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Medical Musings: Is the glass half empty or half full?

Nervous about capital investment for the medical sector?

Read the daily news and economic reports and it's enough to make your stomach turn. The U.S. economy grew at just a 1.5% rate in the second quarter and is expected to continue at rather anemic levels through early next year, when news reports warn of a potential "fiscal cliff" rooted in the political deadlock in Washington, D.C. Economic growth in Europe is even slower than in the United States. Some medical device manufacturers are warning of very harmful effects from a 2.3% excise tax that goes into effect next year.

It's really easy to be a pessimist right now. But as I've written in this space earlier this year, follow the money.

Wall Street financial analysts have generally reduced their 2013 earnings forecasts for the energy, financial, industrial, technology and utility sectors since July 1-- but they have raised  them for the healthcare, basic materials and telecommunication sectors, according to a report from Reuters.

And American plastic processors continue to invest in new plants, equipment and even new companies due to their confidence that growth in the medical device and packaging sector will continue to grow at rates well above the real gross domestic national product.

Here's an abbreviated list of processors betting on the future of the medical device industry:

  • Vention Medical, which last year acquired two companies including ATEK Medical, substantially expanding its injection molding and device assembly technology and capacity.
  • Wise Plastics Technologies, which is adding injection molding machines, custom automation equipment and four additional bulk storage silos to support several long-term programs, including medical, awarded late last year.
  • Phillips Plastics almost doubled its size last year with its acquisition of Medisize, and is scouting additional investment opportunities. It's now known as Phillips Medisize.
  • GW Silicones recently completed an expansion targeting medical applications.

Many more examples could be provided. In fact, any processor that wants to play in the market needs to boost its geographical, manufacturing, and supply chain footprints. Capital from major financial management and venture capital funds continues to flow into the medical plastics industry.

The Affordable Care Act is one of the reasons why the medical sector outlook is brightening and most other markets see a weaker outlook.

Commenting on the Supreme Court's recent affirmation of the law's controversial individual mandate, Dena Bravata, chief medical officer of Castlight Health, said: "The mandate itself I think is really important in so far as now we will have this enormous influx of patients who have not previously had health care."

While the daily financial headlines are ominous, the underlying fundamentals point to a solid foundation for medical plastics processors.

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