The sterilization and packaging sector sees demand for its services increasing, along with an escalation of customer needs.
The contract sterilization and packaging sector is teeming with activity these days as OEMs ratchet up their use of such services, with heavy emphasis on meeting both supply chain management and regulatory issues that they don’t wish to maintain in-house.
Medical Product Outsourcing talked recently with representatives of several companies involved either in the sterilization or contract packaging segments of the sector, and they generally pointed to the “faster, better, cheaper” mantra that is gripping medical product manufacturing in particular as it envelops industries far and wide.
Asked what his company is hearing from its customers in terms of their needs, Tom Stephan, executive vice president ofBeamOne LLC, a San Diego, Calif.-based contract sterilization firm, put it succinctly: “Rapid turnaround times with very product-specific sterilization parameters.”
BeamOne uses ionizing energy from accelerated electrons as its sterilization source, and is considered a global leader in the application of electron beam technology for medical device sterilization purposes.
Stephan added that the “management” part of supply chain management is in vogue as never before.
“The focus is on Lean manufacturing,” he said. “Even labware suppliers that conventionally built to inventory now build small volumes on a ‘just-in-time’ concept. Process flexibility is the key to meeting the turnaround and special parameters required for today’s new products.”
With transportation costs at record levels due to the price of fuel, he said that “the distance and cost of moving finished freight hundreds of miles from manufacturing to sterilization to distribution has to be assessed. The most common thing we hear is ‘build it next door,’ so the concept of a sterilization network of smaller facilities in more local markets is in demand.”
Acquired in April by the growth-minded United Kingdom-based sterilization firm Synergy Health plc, BeamOne now will be at the forefront of a new Synergy Health Americas division.
As part of his response to the same question, Chris Ramsden, CEO of Millstone Medical Outsourcing LLC in Fall River, Mass., noted that the company added a facility in Fall River last autumn, had just completed the addition of 5,000 square feet of advanced mechanical inspection area, and would be starting work on another 40,000-square-foot addition to another facility later this summer.
Ramsden told MPO that his growing company “is seeing a tremendous need from our customers in regards to first article inspection and advanced mechanical inspection, hence some of the expansion we’re doing in that area. We’re really beefing up in the inspection area; we see that as an area that has not traditionally been outsourced, and they’re getting more and more comfortable with that.”
He said that large medical device manufacturers are “going directly to outside design firms, they’re picking best-of-breed manufacturers, and then they’re using someone like Millstone to be the back-end or Tier 1 supplier and do the inspection, cleaning, sterilization, packaging, and shipping the stock.”
Thad Wroblewski, vice president of sales for sterilization industry kingpin Steris Isomedix Services, headquartered in Mentor, Ohio, said, “In the sterilization world today, there is a continued focus on supply chain, on Lean initiatives, on time and cost—anything that can provide visibility and tracking.”
Wroblewski, who is located at the Steris Isomedix facility in Spartanburg, S.C., said “the demands for service, reliability and quality are ever so high now and investments are being made to address all those different things. That is what we’re hearing from our customers.”
Barry Fairand, a senior consultant in radiation sterilization for Sterigenics International Inc., another of the pair of “big guys” atop the U.S. contract sterilization sector, offered a reminder that radiation sterilization “is an old industry—it’s now over 50 years old. So it’s not like we’re breaking new ground – what we are doing is extending our use of radiation into new areas. The area that is growing is in the terminal sterilization of drug products and drug/device combination products. More and more of those are coming into play.”
Fairand said that demand is high among customers of Oak Brook, Ill.-based Sterigenics.
“All of our radiators probably are operating 24/7, with only a few percent downtime, so they’re at maximum capacity. Theindustry has grown to that point,” he said.
Brian Meltzner, sales manager at Merrill’s Packaging, a Burlingame, Calif.-based packaging specialist that has been in business since 1961, said, “Customers are becoming more demanding of their suppliers. A lot of our larger companies are involved with consolidation, so they’re looking for their vendors to do more things for them in managing aspects of their business, such as managing their inventory. That’s become very important.”
Localization also is growing in importance, citing his company’s new plant in Costa Rica.
“We’re going there to service existing customers who are manufacturing there and now are looking to localize their supplier base,” Meltzner said.
Rick Schulz, director of operations for Merrill’s Packaging, identified another trend—the U.S. Food and Drug Administration (FDA) asking medical device manufacturers to have “a lot more control” on the activities of their vendors, “so that has meant a lot more formal validation activities, a lot more reporting as to how we do our business and getting into a lot more detail of how we do the business, so we have developed systems in-house so we can respond efficiently to those needs.”
Ramsden said that, generally speaking, “It seems the large medical device manufacturers are more and more comfortable with outsourcing and don’t want to make the capital investment to do things they might have once done themselves.” He added that a superior quality system “is still the entry price to get into the game. For a company like Millstone, which is audited 40 or 50 times a year by its customers and ISO [International Organization for Standardization] and the FDA, that question is no longer brought up very much. It’s all about speed and cost now, and outsourcers like Millstone compete very well in those arenas.”
Asked if the mantra should really be faster, better, cheaper, but with better recordless, Wroblewski said, “Better recordless is essential. So much has been done with automation and the technology today so that you don’t have to write and rewrite things. We’ve gone from paperwork to digital systems. Tools such as bar-coding and RFID (radio frequency identification) are used to quickly scan and quantify what is coming in, to monitor it going through, make sure it’s the right product, make sure it’s getting the right process.”
Regulatory Scrutiny Helps Drive the Process
Medical product manufacturers in general are finding that they are under greater and greater regulatory scrutiny. The companies they turn to for sterilization and packaging are impacted in turn, but regard performing to exacting standards as simply part of the job—albeit a challenging one.
Stephan of BeamOne said, “With the added complexity of medical devices, product compatibility can be challenging from a regulatory perspective. Interactions between the sterilization process and polymers or drugs have to be assessed and approved, challenging the market demand for such innovative products. Technical assistance and sterilization validation expertise increase the demands on sterilization vendors, as these core competencies do not always reside at the manufacturing and design level.”
Millstone Medical’s Ramsden said, “We have hired a full-time person to audit our vendors so that when a large orthopedic manufacturer comes to us and chooses us as a Tier 1 partner, they don’t have to worry about the Tier 2 and Tier 3 suppliers. That’s where we believe the FDA is focusing, on how well are you checking your suppliers, so by taking that worry away from companies doing business with Millstone, that’s another big selling point with us.”
Understanding the regulatory environment is critical.
“That is one of the key initiatives in our company this year—understanding our regulatory environment, understanding what our obligations are to our customers based on this environment, and understanding our responsibilities to the FDA,” Wroblewski explained.
“That is a huge thing—an identified initiative by our senior management, pulling all our operations and quality groups together, as well as looking at our continued improvement of our activities to improve supply chain visibility, the Lean programs to manage costs at facilities and improve services, throughput, etc.”
He said there definitely is more activity. The FDA is visiting manufacturers more frequently, looking deeper into procedures and all aspects of processing.
“They’re definitely looking at non-conformances in the records, and how companies manage these,” Wroblewski said.
Schulz said Merrill’s Packaging’s customers “definitely are feeling [regulatory] pressure. They are asking us to be a lot more formal and a lot more detailed in our reporting of how we conduct and control our business, and particularly how we conduct and control quality. Now they’re going much deeper into the actual nuts and bolts of how we control quality. You have to prove that your process is capable, you have to statistically prove it.”
He said another trend is that the FDA is asking the OEM manufacturers of medical devices to have a lot more control on the activities of their vendors. “So that has meant a lot more formal validation activities, more reporting as to how we do our business and getting into more detail on that. We have developed systems so we can respond efficiently.”
Fairand said his company’s SteriPro Division has “significant regulatory experience, and also is knowledgeable in the latest standards that govern the radiation sterilization industry; [they] are members of organizations that write the standards for the industry.”
Wroblewski also cited collaboration on industry standards. “We’re all in this together at industry meetings. We and the other suppliers have reps at the industry meetings and are involved with the development of standards, along with our industry’s customers.”
Plant Expansions and New Approaches
When MPO asked what in particular is new at the participating companies, the responses ranged from new plants to expansions to new approaches to doing business.
Wroblewski said that understanding the direction customers are heading in is important, particularly given the number ofacquisitions and consolidations that occur.
He also noted capacity issues.
“Our main focus is the customer and what the customer wants from us in terms of service and capacity,” Wroblewski noted, which means continued investment in new equipment, new facilities and expansion of capacity. Steris recently initiated expansion in Chester, N.Y., where the company has an existing gamma sterilization facility with two large-capacity irradiators under one roof.
“Now we’re adding a third irradiator, which is a batch irradiator. With the addition of the batch irradiator, we’ll be able to supply specialized services to the high-end medical device industry,” he said.
For BeamOne’s Stephan, the answer to “what’s new?” came easily. The $35 million acquisition of his company by Synergy Health serves the dual purpose of providing the U.K. firm with a platform to move into the U.S. market, while giving BeamOne a substantial boost up the ladder in joining Steris and Sterigenics in the top ranks of players in the sterilization market.
“With BeamOne’s five service centers, Synergy Health now operates 24 sterilization service centers worldwide,” he noted, “using electron beam, gamma radiation, ethylene oxide (EtO) and ion beam for the sterilization of single-use medical devices, labware, pharmaceuticals, foods, agricultural products, and semiconductors.”
Stephan noted that BeamOne is doubling the size of its Costa Rica electron beam facility to add an additional electron beam system to meet current and growing demand. BeamOne also is building an ethylene oxide sterilization center in Costa Rica, expecting operations to commence in the latter half of 2012.
Addressing both the capacity and localization issues, Fairand noted that Sterigenics has 15 radiation sterilization facilities, eight EtO facilities and two analytical laboratories among its contract facilities located across the United States
Solid Growth Noted
Asked how they see the sector doing overall, the respondents often chose the term “solid growth” to describe the outlook for both packaging and sterilization, reflecting the reports on plant expansions and additions.
BeamOne’s Stephan, for instance, sees average growth levels of 5-8 percent in device volume. And he foresees growing localization trends in the sterilization segment: “As market demand for healthcare increases in Asia, most manufacturers will have offshore manufacturing poised to meet demand.”
Stephan said that drug-eluting stents and bioabsorbableimplants are examples of smaller, complex medical devices requiring complex sterilization parameters.
“These combination products require small batches with very tight control parameters and almost immediate turnaround,” he noted.
Ramsden said the handling of custom implants is a clear growth area among its orthopedic manufacturer customers.
“We handle custom implants every day,” he said. “We’re seeing more and more volume. We’re also seeing a tremendous amount of movement in trauma and spine products moving from a non-sterile packaged arena into a sterile packaged configuration.”
He also cited post-sterile release as a growth opportunity. “In our opinion, a lot of the large orthopedic companies don’t handle products in their distribution centers that are awaiting sterile or non-sterile release very well, so a lot of program managers are more comfortable with having us handle the whole sterilization and post-sterile release program.”
Of the packaging and sterilization sector generally, Ramsden said, “I believe it’s a healthy industry; it’s dynamic, and outsourcing companies that are nimble and provide quality, cost and speed are going to continue to be successful.”
He said Millstone is seeing moderate growth by the large orthopedic OEMs. “I think we’re seeing faster growth than they are, because they’re outsourcing more and more, and certainly the consolidation that is going on in the orthopedic and medical device markets, those changes are good for outsourcers.”
To win customers, companies often have to ask the right questions. Meltzner cited a recent example.
“We achieved a new project because we were asking enough questions,” he said. “One of the components that went into the package was in a foil pouch to control moisture. We asked what their requirements were beyond that one component, and we found that moisture barrier was still important. We have had long experience with high-density polyethylene, which has a much better moisture barrier than PET does and also has a 20 percent lower cost, so when the bean-counters did their analysis, they found we were offering a better solution at a lower cost, and we earned the business.”
X-ray Sterilization on the Move
As for what’s new in the way of technical developments, the biggest play was given to expansion of the still-nascent X-ray sterilization, a decidedly big-ticket segment that Fairand estimates takes up less than 1 percent of the current market but clearly is on the move despite a penthouse-level price tag.
“There are only a few X-ray irradiators in the world today, the last one commissioned in Switzerland,” he said. “They’re very expensive facilities, requiring very high-power
electron beam accelerators to generate the X-rays. You’re talking $15 million to $20 million just to get the facility up.”
He added: “The advantage of an X-ray irradiator is that it is machine-sourced; you can shut it down and bring it back up again, unlike gamma radiators that have to run all the time for efficient use of isotopes. And of course you don’t have the isotopes, you don’t have the nuclear component.”
Joining with other respondents in citing movement in the X-ray sterilization segment, Stephan said X-rays “continue to be assessed as an alternative to cobalt-60 gamma radiation.He added that the generation of X-rays using electricity “is viewed by some as a cost-control opportunity, moving away from the increasing cost of cobalt-60 radioisotopes and the public’s perception of radioactive materials.”
He said demand for electron beam sterilization “continues to increase as our network of facilities rolls out to an international market.” Noting that electron beam sterilization control systems have been modified to provide increased product and parameter tracking and recording through the process, he said that electron beam sterilization is “vital for ensuring the uniform dose delivery on medical devices.”
Ramsden of Millstone Medical said “We’re seeing a lot of customization—a tremendous number of disposable instruments and also advanced handling of loaner kits, not just handling and sending them back out for surgery, but also doing inspection and replenishment and even customization. It has almost become ‘surgery in a box,’ where it’s doctor- and patient-specific,” he said. “So when we start thinking about future developments, a custom kit allows the medical device manufacturer to no longer send out 200 pieces in a surgical kit but now can ship 80 knowing that you’re covered for the particular surgery or patient that it is intended for.”
Fairand also cited the growth of drug/device combination products such as implants, including those used to treat what might have been considered inoperable cancers in the past.
“These are complex products to deal with—you need a source of very high-energy radiation to penetrate all parts of the device. The problem is in dealing with the drug part of the product, when other problems come into play that need to be taken into account,” he concluded.
Schulz said, “Certainly our customers are more and more being open to new materials to help drive costs down, but overall the broad brush of the technology hasn’t changed much.”
Jim Stommen, retired editor of industry publication Medical Device Daily, is a freelance writer focusing on the medical product sector.