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March 15, 2018 02:00 AM

Editorial: Medical sector not immune to all business pressures

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    Leo Michael

    It's long been assumed that the health care and allied medical device makers were recession-proof, giving suppliers to the businesses some shelter from the ups and downs of the economic cycles. And to a certain degree that idiom still holds true.

    But that doesn't mean the medical sector is immune to other business pressures. With health care costs continuing to rise at a seemingly unending pace, that puts increasing pressure throughout the supply chain.

    This pressure is causing a domino effect that is bringing about a number of different trends for those supplying the medical device field. Most predominantly, medical OEMs are looking for their supply chain to offer more services, so they can consolidate the number of suppliers they work with. One OEM had been working with a vendor base of more than 350 suppliers, but now is looking to slice that number down to 50.

    That kind of mandate is a growing trend among medical device OEMs, and it's leading to a number of acquisitions in the medical field, including those supplying elastomer-related components and systems.

    For example, Flexan's FMI unit bought Medron to give it a presence on the thermoplastics side. The firm also added a host of other capabilities, including high-volume production, design engineering and prototyping, among others.

    Qure Medical purchased Degana Silicone Ltd. to give it a bigger foothold in Europe along with a larger presence in catheters. Freudenberg Medical acquired Hemoteq and its surface coating technologies to widen its capabilities.

    When Trelleborg Sealing Solutions brought high-precision component maker Specialty Silicone Fabricators into the fold in the last couple of years, it benefited both sides. Not only did Trelleborg get SSF's range of specialized technology, the much smaller SSF was aided by Trelleborg's global footprint and supply chain management capabilities. Without such a deal, SSF—despite its strong technology—may have been among the large number of suppliers with a narrow scope of offerings that could be at the greatest risk as vendor consolidation escalates.

    The message is clear: While it's hard enough to break into medical because of the regulatory hurdles, now suppliers need to have a variety of services and a strong footprint to be attractive to medical OEMs. As a number of officials from rubber-related suppliers said, the more they can offer to OEMs, the better their chances of staying on the approved vendor lists as those ranks are whittled.

    And though there still will be opportunities for niche technologies, inevitably it seems those companies will need to pair with others that offer fuller services as long as health care cost pressures continue to trickle down to the supply chain.

    Letter
    to the
    Editor

    Rubber News wants to hear from its readers. If you want to express your opinion on a story or issue, email your letter to Editor Bruce Meyer at [email protected].

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