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Reduce Cost & Complexity by Outsourcing the Production of Legacy Medical Devices

By outsourcing the production of legacy medical devices to a contract manufacturing organisation (CMO), business unit managers can satisfy customer demands and maintain a minimum margin.

The CMO may have a lower cost base than the original manufacturer or it may offer a greater economy of scale for a particular product line. Outsourced manufacturing can help a brand maintain its margin and breathe new life into legacy products. The introduction of an outsourced partner can allow a company to review and consolidate its legacy products range.

Research & Development

Satisfying the demands of medical device companies to achieve healthy revenue growth whilst maintaining strong margins requires a strong pipeline of innovation as well as the ability to maintain margins on existing product portfolios. Medical device companies worldwide are now investing heavily in research and development (R&D), with the average top 20 firm devoting 6.8 percent of total revenue to the practice, according to Evaluate Ltd. data. It has been estimated that global medtech R&D investment (from the top 20 companies) reached a record $15 billion in 2015 and it’s predicted to rise to $22 billion by 2022. Certainly, the pace of new product introduction (NPI) is not about to slow anytime soon.

 

Source: Medical Product Outsourcing.

Increased investment in R&D has resulted in a deeper investigation into areas where cost can be cut. Traditionally, companies look at implementing lean programs, reducing wastes, increasing efficiency and maximising output.

Why not discontinue legacy products?
With so much new technology expected, why don’t medtech companies discontinue legacy products? The medical device market can be complex and it is often difficult to discontinue legacy products even when it seems most practical. The lengthy, time-consuming regulatory approval process in the medtech sector generally curtails the patent protection period in the drug and device arenas compared with other industries.

Outsourcing Legacy Medical Products
How can a business unit manager satisfy customer demand then, while maintaining a minimum margin? One way is by outsourcing the production of a legacy device to a contract manufacturing organization (CMO). The CMO may have a lower cost base than the original manufacturer or it may offer a greater economy of scale for a particular product line. Outsourced manufacturing can help a brand maintain its margin and breathe new life into legacy products. The transfer of technology to a CMO can have a major impact on all stakeholders in the legacy product supply chain. The introduction of an outsourced partner can allow a company to review and consolidate its legacy product range.

Medical Device Contract Manufacturers
By outsourcing the production of a legacy device to a contract manufacturing organization (CMO), business unit managers can satisfy customer demands and maintain a minimum margin. The CMO may have a lower cost base than the original manufacturer or it may offer a greater economy of scale for a particular product line. Outsourced manufacturing can help a brand maintain its margin and breathe new life into legacy products. The introduction of an outsourced partner can allow a company to review and consolidate its legacy product range. The transfer of technology to a CMO can have a major impact on all stakeholders in the legacy product supply chain.

This blog is adapted from the article ‘The Everlasting Life of Legacy Medical Products’, featured in the August edition of Medical Product Outsourcing.

 

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