MPMN_Medical Product Manufacturing News

Medical Product Manufacturing News, March/April 2015

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M E D I C A L P R O D U C T M A N U F A C T U R I N G N E W S Q M E D . C O M / M P M N 2 4 M A R C H / A P R I L 2 0 1 5 SPECIAL FEATURE: OUTSOURCING Why Medtech Pros Should Think Big Because medical devices are but one piece of the healthcare ecosystem, it makes sense for medtech firms to design healthcare systems rather than devices alone. Brian Buntz M edtech companies should constantly think about how their products fit into a broader ecosystem. "A company that is designing a product for the operating room doesn't want to just supply, for instance, the operating table. They want to supply the lights, and just about everything else," said Ben Davenport, site director at Nypro Healthcare, an outsourcing company based in Coppel, TX, in an interview at MD&M West. "They want to supply it and say, 'That is my surgery system.'" Medical device engineers should also think about how their products integrate with other related products, whether it be other medical products or computer systems. "Instead of just looking at a device, look at the device plus the computer that hooks up to it. Or look at how it connects to an iPhone app," Davenport said. In addition, it is helpful for engineers to start thinking about designing devices in tandem with related services to help the hospital realize greater efficiencies. "If I were to project into the future, and try to speculate what our medtech customers are doing in 20 years, I would say they are not only manufacturing devices but are also providing services to our customers," said Brad Womble, Nypro's business development manager. "They want to help monitor patients inside of the hospital and at home. They want to be part of that value chain." As medical device companies expand their value proposition to include more than just manufacturing products, they could feasibly tap outsourcing companies in the future to help them do that. "Does that mean our customers would expect groups like Nypro to be part of that service solution as well? That is a question mark, but presumably we evolve with our customers," Womble said. A Mindset Shift Already, there has been a big shift in the medical device sector's mindset in the past several years—in large part related to the Affordable Care Act (ACA) and the consolidation of the big players in the field. A lot of big medtech companies are looking to streamline their product portfolios and their manufacturing infrastructure. And they are looking to make their supply base more efficient and are tapping experts in that supply base to help them reduce costs. While cost pressures have been rampant in medtech over the course of the past 15 years or so, device companies are using new strategies to lower costs in light of the added pressures created by the ACA. "Systems thinking is a key mindset difference," Womble explained. "This means designing costs out of the product in the design phase instead of designing a product and then waiting until commercialization to take costs out." Once a company has hit the design freeze stage, about 80% of the costs are locked in. "Once you get your 510(k) or your PMA, you are done. It is set in stone," Davenport said. "The regulations are there to prohibit you from making changes." There may be a few levers you can pull on the back end to help keep costs down, but the biggest cost benefits can be realized by thorough planning from the earliest design stage. "Already in the beginning, you should be thinking about how you can fit your components together, what resins you should use, is there an assembly process that is more efficient you could use?" Womble asks. It is also important to thoroughly establish that the products and components you spec early on are available in the long run. For instance, there are thousands of resin offerings, but some end up being hard to track down. "We've heard of companies that are scouring the earth to make sure they have plenty of resin to supply them for the next five to seven years. But if you decide early on to buy a resin that is well known and commonly used, it makes your job a lot easier," Davenport explains. Not a Zero Sum Game One factor complicating medical device design is the notion of optimizing for all of the stakeholders involved. Products sometimes fail to gain traction because they might reduce cost for one stakeholder while raising them for another. The relationship has been likened to a balloon. "In that balloon analogy, you squeeze in one end and it pops up on the other. The reality is that it doesn't have to be that way—as that would be a zero sum game," Womble says. "What we are saying is that by designing for costs from day one, you are making it not a zero sum game but a value-add game. That mindset changes everything." Professionals at medical device companies are growing accustomed to thinking in this way, and it is evident in how they work with contract manufacturers. Ten years ago, a lot of medical device companies were vertically integrated and primarily used outsourcing to manufacture components that they would integrate into their products in-house. "Now, some of our customers are vertically integrated, but I would say the majority are not," Womble said. "They want to spend more of their money on sales and R&D, and less on manufacturing. Probably the reason why is that they are realizing that their return on investment on sales and marketing and research and development yields a higher value than their return on investing in bricks and mortar for manufacturing." This trend is spurring more of a team dynamic between device companies and contract manufacturers rather than a client–vendor relationship. "We see a tighter integration with our customers' teams because we are touching so many different elements," Womble says. "The analogy I like to give is we have a mitochondria in our cells, which provides energy. But it was a bacterium at one point. And the bacteria got integrated into the cell," Womble explained. "I am seeing that same sort of principle with respect to the evolution of contract manufacturing, where it is more of a symbiotic relationship."

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