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How Have Megamergers Affected the Medtech Little Guy/Gal?

Medtech suppliers share their views on how megamergers by the OEMs have affected their business.

Medtech suppliers share their views on how megamergers by the OEMs have affected their business.

Arundhati Parmar

Like a stone thrown in a pond that ripples outward, megatrends in the medtech OEM world have ramifications for others.

And one giant trend in the medtech industry has been the megamerger.

Not surprisingly, the medtech little guy/gal — medtech suppliers — haven't been immune. Here are three effects that they are feeling:

Loss of Experience

It goes without saying that once two large companies merge, layoffs and resignations are bound to follow. One supplier at the recently concluded MD&M West Conference and Showcase in Anaheim, CA, believes that there is a loss of "institutional memory" as a result of those departures.

"You may have had people that had five or 10 years of experience, and they are lost in the merger," said Jay Tourigny, senior vice president at MicroCare Corp, which makes cleaning products for medtech and other industries. [New people] have to go back and learn everything, and we are winding up having to train people."

Another supplier agreed.

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"If you have a merger, each engineer has a particular knowhow and you lose knowhow," said Michael Boem, director of marketing and sales, and global marketing coordinator for flexible shafts, at Suhner, in an interview at MD&M West. "It is a problem."

A Medtronic spokesman declined comment. 

Sometimes the departure of personnel may be voluntary too.

"Engineers are special people, we know. They are tender little souls," Boem said, slightly tongue-in-cheek. "So if they have been working in a small environment, they may not necessarily be happy if they are part of a huge organization."

Regulatory Demands Increase

Compared with other industries, the regulatory burden is heavy in medtech. And megamergers have merely added to that. How come?

Well, suppliers so far had been dealing with a scenario like this: A company has headquarters in the U.S. with manufacturing facilities in say Ireland, China, and somewhere in the Caribbean, explains Tourigny of MicroCare. Suppliers and OEMs have strived to make a product that complies with regulations in these three locations. Add a dash of merger mania and "instead of three facilities, there are 17 facilities and not all 17 facilities may be making a particular product." he notes.

"Now, with the chemistries that we are dealing with, we are walking a fine line of making sure that we are meeting the regulations in those countries," Tourigny said.

Becoming One-Stop Shops

It's no secret that hospitals want to work with fewer and fewer medtech OEMs in a bid to cut costs and reduce treatment variation. That desire to consolidate vendors has spread to the next tier too.

"The OEMS have suggested that they want to reduce the number of suppliers that they have," said Deb Langer, vice president Lubrizol Lifesciences, which makes engineered polymers and can do custom contract manufacturing for the medtech industry.

Langer feels that puts Lubrizol in a competitive advantage compared with how OEMs have traditionally have worked with several different suppliers.

"Somebody will make a resin, and then it’ll go to an extrusion house and somebody will make a piece of a tube or one tube, and then it’ll go to somebody else who will add some pieces and parts on, and then it will go to somebody else to assemble, and then it goes to the OEM. That's four or five people in that supply chain," Langer explained. "We can do it all."

She believes that this ability to be a one-stop shop is attractive to OEMs."Consolidation of the supply chain is very, very key." Langer said. "It’s not possible for a Medtronic or a J&J to audit all their suppliers. If  we can consolidate that supplier chain, it’s a big cost advantage for them and a risk minimization."

[Photo Credit: iStockphoto.com user NicolasMe]

Arundhati Parmar is senior editor at MD+DI. Reach her at [email protected] and on Twitter @aparmarbb 

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