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Through the 1990s, many of the companies in the medical supplies industry achieved growth through research and development and market expansion. The acquistion of companies now appears to be the favorite means to achieve growth. This trend is expected to continue for the next two years. Investors are encouraged to select companies having a well rounded product base.

Prices and earnings in the medical supplies industry have been under pressure in the late 1990s from government insurance agencies, such as Medicare, and competition within the industry. Reaearch and development, technological innovation, and industry consolidation are some of the methods by which medical supply companies have attempted to cope with the situation. Investors need to consider safety and timeliness factors when evaluating these stocks for selection.

Automation in medicine is the most notable trend in the medical supplies industry during the 1990s. Electrophysiology is the area where the greatest advances have been made in the last four years, along with new therapeutic delivery systems. New products and a weak dollar have kept these issues favorable. Medical supplies stocks are expected to show 10%-15% earnings growth, stable margins, and rising sales.

Several medical supplies stocks are expected to outperform the market through 1996. Hospitals are cutting costs, reducing capital expenses for equipment, and are entering exclusive contracts for supplies. However, revenue and earnings for both manufacturers and distributors will increase, in spite of the slowing international economies and higher interest rates. Investors need to evaluate these stocks' timeliness.

The medical supplies industry saw sales increase 7.2% during the 12 months ended Sep 30, 1994. During the same period, hospital admissions and outpatient visits rose 0.9% and 7.9%, respectively. Regulatory changes are anticipated that would increase the cost of clinical trials, reduce product liability, and allow the export of drugs and medical devices without the approval of the Food and Drug Administration.

Stocks in the medical supplies industry are expected to perform well out to 1998-2000. The loss of tax benefits for many companies in Puerto Rico should be countered by higher sales from new products and services during 1995. Potential long-term investors should examine timeliness and safety ranks for particular companies especially carefully, although the industry as a whole is expected to do well.

Medical supplies industry stocks are forecasted to perform well both during 1994-1995 and out to 1997-1999. The optimism is due to current market conditions and the slow pace at which national health care reform is being enacted. Under the eventual standardization of health care, companies with large market shares, with products in strong demand by consumers, with multiple product lines, and large distributors will be especially well poised for profit.

Healthcare reform could be a double-edged sword for medical supplies stocks. Federal cutbacks in research and development, delays in the product approval process and managed care are all combining to reduce prices and profits. On the other hand, reform is creating opportunities in new areas, such as home health care. New products will make 1995 a better investment year than 1994.

Prospective investors in the medical supplies industry should carefully watch the debate in Congress over health care reform. The redefinition of the marketplace will probably limit sales during 1994 and 1995 but could produce gains in the long term. Medical supplies companies are conducting studies to find which medical procedures will yield highest results at low cost. Business in overseas markets, particularly South America and the Pacific Rim, will likely expand in the long term.

Medical supplies industry stocks have remained somewhat unsteady while investors wait to see what the Clinton health care plan will look like. As the healthcare industry again begins making capital investments on equipment and supplies, stock prices should go up. The outlook for the industry has improved over the past few years, but volatility remains high, so investors should pay close attention to their stock's risk and safety features.

Acuson, Diasonics suffer earnings' decline; market lacks breakthrough product With hospitals holding the lid on major equipment purchases, makers of ultrasound devices, including Acuson Corp. of Mountain View and Diasonics [...]