4 MIN. READ
The medical equipment industry is well-balanced in juggling strong sales, unstable international trade policies, constantly changing regulations and a nascent explosion in innovation.
The industry is optimistic and predicts steady growth well into the future.
1. International Distribution Factors
More than other sectors of the manufacturing industry, medical equipment, including surgical and medical instruments have a very high international distribution rate. Data collected by MNI shows that while manufacturing overall distributes 29% of its products to other countries, the medical equipment far exceeds that with a rate of 66%.
This distribution rate is due to a large demand for precision medical instruments outside of the United States.
According to analysts, 96% of the customer base is located in other countries. The standards set by the United States for quality, post-sale service and continuing innovation also create high international demand for medical instruments.
That demand, combined with several other important factors, is a primary driver of the industry's growth. Some of those influential factors include an aging global population, health care expenditures, chronic diseases and new technological developments.
2. Health Care Spending Increases
National health care expenditures (NHE) reached $3.5 trillion in 2017, accounting for 17.9% of the gross domestic product, or the equivalent of $10,739 per citizen.
Of this total, Medicare represented 20% of NHE, Medicaid 17% and private health insurance 34%. The remainder of NHE spending was divided among hospital expenditures, out-of-pocket payments and clinical services. Total NHE is expected to grow by roughly 5.5% annually until 2027 when it reaches $6 trillion.
Declining fertility rates and a higher life expectancy are creating a U.S. population skewed toward older individuals. It's estimated that the elderly already consume approximately one-third of all health care in the United States. Globally, those factors also affect many developed and emerging nations.
China is the world's second-largest consumer of medical instruments, with India, Russia and Brazil close behind. Those nations' drastic increases in elderly populations, combined with initiatives by government agencies to improve health care, have boosted demand for medical instruments. In fact, all regions of the world except Sub-Saharan Africa have increased health care spending over the past 20 years.
3. New Technology
The development of tiny but powerful microprocessors, breakthroughs in material sciences and reliable automation have also added to the instrument sector's growth.
Advancements in health technology are being made in several ways, including minimally-invasive devices, telemedicine, automated systems and self-administered, portable home care. All are receiving significant attention and funding from doctors, patients and investors.
4. Negative Influences
Not all is rosy, however. Factors that can reduce the profitability and growth of the sector include government-funded payment systems such as single payer or Medicare, cost-control policies and the uninsured. In addition, the rise of health care consumerism, in which patients take a more active role in the type and amount of treatment they receive, has a potential of reducing growth.
The existing transactional fee-for-service model is rapidly shifting to a population wellness model. That means more focus on preventative testing and care.
5. Resilient Industry
Because of those factors, the medical equipment ndustry is resilient to recessions. While there undoubtedly has been much uncertainty caused by the trade war and rapidly changing tariffs on raw materials and exports, industry predictions are optimistic, and current average sales figures are essentially stable at $263 billion.
Compared with the previous year, that's only a 0.11% increase in sales.
To those more familiar with more domestically-focused manufacturing sectors, that may appear to be disappointing growth.
But considering the significant external influences on this particular sector, the numbers are very encouraging.
5. Proof is in the Numbers
Further evidence that the sector is going strong is the increase in jobs. According to MNI, compiler and publisher of the industrial data that powers IndustryNet, total number of jobs in the medical equipment ndustry has increased by nearly 2.5% to 168,963.
The sector has 1,480 companies, only 18% publicly held. Their distribution is nearly equal among the four U.S. regions. The West leads with 415 companies, 28% of the total. The Midwest is second with 26%, followed by the Northeast with 24% and the South with 21%.
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Article Sources:
https://www.dreamit.com/journal/2018/7/23/a-comprehensive-list-of-healthcare-venture-capital-firms
https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html
https://mercercapital.com/insights/5-trends-to-watch-in-the-medical-device-industry-in-2018/
https://www.prnewswire.com/news-releases/global-medical-device-market-2018-with-forecasts-to-2023---driven-by-healthcare-expenditure--technological-development--aging-population--chronic-diseases-300634442.html
https://www.mddionline.com/exports-growing-opportunity-us-medtech-firms
http://education.healthcaresource.com/6-factors-the-future-of-healthcare/
