Medical Device Manufacturers

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 8,900 medical device manufacturers in the US produce a range of products designed to diagnose and treat patients. Medical devices range in nature and complexity from simple tongue depressors and bandages to complex programmable pacemakers and sophisticated imaging systems. The key products include surgical appliances and supplies, surgical and medical instruments, electro-medical equipment, in-vitro diagnostic substances, irradiation apparatuses, dental-related products, and ophthalmic goods.

Challenges of Complex Regulations

Medical devices are subject to extensive regulation in the US by the FDA, and by comparable government agencies in other countries.

Developing New Hybrid Technologies

New hybrid technologies that incorporate pharmaceutical products with traditional medical device products are becoming popular.

Industry size & Structure

A typical medical device manufacturer generates $10 million in annual revenue and has about 35-36 employees.

    • The overall medical device manufacturing industry consists of about 8,900 companies with $92 billion in sales and 320,000 employees.
    • The two largest segments of the industry, surgical and medical instruments and surgical appliances and supplies, consist of about 2,700 companies with over $75 billion in sales and 245,000 employees. These segments are the primary focus of this profile.
    • The states with the highest number of medical device companies include California, Florida, New York, Texas, Illinois, Indiana, Pennsylvania, Ohio, North Carolina and Minnesota.
    • Major US medical device companies include Medtronic, GE Healthcare Technologies, Johnson & Johnson, Boston Scientific, Baxter, Becton Dickinson, Beckman Coulter, Abbott Labs, and Stryker Corporation.
                              Industry Forecast
                              Medical Device Manufacturers Industry Growth
                              Source: Vertical IQ and Inforum

                              Coronavirus Update

                              May 8, 2022 - Shortages Hit Wider Array Of Products
                              • Current medical device, equipment, and supply shortages dwarf the problems experienced in the early days of the coronavirus pandemic, according to Forbes Magazine. Shortages might have been more urgent in early 2020, but today’s problems include a much wider array of items. Shortages can be traced to component scarcities, backlogged ports, transportation glitches, and lockdowns in China to combat the spread of Covid-19. Healthcare logistics firm Owens & Minor says that 45% of the items it handles are in some way supply constrained.
                              • Manufacturers that depend on inputs produced in China may face shortages. China’s manufacturing output decreased at the sharpest pace in 26 months in April amid escalating COVID-19 lockdowns. The Caixin/Markit purchasing managers’ index (PMI) decreased to 46.0 in April from 48.1 in March. A reading below 50 suggests output is contracting rather than expanding. The rate of decline in manufacturing production was the second-steepest since the survey began in early 2004, beaten only by the reduction seen at the initial onset of the pandemic in February 2020.
                              • Supply chain issues are likely to have a more severe impact on medical device manufacturers, according to industry experts. Unlike other electronics manufacturers, medical device manufacturers must ensure regulatory compliance for their products. This means that if a component is in short supply, they cannot just replace it with something similar. Medical device components must be approved with the initial design by the regulatory board for that jurisdiction.
                              • Experts note that there are ways to decrease the impact of supply chain disruptions. Firstly, in the design phase for the medical device, the manufacturer should try to be as vague as possible on the specifications of the device components. This will make it easier to source spare components while still meeting the approved design requirements, meaning that the safety and efficiency of the final product will not be compromised. For manufacturers already past the design stage, the best way to combat the negative consequences of shortages is by keeping track of stock and increasing inventory whenever possible – if a popular component becomes available, buy as much as you can afford. Invest in Supply Chain Management (SCM) software can help track inventory, manage shipping, and keep updated on which stocks are decreasing fastest.
                              • The semiconductor shortage will not be as severe in 2022 as it was in 2020 and 2021, according to Ariane Bucaille of consulting firm Deloitte. The shortage will also not affect all chip varieties. Customers were waiting between 20 and 52 weeks in mid-2021 for multiple kinds of semiconductors, according to Bicaille. Those lead times will be closer to 10-20 weeks by the end of 2022, and the industry will be in balance by early 2023.
                              • Manufacturers may have difficulty acquiring imported components due to pandemic-related logistical issues. Supply chain chaos will likely persist until the middle of 2022, according to Jim Snabe, chairman of German conglomerate Siemens and Danish shipping firm Maersk. "The trade of goods has actually gone up, not down," he explained. "There was a short period when the factories closed when the volumes went down but since the middle of 2020, the demand for physical products has gone up dramatically. Right now, we have congestion primarily in the West Coast of the US where the ports are full of containers." One of the main issues, Snabe said, is there aren't enough truck drivers to pick up containers from the ports. Ships were waiting an average of 18 days in front of ports in late November, Snabe said. "That takes capacity out of the shipping industry because they are lying there idle," he said. "You have higher demand and lower capacity, not because we don't have enough vessels, but because they are not sailing because of congestion," Snabe added. "We have to balance that out. We think this will happen somewhere mid-next year, but maybe not before."
                              • Demand for medical devices may decrease if hospital labor shortages result in reduced procedure volumes, but adaptations being made in hospitals could minimize the impact. Ashley McEvoy, executive vice president and worldwide chairman of medical devices at Johnson & Johnson, said that J&J expects hospitals to continue to face labor shortages. "I don't expect that to get better in quarter four, nor in 2022, but [hospitals] have been quite masterful on how to manage patient flows," McEvoy said.
                              • Limitations on COVID-19 liability lawsuits have been extended in several states, according to Bloomberg News. Some of the measures prolong for a year or more what was seen as provisional legislation, other bills extend those protections indefinitely. “We don’t know when, or really if, Covid is going to end,” said Ashley P. Cuttino, a Greenville, SC, attorney who co-chairs the COVID-19 litigation practice for the Ogletree Deakins law firm. She predicted that more states will extend the duration of their liability protections or enact liability shields with no expiration date.
                              • The goal in liability reform efforts has been the creation of a “safe harbor” for manufacturers, said Andrew Berger, a lawyer and the senior vice president for governmental affairs at the Indiana Association of Manufacturers. If a company is acting in good faith to help stop COVID-19, he said, it shouldn’t be exposed to lawsuits. “If you can demonstrate that you followed the guidelines at the time, the state needs to recognize that you tried to do it right,” Berger added.
                              • The US Food and Drug Administration (FDA) is providing a list of medical devices in shortage or that have been discontinued during the coronavirus disease. The CARES Act requires manufacturers of certain devices to notify the agency of manufacturing interruptions or permanent discontinuances that could lead to a disruption in the supply of a device during a declared public health emergency. The CARES act also requires the FDA to maintain lists of devices reported to be in shortage or discontinued. The shortage list, which includes entries for devices under 20 different product codes, does not mention the specific devices or names of manufacturers. While the CARES Act calls for the list to include “The category or name of the device in shortage [and] the name of each manufacturer of such device,” FDA explains that it is not naming the devices because doing so would increase “the potential for hoarding or other disruptions in device availability to patients.”
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