By Mark R. Smith, Contributing Writer
2022 hasn’t been a good year in many business circles, considering the dissipating but ongoing pandemic, a depressed stock market, the dearth of workforce, supply chain issues and the resulting inflation all front, center and loud.
Yet, some industries, while not immune to today’s challenges, are standing strong such as medical device manufacturing.
That’s the general feeling within the industry, despite the scarcity of expensive parts and the labor shortage, with that latter dilemma being addressed via collaboration with educational institutions, and heightening reliance on analytics and robotics.
Companies are “hearing about talent needs across the board,” said Bob Vitoux, CEO and president for Warsaw, Indiana-based OrthoWorx, a nonprofit that serves as a liaison in the medical device industry. “On the skilled trades side, its CNC machinists and artisan craftsman polishers, as well as anything in manufacturing 4.0 or 5.0, or basically any format you can think of that the industry needs to operate in.”
Data, Analytics
On the professional side, Vitoux said the landscape has changed since the pandemic with the preponderance of virtual work.
“Twenty-five years ago, companies wanted people to live and work in the same community,” he said, “but today, the greater acceptance of virtual work has allowed our ‘region’ to include faraway markets and attract those as close as Fort Wayne (which is just less than an hour away).”
Vitoux pointed out that the state department of transportation has been streamlining the highway system to decrease that commute in the effort to bolster the talent pool. “Fort Wayne has roughly 15 times the population of Warsaw, so [heightened] access could be [mutually] beneficial.”
With the ever-growing amount of technological options, coupled with the science in orthopedics, “the biggest area of need is engineers,” he said, citing the orthopedic industry’s relationship with many of the state and local colleges for mechanical, electrical and industrial talent. The market is continuing to advance in that area, including large and small Original Equipment Manufacturers that are shifting toward robotics.
“Everyone in the industry is looking to advance their games,” said Vitoux, “so they can compete in the largest movement to computer-navigated procedures.”
So the technological side of the equation is “ramping up, as well as data collection. For many years, we designed and manufactured a range of sizes across an array of products,” said Vitoux, “but now with more data, analytics and pre-operative planning tools, we’re getting better at knowing precisely what they need. This reduces the inventory and instrument requirements per procedure and, more importantly, is a much ‘greener’ way to operate.”
It’s all led to tremendous progress. “In my 30 years in this industry, we’ve seen advances in devices that now extend far beyond the traditional hip, knee and shoulders,” he said. “Now we see them all across the body, with a major movement toward extremities like elbows, ankles, toes, etc.
“So if there is a joint with osteoporosis,” Vitoux said, “this industry can handle it.”
Explosive Growth
The availability of those high tech body parts is resulting in the enhancement of bottom lines.
“Clearly, orthopedic products continues to be a very strong area in the medical device sector, due to the amount of elective surgeries continuing to grow,” said Larry Gigerich, executive managing director with Indianapolis-based Ginovus. “In addition, the rapid acceleration of youth and adult sports has led to more injuries. As a result, surgeries to address injuries are on the rise.”
Consequently, another area where the medical device industry has seen significant growth is in the equipment used in hospitals and surgery centers.
“From robotics to laser technology to oncology treatment equipment, we have seen this space explode,” said Gigerich. “Component manufacturing tied to orthopedic and medical equipment has experienced significant growth for an extended period of time, since these products are in higher demand.”
In addition, he said the assembly of these types of medical devices and equipment “are also seeing a lot of growth. From plastics to composite material to metal products, there is [considerable] forward momentum.”
Concerning hot addresses in the sector, Gigerich cited several locations. “In terms of orthopedic products, Indiana (Warsaw is known by the trademarked tagline “The Orthopedic Capital of the World”) continues to be a U.S. and global leader, due to the concentration of the industry in the north central part of the state,” he said, “and despite of their expensive cost structure, places like California and Massachusetts remain leaders due to their innovation,” especially from research universities.
He also cited Minnesota, which is known for its Medical Alley from the Twin Cities down to Rochester; and Florida, with its concentration of medical device and implement companies, as hotbeds in the industry.
Weekly Calls
While the aforementioned addresses are hubs of medical device manufacturing, there’s a general movement by companies that operate plants outside the U.S. to bring their facilities to, or add locations, within the U.S.
“The movement toward manufacturing domestically is in the midst of a big push,” said Seth Martindale, senior managing director of CBRE in Los Angeles and a board member of the Site Selectors Guild. “We’re seeing a large increase in medical manufacturing investments stateside, which is expected to continue.”
That’s not the only expansion Martindale noted. “We’re also seeing more venture funding and expansion of existing companies,” he said. “We’ve been getting calls at least once a week from medical device and pharmaceutical companies that need to expand production capabilities.”
These trends came to the fore, of course, when the COVID-19 pandemic intensified the spotlight on health issues and the sudden need for more equipment, devices, supplies, etc. “But whether they’re due to the pandemic or not,” Martindale said, “the point is that people want to mitigate risk by having easy access to products.”
One for instance concerns the heightened need for a small device, the Pulse Oximeter, which gently clips on to a finger. “They were a hot commodity during the pandemic,” he said, when more people, many of whom had COVID-19, needed to measure oxygen saturation levels.”
Martindale said CBRE works with manufacturers across the business spectrum and called the flow in the demand from the medical devices industry “strong. Just think about the variety of devices that are researched, designed and come to market,” he said, noting that they range “from valves to filters to joint replacements” and much more.
He also observed that the consistency of the sector “could also be due to aging populations,” while also calling the industry “well insulated” from a rough economy because people “are still going to get sick.”
Quick Reviews
At the University of Maryland, College Park, the bioscience department has directed efforts toward the incubation of medical devices to the pediatric market; in this case, with the nearby Children’s National medical center, which is the lead institution in the National Capital Consortium for Pediatric Device Innovation.
This effort is a case of understanding the market share, as the Food & Drug Administration recognizes this market “is much smaller for children than it is for adults,” said Bill Bentley, director of UMCP’s Robert E. Fischell Institute for Biomedical Devices. “Also, in this market clinical devices can become outdated quickly. That means kids can suffer. It can also be difficult getting them enrolled in clinical group studies.”
On this front, UMCP is providing the engineering arm and works with startups to solve problems, connect professionals, conduct trials, etc. It also offers a Shark Tank-type competition for $50,000 grants from the FDA, which infuses funding for many medical device manufacturers.
“There are many great ideas industrywide,” said Bentley, “though some can be hard to implement. For instance, some go through huge startup costs and can’t make the money back in sales. So these orphaned products get a faster review from the FDA to cut development costs.”
As these products pass muster, the startups then compete within other organizations across the country “and get connected with venture capital firms, incubators,” etc., he said. “In one case a few years ago, we ended up having 30 judges for 100 startups entered, then 25 featured, 13 finalists with five winners.”
What’s the most rewarding result? “Even the losers feel like winners,” said Bentley, “because they get a bigger Rolodex.”
Startup Perils?
Med-Ally, of Charleston, South Carolina, designs, develops and manufactures implanted neuromodulation devices for companies like Boston Scientific, as well as creating documentation for the FDA. CEO Raja Hitti said, “Not surprisingly, that dealing with the disruptive supply chain is his company’s biggest issue.”
“That problem is particularly challenging in the medical device field. Obtaining parts is tough by nature, but it’s more so with implanted devices,” said Hitti. “We have strong capacity and in recent years have invested $2.5 million in capital equipment,” he said, “but sometimes it’s not being used because we can’t get enough parts.”
That issue is amplified in the case of one of Med-Ally’s devices, he said, “since it contains 1,300 parts.”
Then, of course, comes the issue that’s been ongoing for many years in many technical fields, attracting and retaining talent. But on that front, Hitti said being located in the southeast is actually a benefit.
“It’s easier to obtain talent from out of state, because many people find the southeast attractive. I see more New York and Connecticut license plates here than from South Carolina,” he said. “I often have to pay relocation costs and about 15-20 percent more in salary, but given that some companies are paying what I consider ridiculous sums to recent college graduates, it’s worth it.”
Med-Ally employs a staff of 15 and Hitti would like to add six more workers but as noted, recruiting even production associates and technicians without overpaying is tough. He’s also hoping that the floundering economy doesn’t stall his business.
“Generally, the medical device industry is the last to be affected,” he said, “but the longer its stays bad there’s more chance that our clients, which are often startups, might be. Thus, us as well.”
But on the positive side, Hitti said, as the pandemic has waned, “We’ve experienced ample demand. We focus on quality, so if we can make several hundred items per year, that’s good. And that’s only a third of our revenue stream,” with mechanical design and engineering of products comprising the remainder.
“So,” he said, “I’m very optimistic.”
Diversity Pays
Hitti is not alone in that optimism as the industry looks ahead.
“We’ll continue to see great innovation,” said Vitoux. “Some people think the industry may hit a wall at some point, but I believe that problem would cause people to think about how they can be more entrepreneurial.”
His perspective is keen concerning history repeating itself, such as when larger companies often scout startups for innovative products, buy their technologies and bring them to the next level via their stronger distribution networks.
“That’s how everyone wins and the industry continues to advance,” he said.
Speaking of progress, Vitoux said the medical device community also “needs to continue its focus on becoming more inclusive and socially aware” – which he and others feel would pay great dividends for their communities.
“The more diverse an industry can become, the greater the thinking and advances will be,” he said. “The trend line during the past several years is going in the right direction here in Warsaw.
“And that,” he said, “is resulting in a fresh immersion of talent.”
Bio: Odenton, Maryland-based Mark R. Smith joined Expansion Solutions after having written about site selection among the vast number of topics he has covered in the business universe. That part of his career began in 1993 when he joined The Daily Record, a Baltimore business and legal publication, where he delved into the worlds of economic development and commercial real estate, among numerous other industries; in 2003, he was named editor-in-chief of The Business Monthly, another Maryland publication that covers the scene in the Baltimore-Washington Corridor counties.
Concurrently, he’s written at length about the film and video industry for a variety of publications, and about his other loves, including music, sports and leisure.
