Contract manufacturing 82%
The percentage of organisations that have
experienced data breaches caused by third parties.
Process Unity Making contract
The pandemic-era enthusiasm for CMOs has persisted – quite aside from the headline growth figures, that’s apparent geographically, with countries as diverse as India and Costa Rica quickly becoming contracting hotspots. All the same, it’d be wrong to conclude from this booming landscape that managers can simply ink a third-party deal before returning to other concerns. On the contrary, Shehata says that fruitful contract manufacturing relationships must represent “a true extension” of an OEM’s operations, and not merely encompass an abstract statement of work. Harte agrees. While noting that the practicalities naturally depend on a range of factors – from the type of device being manufactured to the level of in-house expertise – she says that outsourcing requires plenty of work. There are several ways to understand the importance of honing such intimate professional relationships. Some are obvious. If, after all, you’re an OEM engaging a contract manufacturer to develop a new stent or heart valve, you need to ensure your new partner can actually help. For that reason, Shehata says it’s often a good idea to bring them in early in the process, even during R&D. From her own work at KPMG, Harte makes a similar point. “We would put together a prototype, then take the feedback from that prototype,” she explains. “And during that period, there may be some consideration there: like what are the other sustainable materials that we could potentially use?” From there, Harte continues, OEMs would be wise to understand a partner’s regulatory standing, not least given rules such as ISO 13485 demand consistent quality throughout a product’s life cycle.
Beyond these broad efficiency questions – ensuring a new product travels down the supply chain from factory to patient as smoothly and cheaply as possible – CMOs can potentially pose other challenges. Perhaps the most salient involves intellectual property. Think about it like this: contract manufacturing can only succeed if partners understand the product involved, but what if unscrupulous operators take the chance to steal or copy the technology? Nor is this merely a
hypothetical challenge. According to a recent report by Cyberhaven, intellectual property theft cases have lately jumped by 21% in the US with convictions rising by nearly a third. A related difficulty, both Shehata and Harte agree, involves cybersecurity. Fair enough: 82% of organisations have experienced data branches caused by third parties, with remediation costing an average of $7.5m a pop.
An un-shore future
Not that either problem is intractable here. When it comes to both intellectual property and cybersecurity, in fact, the experts advocate similar solutions: technology. When it comes to IP, for instance, Shehata suggests encrypting a device, with a key allowing use at the point of service. It’s a similar story, Shehata continues, with cybersecurity. “I think there are some good technology solutions that are starting to maintain the integrity and trust between multiple organisations,” he says, suggesting that OEMs and CMOs alike are going to need “very heavy investments” in their cybersecurity capabilities. All the while, the potential threats to the future of contract manufacturing extend to the geopolitical. With the prospect of war in Asia- Pacific looming – and Taiwanese microchips potentially unavailable to global markets – many countries have started reshoring their manufacturing. A prime example here is the US, where dozens of companies have reopened sites domestically over recent years. That’s shadowed by the tendency of OEMs to find CMOs in less politically vulnerable regions. Whatever other problems South Africa faces, for example, invasion by China seems unlikely, transforming the country into a prime contract manufacturing candidate for Western medtechs. The point, stresses Shehata, is that geopolitical concerns “continue to kind of outweigh” any kind of business concern. To put it differently, the cost of contract manufacturing may rise in future, with uncertain consequences for CMOs – and for a sector that’s thrived for years. ●
38 38
Medical Device Developments /
www.nsmedicaldevices.com
Medical Device Developments /
www.nsmedicaldevices.com
metamorworks/
Shutterstock.com
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