After witnessing declines in every quarter since the second quarter of 2009, the UK’s gross domestic product (GDP) increased by 0.4% in the fourth quarter of 2009, an indication that the economy is on a recovery path. While the UK continues to recover from one of the worst economic downturns, the healthcare sector, particularly the medical devices industry, is well on its way to witnessing growth.
This resilience to the economic crisis is largely because demand for healthcare is not tied to consumer discretionary spending and it continues to remain stable, even during times of recession.
Healthcare’s underlying drivers
The UK is home to 62 million people, of which 16% are aged 65 and above. By 2050, this will grow to an estimated 77 million. As a sizable chunk of this population continues to age, a surge in the incidences of chronic diseases is also expected. This, coupled with a sustained rise in benefits provided by payers and providers, is expected to boost demand for medical devices and supplies. Many manufacturers and healthcare providers are spending heavily in raising awareness through direct-to-consumer advertising, and this is further boosting the country’s demand for healthcare.
It is not just the private sector that is encouraging growth. The UK Government can be credited with improvements in the country’s healthcare delivery and services infrastructure, the result of a steady increase in spending on healthcare, which was estimated at $220bn (£141bn) in 2009, roughly 10.1% of the country’s GDP.
UK healthcare spending has witnessed an increasing trend for more than a decade, in absolute terms and as a proportion of GDP. The overall implications of this, and consequently an improved healthcare delivery network, can be judged from the marked improvements in the country’s leading health indicators.
The adult mortality rate (the number of deaths of adults between 15 to 60 years per 1,000 population) fell to 93 in 2010 from 129 in 1990 (males), and to 58 in 2,010 from 78 in 1990 (females).
- Under-fives mortality rate (children less than five years old per 1,000 births), for both sexes, decreased to five in 2010 from ten in 1990.
- Maternal mortality rate (maternal deaths due to childbearing per 100,000 births) fell to 61 in 2008 from 65 in 1990.
- Life expectancy at birth increased to 78 years in 2008 from 73 years in 1990 (males) and to 82 years in 2008 from 78 years in 1990 (females), an indication of the improvement in the UK’s overall health climate.
The flip side to this growth is the severe budgetary constraints that the country’s National Health Services (NHS) will face in the next few years. Publicly financed healthcare expenditure has contributed to most of the increase in health spending for almost a decade.
The UK’s public healthcare is financed through the NHS, the total expenditure of which amounted to $153bn (£98.3bn) in 2009-10.
While the NHS continues to suffer from underfunding, a bigger concern is an estimated £2.6 billion ($4bn) cost savings that the NHS is expected to contribute. Consequently, the funding to NHS for 2010-11 was reduced to £102.3bn ($160bn) from the £104.6 billion ($163bn) originally planned in last year’s budget.
Reportedly, NHS trusts are expected to deliver efficiency savings in the range of £15 billion ($23bn) and £20bn ($31bn) over three years from 2011 to 2014. While there are growth obstacles that do not seem to leave the horizon any time soon, the fact that the underlying demand drivers remain in place, should make the UK industry stakeholders happy.
The UK medical devices industry was valued at £8.2bn ($12bn) in 2009 (figure 1). Driven primarily by an increase in the ageing and unhealthy population pool, the market is forecast to grow by 8.2% annually for the next seven years to reach £14.4bn ($21bn) in 2016. The growth will also be driven by an increasing demand for cardiovascular, orthopaedic and diabetes care devices.
The increased affordability, particularly during the last decade, coupled with rapid industrialisation has led to significant lifestyle changes among healthcare consumers in the UK, a trend that has resulted in a huge pool of patients suffering from lifestyle and work-related disorders such as diabetes, cardiovascular diseases and musculoskeletal disorders.
Diabetes devices market
The prevalence of diabetes has reached alarming proportions in the UK with a 74% rise in new cases of diabetes during 1997 to 2003. In 2005, more than 4% of the total population was reported as having diabetes, nearly double the rate reported ten years earlier.
The majority of these cases are type 2 diabetes, which is indicative of increasing obesity in the country. It is important to note that three out of ten children aged between two to 15 years were classified as either overweight or obese in 2007. Overall, 43% of men and 32% of women were estimated as overweight in 2006. While the incidence of diabetes remains low compared with the US or Canada, the year-on-year growth seems to be much faster than in these countries. The International Diabetes Federation estimated that over two million people in the 20-79 age groups in the UK were living with diabetes in 2009.
The UK diabetes care devices market comprising the glucose monitoring and insulin delivery categories was valued at $497m in 2009. Driven by growth in the demand for glucose monitoring systems, the market is forecast to grow by 16% annually for the next seven years to reach $1.4bn in 2016.
The glucose monitoring market comprising blood glucose meters and blood glucose test strips segments was valued at $389 million in 2009. Driven by growth in the blood glucose test strips segment, glucose monitoring is expected to grow by 17% annually for the next seven years to reach $1.2bn in 2016.
While increasing obesity remains the major cause of diabetes and eventually the driver for increasing demand of diabetes care devices, technological advancements have resulted in the development of devices that are more portable and use-friendly, which is another factor contributing to the increasing adoption and market penetration. Demand is also being driven by a well-informed patient base realising the benefits associated with diagnosing illness and receiving treatment at home.
Chronic diabetes is a leading cause of an increase in the probability of cardiovascular morbidities. Cardiovascular diseases accounted for 198,000 deaths in the UK in 2006. It was estimated that over 2.5 million people with coronary heart disease (either heart attack or angina) were living in the UK in 2006.
Coronary heart disease is also one of the leading causes of death in the UK, causing about 94,000 deaths in the UK in 2006. About 68,000 new cases of heart failure are reported each year in the UK. Overall, cardiovascular diseases are estimated to cost the country $48bn (£30.7bn) annually. 47% of this amount is attributed to direct healthcare costs, 27% to productivity losses and 26% to informal care of people with cardiovascular diseases. Undoubtedly, there are immense opportunities for the leading cardiovascular device manufacturers.
The UK cardiovascular devices market, valued at $1.3bn in 2009, is forecast to grow by 4.7% annually for the next seven years to reach $1.9bn in 2016. This growth is expected to be driven by an increasing demand for cardiac rhythm management, cardiovascular surgery and interventional cardiology devices. Together, these market categories accounted for about 82% of the overall cardiovascular devices market value in 2009.
The interventional cardiology market, valued at $574m contributed almost half of the overall cardiovascular devices market value in 2009. Driven by regained growth in the coronary stents segment, in particular, drug eluting stents, the interventional cardiology market is forecast to grow by 2.4% annually during 2009-16 to reach $678m in 2016.
Orthopaedics devices market
While the diabetes care devices and cardiovascular devices markets present significant opportunities for growth, another market that should remain resilient to any recession is orthopaedic devices. Growth in the UK sector is being driven by increasing incidences of arthritis and other musculoskeletal disorders.
An estimated 539,000 people reported work-related musculoskeletal disorders in the UK in 2007-08. Additionally, an increasingly sedentary lifestyle coupled with increasing cases of arthritis, has led to high incidences of back pain and joint afflictions being recorded – a trend driving demand for spinal implants, joint implants and other products indicated to treat musculoskeletal disorders.
Arthritis affects one in every five adults in the UK. In 2007, an estimated 4.4 million people were found to have X-ray evidence of moderate to severe osteoarthritis in their hands, 550,000 people with moderate to severe osteoarthritis in knees and 210,000 people with moderate to severe osteoarthritis of the hips.
While the incidences of musculoskeletal diseases continue to increase, driven also by the rapid acceptance of technologically superior products such as non-fusion spinal technologies and hip resurfacing implants, the UK orthopaedic devices market, valued at $997m in 2009, is forecast to grow by 8% annually for the next seven years to reach $1.7bn in 2016.
Joint reconstruction, spinal surgery, orthobiologics and trauma fixation are the largest categories in this sector with a cumulative contribution of about 79% to the overall market value in 2009.
Onwards and upwards
Overall, it is evident that the UK medical devices industry is expected to face significant challenges driven primarily by the NHS’s efficiency-saving measures.
Despite these challenges, with an increasing demand for devices indicated to enhance the quality of life and for devices indicated to treat life-threatening medical conditions, industry growth should continue to witness an upward-trend.