Contract manufacturing
broader difficulties around securing the right technical expertise, or around congested supply chains – let alone when emergencies like Covid force managers to transform their production lines on a dime – it can be near impossible for manufacturers to cope with the pressures of modern medtech. Enter contract manufacturing. By offloading aspects of the production process to outside experts, OEMs can dramatically bolster their supply chains, ensuring products reach patients faster and more cheaply. Examine the numbers and this approach is clearly popular. All the same, it’d be wrong to imply that contract manufacturing is straightforward. From cybersecurity to intellectual property, finding the right partner requires time and patience – relationships that must be honed even once initial contracts have been signed. And though the contract manufacturing sector is going from strength to strength, it’d equally be foolish to assume it’ll keep rising forever. Especially with looming geopolitical tensions in East Asia, an increasing group of manufacturers, often prodded by their governments, are rushing to secure new partners, or even reshore their operations entirely. It goes without saying that, notwithstanding the current excitement, the consequences for contract manufacturers could be profound.
Round the world It’s hard to overstate how important contract manufacturing now is to global medtech. Once again, the statistics here are revealing, with work by MarketsandMarkets finding that the global field was already worth $71.2bn in 2022, a figure that could rise to almost $120bn by 2027. As so often in international pharma, the developing world is especially impressive here, with the Asia-Pacific region set to enjoy particularly dynamic growth. Beyond the headline figures, meanwhile, it’s clear that some of the biggest names in global medtech are galloping down the contract road. It’s surely no accident, after all, that giants as varied as Philips and GE Healthcare should have lately re-upped agreements with contract manufacturing organisations (CMOs).
How to explain this dynamic and expanding marketplace? To an extent, suggests Ash Shehata, partner at KPMG’s Global Healthcare Center of Excellence, the answer lies in broad industry trends: “When we look at manufacturing capabilities, it isn’t just at the top line – it’s also at the sub-specialty line.” To explain what he means, Shehata evokes the bewildering spread of medical devices now flooding the market, from long-term cardiovascular devices to disposable stents. The
Medical Device Developments /
www.nsmedicaldevices.com
point, he stresses, is that OEMs can’t hope to develop all these machines in-house – hardly surprising when the WHO notes that there are some two million different kinds of medical devices on the world market today, categorised into over 7,000 different groups. With those kinds of figures, it’s no wonder that OEMs lean on external expertise, especially when two in five skilled US manufacturing jobs could be vacant by the middle of the decade. That’s doubly true when you factor in supply chain woes. Though they’re crucial everywhere, from patient monitors to defibrillators, microchips and other technical components have lately been in short supply. It therefore makes sense for OEMs to partner with CMOs in places such as Taiwan – an island that makes 60% of the world’s semiconductors. For her part, Jenny Harte, a life sciences partner with KPMG, stresses the value of contract manufacturing in an emergency. Unsurprisingly, the most recent obvious example here is Covid, noting that the pandemic sparked a “massive acceleration” in the contract manufacturing space. In Harte’s telling, companies had to “pivot” towards manufacturing point-of-care and diagnostic solutions essentially overnight. “And that,” she stresses, “really hadn’t been something that was significantly there.” Certainly, it’s a point amply supported by the facts. In Minnesota, for instance, the 3M manufacturing giant rushed to ‘surge’ production of N95 respirator masks, over the spring of 2020 doubling output to 100 million units a month. With that kind of pressure to adapt, it’s unsurprising that so many manufacturers tapped CMOs for help, either to pump out Covid-specific equipment or else bolster other production lines.
By offloading some of the production process to outside experts, OEMs can boost their supply chains.
$120bn
The potential size of the global contract medical manufacturing sector by 2027.
Markets and Markets 1/5 Cyberhaven 37
The amount by which intellectual property theft cases have lately jumped in the US.
Dusan Petkovic/
Shutterstock.com
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