Medical device manufacturers face a daunting challenge in today's market. In addition to understanding stringent government regulatory requirements to ensure products are safe and effective, they must also bear the burden of understanding the complexities and rigors involved in moving their innovative concepts through the product development phases while driving the cost down.
In order to be cost efficient and reduce business risk, device manufacturers are actively seeking ways to consolidate their suppliers. They prefer to utilize single-source Contract Manufacturing Organizations (CMOs) starting from prototyping and development to packaging and commercialization of their medical implants. As a result, the outsourcing of manufacturing functions has increased, a trend that is expected to continue as device companies seek one-stop solutions to accommodate their growing needs in terms of increased volume, product differentiation, and compliance with a more stringent regulatory environment.
Here are the 3 key trends of the CMO industry –
1. Global Device Value estimated to be $340 Billion
Per the ITA 2016 market report, the U.S. is the largest consumer which accounts for approximately 45% of the global device market. The estimated CMO market of raw materials, components, and finished goods was $20 billion in 2014 with 9% growth. Many middle and start-up technology firms have experienced strong growth, as smaller firms (those outside the top 50) have doubled revenue from 2010 to 2014 ($85 billion with 19% CAGR). Also, there is a high increased demand for innovative medical devices due to aging population and need for improved healthcare from the emerging economies. As such, the medical technology market will continue to grow in the U.S. and in other developed countries with emerging markets.
One of the device market drivers is the increase of complex medical product engineering, which requires flexible resources, various manufacturing capabilities, and multi-layered project plans. Due to challenges and changing market dynamics, large medical device manufacturers have opted for outsourcing business models to reduce costs and manage business risks. They will engage CMOs at early development phases to collaboratively identify development hurdles, prepare a flexible project plan, and determine the potential production flow. Their objective is to minimize the risk of “lost in translation” during the later technology transfer, to reduce fixed assets and dedicated resources in the early development stage, and to streamline production from the start; ultimately achieving lean manufacturing processes.
As a result, many CMOs have expanded their offerings. They differentiate themselves through operational excellence: enhancing their service offerings, streamlining process execution timelines and optimizing the management of existing resources. All of this is done to maximize output, expand sales and improve sustainability. This versatility enables device companies to improve their operational performance and meet shorter product life cycles while maintaining focus on their core business. When a device company selects a CMO partner, they always first align technology and manufacturing requirements with the CMO’s capabilities; furthermore, a successful offshore R&D and manufacturing partnership requires a dedicated team from the CMO at the early development phase.
2. Product design and development is the largest service segment
The U.S. is expected to continue to be the leader of medical device research and development, with $7.3 billion spent in 2010. Over the past few years, the way the medical device industry assesses innovation and new technology has changed. The old dynamic of the physician as the judge of value has been replaced with the government, private insurers, and consumers increasingly determining what sells and at what price point. Consumers refuse to pay for incremental enhancements that add bells and whistles that do not improve health or reduce cost. The faster, better, smaller, and cheaper innovations in medical devices are the ones that will maintain a sustainable advantage.
In 2014, product design and development was the largest service segment in the medical contract manufacturing market, with revenue share valued at 28.6%. Most activities are related to innovative product development. The expertise provided by the outsourcing partners helps reduce costs and decreases the timeline for product development, pilot testing, and commercialization.
Textile implants require uniquely skilled personnel and special equipment. Device companies typically develop products using experienced and fully equipped partners in order to reduce the time to market. Many textile companies see this opportunity and are actively expanding their textile technology platform while broadening their device finishing capabilities. However, it is only a handful of these companies that have in-depth knowledge and a long history in both medical textile implant processing and device development.
3. Lack of resources in start-up and middle size device companies
Due in part to the tougher regulations, medical device companies are not realizing the same return on every R&D dollar invested. R&D spend for the top 20 medical device companies grew 7.4% annually between 2006 and 2012, but pre-market submissions to the FDA (510k’s) actually declined by 1.2% during the same period. A slowing product innovation engine from large device companies is taking its toll.
Many device start-ups took over the challenge to find new, innovative solutions to old healthcare problems. Robust funding is crucial, which requires development pipelines of 3 to 7 years in duration and millions of dollars in cost in order to develop devices that meet regulatory requirements for commercialization.
In a 2012 economic census report, the medical device industry employed over 356,000 people at about 5800 establishments. It was estimated that 80% of these companies hired 50 or less employees. These companies focused on concept development and filled their pipelines with intellectual property. They tended to have limited resources to complete all phases of device development, and will need production support from concept to commercialization.
A CMO with adaptive quality systems, validated test methods, turn-key processes, and flexible resources can meet a wide-range of R&D needs in start-up and middle sized companies. In essence, these CMOs act as the extended R&D and manufacturing teams of the device customers.
About Secant Group
Secant Group works with visionary teams in multiple industries to bring extraordinary solutions to market through next-generation materials and process technologies. Secant Group has partnered with SanaVita Medical to offer an integrated solution of medical textile implant manufacturing services to the biotech industry.
SanaVita Medical is a U.S. based company that consists of a knowledgeable cross-functional team in FDA and CE regulatory requirements for Class II and III devices. With experience in implant product development, SanaVita Medical is committed to providing high quality services and products to their device customers. SanaVita Medical is compliant with FDA 21 CFR 820 and is ISO 13485 certified.