The medical device industry in the United States is one of the largest in the world. Revenues in this industry exceed $180 billion annually. Any development whether positive or negative can have a major impact on the industry and the revenues that it generates.
Over the past few months, five major developments have occurred which are poised to shape the near and long-term future of the medical device industry. Investors in the industry need to be aware of how these developments might affect profitability.
President Trump’s Trade Policy
Over the past few weeks, President Trump has imposed tariffs on a number of products in a number of different industries. The US has imposed tariffs on Chinese products, and the Chinese government has reciprocated by imposing tariffs on US goods as well.
Most observers believe that medical devices will get caught up in the growing trade dispute. This is significant as the US sent $52 billion in medical devices to China last year.
MedTech Tax Lifted
Those who make medical devices received a tax reprieve until 2020. The lifting of the 2.3 percent excise tax has allowed medical device manufacturers to invest more in research and development.
A Digital Revolution
Innovation continues to take place in the medical device industry. Technologies are being invented that now allow robots to conduct some surgical procedures. As more technologies come online, it is expected that patient costs may be reduced by as much as 50 percent.
Mergers and Acquisitions
The healthcare and medical device industries continue to consolidate. Mergers and acquisitions increased by a rate of 50 percent in 2017. The total value of these mergers was nearly $200 billion. Two of the major consolidations in 2017 were Becton, Dickinson’s buyout of C.R. Bard and the acquisition of Actelion by Johnson & Johnson.
Consolidation Between Pharmacy Benefit Managers and Health Insurers
By working together, pharmacy benefit managers and health insurance companies have been able able to bring down medical device costs. At the same time, they have been able to enlarge their customer base and overall profitability.
Overall, the medical device industry in the United States is expected to grow at a rate of five percent for the year. By 2030, medical devices will be an $800 billion a year global industry.