Medical devices and the Great Deflation

October 10, 2013 by Brian Johnson

The medical device industry's financial growth has been cut dramatically following the Great Recession, even as sales volume has returned to pre-crisis levels. Is there an end in sight?


The medical device industry has "lost" about $131 billion in revenues since the financial collapse of 2008, according to analysts at Ernst & Young.

The findings, taken from the audit firm's annual "Pulse of the Industry" report, paint a glum picture for the medtech industry, once considered to be "recession proof."

Annual revenues for medical device companies in the U.S. and Europe grew at an annual rate of 13% from 2000 to 2007, according to the report. But even as the economy has recovered and sales volumes returned to pre-recession levels, sales growth across the medical device sector has increased just 7% since 2008. E&Y analysts estimated that the gap in growth totals about $131 billion in lost sales.

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"The hard part is that a lot of that [drop-off] has come strictly off the top, from a pricing perspective, with companies dropping pricing," Kevin Casey, a partner at E&Y in Boston, told

Current conditions represent a permanent adjustment, rather than a down cycle, Casey added.

"When you look at pre- and post-recession, you have to look at who is the major customer in healthcare, and it's the government, ultimately, when you look at Medicare and Medicaid spending and the degree to which they set reimbursement levels through CMS," he told us. "Just as much as companies are bringing pricing down, government is forcing pricing down to try and fix some of the cost equation."