Bio & Pharmaceuticals

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New Directions for Medical Device Manufacturing

23 Mar, 2019

By: Fred D. Burkhardt

The global medical device industry has demonstrated strong and sustainable growth in the recent past. Banking on an aging population, increasing incidence of chronic and lifestyle diseases, increasing adoption of artificial intelligence (AI) and big-data applications, upbeat consumer sentiment and increased business investments, this sector appears to be in the pink of health.

The bipartisan two-year suspension of the Medical Device tax, which imposed a 2.3 percent excise tax on MedTech manufacturers, marks a temporary relief. It will be again put into effect starting Jan. 1, 2020.

In the interim, the suspension is expected to boost hiring and investment in upgraded and new physical facilities at 9,000 U.S.-based medical device manufacturers. In addition, the ratification of the tax-repeal amendment has encouraged massive investments in the sector.

The medical supply chain is changing fast. Here are key factors to watch over the next five years:
•Compliance: It’s no surprise that standards of compliance have been and will continue to be important. Within this consideration, UDI (Unique Device Identification) and GSI standards are the most dominant.
•Cloud-Based Solutions: Driven by pressure from healthcare providers for lower costs and improved patient care, cloud-based solutions are:
° Cheaper than on-premises solutions
° Install faster
° Have lower ongoing maintenance costs
° Easier to link together different locations
•Device Manufacturing Will Get a Lot Leaner: It is important to note that the industry is increasingly consolidated in larger organizations. Healthcare providers are getting larger, which means they have more purchasing power and thus, are more able to shop around. Other considerations include:
° An ongoing recognition that medicine is getting more complicated and the ability to deliver high-quality patient care while reducing costs is a core objective for every healthcare provider. And since reducing staff while retaining care quality is extremely difficult, they’re looking up their supply chain for efficiencies.
° And finally, the Affordable Care Act (ACA) is mandating more efficient supply chains by reducing reimbursements for large hospitals, forcing cost-saving measures to be taken elsewhere.
° For medical device companies, though, this is actually good news. An environment that’s more sensitive to price means those who can reduce theirs quickly and effectively will find a wide pool of waiting customers.

By all indicators, medical device manufacturers are in for a shakeup. Demands on the industry for optimized tracked, automated and regulated processes will force those throughout the value chain to examine and rethink their processes.
Fortunately, software providers are ready with relevant solutions that unite tech stacks and allow data to flow through complex systems, automate workflows and manage projects beyond the four walls of individual companies.
For medical device manufacturers who can get in early, it’s an enormous opportunity. T&ID


Takeaways for Medical Device Manufacturers

• The medical value chain is being forced to design out inefficiency as healthcare providers are squeezed with rising costs and (potentially) decreasing revenue.
• Large organizations are willing and able to shop around for suppliers, and newfound price sensitivity means they’ll shop aggressively to find the best price.
• Medical device manufacturers are being pressured to decrease costs, which will translate into software unification and process optimization, impacting the selection process for new facilities.
• There’s room in the market for medical device manufacturers that can implement lean systems that lower production costs and pass savings onto customers, who are already waiting at the lower end of the market.
• Site selectors and communities seeking medical device manufacturers will need to become even more aware of these factors.

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