Industry Size and Employment
If you are looking for somewhere to invest, the medical device industry would be a safe bet. Emerging technologies, including stents and sensor-laden implantables, are receiving much attention from investors. Small-industry growth is expected in the neurostimulation and the orthopedic markets. Bottom line… the industry is growing and it couldn’t be a more exciting time to be a part of it.
David Turkaly, a senior medical technology analyst with WR Hambrecht & Co, stated that both large and small-cap medical device firms have outperformed the S&P 500 in the past three years. The statistics speak for themselves. AdvaMed cites a 10% year over year annual growth for the United States medical device market. By the end of 2006, U.S market size was approximately $86 billion. Now, the medical device market has grown to a robust and profitable $100 billion strong. The international market grew from $220 billion in 2006 to over $300 billion.
According to the US Department of Labor’s Bureau of Labor Statistics, in 2006 (the latest year for which data were available), 305,530 workers were employed in the medical equipment and supplies manufacturing industry. (By 2014, the number of workers is projected to reach 312,000.) These numbers represent one-third of all bioscience industry employment, according to Medical Product Outsourcing magazine. The average annual salary for all occupations within this industry was $42,190—higher than the national average for salaried workers, which remains less than $40,000 annually.
Medical Device Growth
Steady growth in the $100 billion medical device industry is made possible through breakthrough product innovations partnered with sound business and financial plans. In addition to stents and sensor-laden implantables, the introduction of products in the heart valve and spinal sectors holds the promise for strong returns in the future.
Coming at a time when the elderly population is rapidly increasing, drug-eluting stents are being used to treat coronary artery disease and other problems associated with aging. Aging = Growth for the medical device industry.
As the growth in devices propels upward, so do the components that make up popular medical devices. In fact, according to a 2006 report on medical device coatings, performed by BCC Research, the market for coatings and surface-treatment processes used on medical devices will reach more than $5.31 billion by 2010. The orthopedic market is also expected to see explosive growth. The market’s spinal devices segment shows an amazing annual growth rate of 20-25%.
All of this growth is taking place to spite pricing pressures, which have become more evident in the past twelve months. OEMs are now under tremendous pressure by the manufacturers to reduce costs. However, this cost-reduction strategy is only helping the bottom line, bolstering stock prices and encouraging supplier flexibility.
Just like Texas has oil and Florida has oranges, the metro areas of Los Angeles, Minnesota and New York have medical devices.
According to a 2004 study by the Bureau of Labor Statistics, the following are the top 10 designated market areas (DMAs) for Medical Device Employment.
Los Angeles DMA
Minneapolis/St. Paul DMA
New York DMA
San Francisco DMA
Dallas/Fort Worth DMA
The top ten markets for employment in the medical device industry make up approximately 100,000 jobs. Philadelphia is an example of a region that branches out beyond medical devices and into other areas of the biosciences. Although they are seventh in medical devices, they are third in total employment for all areas of biosciences. The medical device industry is thriving in Massachusetts, quickly becoming the East Coast equivalent of the San Francisco Bay area.
Top Bioscience Employment Markets
New York DMA
Los Angeles DMA
San Francisco DMA
Minneapolis/St. Paul DMA
San Jose DMA
San Diego DMA
The top ten markets for employment in the medical device industry make up approximately 450,000 jobs.
Outsourcing is becoming more and more common in the medical device industry. As such, the international markets are growing fast to meet outsourcing demands. For example, according to medic.org, the medical device industry in Canada has grown to approximately $5 billion in sales, with half of those sales being made by manufacturers in Ontario and a quarter of them coming from Quebec.
Outsourcing to Mexico, Ireland, and Malaysia has also grown more common. Lower plant and labor costs make these areas a wise choice for outside manufacturing. Programs such as Six Sigma keep quality high and are among the mandatory attributes that OEMs look at when selecting and oversees partner. As a result, overhead costs reduce, as well as general and administration, allowing companies to remain competitive.
Among the notable trends in overseas outsourcing is the conducting of clinical trials. American-based companies like Q-Med and Coloplast Corporation conduct studies in Europe and obtain a CE mark before moving on to complete studies in the U.S. This allows them to strengthen product weaknesses, if any become evident, before taking the product the final mile.
Study costs are lower in Europe in comparison to the United States. One extra cost of significance is that European countries require companies to carry research liability insurance to protect study subjects in the event that, in testing, a medical device causes any harm. In addition, approval times are shorted due to Europe’s lack of an FDA-type body, which can delay research and development due to lack of presentation of sufficient clinical data. European investigators tend to act more independently than investigators are allowed to in the United States. However, because of this, it is not uncommon for researchers abroad to demonstrate a less stringent compliance with protocol standards which, if not monitored, could be an issue when seeking approvals in the United States.
Future Trends in Medical Technology
The future is an exciting prospect for the medical device industry. According to advamed.org, the following are the hottest trends and innovations expected in medical technology.
Molecular and Gene-Based Diagnostics
Health Information Technology (HIT)
Imagine being able to treat a square inch of tissue with a medical device. Miniaturization makes that kind of targeted therapy delivery possible. Breakthroughs in nanotech will even produce microscopic devices that can deliver treatment to individual diseased cells. This decreases the chance of a procedure needing to be invasive, opening the door for more minimally invasive and non-invasive procedures. These procedures may even be able to be performed on an outpatient basis. Miniaturization also makes it easier to treat younger patients who aren’t old enough to support today’s adult-sized models.
Lives hang in the balance every day waiting for replacement organs and tissue. Advances made in the engineering of artificial organs may be able to provide ground-breaking options for addressing life-threatening illnesses. Some of these new advances include fully implantable, self-contained, artificial hearts, an artificial pancreas and tissue engineers that will be able to grow entire live organs.
Early detection is the best path to successful treatment. Molecular and gene-based diagnostics will make this early detection possible while, at the same time, lowering treatment costs. Gene-based diagnostics for accurate drug to patient matching, molecular imaging diagnostic tests for the early detection of cancer and other molecular level diseases and combination procedures (ultrasound, MRI, PET) will revolutionize the way diagnostics are used to improve patient outcomes.
General information technology innovations in the health care industry will allow all of this and more to be possible, through rapid transmission of critical medical data. The amount of time that this will save will save physicians’ time, accelerate treatment delivery and could save lives. Monitoring of tests over the Internet via wireless connections, home-based testing with secure results transmission and remote monitoring will all be possible through health information technology (HIT) advancements.
Top Companies in the Industry
Johnson & Johnson
The top companies in the medical device industry are the best capitalized and in the best position to take advantage of new technology advancements. Front Line Strategic Consulting, a California-based firm, projects the drug-eluting stent market to triple to $6.3 billion in by 2008. This is just one of the products that will be enhanced through emerging technologies.
Changes and Restructuring
Perhaps the most significant change affecting the medical device industry today is the growing popularity of outsourcing among original equipment manufacturers (OEMs). This increased consolidation is starting to show in the statistics as, according to advamed.org, nearly 25% of medical device manufacturing is currently outsourced and the figure is expected to grow. Even the major firms are claiming that their core competencies lie in marketing and product design versus cutting-edge manufacturing techniques. Manufacturing is more often than not being outsourced vendors who can provide low-cost, efficient solutions. But the solution isn’t more vendors, its quality vendors. Medtronic, Inc. for example, has reduced their vendor roster by 67% between 1998 and today, banking on a manageable vendor base that delivers consistent results. Small vendors unable to deliver on this scale may suffer due to this outsourcing model.