Medical Devices: All Boom, No Bust
North America leads the world in medical device research and development, with the needs of an aging population at the center of the industry's growth.
Mark Crawford (Apr/May 08)
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The Puerto Rican Market
Long-regarded for its high-tech manufacturing expertise, Puerto Rico has a flourishing medical device cluster, led by global companies like Baxter, Biomet, Medtronic, Stryker, and U.S. Surgical. European companies with operations in Puerto Rico include B. Braun, Unilever, and Roche. Exports of medical devices exceed $2 billion annually. Puerto Rico ranks eighth internationally in shipments of medical and scientific devices.
Manufacturers are attracted to Puerto Rico because of its excellent university system and highly skilled and educated (and lower-cost) work force. With over 30 years of life sciences manufacturing history, Puerto Rico also has a high-quality pool of experienced managerial talent with highly valuable regulatory experience.
The Mexican Market
The medical device sector is a vital part of the Mexican economy, especially in the maquiladoras along the northern border with the United States. According to the U.S. Department of Commerce, trade in life sciences products between the United States and Mexico increased an average of 15 percent per year between 2003 and 2006. Today, the value of life sciences goods traded between the two countries is about $3 billion.
The big advantage of manufacturing in Mexico is, of course, lower labor costs. Steve Colantuoni, director of market research and communications for The Offshore Group, a maquiladora organization in Mexico that works with medical device manufacturers, says the average operating cost per hour for their medical device and related industry clients is about $7 per hour.
On the regulatory side, one of the top issues affecting the industry will be complying with the new FDA Amendment Act of September 2007. "If properly implemented, the framework for performance goals and related interactive review processes established by the act should streamline the review process, reducing the time to market for new technologies that will benefit patients," says Durgin.
Over the short term the North American market will likely also see more outsourcing. Besides saving money, manufacturing offshore provides another competitive edge in that products can be launched much more quickly. In a recent poll by Medical Product Outsourcing, more than half of the respondents indicated outsourcing is essential to strategic growth. However, despite these advantages, many medical device companies are reluctant to outsource because they worry about losing control of quality - not just the costs of dealing with defective equipment, but the possibly huge legal settlements for some companies if, for example, the failure of an outsourced implantable device leads to the serious injury or death of patients.