2013 is shaping up to be a year of solid growth for healthcare market—at least as measured by beating the industry average by relevant exchange-traded funds, which have outperformed analysts’ expectations. Growing especially quickly are healthcare service providers and biotechnology firms. Medical device ETFs have also had a solid year. The iShares U.S. Medical Devices ETF has gained nearly 25% so far this year.
Due to market saturation in Japan, Europe, and the United States, emerging BRIC economies hold the greatest potential for future growth in this sector. As early-stage economies develop, the average lifespan there increases. For countries like Brazil, Russia, India and China, these older population segments could help to drive growth in the medical device market.
On top of this, many emerging markets are building state-sponsored healthcare systems for their citizens. While many of these systems are rudimentary, they could serve as a valuable market for medical device manufacturers. However, pricing pressures for some of these groups could impact reimbursement in significant ways. For example, India recently lowered reimbursement prices for a number of stents.
Despite the positive factors outlined here, there are significant threats as well, including a larger-than-planned currency headwind, regulatory overhang, a competitive environment, and challenging economic conditions. On top of this, uncertainty associated with the Affordable Care Act could impact earnings from medical device companies’ domestic business.
Longer-term factors that could affect the domestic market include the nation’s slow growth rate. Presently the third largest country in the world in terms of population, the United States now has a low fertility rate and aging population. The fact that the percentage of the working population has dipped could spell trouble for long-term healthcare spending, which has already coming close to 20% of the nation’s gross domestic product. A recent report from RnRMarketResearch.com projects that the medical device market in the United States will grow at a CAGR of 5.1%. If that holds true, the market size will increase from roughly $138.9 billion in 2012 to about $206 billion by 2020.
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