This paper discusses the challenges facing health technology assessment (HTA) in Europe, based on an explicit analysis of the characteristics of an “optimal” HTA system. It has three objectives: a) to elaborate an explicit system of policy goals and the characteristics of an optimal HTA system that facilitates the achievement of these goals; b) to identify the general institutional incentive barriers (government and market failures) that prevent the attainment of an optimal HTA system in Europe; and c) to argue that evaluation of the implications of health technologies for equity and inequality in health is an essential part of this optimal system and a considerable challenge for HTA decision makers, especially as national governments realign policy toward equity goals.