The remanufactured medical device sector forms part of the broader industry for previously owned (or pre-owned) medical devices and equipment. Pre-owned medical devices commonly fall into three categories—refurbished, remanufactured, and “as is” based on the extent to which the original device’s function is altered and the type of device.
Refurbished medical devices are primarily medical imaging equipment that is restored to OEM or equivalent specifications without changing the equipment’s performance, safety specifications, or intended use. Refurbished medical devices that undergo any upgrades are consistent with the original product specifications and service procedures. Remanufactured medical devices, as defined by the U.S. Food and Drug Administration (FDA), undergo restoration processes that significantly change the device’s original performance or safety specifications, or intended use. Reprocessed medical devices, also according to the FDA, are remanufactured single-use devices (SUDs), whereas “As is” medical devices are generally sold in the same condition in which they were acquired.
Remanufactured medical devices primarily consist of refurbished medical imaging equipment and reprocessed SUDs. Examples of imaging equipment include magnetic resonance imaging (MRI), computed tomography (CT), X-ray, interventional cardiology, and various ultrasound devices. Medical imaging devices are capital intensive both to buy and to use. Due to their advanced technology, they are expensive, costing upwards of $1 million; they also pose a relatively high risk to patients. Conversely, SUDs cost less and represent less risk to patients; they include blood pressure cuffs, diagnostic electrophysiology catheters, forceps, and babcocks (a type of forceps). These devices are frequently used for a variety of procedures, including cardiovascular, arthroscopic/orthopedic, general surgery, gastroenterology, and laparoscopic surgery procedures. The medical device remanufacturing process generally includes selecting the used equipment to be remanufactured, disassembling and inspecting it, restoring it to original working condition or better, reinstalling it, and providing service support.
Global Market for Pre-Owned Medical Devices
The global pre-owned devices market is estimated to reach US$ 5.6 Billion in 2020, growing at a CAGR of 10.6% from 2017 to 2021, according to a market research report published by iHealthcareAnalyst, Inc. The global pre-owned devices market is segmented by device type (X-ray and mammography machines, CT machines, MRI machines, ultrasound machines, nuclear imaging and medicine devices, C-arm devices), and geography – North America (U.S., Canada), Latin America (Brazil, Mexico, Rest of LA), Europe (U.K., Germany, France, Italy, Spain, Rest of EU), Asia Pacific (Japan, China, India, Rest of APAC), and Rest of the World. The report also provides detailed market landscape, market attractiveness analysis and profiles of major competitors (Agito Medical, GE Healthcare, Philips Healthcare, Soma Technology and Siemens Healthcare) operating in the global market.
U.S. Market for Remanufactured Medical Devices
The U.S. market for remanufactured medical devices is the world’s largest, and is estimated to account for more than 35 percent of the global market. U.S. medical device remanufacturers are estimated to export about 35 percent of production, but domestic shipments still account for 90 percent of the U.S. market.
The U.S. industry for remanufactured medical devices is composed of a handful of large OEMs and hundreds of third-party providers, the majority of whom are SMEs. The emergence of OEMs in this industry is a relatively recent development and represents a considerable shift in the OEMs’ strategy, from relying primarily on developing and commercializing new devices towards one that now includes the remanufacturing and remarketing of pre-owned medical devices.
Original equipment manufacturers (OEMs) may have a distinct advantage in this industry, given their familiarity with their technologies coupled with their infrastructure to service, finance, and remanufacture their own products. In an effort to preserve their reputations and capitalize on the growing market for remanufactured equipment, OEMs increasingly began to remanufacture their own medical imaging devices, and entered the SUD remanufacturing segment of the industry as well. For instance, within the past two years, Johnson & Johnson and Stryker Corp., two of the world’s largest medical device firms, acquired the most prominent SUD remanufacturing firms in the United States. Further, OEMs of medical imaging equipment have increasingly resisted sharing their software and technologies with other, non-approved third-party remanufacturers, making it difficult for these firms to service OEM-issued devices. Thus, the influence of OEMs can also limit third parties from entering the market.
U.S. Buyers and Demand Factors
Hospitals (especially hospitals of 200 beds or less) and diagnostic imaging centers are the two leading buyers of remanufactured medical imaging devices in the United States. Hospitals often purchase remanufactured medical devices to supplement existing equipment and accommodate numerous patients cost effectively. Hospitals and surgical centers are also the leading purchasers of reprocessed SUDs. The principal factor driving demand for remanufactured medical devices is price, as healthcare facilities are in constant need of cost-effective solutions to remain competitive. Healthcare facilities must weigh the cost of acquiring imaging devices (new or remanufactured) with the potential benefits in the form of new patient referrals from physicians and clinicians, along with the potential for increased reimbursements from using the device. Further, healthcare facilities must determine whether their most commonly performed procedures require the use of the novel technologies, or if a remanufactured device will prove sufficient. Standard imaging equipment or radiation oncology devices, for instance, feature technologies that do not tend to change quickly and may more commonly be purchased remanufactured.
U.S. Sellers and Supply Factors
The United States is home to many of the world’s largest medical device OEMs and is also a leading market for new medical devices. In the U.S., the principal sellers of remanufactured medical devices are OEMs and independent remanufacturers. OEMs sell the majority of their remanufactured medical devices in the U.S. market; however, foreign markets reportedly account for a significant portion of their sales. For instance, foreign markets, including Brazil, India, Italy, Korea, Japan, Portugal, and Spain, account for 45 percent of GE Healthcare’s sales of remanufactured medical devices. With respect to SUDs, cores are most frequently supplied by hospitals and surgical centers. Once remanufactured (reprocessed), these devices are repackaged and returned to the same end users.
Factors Affecting Trends in Sales
Cost-cutting measures and the general shift towards value-driven healthcare have been the principal factors affecting recent trends in sales of remanufactured medical devices. In particular, declining insurance reimbursements for imaging procedures have become more prevalent. End users are commonly reimbursed through third-party insurers, either through private companies or through the government via the Centers for Medicare and Medicaid Services. Given the high cost of these devices, hospitals and imaging centers alike must increasingly demonstrate long-term benefits from their use. However, many insurers associate high-cost devices with poor value and tend to cover a smaller portion of the total bill for a procedure. As a result, healthcare providers have become more inclined to acquire remanufactured medical devices, which can cost end users 50-75 percent less than a new device.