
Apr 7, 2016
Regulations, competition are causing part makers to tighten profit margins, part tolerances and cycle times By Michael C. Anderson, Manufacturing Engineering The medical device market finds ways to stay in the headlines in one way or another, whether it’s because of big mergers (such as Medtronic’s acquisition of Covidien) or tax-inversion moves (such as Medtronic’s subsequent relocation of its headquarters to Ireland). Medical device companies and their lobbyists continue to push back against the US medical device tax used to cover some of the costs of the Affordable Care Act. And recalls of medical products certainly get into the media. But away from the front page of the business section, manufacturers in the medical device field are feeling the effects of a shift in health care practices. “The regulatory environment in North America and Europe has driven a shift to value-based healthcare solutions, which in turn has resulted in increased competition, changing business models, and innovative strategies to achieve sustainable growth,” medical market analyst Bryan Hughes of P&M Corporate Finance LLC (Chicago) said. The ripple effects from all of these developments are reaching the medical device side of the machining business, resulting in a tightening of a number of parameters, from profit margins to part tolerances and more. Tighter Margins Scott Walker, president of Mitsui Seiki USA Inc. (Franklin Lakes, NJ), gives an example of the way hospitals do business has changed—and how that change affects medical manufacturers and their suppliers. “Ten years ago, a hospital used to go in and buy the entire range of components,” Walker said. “For knee replacements, for example, a hospital would buy a box and in it would be, say, 15 sets of knees. They didn’t know until they cut your leg open what size would fit in there, so they were ready with a range of sizes that they had purchased.” No longer, he said. “Today the way it works is, a knee-replacement salesman goes into the room with the surgical team, he brings in a box of knees, and the hospital only buys and uses what goes into the patient.” That kind of practice means a lot fewer knees get sold, and so the manufacturers are...