A Tough Year for U.S. Medical Device Manufacturing
U.S. medical device manufacturers faced economic and regulatory headwinds in 2011, leading some to call it the industry ’s worst year in recent memory.
December 13, 2011
U.S. medical device manufacturers faced economic and regulatory headwinds in 2011, leading some to call it the industry’s worst year in recent memory.
Employment in the sector fell 2.3% last year, according to the U.S. Bureau of Labor Statistics. The lagging effects of the recession are partly to blame, says Mark Landy, senior medical device analyst with Summer Street Research Partners. Consumers have cut back on healthcare expenditures, pushing down demand for devices. To cope, manufacturers are shifting jobs overseas and scaling back on production, Landy says.
“Management of the larger companies and all companies that manufacture medical devices have in 2010 and 2011 started right-sizing industry manufacturing to be more in line with current demand,” Landy says.
That could also explain a surge in exports. After remaining mostly flat in 2009, device exports leaped 8.9% last year.
“Certainly many of these companies are looking to build a presence in emerging markets and European markets that have performed better than the United States.,” Landy says.
Add in a difficult regulatory environment, and it’s not hard to see why U.S. manufacturing of medical devices hasn’t been up to par.
“If you talk to people who have been in the industry a long time, they’ll tell you it’s the most difficult regulatory environment they’ve seen ever,” says John M. Putnam, managing director of Capstone Investments. “Couple that with the tough economic environment, and it’s been a tough year. The earnings and growth of earnings for the industry has not been what it’s been in the past.”
As 2011 comes to a close, the question is: What does 2012 have in store for the medical device industry? More of the same, Putnam says. But, on the bright side, he says industry is learning to adapt to the challenges it’s facing.
“In 2012, those pressures might still be there, but they won’t have the same impact,” Putnam says. “Things won’t get better quickly, but they’re not going to get much, much worse than they were in 2011.”
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