Markets : Medical Device Industry

Mr. Sameer Tamhane, Industry Analyst, Frost & Sullivan, USA

Increasing patient population and focus on cost containment of health care and preventative therapies globally influence the demand for medical devices. A "medical device" is broad term and includes wide range of equipment, consumable and disposable items used in diagnostic imaging, clinical laboratory, critical and routine patient care, patient monitoring and surgical procedures. It also includes equipment used for assistance in cardiovascular, orthopedic, respiratory, ophthalmic, auditory, neurology, urinary etc. disorders and self care equipment.

In the year 2000, the global medical device market was valued at over $100 billion. A major portion of which (approximately 43%) was generated from the U.S. market.

U.S. is still the largest medical device market and leads the world in advanced medical technologies. An interesting feature of the US industry is its continuos development and use of new and innovative techniques in areas like molecular diagnostics, minimal invasive surgery, biocompatible materials used for cardiovascular, and orthopedic implants. Dominance of US on the global market is apparent even today. However, the past few decades have seen decrease of its share from 75 percent during 1980s to the present level of 43 percent.

Western Europe is the second largest market and accounts for nearly 25 percent of the global medical device industry. In Asia, Japanese market has the highest level of advanced medical technologies and economic development. Countries such as China and India will have greatest growth potential due to their large population and developing healthcare system. Other countries like Singapore, Malaysia, Brazil, Mexico, Chile and Korea are expected to show significant growth in medical disposable and equipment market resulting from improvement in their economies and health care systems.

Digital radiography simplifies storage and archival of images and does not require film It provides with facility to review images on video monitor. Once the image is accepted, the system controller can forward the image to:

• printer

• workstation for post processing

• data storage

• networked radiologist at a remote site

Molecular diagnostics market is one of the most dynamic segments of the in vitro diagnostics industry due to numerous applications emerging as a result of technological advancements. These include tests for:

• Infectious disease (diagnostic and viral load monitoring)

• Inherited disease (susceptibility testing, prenatal testing)

• Cancer

• Forensic science

Currently only few laboratories have molecular diagnostics division, and fewer completely dedicated to the technology. The industry is in midst of transition period where, by the end of 2007, molecular diagnostics are expected to be standard method of diagnosis for many diseases.

The advent of Information Technology (IT) and increasing use of Internet has opened new avenues for patient care and treatment. Telemedicine includes the use of telecommunications related products that allows healthcare professionals to monitor physiological parameters of patients located in remote areas or those with mobility problems and assists in healthcare administration, patient care delivery and case management.

As healthcare providers shift to Digital radiography techniques, Image Integration will gain importance with applications ranging from PACS, RIS, Web based image management and Computer radiology. The shift toward home healthcare and nursing-home care is bound to spur demand for products ranging from ambulatory aids to orthopedic supports. Products focusing on self-care, geriatric population, and women are likely to experience impressive growth.

The disposable market comprises primarily of gloves, masks, drapes, syringes, needles, catheters and tubes/containers used in clinical laboratory. Magnitude of the disposable market is evident from the fact that in US 14 of the top 20 products were disposable products. Unlike the equipment market, this market is more price sensitive, driven by volume business and fast availability. Hence distribution gains paramount importance for this market.

The structure of the medical device industry has been changing due to acquisitions and mergers. Multinational manufacturers are consolidating in order to establish greater presence around the world.

Mergers & acquisitions have helped companies to offer end to end solutions in their core area of operations. The customer gets better products resulting from consolidation of R&D spending with an option of "one stop shop". The company is now able to concentrate on value added functions like understanding customer satisfaction, factors influencing his purchase decisions and product development rather than doing a simple sales function.

Operating in a dynamic and competitive market place requires participants to accurately understand the environment. Understanding about consumer buying behavior, consumer profile, factors influencing purchase decision, expenditure patterns, and payment facilities have become imperative for industry participants. Effective use of such tools will help in positioning their products and create high switching costs, especially in post consolidation era.