Connections : Join the Conversation - The blog of Biomet CEO Jeffrey R. Binder
Part 1: macroeconomic benefits
The world's healthcare systems seem to be of two minds regarding medical technology and the companies that provide it. While generally acknowledging the benefits of advancing medical technology, governments, payors, and academics also reflexively point to medical technology as a driver of escalating healthcare costs, prompting policies to incentivize reduced waste and utilization.
Healthcare systems in all countries are justifiably concerned about improving the value delivered by healthcare spending. Yet their focus has been overwhelmingly on reducing the cost of medical technology, probably because supply costs are relatively easy to identify and squeeze, whereas efficiency and quality improvements are harder to measure and implement.
In the urgency to reduce costs, the value that medical technology companies deliver is generally overlooked or under-emphasized.
The next three blogs will attempt to provide balance to the discussion by exploring the economic benefits that accrue from medical device innovation. These benefits include the creation of jobs and economic growth, which is explored in this installment. Subsequent blogs will examine how medical device technology generates economic benefits to healthcare systems, and how a highly competitive market ensures reasonable pricing for devices.
A profile of the medical device industry
Every country is looking to promote innovative businesses in growing markets that create well-paying jobs. Medical device manufacturers demonstrate all these characteristics.
The world's medical device industry is comprised of over 27,000 medical device companies,1, 2 employing almost one million people2,3 and generating over $233 billion in global revenue.4 Europe employs over half of the world's medical technology workers in 22,500 companies.2 The leading markets for these devices are the Americas and Western Europe.4 Forty percent of revenue is generated in the United States, by far the largest single-country market for medical devices.4
Source: The World Medical Markets Fact Book 2010.
The device industry is also growing, far exceeding global GDP growth from 2004-09.4,5
Source: The World Medical Markets Fact Book 2010; World Bank Global Economic Monitor Database.
The medical device industry is one of the few industries that have created jobs despite challenging global economic conditions. For example, in the U.S., the world's largest medical device market, employment in the medical device industry grew 12.5% between 2005 and 20083 as compared to general employment growth of 2.6% in the U.S. and 3.9% in OECD member countries.6
Nonetheless, the U.S. device industry was not immune from the effects of recession. Employment in the U.S. device industry declined 1.1% in 2008, a far slower rate of decline than all U.S. manufacturing, which shed nearly 5% of its jobs.3
Additionally, in the U.S., each job has a multiplier effect, supporting an additional 1.5 jobs as a result of the companies' economic activity and spending of their employees. Thus, every new job in the medical device industry is actually the equivalent of 2.5 jobs.3 Assuming this ratio holds throughout the world, the global medical device industry supports a total of approximately 2.5 million jobs.1,2,3
Further, the jobs in the medical device industry pay well compared to other jobs. For example, in 2008, the average annual wages per worker in the U.S. medical device industry was 38% higher than the average for all U.S. workers.3
Source: Lewin Group, June 7, 2010
In short, the global medical device industry is an important and productive employer and generator of growing revenue-exactly what the world's economies are looking for.
Medical device companies are also an important source of research and development funding. In the U.S., for example, medical device companies have expanded research spending faster than other entities, including the pharmaceutical industry.7
Source: Dorsey, et al., "Funding of U.S. Biomedical Research, 2003-2008," JAMA, January 13, 2010.
The medical device industry is a highly competitive, growing industry, providing well-paying jobs to one million workers worldwide, and supporting jobs for another 1.5 million. In a global economy wracked by recession, the medical device industry emerged as one of the bright spots.
However, this very track record of success is, to some observers, part of the problem of rising healthcare expenses. The question is whether spending on medical devices delivers value to the world's patients and healthcare systems. I'll explore that topic in the next blog.
- Linehan, J.H., Pietzsch, J.B., "A Comprehensive Analysis of the FDA 510(k) Process: Industry Practice and the Implications for Reform," National Press Club, Washington DC, May 24, 2011, available at http://www.inhealth.org/
- Coudray A.C., "Innovation in medical technology as a response to Europe's healthcare challenges-industry's viewpoint," Eucomed, presented March 22, 2011, available at www.eucomed.org.
- "State Economic Impact of the Medical Technology Industry," The Lewin Group, June 7, 2010, available at http://www.socalbio.org/studies/MTI_Lewin_2010.pdf.
- "The World Medical Markets Fact Book 2010," Espicom Business Intelligence, 2010.
- World Bank Global Economic Monitor, available at http://data.worldbank.org/data-catalog/global-economic-monitor.
- "Main Economic Indicators (MEI): Labour Force Statistics," Organisation of Economic Cooperation and Development, available at http://stats.oecd.org/index.aspx?querytype=view&queryname=213.
- Dorsey, E.R., et al., "Funding of U.S. Biomedical Research, 2003-2008," JAMA, January 13, 2010, available at http://jama.ama-assn.org/content/303/2/137.short
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