Outsourcers Move Into Medical From Other Industries

Over the past 10 years, medical device and diagnostic companies have increasingly turned to contract manufacturers to help them accommodate the growth of their businesses. As word has spread about the opportunities available in medical device outsourcing, contract manufacturers in other industries, such as aerospace and defense, have sought to insert themselves into the sector.

Among the outsourcing companies looking to enter the market is PWI (Wichita, KS), a supplier of coil windings and lighting systems for the aircraft industry, which announced plans to begin contract manufacturing electronics for use in medical devices last year. PWI president Robi Lorik says the company decided to make the leap into medical after Kansas started encouraging subcontractors in the area to switch over from the aircraft industry.

“Being here in Wichita, where the state is putting an emphasis on developing [the medical] market, we wanted to be a part of that,” he says.

Lorik says PWI already has the knowledge and equipment, including pick-and-place machinery and reflow ovens, to begin manufacturing medical electronics used in applications such as hospital beds, test equipment, monitoring equipment, sensors, and wireless data transfer.

“It seemed like a natural transition,” Lorik says. “Being that we’re already involved with FAA, learning to transition and qualify and be validated with FDA wasn’t that big of a step.” The company hopes to achieve GMP validation and ISO 13485 certification this year.

Another company that has been drawn to the medical device industry is titanium producer RTI International Metals (Pittsburgh). This past January the company entered the medical market with its purchase of Remmele Engineering (New Brighton, MN), according to a press release. Remmele Engineering is a contract manufacturer that provides design and engineering services, precision component fabrication, finished device assembly, and supply chain management for OEMs in the endoscopy, laparoscopy, drug-infusion, dental, and orthopedic device markets.

Zentech (Baltimore), a provider of contract and electronics manufacturing, has had some business in the medical device industry for a while, but in recent years it has focused on attracting more medical device customers. The medical market accounted for about 5–10% of the company’s business six years ago and will make up nearly 30% in 2012, says president Matt Turpin. Zentech also serves the defense and aerospace markets.

Like Lorik, he says medical contract manufacturing hasn’t been too much of a stretch for his company.
“It actually shares a lot in common with defense and aerospace,” Turpin says. All three industries have high quality systems requirements as well as smaller lot sizes. He also says there’s not a huge difference between AS 9100, a common quality management system used in the aerospace industry, and ISO 13485, it’s counterpart in the medical device industry. 

It’s not hard to see why outsourcers are being drawn to the industry. Globally, the medical device market was worth more than $230 billion in 2010, and it is expected to top $360 billion by 2015. More than half of the respondents in a survey of medical device companies conducted by Emergo Group and Medical Device Summit reported international sales increases in 2011, and almost 70% are optimistic that their strong performance will continue through this year. The industry was even able to grow during the Great Recession.

Over the past decade, outsourcing has helped OEMs slash product development costs by almost a third, according to market research firm Reporterlinker.

—Jamie Hartford (@readMED) is the associate editor of MD+DI and MED.