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Group Purchasing Organizations Wield Enormous Bargaining Power in the U.S. Medical Devices Market - The new analysis from Frost & Sullivan, U.S. Medical Device Market Outlook, reveals that revenue in this industry totaled $63.76 billion in 2004 and is forecast to reach $139.87 billion in 2011.
Group Purchasing Organizations Wield Enormous Bargaining Power in the U.S. Medical Devices Market

 

PRZOOM - /newswire/ - Palo Alto, CA, United States, 2005/09/28 - The new analysis from Frost & Sullivan, U.S. Medical Device Market Outlook, reveals that revenue in this industry totaled $63.76 billion in 2004 and is forecast to reach $139.87 billion in 2011..

   
 
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Manufacturers in the U.S. medical devices market will have to alter their pricing strategies radically if they are to hold up against the massive bargaining power of group purchasing organizations (GPOs). The GPOs get their clout from negotiating almost 75 to 85 percent of all medical and surgical supply revenue and by representing nearly 96 to 98 percent of the hospitals in the United States.

The new analysis from Frost & Sullivan (.medicaldevices.frost.com), U.S. Medical Device Market Outlook, reveals that revenue in this industry totaled $63.76 billion in 2004 and is forecast to reach $139.87 billion in 2011.

If you are interested in a virtual brochure, which provides manufacturers, end users, and other industry participants an overview of the latest analysis of the U.S. Medical Device Market Outlook, then send an e-mail to Melina Gonzalez, Corporate Communications at melina.gonzalez[...]frost.com with the following information: your full name, company name, title, telephone number, e-mail address, city, state, and country. We will send you the information via email upon receipt of the above information.

The GPOs have moved from strength to strength by including an increasing number of healthcare providers within their fold. Since GPOs purchase products and services wholesale and pass on the savings to members, the medical device companies’ margins are often compressed.

“GPOs sign contracts – mostly long-term ones – with only a few medical device manufacturers, thereby blocking out the smaller companies and market entrants,” says Frost & Sullivan Research Analyst Vaishnavi Ananthanarayanan. “The larger GPOs partner with hospital chains, thus creating a monopolistic market over a large geographic area.”

In such a highly competitive and mature market, manufacturers not only have to consider internal revenue generation but also need to guard against unfair practices by other manufacturers that may try to buy-off their contracts.

Though this intense competition lowers the device manufacturers’ profit margins, the contracts can still generate substantial sales volume. Some GPO contracts require healthcare providers to purchase a specified minimum volume from their facilities to avail discounts.

By being compelled to provide higher and wider levels of support and service at competitive prices, market participants ensure they receive fewer customer complaints.

Due to this emphasis on providing superior services and products, there has been an exceptional rise in the number of clinical studies in the U.S. medical devices market. Manufacturers are resorting to a continuum-based strategy to stay abreast of ongoing clinical investigations for competing effectively in the race for product development.

“Device manufacturing companies are also collaborating with end users to discover new avenues for potential research and product development,” observes Ananthanarayanan. “The manufacturers are using trends in disease patterns, population, and end-user preference to develop new technologies and products offering optimal benefits to doctors and patients.”

Another method used by the manufacturers to cater to the multifunctional needs of consumers is achieving technology synergies through market consolidation. Given the shortage of primary care, nursing, and hospital staff, manufacturers have to invent more automated products and disposables.

All these developments have made the U.S. medical devices market, by far the largest in the world. However, there are many huge, rapidly emerging, and profitable overseas markets offering immense potential for the U.S. participants. Since these manufacturing and business process outsourcing units offer low-cost options, the parent company can safely divert substantial funds and efforts into R&D.

Manufacturers’ move to shift production or the business process abroad could also be proposed as employment opportunities in countries such as China, India, and South America.

However, international market penetration will not be easily achievable due to imposing trade barriers, fluctuating currencies, and the duplication of the regulatory and industry approval processes. Some countries have distinct methods of device classifications and their processes may not be transparent, making it harder for U.S. manufacturers to conduct business therein.

U.S. Medical Device Market Outlook, part of the Medical Device subscription, has been segmented into 18 device types. It provides an overview of the medical device industry challenges and regulatory environment, as well as the revenue and R&D spending of the top 100 enterprises worldwide. This research enables companies to adjust their positioning strategies for benefiting from the changing markets and obtaining maximum return on investment. Analyst interviews are available to the press.

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services, and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics.

U.S. Medical Device Market Outlook
A662

Contact:

Radhika Menon Theodore
Corporate Communications – Asia Pacific
P: +91 44 24314263 Ext: 312
E: rmtheodore[.]frost.com

Katja Feick
Corporate Communications – Europe
P: +44 (0) 20 7915 7856
F: +44 (0) 20 7730 3343
E: katja.feick[.]frost.com

Surbhi Dedhia
Corporate Communications – India
P: +91 22 2832 4705 Ext: 131
E: sdedhia[...]frost.com

Keywords in this release: medical device, U.S., group purchasing organizations, GPO, research, information, market, trends, tec

 
 
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Group Purchasing Organizations Wield Enormous Bargaining Power in the U.S. Medical Devices Market

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