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Asia : Medical Product Outsourcing

  • As medical product manufacturers look to cut costs, preserve cash and reduce debt, partnering with capable contract manufacturers seems a logical step. 

  • The medical industry, on the other hand, has been more conservative and reluctant to outsource because of consistent, high-quality requirements and concerns about intellectual property protection. 

  • Many Asian countries, however, show they have access to the latest technology and skilled personnel, and some are going out of their way to demonstrate their commitment to IP protection. Countries such as Singapore, Malaysia, China and Taiwan have easy access to skilled engineers, scientists and technicians trained in Good Manufacturing Practices and familiar with FDA, ISO and MDD regulations. With their knowledge of the local market and engineering skills, they can be very valuable in contributing towards developing as well as manufacturing high-quality products and components. 

  • Respironics, the U.S.-based leading provider of medical devices for the treatment of sleep disorders, manufactures respiratory masks, thermoplastic and high-labor-content components in wholly owned facilities in Shenzhen, China and Subic Bay, The Philippines and contracts out components in Hong Kong. 

  • In several parts of Asia, there is no problem in finding the skills required to run a plant of equivalent complexity to those in the U.S. or Europe. The skill sets are all available there. Some companies, such as U.S. medical technology specialist Becton Dickinson, do relatively little contract manufacturing but have a strong direct manufacturing presence in Asia. BD opened its first plant in Singapore in 1988 and now has facilities in Korea, China, India and Pakistan. Ranjeet Banerjee, BD director of operations, Asia-Pacific, commented: "The driving factors behind moving production to Asia were improved market access and service to our customers, and, on reaching economies of scale for certain products, reduced cost at consistent worldwide quality levels. 

  • For many OEMs, manufacturing is an entry point to access the Asian markets. Asia can give them cost advantages they can get nowhere else in the world, besides having a strong growth potential. With a population of 3.5 billion, some 60% of the world’s total, Asia’s healthcare markets offer significant scope for growth compared with the established markets of the U.S. and Europe. 

  • According to AdvaMed estimates, medical technology in Asia accounted for approximately $45 billion of a global market valued at $169 billion in 2000. Many governments in the region, including Taiwan, Malaysia and Singapore, have strategies in place to promote the life sciences sector as a key pillar of national economic growth and have generous funding and incentive programs to attract multinational healthcare companies and support start-ups in biomedical science. China is currently attracting about 80% of Asia’s foreign direct investment, and with its accession to the WTO and reduced tariff on electronic components, the market is becoming friendlier for foreign manufacturers. 

  • Asia is not a coherent whole. Each country will score very differently when assessed against different manufacturing criteria. 

  • Sukumar Karuppiah, a senior partner of Ravindran Associates, an IP law practice in Singapore, explained that while there are differences of enforcement of IP rights in Asia, the environment is changing with hopes for better implementation. 

  • "As members of the World Trade Organization, Singapore, China, India, Thailand and Taiwan are obliged to comply with the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) which, inter alia, requires member countries to establish minimum standards concerning the availability, scope and use of IP rights as well as procedures for enforcement of such rights, "he said." Singapore, Thailand, China and Taiwan have fully complied. India, too, has complied but has until January 1, 2005 to accord product patent protection to certain new areas of technology. 

  • Finding the right partner requires a systematic approach but there are many excellent sources of contacts for further advice for OEMs considering the move, including embassies, trade missions, trade shows, regional sales offices and local consultants. However, avoid pitfalls by considering these issues:  

  • Company record and reputation 

  • Thorough due diligence on-site 

  • GMP and general regulatory compliance 

  • Patent protection issues, especially the enforcement of local IP laws 

  • Communications, language skills and relationships 

  • Country regulations and economic stability 

  • IT, telecom and transport infrastructure 

  • Company ability to meet deadlines 

  • Cultural differences 

  • Hidden costs of doing business, import duties and other taxes 

( Ref : "MEDICAL PRODUCT OUTSOURCING", June 2003., http://www.mpo-mag.com/June031.htm )

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