With the U.S. medical device excise tax taking effect in January 2013, manufacturers throughout the country are seeking out opportunities to save money more than ever before. To reduce manufacturing costs, many companies are looking into facilities in Mexico where they can cut down overall costs in labor, utilities, land, taxes and transportation.
International markets are a key focus for medical device manufacturers
In a recent interview with The Wall Street Transcript, Chris Cooley, managing director at investment bank Stephens, talked about how material cost savings are a spotlight for U.S. medical device manufacturers.
Cooley outlined how medical device manufacturers have found that they can take their technologies to foreign markets and design products abroad, and then look to commercialize them in the United States. This strategy not only helps firms save money on research and development, but the products will also stand a better chance of following the regulations set forth by the U.S. Food and Drug Administration.
"We are increasingly not seeing more favorable reimbursement for new technologies coming into the space at a premium, so where you are thinking about higher upfront development costs and subject reimbursement, manufacturers are increasingly moving abroad," Cooley told the source.
Mexico is a viable option for these businesses because shelter companies have skilled workers in facilities ready to start production on complicated medical device manufacturing. Furthermore, Mexico is part of more than 40 free trade agreements, which allows manufacturers to quickly ship their devices straight from the warehouse to their intended recipients no matter where they may be.
Medical device manufacturers can experience many benefits
Mexican manufacturers especially excel in creating medical instruments, as evidenced by 2010 statistics from the Global Trade Atlas, which revealed 78 percent of all medical products exported from Mexico were items such as syringes, scalpels and lancets and surgery or dissection sets.
By producing these types of equipment south of the border with the help of shelter companies, medical device manufacturers can take advantage of a shorter supply chain, reduced time to market and lower amounts of working capital. Mexico has already quickly developed into one of the best places for production, as manufacturers in Mexico shipped $5.2 billion worth of medical devices to the United States in 2008, a 100 percent increase from figures collected just five years earlier.