AN OVERVIEW OF REUSABLE SURGICAL TEXTILES IN THE NORTH AMERICANMARKET

Dan SanchezVice PresidentMedcrest Textiles Division Medline Industries, Inc.

Medline History

Textiles is our HeritageStarted almost 100 years ago as a textile companyMedline pioneered many textile innovations that are now widely-used in healthcare today:

○ Colored scrubs, printed patient gowns, knitted sheets

Largest U.S. Provider of Healthcare Textiles in the USAApproximately 36% healthcare market share in the U.S.

Over 19,800 textile customers#1 or #2 healthcare market position in every major category

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Sales in Billions$4 Billion in sales6000+ employeesNumber one privately held manufacturer and distributor of health care products in the U.S.40+ years of consecutive growth4th generation family leadership1000 person dedicated sales forceSteady International Growth

Medline Sales History

Historical Development of the Reusable Market Until the 1950’s “Muslin” material

was the accepted reusable surgical material

The belief was it would stop airborne microbes & was a T140, 100% Cotton material

The fabric was white in color and produced glare which tired the surgeons eyes – Medline introduced color into the

Operating Room by coloring the gowns and drapes green to reduce glare

Historical Development of the Reusable Market In 1952 William C. Beck reported “muslin

material may have been considered an acceptable bacteriological barrier when dry, but lost whatever barrier capability it possessed once it became wet”.

New fabrics were developed with a higher thread count and chemical finishes such as “Quarpel” were applied

However not much changed at the hospital level for about a decade as they continued to use Muslin fabrics

At the same time disposable fabrics were being developed and their use began to increase

Historical Development of the Reusable Market In the late 1980’s Reusable Surgical

Textiles finally improved substantially100% polyester materials were

developed that provided a very good barrier to fluids and strike through

In the early 1990’s Gore was introduced as a Liquid Proof and Breathable fabric for surgeons gowns

Unfortunately the barn door was left open and the horse was gone!

Disposable Surgical Textiles During the 70’s and 80’s the use of

disposable surgical textiles surged higherThe U.S. government reimbursed hospitals

for single use items on a cost plus basis○ Hospitals used disposables to generate

revenue○ Reusable Surgical Textiles were not

reimbursableThe technology for disposables was better

than the reusable's

Organisation of The Reusable Market As of 2004, through a survey it was estimated

disposables had captured 84% of the market for surgical textiles in the USA

Disposables promised the product would be perfect every time

Whereas, with reusable's you would need to have faith the laundry had processed, inspected and repaired the textile item appropriatelySadly, many laundries were not meeting

expectations

Organisation of The Reusable Market U.S. ~ 20 Million Surgical Procedures

AnnuallyGowns

○ ~ 85% Disposable – 15% Reusable○ Primarily Level 3 and 4 (using AAMI Guidelines)

Drapes○ ~ 85% Disposable Table Covers and Mayo

Stand Covers – 15% Reusable○ ~ 95% Disposable Patient Drapes – 5%

Reusable

Organisation of The Reusable Market Canada ~ 2 Million Surgical Procedures

Annually Gowns

60% Disposable – 40% ReusableReusable's are ~ 80% Level 4Balance is a mix of Level 3 and Level 2Disposables are ~ 75% Level 3, 25% Level 4

Drapes70% Disposable – 30% Reusable

Organisation of The Reusable Market Mexico – number of procedures

unknown Gowns and Drapes are about 60%

Reusable~ 50/50 split between cotton and microfiberRapidly transitioning to disposable gowns

and drapes

Medline’s Position In The Reusable Market USA

31% Market SharePrimarily Gowns, Wrappers, Table Covers and

Mayo Stands Canada

30% Market SharePrimarily Gowns, Wrappers, Table Covers and

Mayo Stands Mexico

Very little Reusable sales

Medline’s Position In The Reusable Market Complete Delivery on a Rental Basis

Sterile Recoveries○ Can cover about 70% of the USA○ About $100 M in revenue

Comprised of reusable's textiles, stainless steel and disposable sterile packs

Primarily Level 4 and 3; some level 2

Other Laundries with Sterilization Capability○ HLS – Illinois○ MUHL – Wisconsin○ Comtex – Ohio○ Crown Laundry – Alabama○ Mayflower - Maryland

Promotion of Reusable's

Creating a sustainability catalog that draws from every division (20) within Medline

Providing support to build Pack Rooms and provide guidance in meeting FDA regulations within laundries

Dedicated Textile Sales Representatives to sell textiles in the USA and Canada

Implementing “Hybrid” programs to provide a mix of Reusable's and Disposables – this will increase our reusable sales by 10 to 30%

Promotion of Reusable's Continue to educate on the AAMI

Guidelines:

The Position of Reusable's vs. Disposables Reusable Surgical Textiles have the

ability to provide a cost effective alternative to Disposables

The U.S. Government is reducing its funding for hospitalsHospitals must find ways to cut cost and

save moneyAdding a pack room to the laundry and

converting to reusable's is one potential savings

The Position of Reusable's vs. DisposablesCost Savings Analysis:

Product Gown pack cost Gowns used per year* Annual Spend

XL Ultra Level 3 - KC 95121 $2.57 12,900 $33,153

XL Fabric Reinforced (no level) $2.71 2,556 $6,927

Total $40,080

Medline Reusable Level 3 $1.93 12,900 $24,883

Medline Reusable Level 4 $2.67 2556 $6,826

Total $31,710

Annual Savings moving to Reusable Gowns $8,370% Savings moving to Reusable Gowns 20.9%

The Position of Reusable's vs. Disposables Reusable's are also primarily synthetic

and do not produce lint which coincides with the objective of AORN in the USA and ORNAC in Canada

Many hospitals have established “Green” committees to try and become more environmentally friendlyWe must support their efforts with

documentation on our sustainable products

Summary Reusable Textiles have dramatically changed

in the past 100 years from Muslin to high tech synthetic materials

Disposables filled the vacuum we provided when our product did not have the required barrier properties

Government helped to reinforce the transition to disposables

We must prove our products are cost effective and sustainable to win over new customers

Thank You!