Medical Device Tax Could Fuel Outsourcing Activity

Slated to go into effect in 2013, the impending 2.3% excise tax on 'taxable medical devices' could prompt an uptick in outsourcing activity, according to a new report by Kalorama Information. "The tax itself won't force a firm to outsource," according to Bruce Carlson, publisher of Kalorama Information. "But since the law taxes revenues notwithstanding the cost of manufacture, it could add further pressure to bring costs down in order to restore profits."

Whether this prediction of increased outsourcing pans out remains to be seen. However, it does make sense. In many instances, it can be much more cost-effective to outsource various aspects of device design and development compared with doing it in-house. It also allows you to benefit from a service provider's niche expertise and experience, in some cases. If considering outsourcing, though, it's imperative to check that regulatory control and quality systems are in place, ideally ISO 13485. And it can't hurt if a vendor has experience serving your particular market or application type.

During a recent interview for an upcoming case study, David Estes, director of engineering at EPRT Technologies, an OEM of pain-management devices, expressed some sage words of advice for fellow manufacturers looking to outsource. "As an outside engineer, you need to approach the manufacturer and their personnel with respect," he says "They're doing a job that is very difficult, and they're doing it day after day with a high level of quality. Your success is going to depend on their success in accomplishing those tasks that you give them."

Peruse the profiles of potential vendors in the Qmed supplier directory or learn more about medical device outsourcing by checking out MPMN's archived content on contract manufacturing. Plus, let us know how your company is thinking about potentially bringing down costs. Is outsourcing or increased outsourcing in your firm's future?