Medical Supplies and Devices
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Industry Overview
In the US, the manufacture of medical supplies and devices includes 12,000 companies with combined annual revenue of about $50 billion. Large manufacturers include Johnson & Johnson, Baxter, Medtronic, and Boston Scientific. The industry has become more concentrated: the 50 largest companies hold close to 60 percent of the market. In some market segments, concentration is high.
Competitive Landscape
Demand is driven by population demographics and advances in medical knowledge and technology. The profitability of individual companies depends on the ability to develop superior products. Large companies have economies of scale in manufacturing and R&D. Small companies can compete successfully by specializing in a particular market segment, or through technical innovation. Annual revenue per employee is about $200,000.
Products, Operations & Technology
Major product segments are general medical supplies; surgical instruments; therapeutic devices such as stents, artificial joints, and pacemakers; and diagnostic equipment. Low-cost manufacturing efficiency is the main concern of companies that make low-technology products like latex gloves, tape, gauze sponges, and syringes. Technological innovation is the main feature of companies that produce diagnostic and therapeutic devices and instruments, derived from the explosive development of medical knowledge and treatment during the last decade.
The industry reflects the highly specialized medical treatments recently made available. Most medical device manufacturers specialize in one area of medicine and sometimes in just one type of treatment. EPMedSystems, for example, makes only devices that treat atrial fibrillation. The high degree of specialization in a field of rapid innovation allows small companies to compete successfully, but also greatly increases the risk of technological obsolescence for any individual company.
Manufacturing is undertaken in facilities that may have to be approved by regulators, depending on the type of product. For many technically advanced products, manufacturing is labor-intensive. Many small manufacturers outsource manufacturing to facilities operated by contract manufacturers. Research is a major activity for many manufacturers. Patents are valuable and patent disputes frequent. Large companies often buy small companies that have developed a promising new technology.