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The U.S. medical electronics industry has been one of the fastest growing industries over the past decade. Similarly, to the rest of the electronics world, growth has been accompanied by the adoption of significant new product technology and innovation. The need for a high level of control, reliability, and confidentiality has also been a major force in keeping U.S. domestic production from moving overseas. Flexible circuits continue to grow in medical technology applications as flexibility, size, weight and reliability make it ideal for many applications.
Medical electronics covers a broad spectrum of products and services that include implantable and non-implantable medical devices, monitoring and diagnostic equipment, surgery tools and others.
The medical electronics industry will certainly grow, but many competing forces come into play, providing opportunities and challenges for suppliers.
Demographics
Not only is the U.S. population aging, but most of the industrialized world is aging. This naturally drives an inexorable growth in medical services and will continue to translate to growth in the medical electronics sector.
Political Landscape
The Affordable Care Act has provided significant revenue streams to the health care industry which ultimately is driving equipment and devices. The current political situation is causing some confusion in the industry (and just about everywhere else), but despite the rhetoric and posturing, replacement legislation is unlikely to markedly hinder the growth of healthcare services.
Technology and Innovation
Advances in medical technology drive new services and solutions, while the adoption of constantly improving state-of-the-art electronics packaging technology results in new and improved medical products.
Emerging Third World Economies
As economies develop and consumers become more affluent, healthcare becomes a higher priority. This translates to a larger global market demand for medical products.
These factors and trends should be considered positive forces for the medical industry. Resisting this growth is another trend providing a significant challenge—the cost of healthcare as a percent of overall expenditure is growing at a rate that is not realistically sustainable. There is going to be increased pressure to reduce costs. These cost reduction forces drive many phenomena directly related to medical equipment. Among these are:
- Tort reform
- Consolidation of service providers
- Government regulations
- Better use of diagnostic data
Regardless of productivity initiatives taken in healthcare, cost reduction pressure is certainly going to affect the medical equipment industry. Manufacturers will be forced to be more aggressive with cost reductions and/or reduced profit margins. Technology and innovation reducing health care costs will provide growth opportunities. This includes automation to reduce staffing needs, replacement of expensive intrusive procedures with lower cost minimally invasive alternatives, and incorporating technology to reduce the chance of human error.
How much the government will continue increasing funding to programs such as Medicare and Medicaid remains to be seen, but it is likely hospitals, clinics, doctors and other care providers will increasingly scrutinize how health care is provided. Higher cost treatments and diagnostics will be replaced with lower cost alternatives and less frequent testing. This will have a direct impact on medical technology. Developing innovative new technology may be too risky, causing fewer resources to be allocated to leading-edge medical equipment. Hospitals will increasingly challenge expensive investments in the latest diagnostic equipment without data to justify the expenditure.
The drive for cost reduction in the medical equipment and device industry should continue to support growth for flexible circuits which can minimize and eliminate connectors while reducing space requirements and overall assembly cost. This design flexibility should translate to adoption in medical products as flexible circuits can offer higher overall value at a lower overall cost.
References
1. Five Trends to Watch in the Medical Device Industry in 2016
2. Healthcare 2017: What does the new year have in store?
3. McKinnsey & Company, Big Data: The next frontier for innovation, competition, and productivity.
Dave Becker is vice president of sales and marketing at All Flex Flexible Circuits LLC.
