Research Shows Medical Device Cleaning and Recycling Industry Growth

According to a report released by research group IBISWorld, the medical device cleaning and recycling market is growing. This industry owns and operates medical waste reprocessing centers where reusable medical equipment is recycled, cleaned, recalibrated, repackaged and re-sterilized. Industry firms then sell the goods back to hospitals and medical suppliers. The market for these services opened up approximately five years ago, and since then, according to IBISWorld, has grown 20.5 percent per year.

“The Great Recession was a strong boon to the industry,” says IBISWorld industry analyst Sophia Snyder. “The poor economic environment resulted in fewer people with health insurance coverage. In turn, the number of insured patients in hospital rooms shrank, contributing to declining operating profit margin for these key customers.”

Healthcare providers’ shrinking revenue and mounting costs made relatively cheaper reprocessed medical devices more appealing. As the economy continues its slow recovery in 2012, growth is expected to decelerate to 12 percent per year, but will still hold a growth pattern.

“The aging population and rising incidence of diseases that can be treated with medical devices are fostering industry growth,” said Snyder. These trends are forecasted to hold till 2017 at least, and aspects of the health care reform set to come into play in 2014 will also help the industry.

Stryker has proven a leader in the industry with its sustainability solutions division, formerly known as Ascent, purchased in 2010. The work of the environmental coalition Stryker is a member of was profiled by Medical Product Outsourcing. Stryker reportedly has managed to reduce waste by 2,150 tons while saving hospitals money. Johnson & Johnson (JNJ) made a similarly large purchase in 2011 when it acquired SterilMed. Between these two purchases, Stryker and JNJ hold a very significant share of the device cleaning and recycling market.

OEMs are not sitting by quietly, though. They obviously have a large stake in the direction this market will move, as they are vested in creating and selling more devices instead of devices that can be reprocessed over and over, driving sales down. In response to OEMs’ efforts to discourage the use of reusable devices citing safety concerns, the U.S. Food and Drug Administration conducted studies to look into the matter. The results lead to standards and regulations for reprocessed and reusable devices, driving manufacturing costs up and profitability down. IBISWorld expects OEMs to create competition in the next five years either by developing devices more difficult to reprocess, or pricing single use devices lower, making them more attractive than reprocessed devices.

IBISWorld also predicts OEMs may also try to enter the device cleaning and recycling industry themselves, either by acquisitions or innovation.

Because of larger market players such as Stryker and JNJ, the industry already has a high market share concentration. Concentration has grown not only due to Stryker and JNJ’s growth, but because of the exit of non-compliant companies as well. If more OEMs try to enter the market, it will create competition, which—in a free market model—is only ever a good thing.