Blog Tag: Medical Device Market

Outsourcing of Services in the Medical Device Industry

As the medical device market continues to grow, the medical device industry has strived to reduce costs through outsourcing. An industry report has found that the global medical device outsourcing market was valued at $33.2 billion in 2016, and is projected to continue to grow. The medical device industry is outsourcing not only the manufacturing of medical devices, but also associated services, such as regulatory consulting and contract manufacturing, to medical device service providers. Medical device manufacturers and outsourced medical device service providers should be conscious of the regulatory and legal ramifications of the delocalization associated with the outsourcing that is increasingly common in today’s global market.

While outsourcing has traditionally been linked to manufacturing, outsourcing of services has become a major growth engine in the medical device industry. Outsourced services include regulatory consulting, product design and development, testing and sterilization, implementation, upgrades, maintenance, and manufacturing contracts. Regulatory consulting, which in 2015 already commanded over 50% of the outsourcing market for services, is particularly expected to grow. Regulatory consulting includes services directed to compliance with national agencies that approve and continually monitor the safety of medical devices, including the F.D.A. in the United States and the E.F.S.A. in Europe. In addition, contract manufacturing is reported to be the fasted growing service in the medical device industry and is projected to grow at a compound annual growth rate of over 11.5% through 2025.

There are several benefits associated with medical device outsourcing. According to an MDDI article, outsourcing can help original equipment manufacturers (OEMs) accelerate time to market for a new product, and speed up return on investment. Furthermore, the article states outsourcing can provide specialized knowledge, expertise, and facilities without the significant resources required to acquire such expertise in house. Moreover, outsourcing can leverage the pre-existing large supply chain of the contractor.

However, outsourcing also carries potential risks. The issues associated with outsourcing so many aspects of services uniquely associated with the medical device industry may not be as well known or well understood as the issues presented by outsourcing manufacturing. According to another MDDI article, these issues may include an increased risk of civil lawsuits from consumers of medical devices. This is especially true as medical devices become increasingly digital, and cybersecurity vulnerabilities are found. The medical device industry may also face increased regulatory scrutiny from national agencies as more regulatory compliance is outsourced to consulting services. Consequently, the medical device industry and medical device legal community will increasingly face new challenges from a world in which more and more industry services are outsourced.

Medical Device Market to Reach $361 Billion

According to an article in Medical Design Technology, Kalorama Information’s 2014 report on The Global Market for Medical Devices estimated that the global market for medical devices was expected to reach $361 billion by year’s end, reflecting somewhat slower than expected growth in the industry.  Looking forward, the article projects that at an average growth rate of 3%, the global medical device market should grow to $427 billion in 2018.

According to the article, there are many competitors in the global market due to the wide variety of types of medical devices; however, only eighteen companies are responsible for most of the global revenue.  Those companies include Johnson & Johnson, GE Healthcare, Siemens, and Medtronic (including Covidien).

The article cites the report as noting that hospitals are the key customer of medical devices with respiratory equipment, catheters, patient monitoring, and dental equipment being the largest categories of medical devices.

The article states that the report notes that areas outside of the U.S., Europe, and Asia represent almost a fifth of the global medical device market.  Growth in the market was driven by healthcare spending in countries such as Brazil, Turkey, South Africa, Chile, and Mexico.  These import-heavy markets are expected to be a focus of medical device companies in the coming years.

A 2015 Medical Device Industry Survey conducted by the Emergo Group provides additional insight on 2015 medical technology forecasting. The survey indicated that 75% of the 5,400+ survey participants are positive about prospects for the industry in 2015, and that companies expect China and the US markets to perform well in 2015 compared to others. Interestingly, the survey noted that China, Japan, Russia, and Brazil have become more difficult from a regulatory compliance perspective.