Medical and dental instruments and supplies - Industry Overview

Michael J. Fuchs

Shipments by the combined medical equipment industries are expected to increase 8 percent in constant dollar value in 1993, following an 8.7 percent increase in 1992.

Medical and dental instruments and supplies comprise five specific industries: surgical and medical instruments (SIC 3841); surgical appliances and supplies (SIC 3842); dental equipment and supplies (SIC 3843); x-ray apparatus and tubes (SIC 3844); and electromedical equipment (SIC 3845).

These industries manufacture a wide range of health care products used to diagnose and treat patients, ranging from tongue depressors to highly sophisticated diagnostic devices that can provide clear images of internal organs. Medical items not covered in this chapter include in vitro and in vivo diagnostics, classified under SIC 2835, and surgical gloves, condoms, and similar latex-based products that fall under fabricated rubber products, not elsewhere classified (SIC 3069). For other topics related to this chapter, see chapters 42 (Health and Medical Services), and 43 (Drugs and Biotechnology).

Before reading this chapter, please see "How to Get the Most Out of This Book" on page 1. It will answer questions you may have concerning data collection procedures, factors affecting trade data, forecasting methodology, the use of constant dollars, the difference between industry and product data, contact points for sources of information, and the Standard Industrial Classification (SIC) system.

Medical equipment manufacturers experienced solid growth in 1992, as output, employment, and trade continued their upward trend. This growth was fueled by rising national health care expenditures, which are expected to reach $838.5 billion in 1992, an 11.5 percent increase over the previous year. Strong overseas demand, reflected by a nearly 9.5 percent increase in US. exports, also contributed to the strong performance. Exports accounted for 21.9 percent of product shipments in 1992, compared with 14.8 percent a decade ago.

Despite this success, the medical and dental instruments and supplies industries face growing challenges that may dampen their historic growth. These challenges include the costs of meeting new regulatory requirements to ensure product safety and effectiveness, changes in Medicare reimbursement plans, and pressure from hospitals to contain costs.

Numerous bills have been introduced in Congress to lower health care expenditures, which more than tripled during the 1980's, while extending coverage to the more than 30 million Americans who lack medical insurance. While health care reform may provide new markets for medical equipment suppliers, it also promises to add additional uncertainty to an already heavily regulated industry.

Nevertheless, opportunities are presenting themselves to those manufacturers that can adapt to the slower growth and fiscally conservative domestic market. Products that reduce hospital labor costs will be in strong demand. Labor accounts for about one-half of total hospital expenditures. Other opportunities are appearing in the large, but fragmented, outpatient care market. Encompassing home health care, ambulatory care units, and outpatient surgery centers, this $23 billion market is expected to grow significantly in coming years.

Many overseas medical equipment markets are experiencing strong growth. This, combined with US. Government initiatives to further open key markets and eliminate potential and existing tariff and non-tariff barriers, should ensure expanded trade and investment.

Medical Device Regulations

Among the regulations that affect the medical device industry, the 1990 Safe Medical Devices Act (SMDA), poses a significant challenge to the industry. This landmark legislation redefines how medical products are brought to market.

Key provisions of the law require manufacturers of certain high-risk devices to:

* establish a tracking system to notify patients in the event of product malfunction;

* include a summary of safety and effectiveness data for medical devices when applying for pre-market clearance (known as 510(k)s), or state that such information is available upon request; and

* submit post-market surveillance protocols for certain implants and other devices.

In addition, hospitals and other end-users must directly report injuries and deaths associated with the use of life-sustaining devices directly to the Food and Drug Administration (FDA) and/or manufacturers. Distributors are now required to file medical device reports. Enforcement provisions also have been strengthened, allowing the FDA to order the recall of products, temporarily suspend certain high-risk devices, and impose monetary penalties for violations of the law.

The industry is working with regulatory authorities to ensure that as implementing legislation is drafted, manufacturers' financial burden under the new law is minimized. The industry is particularly opposed to FDA user fees, on the ground that they would constitute a tax on new medical technology and could stifle U.S. (R&D) efforts.

Technology

The industry's concerns about the effects of the SMDA were partially realized in 1991 when the number of medical devices that received pre-market clearance dropped 10 percent, from 4,748 to 4,294. The number of break-through new technologies approved through the FDA's stringent premarketing approval process (PMA) dropped 43 percent in FY91, from 47 to 27, while PMA approval times increased 53 percent. Approval time averaged 633 days for these devices. The time to process product approvals increased an average of 4 percent for 510(k)s and 53 percent for PMAs in 1991.

The industry holds that fewer product approvals and lengthier reviews reduce its competitiveness. Manufacturers in foreign countries often have less burdensome regulations, enabling them to introduce their products more rapidly, domestic producers argue.

Despite these regulatory trends, the US. industry continues to invest heavily in R&D. In 1991, publicly held companies invested an average of 6.3 percent of sales in R&D for the second consecutive year, nearly twice the national average of 3.6 percent for all firms. This rate also compared favorably with that of leading competitors. The European Community (EC) reported a rate of 5 percent, (Germany spent 7 percent), while Japan's medical equipment R&D expenditures totaled 6 percent in 1991.

Domestic Market

The U.S. market for medical devices was expected to increase 5.6 percent in 1992, compared with 8.7 percent the previous year. Hospitals and other end-users face increasing pressure from Medicare and private insurers to curtail rising health care costs. Hospitals, which account for the bulk of medical equipment purchases, saw their total revenues exceed expenses by 4.2 percent in 1990, up from 3.7 percent the previous year, but still below the 7.3 percent margin of 1984. However, the overall financial performance of various hospital groups differed significantly. Large urban hospital have consistently reported one of the lowest total margins, whereas the opposite has been the case for large rural hospitals. Over 25 percent of all hospitals reported a net loss in 1990.

Hospitals have sought to adapt to a changing health care environment that saw admissions decline to 33 million in 1990, nearly 5 million fewer than in 198 1. Occupancy rates fell 15 percent during this period, and average length of stay declined 8.9 percent. As a result, hospitals have directed their efforts to the growing outpatient market. Income derived from this market nearly doubled in the 1981-90 period and now accounts for 22.5 percent of total revenue.

The growing outpatient market also has attracted a number of health care providers that compete directly with hospitals. The number of free-standing ambulatory surgical centers increased nearly five-fold in the mid-1980's, while outpatient rehabilitation facilities and urgent-care and diagnostic imaging centers also have grown sharply.

Intensity of care has increased in all settings as providers compete for health care revenues. New medical technology permits more sophisticated in-patient diagnostic procedures. At the same time, more complex surgeries are being performed increasingly in outpatient facilities.

INTERNATIONAL COMPETITIVENESS

The U.S. medical products industry, which accounted for 48 percent of world output in 1991, remains the leading supplier to the $70.9 billion global market. As the domestic market is expected to expand at slower rates, business opportunities continue to emerge in a number of faster growing overseas markets. Medical equipment exports reached $7.4 billion in 1992, an increase of 9.5 percent over the previous year, and contributed to the industry's growth. Exports accounted for nearly 21.9 percent of product shipments, compared with 14.8 percent 10 years ago.

Despite aggressive targeting of the U.S. market by foreign competitors, imports of medical equipment increased only 3.8 percent in 1992, the first time in four years that imports grew less than 5 percent. The strong growth in exports and the slowed growth in imports contributed to a $3.1 billion trade surplus, the largest to date.

To identify the most attractive medical device markets for U.S. suppliers, the Health Industry Manufacturers Association (HIMA) reviewed the business climate in selected key markets. Based on 10 factors, HIMA found that the EC and Japan are the most attractive markets outside the United States, while other countries--Korea, Taiwan, and Mexico, for example--also demonstrate favorable characteristics. The selection criteria were market size; growth prospects for per capita consumption of these products; expected growth trends for medical devices; industry and government's commitment to R&D; relative openness of the market, including factors such as tariff and non-tariff barriers; the reimbursement and regulatory climate for medical devices; strength of the domestic industry's ability to support its goal and objectives; Government support of the industry; and Government willingness and ability to simplify and harmonize medical device regulations.

European Community

The $19 billion medical products market in the EC is the largest outside of the United States. The market grew 6.3 percent in 1991 and is expected to grow at an annual average rate of 7 percent through 1995. The aging of the population and a lower per capita consumption of medical devices compared with the United States and Japan suggest market potential. This prospect has already spurred US. medical equipment exports to the EC, which reached $2.2 billion in 1992.

Further growth for US. medical equipment in the EC may present itself with the development of a harmonized regulatory system for medical devices. US. suppliers will have to meet only one set of regulations to sell their products, rather than 12 separate sets of requirements.

Three EC directives affect the medical device sector: the Active Implantable Medical Devices directive covering pacemakers and other implantables became effective on January 1, 1993, with a two-year transition period. The bulk of medical devices is covered under the Medical Devices Directive (MDD). It is likely to go into effect in early 1995 and will have a three-year transition period. Work has only recently begun on the In Vitro Diagnostics Directive. Implementation is likely to lag behind that of the MDD.

To place products on the EC market after implementation of medical device legislation, manufacturers will have to go through the necessary steps to certify that their products conform to EC requirements. Accredited or "notified" EC bodies will perform required tests and issue certificates of conformity where third-party testing is required. Non-EC bodies, such as U.S. test houses, may serve as subcontractors to EC notified bodies to perform product tests and quality assurance inspections. This will help ensure that US. medical devices are approved in a timely fashion. Moreover, EC officials have indicated that they are willing to negotiate mutual recognition agreements which would provide for the establishment of non-EC notified bodies in the United States and other countries.

Japan

Japan is the largest single-nation market for medical products outside the United States. This $12 billion market grew 8 percent in 1991 and is expected to continue expanding at the same rate through 1995. Despite Government efforts to contain rising health care expenditures, the Japanese market continues to grow because the country's aging population is demanding increased access to health care products, and because Japan's socialized health insurance system covers every citizen. Japan spent $94 per capita on medical products in 1991. This compares favorably with $118 per capita in the United States and $108 in Germany.

U.S. exports to Japan totaled $1 billion in 1992, an increase of 13 percent

over the previous year. The United States remained Japan's leading foreign medical equipment supplier, accounting for nearly 50 percent of total imports. US. imports from Japan increased less than 1 percent to $1 billion in 1992, and virtually offset exports. Japan is a net exporter of medical equipment and is particularly competitive in x-ray-based technologies.

Despite growing US. exports to Japan, the market remains difficult to penetrate. US. market share in Japan was 20 percent in 1991, far below the 48 percent global market share that U.S. firms typically hold in overseas markets outside of Japan.

U.S. Government negotiations continue to address U.S. industry concerns under the Market-oriented Sector-Selective forum. These include issues under the Japanese insurance system for reimbursing health care expenses--reimbursement is perceived to be slow; the introduction of sophisticated medical technologies that often originate in the United States; and the Japanese regulatory system, which allegedly hinders medical equipment imports.

Canada and Mexico

The creation of a free trade zone with Mexico and Canada, as proposed under the North America Free Trade Agreement (NAFTA), will create an estimated $32.7 billion market for medical products, the world's largest. The Canadian market is expected to grow 8 percent and the Mexican market 6 percent through 1995.

Both countries were leading export destinations for US. medical equipment in 1992. US. exports to Canada reached $945 million, making it the second largest export market after Japan. Exports to Mexico increased 10.4 percent, to $424 million, making it the seventh leading purchaser of US. medical equipment.

NAFTA will provide greater access for medical equipment manufacturers across the United States, Canada, and Mexico. Trade flows should increase, as the agreement calls for the immediate elimination of tariffs on most medical devices. NAFTA should assist companies in further expanding their investments in Mexico and Canada. It also will ensure that the important Mexican public sector market, which accounts for the bulk of purchases, remains open by requiring transparent and nondiscriminatory government procurement practices.

East Asia

The six countries that comprise the Association of Southeast Asian Nations (ASEAN), in addition to Korea and Taiwan, represent a small but rapidly growing market for US. suppliers of medical products. In 1991, this market stood at $1.4 billion and is expected to grow at an average annual rate of approximately 15 percent through 1995. Factors that contribute to the expanding medical products market are exceptional economic growth, which has allowed the respective governments to upgrade and build new hospitals and clinics; implementation of health insurance programs that in certain countries call for universal coverage; and limited local production that focuses on lower technology medical items.

While US. exports totaled only $380 million in 1992, they are expected to grow rapidly in the future. Imports stood at $241 million, producing a surplus of $139 million.

Competition is fierce in this region, as the United States, Japan, and Germany vie for market share. The trade and investment environments are relatively open. Many foreign companies have established local production facilities to take advantage of lower labor costs. However, a growing number of regulatory and reimbursement requirements can delay the introduction of foreign medical technologies.

Eastern Europe and the Newly Independent States of the Former Soviet Union

Improving health care is a high priority for the governments in this region of the world. The dissolution of the Soviet Union has severed historical supplier relationships among the former Soviet republics and with Eastern Europe. The slow shift to a free-market economy is causing painful restructuring in the health sector as domestic suppliers seek joint ventures with foreign firms to produce higher quality medical devices and components. Despite the uncertain regulatory environment, unpredictable changes in tax rates, currency inconvertibility, unpaid debts, and lack of commercial, legal or market information, many Western firms consider the newly independent states of the former Soviet Union a huge potential market. These firms are beginning to discuss a wide array of commercial ventures with health officials, including the creation of private distribution networks for medical products to replace the former centralized system.

Due to the dissolution of the Soviet Union, U.S. exports have declined dramatically from their peak of $27 million in 1990. Exports are expected to improve as various US. Government programs, including creation of a bilateral U.S.-Russia Medical Equipment, Products and Health Services Working Group, seek to assist the reconstruction of the productive capacity in the health sector through private sector participation.

Eastern Europe has made strides in overcoming some of the barriers afflicting the newly independent states. The nations in Eastern Europe have dedicated major assets so programs aimed at increasing their health care services and improving their infrastructure. US. exports to Eastern Europe rose 29 percent in 1992, to $28.6 million, with instruments, electromedical and x-ray equipment leading the way.

Global Regulatory Harmonization

Regulators and industry representatives in the United States and other countries recognize the benefits to be gained from harmonizing key regulatory requirements. Discussions are beginning that could lead to the elimination of duplicative requirements in global markets and help ensure open access to these markets.

SURGICAL AND MEDICAL INSTRUMENTS

Shipments by the surgical and medical instruments (SIC 3841) industry rose an estimated 10.3 percent in 1992, to $12.1 billion measured in constant dollars. Fueled by health concerns over the spread of AIDS and other infectious diseases, industry shipments of these primary nonelectronic diagnostic and therapeutic devices have grown consistently since the mid-1980's.

The industry employed an estimated 96,900 in 1992, up 4.4 percent from 1991. Production workers made up 61.7 percent of the work force.

INTERNATIONAL COMPETITIVENESS

U.S. manufacturers of medical and surgical instruments remain extremely competitive in international markets. Exports of $2.3 billion in 1992, the largest dollar volume in the medical and dental group, grew 5.8 percent over 1901. US. exports increased 30 percent to Latin America, with Mexico accounting for the majority. The Mexican market will become even more important as NAFTA leads to greater access to the country's $500 million market for medical devices. NAFTA also should enable companies to expand their investments in Mexico, both to serve the market for medical devices in Mexico and those in other Latin American countries.

U.S. imports rose 6.5 percent in 1992, to $1.07 billion. The resulting trade surplus rose to $1.2 billion, an increase of 5.2 percent. This surplus should rise further as exports accounted for only 19.4 percent of shipments, among the lowest in the medical group.

Outlook for 1993

Suppliers of medical and surgical instruments that adapt to the changing health care delivery system will lead the growth in shipments, projected to increase 8.5 percent in constant dollars. The outpatient market will become increasingly important, as a growing number of surgeries are performed in ambulatory surgical centers and similar settings. In addition, technological advances aare leading to changes in surgical procedures. The new procedures often are minimally invasive, resulting in less patient discomfort and shorter hospital stays. Already, these surgical advances account for a growing proportion of revenue for providers.

The fastest growing market is in laparoscopic equipment, which is gradually replacing tubular devices and other specialized microsurgical instruments in certain operations. It is projected that 90 percent of the 600,000 gall bladder surgeries performed in the United States every year will eventually be done laparoscopically, creating a growing market for items such as internal surgical staples. Other products expected to benefit from minimally invasive surgery are endoscopes and surgical sutures.

As the new surgical procedures gain wider acceptance, US. manufacturers also will find overseas markets for these products. Economic expansion in East Asia, NAFTA, and EC harmonization efforts for medical devices also should contribute to strong export growth, projected at 10 percent in 1993.

Long-Term Prospects

Industry shipments of medical and surgical instruments are projected to increase at an annual rate of 6 percent during the five-year period ending in 1997, measured in 1987 dollars. By that time, manufacturers will have adapted to the requirements of the 1990 Safe Medical Devices Act and be able to focus on the economic fundamentals that underlie this industry: population demographics and changing disease conditions.

SURGICAL APPLIANCES AND SUPPLIES

Manufacturers of surgical appliances and supplies (SIC 3842) shipped an estimated $12.4 billion in 1992, an increase of 7.2 percent in constant dollars. The industry manufactures a wide range of products, including wheelchairs, crutches, prostheses, orthopedic supplies, bandages, and protective clothing. Industry shipments have grown for 16 consecutive years.

Employment rose 2.2 percent in 1992, to 91,400. Production workers comprised 66.5 percent of the work force, up 3.8 percent from 1991.

INTERNATIONAL COMPETITIVENESS

The surgical appliances and supplies industry has become more active in international markets in recent years. U.S. exports accounted for only 13.9 percent of shipments in 1992, compared with 6.5 percent in 1987. Exports reached $1.7 billion, an increase of 14.6 percent over 1991. Canada remained the most important destination for these products. Among other major trading partners, the EC had the strongest demand, increasing purchases of U.S. surgical appliances and supplies nearly 24 percent over 1991. Harmonization of EC medical device regulations should ensure that trade and investment opportunities in the region will expand. Principal export items to the EC include respiratory products, orthopedic equipment and supplies, and artificial joints and internal fixation devices.

While U.S. imports of surgical appliances and supplies increased 21.9 percent in 1992, to $806 million, they accounted for only 6.7 percent of shipments, the lowest of the medical equipment group. As a result, the trade surplus reached $855 million in 1992, an 8.4 percent increase over the previous year.

Outlook for 1993

The value of shipments of surgical appliances and supplies is expected to increase 8.5 percent in 1993. Cost conscious hospitals will seek to ensure that prices for conventional supplies remain near the overall inflation rate. Specialized surgical appliances should face less severe pricing pressures and may provide end-users with cost savings. These include kidney dialysis items that can be used in outpatient settings, implantable infusion pumps for patients suffering from liver cancer, and nutritional therapy products. The home health care market represents another growing segment of the outpatient market and is expected to increase 10 percent in 1993.

Exports are expected to reach $1.9 billion in 1993, an increase of 13 percent. Exports of implantable devices to Japan are expected to grow because local competition is limited. Imports are expected to rise 1 1 percent, to nearly $900 million.

Long-Term Prospects

Industry shipments are expected to increase at an average annual rate of 7 percent over the next five years. The increasing number of medical services and procedures that will be provided in outpatient settings will stimulate further demand for surgical appliances and supplies. In addition, the aging of the population in the United States and abroad and the increase in diseases prevalent among the elderly will continue to spur technological innovation.

Western Europe will remain the most important export market for surgical appliances and supplies. The Far East, Latin America, Eastern Europe, and the newly independent states of the former Soviet Union should provide long-term trade and investment opportunities as these countries emphasize development of their health care sectors.

DENTAL EQUIPMENT AND SUPPLIES

Manufacturers of dental equipment and supplies (SIC 3843) were expected to increase shipments 1.6 percent in 1992, measured in constant dollars. Shipments have remained relatively flat since 1988 as this small industry continues to consolidate.

The dental industry employed approximately 13,250 people in 1992, a 1.1 percent increase over 199 1, following a similar increase in 1990. Demonstrating the high labor intensity of the industry, production workers accounted for 62.7 percent of total employment.

INTERNATIONAL COMPETITIVENESS

Offsetting slow domestic growth, international markets represent a significant source of revenue for the industry. Exports now account for one-third total shipments, compared with the medical group's average of 21.9 percent. US. exports of dental equipment soared 21.8 percent in 1992, to a record $458 million. The EC accounted for nearly half of these purchases. However, the sharpest growth occurred in the Far East. Exports to Japan increased 64 percent. Strong demand in Singapore, Taiwan, and Korea also contributed to sharp increases in exports.

U.S. imports of dental equipment and supplies rose 7.5 percent in 1992, to $200 million. Imports accounted for 18.1 percent of consumption, more than double the rate of 1985. The EC remains the leading supplier to the United States. However, U.S. dental laboratories and clinics have sharply increased their purchases from Japan (19 percent), Taiwan (64 percent), and Korea (26 percent), as these countries can provide low-cost products and supplies.

Outlook for 1993

The value of shipments is expected to increase at a constant-dollar rate of 5.3 percent as the number of consolidations in the dental equipment and supplies industry decreases. The shakeup is the result of a significant drop in tooth decay over the last two decades, an outgrowth of the use of fluoride and increased oral hygiene. Consequently, demand for hand-held instruments, dental cements, amalgam alloys, and other traditional items is declining.

To attract patients, dentists are providing a broader range of specialized services, such as treating periodontal disease, a leading cause of tooth loss. This and other growth areas will increase demand for dental implants, orthodontic supplies, and composite resins.

Long-Term Prospects

From 1992-1997, dental equipment and supply shipments are projected to increase an average of 3 percent in constant dollars.

As demand overseas is expected to exceed that in the United States, exports will remain an important source of revenue. If past trends hold true, exports will account for about 40 percent of shipments, the highest in the medical and dental group. While Western Europe will remain the largest market, the small but growing dental markets in Eastern Europe and the newly independent states of the former Soviet Union will offer good trade and investment opportunities.

X-RAY APPARATUS AND TUBES

In 1992, shipments of the x-ray apparatus and tubes industry (SIC 3844) rose 11.2 percent, to $3.1 billion, the fourth consecutive year of double-digit growth. Manufacturers of these radiographic, fluoroscopic, and therapeutic x-ray devices, most of which are used in medical applications, have benefitted from the spread of these increasingly sophisticated products to smaller locations, such as doctors' offices, ambulatory care centers, and outpatient clinics.

Total employment stood at 13,740 in 1992, an increase of 2.9 percent over 1991. Production workers made up 51.7 percent of the work force.

INTERNATIONAL COMPETITIVENESS

Stronger-than-expected domestic demand shifted manufacturers' attention away from international markets. As a result, exports rose only 4 percent in 1992, to $783 million. Leading markets were Japan, Germany, and Canada. Although exports to Eastern Europe totaled only $8 million, this was a threefold increase over 1991.

U.S. imports of x-ray apparatus and tubes totaled $1.1 billion in 1992 and declined 2.7 percent after five years of consecutive growth. This contributed to a 16.5 percent improvement in the $304 million trade deficit. Imports accounted for over 42 percent of consumption, the highest in the medical group. Germany and Japan remain the United States' leading competitors, accounting for nearly 60 percent of imports.

Outlook for 1993

Industry shipments of x-ray apparatus and tubes are forecast to increase 5.6 percent in constant dollars. Capital intensive new medical technologies, such as cardiac catheterization, computed tomography (CT), and megavolt radiation therapy will continue to be purchased by hospitals, despite the prospective payment system introduced in 1983, which regulates Medicare reimbursements for inpatient services more stringently. In general, larger hospitals are expected to expand the availability of these technologies, whereas smaller hospitals can usually just afford the more traditional radiography and fluoroscopy technologies.

U.S. exports are expected to increase 7 percent, to $838 million, while imports should increase 5 percent, to $1.1 billion. This will reduce the trade deficit slightly, to $303 million.

Long-Term Prospects

During the five-year period ending in 1997, manufacturers of x-ray apparatus and tubes are expected to increase shipments at an average annual rate of 5 percent as hospitals adopt new technologies at slower rates in response to cost-containment efforts. As domestic growth slows, this export-intensive industry will refocus its efforts on international markets. U.S. exports are expected to increase 5 percent. Strong growth potential lies in the developing markets of Latin America and East Asia. Longer term commercial opportunities exist in the former Soviet Union and other Eastern bloc nations. U.S. manufacturers will face continued strong competition in these regions from Germany and Japan, which invest significant proportions of earnings in x-ray R&D.

ELECTROMEDICAL EQUIPMENT

The electromedical equipment industry (SIC 3845) manufactures a wide range of powered medical devices, including pacemakers, patient monitoring instruments, and radiology products (excluding irradiation equipment). Industry shipments grew at a constant-dollar rate of 9.2 percent in 1992, following four years of double-digit growth driven by increased hospital purchases.

The electromedical equipment industry employed 35,540 during 1992, an increase of 3.7 percent. The number of production workers increased 1.3 percent and accounted for nearly 40 percent of the industry's employment. INTERNATIONAL COMPETITIVENESS US. exports of electromedical equipment increased 9.5 percent in 1992, to $2.2 billion. Combined with a 2.7 percent drop in imports, the trade surplus rose $1 billion, a 29.3 percent increase over 1991. Exports accounted for 35 percent of product shipments, among the highest in the medical equipment group. Principal overseas purchasers were the EC, Japan, and Canada. U S. Government efforts to expand access to foreign markets should ensure continued growth of this export dependent industry. Export items showing the strongest growth were ultrasound scanners, pacemakers, and other electrodiagnostic devices.

Imports of $1.2 billion in 1992 accounted for 22.7 percent of consumption. Leading suppliers of x-ray apparatus and tubes to the US. market were Japan and Germany, which together accounted for about 60 percent of total imports.

Outlook for 1993

Constant-dollar shipments of electromedical equipment are forecast to increase 7.8 percent. Demand for capital intensive items, such as magnetic resonance imagers (MRI), should grow only moderately because hospitals made significant investments in this technology over the last three years. Ultrasound should remain the fastest growing imaging modality. Only one-half of U.S. hospitals have purchased this equipment in the last three years. Ultrasound offers cost-effective substitutes for more expensive CT and MRI scans. New technological advances, such as real-time, quantitative diagnosis of the heart, also may increase demand.

The industry is working with the FDA to harmonize international regulatory requirements for electromedical equipment with those of the U.S. This would expedite access to the EC market, which has committed itself to adopting relevant standards developed by international standards-setting organizations. Exports to the EC are forecast to increase 11 percent in 1993. Other potential markets for electromedical equipment include Latin America, Asia, and India. However, competition is expected from Japan, which is focusing its efforts on developing its own pacemaker.

Imports are expected to increase 7.5 percent, to $1.3 billion, with the EC and Japan accounting for the bulk of the total.

Long-Term Prospects

During the five-year period ending in 1997, industry shipments of electromedical equipment are projected to increase 7 percent. Demand for these products will be determined by such factors as the increase in radiological services provided by physicians.

The development of picture archiving and communication systems (PACS) may eventually replace film in radiology departments. The benefits of this technology include digital storage capability that could reduce archiving costs and make possible rapid transmission of diagnostic images through local area networks. While adoption of entire PACS systems may not occur before the 2 1 st century, markets for subsystems may find application by 1997.--Drafted by Michael Fuchs. Direct inquiries to Patricia Eyring, Office of Microelectronics, Medical Equipment, and Instrumentation, (202) 482-0429, August 1992.

[TABULAR DATA OMITTED]

Additional References

(Call the Bureau of the Census and other references directly for information about how to order documents.) Medical Instruments, Ophthalmic Goods, Phologmphic Equipment, Clocks, Watches and Watchcases, SIC Industries 3841, 3842, 3843, 3844, 3845, 3851, 3861, 3873; 1987 Census of Manufactures, Industry Series MC87-1-38B; Bureau of the Census, Washington, DC 20233. Telephone: (301) 7634100. Electromedical Equipment and Irradiation Equipment (Including X-Ray), Current Industrial Reports 1991, MA-36R(92)-1; Bureau of the Census; Washington, DC 20233. Telephone: (301) 763-4100. The Global Medical Device Report. Market for Healthcare Technology Products, July 1992, Health Industry Manufacturers Association, 1200 G St. NW, Suite 400, Washington, DC 20005. Telephone: (202) 783-8700. Medical Device & Diagnostic Industry, Canon Communications, Inc., Santa Monica, CA 90403. Telephone: (310) 392-5509. Medicare Prospective Payment and the American Health Care System, Report to the Congress, June 1992, Prospective Payment Assessment Commission, 300 7th St. SW Suite 301 B, Washington, DC 20024. Telephone: (202) 401-8986.

COPYRIGHT 1993 U.S. Department of Commerce
COPYRIGHT 2004 Gale Group