European home healthcare companies have been very aggressive and ahead of the outsourcing curve in terms of Asian sourcing. This has been born, not only as a result of optimizing their bottom lines, but out of necessity as European government pressures on reimbursement (especially in Germany) have increased dramatically.
Here is an example of the problem – and this just scratches the surface.
It is no secret that manufacturing companies as well as pure distribution companies have been competing for the volume of hundreds of thousands or perhaps millions of wheelchairs, rollator, walker or other patient aid products. Price competition has been fierce and margins, after shipping are often less than 1O%.
It is also true that products sourced in Asia are commonly quoted in US Dollars. European customers have benefited from a rising Euro over the past three years and have become complacent as to currency risk as the favorable exchange bubble continue to grow.
Three months ago 1 Euro would have bought you 1.55 US Dollars. Today 1 Euro will buy you 1.29 US Dollars. A drop of round about 20%. Check the chart.
Here is my take on this:
The Chinese are not going to be able to decrease their costs meaningfully.
The Governments are not going to raise their reimbursement prices.
The Manufacturers are not going to sell at a loss.
The Dealers are going to take a haircut.
Manufacturers or Dealers that have signed up for a low competitive bid in Germany are going to have to visit their bank for a loan.
The Banks don’t have any money to loan.
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