Global Medical Device Industry: Solid Growth, with Midwest Companies Leading the Way!

Global Medical Device Industry: Solid Growth, with Midwest Companies Leading the Way!

CHICAGO – The Pharmaceutical Drug industry usually has high visibility with consumers in overall healthcare costs although it only represents some 10% of total U.S. healthcare expense to the consumer. The worldwide, and in particular U.S. drug industry sales, have slowed considerably due to an overall slowdown of prescriptions and the impact of blockbuster drug patent expirations and the ensuing launch of generic products.
Another important part of consumer healthcare is the Medical Device industry with some $250+ million in annual sales (versus Pharma’s $700 billion). The Medical Device industry covers a wide spectrum of devices ranging from diagnostics, imaging, dental, surgical, ocular, wound care, orthopedic and cardiovascular devices.
Although there is some overlap in players in the pharma and medical device industries, e.g. companies like Johnson & Johnson, Abbott Labs, Hospira, etc., in general the medical device industry brings to the table a whole different group of players that are often linked to other industries such as consumer electronics and computers (Toshiba, Siemens, Philips), photographic products (Olympus, Agfa), etc.
As convergence has been a big issue recently within the medical device industry, e.g. imaging companies acquiring in vitro and clinical diagnostic companies, the expected convergence between drug and device companies seems to be slowing down, perhaps due to the FDA lack of clarity and action in this area and resultant slower approval times.
A logical question for the medical device industry is: what has the impact of the worldwide recession down to revenue and income of this industry? According to the industry publication Medical Products Outsourcing July/August 2009 edition, 8 out of 10 hospitals in the U.S. (the largest individual country/regional market) have cut their capital expenditures, according to a recent study by the American Hospital Association. Furthermore, the study indicated that 45% of hospitals in the U.S. expected to post first quarter losses.
It gets worse according to this study:

  • High-priced products (imaging and robotics) face a difficult environment as purchases have slowed considerably
  • Cost-sensitive consumers are delaying or spending less on elective and out-of-pocket procedures (e.g. hip replacements, LASIK surgeries, diabetes-testing, dental)

Within this negative environment, industry sectors such as cardiology and oncology are faring better as these diseases are more life-threatening.
Medical Product Outsourcing does an annual review of the Medical Device industry for 2008, and the leading device companies, that is insightful. Although the sales listed below are principally device-related, they do provide the caveat that these may contain some non-device sales including combination products, drug-delivery, or software or device-related services. Let’s take a look:
Leading Global Medical Device Companies (2008 Revenue)

Company/Rank Home
2008 Sales ($B) 2007 Sales ($B) %
Med Device Sales % of Total Company
1. Johnson & Johnson U.S. $23.1 $21.7 +7% 36.3%
2. GE Healthcare U.S. $17.4 $17.0 +2% 39%
3. Siemens Healthcare Germany $16.1 $14.4 +12% 14.4%
4. Cardinal Health U.S. $13.7 $5.0 +174% 15%
5. Medtronic U.S. $13.5 $12.9 +5% 100%
6. Baxter International U.S. $12.3 $11.3 +9% 100%
7. Philips Healthcare Netherlands $10.7 $8.9 +20% 28.9%
8. Covidien Ireland $8.9 $10.0 <11%> 89.9%
9. Boston Scientific U.S. $8.0 $8.4 <5%> 100%
10. Abbott Labs U.S. $7.2 $6.3 +14% 24.4%
11. Becton Dickinson U.S. $7.2 $6.5 +11% 100%
12. Stryker U.S. $6.7 $6.0 +12% 100%
13. B. Braun Germany $5.3 $5.0 +6% 100%
14. St. Jude Medical U.S. $4.3 $3.8 +13% 100%
15. 3M Healthcare U.S. $4.2 $4.0 +5% 16.6%
16. Zimmer Holdings U.S. $4.1 $3.9 +5% 100%
17. Toshiba Japan $3.9 $3.1 +27% 5.1%
18. Smith & Nephew U.K. $3.8 $3.4 +12% 100%
19. Hospira U.S. $3.6 $3.4 +6% 100%
20. Danaher U.S. $3.3 $3.0 +10% 26.0%
21. Olympus Medical Systems Japan $3.3 $4.2 <22%> 30.8%
22. Synthes U.S $3.2 $2.8 +14% 100%
23. Beckman Coulter U.S. $3.1 $2.8 +11% 100%
24. Terumo Medical Japan $3.0 $2.6 +15% 100%
25. Alcon Switzerland $2.9 $2.5 +16% 46%
26. Fresenius Medical Care Germany $2.8 $2.5 +12% 26.4%
27. Biomet U.S. $2.4 $2.2 +13% 100%
28. C.R. Bard U.S. $2.4 $2.2 +9% 100%
29. Dentsply International U.S. $2.2 $2.0 +10% 100%
30. Agfa Healthcare Belgium $1.7 $2.0 <15%> 40.5%
TOTAL Top 30 $201.9 $183.8 +10% N/A

Source: Medical Product Outsourcing: July August, 2009
Legend: Blue= U.S. companies, Red = Midwest companies

Interestingly, of the top 30 companies, 18 are based in the U.S., and 11 of the 18 U.S. companies are headquartered in the Midwest. The conspicuous absence of Roche and its diagnostic business makes this list a bit incomplete; likewise, there are a few other large companies such as Bayer (again diagnostics) not mentioned. Nevertheless, this list provides a good view of the Medical Device market.
Although there are some companies that took a big hit in revenue for the year, most of the companies demonstrated solid growth. Cardinal Health, which showed the largest growth, has been undergoing significant change as a result of reconfiguring itself by selling off divisions such as the pharmaceutical technologies and services arm, and consolidating other divisions.
Danaher is kind of a surprise as the company is not well-known by its corporate name but better known by the brand names of some of its key products and divisions including Leica Microsystems, Imaging Sciences International, Gendex, etc.
The overall analysis does not really go into key growth areas of the medical device industry, but I would have to bet that cardiovascular stents and imaging would be top choices. The imaging industry as grown substantially and has several major subgroups including: magnetic resonance (MRI), computerized tomography (CT), ultrasound (US), X-ray, PET-scanning, and other modalities. Each of these types of imagining devices also has application in different diseases such as cardiovascular, neuroscience, oncology, obstetrics-gynecology, etc.
While a logical conclusion is that the medical device industry is a much safer and cheaper bet than the drug industry and thus growing a lot faster, there are still few “blockbuster” devices (devices that sell over $1 billion/year in sales), while there are now over 130 “blockbuster” drugs. Additionally, device price reimbursement is becoming a thornier issue and taking longer to achieve. The reality is that the medical device industry is growing faster than the drug industry and part of that reason is that new devices take a lot less time to get to the market place, and there is a lot of room for and need for innovation.
In all of this, the Midwest companies seem to be well-positioned to maintain leadership and growth.
Recent columns by Michael Rosen

Michael S. Rosen is Senior Vice President, New Business Development for the Science + Technology Group at Forest City Enterprises, a NYSE-traded real estate development company which develops and builds bioscience parks across the U.S. Rosen is also a founder and board member of the Illinois Biotechnology Industry Organization. He can be reached at
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