What Is Driving Medical Device Sales In 2013

By Jill | Medical Devices, , , , , , , , , , ,

When Medtronic manufactured the first pacemakers more than 50 years ago, physicians did not know what they were. The idea of implanting a man-made device in a patient’s chest sounded crazy. It was up to sales reps to teach doctors how pacemakers worked and how they could be used to safely treat patients. Reps had to be technically skilled to instruct physicians; socially adept to build deep, lasting relationships; and savvy enough to negotiate purchase orders and supply contracts.

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Fast-forward to 2013. The medical device business is a mature industry with sales and marketing costs that are twice what they are in other mature industries. On a relative basis, sales reps are viewed as less important, as physicians are more comfortable with all types of devices and need far less guidance. At the same time, purchase decision making is increasingly moving from individual physicians to hospital executives – C’X’Os who are fast becoming physicians’ direct bosses and are actively winnowing their lists of vendors and seeking better terms from those they keep.

Despite the changes, the medical device industry is expected to grow 6.6% annually during the next five years. One factor contributing to that growth is the increasing number of seniors who are more likely to develop chronic diseases like diabetes and heart disease. A second factor concerns the expansion of coverage provided by the Affordable Care Act, or Obamacare. With more Americans purchasing health insurance, a growing number of people will seek out physicians for their illnesses potentially leading to a greater demand for medical devices. However, Obamacare contains a 2.3 percent excise tax on the sale of medical devices, which is expected to cost the industry at least $20 billion in the next decade. This might result in job losses and cutbacks in research.

In 2012, the 828 U.S. companies in the medtech industry generate in excess of $60 billion in revenue and employ over 88,000 workers. Medtronic, GE and St. Jude Medical are the top three grossing companies, controlling 32% of market share. As the U.S. population ages and becomes less healthy overall, the demand for medical devices will continue to expand.

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