Definition / Scope
Medical devices are used across therapy areas. Medical device market is composed of broad category of segments including diagnostics and surgical for the treatment of human body disorders and diseases.
These segments consist of highly technological complex and sophisticated devices as well as simple consumables. Diagnostic equipments also come under the category of medical devices. Highly technological and complicated devices includes active implantable devices, non active implantable devices.
Simple consumables include bandages, dressings and drapes, barrier contraceptives. Active implantable devices examples are pacemakers, cochlear implants etc. Non active implantable devices are hip and knee replacements devices etc.
In short, Medical devices are segmented by device areas such as Diagnostic Imaging Devices, In Vitro Diagnostics, Cardiology, Orthopedics.
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Revenue for the global medical device marketplace reached $330- billion in 2012
Geographically, the United States has the major market share worldwide (45%). During the same period, European union has 25%, Japan with 10%, Asia-Pacific with 8%, and the rest of the world with 12% market share, including emerging markets in China, India, and Brazil.
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Top Market Opportunities
Companies have started looking for investment in untapped and fast growing emerging markets.
BRIC (Brazil, Russia, India, China) have not been highly attractive lately as it was expected.Political and economic reasons are the major factors but still these markets are able to show double digit growth.
Some the reasons are listed below for respective countries:
- Russia is suffering from political turmoil
- Brazil is on the brink of economic recession
- China is facing slow economic growth
- India and Indonesia are still showing positive signs of investment even after the recession.
Companies are focusing on inorganic growth to increase their market share, competitiveness and market access across different geographies in the world. They are also focusing more to tap emerging markets.
Market access is one of the factors that can be derived from the current market trend of Mergers and acquisitions. Most of the medical device companies want to increase their coverage and penetration resulting in their geographical expansion of markets. Companies are also focusing to diversify their product pipelines.
Regulations governing the marketing are not stringent as in pharmaceutical industry.
Most of medical device market across the world is not highly regulated unlike like pharmaceutical industry. The governments around the world are trying to regulate the market but still plenty of work is to be done by regulatory agencies.
In European Union, directives to regulate medical devices became effective in early 90's. Additionally,medical device products are based on mechanical, electrical and material engineering principles. They are designed to perform certain functions, based on specific performance and safety requirements.
The development process is completely different in comparison to the pharmaceutical sector which is largely based on clinical trials. Medical device market is associated with rapidly changing technology.
The increasing development of new medical devices targeting new indications and devices with new modes of action require regulatory laws. Huge research and developments costs spent in development of medical devices and products requires strict regulation by the medical device regulators as there is a need for good quality clinical research within this diverse industry.
Medical industry success has been attributed to the common business model of selling clinical features and needs to physicians rather than focusing on patients and payers. Medical device has been growing steadily over the past decade. However, future will be very different from now as there will be need for new business models.
Operating margins will decrease in future owing to price erosion in established markets space. Rather than focusing on clinical needs, companies need to focus on end to end solutions with evidence based data of their products.
- Regulations will be more stringent
- New healthcare models will emerge to provide end to end solutions
- Pricing strategies to serve lower socioeconomic classes
- Shift of power in decision making to payers and patients in making decisions for purchase of products
Key Mergers and Acquisitions
Mergers and acquisitions has resulted in the consolidation of the medical device market.Most of the big firms are focusing on inorganic growth by acquiring new as well as small companies existing in the market. Tax evasion is also oone of the reasons for for increasing trend of Mergers and acquisition in tne medical device market.
Focus of the companies is to optimize and diversify their portfolio of main business segments. The has been a big wave of acquisitions recently in the industry by big firms.Some of the examples are listed below:
- Medtronic -covideien is the biggest in medical device space. It will help Medtronics to enhance its long term competitiveness in the market
- Zimmer -Biomet merger leading new innovative company in musculoskeletal industry
- Becton-Dickinson recently acquired CareFusion in March
- Other notable mergers are J&J-Synthes, S&S-Arthocare and Stryker-S&N
Rush for Divestments
Companies are divesting their non core businesses and focusing more on their main core business segments.
Moreover, companies have to shed the same businesses acquired through mergers for cost containment. This is also forced by US Federal trade mission and other international trade regulators to restrict monopoly of companies in the market.
Companies are managing their portfolio to have maximum profitability. Companies are also selling their assets to get approvals for merger from anti trust regulators. Companies are trying to strengthen their main businesses by selling less profitable businesses to look more comfortable on their respective balance sheets.