True to form as a market known for stability and strict performance requirements, the medical-device market in 2006 has a prognosis much like that of previous years: solid growth and continued opportunities for outsourcing.
Projections say the device market generally is growing 8-12 percent a year, although some observers said high raw material costs inflate that figure somewhat. On the high end, consulting firm Frost & Sullivan of Mountain View, Calif., projects the device market will grow from $71.6 billion in 2005 to $79.9 billion in 2006, or about 11.5 percent.
Of course, the market continues to have high entry barriers, and processors involved in medical manufacturing said cost pressures from the health-care industry continue.
But industry officials said opportunities for plastics processing continue to grow, along with outsourcing. One of the larger contract medical manufacturers, Accellent in Newton, Mass., said studies show that outsourcing will grow 14 percent a year through 2009, faster than the overall medical-device market.
Currently, about 30 percent of U.S.-based manufacturing in cardiology, endoscopy and orthopedic devices - Accellent's main markets - is outsourced, said marketing director Greg Audu.
``We're seeing steady, consistent growth,'' said Jay Policastro, president of Classic Industries Inc. in Latrobe, Pa. ``We continue to see the big companies outsource subassemblies and components. There is still quite a bit of pressure on costs.''
Classic, which focuses almost entirely on medical molding, is seeing annual growth of 10-12 percent, Policastro said. The firm, with $50 million in sales, has been beefing up engineering and design for manufacturing services, he said.
``I see more outsourcing in general, because the small to midsize [medical-device] companies don't have the ability to hire more full-time staff, so they hire manufacturers,'' said Len Czuba, president of product development firm Czuba Enterprises Inc. in Lombard, Ill. Czuba, whose firm specializes in the medical industry, was twice chairman of the Society of Plastics Engineers' medical division and is currently SPE president.
Those smaller medical-device makers are often more creative in product development than larger firms, creating opportunities for smaller plastics processors to partner, Czuba said.
``There is still a lot of business being done by the small to midsize molders,'' he said.
The picture can be contrary. Medical is also a market where big firms are getting bigger: Some of the larger medical plastics processors, including Tech Group Inc. and Precise Technology Inc., were acquired in 2005, and analysts expect more of that as medical-device makers trim their supply bases.
Nypro Inc.'s medical-related business has grown more than 30 percent in its fiscal year that began July 1, though that is a spike, said Bill Partridge, health-care business unit manager. Nypro's long-term sustainable medical growth is closer to 15 percent a year, he said.
``It's the fastest-growing market segment for Nypro,'' Partridge said. ``Everybody is going global, and I'm also seeing [medical-device makers] refocusing on their core competencies. Everybody is rationalizing what they are manufacturing, and the result is more outsourcing.''