Increasing Trend of Medical Device Outsourcing
The medical device market is currently witnessing an explosive growth due to increasing geriatric population across the world, increasing chronic and infectious disease burden among the population, increasing demand and acceptance for smart, technologically advanced medical devices, growing economies of the emerging countries and favorable reimbursement scenario for most of the medical devices. To meet the huge volume demand of differentiated, regulatory compliant medical devices at a shorter time span economically, medical device companies (OEMs) are outsourcing their manufacturing activities to medical device contract manufacturers (MDCMs).
The medical device contract manufacturing global market is expected to reach $97,239.4 million by 2026 growing at a high single digit CAGR from 2019 to 2026. Medical device OEMs tend to outsource to MDCMs primarily to streamline their overextended budgets, to hasten market entry of their products, gain a competitive edge with differentiated and innovative products, to reduce their manufacturing footprint, to focus on their core competencies like research and innovation and to expand their capacities without making a capital investment. The increasing complexity of medical device testing, constantly changing and evolving regulatory landscape across the globe, increasing demand for independent verification will surely drive the adoption of outsourcing by device manufacturers. The continued growth of outsourcing is further fuelled by the efficient core competencies offered by contract manufacturers, technological advancements in medical devices, increase in margin pressures, competitive rivalry, requisite of product differentiation, huge volume demand, compliance with a more stringent regulatory environment and shorter product life cycles. To gain more market share by bringing innovative and differentiated products to the market in a shorter time and the requirement of medical device companies to stay abreast in the patient-driven market with smart and superior medical devices by focusing on research and development will further fuel the growth of the MDCM market.
Medical device contract manufacturing companies are trying to expand and enhance their manufacturing competencies and their service offerings so as to provide one stop shopping destination or end to end solutions to their medical device clients and to maintain their leadership status in the market. Some of the key capabilities adopted by the major MDCMs to differentiate themselves and gain a competitive edge over their counterparts are 3-D printing or additive manufacturing (AM), high volume automated manufacturing of devices, fine-tuned systems engineering process, plasma and resistance welding, mechatronics enabled medical device design and manufacturing, miniaturized component technologies and others. Ideally, a MDCM displaying qualities like expertise and experience in the medical device industry, well versed in Design for Manufacturability and Assembly (DFMA), acceptable information management capabilities, solid financial statistics, strong supply-chain capabilities and experience, excellent quality systems and certifications, reputation and also with a culture compatible with that of the OEM will be the best partner for an OEM. A contract manufacturer with ISO 13485 Certification, FDA compliance, and risk mitigation plans, ISO 14644 and ISO 14698 compliant cleanrooms, will be more appealing to an OEM.
Medical device contract manufacturing market has huge opportunity for existing players and new entrants. The total medical device market is estimated to be $402.6 billion in 2019 of which the manufacturing cost spent by OEMs is estimated to be ~40% in which the MDCMs have penetrated one third of the market indicating huge opportunity for the MDCMs. Maximum medical device outsourcing penetration has been observed in the in-vitro diagnostics (IVD) market due to increasing demand of rapid, accurate and early detection of diseases especially for the highly prevalent infectious and chronic diseases. The least penetrated medical device outsourcing markets are diagnostic imaging, endoscopic tools and cardiac devices as most of them are highly sophisticated, Class III devices demanding enhanced technological capabilities and quality adherence from the MDCMs.
In medical device contract manufacturing market by service type, device manufacturing and assembly services followed by design and development services are outsourced more to meet the huge volume demand of innovative, value based medical devices. Regulatory consulting services are minimally outsourced due to the limited number of companies offering customized regulatory strategies for medical device due to lack of sufficient knowledge of the device.
The medical device contract manufacturing market is fragmented with the top ten players occupying minor market share and the major share of the market is occupied by other players. The top players in the market are Flex (Singapore), Jabil (U.S.), Integer Holdings (U.S.), Celestica (Canada), Sanmina (U.S.), Plexus (U.S.), Gerresheimer (Germany), Molex (U.S.), Tecomet (U.S.), West Pharmaceuticals (U.S), Benchmark Electronics (U.S.), Orchid Orthopedic Solutions (U.S.) and TE Connectivity (Switzerland).