According to Millennium Research Group (MRG), the global authority on medical technology market intelligence, medical device brand owners in many countries are facing increasing budgetary pressures due to factors such as the ongoing debt crisis in Europe and the implementation of the medical device excise tax in the United States. As a result, there will be rising demand for medical device outsourcing and contract manufacturers (CMs) as brand owners aim to cut down on production costs, particularly for high-volume and low-margin devices such as endoscopes and surgical instrumentation.
Additionally, some brand owners, especially small and midsize companies, work with CMs when they are looking to launch new products but do not have the resources for large-scale manufacturing. As a result, the penetration of medical device outsourcing is fairly high in the spinal implant market, in which many smaller companies with innovative products compete. Medical device outsourcing is also a strategy being used by brand owners seeking to increase their presence in developing markets.
"Rising interest in emerging markets, such as in Brazil, India and China, is also greatly impacting medical device outsourcing," said MRG Analyst Julia Wall. "Working with local CMs can help foreign brand owners avoid high import and shipping costs. They can also more easily navigate local regulations and distribution networks." Despite the benefits of working with local CMs, brand owners do face some risks. For example, there have been recent controversies surrounding product recalls of devices produced from offshore manufacturing. Consequently, there has been somewhat of a shift back to US-based manufacturing due to concerns regarding quality control.
Another trend in the medical device outsourcing market is the increasingly collaborative and long-term relationship between brand owners and CMs. Building an established partnership encourages accountability and helps the CM become more invested in the design process. Brand owners are thus working with CMs earlier in the design process to optimize and streamline manufacturing processes. In addition, more brand owners prefer working with fewer CMs to better manage quality control. In response, CMs are broadening their range of products and services through acquisitions of smaller CMs and organic growth to address the increasingly diverse needs of brand owners.