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The Medical Device Industry's Robust Times: Are They Sustainable?

Executive Summary

Notwithstanding an occasional blip, the environment for medical device companies has never been stronger, with robust technology development, company creation rewarded with high levels of private and venture investment, and strong M&A activity all supporting a business model that was born out of the doldrums that device companies found themselves in a decade ago. Still, there are pressures that are straining the current model and raising legitimate concerns, including physician conflict-of-interest charges; regulatory pathways that are trickier and a climate of evidence-based medicine that leads to longer, more expensive trials; and a robust M&A environment that is sustainable only if a next-generation of acquiring companies steps up. Part one of a two-part series.

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Industry Outlook: Is Health Care Recession-Proof?

In the current credit crisis, the widely held notion that health care is a recession-proof industry is being put to the test. The pretext has been that no matter how poor the economy becomes, people will still need medical treatment, and private and public insurers will still have money set aside to pay for those treatments. Although there's some validity to that oversimplification of health care as a business, it doesn't take into account the real fuel that keeps any business running--the availability of credit. While medical supply manufacturers may be in a better position than many companies in other industries, hospitals, which purchase those medical supplies, are not faring as well. That should be a concern to all.

Industry Outlook: Is Health Care Recession-Proof?

In the current credit crisis, the widely held notion that health care is a recession-proof industry is being put to the test. The pretext has been that no matter how poor the economy becomes, people will still need medical treatment, and private and public insurers will still have money set aside to pay for those treatments. Although there's some validity to that oversimplification of health care as a business, it doesn't take into account the real fuel that keeps any business running--the availability of credit. While medical supply manufacturers may be in a better position than many companies in other industries, hospitals, which purchase those medical supplies, are not faring as well. That should be a concern to all.

Health Care Trends: Cost Control Measures in Full Swing

Affordability drives medical devices purchases and use. Even the most remarkable devices can see a tremendous downturn in usage is reimbursement is lowered. That's why an an annoucement that CMS is considering changes to coverage of certain medical procedures is making device company CEOs more than a little nervous.

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