Medical Equipment Distributors

Industry Profile Report

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

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

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

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

Industry Profile Excerpts

Industry Overview

The 8,100 medical equipment distributors in the US sell and distribute a broad range of medically related products, principally to hospitals, physician and dental practices, alternative care and rehabilitation facilities, and directly to the home healthcare market. Major categories of products include medical/surgical instruments and equipment, medical and hospital supplies, and dental equipment and supplies.

Growing Industry Consolidation

In recent years, the medical, dental and hospital equipment and supplies distribution industries have undergone consolidation.

Complex Billing and Record Keeping Requirements

Medical equipment distributors are frequently subject to many stringent and complex billing and record-keeping requirements in order to substantiate claims for payment under both government and private insurance healthcare reimbursement programs.

Industry size & Structure

The average medical equipment distributor employs 32-33 workers and generates $16 million in annual revenue.

    • There are about 8,100 distributors with total sales of $129 billion and 263,200 employees.
    • The hospital equipment and supplies market is dominated by the influence of Group Purchasing Organizations.
    • The physician office-based practice market is increasingly being influenced by the growth of Integrated Healthcare Networks, as more independent physician practices merge and consolidate.
    • Dental practices have generally remained small and independent, leaving distributors with unique challenges in servicing a large number of small, scattered customers efficiently and profitably.
    • The three largest medical/dental product distributors are Owens & Minor, Henry Schein, and Patterson Companies.
                                Industry Forecast
                                Medical Equipment Distributors Industry Growth
                                Source: Vertical IQ and Inforum

                                Recent Developments

                                Mar 2, 2023 - Congress Authorizes Cybersecurity Regulations For Medical Devices
                                • The Fiscal Year 2023 Omnibus Appropriations Bill that was signed into law in late 2022 includes an expansion of the US Food and Drug Administration’s (FDA) authority over medical device security. The expanded authority and funding give the FDA the power to set cybersecurity requirements for medical devices and requires all device manufacturers to demonstrate that their products meet these requirements. Device manufacturers will be required to implement a product development framework that meets FDA security requirements. They must also monitor and address post-market cybersecurity vulnerabilities, develop processes to provide reasonable cybersecurity assurance, submit a software bill of materials, and comply with other requirements set by the FDA. Distributors are likely to be affected, as they must comply with many laws and regulations governing the storage, transportation, safety and security of medical products.
                                • Deglobalization and reshoring are affecting the entire medical technology industry, according to health care consulting firm IQVIA. The World Bank's global trade to GDP ratio, a frequently used indicator for globalization, has decreased from 61% in 2008 to 52% in 2020. Trade restrictions between the US and China, the COVID-19 pandemic, and Russia-Ukraine conflict have emphasized the importance both of having sufficient stock of critical components and raw materials, and of having a well-diversified supplier base. If the current global trade environment and trajectory persists, both governments and market players may resort to ‘near-shoring’ or ‘friend-shoring,’ which would benefit certain geographies as production and logistics hubs, depending on their proximity and/or friendliness to a certain geopolitical bloc. Another possibility is that fragmentation at the global level may promote further integration at the regional level, leading manufacturers to further regionalize their production and supply chains.
                                • The pandemic-related rising cost of materials and shortages of components is expected to affect the medical equipment industry into 2023, according to data analytics and consulting firm GlobalData. Manufacturers have not yet passed the extra costs on to hospitals. Product pricing has been stable for the majority of items, continually following historic trends from 2019 in the US. Companies with more commoditized portfolios will have less pricing power and a more limited ability to pass pricing on to care providers.
                                • High purchase cost is often a major barrier to entry for companies working in logistics, manufacturing, fulfillment, and other industries where automation is required to remain competitive and counteract labor shortages. Some robotics companies offer a robotics-as-a-service (RAAS) model that allows customers to lease or rent robots to avoid high up-front purchase costs. There are two major RAAS models: leasing, and payment per transaction or task performed. “The flavor more associated with RaaS today is charging per unit of work,” said Peter Sieff, CEO of Aethon, which specializes in autonomous mobile robots that work in healthcare and hospitality settings. “Instead of charging for the hardware and software as a product itself you pay for the service it is delivering. Companies often rent and buy robots based on needs or market trends. Companies may rent first and then buy, or they may rent robots during peak demand season.
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