Global medical device outsourcing is forecast to grow 11.5% CAGR, reaching a value of more than $50 billion by 2020, according to a recently published market report from Grand View Research Inc. (San Francisco, CA). Increased pricing pressure on medical device manufacturers along with onerous and burdensome regulatory constraints are among the factors driving OEMs to seek outsourcing partners in greater numbers.
The 2.3% excise tax levied on sales of certain medical products, which is part of the Affordable Care Act (aka Obamacare) and shifts in purchasing protocols, as purchasing groups increasingly make medical device procurement decisions, will continue to squeeze manufacturers to do more for less. Even if the device tax is repealed under a Republican-led Congress, the overall business dynamics affecting the device industry will not fundamentally change. Relentless pressure to invest in research and development and introduce innovative products has significantly increased "expenditure levels, and medical device OEMs, therefore, are rapidly adhering to outsourcing as an effective cost curbing tool. Statistics suggest that medical device outsourcing helps OEMs reduce cost of production by approximately 15%," note report authors.