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Significant Growth in Medical
Equipment Sector Expected
(Abstracted from a Report By Ron Sommer)
The medical equipment and
supplies sector includes surgical and medical instruments; orthopedic,
prosthetic and surgical appliances and supplies; dental equipment and supplies;
x-ray apparatus, tubes and related irradiation apparatus; electro-medical and
electrotherapy apparatus; and ophthalmic equipment.
The main demographic change
influencing this industry is the rapidly growing number of elderly in the United
States. Projections show that the percentage of people 65 and older will
increase from 12.4 percent in 2000 to an estimated 20.7 percent by 2050.
According to Census estimates, there were approximately 35 million Americans
over the age of 65 in 2000; due to the influx of "baby boomers" and an
anticipated increase in overall life expectancy, by 2020 there will be more than
54 million people 65 and older, and more than 86 million by 2050.
The aging population is already
influencing the future direction of the medical device industry due to their
changing health needs and an accompanying shift in thinking on how and where
seniors will be treated. baby boomers are living longer lives than previous
generations, requiring more sophisticated and longer-term healthcare. This has
driven the need for advanced medical electronic devices and raised expectations
that new technologies will enhance the quality and length of patients' lives as
they get older. As the U.S. population ages, and pressures to contain costs
increase, expensive hospital stays will be discouraged, and health care will be
increasingly delivered in alternative settings, such as nursing homes, hospices,
and, especially, the patient's own home.
As a result, home health-care
products are expected to become one of the fastest growing segments of the
medical device industry. In recent years, these products have become
increasingly more sophisticated and are now used in a wider variety of
situations. For instance, unskilled health care workers who previously were
limited to using only low technology products now have hightech devices at their
disposal for responding to critical care needs. In addition, patients will have
access to an increasing array of sophisticated equipment to address their own
medical care. Demographics and technological advances will continue to increase
demand for pacemakers and defibrillators.
The mid- to late-nineties saw a
tremendous number of mergers and acquisitions within the medical device
industry, and this trend is expected to continue. The long-term effects are not
known but consolidation of the medical device industry is already changing the
structure of firms and the delivery of medical technology to patients.
There are a number of dynamics
driving this trend. Small firms that find it too expensive to devote significant
resources to providing "proof data" for their new innovations are merging into
larger firms that have the financial resources necessary to bring new technology
products to market. Larger firms receive the benefit of the new technology and,
therefore, maintain
market share, while small firms can afford to continue to produce and get the
benefit of the large firm devoting resources to continued incremental
improvements crucial to the industry. The rate of consolidation has been further
augmented by two other trends in recent years:
1. Larger firms generally have a
greater capability for exporting products globally than do small stand-alone
firms.
2. Larger firms are better
positioned to negotiate favorable deals with group purchasing organizations such
as HMOs and health care companies with nationwide reach.
The federal government would like
to implement incentives to encourage doctors, health care providers and patients
to become actively involved in using technology to create a more seamless health
care system. These initiatives fall under several broad headings:
1. Adoption of electronic health
records by physicians should result in workplace efficiencies as well as better
levels of care for patients.
2. Ensuring that clinicians can
share information seamlessly with each other will make availability of patient
records easier and more useful.
3. From the patient's
perspective, wide use of Personal Health Records that are truly portable and
accessible could result in more educated patients able to make well-informed
decisions regarding necessary treatments, as well as choosing qualified
physicians and hospitals.
Medical device manufacturers
are benefiting from a new generation of materials and manufacturing processes.
As medical device and biotechnological products converge, one area that will see
tremendous growth is drug delivery devices - many treatments and therapies
derived from research will not necessarily be available in pill form. Medical
devices will therefore act as delivery systems for new products resulting from
genetic engineering and biotech research. Most industry experts view the
impending convergence of medical devices with biotechnology with great
enthusiasm, but also warn that if the regulatory and reimbursement issues are
not addressed, problems will ensue as convergence takes place.
(Ron Sommer is chief financial
officer at an institution of higher education in New York City. He has 35 years
of financial management experience in the public, private and not-for-profit
sectors. Sommer has also been a private investor for more than 30 years.)
Ref :
http://seekingalpha.com/article/148193-prepare-for-significant-growth-inmedical-equipment-sector
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