December 17, 2020    < 1 min read

The medical device industry covers the manufacturing of medical, scientific, and surgical equipment. This includes devices such as syringes, thermometers, imaging devices, dental equipment, and more.

These products are made with the help of medical device manufacturing software, and sold directly to healthcare providers, or delivered to wholesalers and other customers.

Here we break down the key trends affecting the medical device manufacturing sector in 2020 and 2021, focusing on the United Kingdom, Australia and New Zealand.

The medical device industry in 2021 – overall trends and outlook

The Covid-19 pandemic has dominated every aspect of the medical device industry in 2020. While the drop in economic activity has dampened revenue streams, demand for products such as ventilators and Personal Protective Equipment (PPE) has soared, buffering the financial impact.

The pandemic has also accelerated technological advancements that allow the treatment of care with limited physical contact, and the use of wearables that enable users to better track their own healthcare indicators and needs.

Home-based treatments, supported by remote healthcare professionals, have also risen in popularity as patients look to decrease their exposure to the Covid-19, and seek alternative ways to access medical support.

This new way of working – reflected by so many industries affected by the Covid-19 pandemic – will likely shift patients’ expectations and preferences, leading to new ‘norms’ in the healthcare sector, and in turn the provision of medical devices.

Overall, revenue for the medical, surgical and scientific device industry is expected to fall through 2020-21 as a result of the pandemic, despite the boost provided by higher demand for specialist equipment needed to combat the virus. It is then expected to recover slowly through the second half of 2021.

Covid-19 has dominated the medical device manufacturing industry in 2020

Technology trends in the medical device industry

Technological advances accelerated by the pandemic have prompted a rapid shift toward digitised, personalised medical care. However, differences in global jurisdictions provide varying degrees of support for the advancement of such products.

New Zealand

In New Zealand, the medical industry is dominated by Fisher & Paykel Healthcare, with high and stable barriers to entry protecting the company’s position.

Despite this, there has been a rise in start-ups developing products such as wearables or apps that enable personal tracking of healthcare concerns, and remote access to medical professionals.

These devices are becoming increasingly sophisticated and, as people get more comfortable integrating them into everyday usage, are set to rise in popularity.

3D printing technology is also set to disrupt the industry. Simple medical devices such as syringes could eventually be printed within hospitals, challenging traditional medical supply chains and enabling greater autonomy of individual hospitals and healthcare centres.

Australia

In Australia, similar trends can be seen, with advances particularly in biotechnology, nanotechnology, and robotics. Automated and computer-aided design is also on the rise, improving efficiencies and precision of medical care.

Australia’s technological progression, however, is constrained by the likes of governments and public hospitals, as they are incentivised to keep a lid on capital expenditure.

In Australia public hospitals are cutting expenditure on medical technology

United Kingdom medical technology trends

In the UK government incentives including tax breaks have supported the industry to become a world leader in medical device technology. In recent years, there have been notable advancements in 3D printing and prosthetics in particular. The UK government has flagged its intention to continue supporting innovation in the sector, pledging to pump tens of billions into the sector over the next few years.

Legislation trends & changes in the medical device industry

The medical devices industry is heavily controlled, with laws, regulations and government bodies ensuring high standards of quality and safety, from manufacturing right through to the end user.

Legislation in New Zealand

In New Zealand, the industry is governed by the New Zealand Medicines and Medical Devices Safety Authority, known as MedSafe, and Standards New Zealand. Industry operators must comply with high standards across safety and quality. When products are exported, they need to reach the safety standards of that target market.

The regulatory reach extends to personal usage, with rules around how information is conveyed to the person who uses the product.

There are, however, changes in the wind for the New Zealand market. A Therapeutic Products Bill has been developed to replace the outdated Medicines Act of 1981, but its progress toward law has been slow.

The bill is designed as the backbone to a new regime which is expected to be more agile in its responses to changing technology, and it is also designed to align New Zealand’s standards with those overseas. In doing so, it is hoped to ensure the safety of products used locally, while also ensuring New Zealand products are well received internationally.

Legislation in Australia’s medical device industry

In Australia, the industry is regulated under the Australian Code of Good Wholesaling Practice for Medicines, alongside the Therapeutic Goods Act and the Therapeutic Goods (Medical Devices). Any medical devices released for public use are overseen by the Australian Regulatory Guidelines for Medical Devices.

Australia has delayed the overhaul of some medical device regulation as a result of the pandemic. This means the manufacturers of some devices, including implantable medical devices and inhalation devices, now have a longer timeframe in which to meet required standards.

Legislation in the United Kingdom

In the UK, Brexit has created significant uncertainty for the industry’s future. The UK has historically been governed by EU regulations, and benefitted from these structures both financially and scientifically. Once the UK and the EU are officially separated, new regulations will apply. However, anything sold into the EU will still need to comply with standards of the bloc.

Many elective procedures in dentistry and orthopaedics have been delayed

Consumer trends in the medical device industry

The Covid-19 pandemic has dominated the globe this year, upending how we work, live, play – and care for one another. The medical devices industry has suffered from the economic slump, but its ability to provide specialist equipment such as ventilators has buffered the financial pressure.

Against this backdrop, ageing populations around the world have created a natural and increasing demand for medical devices and support.

Consumer trends in New Zealand’s medical device industry

In New Zealand, the rising numbers of over 50s has driven demand for medical equipment, and this trend is expected to accelerate as the country’s population continues to skew older. Further, public health expenditure is expected to increase, both as a result of the pandemic and the needs of an aging population. These trends will likely create a trickle down of revenue increases through the supply chain.

Consumer trends in Australia

In Australia, an ageing population is also prompting increased expenditure on healthcare, and increased demand for medical products that support old age.

Australia’s mining industry, which contributes more than 10% of the country’s economy, also influences the medical device industry. At present, demand for measuring and exploration equipment – which is also supplied by makers of medical tech products – has been mixed from the mining sector, pulling the medical industry’s revenues down.

Consumer trends in the UK

The United Kingdom’s population is also ageing and this trend, alongside its high rates of obesity, is a significant driver for medical devices and products.

The NHS (National Health Service) dominates the sector, and is expected to get an injection of funds as a result of the pandemic. Again, this is expected to create a trickle-down effect for revenue in the industry.

Global medical device industry performance and outlook – a snapshot

Globally, the medical devices industry has faced severe headwinds, with an intense focus on producing equipment such as ventilators and PPE, and a fall in the production of other equipment. Major production lines have been disrupted by the pandemic, and a mass deferral of elective surgeries has upended expected demands and associated supply chains. Some specific areas, which are non-essential and elective – such as orthopaedics, for example – have seen a significant drop-off in demand.

The impact of the pandemic is likely to reverberate for years to come, with production unlikely to recover any time in the near future.

Global medical device industry profit margins and financial performance

In 2019, the market reached nearly US$460 billion, but that is expected to shrink by more than 3% through 2020 as a direct result of the pandemic, and the lockdowns imposed by governments around the globe. The market is tipped to recover from 2021 at a rate of more than 6%, pushing past US$600 billion by 2023. Private expenditure is expected to help boost financials, along with public injections of cash.

Medical device industry profit margins in New Zealand

New Zealand’s industry revenue is expected to rise by just over 3% over the next five years, to $1.3 billion. This follows a fall of more than 6% through 2020, as a result of the pandemic, weak economic conditions and the reduction of private expenditure. Profits have sat around 20%, although that is likely to be impacted by the pandemic.

Australian medical device profit margins

In Australia, injections of cash from the government and increased demand for healthcare has buffered against the worst of the COVID-19 drag. Industry revenue is expected to increase by nearly 4% over the next five years to AUS$5.5 billion, despite the pandemic and weak demand from the country’s mining sector. Profit margins in Australia are far lower than in New Zealand, sitting at just over 5%.

UK medical device industry financial performance

In the UK, industry revenue is expected to drag at less than 2% over the next five years, ultimately reaching GBP5.5 billion. Revenue growth is expected to slump through 2020-21.

However, the UK government’s emergency measures in response to the pandemic is expected to buffer the industry, protecting it from the worst of the economic downturn.

The world is also expected to face a new era of increased infectious diseases and chronic illnesses, which will help fuel growth in the industry. North America is expected to dominate the global medical devices market over the next few years.

Covid-19 vaccines are now being rolled out across the world, however the impact of these are yet to be seen.

A new global focus on infectious disease control is likely to alter the medical manufacturing industry

Dominant medical industry sub-sectors by country

Medical and surgical equipment dominates industry revenue across different jurisdictions, with dental equipment, eyecare products and measuring devices also strong drivers of revenue in the sector.

Globally, the production of equipment includes basic medical requirements such as syringes and dressings, alongside specialised equipment such as hearing aids, prosthetics, and ultrasound equipment.

Dental equipment consists of products such as drills and lasers, and demand can fluctuate as some of the work is discretionary. Eyecare can also be discretionary, with big ticket items including contact lenses, frames, and protective eyewear.

Beyond these major sectors, there is crossover in demand for equipment across industries such as agriculture, construction and manufacturing, which require high-grade products to measure and survey projects.

New Zealand

The dominance of each sub-sector reflects the economic activity of individual jurisdictions.

In New Zealand, medical and surgical equipment is by far the most dominant contributor to the industry’s revenue. This is largely due to New Zealand’s progress in developing new products and technology, particularly through the country’s leading player, Fisher & Paykel Healthcare.

Dental equipment and scientific equipment are also major drivers of the industry’s revenue.

Australia

In Australia, medical and surgical equipment accounts for more than half the industry’s revenue. This sub-sector includes ventilators and is therefore expected to grow in the coming months.
Another major sub-sector is measuring equipment, which makes up more than 16% of revenue and reflects Australia’s heavy economic reliance on the mining industry.

United Kingdom

In the United Kingdom, the medical and surgical equipment sub-sector accounts for nearly a quarter of revenue but, like other countries, this share is expected to expand as demand for Covid-related products increases.

Eye-related products are the next largest sub-sector in the UK, making up just over 22% of industry revenue. However its share of revenue is expected to decline, as many procedures are discretionary and the economic downturn is putting financial pressure on households across the country.

Sources used in this article

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