What Were the Big Trends in Contract Manufacturing in 2024?What Were the Big Trends in Contract Manufacturing in 2024?

There were a lot of changes in 2024 for the medical device industry. The world was just getting comfortable moving beyond a pandemic-mindset. Deal activity began to return and FDA tightened its regulatory grip in some ways.

Perhaps one of the segments in the industry that felt a huge brunt of the impact of change was the contract manufacturing space. MD+DI, reached out to medtech consultant Steve Maxson of Maxson Insight Services, to get his take on the trends that contract manufacturers saw in 2024 and the next frontier for the space.

What were some of the biggest trends we saw in the medical device industry – pertaining to contract manufacturers? What stood out in 2024 regarding contract manufacturing?

Maxson: One of the big challenges for contract manufacturers this year was supply chain issues related to certain specialty materials and components. The first one that comes to mind is PTFE (polytetrafluoroethylene).

PTFE is used heavily in medtech—medical devices, delivery systems, catheters—as the inner liner for its low friction and other amazing properties. But there was a shortage of PTFE liners and PTFE materials for those catheters, as well as other fluoropolymer-based components like FEP heat shrink tubing. This started in 2023, but by now, it's been fixed in some regards. Many companies, in response, insourced this capability, bringing it in-house to mitigate the supply chain risk.

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You saw a lot of contract manufacturers involved in medical extrusion of thermoplastic materials suddenly take on fluoropolymers, even though they had avoided them in the past due to the different material properties and handling requirements. But they adapted, bringing PTFE, FEP, and heat shrink capabilities in-house, mostly to support their own internal catheter builds—not necessarily to sell to the broader market.

So that was a big trend. And with the supply chain issues, people were just trying to get materials and liners whenever they could, stockpiling to ensure they had inventory. As a result, many found themselves with excess inventory that had to be worked off, which led to a bit of stagnant growth in contract manufacturing. It still grew, but it created some challenges, especially with excess inventory.

Right. So, in terms of inventory, it seems like the material and component suppliers also faced similar struggles.

Maxson: Exactly. That was a significant issue. Companies were sitting on inventory, and it was a struggle to manage it.

Got it. And inflation—how did inflation impact contract manufacturers? Was it a major challenge in 2024?

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Maxson: Inflation was certainly a challenge for anyone processing plastics. When the cost of materials goes up, you need to pass those increases onto your customers, which isn’t always an easy conversation. For instance, in extrusion, materials typically make up about 40% of the total cost. So, if you're extruding polyurethane and its cost rises, you have no choice but to pass that cost increase along.

This year, commercial teams spent a lot of time focusing on price increases rather than chasing new business. But you know, when you have a multi-year supply agreement with a customer — say, a three- to five-year deal—there's usually a clause built in that allows you to raise prices based on raw material increases (but not labor). It can take a while, but those price increases are typically built into the contract.

Interesting. How do those price increase conversations go, though? What's it like approaching a customer to say, "Hey, sorry, prices are going up"?

Maxson: Trust me. It's not a fun conversation. But it has to happen. And when you have long-term agreements, especially, you're able to include clauses that allow you to adjust for material cost changes. But it’s still tough. It’s never easy to pass price increases along to customers.

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That makes sense. Now, on a different note, I know artificial intelligence has been gaining traction across many industries. Was AI a notable factor in contract manufacturing this year?

Maxson: I wouldn’t say it’s been a significant factor just yet, but more people are starting to adopt it, and it will definitely play a bigger role in the future. I use it all the time. Even catheter designers are using AI for their designs. You’ll definitely see more use of AI in contract manufacturing—across design, operations, and commercial functions.

What would you say was the biggest challenge in 2024 for contract manufacturers, other than cost and supply chain issues? I know the industry is still recovering from the pandemic, and we're seeing medtech resetting its baseline. Was the regulatory landscape a challenge for manufacturers this year?

Maxson: Yes, definitely. The regulatory burden has shifted more onto contract manufacturers. It used to be that you could just have ISO 13485 certification, hire a couple of quality people, and you were good to go. But now, OEMs are pushing more of the regulatory responsibility onto contract manufacturers, which increases their overhead. The regulatory landscape has evolved significantly, and it's not just quality-related—it’s also social and environmental considerations, things manufacturers might not have had to deal with before. This shift has increased the complexity of operations for contract manufacturers.

That seems like quite a burden for contract manufacturers to shoulder without much of a reward, right?

Maxson: Exactly. It’s a bit unfair, but the prize for contract manufacturers is the volume production. You’re doing a lot of R&D and prototyping upfront, and you’re hoping for that long-term production contract. It’s a lot of work before you get to the prize of recurring revenue.

In terms of global manufacturing, we saw China as a dominant force in the market before COVID. But since then, nearshoring has become more popular. What’s the current landscape look like? Is China still a major hub for manufacturing?

Maxson: China is still a powerhouse, but there have been some challenges, especially post-COVID. That said, China is still set up to manufacture. The workforce is highly skilled in engineering and manufacturing, and they have vast infrastructure for scaling production.

For example, UMass Lowell’s plastics engineering program once had 60 students enrolled. Now, due to the negativity surrounding plastics, they’re lucky to have 10. It’s a real problem in the U.S. There are fewer people interested in pursuing careers in plastics engineering, which is a problem for the industry.

That’s a dramatic shift.

Maxson: Exactly. Meanwhile, in China, you can send a quote out to five vendors and get pricing back in just a couple of days, while in the U.S., it could take a week. The infrastructure and scalability there are still unmatched.

Interesting. Do you think this trend can change, or does the U.S. need to put more focus on manufacturing?

Maxson: Absolutely. The U.S. needs to emphasize manufacturing, particularly in engineering and plastics. We’re doing some events at UMass Lowell to raise awareness, but there’s a lot of negative publicity around plastics, which isn’t entirely fair. We need to change that narrative or else the U.S. will struggle in plastics processing.