A new trend I have observed is the drive to bring down the cost of the medical devices, and the high cost of healthcare in America is the driver behind the new trend. The common complaint is that the government spends a lot of money in healthcare, and yet the outcomes are not commensurate with the investments. Results are almost equal to those of countries that pay less on healthcare but are more efficient in delivery. One area in which the government can deal with the cost escalation is reducing the cost of the devices.
In literature, the trend is also driven by the need to produce medical devices for the emerging market. In those markets, an excellent medical device might fail to sell due to the cost factor (Wen, 2004). Thus, in the quest to make the devices cheap, production has moved to emerging costs were the cost of production is low (Performance improvement in the medical technology sector, 2018, July 02). That movement continues to accelerate.
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The most critical impact of this trend is the cost of devices will remain manageable. In the west, manufacturing is costly due to the high cost of labor, onerous environmental regulations, and labor shortages (Sodhi & Tang, 2013). However, by moving production to a lower-cost destination, the imported devices are significantly cheaper while remaining performant (Poon & Zhang, 2008). Also, with economic liberalization and low trade tariffs, it is easier to produce items in one country and then exports them to another.
This trend is likely to remain in place because western companies that used to produce those devices have moved operations overseas. With the population growth in emerging markets, the need for medical devices will increase, and yet cost a huge factor (Weber, Hiete, Lauer & Rentz, 2010). Therefore, producing these products in wealthy countries is not an option for companies.
References
Performance improvement in the medical technology sector. (2018, July 02). Retrieved from https://www.bain.com/insights/performance-improvement-in-the-medical-technology-sector/
Poon, C., & Zhang, Y. (2008). Perspectives on High Technologies for Low-Cost Healthcare. IEEE Engineering in Medicine and Biology Magazine, 27 (5), 42-47. doi:10.1109/memb.2008.923955
Sodhi, M. S., & Tang, C. S. (2013). Strategies and tactics of Chinese contract manufacturers and western OEMs (2001–2011). International Journal of Production Economics, 146 (1), 14-24. doi:10.1016/j.ijpe.2012.10.014
Weber, M., Hiete, M., Lauer, L., & Rentz, O. (2010). Low-cost country sourcing and its effects on the total cost of ownership structure for a medical devices manufacturer. Journal of Purchasing and Supply Management, 16 (1), 4-16. doi:10.1016/j.pursup.2009.06.001
Wen, M. (2004). Relocation and agglomeration of Chinese industry. Journal of Development Economics, 73 (1), 329-347. doi:10.1016/j.jdeveco.2003.04.001
