Drug Eluting Stents: A Paradigm Shift in the Medical Device Industry
By the mid 2000s, no segment of the $180 billion global medical device industry was as dynamic as the market for drug eluting stents (DES). In 2005, two-and-a-half million drug eluting stents were expected to be implanted in patients around the world. In the U.S., which accounted for nearly three-quarters of the total DES market, only two companies had regulatory approval to sell the small devices: Johnson & Johnson and Boston Scientific. In combination, these two organizations expected 2005 DES sales of approximately $5.5 billion - an increase of 36 percent from 2004. Given the explosive growth since the first DES was introduced in 2002 and taking into account forecasts which called for the segment to potentially exceed $7 billion by 2008, some analysts predicted that drug eluting stents could be the first medical devices capable of becoming as profitable as blockbuster drugs such as Viagra. Driven in part by its size, the DES market was among the most competitive and challenging sectors in the medical device industry. The competitive landscape was marked by intense rivalries and plagued by fierce litigation over intellectual property. Yet, it was also characterized by complex inter-company partnerships, collaboration, and licensing deals. While drug eluting stents had been shown to significantly reduce restenosis rates, new safety concerns were emerging related to the development of life threatening blood clots linked to DES. Some controversy also existed regarding the cost/benefit of drug eluting stents, with many hospitals losing money on complex procedures that involved the placement of more than one DES. Product recalls and program failures were common as companies sought to bring new DES technologies to market. And, against this backdrop, the segment was characterized by dramatic swings in market share as interventional cardiologists shifted their loyalties in response to new product releases, incremental device innovation, and negative publicity generated by the many challenges encountered by DES manufacturers. Despite these challenges, the future for drug eluting stents looked promising. This paper explores the medical device industry and examines the unusual story of drug eluting stents as one of the sectors most dynamic and complex segments.