Asianizing Medical Device Testing

Originally Published MDDI April 2004

Testing

Asia has become a magnet for medical device OEMs seeking a slice of the region's exploding economy. As the demand for testing and sterilization grows, the industry there is looking increasingly for local providers of these services.

Eugene Khor and Nealda Leila Muhammad Yusof

The global medical device market is worth more than $100 billion, according to a Frost & Sullivan 2004 survey.¹ About one-third of the expenditures on healthcare worldwide is attributable to Asia, and spending there is expected to increase an additional 45% by 2005.

The spending is driven by an aging population; increased life expectancy; increasing incidence of major diseases such as diabetes, coronary heart disease, and stroke; the needs of the health-conscious Asian people; and higher disposable income. With a total population of more than 3 billion, Asia accounts for about 60% of the world's population and includes highly advanced markets such as Japan, Singapore, and Hong Kong.^2,3 In recent years, Asia's fast-expanding economy has been a magnet for global medical device companies seeking to benefit from the vast market opportunities as well as attractive incentives to foreign investors. 

The most compelling factor in the shift of medical device operations to Asia and subsequent penetration of the Asian market is the development of low-cost, high-quality medical device products. Outsourcing of medical device manufacturing already has become the modus operandi of choice for many global device companies with a market presence in Asia. 

Outsourcing Trends in Asia

Although both the idea and the reality of outsourcing to Asia have taken shape, thus far the practice has been limited to manufacturing. Despite the cost benefits of leveraging the high-tech capabilities of Asian contract manufacturers, outsourcing still poses a substantial logistical feat: The Asian-made products must be transported back to the West for sterilization and testing before they are released for worldwide marketing. However, as companies' shopping lists for outsourcing grow to include independent sterilization facilities and testing laboratories, the industry is poised to begin Asianizing these services.

What Is Asianization? Asianization is the utilization of turnkey primary and supporting operations, technologies, or capabilities in Asia to improve the efficacy of a production process.

The need to cut costs is pushing global device companies to concentrate all manufacturing, sterilization, testing, and marketing operations in Asia. They must also ensure that these operations are situated close to one another, preferably within a country, to preclude both capital and time expenditures incurred by logistics. 

Is Asia Prepared to Meet the Needs of the Global Market? Ultimately, medical device products must be manufactured, sterilized, and tested according to accepted standards and regulatory requirements. Throughout Asia, local contract manufacturers and sterilization facilities alike are becoming sensitive to FDA, ISO, and EN medical device standards. They are eager to meet the requirements of customers who are marketing medical device products in the United States, Europe, Australia, Canada, and Japan.

Contract manufacturers and sterilizers have been investing heavily in implementing and upgrading quality systems to comply with the latest international quality system standards, such as ISO 13485. Such certification is especially important to those who are venturing into the medical device field. Certification enables them to demonstrate competency, credibility, reliability, and knowledge in the area. Meanwhile, they can establish a portfolio of experience to build the confidence of future customers.

Medical Device Testing In Asia

In addition to assessing their suppliers' quality system compliance, global device companies are increasing pressure on Asian contract firms to ensure that all raw materials, as well as production and sterilization processes, are subjected to appropriate validation and testing. In response, Asian contract manufacturers are providing supply-chain support to integrate manufacturing, sterilization, and testing. By doing so, the contract manufacturers add value to their services.

Such demands may have the greatest impact on contract manufacturers in Southeast Asian countries such as Singapore, Malaysia, and Thailand, where device regulation is still in the developmental or early implementation phases. In these countries, contract manufacturers are just beginning to familiarize themselves with quality system and testing requirements for medical devices. Unlike Taiwan and South Korea, which have a more established manufacturing base and larger device markets, or Japan with its more-advanced device regulatory system, Southeast Asia's medical device contract manufacturing efforts are relatively new initiatives, largely propelled by the sluggishness of the electronics industry. Many contract manufacturers previously specializing in material parts molding and micromachining for other applications are now seeking medical device projects.

Current Testing Needs in Southeast Asia. Among the testing needs of contract device manufacturers in Southeast Asia are the microbiological assays associated with sterilization process validation. This lack of specialized testing services in Southeast Asia has led contract manufacturers to take a conservative approach to outsourcing testing. Finished medical device products are usually shipped to Europe, the United States, or Japan for sterilization and testing.

However, Asian contract manufacturers have recently faced demands from global clients to exhibit vigilance and take responsibility for both production and sterilization processes, including validation and testing. These changes are likely driven by the cost benefits of localizing all aspects of device production in Asia. In addition, testing in Asia would enable OEMs to avoid the logistical complexities of delivering time-sensitive device samples to overseas laboratories. With multiple device projects to handle and no laboratory facilities or testing knowledge, most Asian contract manufacturers would prefer to focus on their manufacturing expertise and outsource microbial test services to outside laboratories. Unfortunately, most microbial testing laboratories in Southeast Asia serve the food and petrochemical industries; they are not familiar with medical device requirements.

The lack of medical device safety testing facilities in Southeast Asia can be attributed to the slower pace of the region's regulatory agencies in enforcing a device regulatory system that embodies rigorous product control and manufacturing audits. Although the need for medical device testing is growing, manufacturers supplying device products solely to the Southeast Asian region are still oblivious to the U.S. and EU quality system and testing requirements for medical devices. They often do not see the need to implement such measures in the absence of regulatory hurdles. When ad hoc microbiological testing is required, laboratories with specialization in nondevice testing, such as food testing, are easily recruited.

Now, contract manufacturers are increasingly turning to laboratories that have a history of testing medical devices. Preferred laboratories are able to provide scientific consultancy and testing recommendations, as well as being widely knowledgeable in the appropriate testing standards and regulatory requirements for medical devices. A laboratory with these characteristics can essentially act as a reliable device-testing arm of the contract manufacturer. Such laboratories can facilitate the creation of an integrated manufacturing and testing solution for global device companies.

With the increase in market opportunities, global companies are introducing many new devices through their manufacturing subsidiaries in Southeast Asia. These companies have strict procedures designed to keep all aspects of manufacturing, sterilization, and testing in-house in order to protect intellectual property. Recently, however, they have been pressured to outsource some manufacturing and testing activities to alleviate overcapacity of in-house production lines and laboratories. Asian subsidiaries of global device companies are often more receptive than contract manufacturers to the concept of outsourcing tests to an outside laboratory. These subsidiaries have experience in device manufacturing and testing that enables them to assess and qualify contract laboratories to meet their specific needs. Contract manufacturers may not yet have this advantage, which makes them highly dependent on laboratory accreditations and on the expertise and directives of their clients in choosing the right laboratory.

Future Testing Needs in Southeast Asia. The demand for outsourced laboratory services only multiplies as device manufacturers based in Southeast Asia prepare to enter the U.S., European, Australian, Canadian, and Japanese markets with innovative medical products. The aims of these companies are to establish the necessary safety and effectiveness data for regulatory evaluation and approval. The needs of these Asian-based companies include biocompatibility tests, raw-materials characterization, performance tests, and microbiological tests for sterilization validation. 

Currently, there is a dearth of support services in Southeast Asia to cater to these testing needs. Consultancy enterprises that assist in the preparation for quality system certification often have little or no experience with medical device manufacturers and provide only generic solutions.

The response to outsourcing testing to date has been mixed. Some sterilization facilities are considering setting up safety testing capabilities to offer one-stop sterilization and testing packages. At the same time, laboratories from the United States and Europe that have comprehensive testing services are appointing Asian representatives to gain a share in the potential market for medical device testing in Asia. These representatives perform marketing and customer management tasks, and samples are submitted to the parent laboratory for actual testing. Although such an arrangement is workable, this situation is hardly ideal; but whatever the approach, caution is the key sentiment.

R&D Opportunities in Asia

Relocating to Asia has provided global device companies with both proximity to low-cost manufacturing options and opportunities to advance state-of-the-art medical technology. Asianization is being brought to a new level as product research and development finds its way into Asia as a tactic for global companies to continue meeting the low cost requirements of the market. Attractive tax incentives and a highly motivated, well-educated workforce are driving global companies to locate R&D facilities in Taiwan and Singapore, for example. 

Singapore. Singapore's biomedical R&D initiative is an ambitious strategy to move the nation beyond manufacturing to become a knowledge-based economy. The Economic Development Board (EDB) of Singapore plays a key role in strategic and policy planning in an effort to create a biomedical science industry. The following infrastructure and funding have been allocated to support the growth of the biomedical sector:

• The EDB will nurture scientific talent by providing a range of industrial training programs as well as scholarships for doctoral and postdoctoral fellowships.
• The Biopolis, an integrated R&D complex, will bring together more than 2000 researchers and support staff in five publicly funded biomedical research institutes and laboratories of biotech and pharmaceutical companies.
• The Biomedical Sciences Investment Fund (BMSIF) sets aside SGD$1 billion (US$600 million) to invest in selected companies and technologies from local universities. From the BMSIF, start-ups are provided with up to SGD$2 million (US$1.2 million) as seed capital for viable business ideas and execution of business plans, as part of the SGD$25 million (US$15 million) Biomedical Sciences Innovate ‘N' Create Scheme.^4,5

Taiwan. The Hsinchu Biomedical Science Park was developed to integrate advanced medical services, research, and biomedical industrial development, and to enhance the quality of life. A planned budget of NT$20 billion (US$600 million) is to be invested in five years to develop Taiwan's biomedical industry.

Emphasis on Research and Development—Is Asia Ready? Product development and regulatory mandates have given rise to requests for more-complex studies that investigate the safety and effectiveness of medical devices, including biocompatibility, performance, and materials characterization tests. Clinical trials in Asia are also becoming increasingly advantageous due to the availability of a potentially sizable patient population. Clinical research can provide Asian patients with early access to innovative new treatments.

Asian device manufacturers are also beginning to establish their market niche by catering to local demands. The less-stringent device regulatory controls in this region have given focused players a head start in production for their targeted market segments. Yet with the growing acknowledgment by many Asian governments that stricter controls are necessary to safeguard the manufacture and use of medical devices in Asia, an increase in competent testing facilities to meet the demands for safety and effectiveness tests is inevitable.6

Conclusion

There is a growing need for medical device testing support services in Asia. This demand is prompted in part by the growth of medical device manufacturing in the region. The increase in medical device R&D in Asia is also an important driver behind the need for safety testing. Ultimately, cost is the key factor, and global device companies are expected to pursue the cost benefits of outsourcing device testing in Asia. Inevitably, the Asianization of such capabilities will pick up its pace. 

References

1. Frost & Sullivan, “Medical Device Industry” (2004); http://it.frost.com/prod/servlet/vp-further-info.pag?mode=open&
sid=2850206. 
2. Michael Simonsen, “Growth Opportunities Diverse in Asian Medical Products Market. (Industry Overview),” BBI Newsletter, November 2002.
3. Michael Simonsen, “Asian Medical Products Market Is Showing Signs of Recovery,” BBI Newsletter, July 1999.
4. Economic Development Board, “Industry Opportunities: Biomedical Sciences” (2004); www.sedb.com/edbcorp/sg/en_uk/index/industry_opp/biomedical_sciences0.html.  
5. David Brantley, “Singapore's Biomedicine Initiative: Prescription for Growth? (White Paper),” (Washington, DC: U.S. Department of Commerce, Technology Administration, 2002); www.technology.gov/reports/techpolicy/p_Singapore_Biomedical_2002.htm.  
6. Su-Ming Hsu, MD, “Hsinchu Biomedical Science Park, Integration of Knowledge-Based Economy and Biotechnology—Managing Taiwan's Future,” National Taiwan University Hospital (2004); www.taba-usa.org. 

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