Medical Industry Essay

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The actual industry in review is Medical, Dental, and Hospital Equipment and Supplies Merchant Wholesalers. NAICS code 423450. SIC code 5047. This industry classification includes companies that are primarily engaged in the wholesale distribution of instruments, apparatus, and equipment to physicians, hospitals, and extended care facilities. Products of the industry include surgical instruments, prosthetics, pharmaceuticals, operating room equipment, internal imaging machines, and medical equipment and supplies used by hospitals and healthcare professionals. Wholesale distributors of industrial safety devices (e.g. first-aid kits and face masks) are also included in the industry. The U.S. Census Bureau reported 8,602 organizations…show more content…
Industry Risks
Ever increasing health care costs has led many healthcare organizations to form alliances and make collective purchasing decisions. This has diminished supplier power and has significantly lowered distributor’s profit margins. Along with the concern of cost containment, the medical industry is always faced with increasing pressure to reduce waste and be more environmentally conscious. The cost of disposing of medical waste materials has also been increasing. Manufacturers and suppliers have been called upon to provide innovative products that are better suited to patient needs while also reducing waste.
Due to the intensity of competition within the industry, suppliers have begun competing to provide improved service at lower prices. "Activity-based costing," has become a standard operating procedure, in which prices are based on actual costs rather than a negotiated price that included shipping and operating fees. In some areas, healthcare institutions have turned to regional suppliers and even started implementing some functions formerly performed for them by distributors. Most small companies either fold or are bought out.
Analysts are assuming there to be an increase in demand for medical devices and supplies due to the influx of newly insured individuals that is a result from healthcare reform. However, FDA regulations are growing more stringent, which experts believe will cause decrease in profits and force companies
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