Medical Supplies and Devices
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Industry Overview
The medical supplies and devices manufacturing industry includes about 12,000 companies with combined annual revenue of $78 billion. Large manufacturers include Johnson & Johnson, Baxter, Medtronic, and Boston Scientific. The industry is slightly concentrated: the 50 largest companies hold close to 60 percent of the market.
Medical supply and device manufacturers produce instruments, apparatus, and supplies used in the medical field. The industry doesn't include the manufacture of x-ray or electromedical equipment and devices, such as ultrasound equipment, pacemakers, and electrocardiographs.
Competitive Landscape
Demand is driven by population demographics and advances in medical knowledge and technology. The profitability of individual companies depends on the ability to develop superior products. Large companies have economies of scale in manufacturing and R&D. Small companies can compete successfully by specializing in a particular market segment, or through technical innovation. Annual revenue per employee is about $250,000.
Products, Operations & Technology
Major products include surgical and medical instruments such as syringes, hypodermic needles, and catheters (nearly 40 percent of industry revenue), and surgical appliances and supplies such as sutures, surgical dressings, and orthopedic devices (also about 40 percent). Other sources of revenue include lab equipment and furniture (centrifuges, scales, operating tables, hospital beds); ophthalmic goods (prescription glasses, contact lenses); and dental equipment and supplies.
Syringes are typically produced in assembly lines. The basic stages include needle formulation, plastic component molding, piece assembly, packaging, labeling, and shipping. Needles are produced from molten steel drawn through a die. The steel is rolled into a continuous, hollow wire and cut to form the needle. Plastic barrels and plungers can be made through extrusion or injection modeling. The barrel moves down a conveyor and is held in place to receive the plunger, needle, and safety cap. The completed syringes are packed into boxes, stacked on pallets, and sent to distributors.
Sterility and safety are key in manufacturing. Steel is often coated with nickel to prevent corrosion, and the production plant must be free of disease-causing agents. Workers wear masks and sterile garments to prevent the spread of germs. Quality control agents use precise instrumentation like calipers, micrometers, or microscopes to ensure that products are the appropriate thickness, length, and width.
For many technically advanced products, manufacturing is labor-intensive. Many small manufacturers outsource manufacturing to facilities operated by contract manufacturers. Manufacturers of low-tech product like latex gloves, tape, syringes, and gauze are most concerned with maintaining a highly efficient, low-cost manufacturing environment. Companies that specialize in diagnostic and therapeutic devices generally emphasize technological innovation and precision.
Major inputs include stainless steel, silicone or latex rubber, plastic, aluminum, polymers, and natural fabrics. Electricity and natural gas typically provide the power for manufacturing.
The industry is technologically advanced, and new product development is a major activity for most manufacturers. Patents are valuable and patent disputes frequent. Large companies often buy small companies that have developed promising new technologies.