Israel Invests Heavily in Medical Innovation but Struggles to Integrate It Locally
Israel has developed a leading life sciences and health-tech industry, with $2.7 billion invested in Israeli life sciences companies in 2024 alone, marking a 25% increase from the previous year. The Innovation Authority also allocated around 500 million shekels in grants to companies in this sector. The government recognizes the economic and technological potential of medical innovation and supports Israeli companies in developing next-generation healthcare solutions.
However, a paradox exists: while Israel invests heavily in medical innovation and encourages companies to enter global markets, integrating new medical technologies into the local healthcare system remains challenging. Even after completing development and regulatory approval, adoption is hindered by limited hospital and health fund budgets, lengthy procurement processes, and the need for pilots, economic validation, staff training, and alignment with existing treatment pathways.
A major barrier is the disconnect between who pays for new technology and who benefits from its cost savings. Hospitals may bear upfront costs, while savings from reduced readmissions or long-term care accrue to health funds or other parts of the system. Consequently, even technologies with proven medical and economic value can face slow adoption, resulting in Israeli patients lagging behind international users.
This issue is not only medical but economic. Israel spends about 7.6% of its GDP on healthcare, below the OECD average of 9.3%, and operates under workforce and infrastructure constraints. With a growing and aging population, the healthcare system must deliver more services with relatively fewer resources. Therefore, evaluating new medical technologies should consider not just acquisition costs but also the costs of not adopting them.
Innovations that enable earlier disease detection, home monitoring, minimally invasive procedures, or advanced chronic wound care can reduce expensive treatments, hospital stays, and complications. In fields like oncology, cardiology, rehabilitation, chronic diseases, and community medicine, innovation should be assessed by its overall impact on patient care costs and outcomes.
Israel needs a streamlined, faster process for evaluating new medical technologies, allowing hospitals and health funds to conduct pilots, gather real-world data, and assess both medical benefits and economic feasibility. This approach would also benefit Israel’s biotech industry by turning the local healthcare system into a research and validation environment for companies aiming at global markets. Without effective adoption, Israel risks losing returns on its innovation investments. Medical innovation should drive not only exports but also efficiency within the healthcare system.
Alon Kushnir, CEO of Israeli biomedical company RedDress, highlights the need for such systemic changes to fully realize the potential of Israel’s medical innovation.
