The story behind the story on this week's battle over Obamacare is the potential impact on the plastics contract manufacturing business.
There are two issues: the possible delay (or even demolition) of President Obama's controversial Affordable Care Act and the possible repeal of the 2.3% medical device excise tax.
The Affordable Care Act will significantly expand the market for medical devices as more Americans receive health insurance. That should kick into a higher gear in 2014. At the same time the device tax that is being used to partially fund the law adds to significant economic pain for the medical device manufacturers, who are reeling from efforts by hospitals and insurance companies (mostly unrelated to Obamacare to date) to dramatically reduce costs through smarter purchasing, product lifecycle management and supply chain control.
As a result, major medical device manufacturers such as Stryker and Covidien have launched restructurings that are moving more design and manufacturing to third parties, particularly plastics processors.
In an excellent presentation at MD&M West earlier this year, Phillips-Medisize CEO Matt Jennings forecast annual growth of medical device contract manufacturing at 8-15%. He estimated that outsourcing increased from 23% of the total medical manufacturing market in 2010 to 30% this year.
And that was before all of the craziness this week