U.S. firms generally are projecting a good year for medical plastics, in spite of warnings from analysts that Asian economic troubles and health-care spending restrictions in some of the big overseas markets could slow growth for domestic device makers.
Plastics firms engaged in medical manufacturing, mainly contract manufacturers and resin suppliers, project 8-15 percent growth for the segment and do not expect overseas cutbacks to have a dramatic impact on the products they deal in — lower-priced disposables or reusables. Rather, those cutbacks will affect big-ticket items, they said.
But several analysts said the medical device firms that many plastics processors supply will face a tougher 1998, and officials with some of the plastics firms said they expect general industry cost pressures to intensify.
Worldwide, the medical device market is projected to grow 4-6 percent to about $136 billion in 1998. The United States should see growth of 6-7 percent, and Europe 5-6 percent, according to a Merrill Lynch Capital Markets analysis. The Japanese market, on the other hand, may shrink as much as 5 percent.
``Overall, it will take very strong product lines and presence disproportionately in the U.S. to deliver the anticipated performance in 1998,'' the report said.
A report from Prudential Securities echoed that: ``The U.S. medical device industry is facing the prospect of major payment cuts in its major overseas markets: Japan, Germany and France. ... Targeted will be cardiovascular devices such as pacemakers, defibrillators, and stents, particularly in Germany and Japan.''
The combination of unsettled economic conditions, mainly in the Far East, and government cost controls on health-care spending will increase cost pressures on the medical market, said Doug Small, business market manager for medical at Eastman Chemical Co. in Kingsport, Tenn.
``That is the general trend anyway, and it will get tighter,'' he said.
But the economic troubles in Asia and cost-cutting overseas is not causing Clinton, Mass.-based injection molder Nypro Inc. to make major changes in its plans for more international medical market business, said Jim Dolan, business manager for the health-care group at Nypro. About one-third of the molder's $433 million business is medical-related.
``We are looking at Europe and Asia as potential markets,'' Dolan said. ``Europe is probably sooner and Asia is a little down the road, but particularly as China develops for health care, we want to be well-positioned.''
The cost pressures on Nypro's customers will continue to push consolidation in the device industry, Dolan said.
Those same pressures are driving Merit Medical Systems Inc. to implement a cost-cutting program without layoffs, even as the injection molder projects its sales will rise above $70 million in 1998, up from $60 million in 1997, said Nancy Schultz, spokeswoman for the South Jordan, Utah-based firm.
``This coming year we are going to see a stringent, cost-cutting program internally that will last for at least six months,'' she said. ``There will be a freeze on personnel to keep expenses at a stable level.''
But overall, plastic processors are not panicking at the overseas spending cuts, said Nancy Hermanson, medical market technical leader for Dow Plastics in Midland, Mich.
``When you scale back, it is typically on big-ticket items,'' she said. ``Basic health care is not going to change.''
China had been growing 20 percent a year, and will continue to show strong growth, and Japan remains a good, long-term prospect, even amid cuts in government spending — because the percentage of its population aged 65 and older is the largest in the world, Hermanson said.
Dolan said medical device makers are asking their suppliers to do more, such as provide assembly work and some device manufacturing. And larger device companies also hire small processors for faster product development, said A. Adam Sanford, chief executive officer of Adam Spence Corp., a Wall, N.J.-based insert molder and extruder.
As for the hot markets for medical plastics in 1998:
Hermanson said home health care and alternative-site care is the fastest-growing segment of health care, and it favors plastic products.
Nypro will concentrate on diagnostics and drug delivery, Dolan said. An official with the Kipp Group, an Ontario, Calif.-based injection molder, also said diagnostics and drug delivery systems will be strong segments.
Merit is rethinking selling its products in kits and is looking at radiology as a growth market, according to Schultz.
