Like the insects that represent it, Utah is buzzing with business activity. While it’s poised to become the next Silicon Valley, it also has a thriving medical technology industry. It bodes well for the Beehive State as the world is ready for medical devices.
Medical Device Demand
The forecasts for medical devices can vary depending on the research firm. For Moody’s, industry players can expect a growth in earnings from 4.5% to 5.5% (excluding other expenses such as depreciation, taxes, and interests) in 2019.
For Research and Markets, this healthcare segment will earn over $409 billion by 2023. Within 2018 and at the end of the forecasting period, the compound annual growth rate (CAGR) is 4.5%. BCC Research has a higher projection. By 2022, the market value will already be more than $600 billion or a CAGR of 5.3% beginning in 2017.
All these things point to one thing: the outlook is positive. In fact, it’s excellent enough it can potentially beat the growth of pharmaceuticals and hospitals.
The Factors that Drive Its Success
Medical devices benefit from the growth of many factors associated with it. One is aging. The Aging in the United States report by the Population Reference Bureau revealed that the number of Americans 65 years old and above would more than double by 2060. By this time, there will almost be a hundred million seniors in the country. They will also comprise 24% of the population as opposed to only 15% in 2016.
Aging affects healthcare needs in many different ways. For one, it means an average American now has a higher chance of developing a chronic disease or being diagnosed with one. Those who already have an existing illness, growing older can force them to spend more on healthcare.
Healthcare spending in the United States is also increasing. In 2017 alone, it already accounted for nearly 18% of the country’s gross domestic product (GDP). By this time, the average healthcare cost per person was over $10,500, according to Centers for Medicare and Medicaid Services.
The Challenges to Beat
In spite of the potential growth, the medical device industry in Utah does face specific challenges, and they highlight the importance of an industrial automation consultant.
One of the growing issues is a labor shortage. The state continues to attract more talented residents, and it still provides reliable training and education on science, technology, engineering, and math (STEM).
Companies, however, are finding it difficult to fill positions, especially the high-paying ones. While the labor shortage is not as critical as that of the other states, it can still have a statewide impact in the long run. For example, businesses might have no other option than to offshore jobs. It can also increase labor costs, which can make the state less friendly to med tech investors.
Another is cost control. By 2020, the United States will reinstate its excise tax on medical devices. It will be 2.3% of the total sales in the country. It might not be much, but medical devices sell billions a year. It can force companies to sell their products at a higher price.
Automation doesn’t wipe out these two primary concerns entirely, but it can significantly reduce labor costs and make companies more productive and efficient. Higher efficiency translates to lower manufacturing spending, which then provides businesses more competitive products and savings.