An overview of reusable surgical textiles in the North American market

1. Dan Sanchez Vice President Medcrest Textiles Division Medline Industries, Inc. An overview of reusable surgical textiles in the North Americanmarket

2. Medline History Textiles is our Heritage • Started almost 100 years ago as a textile company • Medline 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 USA • Approximately 36% healthcare market share in the U.S. • Over 19,800 textile customers • #1 or #2 healthcare market position in every major category

3. Medline Sales History • $4 Billion in sales • 6000+ employees • Number one privately held manufacturer and distributor of health care products in the U.S. • 40+ years of consecutive growth • 4th generation family leadership • 1000 person dedicated sales force • Steady International Growth

4. 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

5. 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

6. Historical Development of the Reusable Market • In the late 1980’s Reusable Surgical Textiles finally improved substantially • 100% 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!

7. Disposable Surgical Textiles • During the 70’s and 80’s the use of disposable surgical textiles surged higher • The 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 reimbursable • The technology for disposables was better than the reusable's

8. 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 appropriately • Sadly, many laundries were not meeting expectations

9. Organisation of The Reusable Market • U.S. ~ 20 Million Surgical Procedures Annually • Gowns • ~ 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

10. Organisation of The Reusable Market • Canada ~ 2 Million Surgical Procedures Annually • Gowns • 60% Disposable – 40% Reusable • Reusable's are ~ 80% Level 4 • Balance is a mix of Level 3 and Level 2 • Disposables are ~ 75% Level 3, 25% Level 4 • Drapes • 70% Disposable – 30% Reusable

11. Organisation of The Reusable Market • Mexico – number of procedures unknown • Gowns and Drapes are about 60% Reusable • ~ 50/50 split between cotton and microfiber • Rapidly transitioning to disposable gowns and drapes

12. Medline’s Position In The Reusable Market • USA • 31% Market Share • Primarily Gowns, Wrappers, Table Covers and Mayo Stands • Canada • 30% Market Share • Primarily Gowns, Wrappers, Table Covers and Mayo Stands • Mexico • Very little Reusable sales

13. 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

14. 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%

15. Promotion of Reusable's • Continue to educate on the AAMI Guidelines:

16. 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 hospitals • Hospitals must find ways to cut cost and save money • Adding a pack room to the laundry and converting to reusable's is one potential savings

17. The Position of Reusable's vs. Disposables Cost Savings Analysis:

18. 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 friendly • We must support their efforts with documentation on our sustainable products

19. 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

20. Thank You!