This industry classification is comprised of establishments primarily engaged in the wholesale distribution of instruments, apparatus, and equipment to medical and dental practitioners, clinics, and hospitals. Products of the industry include surgical instruments, artificial limbs, operating room equipment, X-ray machines, hospital beds, medical and dental laboratory equipment, and professional supplies. The industry also includes wholesale distributors of industrial safety devices such as first-aid kits and face and eye masks.
421450 (Medical, Dental and Hospital Equipment and Supplies Wholesalers)
446199 (All Other Health and Personal Care Stores)
According to the U.S. Census Bureau, there were a total of 9,212 establishments operating within this industry in 2001. The establishments were subdivided into two categories: wholesalers engaged primarily in the distribution of medical and hospital equipment and supplies, and wholesalers engaged primarily in the distribution of dental equipment and supplies. Medical and hospital wholesalers formed the largest segment of the industry, accounting for 14,262 establishments and sales of $23,488.4 million. Dental wholesalers accounted for 1,314 establishments and sales of $8,065.9 million. The total number of establishments climbed to 21,189 in 2003. Their combined sales totaled $49,542.30.
During the early 1990s, rising health care costs led many hospitals to form alliances and make group purchasing decisions. Critics of the policy claimed that the situation created an adversarial relationship between the medical community and its suppliers because the purchasing groups left distributors with unprofitable margins.
In addition to concern over cost containment, the medical community faced increasing pressure to reduce its impact on the environment. Costs related to the disposal of medical waste, including toxic and hazardous materials, were mounting. Medical administrators called upon manufacturers and distributors to help provide products able to serve patients' needs and also reduce waste.
As the 1990s continued, suppliers engaged in cutthroat competition and managed care placed additional pressure on the industry. Hospitals began to complain about declining standards of service, even from the major national suppliers. As a result, suppliers found themselves competing to provide improved service at lowered prices. "Activity-based costing," in which prices are based on actual costs rather than a negotiated price plus a set shipping cost, became popular. Some hospitals turned to regional distributors and even took back some functions formerly performed for them by distributors.
Not surprisingly, many smaller companies folded or were acquired by larger companies. For instance, in 1994 Owens & Minor Inc. acquired third-ranking distributor Stuart Medical. Even the largest companies suffered a decline in profits. The average pretax profit margin for hospital distributors fell to 1.8 percent in 1994.
In the latter part of the 1990s, the remaining national medical-surgical distribution companies were struggling to maintain their standing, with regional distributors and drug distributors providing additional competition. In 1999 the industry leaders were Allegiance Corporation of McGaw Park, Illinois (a spinoff from Baxter International, which had broken up); Owens & Minor Inc. of Glen Allen, Virginia; Cardinal Medical Products and Services of McGaw Park, Illinois; and Fisher Scientific International Inc., of Hampton, New Hampshire, which completed its acquisition of privately owned Oxoid Group Holdings Limited in March of 2004. Oxoid is a manufacturer of microbiological culture media and other products that test for bacterial contamination. Fisher completed its acquisition of privately held Dharmacon, Inc. in April of 2004.
When ranked by sales, firms were more in the mid-size range, with 6,808 posting sales between $250,000 and $499,000. Of the remaining establishments, 2,882 firms had sales between $100,000 and $249,000, while there were almost an equal number above that mid-size range, with 2,443 companies with sales of $500,000 to $999,000.
A majority of companies in this business were small: 3,818 had fewer than 5 staff members. An additional 1,260 firms employed 5 to 9, and 848 employed 10 to 19 people. There were 651 that staffed between 20 and 99. States with the highest number of establishments were California with 3,066, Florida with 2,414, Texas with 2,071 and New York with 1,282.
One tool available to help medical supplies distributors locate specialized products was a CD-ROM database provided by MDI (Medical Data Institute) called EPIC Plus. The EPIC Plus system provided suppliers with an upto-date database of more than 500,000 products produced by more than 2,000 manufacturers and wholesalers. The system was used by the Health Industry Distributors Association (HIDA) and recommended by the Independent Medical Distributors Association (IMDA), an organization formed to facilitate the exchange of ideas among medical suppliers and to meet the needs of firms involved in the distribution of specialized medical products.
D&B Sales & Marketing Solutions, 2003. Available from http://www.zapdata.com .
Fisher Scientific International Inc., 2004. Available from http://www.fishersci.com
Independent Medical Distributors Association, 2004. Available from http://www.imda.org .
U.S. Census Bureau. Statistics of U.S. Businesses 2001. Available from http://www.census.gov/epcd/susb/2001/US421420.HTM .
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