Medical Device Companies Struggle in a Tough Market

These are the latest findings of Kalorama Information (New York, NY, USA), an independent medical market research firm.

The Kalorama Information report found that the global medical device market reached USD 331 billion in 2012, just 3% higher than 2011. In the United States, Medicare, Medicaid, as well as state governments implemented anemic spending increases to hospitals, the key buyer of medical device products. The cuts took the form of nonpayment for patients for infections acquired at the hospital, or code recovery fees. In Europe, the extreme economic downturn in Spain, Ireland, Greece, and Portugal led to layoffs and proposed reforms to the health care systems. Even emerging markets have grown spending less quickly than had been expected.

In a slower-growing device market, there was little room for new entrants and the giants continued to dominate. According to the report, Johnson & Johnson (New Brunswick, NJ, USA) is the world's largest medical device company, followed by imaging giants GE Healthcare and Siemens (Munich, Germany), and cardiology and spinal device expert Medtronic (Fridley, MN, USA).

The beginning of 2013 saw the medical device industry make the first payments a new 2.3% excise tax on all classes of medical devices, as part of the 2009 US healthcare reform. Many companies attributed layoffs to the tax in widely publicized announcements, or said that they would not build additional US facilities. While the device tax was not factored into the slow growth experienced in 2012, the report does predict long-term effects on venture capital investment and research spending in the industry.

“Growth in the overall market was challenged as European and US healthcare systems are reducing costs,” said Bruce Carlson, publisher of Kalorama Information. “Hospitals continued to purchase through group organizations and insist on transparent prices.”

Emerging markets were a key strategy for leaders and the report notes the emergence of a new trend in 2012, the acquisition of Chinese local companies by device giants. Johnson & Johnson acquired local Chinese company Guangzhou Bioseal Biotechnology, while Medtronic announced it would acquire China Kanghui Holdings, a developer and producer of trauma and spine orthopedic transplants.

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