Ensuring Reliable Sourcing in Medical Device Supply Chains

Key complications include the multifaceted complex nature of medical devices, the intricate assembly process, stringent regulatory requirements, import/export restrictions, and a fiercely competitive landscape, and a need for a continuous improvement (CI) system (figure 1).

To navigate these challenges, organisations can take actions to invest in research and development, implement strong quality control measures, build robust regulatory teams, understand international trade laws, differentiate their products, and continuously improve their operations. 

By addressing these factors, medical device companies can enhance the reliability of its supply chains, leading to improved patient outcomes. As the global medical device market is expected to reach $754 billion by 2028, the stakes are high, and the industry must rise to the challenge through reliable sourcing and supply.

Figure 1: Complications to address for sourcing in medical devices.

Complication 1: The Multifaceted World of Medical Devices

Medical devices are as diverse as the healthcare field itself, encompassing a broad spectrum of instruments, machines, implants, in vitro reagents, and software designed for a myriad of purposes. The diversity in medical devices operates on two primary planes – human factors diversity and device factors diversity. This diversity extends across different dimensions, acknowledging individual differences. 

Moreover, medical devices are often mechanical in nature and have an inert effect on the human body. They range from simple everyday consumer products such as spectacles and bandages, to complex systems like MRI equipment and pacemakers. The technologies involved extend far beyond those of pharmaceutical science to include materials science, bioengineering, engineering, electronics, software, information, and communication technology, and many more. 

According to the World Health Organization, there are over 10,000 types of medical devices available. The global market for medical devices reached nearly $409.5 billion in 2017 and is expected to reach $753.8 billion by 2028. 

Action 1: Invest in research and development.

Organizations can invest in research and development to stay abreast of the latest advancements in medical technology. For example, Medtronic, a global leader in medical technology, services, and solutions, invests heavily in R&D to develop innovative medical devices.

Medtronic’s R&D expenses for the twelve months ending January 31, 2024, were approximately $2.7 billion, which represented approximately 9% as a percentage relative to revenue. These high R&D investments have seen successes in wearables, apps, surgical robots, and artificial intelligence.

In collaboration with Cosmo Pharmaceuticals and NVIDIA, Medtronic introduced the GI Genius™ AI Access™ platform. This platform is designed to accelerate AI innovation for healthcare. The GI Genius™ intelligent endoscopy module is the first FDA-cleared, AI-assisted colonoscopy tool to help physicians detect polyps that can lead to colorectal cancer. (https://news.medtronic.com/2023-03-22-Medtronic-to-boost-AI-innovation-with-new-platform-introduction).

Complication 2: The Art of Assembly

The assembly of medical devices is a highly complex and time-consuming process. Precision in assembly is key to excellence for medical device manufacturing companies. Clear assembly instructions ensure that all assembly line workers follow the same set of guidelines, promoting consistency in manufacturing processes. For instance, precise instructions for the installation of intricate medical devices, such as pacemakers or infusion pumps, guarantee uniformity in production. 

According to a report by McKinsey, the medical device industry spends approximately 7% of its sales on research and development, and about 12% on manufacturing. This highlights the importance and complexity of the assembly process in the industry. 

Action 2: Implement strong quality control and advanced manufacturing.

Implementing strict quality control measures and investing in advanced manufacturing technologies can help ensure precision in assembly. For instance, Boston Scientific uses advanced manufacturing technologies and rigorous quality control measures to ensure the reliability of their products.

Their quality strategy, known as Best4, centres on patient safety as their top priority. This proactive, preventive approach to quality begins with product design and continues throughout each product’s lifecycle. The Best4 strategic framework enables them to uphold cohesive quality across their global supply chain. Its key drivers are culture, agility, performance, and compliance (https://www.bostonscientific.com/content/dam/bostonscientific/corporate/corporate-responsibility/performance-report/how-we-approach-quality.pdf) 

Complication 3: Navigating Regulatory Requirements

Regulatory requirements play a pivotal role in ensuring compliance within the medical device industry. The FDA has formulated many regulations for medical devices that define the requirements for supplier selection, management, and control. Moreover, the Australian Regulatory Guidelines for Medical Devices (ARGMD) provides information on the import, export, and supply of medical devices within Australia. 

In the United States alone, there are over 6,500 medical device companies, and the regulatory landscape they navigate is vast and complex. The FDA's Center for Devices and Radiological Health (CDRH) is responsible for regulating firms who manufacture, repackage, relabel, and/or import medical devices sold in the United States. 

Action 3: Build a strong regulatory team.

Staying updated with regulatory changes and maintaining strong relationships with regulatory bodies can help navigate regulatory hurdles. Johnson & Johnson, for example, has a dedicated regulatory affairs team that works closely with regulatory bodies to ensure compliance. This team works closely with various departments such as R&D, manufacturing, sales, and marketing to ensure compliance with all product-related regulations. They also have regulatory affairs professionals in different locations, such as Warsaw, Indiana, United States, and Leeds, England, United Kingdom

Complication 4: Understanding Import/Export Restrictions

Importing and exporting medical devices are subject to various restrictions. For instance, all commercial imports of medical devices are subject to approval by the FDA, prior to being cleared by U.S. Customs and Border Protection. On the other hand, any medical device may be exported from the United States to anywhere in the world without prior FDA notification or approval if it can be legally marketed in the United States. 

According to the U.S. Department of Commerce, the United States is the largest medical device market in the world, representing about 40% of the global market. However, the process of importing and exporting medical devices is heavily regulated and can be a significant challenge for companies in the industry. 

Action 4: Ensure a global trade compliance function is in place.

Understanding international trade laws and hiring experts in import/export regulations can help navigate these restrictions. For example, Stryker, a leading medical technology company, has a dedicated team to handle import/export regulations and ensure smooth operations.

Stryker’s dedicated Import/Export regulations team plays a crucial role in ensuring the company’s compliance with international trade laws. They handle the complexities of importing and exporting medical devices, which are subject to various restrictions and regulations1. This team is part of Stryker’s larger supply chain team, which focuses on aligning supply sources with future demands.

They also ensure responsible sourcing from conflict regions and expect their suppliers to procure materials from socially responsible sources. They have a Conflict Minerals Policy to eliminate the use of certain minerals that may finance armed conflict and promote human rights abuses.

Complication 5: Surviving the Competitive Landscape

The medical device industry is fiercely competitive. With industry-specific requirements under the EU Medical Device Regulation (MDR) or Labour Standards Assurance System (LSAS), medical device manufacturers have several regulations to meet to gain and maintain market access. Moreover, the COVID-19 pandemic has placed healthcare systems around the world under tremendous pressure, which has in turn posed a major challenge for the MedTech industry to meet increased demand for its products. 

According to a report by EvaluateMedTech, the global medical device market is expected to grow at a CAGR of 4.7% to reach $754 billion by 2028. This growth is driven by innovation, but also presents a significant challenge in terms of competition (https://info.evaluate.com/rs/607-YGS-364/images/Medtech%20World%20Preview%20Report.pdf)

Action 5: Create differentiation in your products

Differentiating products through innovation, superior quality, and excellent customer service can help stand out in a competitive market. For instance, Becton Dickinson (BD) differentiates itself through its wide range of high-quality products and commitment to improving patient outcomes.

BD is known for its continuous innovation in the development and manufacturing of medical devices, diagnostic systems, and reagents. For example, BD’s Pyxis™ MedStation™ system is an automated medication dispensing system that has revolutionized medication management and distribution in hospitals. It improves patient safety by ensuring that the right patient receives the right medication at the right time.

Another example is the BD Veritor™ Plus System, a portable device for rapid detection of SARS-CoV-2 (the virus that causes COVID-19). This system provides healthcare providers with fast and accurate test results, enabling them to make informed treatment decisions and improve patient outcomes.

Complication 6: Reimagining Operations for the Future

As companies grow bigger and devices become more complex, operations will be a differentiating factor for medtech leaders. Medtech companies can improve their operations to become more reliable, robust, and profitable, ultimately delivering better patient care. They can pursue targeted initiatives to rebuild supply chains with resilience as a priority and capture the full value of digitalization and Industry 4.0. They can drive innovation with a design-to-value approach and redesign their manufacturing and distribution networks to balance costs, increase flexibility, and expand market access. Importantly, medtech leaders can invest in quality capabilities that are deeply embedded in business processes. 

Action 6: Deploy a continuous improvement operating system across your operations.

Adopting lean manufacturing principles, investing in digital transformation, and continuous improvement initiatives can enhance operational performance. GE Healthcare, for example, has adopted lean manufacturing principles and invested in digital transformation to improve its operational efficiency. Using lean principles, an international team at GE was able to reduce the cost of four parts by as much as 35% in just 10 months, all during the pandemic. This project is an example of the versatility of lean. GE has used it to improve manufacturing and services, reduce inventory, simplify its office operations, and speed up innovation. In GE Healthcare, the approach is to have a “human-led, tech-enabled” operating system (https://pharmasource.global/content/expert-insight/how-ge-healthcare-are-applying-lean-procurement-principles/)

Conclusion

In conclusion, ensuring reliable sourcing in medical device supply chains requires a comprehensive understanding of the diverse elements that go into medical devices, the complexity of assembly, regulatory requirements, import/export restrictions, and the competitive landscape. By addressing these factors, the medical device industry can enhance the reliability of its supply chains, ultimately leading to improved patient outcomes. With the global medical device market expected to reach $754 billion by 2028, the stakes have never been higher. The future of healthcare depends on the reliability of these supply chains, and the industry must rise to the challenge through reliable sourcing and supply.