Note from the Editor

A NOTE FROM THE EDITOR

What has brown done for you lately? Well, I’m glad you asked. As it happens, United Parcel Service just distributed the results of a survey on healthcare supply chains. While the poll does not till any new ground per se, it exposes some industry trends that merit attention.

Regulatory compliance and competitive pressures top the list of concerns among supply-chain decision makers in the medical, pharmaceutical, and surgical device and biotech industries, according to the survey. Global market access also ranks high, and it was cited as an area in which companies reported needing the most assistance. (Hmm—did I mention that the survey was commissioned by UPS?)

“Capitalizing new global market opportunities amid an increasingly competitive industry landscape requires changes in supply-chain and business strategies,” comments Bill Hook, UPS vice president for healthcare logistics. “It’s crucial that companies have the supply-chain flexibility to respond to changing market conditions . . . and [to] navigate the many complexities associated with global market access.” If you don’t have those resources in-house, who you gonna call? I think you see where this is headed. You can read the entire press release here.

But getting back to the phrase “global market access:” when you hear that, you immediately think of China, and a couple of reports on its med-tech market caught my eye recently.

It has become conventional wisdom to say that China is poised to overtake Germany to become the third-largest medical market in the world at some point in the next few years. Given the size of its population and the economic boom that continues to steamroll ahead, how could it not?

China is home to 20% of the world’s population, and it is nurturing a burgeoning middle class that demands a level of healthcare akin to Western standards. Consequently, China’s medical device market is forecast to grow at an annual compound rate of 15% over the next 10 years, according to Burrill & Co., a San Francisco–based investment firm specializing in life sciences. One sector that is growing by leaps and bounds is orthopaedics, according to medical technology analysts at Wachovia Capital Markets (New York).

Biomet, DePuy, and Smith & Nephew have set (or are setting) up major production facilities in China, according to an August 2008 report from Wachovia. Talking about the plants it is building in China for its orthopaedics and wound-care businesses, Smith & Nephew CEO David Illingworth offered this insight into his company’s motives during an earnings call with Wachovia.

“It really is a two-pronged strategy that may not seem to be totally related. One is a lower-cost manufacturing base. And that’s clear,” said Illingworth. “The other thing is that if you’re going to establish a lower-cost manufacturing base, why not do it in the country that everybody believes is going to have a tremendous impact and tremendous potential in two years, three years, five years, 10 years? Pick the time frame.”

As an aside, in addition to this magazine, Canon Communications publishes China Medical Device Manufacturer and organizes the MEDTEC China conference and trade show, both of which are predicated on serving China’s domestic market. I apologize for the self-promotion, but it’s nice to get validation from someone as plugged in to the industry as Illingworth.

The full report from Wachovia is posted here.

On a completely unrelated note, I wanted to share my favorite press release headline of the month: “Machining Stronger while Housing and Banking Crumble.” Doesn’t that sound a little bit like: “Marine Ecosystem Unaffected by Titanic Incident?” That said, it is good news for maker of machining systems Agie Charmilles, which issued the release, and, not coincidentally, for the med-tech industry.

The Machining Business Activity Index increased to 62 in August from 59 in July for Agie Charmilles. (Any reading above 50 indicates an improvement in business activity.) The report also stated that activity was strongest in the medical and aerospace sectors.

So, aren’t you glad to be part of the medical device industry right now?