Growing Demand for Medical Device Contract Manufacturing

Changes in Medical Technology

In light of recent growth and development, the term “Medtech” is now being widely employed to describe a broad range of medical-related services. These services include design, development, testing, installation, sterilization, upgrades, maintenance, quality assurance, regulatory consultation and contract manufacturing.

The term “medtech” currently encompasses a much wider range of activities than simply the manufacturing of medical instruments. The increased demand from patients and the availability of cost-effective, user-friendly technology has led to a recent surge in the sector. Furthermore, the impact of this growth is being felt in other, related outsourced industries.

An Overview of Contract Research Organizations in the Medical Device Industry

The MedTech sector has experienced an unprecedented amount of growth in recent years, and this is projected to continue in the future, with sales anticipated to reach $800 billion by 2030, representing an annual growth rate of over 5%. This vast and expanding industry is intricate and complex, with slim profit margins, and these challenges are driving the demand for increased manufacturing efficiency and compliance with changing regulations. As such, the outsourcing industry is being propelled forward as a result.

Only a small number of corporations have the necessary resources to manage the entire process of medical device development and distribution independently. Even fewer are able to do this while keeping costs for patients as low as possible. The need to outsource is being driven by a combination of these factors. Major healthcare companies, such as Medtronic, are increasingly turning to external providers in order to remain competitive and profitable.

In-Depth Analysis of Medical-Related Software

The traditional medical equipment of yesteryear is no longer suitable for modern medical settings. As iPhones and iPads become ubiquitous in hospitals, medical staff and patients alike are becoming more accustomed to using them. To ensure consistent performance, any medical equipment must be user-friendly, robust, able to be operated remotely, secure, long-lasting and compatible with an array of technologies. Consequently, the software powering the medical equipment must be of the highest quality and complexity.

Developing medical technology often requires a collaborative effort involving multiple disciplines, such as engineering, design, web development, security and programming. Furthermore, before any device can be sold, it must be approved by the Food and Drug Administration. With all these regulations to adhere to, healthcare providers and manufacturers are finding it increasingly difficult to cope without external help. As a result, many companies in the medical technology field have no option but to outsource their IT services and software.

Expanding Medical Technology

As populations age and chronic diseases become more prevalent, the healthcare markets across all sectors and nations are experiencing sustained growth. Initially, the medtech industry was mainly focused on emergency life-saving devices; however, it has since evolved to encompass a much broader range of products and services. These include complex implanted devices designed to improve long-term health and wellbeing, medical devices, software, robots, testing services, disposables and support services, among others.

Statistical Analysis

It is easy to quantify the size and expansion of the MedTech market:

  • The market for medical equipment in the United States is predicted to reach $173 billion by 2023.
  • The average yearly rate of expansion is projected to be 5.3%.
  • The American healthcare system costs the country 17.1% of its GDP.
  • The United States is home to approximately 6,500 medical device manufacturers that together provide over 4,000 unique products.
  • In 2023, Johnson & Johnson’s MedTech segment contributed $27 billion to the company’s total revenue.

Furthermore, the outsourcing industry is thriving:

  • The global market for outsourcing is expected to grow from $94.2 billion in 2023 to $195 billion in 2025.
  • The market is expanding at a CAGR of 10.9%.
  • The value of contract manufacturing, the most outsourced industry, will rise to $104.5 billion worldwide by 2025.

Why Is There Such a Boom?

It is clear that the meteoric rise of the medical technology sector is not merely due to strong consumer demand or ageing populations. As previously mentioned, advances in technology are enabling greater patient access to smart healthcare, while an increasing number of businesses with diverse capabilities are entering the market. This trend is being further fuelled by the emerging middle classes in countries such as India and China, as well as their growing disposable incomes, which mean that more people can now afford and expect high-quality medical care.

Regulations are also playing an important role in driving market shifts, with requirements becoming increasingly complex and needing to be satisfied in a timely manner. While this presents a challenge, it is also driving the increased uptake of medical technology. Furthermore, the alterations in regulations have led to an improvement in the overall quality of service and security for customers. As the use of medical technology becomes simpler and less risky, more people will be able to reap its benefits.

A staggering 100 million people in the United States are either diabetic or at risk of developing the condition, and the country is the highest spender of its gross domestic product on healthcare. Insulin pumps and blood glucose monitors are two of the biggest products in the multibillion dollar diabetes industry.

The medical technology sector is currently experiencing a surge in merger and acquisition (M&A) activity, which is being driven by a considerable amount of venture capital funding. This trend is indicative of an increasing number of new entrants that are likely to shape the future of the medtech sector in the coming years.

The Increasing Popularity of Outsourcing Medical Devices

Increased Outsourcing of Medical Technology

It is undeniable that outsourcing is an essential element of the medical technology industry. A recent study has revealed that Original Equipment Manufacturers (OEMs) can significantly reduce their manufacturing costs by up to 15% through outsourcing. This ultimately leads to a greater financial return on investment for businesses that outsource. The study further showed that businesses that are successful in the medical technology sector are 2.6 times more likely to have outsourced than those that are not. In the current climate, with hospital budgets reducing and closer monitoring of patient expenditure, it is not possible to pass on high manufacturing costs to customers.

The implementation of the Patient Protection and Affordable Care Act has resulted in the introduction of a 2.3% charge on all medical equipment supplied within the United States. This has had a significant impact on Medtech businesses, as the industry already operates on narrow profit margins. It is therefore essential for companies to find ways to increase their efficiency and reduce their expenditure in order to remain competitive.

It is unsurprising that such a significant proportion of individuals are opting to use outsourced services, given the potential cost savings associated with both initial and ongoing costs. Moreover, businesses may be able to reduce the amount of time required to bring a product to market by finding a dependable outsourcing partner.

Outsourcing Worries

The medical industry faces a number of barriers that impede its full acceptance of outsourcing. Companies may be hesitant to outsource due to the possibility of delivery delays, quality issues, and service provider non-compliance with regulations, all of which could have a negative impact on the reputation of the outsourcing partner. Moreover, privacy and safety requirements in the MedTech sector are stricter than in other industries, making it seem more secure to keep product planning, design, testing, and quality, security, and compliance assurance within the company. Historically, many believed that maintaining complete control of the supply chain was necessary to ensure anonymity.

Mindset Shifts

In recent years, the markets have undergone considerable changes, resulting in a shift in the way businesses think. Companies now have the option of keeping all operations in-house, which can be limited by the knowledge and resources available, or outsourcing the work to an external firm, which is likely to achieve the desired outcome more quickly and efficiently.

Despite the detrimental effects on performance, some businesses have continued to opt for vertical integration, which has resulted in their failure. Initially, there was only a small number of businesses outsourcing their operations; however, this has now become a widespread phenomenon. The shift has been gradual, but as automation has become increasingly commonplace, entire departments are taking advantage of the opportunities that outsourcing can bring.

The increasing availability of outsourcing and the growing prevalence of reliable third parties and consultants in this sector has alleviated many of the traditional worries associated with dependability. Not only does outsourcing offer businesses an opportunity to save money, it can also make them more agile, accelerate production and increase profits by allowing them to allocate more resources to areas such as research and development. The future of the market is likely to be heavily influenced by research, thus businesses that afford their employees the opportunity to focus on such matters are more likely to be successful.

Computing Functions Being Contractually Transferred

The Food and Drug Administration (FDA) sets demanding requirements for the software used in medical devices. In order to be deemed suitable, software must be unambiguous, consistent, traceable to its original source, completely accurate and verifiable. Furthermore, it must ensure that the interfaces, data storage, performance, security and safety are all in line with these strict standards. Achieving this is far from simple, and can be intimidating for those who don’t have an in-depth knowledge of the technical requirements of sophisticated equipment.

If the challenge of creating effective software for medical equipment wasn’t already daunting enough, it is important to keep in mind that software must be dynamic in order to remain effective. It must be regularly updated to ensure that it is able to respond to varying user input without breaking down. Additionally, in order to ensure that software remains effective, it is essential for it to be a constantly evolving component of any medical equipment. This requires a great deal of forethought and effort in order to effectively manage software, particularly when dealing with complicated instrumentation. Furthermore, in order to create improvements and better comprehend usage, it is necessary to gather data from deployed devices. This is a large undertaking in itself and requires constant communication, monitoring and maintenance of the device in question.

It can be time-consuming and costly to train personnel in-house to carry out these tasks, and even more so to employ software professionals directly. As a result, many companies have to outsource the development and implementation of the digital elements of medical equipment due to a lack of the necessary expertise within their organisation.

Outsourcing: Recent Developments

In order to remain competitive in the ever-changing market, businesses must be prepared to adapt their strategies to remain successful. According to industry predictions, the outsourcing sector will experience a range of developments over the coming years. These developments may include an increased focus on cost-effectiveness, the implementation of more advanced technologies, and the emergence of more specialised service providers. By keeping an eye on industry trends, businesses can ensure they are well-equipped to respond to the changing needs of the market.

  • It is expected that there will be a surge in mergers between Information Technology (IT) companies and traditional healthcare providers in order to form Artificial Intelligence (AI)-enabled organisations which will be devoted to the management of illness.
  • There is an increasing trend towards providing care for patients in their own homes, due to a combination of cost-saving measures and the need to accommodate a larger patient population. Doctors may be able to save time and money by remotely monitoring patients who have access to connected home gadgets. Not only can these tools help to resolve accessibility issues, they can also help to prevent them from occurring.
  • As Artificial Intelligence (AI) technology continues to improve and develop, it is becoming increasingly clear that this will have a major impact on certain areas of medicine, particularly radiology. With the rapid advances in AI, it is likely that medical technology providers that specialise in AI-related products and services will become essential, while human diagnosticians might gradually become obsolete.
  • Hospitals are increasingly incorporating robotics into their practices. The latest surgical robots are replacing less sophisticated systems, such as billboards, due to their ability to reduce risk of harm to both patients and surgeons. It is expected that more sophisticated robots will be used to undertake increasingly complex tasks, and this trend is likely to continue.
  • As the complexity of medical devices increases, so too do the associated risks; this has necessitated a greater focus on IT security in the future. Unfortunately, past incidents have demonstrated that hackers have the capability to breach these devices and systems.

Where Medical Technology Is Headed

The necessity of providing effective medical treatment that meets the individual requirements of patients is an enduring one. The MedTech industry is expected to continue to grow and expand, and outsourcing can play a critical role in this growth. Companies operating in this sector are looking for ways to innovate, reach new customer bases and increase their income streams, and outsourcing can provide assistance with this, from providing contract manufacturing to collaborating on product design and delivery.

Join the Top 1% of Remote Developers and Designers

Works connects the top 1% of remote developers and designers with the leading brands and startups around the world. We focus on sophisticated, challenging tier-one projects which require highly skilled talent and problem solvers.
seasoned project manager reviewing remote software engineer's progress on software development project, hired from Works blog.join_marketplace.your_wayexperienced remote UI / UX designer working remotely at home while working on UI / UX & product design projects on Works blog.join_marketplace.freelance_jobs