Friday, August 17, 2007

Medical Equipment and Supplies Industry Profile


Many areas have targeted medical equipment and supplies for for business and job development. This summary profile discusses some of the major trends in the industry that economic developers should be aware of. Contact Don Iannone for more information.

In 2006, the total value of the medical equipment and supplies market was approximately $89 billion, a 4.2% increase over 2005. Reflecting the growing medical requirements of an aging population, and the incidence of chronic diseases such as diabetes, the US medical equipment and supplies market is forecast to continue strong growth moving forward.

The most lucrative segment of the market consists of disposables such as syringes, catheters and dressings, which account for 40% of the total revenues. Opthalmic and IV diagnostic equipment and supplies each generate a further 11% of the market value.

The high cost of crude oil has driven up the price of oil-derived plastic resins used in the manufacture of many items of disposable medical equipment. In a bid to maintain profit margins, many companies have increased the retail price of such items or relocated manufacturing operations to low cost regions such as Southeast Asia or Latin America.

Leading companies include Johnson & Johnson, Medtronic, Baxter International, and GE Medical Systems. The market favors large companies with high levels of supplier power, who can provide broad product portfolios, competitive pricing, and extensive technological expertise.

A high degree of M&A activity is evident within the industry, especially with respect to larger players enhancing their IP ownership through the acquisition of niche, innovation-driven SMEs. High levels of R&D expenditure are characteristic of the industry, with companies recognizing a healthy innovation pipeline as a key strategy for organic growth.

Key Issues

Aging Population - As the baby boomer generation advances to old age, the US elderly population is growing rapidly, which in turn is increasing levels of medical treatment and hospital admissions. The medical equipment and supplies industry is therefore benefiting greatly from increased sales volumes and enjoys positive long-term sales forecasts.

Diabetes Epidemic - The increasing prevalence of diabetes mellitus is considered to have reached epidemic proportions according to the US Centers for Disease Control. It has been estimated that diabetes accounts for more than $130 billion of healthcare spending in the US annually. The market for diabetes diagnostic, monitoring, and treatment devices is set to increase considerably moving forward.

High Plastic Prices - The high price of crude oil and natural gas is driving up the price of petrochemical-based plastic resins required for the manufacture of many disposable medical supplies, such as syringes and catheters. Although much of the increased cost can be passed onto customers, many manufacturers have relocated their manufacturing plants to low-cost environments in Southeast Asia and Latin America in an attempt to preserve profit margins.

Significant Trends

Consolidation - The US medical equipment and supplies market favors the growth of large players. Larger firms are in a better position to negotiate favorable deals with group purchasing organizations (GPOs) and can afford the often prohibitive expense of product development including gaining FDA approval for new technologies. Smaller companies within the industry mostly represent niche technologies and are often targeted by larger players looking to increase their technological expertise.

E-Procurement - The growth in e-procurement and Internet sites featuring medical product and purchasing information has introduced significant price transparency within the market. This has increased the purchasing power of many healthcare institutions and GPOs, especially for high-volume disposable medical supplies.

R&D Expenditure - Maintaining a healthy innovation pipeline is key to protecting market share and maintaining revenues, with many companies continually increasing R&D expenditure in a bid to stay at the forefront of the industry. An increasing amount of research spending is currently being channeled into biotechnology, whose medical applications are becoming increasingly valuable.

The medical equipment and supplies market consists of the total revenues generated through the sale of laboratory apparatus; surgical and medical instruments; dental equipment; catheters, syringes, needles; diagnostic and laboratory disposables; wound management supplies; non-woven medical disposables; and all other related disposable medical supplies, valued at manufacturers selling price. Pharmaceuticals are not included.


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