Taking the pulse of the industry.

• Author: Smith, Robert C.
• Position: Biomedical industry as solution to health care cost problem - Chairman's Agenda: Managing Health Care Costs

A growing and prosperous biomedical industry is not the cause of the health care cost problem but the best hope for a solution.

Management of health care cost has become an important agenda item for corporate chairmen, as the size and growth of such budgetary expenditures endanger corporate profitability and competitiveness. The health care cost issue ranges far beyond corporate boardrooms, of course, and impacts so many constituencies that it will quite probably play a major role in the debate for the 1992 election in this country. A number of resolutions are being proposed in this debate, and it is difficult to peruse any popular news publication without encountering some discussion of these topics.

But amid all this rhetoric exists the danger that an important distinction will be obscured. The health care industry -- the investor-owned biomedical companies that provide products and/or services for the prevention, diagnosis, or treatment of medical conditions -- is not the cause of the problem and is actually the best hope for solution.

The biomedical industry -- the investor-owned companies that are distinct from such health care providers as physician groups and municipal hospitals, for example -- is a multi-billion-dollar enterprise. The industry is summarized in Tables 1 and 2. These data, taken from the ongoing MLR Biomedical study of the industry (the study that results in the annual publication known as the Medical & Healthcare Marketplace Guide), identify more than $550 billion in industry revenues. Table 1 represents the industry's product categories and shows the scale and growth of both U.S. and worldwide markets, while Table 2 represents the U.S. health care services markets -- the aggregates of the investor-owned companies providing the services specified in the table. [Tabular Data 1 to 2 Omitted]

This biomedical industry, unlike many of the constituencies it serves, is quite healthy. The industry is large and generally profitable, and growing faster than the general economy. The fundamental factors that have contributed to the industry's traditional growth will remain in place and, in certain cases, may even lead to accelerated growth patterns. These factors are:

Demographics: The world's population is growing about 1.6% a year, with developed countries usually growing at less than 1%. But the geriatric cohorts, which use disproportionately larger portions of medical products and services, are growing at double the rates of...