Looking back at 2016, there were a number of noteworthy events that dominated headlines throughout the year for both positive and negative reasons—the Brexit vote, the
Zika virus, the Cubs winning the World Series, and Kirk Douglas
turning 100 (notable to me since we share a birthday, although
I’m quite a bit younger). One item, however, captured the attention of every single American
and much of the world—the 2016
presidential election. Depending
on the winner, the U.S. would either see its first female president
or its first leader with no political
or military experience.
Although the 2016 U.S. presidential election was arguably one
of the nation’s most divisive yet,
one can’t help but get the feeling that we are entering an era of
new beginnings. Perhaps it’s only
natural to have that sense given
the result, as it’s likely the next four years will reflect a significant
difference in policy and opinion from the previous eight. Further,
regardless of with which side of the aisle you align, the medtech
industry should expect to see some positives in 2017.
If campaign promises are kept, today’s version of the Affordable Care Act (ACA) should look very different in 2017. Which
aspects remain and which will be removed is a decision that’s
yet to be revealed, but it will undoubtedly be a different piece of
legislation—if it resembles the original document at all.
With that said, given the successful suspension of the device
tax at the eleventh hour of 2015 coupled with the new political
environment, it is unlikely the 2.3 percent levy that came out of
the original version of the ACA will return. While technically still
suspended in 2017 as part of the spending bill that put it on hold
for two years, several members of industry have stated that its
return is less than likely (and that was even before the presidential election results). During a panel discussion at the 2016 MPO
Summit in Austin, Texas, both Clayton Hall, vice president of government affairs for the Washington, D.C.-based Medical Device
Manufacturers Association, and Perry De Fazio, a vice president
at Boston, Mass.-based investment banking firm Covington Associates, stated they expected the device suspension to continue
after 2017. Neither predicted a permanent repeal, but both anticipated the suspension to remain in place.
Hopefully, the return of those funds to device makers will
see continued investments in R&D and hiring in 2017, leading
to more reliance on outsourcing partners to supplement non-
core capabilities. With new ideas in the pipeline, medical device
makers will look to their supply chains for support of everything
from development to manufacturing to packaging and steriliza-
tion. As always, they will be seeking to eliminate costs as much
as possible from those projects early in the lifecycle. In addition,
since many OEMs’ engineering teams will be tasked with devel-
opment of these new concepts, legacy products may move over
to outsourcing providers who can help trim waste, time, and ex-
penses from the existing processes. Regardless of the device tax’s
ultimate fate, the trend toward increased outsourcing by medical
device companies is likely to continue in 2017.
Speaking of outsourcing, another trend that has started to
emerge is the reshoring of manufacturing. To what extent we’ll
see this grow in 2017 is unknown. Further, it may result in many
companies bringing manufacturing back only to replace human
resources with automated and robotic solutions. Some of the reshoring of manufacturing, however, may fall to local outsourcing
providers for tasks that are too delicate or sophisticated to make
automation an effective alternative. Or, the OEM may simply be
unwilling to invest in the automation and robotics required. It
may look to an outsourcing provider that has already made those
investments and can truly maximize the output of such equipment. Either way, if reshoring continues, outsourcing providers
may see benefits from this trend in 2017 and beyond.
In 2017, MPO will continue to serve as a reference for the
medical device industry, providing critical information on the capabilities of service providers and for those seeking new partners
with which to work. The 2017 MPO Company Capabilities & Outsourcing Directory will be paramount to that effort’s success.
I’d like to thank all of our loyal readers for your continued support. The entire staff of MPO would like to wish you a very happy,
healthy, and safe holiday season and new year. Moving into 2017,
I join you in welcoming the“new beginnings” we can expect and
wish for the best for all of us.
Howard A. Revitch