More than a decade ago, a wave of notable trends and market forces began to erupt within the medical device industry. Once these trends were formed, it changed how the manufacturing sector of the medical device industry introduced its products to the world. Remarkably, these trends are still shaping the industry today.
Read on to learn more about the history of the medical device industry, how it has adapted to meet the needs of a constantly shifting economy, and what trends continue to be crucial for business today.
During the early 1990’s, computer technology and industrial outsourcing grew quickly as many companies, including Celestica Inc., Jabil Inc., and Flextronics International Inc. (now Flex Ltd.), started to acquire their client’s manufacturing business, causing a need to develop areas of their organizations that specialized in consumer electronics.
Although this led to a greater financial expansion for these companies, outsourcing in the medical device department was still lagging because of the inherent risks linked to medical products and the often unpredictable nature of the market. Only a few organizations, including major players and smaller, highly-specialized processing shops, could provide these unique services to clients.
However, a more robust and capable medical device industry began to emerge overtime. Fast forward ten years later and was now a number of notable market forces and trends that began to emerge. These trends changed the way the medical device manufacturing sector introduced its product to the world, and they continue to change the ways of the market today.
Whether or not it was intentional, the medical device industry has demonstrated an amazing ability to practice forward thinking by evolving to meet new market challenges, opportunities, and demands. This is especially true of the contract manufacturing sector of the industry, which has grown over the last 20 years to meet new clinical demands and become an important part of the industry’s success.
Since then, the medical device industry has reshaped its product manufacturing process to better respond to a shifting economy, which has come in handy during the modern times of the COVID-19 pandemic. The perceived pace in which the market has evolved indicates that experts are constantly charting trends in an attempt to stay ahead of the curve. The medical device manufacturing industry has developed a variety of trends that are shaping the future of the market, including cloud computing, expanding the role of additional manufacturing, increased supply chain efficiencies, and more.
During this time, the FDA approved 3D printing of medical devices, which was a first-of-its-kind development. The approval came back in 2017 and was considered ahead of its time. Back then, the 3D printing of medical devices, human tissue, and medications was something only considered possible in the far future. Patients were already benefiting from 3D printed medical products with access to innovative drugs and personalized devices, but the approval for more comprehensive technology facilitated an advancement that is more important than ever today.
Once referred to as “leap-frog” technology because it is designed to help bridge the past and the future, 3D printing first evolved into use at hospitals and academic centers to create replacement knee joints, experimental heart valves, bone implants for clinical study use, and innovative dental implants. Surgeons across the country began to use the technology to save infants born with life-threatening breathing conditions by creating 3D printed splints with patient-matching capabilities to install in the infants small airways. This technology was expandable and degraded as babies grew.
Companies can use this information and other trend-spotting technologies to better position themselves for success in the future. For example, during the current COVID-19 pandemic, many companies are transitioning to telemedicine and other remote health monitoring systems to reduce the risk of spreading the virus between patients and staff. These technologies are forecasted to stay, even when the pandemic ends. Companies who start now and make the necessary adjustments to incorporate this technology into their business have a better chance of staying ahead of the competition.
Here are seven trends that may have permanently shifted the medical device industry to be aware of:
1.New, Eager Players
Over the last decade, the medical device industry has seen an increase of manufacturing companies entering the sector without a lot of prior experience. However, these companies make up for their lack of knowledge with an eagerness to learn and create a healthcare niche with their services. For example, Molex, which is owned by the Koch brothers, did not have much of a background in medical device manufacturing. The company mainly focused on consumer electronics, automotive, information technology, and other industries.
Other examples of inexperienced companies finding success in the medical device industry include TE Connectivity, Lubrizol, Telleborg, Nordson, and Freudenberg. Many manufacturers and industrial companies have been active in medical company merging and acquisitions of organizations, but have yet to put together medical device manufacturing portfolios that show promising advancements within the industry.
2.Changes Within Distributors and Suppliers
Medical device industry distributors have branched out from supplying hospitals to developing a niche as healthcare salutation and supply chain providers. Medline Industries, for example, has been an active manufacturer and distributor for a long time with many private-label products that are made in Asia with contract developers.
However, some of their competitors significantly added to their distributing capabilities and product portfolios, giving them leverage above others. Cordis was acquired by Johnson & Johnson from Cardinal Health and Medtronic acquired the Medical Products Division from Covidien. Also during this time, Owens & Minor bought a large part of Halyard Health’s surgical supply business (formerly known as Kimberly Clark Health Care). These changes indicate a change in the major players and how they operated.
3 .Extensive Consolidation Among Top Companies
One of the biggest trends that have influenced the medical device industry within the past decade is that of major consolidations among top players. When companies merge and share their skills, it helps secure a greater market share, especially in the outsourcing sector. One of the largest consolidations that this decade saw was that of Accellent. It’s likely that because of how many major collaborations have come together in the last decade, the Accellent model was likely before its time. The company put together a group of organizations that were not well integrated but provided a wide variety of skills and services. The global investment firm that owned Accellent, KKR & Co., put the company in debt. It took more than ten years for Accellent to evolve into Integer in 2016, which was a medical device company with sales of more than $1.5 billion at the time.
Other collaborations at that time included when Jabil acquired Nypro, when Molex bought out Phillips-Medisiz in 2016, and when Flextronics purchased Avail in 2007. These collaborations accounted for nearly $3 billion in medical device manufacturing within one year. Also significant during this time was when MedPlast reached the $1 billion in revenue, thanks to all the collaborations it made over the years, including those with Coastal Life and Vention. Today, collaborations among top companies are crucial in the post-pandemic medical market, which includes remote monitoring devices, among many others.
4 .Minimally Invasive Procedures On The Rise
Some research suggests that the global market for minimally invasive technology and procedures will be worth $50 billion in the upcoming years. This is because many healthcare centers are moving more laparoscopic and catheter-based procedures, which calls for miniature supportive technology. Experts suggest that this market has the potential to grow substantially over time.
This segment of the medical device industry is especially attractive to contract manufacturers who wish to provide a wide range of outsourcing abilities. Companies who are willing to meet the needs of this sector and create an inclusive salutation for OEM clients include Nordson with its acquisitions of Vesta and Vention Medical Advanced components, Freudenberg with its buyout of MedVenture Technology Corp., and TE Connectivity with its purchase of AdvancedCath and Creganna.
5. Private Equity Investments
Private equity investments have deeply impacted the medical device industry over the past decade. They have brought mergers, professional management, liquidity, and acquisition information to smaller businesses, which helps these organizations grow.
Examples of this included the following:
While medical device companies have started to decrease their brick-and-mortar services and turned to manufacture one-stop-shops, it has created an increased demand from suppliers. This demand has changed the way contract manufacturers work over the past decade. In the past, many contact manufacturers were told how to build their products and how.
However, in recent years, these companies found a niche by being able to provide services that range from product development and concept to very specialized manufacturing, supply chain management, and then delivery of the product.
The medical device industry may never look the same as the automotive industry in terms of contract manufacturing, but some areas are similar. For example, the most successful suppliers are valued as true partners and tightly integrated into the process. They are also in charge of calling on smaller suppliers on behalf of their client. Top manufacturing contractors can gain a competitive advantage by offering supply chain management services.
As a result, OEM consolidation has forced consolidation in other areas as well. When OEMS buy other OEMS, it encourages contract manufacturers to act as partners to these OEMs and expand their business. Additionally, when OEM supply chains become larger as they acquire other companies, it becomes possible that smaller contract manufacturers will be removed from supplier lists. This allows top contract manufacturers to thin out the competition and become viewed as a trusted partner.
6 .Changes in OEM Operations
There have been rapid changes in OEM landscaping over the past decade. These changes have fueled the evolution of contract manufacturing as OEMs seek to reduce manufacturing footprints and use trusted partners to provide their production and technical services. Timelines and developmental budgets are under pressure. OEMS seek to outsource their partners to help navigate their global and competitive markets.
Other aspects of the supply chain have changed, including how distributors are buying commodity product companies. Distributors that are struggling to stay in the high digits of margin might view the market as an opportunity, whereas some OEMs might see businesses as undesirable with only 20 percent margins. This allows distributors to gain more control over the cost and provide private label products. This trend may continue within companies such as Owens & Minor, Cardinal, and McKesson, and may increase in the upcoming years.
While many of the trends listed above have shaped the industry to date, the COVID-19 pandemic has brought about new challenges and opportunities that are hard to predict. Many key players have lost millions of dollars due to factors such as postponed elective procedures, which can account for up to 50% of the revenue in some operations. However, these companies are following some of the above mentioned trends by merging with other companies to provide remote technology and other software programs designed to address the current public healthcare emergency.
As the pandemic continues and even starts to die down, these new trends may no longer be relevant. The FDA, which has been relaxing on its approval of needed devices during this time, will eventually go back to requiring more substantial approval processes. Hospitals are struggling with financial operations, which puts a strain on the entire healthcare system. Ultrasound devices are expected to be on the rise, even after the pandemic, due to their ability to monitor patients remotely and avoid exposure to healthcare workers. Other services deemed important right now are contactless delivery of necessary medical supplies to workers and breathing machine services, which can be used to save patients currently suffering from COVID-19.