Market Snapshot: Medical

Suppliers looking for stability and recession resistance continue to find medical molding an attractive, yet challenging market.

As baby boomers approach retirement age, the healthcare industry is booming as well. According to Standard & Poor’s Ratings Service (New York), heavy M&A activity such as Boston Scientific’s recent $28 billion acquisition of Guidant will continue this year based on the market’s strength.

For those processors who have not ventured into medical, the market appears enticing. Not only is it growing, but it also offers a certain resistance to recession and downturns, and is not currently a candidate for outsourcing to China. On the other hand, those who are experienced medical molders will tell you that there are downsides: a high cost of entry, critical quality requirements, FDA regulatory compliance, and others.

Medical Device Market Research (Austin, TX) projects U.S. medical plastic demand to rise 3.1% annually to 4.3 billion lb by 2008, valued at $5.6 billion. In addition to an aging population, the company contends that increased use of disposable devices and supplies is also leading to more intensive use of plastics over glass, metal, and other materials.

MDMR also predicts that growth in demand for medical plastics used in devices will outpace packaging applications. Areas of opportunity include prosthetic devices and minimally invasive surgical instruments. In packaging applications, plastics dominate most medical container and accessory uses and will be adversely affected by cost pressures, saturated markets, and pressures for less material-intensive packages.

Materials and trends

George Paleos, medical market manager for Bayer MaterialScience (Pittsburgh, PA), concentrates on polycarbonates used in the medical device market. From a materials standpoint, he explains, commodity plastics such as PVC, PE, PP, PS, and others continue to dominate the market with demand reaching more than 80% of the total thermoplastics consumption by volume.

“On the other hand, engineering thermoplastics use continues to grow at a higher rate than that of commodity resins, which is estimated to be about 3% per year,” Paleos explains. “Specifically, the growth in usage of polycarbonate is ranked among the highest within the engineering thermoplastics area.”

One of the reasons for PC’s rise is its ability to be implanted in the body without danger of rejection. At Bayer, Makrolon Rx1805 and Makrolon Rx2530 are two examples. Both offer biocompatibility compliance along with gamma and e-beam radiation stability while Makrolon Rx1805 also offers lipid resistance.

Paleos observes that while the number of molders interested in entering the medical market is growing rapidly, the number of molders actually entering the market with cleanrooms, Good Manufacturing Practices, and other capabilities necessary to serve the market is much lower. “The number of medical molders is growing more slowly because of market characteristics such as complexity of the business, regulatory compliance, product liability, niche size compared to other market segments, profitability, long approval process, and high barriers to entry,” he says.

Two megatrends are affecting the market, according to Paleos. One is an increase in activity due to an aging and growing population, confirmed by the S&P report. “We are also looking at pressures due to cost containment arising from managed care and group purchasing organizations.” A trend toward less invasive devices that reduce patient trauma and recovery time has not abated, says Paleos. And some of the same conditions that were apparent last year remain in this year’s landscape, including industry consolidation, device miniaturization, and high growth in developing nations.

Processor’s perspective

At Tech Group (Tempe, AZ), medical molding and contract manufacturing have become an essential part of its business. A recent project with Pfizer, the Exubera inhaler, is the largest project Tech Group has ever undertaken and enables pulmonary delivery of powdered insulin. Mike Treadaway, manager of drug delivery devices, explains that in the drug delivery market, this product represents a trend toward more patient convenience. “Pharmaceutical companies are developing devices that differentiate them from their competition in terms of convenience and ease of use,” he explains.

Treadaway sees significant growth potential in products driven by customer convenience and differentiation. “Easy-to-use products enable patients to administer drugs themselves or perform testing themselves to drive healthcare costs down. Cost, after all, is still king in this market.”

Tom Podesta, VP, sales and marketing, healthcare notes that less invasive endoscopic surgery still dominates the device market, with OEMs looking for designs that are smaller and easier to use. “Startups are always the driver for a lot of new technology,” he adds, “but they are not setting up any infrastructure for manufacturing. They now have a selection of contract manufacturers to choose from who offer competency. The more experience you have, the lower risk you represent. There are major opportunities for contract manufacturing if you have experience, logistics and manufacturing capabilities, and a global footprint.”

As for raw material price hikes in this market, both Podesta and Treadaway agree that OEMs are aware of the problem and typically agree to take on the added cost. Says Treadaway, “People talk about cospecification [getting approval for another lower-cost material], but we haven’t seen a lot of it. No one can afford to spend several years to do so. We do the best job we can to get the best possible pricing with our material suppliers.”