Competition, cost-cutting drag down medical device results

January 31, 2013

Increased competition, more emphasis on cost reduction and questions about products' effectiveness are negatively affecting results at major medical device manufacturers, resulting in layoffs and plant closings.

Zimmer Holdings reported a slight 1% revenues increase for the final three months of 2012, but reported that sales in Europe actually tumbled 4%, with an 8% drop in its hip business. Growth for the full year in the America was just 1%. Zimmer Spine is closing a plant in Texas, and the company is launching other moves, including improved materials management programs, as it tries to cut costs by more than $80 million.

Boston Scientific, a major player in the coronary stent market, launched a restructuring program aimed at cutting costs more than $100 million annually. "We clearly need to tighten down and improve our research and development productivity," CEO Michael Mahoney said. The company is facing what could become a major shift from drug-eluting metal stents to bioresorbable plastic stents. Abbott is the leader in the fast-emerging field of disappearing stents.

Another issue facing the medical device community is slow growth, particularly in Europe. According to Millennium Research Group, the European interventional cardiology market will barely grow through 2017. Procedure growth will average around 1% per year, while revenue growth will be less than that.

According to the research group, the malaise is due to lower average selling prices. In another development, European governments are offering lower reimbursements in efforts to cut costs.


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