According to the latest data from the study “Observatory for Digital Health Technologies in Europe”, commissioned by the DG CONNECT, the EU digital health market is projected to grow from €11 billion in 2023 to €61,2 billion by 2035 (CAGR 15,1%).
The over 300-page study involved 300 healthcare providers and 70 digital health vendors, and mapped 690 vendors across 45 technologies, with half located in the US (345). There are only 196 vendors with headquarters in the EU27, mainly developing health data management, diagnostic workflow, and administrative solutions. Germany (45 vendors) and France (26) are leading the EU ranking, with 15 countries reporting five or fewer vendors.
Current drivers and barriers to the EU digital health market
The many new policies issued by European institutions are key to deploy the full potential of digital health technologies. Among them are the European Health Data Space (EHDS), the AI Act, and the Medical Devices (MDR) and In Vitro Diagnostics (IVDR) regulations, as well as the NIS2 and Cyber Resilience Act directives.
The increasing demand for innovative tools to support the management of chronic diseases is a key driver at the clinical level, alongside the need to reduce the burden of hospitalisation and enable new models of decentralised care.
These challenging objectives can be pursued thanks to the improved IoT connectivity, cloud infrastructure and high-performance computing systems, which support the real-time collection of data and enable complex use cases.
Industrial partnerships and consortia among vendors from different sectors (i.e., pharma, medtech, and digital) are key to leveraging their respective expertise and developing state-of-the-art solutions. Costs, functionality, and system integration are the main elements of differentiation in mature segments, leading to a service-oriented market mainly focused on localised implementation services.
Many barriers remain in the EU, ranging from the heterogeneity of national healthcare systems to divergent interpretations of regulations governing digital health solutions. The commercial viability of these technologies suffers from still-fragmented HTA approaches, limited reimbursement pathways, interoperability gaps in IT systems, and gaps in data standardisation. Trust also needs to be improved to support the diffusion of these technologies across patients and healthcare professionals.
The market analysis also showed that no EU27-based vendor currently offers software solutions for supply chain security and risk management, representing a critical dependency in a strategically sensitive domain.
The strategic positioning of the EU Digital Health sector
The study also conducts an in-depth analysis of the factors underpinning the strategic positioning of the digital health technology market.
The capacity to combine clinical evidence, regulatory clarity, and a scalable integration into care pathways emerges as a key driver. Product innovation is the primary competitive differentiator (52%), followed by strategic clinical partnerships (49%). In this instance, large pharma companies can leverage their expertise in establishing clinical trial networks, coupled with regulatory experience and relationships with payers. On the other side, native digital companies excel at rapid iteration, user experience design, and data engineering.
The analysis of differentiation strategies shows that patient-centred design (17% of vendors) and value-based pricing models (13%) remain a low priority. The interest is higher in data-driven approaches (37%) and clinician experience (31%). Pragmatic and hybrid trials would be needed to demonstrate the outcome and cost impact of digital health solutions. Other key enablers may include reducing clinician burden and integrating with existing electronic health records and care pathways, with a focus on therapeutic areas with clear digital endpoints (e.g., diabetes, mental health) to accelerate adoption.
Investments in R&D focus on strategic emerging technologies (AI/ML, generative AI, cybersecurity, advanced biosensors) and are often targeted to align with the needs of healthcare systems. R&D activities may also benefit from the early involvement of clinicians in co-development and from a regulatory design aligned with the requirements of relevant EU legislation.
A major area of public R&D funding is the European Virtual Human Twins Initiative, which received €80 million from the Horizon Europe program to explore use cases for disease management across several therapeutic areas.
The study highlights the still insufficient involvement of patients in the co-development process, including behavioural engagement. Patients would need a demonstration of concrete benefits of digital health technologies, for example, for their quality of life, and support to overcome the digital divide.
Revenue models are primarily focused on enterprise licensing (46%) and tiered pricing structures (47%), due to the major impact of institutional procurement in public health systems. Consulting and implementation services also generate significant revenues, while outcomes-based and risk-sharing models are emerging strategic alternatives still adopted by very few vendors.
Emerging trends and expected impact
The study identifies 5 top digital health technologies expected to have a significant impact on healthcare.
AI positions as the most mature and broadly applicable technology across clinical, operational, and strategic domains (Technology Readiness Level, TRL = 7-8). According to the study, adoption by healthcare providers should reach 80% by 2029. The EU’s European Cancer Imaging Initiative and the EUCAIM platform, providing federated pan-European cancer imaging data, represent an example of public infrastructure investment in AI-powered diagnostic tools. Explainability requirements under the AI Act, interoperability limitations and generalisation concerns are the main barriers currently preventing the achievement of TRL 9.
Next-generation virtual care and patient monitoring platforms (TRL 6-7) are projected to reach 91% adoption by 2029. They integrate AI-driven remote patient monitoring enabled by sensors, support for clinical decisions, and immersive tools such as augmented reality (AR) and virtual reality (VR), thus reducing the need for hospital visits. Multimodal data integration (wearables and consumer sensors, patient-reported outcomes, genomics, etc.) is combined with risk prediction for hospitalisation and immersive rehabilitation to enable the implementation of precision care models.
Another technology at TRL 6-7 is hospital early-infection warning systems, currently used by 20% of providers and expected to reach 74% by 2029. These platforms integrate data from electronic health records, vital-sign monitoring, laboratory results, and environmental data to prevent and predict sepsis, monitor hospital-acquired infections, and support surveillance of antimicrobial resistance.
Virtual human twins are currently at TRL 4–5 and are used by only 10% of providers, with projections reaching 51% by 2029. The aforementioned European Initiative has already launched several dedicated projects (EDITH, VITAL, and ENRICHMENT, the latest of which focuses on the use of virtual heart models for in silico clinical trials). Patient digital twins hold the promise of completely reshaping preclinical and early clinical development, reducing the need for animal studies and enabling personalised dose modelling.
Advanced wearables, ingestibles, and implantables are the new generation of biosensors, currently at TRL 5–6. Wearable biosensors are expected to reach >60% adoption by 2029, vs 50% of ingestible sensors. Continuous glucose monitoring, cardiac rhythm analysis, and sweat-based metabolic sensing are typical applications under development in several EU-funded projects (e.g., ELSAH, WELMO).
The global competition
The comparative analysis of the main global competitors highlights significant divergences in investment intensity, regulatory approaches, innovation focus, and the speed of deployment of digital health technologies.
The United States is the unchallenged global leader in the sector. Between 2019 and 2024, the US accounted for 81% of total global digital health investment by volume and 51% of all deals. The internal digital health market is forecast to grow from €33 billion in 2025 to €146 billion by 2035 (CAGR of 16%). Its typical characteristics include a dynamic venture capital ecosystem, faster regulatory clearance pathways, and deeper commercial traction with private payers.
The stand-alone post-Brexit evolution of the United Kingdom has led to advanced regulatory frameworks for health data governance and medical AI, a strong NHS digital infrastructure, and progressive interoperability standards. Structural weaknesses persist in workforce planning, national investment coordination, and consistent implementation across all NHS trusts.
China is a rapidly emerging player, with a projected growth of up to €58.5 billion by 2035 (CAGR 15%). The system is characterised by centralised governance, which has already deployed the telehealth infrastructure, with 80% of Chinese healthcare providers engaged in AI-enabled clinical documentation. China’s regulatory framework is also evolving, but implementation gaps persist in workforce development and service-level integration.
Japan is characterised by a balanced, moderately developed digital health profile, with stable institutional engagement and a strong supercomputing infrastructure (the Fugaku system, supporting cancer genomics and drug resistance modelling). The internal digital health market is projected to reach €9.3 billion by 2035.
The final recommendations
The DG CONNECT study on digital health technologies concludes with nine evidence-based policy recommendations directed at EU institutions and Member State authorities.
A key objective should be the integration of the EU Digital Health Market and the alignment of procurement, for example, through joint procurement frameworks and mutual recognition of certifications to reduce fragmentation and enable cross-border scaling.
Acceleration in interoperability and data infrastructure, supported by the EHDS implementation, is the prerequisite for generating real-world evidence at the scale and quality required by regulatory agencies and health technology assessment bodies.
Improved support for investment and increased reimbursement stability would facilitate the exchange of best practices on reimbursement frameworks, building on successful national models (DiGA, PECAN, Belgium mHealth).
Targeted instruments to reduce compliance costs and enable cross-border expansion should also be developed to better support SMEs and Scale-up activities. In particular, proactive retention strategies would be required to reduce the risk of EU digital health SMEs prioritising entry into the US market.
Innovation in frontier technologies should be supported by adequate funding for AI diagnostics, genomics, and cybersecurity to strengthen the EU’s leadership in these domains.
Adoption of digital health technologies should extend beyond hospitals, with incentives to support deployment in preventive care, community care, and public health.
Organisational readiness and workforce skills should also be strengthened by investing in digital competencies, change management, and integration support.
Improved sustainability and green digital health should be achieved by integrating eco-design, energy efficiency, and green procurement criteria into funding and procurement calls.
Finally, digital health initiatives should address disparities by embedding accessibility, equity, and usability requirements across the design, procurement, and funding frameworks.
