2020 forecast: Growth and outsourcing

Features - Cover Story

An aging and growing population combined with increasing healthcare spending supports medtech’s continuing growth

January 30, 2020

Healthcare spending will grow to $6 trillion annually, an average of 5.5% compound annual growth rate (CAGR) to 2027, according to The Centers for Medicare and Medicaid Services. That growth continues boosting demand for medical devices. Valued at $425.5 billion in 2018, the global medical device market is forecast to reach $612.7 billion by 2025, registering a 5.4% CAGR. A growing global medical device market leads to expanded medical device outsourcing, with Reports and Data indicating that the global medical device outsourcing market, valued at $96.6 billion in 2018 will reach $208.4 billion by 2026, a CAGR of 10.1%.

Beyond these strong forecasted numbers, 2020 also began with the permanent repeal of the medical device tax (see Regulatory, pg. 16) and the growing, aging population where globally, there are more centenarians than at any point in history and average life expectancy has increased from 67 to 72 in the past 20 years. And, while connected technology has been quickly adapted by younger generations, 76% of those 65 and older report that connected care technology is important to enable them to age at home; the market is projected to grow at a CAGR of 30.27% through 2025, reaching $232.9 billion.

The U.S. Census Bureau puts the global population at 7.6 billion, with the U.S. accounting for about 330 million people:

  • 2 million: Greatest Generation (born before 1928)
  • 24 million: Silent Generation (1929 – 1945)
  • 72 million: Baby Boomers (1946-1964)
  • 65 million: Gen X (1965 – 1980)
  • 79 million: Millennials (1981-1996)
  • 90 million: Gen Z (1997 and later)

Baby Boomers has long been medtech’s favorite demographic group, but other groups are aging (GenXers are already getting orthopedic joint replacements) and advances in medical technology – connected technologies for drug delivery ($4.1 billion by 2026), wearable devices ($139.3 billion by 2026), medical robotic systems ($10.71 billion by 2026) – show a market set to grow faster than ever.

Demand for personalized devices is pushing through the supply chain. Value-based care for best health outcomes initiatives from insurers are pressuring hospitals and original equipment manufacturers (OEMs) to reduce costs. OEMs are responding by outsourcing more; contract manufacturers, in turn, are consolidating supply chains for better quality and traceability while investing in advanced technologies as they become smart factories.


Ernst & Young’s 2019 Pulse of the Industry: Medtech revenues increased 7% to $407.2 billion; third consecutive year of growth; highest revenues recorded to date

“Medtechs have a unique opportunity to capitalize on digital transformation. As devices become increasingly connected, medtech companies have a built-in advantage,” says Jim Welch, EY global medtech leader. “What they don’t have are broad, in-house capabilities to develop personalized healthcare offerings. Increased investment in digital collaborations that expand customer experience as well as data and analytics capabilities will continue to move medtech closer to the patients.” 

KPMG’s 2020 Healthcare and Life Sciences Investment Outlook: More diseases are cured; treatments are personalized; patient/consumer preferences at the center of decision-making

Medical device manufacturers are converging with other subsectors to improve outcomes, with diagnostic and device makers working with pharma companies to provide full patient customization.

Noting that innovation in medtech remains robust, KPMG predicts the industry to grow at a pace of more than 5% per year, with annual worldwide sales reaching $800 billion by 2030. Much of that will come in the area of health IT and revenue cycle management, where 30% in a KPMG survey said they are targeting those areas for investment in 2020. 

Digimind Digital health trends report at CES 2020: Internet of Medical Things (IoMT) market to exceed $136.8 billion by 2021; propelled by convenient, patient-oriented medical device, applications that gather, analyze, transmit data to healthcare IT systems in real-time, supporting the aging population – 1.2 billion people worldwide by 2025 who want to age at home. 

Deloitte’s 2020 Manufacturing Industry Outlook: 67.9% of manufacturers optimistic for 2020, down from 2019 survey

Vice Chairman, U.S. Industrial Products & Construction Leader Paul Wellener says manufacturers should increase resilience in their operations and double-down on the core of their portfolios. Companies should build digital muscle across the supply chain and mobilize partnerships within their ecosystem. Start by examining current supply networks and consider how to build additional agility, including additional digital technologies to increase visibility and transparency in order to flex production and resources as necessary. 

McKinsey & Co.’s Global AI Survey: Manufacturing, supply chain management reporting significant cost decreases via individual artificial intelligence (AI)

In manufacturing, some of the most significant savings come from optimizing yield, energy, and throughput. In supply chain management, savings come from spend analytics and logistics-network optimization. 

Mercer Capital’s Shifting care from in-patient: "The transition to the healthcare delivery paradigm from fee-for-service (FFS) to value models is expected to lead to fewer hospital admissions and procedures, given the focus on cost-cutting and efficiency. …Ultimately, lower reimbursement rates and reduced procedure volume will likely limit pricing gains for medical devices and equipment," notes Sujan Rajbhandary, vice president, Mercer Capital’s Financial Reporting Valuation Group and Daniel McLeod, senior financial analyst with Mercer Capital.

In addition, Rajbhandary says, "pricing pressures will be felt by many incumbent and older devices, which further underscores the need for manufacturers to keep on top of innovation to continually pursue new products and technologies."

Critical new technologies such as additive manufacturing (AM), streamline early stages of product design and development and design for manufacturability (DFM). 


While the first half of 2020 is likely to start slower than some anticipated, now’s the time for manufacturers to invest in advanced technologies. With connected shop floors, common software platforms working across a company, real-time machine monitoring, and automation, manufacturers can enter the decade with a plan to be more data-driven so they can troubleshoot problems sooner, improve product quality, and excel in a sector where labor shortages remain.

About the author: Elizabeth Engler Modic is the editor of Today’s Medical Developments magazine. She can be reached at emodic@gie.net or 216.303.0264.