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Thomas Dworetzky, Contributing Reporter | January 12, 2017
Big changes are on the docket for the health care device sector this year.
Market research firm
Kalorama Information has detailed several trends to look for in their market report, “The Global Market for Medical Devices.”
Top trends this year will include:
- Trump Administration and MDUFA Fees: It is logical for medtech to expect a “sympathetic hearing from the incoming administration, especially as they opposed President Obama's signature health care reform legislation,” noted the report.
One key test to look for is the Trump administration's take on the fee negotiations associated with the Medical Device User Fee agreement. At present it runs above $200,000 to launch a new device with the FDA and $4,700 for a "shortcut" or 510 (k) application, off a previously approved device.” There are also inspection fees for plants making devices. The industry saw fees down 10 percent last year, but seeks further cuts or at least no raises.
- Trump Administration and ACA and FDA: Expect the industry will push for appeal rather than suspension of medical device taxes.
- Revenue Growth Slow, but Steady: Expect the $390 billion-dollar medical device market to have “lower growth” in 2017 – and the next five years – of about 2.8 percent on average as the medical device user base grows but cost-cutting continues to hamper price increases, which will continue for the “near term.”
- No Slowdown in M&A: Expect mergers to keep to their present pace as sluggish growth in the market drives leaders to look to deals to boost revenue growth and market share. In 2015-2016 there were “significant” mergers in the device space, observed the report, including Canon's Toshiba Medical Systems buy, Becton Dickinson's deal with Care Fusion, and Abbott's St. Jude Medical acquisition.
- Hospital Consolidation Unfolding: Expect consolidation to continue its five-year trend in the hospital space. In that time period from 80 to 100 deals have happened – which means fewer device buyers with more leverage. But bigger hospital players have been doing better, which could boost their spending.
- GPOs, Buying Committees, Legislation Continues to Tame Pricing: Expect device prices to keep to their slower-than-inflation pace, as hospitals continue to move toward group purchasing organizations (GPOs) – and have formed value-analysis committees and competitive bidding schemes, all the while facing cuts in reimbursement themselves, making for slower price growth.
- Optimistic Device Companies Seek Innovation: Anticipate that, despite the headwinds, makers keep pushing innovation. The report found that makers are putting about 7 percent of revenue toward R&D.
- United States Still a Focus, Asia Rising: Look to the U.S. to remain the center of the device market, but watch for Asia to come up in importance — especially China. Slightly less growth is the trend in Europe.
- Cybersecurity: Look for continued surging of cybersecurity efforts as greater network connectivity in devices makes hacking an ever-greater threat.
- Wearable Features Grow Revenues: Watch the continued coming-of-age of wearable gear. “Devices with a wearable component will experience average revenue growth double the overall device market,” which was $13.2 billion in 2016, noted the report.
