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WWW.IBISWORLD.COM Medical Instrument & Supply Manufacturing in the US December 2018 1
IBISWorld Industry Report 33911a Medical Instrument & Supply Manufacturing in the US December 2018 Jack Curran
Fine tuning: Healthcare reform will boost industry demand
2 About this Industry 2 Industry Definition
2 Main Activities
2 Similar Industries
3 Additional Resources
4 Industry at a Glance
5 Industry Performance 5 Executive Summary
5 Key External Drivers
7 Current Performance
8 Industry Outlook
11 Industry Life Cycle
13 Products and Markets 13 Supply Chain
13 Products and Services
15 Demand Determinants
15 Major Markets
17 International Trade
19 Business Locations
21 Competitive Landscape 21 Market Share Concentration
21 Key Success Factors
21 Cost Structure Benchmarks
23 Basis of Competition
24 Barriers to Entry
25 Industry Globalization
26 Major Companies 26 Johnson & Johnson
27 Stryker Corporation
28 Becton, Dickinson and Co.
29 Baxter International
29 Boston Scientific Corporation
30 Operating Conditions 30 Capital Intensity
31 Technology and Systems
32 Revenue Volatility
33 Regulation and Policy
34 Industry Assistance
36 Key Statistics 36 Industry Data
36 Annual Change
36 Key Ratios
37 Industry Financial Ratios
38 Jargon & Glossary
www.ibisworld.com | 1-800-330-3772 | [email protected]
This report was provided to Career Education Corporation (2134366661) by IBISWorld on 19 November 2019 in accordance with their license agreement with IBISWorld
WWW.IBISWORLD.COM Medical Instrument & Supply Manufacturing in the US December 2018 2
This industry primarily researches, develops and produces nonelectronic medical, surgical, dental and veterinary instruments and apparatus, such as syringes, anesthesia apparatus, blood transfusion equipment, catheters, surgical
clamps and medical thermometers. The industry does not manufacture electromedical and electrotherapeutic apparatus, X-ray apparatus, nonmedical thermometers or ophthalmic goods (such as contact lenses and eyeglasses).
The primary activities of this industry are
Designing, developing and manufacturing medical and surgical instruments and supplies
Designing, developing and manufacturing dental instruments and supplies
Designing, developing and manufacturing veterinary instruments and supplies
33451b Medical Device Manufacturing in the US This industry manufactures electronic cardiovascular, surgical, diabetes, irradiation and diagnostic devices.
33911b Glasses & Contact Lens Manufacturing in the US This industry manufactures ophthalmic goods including eyeglass frames, lenses and contact lenses.
42345 Medical Supplies Wholesaling in the US This industry stores and distributes large volumes of medical and surgical equipment, instruments and supplies.
62161 Home Care Providers in the US This industry supplies medical instruments and supplies to provide healthcare services in the home.
62211 Hospitals in the US This industry is the largest-single market in the United States for medical instruments and supplies.
Industry Definition
Main Activities
Similar Industries
About this Industry
The major products and services in this industry are
Dental instruments and supplies
Dental laboratories
Personal safety equipment
Surgical appliances
Surgical instruments
Hospital beds and other specialized hospital furniture
Provided to: Career Education Corporation (2134366661) | 19 November 2019
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About this Industry
Additional Resources For additional information on this industry www.advamed.org Advanced Medical Technology Association
www.mddionline.com Medical Device and Diagnostic Industry
www.medicaldevices.org Medical Device Manufacturers Association
www.mymeta.org Medical Equipment and Technology Association
IBISWorld writes over 1000 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com
Provided to: Career Education Corporation (2134366661) | 19 November 2019
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% c
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Number of physician visits
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Revenue Employment
Revenue vs. employment growth
% c
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Number of physician visits
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Revenue Employment
Revenue vs. employment growth
Products and services segmentation (2018)
47.6% Surgical instruments
2.1% Hospital beds and other
specialized hospital furniture
34.1% Surgical
appliances
5.8% Dental instruments
and supplies
5.4% Dental
laboratories 5.0%
Personal safety equipment
Key Statistics Snapshot
Industry at a Glance Medical Instrument & Supply Manufacturing in 2018
Industry Structure Life Cycle Stage Mature Revenue Volatility Medium
Capital Intensity Low
Industry Assistance Medium
Concentration Level Low
Regulation Level Heavy
Technology Change High
Barriers to Entry Medium
Industry Globalization Medium
Competition Level Medium
Revenue
$93.6bn Profit
$5.8bn Exports
$24.6bn Businesses
16,105
Annual Growth 18–23
1.3% Annual Growth 13–18
-0.6%
Key External Drivers Number of physician visits Number of adults aged 65 and older Research and development expenditure Trade-weighted index Number of people with private health insurance
Market Share Johnson & Johnson 7.8%
Stryker Corporation 6.8%
p. 26
p. 5
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 36
SOURCE: WWW.IBISWORLD.COM
Provided to: Career Education Corporation (2134366661) | 19 November 2019
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Key External Drivers Number of physician visits The number of physician visits has a direct effect on industry revenue. When demand for medical services from physicians rises, the stock of medical equipment will expand and the equipment will get more use, spurring a higher rate of replacement. The number of physician visits is expected to rise in 2018, presenting a potential opportunity for the industry.
Number of adults aged 65 and older People aged 65 and older are major consumers of medical services because, as people age, they generally require more medical assistance and surgeries. As this
demographic increases in size, demand for industry products is also expected to rise. The number of adults aged 65 and older is expected to increase in 2018.
Research and development expenditure A significant portion of total public and private funding of research and development (R&D) is devoted to industry- relevant activity. As public and private R&D expenditure grows, industry companies will increasingly have access to better technologies and will be more capable of developing new product lines. Total R&D expenditure in the United States is expected to decline in 2018, posing a potential threat to the industry.
Executive Summary The Medical Instrument and Supply Manufacturing industry has struggled over the five years to 2018 as a result of declines throughout the manufacturing sector. Immediately following the recession, manufacturing industries benefited from inflated demand created by the improving economy. However, this inflated demand has slowed over the past five years. As a result, industry revenue is expected to decline at an annualized rate
of 0.6% to $93.6 billion in 2018. This decline is mostly due to an 8.8% drop in 2014, caused by downstream healthcare providers trying to cut costs in the wake of healthcare reform. However, industry revenue has since recovered, rising 3.3% in 2018 alone.
Meanwhile, profit is expected to fall from 7.1% in 2013 to 6.2% in 2018. New regulations have made industry profit margins volatile. In 2013, the Food and Drug Administration (FDA) implemented
a new standard pertaining to medical device manufacturers’ assessments of device risk and safety. Moreover, the advent of new products has been limited, with many industry operators moving away from focusing on product innovation and toward extending their current lines to slash research and development (R&D) spending and mitigate regulatory compliance costs. As more accountable care organizations (ACOs) have emerged, which coordinate patient care across providers, these organizations have focused on cost-cutting strategies, including methods to eliminate redundant medical supply purchases.
Over the five years to 2023, IBISWorld expects industry revenue to grow an annualized 1.3% to $100.0 billion. In particular, as healthcare reform expands healthcare coverage, some traditionally underserved demographics will gain access to care. For example, according to A.T. Kearney, manufacturers that provide in vitro diagnostics as well as orthopedic, cardiovascular or renal care devices will benefit from robust demand from the expansion of healthcare coverage.
Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage
As more ACOs have emerged, they have focused on cost-cutting strategies
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Industry Performance
Key External Drivers continued
Trade-weighted index The trade-weighted index (TWI) measures the strength of the US dollar relative to the currencies of its major trading partners. When the value of the US dollar declines, imported goods become more expensive for US consumers, increasing demand for the domestic Medical Instrument and Supply Manufacturing industry. The TWI is expected to decline in 2018.
Number of people with private health insurance Private health insurance provides insured patients with a wider range of doctors and better ability to pay for healthcare services. As the number of people with private health insurance rises, demand for medical equipment and supplies increases. The number of people with private health insurance is expected to increase in 2018.
% c
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2.0
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3.5
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2412 14 16 18 20 22Year
Number of adults aged 65 and older
SOURCE: WWW.IBISWORLD.COM
% c
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-10
-5
0
5
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2412 14 16 18 20 22Year
Number of physician visits
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Industry Performance
Current Performance
The end of inflated demand from economic recovery and downstream cost cutting measures have hindered revenue growth for the Medical Instrument and Supply Manufacturing industry over the five years to 2018. Demand for industry products was high immediately following the recession as the economy was recovering. However, as the economy has stabilized that demand has slowed. In addition, healthcare reform has placed increased compliance costs on healthcare providers, which has led to healthcare providers attempting to cut costs. This has resulted in limited demand for industry products. As a result of these factors, over the five years to 2018, industry revenue is expected to decline at an annualized rate of 0.6% to $93.6
billion. However, despite this decline, strong demographic trends are expected to lead to 3.3% revenue growth in 2018 alone.
% c
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2410 12 14 16 18 20 22Year
Industry revenue
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Demographics and spending
Favorable demographics, government and private spending on healthcare, advances in medical technology and the age of capital equipment in stock all bolster demand for industry products. Additionally, demographic changes, including an aging population and rising obesity rates, are causing more individuals to require surgeries or other types of treatment necessitating medical instruments or supplies. In 2018, IBISWorld estimates that 52.5 million Americans will be 65 years of age or older. As people age, they are more likely to require health services, such as cardiovascular surgery or diabetes monitoring. Moreover, more than half of the US adult population is overweight and more than one-third are considered
obese, according to data from the Organisation for Economic Cooperation and Development. As the population has become both older and less healthy overall, demand for medical services has increased and, with it, demand for medical instruments and supplies.
Due to the Patient Protection and Affordable Care Act (PPACA), public and private health spending on health programs has grown considerably over the past five years. The number of Americans with private health insurance grew 2.7% and 0.9% in 2015 and 2016, respectively. However, the repeal of several crucial aspects of the PPACA has posed a threat to this trend, and has created uncertainty for the healthcare sector.
Consolidation and profitability
Over the five years to 2018, the number of industry operators is expected to fall at an annualized rate of 0.3% to 16,105 operators. This is mainly attributed to industry consolidation, driven by large
industry operators acquiring smaller companies that may be able to offer access to new technologies or markets. This trend varies among segments; however, manufacturers of medical and
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Industry Performance
Consolidation and profitability continued
surgical instruments, appliances and supplies operate in a segment of high concentration, while the dental laboratories segment is fairly fragmented, with a large number of operators. Nonetheless, consolidation has led to limited growth in employment over the past five years, as newly merged companies have eliminated labor redundancies. Consequently, the total number of industry employees has grown at an annualized rate of 0.2% to 270,622 people.
IBISWorld expects profit for an average industry operator to account for 6.2% of revenue in 2018, down from 7.1% in 2013. While large companies like Johnson & Johnson have strong negotiating power, other industry companies are struggling to negotiate with group purchasing organizations. Purchasing organizations allow healthcare providers to purchase supplies and equipment at a lower cost, because these organizations purchase supplies in bulk and can negotiate lower prices from manufacturers. This has
threatened this industry, because it has forced manufacturers to accept lower prices.
Larger, more profitable companies also have a competitive edge in the international market, which has steadily become more important to the industry. The value of industry exports is expected to decrease at an annualized rate of 0.3% over the five years to 2018, to total $24.6 billion, accounting for 26.2% of total industry revenue. Companies that can funnel their profit into increased research and development will be more competitive in the lucrative international new products market. At the same time, larger companies with established distribution channels have been more capable of competing in the domestic market, which has been increasingly threatened by competition from foreign-made goods; the value of industry imports is expected to increase at an annualized rate of 5.3% to $35.0 billion during the five-year period, satisfying 33.6% of domestic demand.
Industry Outlook
The outlook for the Medical Instrument and Supply Manufacturing industry is positive, with revenue forecast to grow at an annualized rate of 1.3% to $100.0 billion over the five years to 2023. Changing demographics, healthcare reform and product innovation will shape the industry in coming years. The aging population is expected to have the most significant effect on demand for medical supplies and instruments, as their need for care drives increases in overall public and private health expenditure. In contrast, possible
constraints to industry growth may come in the form of reduced hospital capital equipment spending amid tight credit market conditions, stressed government budgets and soft demand for elective medical procedures.
The aging population is expected to have the most significant effect on demand
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Industry Performance
Domestic demographics and emerging markets
The baby boomer demographic is set to become the industry’s largest market. The number of US residents aged 65 and older is expected to increase at an annualized rate of 3.2% over the next five years, reaching 61.6 million people in 2023. In comparison, the total US population is forecast to grow at an annualized rate of 0.7% during the same period. This trend indicates that people aged 65 and older will constitute an increasingly significant proportion of the population. Due to the elderly generally requiring more healthcare than other demographic groups, this trend will likely boost demand for industry products.
Changing tastes and preferences as well as a stronger overall economy will further increase demand for elective surgery procedures. The average age of people undergoing cosmetic procedures is declining, and the emergence of less- invasive surgeries is making procedures more attractive to people who were previously skeptical. Plastic surgery procedures are more sensitive to changes in per capita disposable income than other surgical procedures because they are generally considered to be a discretionary
expenditure. IBISWorld expects per capita disposable income to increase at an annualized rate of 1.4% over the five years to 2023, further boosting demand for elective procedures and, in turn, industry products.
Demand from emerging markets, such as China, India, Russia and Brazil, will further support product development. Although some of these countries have exhibited a slowdown in economic growth, many of these countries have still expanded their healthcare services. As a result, IBISWorld expects the value of industry exports to grow at an annualized rate of 1.6% to $26.6 billion over the five years to 2023. This increase also reflects the increasingly global nature of the medical instrument and supply market, as the value of imports in the domestic market is also forecast to grow an annualized 3.1% to total $40.7 billion during the five-year period.
Changing tastes and preferences will further increase demand
Innovation, consolidation and profitability
Innovation and product development are the most important sources of industry growth. Many incumbent operators are expected to invest in strengthening their current product lines. At the same time, continued industry consolidation will give many smaller manufacturers access to substantial research and development (R&D) budgets, driving innovation. Over the five years to 2023, IBISWorld expects the number of industry operators to increase at an annualized rate of 0.5% to 16,552 enterprises. At the same time, increased R&D spending will result in more demand for skilled laborers. As a result, industry spending on wages is projected to increase at an annualized rate of 1.0% to $19.5 billion.
Downstream customers are also consolidating. Hospitals are increasingly acquiring doctors’ practices, putting physicians closer to hospital administrators that want to control costs for pricey instruments and supplies. Large industry operators such as Johnson & Johnson can benefit as hospitals thin their lists of product vendors. However, smaller companies with less negotiating leverage will likely experience significant downward pricing pressure and struggle to maintain profitability as a result. Still, by 2023, IBISWorld expects average industry profit to moderately increase to account for 6.3% of revenue, up from 6.2% in 2018, in line with the
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Industry Performance
emergence of more large-scale medical device manufacturers, which have higher profit margins on average.
Innovation, consolidation and profitability continued
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Industry Performance Industry revenue growth is trailing US GDP
The industry is consolidating as large companies acquire smaller operators
Industry product development does take place, but few new markets are being created
Life Cycle Stage
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Industry Performance
Industry Life Cycle Over the 10 years to 2023, industry value added (IVA), or the value that the industry adds to the overall economy, is expected to increase at an annualized rate of 0.3%. Comparatively, the US economy as a whole is anticipated to grow at an annualized rate of 2.1% during the same period. The Medical Instrument and Supply Manufacturing industry is currently in the mature life cycle stage. This is in line with stagnant growth in the number of industry enterprises and growing leverage from key markets, namely group purchasing organizations (GPOs) that negotiate medical supply prices on the behalf of hospitals. While product innovation has occurred, which is typically indicative of an industry in the growing life cycle stages, it has not created new markets; rather, novel products enhance already existing treatment markets. Although there are some innovative products that address health concerns, such as devices for diabetics, it has not been adequate enough to prompt the industry into the growing or mature life cycle stages.
Moreover, changes to the regulatory landscape, namely the implementation of the medical device excise tax from 2013 to 2015 (with the tax later being suspended), has posed as a key regulatory hurdle for the industry.
Establishment growth has slowed over the past five years due to strong competition and merger and acquisition activity in the largest two segments: surgical and medical. Hospitals, doctors’ groups, clinics, purchasing groups and managed-care organizations are also consolidating and expanding in size, increasing their negotiating power with industry suppliers. Sellers are more likely to get large contracts with these powerful groups if they can offer a wide product assortment to cater to the entire buying group’s needs. Shorter product life cycles and the high cost of new technology development are further driving consolidation. Over the 10 years to 2023, the number of industry enterprises is expected to increase at a slight annualized rate of 0.1% to 16,552 operators.
This industry is Mature
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Products and Services Surgical instruments Surgical instruments comprise an estimated 47.6% of total revenue. This product segment includes the following: surgical instruments; surgical and medical diagnostic apparatuses; syringes; needles; blood transfusion and IV equipment; catheters as well as related parts. This segment’s share of total industry revenue has remained relatively
constant over the five years to 2018. However, the development of next- generation instruments based on new technologies and improved materials will drive segment growth in coming years. Moreover, shortcomings in existing drug therapies will promote the use of surgery in the treatment and management of cardiovascular, neurological, ophthalmic and various other chronic disorders. As
Products & Markets Supply Chain | Products and Services | Demand Determinants Major Markets | International Trade | Business Locations
KEY BUYING INDUSTRIES
42345 Medical Supplies Wholesaling in the US Medical supplies wholesalers purchase goods from this industry to resell to downstream customers.
54194 Veterinary Services in the US Veterinarians purchase supplies and instruments from this industry for animal care and treatment.
62111a Primary Care Doctors in the US Doctors purchase supplies and instruments from this industry for patient diagnosis and treatment.
62111b Specialist Doctors in the US Specialists purchase supplies and instruments from this industry for patient diagnosis and treatment.
62121 Dentists in the US Dentists purchase supplies and instruments from this industry for patient diagnosis and treatment.
62211 Hospitals in the US Hospitals purchase supplies and instruments from this industry for patient care and treatment.
62423 Natural Disaster & Emergency Relief Services in the US Relief services purchase first-aid supplies and instruments from this industry.
KEY SELLING INDUSTRIES
11192 Cotton Farming in the US This industry supplies cotton used to manufacture medical dressings, gauze, slings and other industry products.
32612 Plastic Pipe & Parts Manufacturing in the US This industry supplies plastic profile shapes, such as tubing, used to manufacture orthopedic devices and prosthetic appliances.
32622 Hose & Belt Manufacturing in the US This industry supplies rubber hose and reinforced plastic hose used to manufacture of medical appliances.
32629 Rubber Product Manufacturing in the US This industry supplies rubber parts used to manufacture stoppers and catheters, among other industry products.
32721 Glass Product Manufacturing in the US This industry supplies glass used to manufacture surgical and medical appliances.
Supply Chain
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Products & Markets
Products and Services continued
demand for surgery increases, so will demand for this segment’s products.
Surgical appliances Surgical appliances collectively make up 34.1% of total revenue. However, this product segment can be broken down further to include orthopedic, prosthetic and therapeutic products. Additionally, this product segment includes personal safety equipment and clothing (5.0%) and hospital beds and specialized hospital furniture (2.1%). Overall, this product segment includes artificial joints and limbs; orthopedic and prosthetic appliances; surgical dressings and sutures; surgical gloves; breathing devices (e.g. respirators); wheelchairs and other patient transportation devices; stents and personal safety equipment. Over the next five years, demand for this product segment is expected to rise.
Dental laboratory equipment In 2018, dental laboratory equipment makes up 5.4% of total revenue. Dental laboratory equipment includes casting
machines, artificial teeth (if they are not customized for individual application) and other dental laboratory supplies. Over the next five years, demand for dental laboratory equipment that features the most up-to-date restorative technologies will support growth for this product segment.
Dental equipment and supplies Dental equipment and supplies comprise 5.8% of total revenue. This product segment includes dental chairs, dental units and dental instruments, such as dental tools that work in conjunction with alloys for amalgams or impression materials. While growth in the Dentists industry (IBISWorld report 62121) will spur demand for dental equipment and supplies, this will be offset by the growing emergence of dental practice management companies (DPMCs). For example, as the number of DPMCs grow, so does their leverage to negotiate low-cost purchase prices, cutting into revenue for this product segment.
Products and services segmentation (2018)
Total $93.6bn
47.6% Surgical instruments
2.1% Hospital beds and other
specialized hospital furniture
34.1% Surgical appliances
5.8% Dental instruments
and supplies 5.4% Dental laboratories
5.0% Personal safety equipment
SOURCE: WWW.IBISWORLD.COM
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Products & Markets
Major Markets Industry customers vary depending on the type of medical equipment being manufactured; for example, neurosurgical products are mainly demanded by neurosurgeons, spinal surgeons and the hospitals and clinics where they operate. Moreover, different types of medical equipment are demanded at different rates, resulting in a variety of distribution and marketing systems required to supply customers. For example, dentures, crowns, syringes and hypodermic needles are regularly purchased items. By comparison, laboratory apparatus and furniture are not purchased as often, but they generally have higher costs. Some products are sold through contracts. Many of these contracts, which are often with group purchasing
organizations, have terms of more than one year and place limits on manufacturers’ price increases. These contracts may specify minimum quantities of a particular product to be purchased.
Hospitals Hospitals are expected to account for 30.0% of total revenue in 2018. Overall, hospital consolidation has limited demand for industry products, thus causing this market segment to decline during the five-year period, which has been further exacerbated by hospitals’ growing use of group purchasing organizations (GPOs). As hospitals have used GPOs, which negotiate medical supply prices in bulk, demand for industry products has been limited. Still,
Demand Determinants
The level of healthcare spending in the United States is affected by the health of the overall economy, the level of insurance coverage, demographic shifts and new product development. The number of physician visits has a direct effect on industry revenue and is itself affected by the economy and demographic changes.
More patients visiting specialists, coupled with the growing prevalence of cost-sharing (e.g. copayments), has limited the number of physician visits over the five-year period. The prevalence of major markets’ (e.g. hospitals) use of group purchasing organizations (GPOs) also plays a role in determining demand for industry products. For example, as more hospitals use GPOs to secure medical supplies in bulk, the GPOs’ strong market leverage intensifies price-based competition for the industry, cutting into margins.
The aging US population and the trend toward more consumer-oriented healthcare products and devices will further contribute to mounting healthcare spending. Consumers are
increasingly taking an active role in their own healthcare, and manufacturers are accordingly developing more technologies and products for this market. The prevalence of conditions such as heart disease, cancer, AIDS and hepatitis is increasing, which increases demand for specialized instrumentation and consumables.
The development of new products also drives industry demand. As companies invest more in new developments, hospitals and other downstream customers are more likely to purchase these goods to stay capable of delivering the best available treatment options. Advances in science and engineering that involve microelectronics, biochips, genomics and biomaterials enable the development of new products, such as high-performance synthetic materials. The pace of new development is driven by the level of research and development in the Medical Instrument and Supply Manufacturing industry, which is in turn driven by the level of private and government funding of these research efforts.
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Products & Markets
Major Markets continued
hospitals’ demand for disposable medical supplies has grown due to their rising focus on infection prevention, particularly to mitigate the prevalence of infection among patients who receive surgery or long-term chronic care.
Distributors Medical supply distributors serve as a valuable link between medical instrument and supply manufacturers and healthcare providers. They purchase large volumes of medical and surgical equipment, instruments and supplies from manufacturing companies, store these items at distribution centers and provide delivery of these products and related services to healthcare providers. Over the past five years, medical supply distributors have increasingly offered value-added services to their customers to offset wholesale bypass, wherein healthcare providers purchase medical equipment directly from manufacturers, thereby reducing the need for wholesalers. In 2018, wholesalers are expected to generate 28.7% of total industry revenue.
Third-party healthcare providers and specialists Third-party healthcare providers and specialists make up an estimated 15.0% of
total revenue. These health facilities require medical instruments and supplies to provide care and conduct research. This segment’s demand for industry products depends on both the need for more equipment as well as the need to replace existing equipment. Consequently, the number of physician visits affects demand for new supplies and equipment. Over the past five years, the number of physician visits has declined in line with more patients visiting specialists, thus increasing specialists’ demand for medical services and, in turn, industry products. This segment’s share of the total market has risen accordingly over the past five years.
Exports Export markets are a consistent source of revenue for medical instrument and supply manufacturers. Exports of industry products are expected to decline at an annualized rate of 0.3% to $24.6 billion over the five years to 2018. Exports account for 26.2% of revenue, an increase from 25.9% in 2013. Major export markets include the Netherlands, Japan and Canada, which together produce about one-third of total exports by value.
Major market segmentation (2018)
Total $93.6bn
30.0% Hospitals
28.8% Distributors
26.2% Exports
15.0% Third-party healthcare
providers
SOURCE: WWW.IBISWORLD.COM
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Products & Markets
International Trade International markets represent an enormous long-term opportunity for medical equipment and supply companies. Many of the major players in the industry have long been generating significant portions of sales from emerging markets, which represent a particularly lucrative opportunity for industry growth because of the nonelectrical, affordable nature of industry products. Medical instruments and supplies therefore represent a competitive and practical alternative to more expensive electromedical diagnostic and therapeutic devices.
The total value of industry products sold in export markets is expected to fall at an annualized rate of 0.3% to $24.6 billion over the five years to 2018. The value of the US dollar relative to its major trading partners has grown over the past five years, limiting export opportunities for the industry by making US-made products more expensive for foreign buyers. In 2018, exports are expected to account for 26.2% of total revenue, and products sold in Japan, the Netherlands, Canada and Belgium together account for 41.0% of total industry exports.
In 2018, imports are estimated to satisfy 33.6% of domestic demand for medical instruments and supplies, up from 27.5% in 2013. Over the past five years, IBISWorld estimates that the total value of medical instruments and
supplies imported into the United States has risen at an annualized rate of 5.3%, to $35.0 billion. Major sources of imported goods include Mexico, China, Ireland and Germany, which together account for more than one-half of revenue (by value). Many of the goods imported from Mexico are low-cost goods that compete with domestically produced, higher-cost medical products. Ireland, conversely, has leveraged its well- developed technological and financial resources to create and support a high-tech medical device production sector in recent years; as a result, imports from Ireland are less likely to be low-cost good and will instead compete with industry products on the bases of technical quality, precision and capabilities.
$ bi
lli on
40
-60
-40
-20
0
20
2410 12 14 16 18 20 22Year
Exports Imports Balance
Industry trade balance
SOURCE: WWW.IBISWORLD.COM
Level & Trend Exports in the industry are High and Steady
Imports in the industry are Medium and Increasing
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Products & Markets
International Trade continued
Imports From ...
Total $35.0bn
7.5% Germany
11.1% China
16.7% Ireland
17.7% Mexico
47.0% Other
Exports To ...
Total $24.6bn
59.1% Other
14.7% Netherlands
9.7% Japan
8.7% Belgium
7.8% Canada
Year: 2018 SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA SOURCE: USITC
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Products & Markets
Business Locations 2018
MO 1.8
West
West
West
Rocky Mountains Plains
Southwest
Southeast
New England
VT 0.2
MA 2.6
RI 0.5
NJ 2.8
DE 0.2
NH 0.6
CT 1.3
MD 1.3
DC 0.0
1
5
3
7
2
6
4
8 9
Additional States (as marked on map)
AZ 2.0
CA 15.2
NV 0.9
OR 1.9
WA 3.4
MT 0.6
NE 0.6
MN 2.7
IA 0.7
OH 3.1
VA 2.1
FL 7.0
KS 0.7
CO 2.3
UT 2.0
ID 0.8
TX 5.5
OK 0.8
NC 3.1
AK 0.2
WY 0.1
TN 1.7
KY 0.9
GA 3.0
IL 4.3
ME 0.3
ND 0.2
WI 2.0 MI
3.1 PA 3.7
WV 0.4
SD 0.3
NM 0.5
AR 0.6
MS 0.6
AL 1.1
SC 0.9
LA 0.9
HI 0.2
IN 2.2
NY 6.2 5
6 7
8
3 21
4
9
SOURCE: WWW.IBISWORLD.COM
Mid- Atlantic
Establishments (%)
Less than 3% 3% to less than 10% 10% to less than 20% 20% or more
Great Lakes
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Products & Markets
Business Locations Industry locations are concentrated in the West (21.8% of establishments), the Southeast (22.2%), the Great Lakes (14.7%) and the Mid-Atlantic (14.2%) regions. Population size and age distribution largely influence the location of medical and scientific laboratories, while the location of physicians generally correlates with the geographic distribution of the population. In addition to the benefits of being located near downstream customers, industry companies also set up locations near their upstream suppliers, to reduce shipping costs. As a manufacturing industry, medical instrument and supply manufacturing companies benefit from being located proximate to traditional manufacturing infrastructure, such as railroads, waterways and major highways; industry hotspots such as the Great Lakes, Southeast, and Mid-Atlantic regions traditionally boast these features.
California alone accounts for an estimated 15.2% of industry establishments. This concentration is likely due to the fact that California has more than 400 community hospitals operating 74,000 beds with more than 3.5 million annual hospital admissions. The health of California’s medical device and diagnostic companies is often considered an indicator of the well-being of the entire industry. Many high-profile biomedical companies are grouped in Silicon Valley, the greater San Francisco
Bay Area, Los Angeles, Orange County and San Diego. Although many of these companies produce technologies that are outside of the scope of industry-made instruments and supplies, their presence in California represents both a business environment favorable to medical research and production, as well as a large pool of highly educated, medically skilled workers; both of these factors attract industry operators. Moreover, California’s location on the Pacific makes companies in the state more accessible to some of the industry’s largest export markets, including Japan, China and Australia.
%
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Establishments Population
Distribution of establishments vs. population
SOURCE: WWW.IBISWORLD.COM
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WWW.IBISWORLD.COM Medical Instrument & Supply Manufacturing in the US December 2018 21
Cost Structure Benchmarks
Profit Operating profit, measured by earnings before interest and taxes, has contracted over the past five years. In 2018, profit is expected to account for 6.2% of industry revenue, down from 7.1% in 2013. The emergence of more group purchasing organizations (GPOs), which negotiate supply-side contracts on the behalf of hospitals, has intensified price-based competition for medical instrument and supply manufacturers. Still, some larger companies have substantially higher margins due to their economies of scale;
major industry players like Johnson & Johnson consistently have profit margins closer to 20.0% of revenue due to their ability to consolidate costs and establish consistent relationships with downstream customers.
Purchases The cost of input goods is the industry’s greatest expense. Purchase costs are generally high for manufacturing industries, but input goods are particularly expensive for the Medical Instrument and Supply Manufacturing
Key Success Factors Economies of scale Large companies are better able to spread fixed costs across several products, maintain negotiating power with wholesalers and customers, and gain access to a greater pool of talent.
Undertaking technical research and development Future revenue streams are based on significant investment in research and development, which can result in successful product launches.
Having a good reputation Customers’ purchase criteria often include reliability and performance. Reliability of delivery and product performance are particularly important given that a person’s health can be at stake.
Having contacts within key markets Access to distributors and end-users is essential to successful sales of products.
Market Share Concentration
While the Medical Instrument and Supply Manufacturing industry has many large operators, small and medium businesses (SMBs) have traditionally dominated the market. IBISWorld estimates that in 2018 the industry’s four largest players will hold a combined market share of 20.7% of total industry revenue, which indicates a low level of industry concentration. This market share is increasing as these large operators acquire smaller companies for their lucrative product design patents. Small companies are encouraged to join larger companies to gain access to significant distribution networks and research and development budgets. As the industry
consolidates, price competition within the industry decreases and profit margins tend to grow.
SMBs have played a crucial role in the development of new products in the industry. Based on data from the US Census Bureau, 83.2% of industry establishments employ fewer than 20 employees. Due to their quick adaptability, ability to identify market niches and considerable innovative potential, these operators form an important component of the healthcare industry worldwide. According to Net Resources International, 56.0% of new industry products are developed by small businesses.
Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization
Level Concentration in this industry is Low
IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:
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Competitive Landscape
Cost Structure Benchmarks continued
industry because all input goods must be medical-grade (i.e., of high enough quality to pass inspection for use in medical products.) Medical-grade industry-purchased materials include plastic tubing and hoses, glass, rubber and cotton. IBISWorld estimates that purchases account for 34.2% of an average operator’s revenue.
Wages Although the Medical Instrument and Supply industry is capital intensive, the specialized nature of manufacturing medical devices requires highly skilled labor, such as engineers and medical researchers. Such skill sets are more expensive than those typically needed for other manufacturing labor; as a result, wage costs are relatively higher in this industry. Wages account for 19.7% of total industry revenue. Over the past five years, wage costs have remained
relatively stable, increasing from 18.4% in 2013.
Research and development Research and development (R&D) expenses account for 7.8% of industry revenue. Given the industry’s competitive nature and strong dependence on product innovation, operators must invest in R&D to stay competitive. Industry companies may pursue R&D through in-house efforts, licensing products from smaller companies or mergers and acquisitions. Larger companies, such as Johnson & Johnson, will benefit from economies of scale in R&D, as they are able to reap the benefits of their efforts across company segments; proprietary in-house R&D efforts for products outside the Medical Instrument and Supply industry (such as electromedical device research) may have a spillover effect, providing
Sector vs. Industry Costs
n Profi t n Wages n Purchases n Depreciation n Marketing n Rent & Utilities n Other
Average Costs of all Industries in sector (2018)
Industry Costs (2018)
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SOURCE: WWW.IBISWORLD.COM
6.7 6.2
36.0
1.3 0.7 1.9
34.2
19.7
21.5
2.2 0.5 2.1
55.4
11.6
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Competitive Landscape
Basis of Competition Level of competition Competition within the industry has been limited by government regulation requirements. Medical devices are regulated by the Food and Drug Administration, and legislation regarding the production and specification of medical equipment and supplies has formed a significant barrier to entry. This has limited competition from new entrants.
Medical instrument and supply manufacturers have historically experienced little external competition from other industries, due to the specialized nature of the goods they offer. However, device manufacturers are concerned that advances in biotechnology may make certain devices obsolete. Biotech treatments like bone, organ and tissue replacements may ultimately be more restorative than devices implanted into patients. Even preventive and pay-for- performance healthcare, with its proactive focus to reduce the risk of disease and debilitating conditions, may be considered competition for manufacturers.
Basis of competition Technological competence and innovation, excellence in design, high product performance, quality of services and competitive pricing are among the key factors affecting competition for medical instruments and supplies. In the healthcare sector, these factors are
particularly important due to the influence that medical devices can have on the well-being of the end users.
Sales are driven by the introduction of new products, which are created with the support of significant research and development investment. Medical device manufacturers are increasingly specializing in one area of medicine and sometimes in just one type of treatment. The high degree of specialization in a field of rapid innovation enables small companies to compete successfully, but also increases the risk of technological obsolescence for any individual company.
The larger operators in the industry are vertically and horizontally integrated multinationals. Across the industry, pricing power is concentrated with the top five major players. Large companies with strong brands can have an advantage over other lesser-known brands; however, there is also a presence of low-cost, private-label products in the industry that appeal to some markets.
In coming years, price competition will become more important as government and healthcare providers push for price concessions. Operators within the industry will increasingly exploit sources of cost cutting, including acquisitions to achieve economies of scale, the development of proprietary technology, pursuing lower-cost input materials and further outsourcing industry services.
Cost Structure Benchmarks continued
valuable information for industry product development.
New products are a key driver for the long-term growth of industry operators. As products have become more specialized and precise, R&D expenses have risen over the past decade; however,
the payback for product development is not immediate. The US Food and Drug Administration (FDA) reports that the average development timeline (from laboratory testing to FDA approval) for a new product is generally 8.5 years, although approval times vary greatly.
Level & Trend Competition in this industry is Medium and the trend is Increasing
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Competitive Landscape
Barriers to Entry Potential new entrants into the Medical Instrument and Supply Manufacturing industry will experience moderate barriers to entry. Companies entering the industry are often new start-ups based upon the development of an innovative product.
In this industry, most goods are manufactured under patent. This acts as a barrier to entry into certain markets where patented products exist. Operators entering the industry would need to either acquire a company that holds a patent or engage in costly research and development to manufacture a product that can compete without infringing upon their competitors’ intellectual property.
Government policy is another barrier for new entrants. Essentially, medical devices are subject to the regulations of the Federal Food Drug & Cosmetic (FD&C) Act. These controls are the baseline requirements that apply to all medical devices necessary for marketing, proper labeling and monitoring its performance. The whole range of products manufactured in the industry is subjected to rigorous testing with regulatory approval and full clinical trials, which constitute significant entry barriers.
The cost of insurance against product liability claims may also deter entry to the industry. In the health field, claims can be devastatingly high, and costs are trending upward. In addition, access to a highly skilled labor force is essential, and constitutes another barrier to entry. The high capital costs required to manufacture medical appliances could deter some operators from entering the
industry. Competition within the industry and a high degree of product specialization requires significant investment in research and development (R&D). Companies achieve specialization through various methods: some invest in their own in-house R&D, some choose to license products from smaller companies and others acquire technology through mergers and acquisition activity.
Industry rivalry is boosted by the presence of large, international incumbents, namely Johnson & Johnson. Building a name and reputation takes many years, and brand names give operators a high degree of recognition in their respective markets. Companies differentiate themselves based on products, channels of distribution, geography and service. Some of the major international brands within the industry include Johnson & Johnson and Baxter International. While not a barrier to entry, the dominance of these companies and their brands can make it difficult for new operators to compete against these companies.
Barriers to Entry checklist
Competition Medium Concentration Low Life Cycle Stage Mature Capital Intensity Low Technology Change High Regulation and Policy Heavy Industry Assistance Medium
SOURCE: WWW.IBISWORLD.COM
Level & Trend Barriers to Entry in this industry are Medium and Steady
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Competitive Landscape
SOURCE: WWW.IBISWORLD.COM
Trade Globalization Going Global: Medical Instrument & Supply Manufacturing 2005–2018
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Imports/Domestic Demand Imports/Domestic Demand 0 040 4080 80120 120160 160
International trade is a major determinant of an industry’s level of globalization.
Exports offer growth opportunities for fi rms. However there are legal, economic and political risks associated with dealing in foreign countries.
Import competition can bring a greater risk for companies as foreign producers satisfy domestic demand that local fi rms would otherwise supply.
Export ExportGlobal Global
ImportLocal ImportLocal
Medical Instrument & Supply Manufacturing 2005 2018
Industry Globalization
The industry has a moderate level of globalization. Most of the major players own overseas subsidiaries or are involved in the import or export of surgical and medical appliances. Johnson & Johnson and Baxter International have subsidiaries located in Europe, Asia or South America.
There is also a considerable level of international trade; exports account for 26.2% of revenue, and imports represent 33.6% of domestic demand. The United
States imports mostly from Mexico and China, while the Netherlands and Japan comprise the largest export markets. International markets, especially emerging markets, represent a significant long-term opportunity for industry operators. However, in the current environment of cost containment and a strengthening US dollar, international markets pose significant near-term risks to consistent sales growth.
Level & Trend Globalization in this industry is Medium and the trend is Increasing
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Player Performance Johnson & Johnson (J&J) is a leading global healthcare company that develops, manufactures and markets a diverse portfolio of pharmaceutical, medical device and consumer health products. Incorporated in 1887, J&J operates internationally, employing more than 126,500 people worldwide. The company is headquartered in New Brunswick, NJ, and has 26 industry-relevant manufacturing facilities in the United States. While the United States and Europe represent the company’s largest markets, J&J has recently begun to expand its geographic foothold in Asia, particularly in China, and other emerging markets.
Through its medical devices segment, the company offers surgical equipment, monitoring devices, orthopedic products and cardiovascular care products, among other products. The medical devices group accounted for 34.8% of the
company’s total US revenue in 2017, with J&J controlling the market in many product categories. About 61.0% of the company’s medical devices revenue is relevant to this industry; the rest of the segment’s revenue is generated by sales of vision products and medical devices (see IBISWorld reports 33911b and 33451b).
The company has taken advantage of having both medical instrument and pharmaceutical research and development (R&D) expertise in-house; J&J’s ability to converge these efforts has given them an edge in the lucrative new products market. For example, the company’s OneTouch Verio provides increased reading accuracy for the self-monitoring of blood glucose and was a result of combined pharmaceutical and medical instrument R&D. The company’s expansive and flexible R&D base also helps J&J develop or enhance products
Major Companies Johnson & Johnson | Stryker Corporation | Other Companies
85.4% Other
Johnson & Johnson 7.8%
Stryker Corporation 6.8%
SOURCE: WWW.IBISWORLD.COM
Major Players (Market Share)
Johnson & Johnson Market Share: 7.8%
Johnson & Johnson (US industry-specifi c segment) - fi nancial performance*
Year Revenue
($ million) (% change) EBIT
($ million) (% change)
2013 7,602.5 4.6 1,565.3 -26.8
2014 7,350.0 -3.3 2,366.2 51.2
2015 6,702.8 -8.8 2,030.9 -14.2
2016 6,568.8 -2.0 1,640.6 -19.2
2017 7,209.3 9.7 1,725.4 5.2
2018 7,309.6 1.4 1,595.7 -7.5
*Estimates SOURCE: ANNUAL REPORT AND IBISWORLD
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Major Companies
Player Performance Founded in 1941, Stryker Corp. (Stryker) is a Michigan-based medical technology company. Stryker’s product portfolio includes implants used for joint replacements and other surgeries, surgical equipment, emergency medical equipment as well as spinal devices, among other medical devices. The company reports the following segments: instruments (which includes surgical equipment), endoscopy, medical (which includes emergency medical equipment) and sustainability (which includes reprocessed and remanufactured medical devices). In the United States, Stryker has manufacturing facilities in Michigan, California, Florida, Texas, Arizona and South Carolina.
However, industry-specific revenue is derived from the company’s MedSurg segment, which includes surgical equipment and instruments, and orthopedics segment, which includes implants for knee and hip joint replacements, thus excluding the company’s sustainability segment. In 2014, the company acquired Small Bone Innovations Inc., a company that offers technologies that help treat trauma and diseases in small bones and joints. In 2015, the company acquired CHG Hospital Beds, which manufactures hospital beds and related accessories. The company has 27,000 employees throughout the United States.
Player Performance continued
quickly and therefore potentially beat competitors to market. J&J’s medical instrument development efforts also help the company both maintain dominance in medical instrument markets as well as continue to demand premium prices. Moreover, because J&J is known for having a hands-off approach to the operations of companies it acquires, this reputation may entice companies with innovative products to become part of this conglomerate, enabling the operator to continue its global growth.
Financial performance IBISWorld expects J&J’s US industry- relevant revenue to decline at an annualized rate of 0.8% to $7.3 billion over the five years to 2018. Many of J&J’s operating subsidiaries (including surgical supplies companies Ethicon and Ethicon Endo-Surgery, orthopedics device maker DePuy and diagnostics unit Ortho- Clinical Diagnostics) have experienced steady growth in recent years. The recent acquisition of Synthes further contributed to revenue and profit growth for the devices segment. However,
medical device revenue growth has stumbled in recent years, and the segment went from being the company’s top revenue and profit-earning segment in 2013, to second place behind the pharmaceuticals segment.
Over the five years to 2018, the company’s industry-relevant profit margin has also fluctuated, generally accounting for about 20.0% to 30.0% of revenue. The diversity of products in the company’s industry-relevant segment has historically buffered J&J from extreme profit volatility, particularly given the revenue cliffs associated with the expiration of pharmaceutical patents. The Synthes acquisition had a negative effect on the company’s 2013 profit, due to integration costs and inventory amortization. However, the company’s recent sale of its ortho-clinical diagnostics business netted the company a reported $4.0 billion in 2014 and had a particularly significant effect on the company’s industry-relevant profit margin. In 2018, IBISWorld expects J&J’s industry-specific profit to account for 21.8% of revenue.
Stryker Corporation Market Share: 6.8%
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Major Companies
Other Company Performance
Becton, Dickinson and Co. (BD) is a global medical technology company that develops, manufactures and sells medical devices, instrument systems and reagents in more than 50 countries throughout the world. Healthcare institutions, life science researchers, clinical laboratories and patients use BD’s products. The company operates three business segments (of which the industry-specific medical segment is the largest), accounting for more than 50.0% of the company’s total annual revenue. Through the company’s medical and diagnostic segments, BD manufactures a wide array of industry products, including needles, syringes, specimen collection products (e.g. Pap smear tests) and catheters. Founded in 1897 and headquartered in Franklin Lanes, NJ, the company
employs about 30,000 workers worldwide. Revenue generated through US operations accounts for 54.5% of BD’s total revenue. The company’s medical, diagnostics and biosciences segments have experienced aggressive revenue growth over the five years to 2018, with BD’s safety-engineered products (such as sharps designed specifically to minimize the risk of injuries to healthcare workers) pushing this growth. BD estimates that sales of its safety-engineered products in the United States grew 2.9% in 2013 alone, driving overall industry-relevant revenue growth for the company. In 2014, the company acquired international medical technology giant CareFusion for a reported $12.2 billion. In 2018, industry-specific revenue is expected to reach $3.4 billion.
Player Performance continued
Financial performance Over the five years to 2018, industry-specific revenue is expected to grow at an annualized rate of 10.4% to $6.4 billion. In 2015, increasing global demand for trauma products, encompassed under the company’s orthopedics segment, helped spur industry-specific revenue growth.
Moreover, in the company’s latest quarterly report, robust demand for products related to trauma and extremities offset the decline in demand for products related to knees and hips (i.e. implants). Overall, the medical and instruments segments have performed well, offsetting the decline in endoscopy, neurotechnology and spine products.
Becton, Dickinson and Co. Market Share: 3.6%
Stryker Corporation (US industry-specifi c segment) - fi nancial performance*
Year Revenue
($ million) (% change) Net Income
($ million) (% change)
2013 3,876.6 4.9 539.7 -27.3
2014 4,242.5 9.4 546.4 1.2
2015 4,539.6 7.0 849.4 55.5
2016 5,409.9 19.2 1,034.7 21.8
2017 5,967.3 10.5 1,098.7 6.4
2018 6,371.7 6.8 1,246.6 13.5
*Estimates SOURCE: IBISWORLD
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Major Companies
Other Company Performance
Founded in 1979, Boston Scientific Corp. (Boston Scientific) has become a worldwide developer, manufacturer and marketer of medical devices that are used in more than 40 countries. The company’s products and technologies are used for the diagnosis and treatment of a broad range of medical conditions, such as heart, digestive, pulmonary, vascular, urological, women’s health and chronic pain conditions. Boston Scientific generates more than half of its revenue from the interventional cardiology and cardiac rhythm management businesses, followed by the endoscopy business that generates about 17.0% of revenue. The company employs about 23,000 people worldwide. Boston Scientific generates
just more than half of its annual revenue from US operations, and about half of the company’s US revenue is generated from selling industry-relevant products such as coronary stents. Over the five years to 2018, US industry-relevant revenue is expected to reach $2.3 billion. Over the past five years, the company incurred revenue and profit losses due to rising pressure from competitors that were able to introduce new products to market faster than Boston Scientific. However, growth in the company’s medical instruments and peripheral- stenting businesses has helped offset continued revenue declines for its heart-device products, such as pacemakers and defibrillators.
Other Company Performance
Baxter International (Baxter) is a global medical products and services company that was incorporated in 1931 and is based in Deerfield, IL. The company manufactures products in 27 countries and maintains 18 production facilities in the United States and Puerto Rico. Baxter employs about 61,000 people worldwide. The company’s developments assist healthcare professionals with treating medical conditions, including hemophilia, immune disorders, infectious diseases, kidney disease and trauma. The company has historically operated in three segments: medication delivery, bioscience and renal. With nearly 60.0% of company sales taking place outside the United States, Baxter has been losing domestic market share and is increasingly exposed to
fluctuations in the value of the US dollar. In 2013, the company acquired Swedish dialysis giant Gambro, which has had a significant effect on the company’s revenue but has had only a limited effect on Baxter’s industry-specific operations, since Gambro is primarily established outside of the United States. To shore up operations, Baxter split into two separate companies in 2015; one company is concerned with biotech and pharmaceutical products, while the other is solely focused on industry-relevant medical supplies. The divestiture of the company’s biotechnology operations into a separate company will likely have an effect on the Baxter’s industry-specific operations over the five years to 2023. In 2018, the company is expected to generate $2.3 billion in industry-specific revenue.
Baxter International Market Share: 2.5%
Boston Scientific Corporation Market Share: 2.5%
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Capital Intensity Medical instrument and supply manufacturers have moderate fixed capital expenses, yet wage costs account for 19.7% of revenue. For every dollar spent on wages, $0.09 is spent on capital equipment. The industry produces an assorted range of products for highly specialized applications. Not all products can be manufactured on an automated production line; skilled specialists are needed to create many medical instruments, and these employees command salaries well above the manufacturing sector average wage.
Depreciation expense represents 1.9% of revenue. The larger operators within the industry frequently acquire small operators to broaden their range of products and markets, which raises
capital expense. These small operators typically specialize in a particular niche, and hold lucrative design patents, so
Operating Conditions Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance
Capital Intensity
0.5
0.0
0.1
0.2
0.3
0.4
SOURCE: WWW.IBISWORLD.COM Dotted line shows a high level of capital intensity
Capital units per labor unit
Medical Instrument & Supply Manufac-
turing
ManufacturingEconomy
Level The level of capital intensity is Low
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Operating Conditions
Technology and Systems
Industry operators spend extensively on research and development (R&D). Given the competitive nature and strong dependence on product innovation of this industry, R&D is vital in keeping up with technological advances in the medical field. Innovation and product development is the most important source of growth within the industry. First mover advantages in relation to technological change and development are important because it enables operators to earn above average profit for a period of time.
There are two types of research: pure and applied. The primary aim of pure research is to attain greater knowledge of a certain subject area. Often products are developed this way as a by-product of the knowledge gained. Applied research is directed at particular objectives and involves development work on new innovations or improvements to existing products. In this industry the majority of technological change is a result of applied research.
Automation and robotics More medical instrument manufacturers are focusing on machines that are designed to automate complex and precise operations. This automated equipment can perform a variety of applications including medical instrument assembly and dispensing, lab automation, machine tending, material handling, packaging and electronics assembly. The evolving manufacturing needs due to highly competitive environment has led the medical instruments industry to manufacture such automated medical devices that are capable of processing multiple work pieces simultaneously.
Portability Two trends have emerged to make medical instruments more affordable and more accessible for patients: miniaturization and portability. Today, medical manufacturers are moving entire systems – from home-based and clinical instruments to imaging applications – into a portable unit the size of a cell phone or smaller. What was once huge equipment tethered to a wall has become available in mobile clinics, ambulances and in a doctor’s bag for house calls.
Trends in healthcare affect medical instruments Over the next 10 years, healthcare providers will focus on early diagnosis, digitized patient information that can be accessed from numerous locations and “total solution” purchasing that contributes to healthcare productivity gains. Early diagnosis and prevention is enabled by emerging diagnostic instrument technologies. For example, positron emission tomography (PET) is used to detect many kinds of cancer with great accuracy. Digital patient records enable doctors to access patients’ records – wherever the doctor is. In a digitized hospital, healthcare providers do not have to wait days for an X-ray to “come back from the lab” because the X-ray machine is digital and the image is instantly available.
Hospitals are also moving away from purchasing point solutions and toward buying equipment from different vendors that is interoperable and that has a uniform user interface. Hospitals are developing internal networks that connect all diagnostic equipment that
Capital Intensity continued
large corporations acquire these operators as a means to gain intellectual property and keep a competitive edge in technological expertise.
Level The level of technology change is High
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Operating Conditions
Revenue Volatility This industry has a low to moderate level of revenue volatility. Demand for medical instruments and supplies has long been considered constant and immune to economic downturns, due to the necessity of medical care. However, reduced consumer spending and tight credit markets have squeezed even the most recession-proof industries, including hospitals, clinics and physician practices.
For medical technology companies, the most immediate effect of this volatility is less private equity funding, which often funds research and development for small to midsize companies. Personal investors were hit hard by the downturn in the stock market in recent years, and this decrease in
available funding kept new product development low through 2011. Since new products can take years to meet FDA approval and be introduced to market, this funding crunch had a negative effect on revenue from new product sales during most of the five-year period to 2018. However, the industry still received government grants and other efforts to stimulate innovation over the past five years, particularly as economic recovery continued. Moreover, demand (and revenue) have become more stable as the industry has increasingly moved into a period of stable recovery and growth, and IBISWorld expects revenue volatility to remain moderate in coming years.
Technology and Systems continued
feeds all patient information (e.g. computed tomography scans, X-rays, positron emission tomography scans) over a network to data storage servers for instant access. This drives medical equipment vendors to develop interoperable equipment that has a uniform user interface. In effect, vendors are beginning to sell complete solutions that include not only the diagnostic equipment but also the data storage servers and the interface software.
These trends lead to an increase in healthcare productivity. This means more patients can be put through the healthcare system by using better, faster diagnostic equipment, which leads to early ailment diagnosis and treatment. When the paperless hospital is more ubiquitous, productivity is further enhanced because of instant patient test results and records access.
Level The level of volatility is Medium
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Operating Conditions
Regulation and Policy The Medical Instrument and Supply Manufacturing industry is highly regulated by the Food and Drug Administration (FDA). New products manufactured within this industry classify as Class III medical devices and are subject to particular FDA scrutiny if they have a new intended use or use advanced technology that is not substantially equivalent to that of a legally marketed device. These devices almost always require formal clinical research studies to demonstrate safety and effectiveness and must be approved through the premarket approval process described below. Premarket approval applications (and supplemental premarket approval applications) are subject to significantly higher user fees under the Medical Device User Fee and Modernization Act (2002) than are 510(k) premarket notifications.
Healthcare reform On March 21, 2010, the United States Congress passed the Health Care and Education Affordability Reconciliation Act, an amendment to the Patient Protection and Affordable Care Act of 2010. According to the Congressional Budget Office, healthcare reform will cost an estimated $940.0 billion over the course of 10 years. To offset the costs imposed on the government, the Act imposes tax increases on certain classes and industries. One such area is the medical device manufacturing industry. Effective on January 1, 2013, a 2.3% excise tax was imposed on sales of medical devices. The medical device excise tax applies to devices ranging from surgical instruments to bedpans and is expected to raise $20.0 billion over the course of 10 years. However, in December 2015, the medical device excise tax was suspended until December 31, 2017.
The Medical Device Manufacturers Association (MDMA) is concerned about the tax’s effect on manufacturer profit. The MDMA argues that the tax will stifle innovation and cut into research and development (R&D) of medical devices. The long-term effect of the tax on manufacturers
remains unclear, but IBISWorld anticipates that most of the fee will be passed on to consumers via price hikes, and even if unsuccessful, device-makers will only experience a mild reduction to their profit margins.
510(k) Premarket Notifications When an operator within the industry wants clearance for a device that they wish to market, they must submit a premarket notification to the FDA demonstrating that the device is substantially equivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976, for which the FDA has not yet required the submission of premarket approval applications. By regulation, the FDA is required to respond to a 510(k) premarket notification within 90 days of submission of the notification. As a practical matter, clearance can take significantly longer. If the FDA determines that the device, or its intended use, is not substantially equivalent to a previously cleared device or use, the FDA will place the device, or the particular use of the device, into Class III.
After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that changes its intended use, will require a new 510(k) clearance and could require premarket approval. The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with a manufacturer’s determination. If the FDA disagrees with a manufacturer’s determination that a new clearance or approval is not required for a particular modification, the FDA can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or premarket approval is obtained. Also, in these circumstances, an operator may be subject to significant regulatory fines or penalties.
Level & Trend The level of Regulation is Heavy and the trend is Increasing
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Operating Conditions
Regulation and Policy continued
Premarket Approval Pathway (PMA) A PMA application must be submitted if the device cannot be cleared through the 510(k) premarket notification procedures. The PMA process is much more demanding than the 510(k) premarket notification process. A PMA application must be supported by extensive data including, but not limited to technical, preclinical, clinical trials, manufacturing and labeling to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device.
Continuing FDA regulation After a device is placed on the market, numerous regulatory requirements apply. These include: the Quality System Regulation, or QSR, which requires manufacturers to follow design, testing, control, documentation and other quality assurance procedures during the manufacturing process; labeling regulations, which prohibit the promotion of products for unapproved, or “off-label” uses and impose other restrictions on labeling; and medical device reporting, or MDR, regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur. The FDA has broad postmarket and
regulatory enforcement powers. Industry operators are subject to unannounced inspections by the FDA to determine their compliance with the QSR and other regulations. Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions: fines, injunctions, and civil penalties; recall or seizure of products; operating restrictions, suspension of production; refusing request for 510(k) clearance or premarket approval of new products; withdrawing 510(k) clearance or premarket approvals that are already granted; and criminal prosecution.
Even if regulatory approval or clearance of a medical device is granted, the FDA may impose limitations or restrictions on the uses and indications for which the device may be labeled and promoted. Medical devices may be marketed only for the uses and indications for which they are cleared or approved. FDA regulations prohibit a manufacturer from promoting a device for an unapproved, or “off-label” use. Failure to comply with this prohibition on “off-label” promotion could result in enforcement action by the FDA, including, among other things, warning letters, fines, injunctions, consent decrees, and civil or criminal penalties.
Industry Assistance Participants in the Medical Instrument and Supply Manufacturing industry do not receive any direct assistance from the US government. Many industry products, such as syringes and catheters, are not subject to any general import tariffs. The North American Free Trade Agreement further opens the industry to competition from exports; this agreement eliminates tariffs on goods from Mexico and Canada, with US imports from Mexico comprising 16.5% of total domestic imports.
However, industry companies do receive assistance via a variety of industry associations, including the Association of Medical Diagnostics Manufacturers (AMDM), the Medical Device Manufacturers Association (MDMA) and the Advanced Medical Technology Association (AdvaMed). The AMDM acts as a liaison between industry members and regulatory agencies, whereas the MDMA acts as a watchdog against unreasonable regulation in the medical device industry and represents the
Level & Trend The level of Industry Assistance is Medium and the trend is Steady
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Operating Conditions
interests of medical device manufacturers. MDMA largely spearheaded political efforts since 2013 to repeal the 2.3% excise tax levied against medical devices by the Patient Protection and Affordable Care Act, with the tax being suspended until December 31, 2017.
AdvaMed is the largest medical technology association in the world and represents medical device manufacturers
and makers of medical equipment, medical software and medical supplies. AdvaMed promotes speedier product approvals by industry regulators worldwide; more timely coverage and payment determinations globally; fair access to international markets; and effective communications about the value of medical technology to key audiences including legislators, regulators, medical societies and patient organizations.
Industry Assistance continued
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Key Statistics Revenue
($m)
Industry Value Added
($m) Establish-
ments Enterprises Employment Exports
($m) Imports
($m) Wages ($m)
Domestic Demand
No. of physician visits (Mil)
2010 91,896.6 26,683.6 16,943 16,201 268,852 23,357.7 24,721.0 17,356.1 93,259.9 1,008.8 2011 91,273.1 25,971.1 17,103 16,378 269,295 24,432.5 26,313.5 17,345.8 93,154.1 987.0 2012 93,118.7 27,610.2 17,250 16,506 276,167 24,672.5 26,199.4 18,251.7 94,645.6 928.6 2013 96,297.5 26,690.5 17,098 16,380 267,805 24,898.1 27,024.1 17,686.6 98,423.5 922.6 2014 87,841.9 24,866.8 17,106 16,338 263,423 25,182.2 27,543.7 17,180.7 90,203.4 884.7 2015 89,037.2 25,954.6 16,970 16,198 259,823 24,949.3 29,136.3 17,362.5 93,224.2 990.8 2016 89,462.6 27,103.4 16,454 15,770 262,891 24,637.6 30,594.3 17,799.2 95,419.3 956.9 2017 90,637.2 25,326.4 16,595 15,900 265,021 24,058.4 32,520.4 17,984.7 99,099.2 957.9 2018 93,623.0 26,055.1 16,830 16,105 270,622 24,564.6 35,019.2 18,466.5 104,077.6 969.0 2019 95,198.6 26,458.6 17,011 16,273 273,564 25,066.0 35,958.0 18,720.4 106,090.6 981.1 2020 96,562.8 26,754.5 17,066 16,313 275,728 25,691.2 37,462.6 18,919.3 108,334.2 992.5 2021 97,685.1 27,013.9 17,162 16,398 277,575 25,930.4 38,379.3 19,086.7 110,134.0 999.1 2022 98,831.7 27,304.7 17,229 16,453 279,650 26,371.9 39,648.7 19,268.1 112,108.5 1,004.3 2023 99,962.2 27,557.7 17,338 16,552 281,770 26,646.3 40,741.0 19,451.0 114,056.9 1,009.1 2024 101,064.1 27,840.4 17,415 16,617 284,421 26,952.7 41,729.0 19,661.7 115,840.4 1,013.8 Sector Rank 13/193 8/193 6/193 6/193 6/193 10/184 16/184 5/193 12/184 N/A Economy Rank 116/694 118/694 243/694 225/694 126/694 11/216 17/216 93/694 13/216 N/A
IVA/Revenue (%)
Imports/ Demand
(%)
Exports/ Revenue
(%)
Revenue per Employee
($’000) Wages/Revenue
(%) Employees
per Est. Average Wage
($)
Share of the Economy
(%) 2010 29.04 26.51 25.42 341.81 18.89 15.87 64,556.34 0.17 2011 28.45 28.25 26.77 338.93 19.00 15.75 64,411.89 0.16 2012 29.65 27.68 26.50 337.18 19.60 16.01 66,089.36 0.17 2013 27.72 27.46 25.86 359.58 18.37 15.66 66,042.83 0.16 2014 28.31 30.54 28.67 333.46 19.56 15.40 65,220.96 0.15 2015 29.15 31.25 28.02 342.68 19.50 15.31 66,824.34 0.15 2016 30.30 32.06 27.54 340.30 19.90 15.98 67,705.63 0.15 2017 27.94 32.82 26.54 342.00 19.84 15.97 67,861.41 0.14 2018 27.83 33.65 26.24 345.95 19.72 16.08 68,237.25 0.14 2019 27.79 33.89 26.33 347.99 19.66 16.08 68,431.52 0.14 2020 27.71 34.58 26.61 350.21 19.59 16.16 68,615.81 0.14 2021 27.65 34.85 26.54 351.92 19.54 16.17 68,762.32 0.14 2022 27.63 35.37 26.68 353.41 19.50 16.23 68,900.77 0.14 2023 27.57 35.72 26.66 354.77 19.46 16.25 69,031.48 0.14 2024 27.55 36.02 26.67 355.33 19.45 16.33 69,128.86 0.13 Sector Rank 41/193 72/184 52/184 128/193 44/193 159/193 47/193 8/193 Economy Rank 368/694 79/216 62/216 307/694 299/694 278/694 177/694 118/694
Figures are in inflation-adjusted 2018 dollars. Rank refers to 2018 data.
Revenue (%)
Industry Value Added
(%)
Establish- ments
(%) Enterprises
(%) Employment
(%) Exports
(%) Imports
(%) Wages
(%)
Domestic Demand
(%)
No. of physician visits
(%) 2011 -0.7 -2.7 0.9 1.1 0.2 4.6 6.4 -0.1 -0.1 -2.2 2012 2.0 6.3 0.9 0.8 2.6 1.0 -0.4 5.2 1.6 -5.9 2013 3.4 -3.3 -0.9 -0.8 -3.0 0.9 3.1 -3.1 4.0 -0.6 2014 -8.8 -6.8 0.0 -0.3 -1.6 1.1 1.9 -2.9 -8.4 -4.1 2015 1.4 4.4 -0.8 -0.9 -1.4 -0.9 5.8 1.1 3.3 12.0 2016 0.5 4.4 -3.0 -2.6 1.2 -1.2 5.0 2.5 2.4 -3.4 2017 1.3 -6.6 0.9 0.8 0.8 -2.4 6.3 1.0 3.9 0.1 2018 3.3 2.9 1.4 1.3 2.1 2.1 7.7 2.7 5.0 1.2 2019 1.7 1.5 1.1 1.0 1.1 2.0 2.7 1.4 1.9 1.2 2020 1.4 1.1 0.3 0.2 0.8 2.5 4.2 1.1 2.1 1.2 2021 1.2 1.0 0.6 0.5 0.7 0.9 2.4 0.9 1.7 0.7 2022 1.2 1.1 0.4 0.3 0.7 1.7 3.3 1.0 1.8 0.5 2023 1.1 0.9 0.6 0.6 0.8 1.0 2.8 0.9 1.7 0.5 2024 1.1 1.0 0.4 0.4 0.9 1.1 2.4 1.1 1.6 0.5 Sector Rank 83/193 89/193 62/193 58/193 82/193 104/184 47/184 79/193 57/184 N/A Economy Rank 354/694 391/694 322/694 311/694 389/694 116/216 55/216 378/694 63/216 N/A
Annual Change
Key Ratios
Industry Data
SOURCE: WWW.IBISWORLD.COM
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Apr 2016 - Mar 2017 by company revenue Apr 2013 - Apr 2014 - Apr 2015 - Apr 2016 - Small Medium Large Mar 2014 Mar 2015 Mar 2016 Mar 2017 (<$10m) ($10-50m) (>$50m)
Liquidity Ratios
Current Ratio 2.1 2.0 2.2 2.2 2.2 2.1 2.4 Quick Ratio 1.1 1.1 1.2 1.2 1.3 1.1 1.2 Sales / Receivables (Trade Receivables Turnover) 8.4 8.4 8.4 8.9 10.7 8.8 7.5
Days’ Receivables 43.5 43.5 43.5 41.0 34.1 41.5 48.7 Cost of Sales / Inventory (Inventory Turnover) 4.4 4.2 4.2 4.5 5.8 4.5 3.9
Days’ Inventory 83.0 86.9 86.9 81.1 62.9 81.1 93.6 Cost of Sales / Payables (Payables Turnover) 11.6 11.3 12.8 11.9 12.2 11.6 11.6
Days’ Payables 31.5 32.3 28.5 30.7 29.9 31.5 31.5 Sales / Working Capital 6.3 6.4 5.9 6.9 8.5 6.8 4.6
Coverage Ratios
Earnings Before Interest & Taxes (EBIT) / Interest 7.4 8.7 8.6 6.3 7.0 7.2 4.6
Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt 2.8 3.3 3.0 3.1 3.2 2.8 5.9
Leverage Ratios
Fixed Assets / Net Worth 0.5 0.4 0.5 0.6 0.4 0.6 1.3 Debt / Net Worth 1.4 1.1 1.2 1.3 1.2 1.1 3.1 Tangible Net Worth 31.8 32.9 30.6 24.0 18.8 35.5 11.4
Operating Ratios
Profit before Taxes / Net Worth, % 21.2 23.7 26.9 28.3 34.8 23.5 24.8 Profit before Taxes / Total Assets, % 7.6 8.7 9.5 9.2 14.8 9.1 5.6 Sales / Net Fixed Assets 13.1 14.2 12.4 12.6 16.1 12.1 8.0 Sales / Total Assets (Asset Turnover) 1.7 1.8 1.8 1.7 2.3 1.7 1.1
Cash Flow & Debt Service Ratios (% of sales)
Cash from Trading 45.0 44.2 45.8 47.4 50.2 48.0 35.6 Cash after Operations 6.3 6.9 7.0 9.1 8.7 9.1 11.2 Net Cash after Operations 6.0 6.7 6.7 9.0 8.7 8.8 9.5 Cash after Debt Amortization 1.6 1.8 2.2 3.5 3.7 3.4 2.7 Debt Service P&I Coverage 2.8 2.9 3.2 3.3 4.4 3.2 3.0 Interest Coverage (Operating Cash) 8.5 9.0 8.3 10.5 11.2 12.3 7.7
Assets, %
Cash & Equivalents 13.4 13.6 14.0 12.8 15.9 11.7 8.9 Trade Receivables (net) 23.2 23.0 22.7 22.0 23.9 22.7 17.3 Inventory 22.8 22.9 22.6 21.1 21.0 22.3 19.1 All Other Current Assets 2.5 2.6 2.3 3.5 4.0 3.6 2.6 Total Current Assets 61.9 62.2 61.6 59.4 64.8 60.4 47.9 Fixed Assets (net) 19.6 19.5 19.5 19.9 20.6 20.9 16.6 Intangibles (net) 11.5 10.9 12.0 14.0 6.6 13.3 29.1 All Other Non-Current Assets 7.0 7.4 6.9 6.7 8.0 5.5 6.4 Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Total Assets ($m) 15,144.8 14,885.8 14,035.5 14,182.1 367.9 3,162.9 10,651.4
Liabilities, %
Notes Payable-Short Term 8.4 8.8 8.0 8.2 13.5 6.0 2.8 Current Maturities L/T/D 2.9 3.2 2.8 3.3 4.0 3.6 1.3 Trade Payables 11.7 12.6 10.2 10.6 13.2 10.2 6.6 Income Taxes Payable 0.2 0.3 0.2 0.3 0.4 0.2 0.2 All Other Current Liabilities 9.6 9.6 11.0 12.9 14.0 11.6 13.2 Total Current Liabilities 32.8 34.5 32.2 35.3 45.2 31.7 24.1 Long Term Debt 14.8 14.6 18.0 20.3 23.2 14.6 25.9 Deferred Taxes 0.7 0.8 0.7 0.7 0.2 0.8 1.5 All Other Non-Current Liabilities 8.4 6.3 6.5 5.6 5.9 4.1 8.0 Net Worth 43.3 43.8 42.6 38.0 25.4 48.8 40.5 Total Liabilities & Net Worth ($m) 15,144.8 14,885.8 14,035.5 14,182.1 367.9 3,162.9 10,651.4
Maximum Number of Statements Used 461 449 454 379 147 152 80
Industry Financial Ratios
Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more than 260,000 statements of member financial institutions’ borrowers and prospects. Note: For a full description of the ratios refer to the Key Statistics chapter online.
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Jargon & Glossary
BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.
CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.
CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.
DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.
EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.
ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.
ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.
EXPORTS Total value of industry goods and services sold by US companies to customers abroad.
IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.
INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.
INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.
INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.
LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.
PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.
Industry Jargon
IBISWorld Glossary
510(K) PREMARKET NOTIFICATIONS A premarket submission made to the FDA to demonstrate that the device to be marketed is at least as safe and effective to a legally marketed device that is not subject to PMA.
CLINICAL RESEARCH The study of a device in human subjects with the intent to discover potential beneficial effects or determine its safety and efficacy.
WHOLESALE BYPASS A popular trend within retail and manufacturing industries where producers supply goods directly to stores, eliminating the middleman.
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Jargon & Glossary
VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.
WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.
IBISWorld Glossary continued
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