There is a quantitative basis for this judgment that bears noting. According to Thomson Reuters, medical equipment manufacturers enjoy an average five-year gross margin of 59%, compared with 45.8% for the S&P500. Recent research coming from the Deloitte Center for the Edge, which has studied the business climate for US industries over the past forty years, calculates the average return on assets (ROA) for the entire U.S. economy had fallen to almost one-quarter of its 1965 levels by 2008, while performance in the Health Care industry has run contrary to the trend. That occurred while the ROA in healthcare rose from 1.7 percent in the early 1970s to 3.8 percent in the same period, nearly doubling.
Choosing a strategy is a very complicated exercise that involves looking at these issues, plus most of the competitive issues discussed in article 4 of the series. The dynamics of the marketplace and the competitive strengths of the firm itself will play major roles in any assessment of the optimal strategy. My only point here is that each strategy has its own rewards and risks.
Conclusion
This article is meant to give you a high-level understanding of some broad strategies for avoiding or at least reducing your company’s FDA compliance obligations. Within each of these broad strategies are multiple variations that raise complexities well beyond the scope of this article. The last strategy, selling services or being a user of products, is complicated enough that it deserves its own article. So the next article, number six in the series, will focus on hospitals and other providers of care that might employ their own tailored technology to diagnosing, monitoring or treating patients, and the corresponding FDA obligations that may apply.
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