NEW YORK — The medical plastics market continues to be strong, fueled by health-care trends including continued growth in disposable products and out-of-hospital care.
Industry officials interviewed at the Medical Design & Manufacturing East '98 show, held June 2-4 in New York, said cost pressures from health maintenance organizations remain, and consolidation among medical device manufacturers means they are asking their plastic parts suppliers for more work, from assembly to engineering.
But executives remain unsure about whether the consolidation of original equipment manufacturers will force consolidation among plastics processors, similar to the automotive industry.
Contract manufacturer Tenax Corp., which does 95 percent of its molding for medical applications, thinks the consolidation is coming, said President Peter Kershaw.
``Medical device companies recognize they should operate with fewer suppliers of injection molded parts and extruded parts,'' said Kershaw, who had 15 years of experience working for large medical device makers before moving to Tenax.
Three of the Danbury, Conn.-based molder's customers are reducing the number of injection molders they deal with, pushing Tenax to embark on a five-year plan to make sure it can perform all the molding, extruding, assembly and engineering work that medical manufacturers want, Kershaw said.
Nancy Hermanson, medical market technical leader with Dow Chemical Co. in Midland, Mich., said OEMs are leaning toward fewer suppliers because of new Food and Drug Administration rules for good manufacturing practices, and a push to meet more ISO standards.
``I think what you are seeing is people getting squeezed out of the medical market because they don't have quality control,'' she said.
Other molders say they are not seeing pressure to consolidate, but some OEMs are pushing them to provide more services, including design and assembly, and some are seeking quicker product development.
``OEMs want us to get closer to their plants and they want to see more engineering support,'' said Michael Keogh, regional sales manager for health care for Tech Group Inc. in Scottsdale, Ariz.
Still, some processors continue to seek business in the medical market, lured by what they see as stronger profit margins than in other plastics segments.
Goshen Rubber Cos. Inc. does mainly automotive molding now, but recently opened a plant in Englewood, Ohio, that will focus partly on growing its medical molding, said Larry Schnabel, sales manager for Goshen's thermoplastics division.
``Even though there are intense price pressures in medical, we think those margins are better than average in transportation,'' he said, adding that medical is probably 10 percent more profitable.
Electronics and connector maker AMP Inc. plans to invest $2 million in medical molding and assembly capabilities, focusing on minimally invasive products. The firm is looking to tap into the $1 billion that will be spent on disposable products for vascular and cardiac surgery in the next five years, said Jose Domingos, AMP global medical industry manager.
The medical device industry projects growth of 5-7 percent this year, but many processors and resin suppliers anticipate their own growth will be greater.
A May study from Freedonia Group Inc. in Cleveland said the disposable medical products market will grow 6.2 percent a year until 2002, with the fastest growth coming in home health care.