Pharma is the powerful subsector, and medical devices / technology its little brother within the huge healthcare industry. They are different enough that the two subsectors often move in opposite directions, allowing investors to stay diversified within the health care boom by moving in and out of the two subsectors at the right times.
In various treatment areas, one sector can take market share from the other. Take the huge market for heart disease as an example. Although surgical interventions have become increasingly minimally invasive, pharmacological interventions, including thrombolytics, fibrinolytics, beta-blockers, statins, and antiplatelet treatments, cover a broader spectrum of acute coronary syndromes, sometimes eliminating the need for surgery.
When evaluating the potential of the two sectors, it must be said that there is nothing like getting into a blockbuster drug early and taking it to new levels. Meanwhile, savvy pharmaceutical investors are keeping an eye out for news of clinical trials leading to new indications for a drug or showing a reduction in mortality, side effects, and more. Modifications to a drug that broaden target populations are also good. Often these types of developments appear in television commercials. Today, through a series of commercials, you can watch the battle unfold over new indications for insomnia treatments as pharmaceutical companies tackle America’s huge and growing insomnia problem.
But overall, right now Pharma is a bit down, looking forward to new blockbusters, while medical devices / tech are more exciting, especially minimally invasive technologies. The substantial acceleration in FDA approval timelines since the passage of the Modernization Act of 1997 has helped the medical device industry.
As competition between broad-based medical technical companies such as Medtech, Boston Scientific J&J and others has become more intense, more and more are looking to acquire small companies with promising technologies. This has stimulated great business growth.
Is there a highly successful medical device? Except for drug-eluting stents, probably not, when the devices are compared to the top pharmaceutical winners. But medical technology is targeting some huge markets, with great profit potential.
Take the back pain. It is the scourge of millions with a market of more than $ 60 billion annually. Artificial disc technology is rapidly advancing to treat chronic back cases. Carotid stent placement, which was approved last year, is less invasive than surgery and carotid stent sales are projected to increase to $ 1 billion in the decade, from less than $ 100 million today. And the annual growth rate of the computer-assisted surgery rate is expected to increase from 10% in 2005 to more than 20% in 2009.
Aging baby boomers will help the medical device boom. Age-related ailments combined with Medicare eligibility will expand the use of pacemakers, defibrillators, stents, orthopedic implants, and cochlear implants.
Medical devices / technology and pharmaceuticals provide a good way to diversify within healthcare, although you need to keep up-to-date on developments in both fields. Of course, if you’re really looking for growth, you can turn to an even smaller sibling brother: the health / biotech diagnostic. With approval power over payments, healthcare providers essentially control money and therefore have enormous influence over which treatments are shared. Increasingly, healthcare providers are seeking preventive measures to avoid the enormous expense of treating full-blown illnesses. And how are diseases prevented? Early diagnosis. But more on that in another article.