Contract manufacturing Contract manufacturing
Forging new partnerships With the supply chain issues within the medical device industry, CDMOs are no longer just contract manufacturers. They have become strategic partners for many OEMs to help them onshore manufacturing. CDMOs are now playing a central role in helping OEMs to navigate different regulatory environments, reduce development and product design lead times, scale faster, lower costs and reduce the capex required for onshore manufacturing. By turning to CDMOs, OEMs are now building supply chain resilience and agility by using strong local supply chains and reducing geopolitical risk.
While interest in CDMO partnerships has been growing for the past few years, medical devices continue to increase in complexity, which not only increases technical proficiency but also regulatory demands, so a lot more OEMs are turning to CDMOs for production and integrated end-to-end support. The ability to create regulatory-compliant medical devices faster, more reliably, cheaper and closer to the end user is also resulting in a better patient experience as surgeons do not need to wait as long for the devices. “Building a compliant, FDA-inspectable facility requires enormous investment in cleanrooms, validated equipment and quality systems,” says Dai. “CDMOs convert that into a variable cost, freeing up OEM capital for R&D.” However, Dai states the most important way that CDMOs are helping OEMs scale is time. “CDMOs bring pre-certified quality systems and regulatory expertise that can take months or years off the path from prototype to scaled production,” explains Dai. “CDMOs also give OEMs what I would call manufacturing optionality, which is the ability to shift volumes or relocate production across regions without carrying the full cost of that flexibility on their own balance sheet.”
On the regulatory side, OEMs need to comply with different regulations, including EU MDR requirements, FDA regulations and ISO 13485 certifications. OEMs are looking to onshore directly in different markets to reduce logistical risks and legislation challenges of using foreign suppliers. CDMOs have a lot of expertise in meeting these requirements and filing the correct submissions in each region, so CDMOs are now helping OEMs to reduce risk and shorten regulatory timelines across markets.
OEMs are also partnering with CDMOs for both high-volume and smaller-scale niche devices. “For niche devices like implantable neuromodulators or robotic surgical components, specialised CDMOs offer capabilities in micro-machining and biocompatible materials that no individual OEM at low volumes could justify building,” explains Dai. “For high-volume disposables and wearables, large CDMOs offer the scale economics and distribution reach that OEMs need. The most interesting development is a bridging model where early-stage companies use a boutique CDMO for development and clinical manufacturing,
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then move to a large-scale partner for commercial production. The market is fragmented enough – with the top five players holding only 15 to 20% share – that OEMs have real options at every stage.”
OEMs and CDMOs going forward OEM and CDMO partnerships have been helping to streamline supply operations. Working with a CDMO enables OEMs to work with a single partner rather than multiple vendors, which helps to reduce errors from coordinating many global suppliers. CDMOs are also supporting multiple OEMs simultaneously, so for SME medical device manufacturers, they are taking advantage of CDMOs’ economies of scale to obtain cheaper materials, components and logistics without reducing their quality, leading to cheaper clinical devices. The economies of scale that CDMOs have also give them more of a buffer against supply chain disruptions as they often have a diversified supplier network.
CDMOs are also expanding their capabilities to serve both medical device and combination product markets, investing in capabilities such as sterile fill-finish, biologics, injectable drugs and advanced therapies, as well as investing in automation and digital manufacturing tools. Automation and real-time analytics could significantly improve transparency across the supply chain, as they would allow real-time oversight of the supply chain network and would help to manage continually changing demand against the availability of materials and components. “The supply chain is still largely opaque. We need disclosure requirements for critical component sourcing, similar to what the EU is moving towards for drug shortages,” says Dai.
CDMOs are helping OEMs in several ways to navigate the various regulatory and supply chain challenges, but when asked about how the medical device supply chain could be made more resilient going forward, three things were mentioned by Dai: transparency, procurement reform and industrial policy. On procurement reform, Dai states that “if hospital systems and GPOs continue to select on price alone, suppliers have no incentive to invest in resilience. Building resilience criteria into procurement would change the economics overnight.” Industrial policy is another area that could help the industry going forward, particularly in the US, according to Dai. “Semiconductors received $52bn in federal support through the CHIPS Act. Medical devices are equally critical to national health security and have received nothing comparable,” explains Dai. “Tax incentives for nearshored production and expedited FDA pathways for supply-chain-driven manufacturing changes would make a real difference. CDMOs are the natural vehicle for all of this because they can serve as regional manufacturing nodes that give the whole system flexibility without requiring every OEM to duplicate infrastructure.” ●
www.medicaldevice-developments.com
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