Maria Shepherd
Data Decision Group
There’s no denying that 2009 and 2010 were tough times for the medical device industry. During this period, we experienced the recession, layoffs at large medical device companies and high U.S. unemployment rates that negatively affected patient procedure volumes.
Financing dried up and had a significant negative impact on early stage companies, which are the product innovation source for large acquiring companies. Five years from now, will there be anything available to acquire? U.S. Food and Drug Administration (FDA) reform, healthcare reform and changing policies at the Centers for Medicare & Medicaid Services all combined to create uncertainty for doctors, hospitals, and medical device manufacturers.
It has to get better, right? Right. There are indications that the economy is turning around. Unemployment is down from its highest point of 10.1 percent to 9.4 percent and is expected to continue to decline. According the Bureau of Labor Statistics, in December, healthcare employment continued to expand, with a gain of 36,000 jobs in ambulatory services (+21,000), hospitals (+8,000), and nursing and residential care facilities (+7,000).1 When hospitals and ambulatory surgery centers hire, this means procedure volumes are expected to go up.
Our quarterly gross domestic product (GDP) steadily has been increasing since 2009, but in the fourth quarter of 2010, Reuters reported that the U.S. economy grew at a faster than expected pace—5.7 percent—the quickest pace in more than six years.2
If procedure volumes are expected to increase, the demographics of orthopedic surgery work to the benefit of the medical device industry. The combination of the baby boomer impact and healthcare reform’s potential addition of 30 million people to the healthcare system has the potential to driveindustry growth substantially.
Orthopedic Companies Showing Growth
Orthopedic company acquisition activity appears to be increasing.3 In 2010 orthopedic device industry acquisitions included Baxter (ApaTech), Hanger Orthopedic Group (Accelerated Care Plus), Medtronic (Osteotech, Inc.), Stryker (the Neurovascular division of Boston Scientific), Zimmer (Beijing Montagne Medical Device Co., Ltd., and Sodem Diffusion S.A.), and several more.
Investment bankers report an increase in inquiries from orthopedic companies looking for acquisition targets, which is a positive change from the 2009 period. The changes at FDA, in reimbursement and through healthcare reform, can drive the development great technologies.
In a recent interview, Marc Viscogliosi, co-founder ofViscogliosi Brothers, a merchant banking firm focused in the orthopedic space, was highly positive about the industry’s future prospects.
“As we look to the future, in both the United States and globally, it's all going to be about delivering value,” he said.“Products will be judged by their clinical and cost effectiveness. The goal is finding a better product at a cheaper cost. Every solution we look for has to add value and improve outcomes. One of the great things about orthopedic and spine is that procedures generally have very high outcomes in regard to quality of life improvement.
Orthopedic devices are able to get patients back to a very high quality of life, so patients create a high demand for these products and innovation in these areas is welcomed. They want their doctors to use tools that result in higher quality care.”4
Maria Shepherd has 20 years of leadership experience in medical device/life-science marketing in small startups and top-tier companies. Following a career in senior management positions including vice president of marketing for Oridion Medical, director of marketing for Philips Medical and Boston Scientific Inc., she founded Data Decision Group (www.ddecisiongroup.com), which provides critical data to support sound decision making. The firm quantitatively and qualitatively sizes opportunities, evaluates new technologies, and assesses prospective acquisitions. Shepherd can be reached at (617) 548-9892 or at
mshepherd@ddecisiongroup.com.
References:
1. www.bls.gov/cps/
2. www.reuters.com/article/idUSTRE60S3AZ20100129
3. StreetInsider.com
4. www.beckersorthopedicandspine.com/orthopedic-spine-device-implant-news/2840-orthopedic-device-trends-qaa-with-marc-viscogliosi-of-viscogliosi-brothers-