Medical and dental instruments and supplies - Industry Overview

Michael J. Fuchs

Medical equipments represent a wide range of health care products used by physicians to diagnose and treat patients in inpatient and outpatient settings. These range from tongue depressors, to highly sophisticated diagnostic devices that can provide clear images of internal organs.

Medical and dental instruments and supplies include 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). Items that fall outside the realm of this chapter include diagnostic products, classified under In Vitro ard In Vivo Diagnostic Substances (SIC 2835); and surgical gloves, condoms, and similar latex based products, under Fabricated Rubber Products, Not Elsewhere Classified (SIC 3069).

Before reading this chapter, please see "How to Get the Most Out of This Book" on page 1. It will clarify 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, sources and references, and the Standard Industrial Classification system (SIC). For other topics related to this chapter, see chapters 43 (Health and Medical Services), and 44 (Drugs).

Medical equipment manufacturers experienced another strong year of growth with rising trends on all traditional indicators of competitiveness, such as output, employment, and trade. Growth levels were driven by national health care expenditures, which increased 11.1 percent to a record $604 billion in 1989, and strong foreign demand that resulted in a record sixth year of export growth approaching 20 percent.

However, the industries are facing strong challenges in domestic as well as international markets that may slow their historically strong economic performance. These include the costs of new regulatory requirements to ensure product safety and effectiveness, and changes in Medicare coverage and payment policies aimed at curbing spiraling health care costs. One example of the former is the 1990 Safe Medical Devices Act, which redefines many of the procedures for bringing medical devices to the market. Medicare, meanwhile, has implemented a prospective payment system for physicians, as well as for capital items such as computed tomography scanners (CT) and other high-cost radiology products. Medical device companies now are forced to balance the need to expend funds on meeting increased health care regulation with those of funding new medical technologies.

Internationally, implementation of medical device regulations will continue to pose challenges to U.S. firms seeking greater access to foreign markets. In the European Community (EC), officials are harmonizing the approval process to achieve a unified market by the end of 1992. In Japan, the government is revising its health requirements and reimbursement system to control rising health care costs.

Medical Device Regulations

The Safe Medical Devices Act of 1990 is the first comprehensive legislation to cover this industry in 14 years. It establishes new requirements for manufacturers to ensure that products entering the market are safe and effective, particularly in the areas of premarket approval and postmarket surveillance. For example, premarket notification applications, commonly referred to as 510(k)s, for certain types of medical equipment now must include a summary of safety and effectiveness data or state that such information is available upon request. The law also requires that for high risk devices introduced after 1990, manufacturers must conduct postmarket surveillance. The Food and Drug Administration (FDA) also may require postmarket surveillance for any other device if the agency believes this action is necessary to protect public health. Other provisions of the law call for regulating hybrid products, which are a combination of device, drug, or biologic; track distribution and end use of certain devices; and require hospitals and other end-users to report deiths associated with faulty medical devices.

The law also calls for stricter FDA enforcement. Manufacturers that are not in full compliance with specified good manufacturer practices may face civil penalties, recalls, or cessation of shipments.

The industry is carefully reviewing whether implementation of this law will slow the FDA approval process, as well as whether costs associated with meeting other regulatory requirements in the act might diminish its ability to compete in domestic and international markets.

Technology

The industry's concerns over the effects of these laws were partially realized in 1990. The number of medical devices that received premarket clearance [510 (k)s] by the FDA declined 2.5 percent to 4,748. The number of devices requiring more rigorous premarket approvals declined 16.1 percent to 47. The time to process product approvals by the FDA increased an average of 20 percent in 1990 over 1989.

However, in spite of these trends, the industry continued to develop new products. Research and development (R&D) expenditures for publicly traded medical technology companies continued their upward trend, reaching 6.3 percent in 1990, up from 6.2 percent the previous year. This industry remains one of the most innovative in the United States. Only 32 percent of U.S. medical device patents were of foreign origin in 1990, compared with 48 percent of patents across all industry sectors.

Domestic Market

The U.S. market for medical equipment was expected to increase 4.7 percent in 1991, as manufacturers and end-users gained a better understanding of new medical device regulations. Hospitals, the largest end-users of medical equipment, are continuing to face extreme pressures by the Government and other third-party payers to curtail rising health care expenditures. These cost containment efforts have affected the overall financial status of the hospital industry. Total hospital margins - the difference between total hospital revenues and costs - increased from 3.6 percent to 3.8 percent in 1989. But this still is far below the 7.6 percent reported in 1984, the first year the Government began to reimburse Medicare inpatient procedures a fixed dollar amount under the Prospective Payment System.

As a result, health care delivery will continue to change, which, in turn, will determine the types of products purchased by hospitals and other end-users. For example, inpatient admissions declined 10 percent from 1979 to 1990, while outpatient visits grew nearly 44 percent, the latter now accounting for 27.5 percent of hospital revenue. Nearly one half of surgeries were conducted on an outpatient basis.

The supply of competing providers like ambulatory surgical centers, urgent care centers, comprehensive outpatient rehabilitation facilities, and diagnostic imaging centers have increased rapidly, and are providing significant new markets for medical equipment. In addition, items for home care, such as nutritional therapy products, are expected to grow at rates exceeding 10 percent during the next 5 years.

INTERNATIONAL COMPETITIVENESS

The U.S. medical device industry is the leading supplier in the $65 billion global market, accounting for nearly half of world production. As the U.S. market is expected to slow due to economic reasons, medical device firms are increasingly looking overseas for business opportunities. Medical equipment exports reached approximately $6.7 billion in 1991, representing an increase of 16 percent over 1990. Exports to Europe and Japan, the largest markets outside the United States, led the growth, while Mexico became the seventh leading destination country. Exports have grown at an average of nearly 20 percent annually for the last 6 years, and in 1991 accounted for about 23 percent of product shipments, the highest ratio to date.

Foreign competition continues to intensify, reflected in the 8 percent increase in U.S. imports of medical equipment, to more than $4 billion in 1991. However, this increase is the second time in 3 years that imports have grown at less than double digit rates. The slowed growth in imports, and the sharp increase in exports, combined to contribute to a fifth consecutive annual increase in the U.S. trade surplus for this industry. In 1991, the surplus was $2.7 billion, up 29 percent from the 1990 level.

Western Europe

The $20 billion medical products market in Western Europe is by far the largest outside the United States. Western Europe continues to be this country's largest regional trading partner for medical equipment, accounting for nearly 50 percent of U.S. exports and 51 percent of imports in 1991. U.S. firms also have a strong manufacturing presence in this region. Per capita consumption of health care products in Western Europe, lower than that of the United States, suggests that this affluent region has room for growth, and that it will increase in importance as a market for U.S. manufacturers.

The EC, comprising 12 Western European countries, is developing directives that will determine how medical devices will gain entry into this market. In June 1990, the EC adopted the Active Implantable Medical Device Directive (AIMDD) covering a small product area, including pacemakers and defibrillators. EC member states are scheduled to implement this legislation by July 1, 1992, to become effective December 31, 1992. The EC has established a 2-year transition period for this directive, during which manufacturers can use either EC procedures or the certification procedures of individual countries to demonstrate compliance with essential safety requirements.

The Medical Devices Directive, covering most devices outside of implantable devices to be sold in the EC, is still in a draft stage and is not expected to be made final by the EC Commission and EC Parliament until mid- to late- 1992. Similar to the specifications in the AIMDD, products covered by this directive also will be broken into risk categories. Class I devices, those with minor risks, will be subject to manufacturers' self certification that they are in conformance with EC standards. However, devices considered riskier will fall in Class II or Class III. These devices will be subject to third party testing and certification before receiving marketing approval. The "notified bodies" will oversee the certification of medical devices.

The U.S. industry has been pressing the EC to allow notified bodies to subcontract with test houses outside the EC. If the EC agrees to allow the quality assurance registration and certification functions to be subcontracted - as it already has for product testing - this would allow for greater market access.

Japan

Japan is the single most important U.S. trading partner in medical equipment, accounting for 14 percent of U.S. exports and 25 percent of U.S. imports in 1991. Japan is one of the world's premier suppliers of X-ray and electromedical products; it built a $127 million surplus with the United States in these product areas in 1991.

But the $10 billion Japanese market for medical products also makes it the leading foreign market for U.S. manufacturers. As in Western Europe, lower per capita consumption compared to the United States makes this an attractive growth market. In particular, the increased life expectancy of the Japanese population, far higher than that of Western countries, should contribute significantly to the growing Japanese health care market, which is expected to increase at an annual rate of 10 percent during the 1990's.

U.S. Government negotiations continue under the Market-Oriented Sector-selective (MOSS) forum to address trade issues arising from the Japanese regulatory system designed to protect that country's public health and safety, and health insurance system. Japan's Ministry of Health and Welfare (MHW) is developing price controls on implantable medical devices, such as pacemakers, heart valves, and artificial joints. These are expected to be implemented in April 1992. MHW has upgraded its Office of Medical Devices to division status, combining both research and licensing functions. This should facilitate the approval process for medical devices, which are manufactured domestically and abroad.

Eastern Europe and the Soviet Union

As Eastern Europe and the Soviet Union undertake steps to restructure and modernize their economies, health care and other commercial sectors are receiving high priority. Health care levels remain extremely low because domestic industries are outdated and produce only a fraction of the health equipment needed to meet demand. To improve quality and increase output, these countries are seeking to develop joint partnerships with Western firms. Some countries in Eastern Europe offer relatively advanced health care enterprises as partners. The Soviet Union is seeking to improve output by shifting excess capacity from its defense industry, which historically possessed the most sophisticated production capabilities, to health care and other sectors. Due to a severe shortage of hard currency in the Soviet Union, as well as in Eastern Europe, U.S. firms must employ creative financing techniques to enter those markets. Nonetheless, U.S. exports of medical equipment doubled to Eastern Europe, reaching a level of $20 million in 1991. Exports to the USSR declined 22 percent in 1991 to a level of $21 million. However, this still represents a 150 percent increase over 1989 levels.

The U.S.-USSR Joint Commercial Commission set up a bilateral Working Group in April 1988 to expand commercial relations in health care. This Group has met five times to date, and is increasing its activities with the Ministries of Health in key Soviet Republics. Export controls are no longer an impediment to trade since medical equipment was decontrolled for import to these non-EC market countries.

SURGICAL AND MEDICAL INSTRUMENTS

Manufacturers of surgical and medical instruments (SIC 3841) shipped an estimated $10.7 billion in products in 1991, representing an 8.9 percent increase in 1987 dollars. Industry shipments of these primarily non-electronic diagnostic and therapeutic devices have grown consistently since the sharp increases of the mid-1980's, fueled by health concerns over the spread of AIDS and other infectious diseases.

Total employment stood at 89,300 in 1991, an increase of 4.8 percent over the 1990 level of 85,200. Production workers made up 62 percent of the work force.

INTERNATIONAL COMPETITIVENESS

U.S. manufacturers remain extremely competitive in medical instruments. Exports reached almost $2.2 billion in 1991, increasing 17 percent from 1990, owing to strong foreign demand for disposable products. Exports accounted for 21 percent of product shipments. Mexico has become the third largest U.S trading partner in medical instruments, accounting for 8 percent of U.S. exports and 15 percent of U.S. imports. This market should become even more important as negotiations for the proposed North America Free Trade Area (NAFRA) seek to expand trade between the United States and Mexico in the medical products sector.

Imports in 1991 are estimated to have increased 22 percent to $1 billion, resulting in a trade surplus of $1.2 billion, a 12 percent increase over the previous year.

Outlook for 1992

Industry shipments of surgical and medical instruments are projected to increase 8.2 percent in 1992 in constant dollars. Suppliers of medical and surgical instruments that adapt to the change in health care delivery from inpatient to outpatient settings will show the greatest commercial prospects. Increasingly, minimally invasive surgical procedures are being performed in outpatient settings. These benefit the patient who suffers less pain and trauma as contrasted with the use of conventional surgery. They also provide significant cost savings to health insurance companies through reduced hospital stays, while the provider is able to treat a greater volume of patients, and thus realize greater revenues.

One procedure that fits in this category is coronary balloon angioplasty, frequently eliminating the need for open heart surgery. The number of these procedures has grown, from 10,000 in 1982 to and estimated 320,000 in 1990, escalating demand for various types of catheters. Another example is arthroscopy, which treats diseases of the joints less invasively than conventional surgery. More than one million procedures are expected to be performed in 1991. This has spurred development of various types of endoscopes, specialized hand-held instruments, internal stapling devices, and imaging systems.

Exports should grow 15 percent in 1992. The proposed NAFTA is spurring formal and informal discussions of Mexico's product testing and device registration program. These steps should enhance trade opportunities. Mexico also will remain an important site for low cost production for U.S. manufacturers.

Long-Term Prospects

During the 5-year period through 1996, industry shipments of medical and surgical instruments are forecast to increase at an average annual rate of 5 percent, in 1987 dollars.

Domestically, the effects of the Safe Medical Devices Act and Medicare coverage and payment regulations will determine the technological development of this and the other medical device industries. Cost containment efforts will accelerate the trend to outpatient care as suppliers and providers begin to focus on the home medical market. This market provides even greater savings to health insurance companies because hospital stay is completely eliminated, and patients can often treat themselves in the comfort of their own homes.

Internationally, as surgical procedures adopted at home gain acceptance overseas, new markets will open for continued growth in exports.

SURGICAL APPLIANCES AND SUPPLIES

The surgical appliances and supplies industry (SIC 3842) manufactures a wide range of products, including walkers, wheelchairs, orthopedic supplies, bandages, hearing aids, and protective clothing. It is the largest in the medical and dental group, accounting for about 35 percent of the group's shipments. Industry shipments grew 6.4 percent to an estimated $10.7 billion in 1991 and have registered consecutive increases measured in constant dollars since 1977.

The industry employed an estimated 89,500 people in 1991, up 3.0 percent from 1990. Production workers numbered about 58,300, or 65 percent of the total work force.

INTERNATIONAL COMPETITIVENESS

While international trade historically has been limited for this industry, exports are beginning to play a more important role. Exports as a percentage of shipments have more than doubled since 1980, reaching an estimated 14 percent in 1991. U.S. exports of surgical appliances and supplies rose 18 percent in 1991 to $1.4 billion, the fourth consecutive year of double digit growth. Principal export items include respiratory products, orthopedic equipment and supplies, as well as artificial joints and internal fixation devices.

Similarly, total U.S. imports of surgical appliances and supplies accounted for only 5.6 percent of domestic consumption in 1991, the lowest in the medical products group. The value of these imports was about $538 million in 1991, a decrease of less than 6 percent compared with 1990. Principal imports were respiratory products and orthopedic appliances and supplies.

The EC purchased 33 percent of U.S. exports of these products and supplied 34 percent of U.S. imports in 1990. Exports of these items increased sharply to Belgium, Germany, and the Netherlands in 1991. This trend reflects growing public expenditures on health care in these countries.

Outlook for 1992

The value of U.S. shipments of surgical appliances and supplies is expected to increase about 8 percent in 1992, measured in constant dollars. The shift to ambulatory care also will benefit certain segments of this industry. Sutures, complementary items to stapling devices, will find new applications as the use of minimally invasive surgical procedures expands in outpatient settings. A wide range of disposables, incontinence products, and orthopedic supplies also are expected to benefit from this shift in health care delivery.

The wound management market may begin to experience growth in 1992, as more manufacturers test the consumer market. Firms are introducing first-aid kits to treat specific injuries, such as burns, cuts, scrapes and blisters, and splinters. In addition, the emergence of specialty children's lines of bandages may also spur development of this industry.

If past trends hold true, exports will surpass $1.6 billion in 1992, an increase of 12 percent. Export items expected to grow in importance include basic patient-care products such as gauze, adhesives, and respiratory apparatus. Changes in the 1989 tax laws in Japan caused a tremendous boom in the purchase of incontinence disposable supplies. This trend is expected to continue in 1992. Imports should rise only about 2 percent to $549 million, increasing the trade surplus by 18 percent.

Long-Term Prospects

Industry shipments of surgical appliances and supplies are projected to rise at an annual constant dollar rate of 8 to 10 percent from 1991 to 1996. The increasing amount of services furnished to each patient across the board will help spur the development of new technologies, as well as increasing the demand for existing technologies. In addition, the aging of the population, and the increase in disease conditions prevalent with age, will continue to drive this industry.

Western Europe will remain the U.S. industry's most important market. However, the growing economies of some Asian Pacific Rim countries will pose significant trade and investment opportunities as these countries commit their financial resources to developing their health care infrastructure. These newly industrializing countries are expected to emerge as strong trade competitors in the future.

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DENTAL EQUIPMENT AND SUPPLIES

The value of shipments of the dental equipment and supplies industry (SIC 3843) was expected to increase 10.7 percent in 1991 measured in constant dollars. This represents the first significant expansion after 3 years of flat or negative growth. Niche segments in the overall mature dental market have contributed to this growth. The industry is the smallest in the medical group, with only about 4.5 percent of total shipments.

The dental industry employed approximately 11,300 people in 1991, a 5 percent decrease over 1990. The industry has registered declines in employment the last 3 years, reflecting consolidation of suppliers. Production workers still account for about 65 percent of all employees in this industry.

INTERNATIONAL COMPETITIVENESS

U.S. exports of dental equipment and supplies increased 17 percent in 1991 to $364 million, as overseas growth rates exceeded those in the United States. Leading export destinations were Canada, Germany, Italy, and Japan. Exports accounted for 29 percent of product shipments, the highest ratio to date for this industry.

U.S. imports of dental equipment and supplies reached $168 million in 1991, up 2 percent from 1990. Imports accounted for 16 percent of consumption, with over one half originating in Western Europe. Dental laboratories in these countries offer entire ranges of products and services to dentists compared to their more specialized American counterparts. This provides for economies of scale and allows European laboratories to adopt new technologies more rapidly. Another advantage is that R&D intensive dental products, such as high cost restorations, are often reimbursed by health insurance companies in Europe; traditionally, this has not been done in the United States.

Outlook for 1992

The value of shipments is expected to increase 2 percent in 1992, measured in 1987 dollars. Development of new preventative cavity techniques and declining restorative procedures, such as fillings and dentures, will lead to slow growth for traditional types of dental equipment. However, growth and technological development for the treatment of periodontal disease offers new commercial prospects. Periodontal disease affects 75 percent of all adults and is the main cause of tooth loss. Other growing sectors include dental implants, composite resins used in cosmetic enhancement, orthodontic devices and supplies, and lasers and devices for more accurate assessment, evaluation and intervention.

The FDA required suppliers of certain types of dental implants (endosseous) to perform clinical trials and submit premarket applications by September 1, 1992. Manufacturers not able to meet this new guideline will not be allowed to continue marketing their products. Historically, the FDA only required the more simple premarket notification [51(k)] for these implants.

Long-Term Prospects

During the 5-year period ending in 1996, dental equipment and supply shipments are forecast to increase at an average annual rate of 4 percent in constant dollars.

National expenditures for dental services are expected to continue their rapid growth. On a per capita basis, these have increased from $60 in 1980 to $150 in 1990 and are forecast to climb to $300 by the year 2000. In that year, 6 percent of the health care dollar is expected to be spent on dental care, spurring development in certain dental products. Improved dental implant technology, fostered by stricter FDA requirements, will expand, driven by a market where one half of the U.S. population is missing one or more teeth. In addition, an aging population will mean an increase in the number of teeth at risk.

Germany and Japan should remain the leading suppliers of dental equipment, accounting for 50 percent of total imports. Exports will continue to be geared to both advanced and emerging health care markets. Eastern Europe and the Soviet Union will represent small but rapidly growing markets for dental instruments and supplies.

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X-RAY APPARATUS AND TUBES

The value of shipments by the x-ray apparatus and tubes industry, which manufactures radiographic, fluoroscopic, and therapeutic x-ray devices for medical, research, and industrial applications (SIC 3844), decreased less than 1 percent measured in constant dollars in 1991, to $2.1 billion, after exhibiting growth rates exceeding 10 percent in 1989 and 1990. This slowdown is the result of lackluster sales of digital radiography devices, computed tomography scanners, nuclear medicine equipment, such as gamma cameras, and x-ray tubes. Slow domestic growth and increased foreign competition have limited manufacturers' ability to invest significantly in R&D.

The x-ray apparatus and tubes industry employed about 9,900 people during 1991, an increase of 1 percent over the previous year. The number of production workers increased less than 1 percent and accounted for nearly 58 percent of total employees.

INTERNATIONAL COMPETITIVENESS

Foreign markets provide one of the few avenues of growth for the ailing x-ray apparatus and tubes industry. Exports rose 20 percent in 1991 to $724 million and accounted for 37.5 percent of shipments, the highest in the medical products group. Imports rose 5 percent to about $1 billion, resulting in a trade deficit of $294 million in 1991. Imports accounted for 46 percent of domestic consumption, the highest rate to date.

Outlook for 1992

Industry shipments of x-ray apparatus and tubes are forecast to increase 6 percent (1987 dollars) in 1992. One segment of the radiology market, mammography, should enjoy growth as public campaigns expand to raise awareness of the benefits of breast screening. x-ray accessories that enhance or upgrade the performance of existing systems also should experience further growth.

Federal Government efforts to limit spiraling health care costs will have a direct impact on manufacturers of CT scanners, and other diagnostic imaging devices.

The Health Care Financing Administration (HCFA) was scheduled to implement a prospective payment system for capital items, including radiology products, on October 1, 1991. The plan calls for hospitals to be reimbursed a flat dollar amount per Medicare case for capital costs. Currently, Medicare pays hospitals for capital on the basis of cost minus a 15 percent discount. Suppliers who derive about one half of their revenue from hospital sales are concerned that their hospital end-users will delay or cut back on procuring such items as CT scanners and other large capital items.

Medicare's physician fee schedule, expected to be implemented by October 31, 1991, will tighten the payment for physician services. Should payments for radiology services not be set at adequate levels, demand for these products may decline. As a result, industry would have little incentive to develop new technologies or refine existing technologies.

Internationally, U.S. exports are expected to increase 9 percent in 1992. The strongest growth potential is in developing and newly industrializing countries, such as Mexico, China, and some Asian nations. Elimination of export controls will make Eastern Europe and the Soviet Union good long term markets. U.S. imports are forecast to grow at about 6 percent, with Germany and Japan contributing the largest share.

Long-Term Prospects

During the 5-year period through 1996, industry shipments of x-ray apparatus and tubes are projected to grow at a compound annual rate of 3.5 percent. The industry probably will experience slowed growth or short term declines in output as companies seek to adjust to Medicare coverage and payment regulations.

Positron emission tomography, capable of detecting small chemical changes in the brain, may slowly find commercial application as large imaging firms invest in this technology. Historically, its use has been limited to research purposes due to its high cost and operational difficulties.

With regulatory changes creating an uncertain environment domestically, manufacturers will seek to increase their international sales. U.S. exports should remain strong, increasing at an average annual rate of 10 percent. In particular, remanufactured or refurbished x-ray equipment should offer good potential to third world countries. Imports should increase at a slower rate, but nonetheless account for a significant portion of the x-ray apparatus and tubes market.

ELECTROMEDICAL EQUIPMENT

The value of shipments by the electromedical equipment industry (SIC 3845), which manufactures a wide range of powered medical devices (excluding irradiation equipment), grew at a constant-dollar rate of 2 percent in 1991, following an increase of 18 percent in the previous year. This industry has shown gains in the last 4 years, after declining in 1985 and 1986, reflecting the industry's cyclical nature.

Industry employment rose 2 percent to about 34,400 during 1991. Production worker employment increased 1 percent, accounting for 44 percent of total employees.

Hospitals are expected to continue to expand the availability of new high technology equipment that requires large operating and capital costs. According to the Prospective Payment Assessment Commission, the number of community hospitals that offered magnetic resonance imaging (MRI) devices increased from 9.5 percent in 1986 to 15.0 percent in 1989; extracorporeal shock wave lithotripters (to crush kidney stones) nearly doubled to 6.3 percent during this same period. Many electromedical equipment (and x-ray) technologies also have contributed to the growth in ambulatory care.

INTERNATIONAL COMPETITIVENESS

Exports of electromedical equipment increased 13.1 percent in 1991 to $2 billion after increasing 12 percent in 1990. Imports increased 7 percent. The resulting 1991 trade surplus rose sharply to $786, an increase of 25 percent.

U.S. government efforts to eliminate tariffs on medical equipment through the General Agreement on Tariffs and Trade (GATT) would significantly benefit the electromedical product sector, which is the most export dependent in the medical group. Exports accounted for 37.4 percent of U.S. shipments of electromedical equipment.

Outlook for 1992

Industry shipments of electromedical equipment are forecast to increase almost 5 percent (1987 dollars) in 1992. Ultrasound devices and accessories are expected to remain the fastest growing segment in radiology. Reasons for the expected strong growth for these products include expanded clinical use that increasingly is syphoning sales from other imaging modalities and costs which are significantly lower than those for CT or MRI. In addition, ultrasound carries virtually no risk to the patient, and reportedly requires simpler hospital personnel training.

U.S. manufacturers will remain competitive in the $8.7 billion global market for electromedical equipment by devoting greater emphasis and resources to international trade. Exports are expected to increase 8.5 percent to a level of nearly $2.2 billion, accounting for about 38 percent of domestic shipments. Exports are primarily geared to countries with advanced heath care systems. However, ultrasound and other cost effective electromedical products will find growing markets in the Pacific Rim countries.

U.S. imports are expected to increase about 12 percent, the EC and Japan expected to supply about 80 percent of total imports of electromedical equipment.

Long-Term Prospects

During the 5-year period ending in 1996, industry shipments of electromedical equipment are projected to grow at a compound annual rate of 6 percent. Implementation of medical device regulations, such as the HCFA prospective payment system for capital items, will have an impact on segments of this industry, primarily the high cost capital intensive items.

Internationally, competition will remain fierce in the electromedical equipment industry. Although U.S. firms have invested heavily in research and development, they must follow up by successfully commercializing their technology.

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Additional References

(Call the Bureau of the Census at (301) 763-4100 for information about how to order Census documents.) Growth Prospects of the U.S. Medical Device Industry in a Changing Health Care Environment, U. S. Department of Commerce, Office of Science Electronics, Washington, DC 20230. Telephone: (202) 377-0550. Medical Instruments, Ophthalmic Goods, Photographic 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. Electromedical Equipment and Irradiation Equipment (Including X-ray), Current Industrial Reports 1989, MA-36R(89)-1; Bureau of the Census Washington, DC 20233. Medicare and the American Health Care System, Report to the Congress June 1991, Prospective Payment Assessment Commission, 300 7th Street SW, Suite 301B, Washington, DC 20024. Telephone: (202) 401-8986. Competitiveness of the U.S. Health Care Technology Industry, Health Industry Manufacturers Association, 1030 15th St. NW, Suite 1100, Washington D.C. 20005. Telephone: (202) 452-8240. HealthWeek, HealthWeek Publications, Inc., Manhasset, NY 11030. Telephone: (415) 444-4234. Medical Device & Diagnostic Industry, Canon Communications, Inc., Santa Monica, CA 90403. Telephone: (213) 392-5509.

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