs 50,000 people and exports around €20 billion of product a year. There are more than 450 medtech companies in the country, from nine of the world's ten biggest to the SMEs and start-ups that make up about 80 per cent of the total. The money problem bites hardest at that 80 per cent.

That kind of horizon suits pension capital, which invests over decades and is under no pressure to exit early.

The money now exists at home

Since January, workers in Ireland without a pension through their job have been automatically enrolled into My Future Fund, the State's new retirement savings scheme. More than 760,000 people are in it already, with contributions coming from the worker, the employer and the State, and the first of that money is now being invested. That pool will build for decades.

Britain has started connecting this kind of money to its own scale-ups. A group of its biggest pension providers, with government backing, is exploring a fund of more than £1 billion to invest in British science and technology companies. The companies get long-term capital to grow at home. The savers share in the growth.

Nobody is suggesting that retirement savings should be concentrated in early-stage ventures. International pension funds routinely allocate a modest proportion of their assets to venture capital, private equity and growth investments in pursuit of long-term returns. The scheme's first duty is the saver's return, and that should not change. Nor does any of this replace private capital. The point is to crowd it in, with State-backed funds investing alongside experienced commercial investors on market terms. The British providers are making the same argument themselves, that backing your own growth companies is one way of earning that return.

Capital alone will not finish the job

Regulatory approval may allow a device to be sold, but it does not guarantee that a hospital will buy it, a clinician will use it, or a payer will fund it. Irish hospitals will generally agree to trial a device. Getting the health service to pay for it routinely, at scale, is the difficulty. In America, hundreds of hospital systems make that decision separately, so a company turned down by one can go to the next. In Ireland, the HSE is effectively the whole market. Investors price that risk into every Irish medtech company they look at.

None of this is news inside the health service. The HSE published its first Framework for Health Innovation in June and was frank that it has no shortage of innovation and that too many good ideas never get past the pilot stage. Anyone working between the companies and the hospitals will tell you why. Tenders ask young companies for turnover they cannot yet show. Purchasing frameworks open only every few years. And moving from a successful trial to a purchase order can take one to two years, which a small firm waiting on revenue may not survive.

A MedTech Adoption Fund would cover the cost of a new device centrally, so that a hospital adopting one is not taking it out of a clinical budget already committed to something else. The purpose would not be to subsidise weak products or shortcut the evidence; public money should go only where a technology shows clinical, operational or economic value. And procurement rules could be written with software companies in mind as well as manufacturers. If we can create and manufacture these technologies for the world, we can be a launch market for them too.

There is a capability gap on our side of it too. Ireland has world-class engineering, manufacturing and clinical research, and much less depth in health economics, outcomes research and market access, which are the skills a company needs to make its case to a buyer.

Ireland is already making this argument abroad. Our programme for the EU Presidency, which runs to the end of December, commits us to advancing revisions to the EU's Medical Device Regulations and to reforming public procurement, and says the Presidency will support an environment in which life sciences innovation can be "translated more effectively into patient benefit and high-value economic activity across the Union". What we are asking of Europe, we can ask of ourselves.

We are good at building medtech companies in this country. The money to grow them is sitting in our pension savings and our sovereign fund, and the first customer they need is running our hospitals. We should use both.