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Market Report: Medical Devices Step Up to Regulatory Challenges

While vigorous in the United States, the medical device industry is preparing for regulatory changes.

March 2011
There's a lot of good news with respect to the medical device industry, including the fact that it's a growing market segment anticipated to top $312 billion globally, thanks in part to an aging U.S. baby-boomer population as well as growing demand from emerging markets, according to Kalorama Information's latest report, The Global Market for Medical Devices.

"There are many drivers on the upside for medical devices," says Kalorama's publisher, Bruce Carlson. "Demand for healthcare services in emerging nations, the need for reducing hospital stays, and the aging world population are the key ones."

A Vast Market
The market for medical devices is vast, with products as varied as MRI machines, laparoscopic surgical equipment, wheelchairs, and medical gloves.

"Some categories of medical devices are commoditized and competition will hold prices in check, while in other areas revenues will flourish," Carlson notes. Kalorama reports roughly 4-6 percent growth for the next few years in the global device market. "Patient monitoring and oxygen systems, home dialysis - anything that can reduce hospital stays and keep patients at home with their families - are seeing faster revenue growth," Carlson adds.

With the United States being the largest consumer of medical devices in the world, the U.S. medical technology (or med tech) industry ships approximately $123 billion in products annually, employs directly more than 357,000 individuals, and pays $21.5 billion in salaries. That makes the med tech market segment one of the biggest and best when it comes to job opportunities. However, while it may be a large industry sector, those in the med tech arena view current U.S. regulatory processes for making products available to patients as unpredictable and characterized by disruptions and delays.

Merger and acquisition activity has been quite strong among many of the major players in the medical device/equipment industry. Medtronic Inc.; Boston Scientific Corp.; St. Jude Medical, Inc.; Johnson & Johnson; and Abbott Laboratories - just to name a few of these large companies - are buying up smaller firms that have developed new products that the big companies want to add to their portfolios.

For example, in 2010 Boston Scientific spent $193.5 million up front to purchase Asthmatx, Inc., a California startup that developed a catheter-based procedure to treat severe asthma. The company agrees to additional payments of up to $250 million contingent upon achieving specific revenue-based criteria through 2019. And during the first week of the new year, Boston Scientific completed the purchase of another startup, Intelect Medical, for $60 million. This will give Boston Scientific a presence in the area of deep-brain stimulation to treat conditions such as Parkinson's disease, a market segment currently held largely by Medtronic Inc.

Medtronic Inc., which is headquartered in Minneapolis, Minnesota, is also expanding its reach through acquisitions. In January of this year, the company announced that it completed the acquisition of privately held Ardian, Inc., a developer of catheter-based therapies including its primary product - the Symplicity® Catheter System™ to treat hypertension and related conditions. The acquisition of Ardian, headquartered in Palo Alto, California, augments Medtronic's existing interventional therapies and complements the company's expertise in catheter design and ablation technologies.

Other Med Tech Moves
In addition to acquisitions, medical device companies are expanding geographically. Merit Medical Systems, Inc. recently announced that it would invest $1 million during 2011 at its plant in Chester, Virginia. The company plans additional equipment purchases, but as business grows, Merit may expand the plant's 100,000-square-foot footprint. The work force is expected to increase to approximately 180 employees over the next year. Merit Medical Systems is headquartered in the Salt Lake City suburb of South Jordan, Utah.

Florida is also noted for its med tech industry clusters, comprised of companies of all sizes and specializations. Global diversified healthcare company Baxter has several facilities in Florida, including manufacturing operations, a global training center, and global technical services.

Suppliers to the med tech industry are also doing well. While there's been some consolidation among this segment, many suppliers are expanding capabilities to help their OEM med tech customers mitigate risk and to provide more in-house services.

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