US market for medical technology gives way

Weaker demand for medical technology and equipment expected

Growth in the US medical technology market is likely to slow in the medium term. The market research institute Freedonia is cautious in its medium-term forecast. According to this source, the market for medical consumables, medical equipment and medical technology is expected to grow by 1.6 percent per year in value terms until 2021. This is explicitly a nominal value, as Freedonia confirmed on demand. If the forecast annual inflation of 1.9 percent in 2018 or 2 percent in the following year is offset, a value between stagnation and minus would result in the short term.

In 2017, the US market for medical technology products had a volume of 112.7 billion US dollars (US$) and thus a growth in value of 8.8 percent compared to the previous year. These figures are based on data from the U.S. International Trade Commission, which belongs to the Department of Commerce, and the U.S. Census Bureau.

The investment promotion agency SelectUSA, which also belongs to the Department of Commerce, put the market volume for medical technology at US$ 156 billion in 2017. The difference results from the fact that the organizations assign different manufacturer divisions to the generic term medical technology. SelectUSA has included more product groups, including medical consumables, medical furniture, wheelchairs, orthopaedic instruments and non-electrical equipment, etc. The company has also included more manufacturers of medical equipment.

USA the world’s largest market for medical technology

However, both figures illustrate that the USA is the world’s largest market for medical technology, with over 30 percent of global sales. Both quality and price levels are very high. The latter has a positive effect on the structure of sales margins.

Medical technology products in high demand include diagnostic and radiation technology, including CT scanners, products for neuromodulation, treatment of the spine and musculoskeletal system, oxygen and other respiratory rehabilitation devices, insulin pumps, blood glucose meters, pacemakers. There is an increasing demand for surgical robot technology to support surgical interventions. The segment of ICT products for health care is also growing rapidly, especially portable devices and apps.

Hospitals and clinics represent the most important customer group, accounting for 49 percent of all sales in value terms. They account for the lion’s share of large and expensive medical devices. Private customers account for 17 percent of all sales due to the increasing number of home therapies, followed by outpatient facilities with 15 percent. Specialized medical practices buy a further 7 percent.

Demand threatens to decline

In the medium term, growth rates in the medical technology market should level off, despite an ageing population. There are several reasons for this. For example, the net increase in the number of health care facilities will be insignificant in the medium term. New clinics are facing mergers or closures of health care facilities in conurbations. Instead of quantitative improvements, qualitative improvements in health care are coming to the fore, including alternative and more cost-effective forms of therapy such as genetic engineering or preventive measures.

Volume growth in sales of medical technology is reaching its limits. As a result, the suppliers‘ businesses are shifting slightly in the direction of services, maintenance and repair. However, rising sales can be expected for the latest generation of devices that enable modern forms of diagnosis and therapy and increase efficiency.

High costs trigger pressure to cut costs

Increases in deliveries in terms of value meet with a general need for savings. For years, the cost of treatment and medical personnel in the USA has been the highest in the world. These costs are borne by social budgets and patients. Savings signals are no longer just being sent out by public health authorities and hospital operators. The private insurance industry is also more rigorous in its handling of treatment costs. Otherwise the already exorbitantly expensive insurance policies would have to increase immeasurably.

Manufacturers save money and specialise more strongly

Manufacturers are responding to flattening market growth and the need to save money in the healthcare sector by reducing internal costs. This includes selling entire lines of business or releasing them into economic independence. This allows companies to specialize in a few or individual product types. At the same time, similar producers are merging or acquiring competitors in order to exploit synergies.

Small innovative companies watch as large and well-funded groups buy up and incorporate them. Otherwise they are unlikely to survive financially in the long run. They lack capital, extensive distribution networks, sales channels and sufficiently large marketing budgets. It is not without reason that large corporations dominate the medical technology sector.

Companies are taking money into their hands for restructuring purposes

A number of companies repositioned themselves in 2017. These include the Abott Laboratories group, which sold its medical optics division to Johnson & Johnson and almost simultaneously acquired Alere and St. Jude Medical.

Boston Scientific in turn acquired the Swiss manufacturer Symetis SA. And BioSip Technologies signed a ten-year cooperation agreement with a major customer, Mayo Clinic.