The recession and the medical industry
I have been in numerous positions within the pharmaceutical, biotechnology and medical device industries over the past 20 years. The one paradigm upon which we all relied during those years was very simple: “the medical industry was recession-proof.” In fact, way back in 2008, medical products stocks, including Big Pharma and medical device manufacturers, were considered safe locations to invest during a economic downturns. Industry analysts, executives, and investors believed that people would continue to buy medical services, who would then buy all of the products from table paper to expensive capital equipment.
Current speculation seems to reinforce the old paradigm. A recent article published in Tech Journal South offers up the following optimistic forecasts:
But if I stand back from the my own personal involvement in this industry, would there be economic issues that trouble me? Absolutely. First, the unemployment rate is high and getting higher. The actual unemployment rate, that is the rate that includes those unemployed and who have given up searching for jobs, and that accounts for underemployment (declining hours for those who remain employed), may be at 13.9%. The unemployment rate troubles me because health insurance becomes a luxury expense, and is therefore eliminated, and people quit going to their physicians and hospitals. Elective procedures are going to fall precipitously.
I’m also concerned about the large budget deficit that will be created by Obama’s stimulus plan. Although there are some short-term benefits for the medical industry, such as a $15 billion injection in to state’s Medicaid budgets, I remain concerned that over the long run there will be fewer dollars available for Medicare and Part D drug reimbursement.
On the other hand, my own personal, and subjective, analysis of the biotech, pharmaceutical and medical device job markets leads me to conclude that it is still healthy. But the growth of jobs (and by logical progression, health of the companies) is not in the large companies like Abbot, Medtronic, or Boston Scientific. It’s with the small innovative companies such as Intuitive Surgical. They market a robotic surgical system for minimally invasive surgeries. And they have 30-40 positions available in sales, engineering and other areas. Merit Medical, a Salt Lake City based cardiovascular products company, as has over 41 positions available. I could go on for a few more paragraphs, but from my standpoint, the job market is healthy in this industry.
And then there’s one more paradigm--once the recession is over, everyone runs to their doctors and dentists to get caught up. Elective surgeries get backed up because everyone wants one. And the industry recovers.
I remain optimistic about the medical products industry. But maybe I’ve just been indoctrinated after all of these years.
By Michael W Simpson
Current speculation seems to reinforce the old paradigm. A recent article published in Tech Journal South offers up the following optimistic forecasts:
- M&A activity will increase significantly.
- Biotech stocks will outperform the rest of the market (which shouldn’t be hard given the continued implosion of stock values)
- Most investors consider biotech undervalued
- Most expect biotech to rebound either this year or next
But if I stand back from the my own personal involvement in this industry, would there be economic issues that trouble me? Absolutely. First, the unemployment rate is high and getting higher. The actual unemployment rate, that is the rate that includes those unemployed and who have given up searching for jobs, and that accounts for underemployment (declining hours for those who remain employed), may be at 13.9%. The unemployment rate troubles me because health insurance becomes a luxury expense, and is therefore eliminated, and people quit going to their physicians and hospitals. Elective procedures are going to fall precipitously.
I’m also concerned about the large budget deficit that will be created by Obama’s stimulus plan. Although there are some short-term benefits for the medical industry, such as a $15 billion injection in to state’s Medicaid budgets, I remain concerned that over the long run there will be fewer dollars available for Medicare and Part D drug reimbursement.
On the other hand, my own personal, and subjective, analysis of the biotech, pharmaceutical and medical device job markets leads me to conclude that it is still healthy. But the growth of jobs (and by logical progression, health of the companies) is not in the large companies like Abbot, Medtronic, or Boston Scientific. It’s with the small innovative companies such as Intuitive Surgical. They market a robotic surgical system for minimally invasive surgeries. And they have 30-40 positions available in sales, engineering and other areas. Merit Medical, a Salt Lake City based cardiovascular products company, as has over 41 positions available. I could go on for a few more paragraphs, but from my standpoint, the job market is healthy in this industry.
And then there’s one more paradigm--once the recession is over, everyone runs to their doctors and dentists to get caught up. Elective surgeries get backed up because everyone wants one. And the industry recovers.
I remain optimistic about the medical products industry. But maybe I’ve just been indoctrinated after all of these years.
By Michael W Simpson