Emerging trends in the medical equipment industry
While the world economy continues to recover from one of the worst recessions ever experienced, the healthcare sector in general and the medical equipment industry in particular is well on its way to witnessing strong growth, says GlobalData, an industry analysis specialist, providing business information products and services.
GlobalData draws from Medical eTrack, a repository of unique and interactive medical equipment databases, to provide an assessment of the market and insight into the trends that are shaping the global market landscape.
The underlying demand drivers remain in Place
The global medical equipment industry, valued at USD 280 billion in 2009, is forecast to grow by more than 8% annually for the next seven years to exceed USD 490 billion in 2016. There are several reasons that suggest that the medical industry will continue to provide healthy returns for all its stakeholders. Firstly, a continuously aging population, primarily in developed economies, will ensure that there is a steady demand for medical equipment and healthcare services. Secondly, awareness, affordability and improving health infrastructure in emerging economies will provide access to markets which remain under penetrated and provide huge opportunity if addressed aggressively. And finally, the fact that most demand for healthcare is not linked to discretionary consumer spending will ensure that the makers of medical equipment continue to make money.
As the financial crisis went from being US-centric to global and migrated from Wall Street to Main Street, it had many victims, small, large and across industries. However, the healthcare sector and the medical equipment industry had bigger concerns than the financial crisis. Product recalls, unsuccessful clinical investigations and tightening regulations were some of the major issues that dominated discussions among the industry stakeholders.
As the recent pricing trend of the leading medical equipment stocks indicate, the industry without doubt was affected—however, not as much as anticipated from a crisis of such magnitude. The largely stable share prices and the dynamic deal landscape all substantiate the fact that medical equipment, as an industry, has been successful in withstanding the credit crunch and the global financial crisis that followed.
Homecare settings to emerge as one of the biggest channels of distribution
Driven by an ever expanding patient base that now prefers self diagnosis and treatment at home, the global home healthcare equipment market, valued at USD 41 billion in 2009, is forecast to grow by 7% annually for the next seven years to reach USD 67 billion in 2016.
The demand for self medication and home-based treatment is increasing, with more and more patients resorting to both the diagnosis and treatment of specific diseases at home. Driven by an increasing awareness of lifestyle disorders, people are, for example, self-monitoring diabetes and diagnosing breathing disorders. The rapid technological developments that home-use devices such as glucose monitors, insulin delivery devices, nebulizers and oxygen concentrators have undergone is contributing to this trend. The use of remote communication technology to allow healthcare professionals to support the home-based patients is further aiding to the preference for home and self care.
Jyoti Ranjan Padhi, Analyst at GlobalData, commented, “A number of treatments that were traditionally being undertaken in the hospital setting can now be dealt with in the home by using home and self-care medical devices. Now, an increasing number of patients are opting to stay at home and avoid visiting a physician. The cost-benefits associated with these treatment modalities has also contributed significantly to this trend.”
However, concerns remain that the increased use of self-diagnosis will increase the risk of adverse events. The danger is that as patients increasingly self-test and self-treat, they may not use the equipment as carefully or correctly as professionals, resulting in more problems and withdrawals.
Jyoti Ranjan continues, “While self-diagnosis and treatment offer advantages to the patient, improper use might lead to serious complications. Consumers who get attracted by the comfort and convenience associated with the use of home and self-care devices often tend to ignore the guidelines of usage. Thus it becomes all the more imperative for manufacturers to continue driving post sale efforts so as to educate and raise awareness.”
GlobalData believes that further improvements may be needed in the way home healthcare equipment is regulated; this applies especially to the post marketing surveillance efforts, which need to be strengthened and intensified further.
A consolidating industry landscape
With high value private equity transactions, super large Mergers and Acquisitions (M&As) and unexpected deal terminations, the last 2–3 years have been startlingly dynamic for the global medical equipment industry. The industry continues to be characterized by a host of market challenges, such as demanding clinical and regulatory standards, cost and productivity pressures, pricing and reimbursement pressures, increasing Research and Development (R&D) expenses, an ever expanding competitive landscape and increasing consumer demand. Companies across the world have the dual challenge of augmenting their liquidity position and boosting the top line while ensuring that costs come down—a trend that’s prompting them to explore the inorganic growth route.
According to GlobalData estimates, more than 100 M&As, valued at about USD 40 billion, have already been signed in the global medical devices industry in the first quarter of 2010. The fact that the total deal value has already exceeded the year-end total of 2009 is indicative of heightened investor confidence in the medical devices industry.
With a range of technologically innovative products expected to be launched in the coming years, the industry is forecast to witness a further increase in the intensity of M&As. While start-ups and cash-starved emerging manufacturers will find it difficult to raise additional funds, the big giants are best positioned to acquire companies with an established market space. Strategic consolidations would thus be the rule of the game.
Emerging economies to drive growth
The emerging economies, comprising of China and India, with a huge pool of under-served patients, represent the next big opportunity for the leading medical devices manufacturers. China remains the world’s most populous country and is consequently home to a large patient base. The country is home to more than 100 million people who are 65 or older—a population in continuous need of medical care. India, the second most populous country globally, is home to 1.17 billion people, approximately 5% of which are aged 65 or over. By 2025, the country will be home to 1.4 billion people and by 2050 the population is expected to exceed 1.7 billion, surpassing China. As the population continues to grow and people continue to age, the underlying demand for healthcare is also expected to increase.
Taken together, the medical devices industry in China and India was valued at USD 15 billion in 2009, accounting for more than 5% of the global medical devices industry. Driven by an ever expanding patient pool, improving healthcare infrastructure, rises in health spending and enhanced health awareness and affordability, the industry is forecast to exceed USD 25 billion in 2016.
Analyst Jyoti Ranjan Padhi, concluded, “As medical equipment manufacturers continue to explore opportunities beyond traditional industry boundaries, China and India, with more than 30% of the world’s older population (65 years and above), will lead to a huge shift in the global medical device industry landscape.”
Information and analysis presented in this brief have been sourced from Medical eTrack (www.medicaletrack.com) and GlobalData’s medical equipment reports which are available for purchase at http://www.globaldata.com/reportstore/
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