Reconsider Outsourcing Strategies in China

In the last couple of decades, China has attracted manufacturers from all over the world because of low labor costs and excellent export infrastructure. By outsourcing their production, China was a way to cut costs when producing big quantities. The medical device sector was no different than that.

However, this trend may be about to change. Chinese wages and the value of Chinese currency are rising. The government mandate to raise the minimum wage, so it could bring labor cost increases of 15–20% per year in Chinese factories. Meanwhile, freight and other costs associated with offshore manufacturing are continuing to rise. There are other risks when outsourcing in China, such as intellectual property protection and quality control.

So manufacturers are rethinking their strategies of outsourcing in China. Some US-based are returning their production back to the United States. This is particularly good when the product is meant for the American market. This reduces shipping costs and challenges, gives OEMs a higher quality control and allows them to take advantages of improving efficiencies in U.S.-based manufacturing.

References: http://www.mddionline.com/article/could-onshoring-be-next-medtech-outsourcing-trend

Hospitalar 2014: Brazilian Healthcare Fair

This year edition of Hospitalar, International Fair of Products, Equipment, Services and Technology for Hospitals, Laboratories, Pharmacies and Clinics, took place in Sao Paulo between May 20-23.

As an effort to reverse the healthcare sector trade deficit, Brazilian Health Devices (ABIMO’s project, developed in partnership with Apex-Brasil) organized an international business round at Hospitalar 2014. It reached US$ 1 million in sales and it is expected US$ 13 million for the next 12 months. The business round aimed to promote Brazilian exports, connecting Brazilian and foreign companies.

During the fair, there were purchasers from 18 countries, including interesting markets for the Brazilian industry: South Africa, Bolivia, Chile, Colombia, Costa Rica, Iran, Jordan, Kuwait, Lebanon, Mexico, Morocco, Nigeria, Panama, Peru, Kenya, Russia, Turkey and Tunisia.

           

References: http://www.abimo.org.br/modules/news/article.php?article_id=511

New EU Medical Device Regulations

In September 2012, the European Commission released a proposal for new European Medical Device Regulations (EMDR) intended to prevent public health scandal, such as the Poly Implant Prothèse breast implant in France. The final version of the EMDR is expected to be approved in late 2014 or early 2015. However, a more likely estimate is October 2015. The original proposal indicated that there would be a three-year transition period (from 2014 to 2017/2015 to 2018) for implementation of the new regulations.

The new regulation may increase costs and eliminate early access to device innovations that patients in Europe are used to experience. A survey made by the trade group Eucomed estimated the cost of the proposed regulations at €17.5 billion (US$24.3 million). European Union's current financial situation could force the European Council and Parliament to make major revisions to the proposed regulations reducing the cost of implementation.

The original proposal has suffered several modifications, but most significant changes include:

• The European Commission’s ability to create common technical specifications (CTS) will be expanded to all devices.
• Formatting of declarations of conformity and technical files will be revised.
• Manufacturers will be subject to unannounced audits by Notified Bodies.
• Spinal implants, devices that control and monitor active implants, nanomaterial, apheresis machines, and combination products will be reclassified as Class III devices requiring technical documentation known as a design dossier.
• Most in vitro diagnostics (IVDs) will require Notified Body involvement.
• A Unique Device Identification (UDI) system will be required for labeling, and the European Databank on Medical Devices (Eudamed) will be expanded.

References: http://www.mddionline.com/article/what-expect-new-eu-medical-device-regulations

Brazilian Health Surveillance Agency simplifies Import processes

Anvisa (Brazilian Health Surveillance Agency) is adopting actions in order to improve the import processes of healthcare products. RDC 15/2014 introduces significant changes to the Certificate of Good Manufacturing Practices and aims to help the new technologies’ registration in Brazil.

First significant change is to validate auditing reports made by third parties  (other regulatory agencies). Also, Anvisa will no longer emit certificates for lower risk products, as gloves, syringes and some surgical devices. Although this measure removes the need for inspection,  it does not change the criteria of effectiveness and security required. Finally, Brazilian Health Surveillance Agency will allow that the protocol of the certificate request is accepted to submit registration applications, maintenance and amendments of highest risk products. This means that a manufacturer will no longer need to wait  for grant of certificate to have an analysis of his products started. With the two processes happening concurrently, the time of arrival of new equipment in the market should be reduced.

References: http://saudeweb.com.br/42867/anvisa-simplifica-processo-de-importacao-de-produtos-de-saude/

Brazilian Health Devices keeps Impressing

Healthcare companies supported by Brazilian Health Devices, and ABIMO’s (Brazilian Association of Medical Devices and Equipment Industry) project, perform better than the national industry as a whole when it comes to exports. In collaboration with APEX-Brasil (Brazilian Trade and Investment Promotion Agency), the 160 medtech companies that participate in the project exported together US$ 190 million in 2012 and their main exports partners were USA, Mexico, Peru, Germany, Venezuela. While the Brazilian industry has reduced imports by 14.8% between 2011 and 2013, the healthcare companies that integrate ABIMO’s project increased their exports by 7.1%.

ABIMO and APEX-Brasil renewed their agreement to keep boosting Brazilian medical and dental devices exports. However, the Brazilian Health Devices’ Manager explained that besides boosting the exports, the Brazilian Trade and Investment Promotion Agency seeks an effective process of internationalization for Brazilian healthcare companies, focusing not only on trade expansion, but also in developing the competitiveness of Brazil.

References: http://www.abimo.org.br/modules/news/article.php?article_id=485

Increasing Healthcare Costs

According to L.E.K. Consulting, medical device companies are suffering from unprecedented pricing pressures. Recently, the consulting company published the results of a survey with American hospitals’ CEOs reporting that reducing costs is among their top five most pressing needs. Also, the purchasing process has become more complicated and all supplies and new technologies have to go through a value/cost analysis.

Despite cost pressure, most of the hospitals’ CEOs answered that they are interested in buying additional services from medtech companies, especially in clinical IT and analytics, operations management and efficiency, and education, training, and compliance. They want to see medtech firms prove that their solutions can improve the quality of patient care, lower hospitals’ overall costs, or increase the efficiency of their clinical staffs.

References: http://www.mddionline.com/blog/devicetalk/6-threats-and-opportunities-medtech-new-healthcare-paradigm

Supply Chain Strategies for Medtech Companies

Before the senior director of the global supply chain at Edwards Lifesciences’ presentation at MD&M West 2014 Conference in Anaheim, CA, he talked about the theme of his session which was the best practices for medical device companies on supply chain strategies in the face of regulatory, technology, and margin-pressure challenges, as well as legislative changes.

     The senior director explained that innovation is and will always boost medical device companies. However, one shall notice that there is another key factor in the healthcare industry: operational and supply chain efficiencies, which is requiring transformational strategies for managing the supply chain. In addition, regulatory requirements are becoming more detailed and more constraining. At the same time, there are increasing margin pressures and legislative changes. All of these different factors are forcing companies to reevaluate their operations and supply chain strategies.

The senior director advises that innovation is not enough in the face of regulatory forces, legislative changes and margin pressures. In order to remain leaders in the medical device industry, companies should improve quality, lean manufacturing operations, distribution efficiencies, and inventory optimizations. Some areas to be focus on: global sales and operations planning platform, solid manufacturing improvement program (that includes lean manufacturing principles), determining how to introduce new products to the market and supplier risk management.

References: http://www.mddionline.com/article/supply-chain-strategies-challenging-medtech-landscape-0