6 Market Drivers for Medical Device Manufacturers

Trends / 6 Market Drivers for Medical Device Manufacturers
Medical device manufacturing trends

Summary: operational efficiency and profitability are the primary drivers for medical device manufacturers. Healthcare providers tasked with lowering their costs will shop around an expanding market for the best price. Manufacturers need to cut their own costs while retaining quality — and will turn to cloud solutions, partnerships, and more to do so while still meeting stringent regulatory requirements.

We’ve been talking a lot about the medical device industry recently because we think the challenges they face are interesting.

With that in mind, we thought we’d dig into some research from MarketsandMarkets to see what’s driving medical device manufacturers in 2018.

Here we go!

Short on time? Zoom to the end for a bullet point summary.

Driver 1: Operational efficiency & profitability

Medical device companies, of course, are always looking to be profitable.

No one makes an MRI machine or goes through all the regulation effort on the US FDA website for medical devices just for fun.

But between 2018-2020, we’re expecting to see increased profitability pressure applied to medical device manufacturers.

According to MarketsandMarkets:

[with] rising healthcare costs and increasing national healthcare expenditures it is becoming increasingly important for healthcare organizations… to optimize their processes while reducing costs.

Basically, the customers of medical device manufacturers are under more pressure to streamline their processes and do more with less

… and they’re passing that demand down the supply chain.

At the same time, there’s more money to be made: since 1994, spending on healthcare as a percentage of GDP is up 25% since in rich countries.

To secure lucrative government contracts, med device manufacturers have to reduce their production costs so their bids can be competitive.

Driver 2: Unique Product Identifier (UDI) initiative by the FDA

We’ve covered the FDA’s UDI initiative before and when different device classes need to be compliant.

In general, though, rolling out UDI is a major driver for change in the medical device industry.

First, other regulatory bodies have taken inspiration from the FDA and it’s only a matter of time before global compliance with UDI requirements (or something similar) is the norm.

Second, medical device buyers have realized that UDIs can help them drive inventory and supply efficiencies. For instance, Mercy Healthcare System in the US was able to save $400,000 in the first few months after they implemented a UDI system.

Driver 3: Cloud-based software solutions

55% of business applications will be cloud-based in the next 3 years, with on-prem incumbents fall fast. And the medical device world isn’t immune.

Amazon’s focus on HIPAA compliance for their data centers has opened the door for medical cloud-based software solutions including PLM, SCM, ERP, CRM, DAM, and more.

So cloud-based solutions can be a reality now in a way that they couldn’t before. This has two main benefits for medical device manufacturers:

1. Operational/cost efficiency

Cloud-based solutions are less expensive to deploy and maintain and can help achieving the operational and cost efficiency and process optimization providers demand.

2. The Internet of Things is here

The Internet of Things (IoT) isn’t an academic concept anymore. It’s a reality, and for medical device manufacturers and their clients, it’s closing feedback loops.

Data can be collected and shared easily across the entire product development network, but the only way to take advantage of that is there’s a system to accept and process that feedback up the supply chain. And because that system is all about collaboration and data sharing, cloud-based solutions just make sense.

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Driver 4: GS1 regulation

Just like the FDA is driving industry-wide regulation in the US, GS1 is driving industry change globally.

GS1 regulation is already an accepted standard in major healthcare markets, including the US, Canada, the UK, France, India, Thailand, Australia, and Russia.

For most medical device manufacturers, that means compliance isn’t optional.

GS1 is focused on increasing transparency and reducing mistakes and errors.

With those objectives in mind, compliance now requires Automatic Identification and Data Capture (AIDC) systems.

AIDC systems are processes that use computers to automate data collection and entry without the need for human intervention. For instance, barcoded products that are scanned into a hospital and automatically added to a total inventory count would be an AIDC system.

Driver 5: Diversified support base

The med device supply chain and manufacturing worlds are increasingly supported by a diverse range of stakeholders:

  • Funding for startup medical device companies continues to accelerate as organizations try and cash in on the burgeoning industry.
  • Incumbent players continue to make acquisitions and partnerships with startups to stay one step ahead of disruption.
  • Medical industry leaders are beginning to form partnerships with tech suppliers to expand their offering and offer the cloud solutions providers are looking for.

For med device manufacturers, it means two things.

First, the industry is hot right now. There’s money to be made  and major organizations know it. They’re investing heavily to stay ahead.

Second, the market’s going to get a lot more crowded. Innovations like 3D printing are already dropping the cost of traditional healthcare manufacturing, and that trend will only continue as more startups are funded, purchased, and partnered with by big players.

Driver 6: Pharma’s going to try and curb drug counterfeiting

While this is a little off the beaten path for med device manufacturing, it’s worth mentioning as a core industry driver.

The pharmaceutical industry has always struggled with counterfeit drugs, but in recent years the problem has intensified.

MarketsandMarkets quotes the WHO:

According to a WHO pooled analysis of 100 studies from 2007 to 2016, covering more than 48,000 samples, 10.5% drugs in low and middle-income countries are fake or substandard.

What’s more, in the US, the counterfeit drugs market is worth $75bn and costs 100,000 deaths annually.

To combat this problem, the US is beginning to roll out RFID chip requirements for pharma companies.

Over time, we predict that this data will be compiled in a centralized database much like the UDI database, so who has what drugs and why can be analyzed and controlled.

It’s not out of the question that a similar RFID regulatory move will eventually cascade down to med device manufacturers and eventually, through their own supply chains.

Bullet point summary

  • Operational efficiency and profitability requirements will be the primary driver, challenge, and opportunity for medical device manufacturers.
  • Compliance with UDI FDA regulation will inform business decisions. Even for companies not in the US, UDI technology is likely to roll out globally and be a requirement for more and more healthcare providers once they realize they can use it to optimize their inventory.
  • Cloud-based solutions will become the norm, both because they’re less expensive and can reduce cost, and because they’ll catalyze the IoT to complete the feedback loop.
  • GS1 regulation will feature more prominently as it’s adopted globally
  • Major players will fund startups and form partnerships with software companies to expand their offering to healthcare providers to stay one step ahead of disruption.
  • Pharmaceutical companies will try to curb drug counterfeiting with RFID chips — an initiative that, if successful, is likely to be rolled out through the rest of the medical industry.

Image Credit: Burst

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