As the current year draws to a close and a new one begins, MedicalDeviceNow caught up with Alan Myers to discuss the ups and downs of 2011 and what he expects for 2012. Myers is vice president of the Global Business unit of Jabil Healthcare & Life Sciences, a division of St. Petersburg, Fla.-based Jabil Circuit Inc., an electronic product solutions company that provides electronics design, manufacturing and product management services.

MedicalDeviceNow: Use one word to describe the year in Medtech. Please explain your answer.
Alan Myers: Evolving. Healthcare is evolving globally, and this means different things for different people, whether you're an OEM, whether you're in the contract manufacturing space, whether you're in Asia, in a BRIC country, Western Europe or North America, it's an activity that's evolving rapidly from my perspective. Having been in this industry for over 25 years, there's probably more evolution with the model than in a long time.

MDN: Please discuss the medical device design trends in 2011 and why those trends have come to the forefront this past year.
Myers: At a macro level, if you think about the marketplace, there's a real challenge going on with global OEMs and how they manage growth. It's an industry where if you looked at North America particularly, surgical procedures are growing probably in the low single-digits or mid-single digits at best. Companies are trying to understand how to grow in this environment. I think there are two avenues from my perspective. One is organic growth and that's the multinational and the big OEMs in particular taking some of their cash and putting it in product pipelines. I think the second avenue from growth that we'll see is the continuation of consolidation in the industry. This consolidation will allow for investments in new technologies that treat for disease states that are growing more rapidly. The industry will continue to move investment away from the single-digit growth areas and move more rapidly into therapies and devices that are growing more rapidly and profitably than the rest of the industry.

MDN: Please discuss the medical device manufacturing trends that have occurred in 2011. Will those trends continue next year?
Myers: The globalization trend continues and accelerates. In earlier times when we thought about that in the industry we thought about moving to low-cost manufacturing countries and exporting back to western markets or North America. Increasingly as we work and poll our customers, they are more interested in manufacturing on a global scale for the purposes of penetrating a global market like Brazil, China and India. They are much more interested in that conversation than trying to go to a low-cost environment because they want to be synergistic with the markets they are in. Globalization is obviously not a new trend, but we see the urgency to find creative solutions for our customers. We also see our major customers working really closely to define what's core and non-core in their businesses where they can bring a product or technology advantage to the market and then determine what manufacturing processes are open to outsourcing. This industry compared to others we serve at Jabil has been relatively slow to outsource and I think most people would admit that from a regulatory perspective, there has to be a safe pair of hands doing this. There's not a lot of demonstrated track record of this in this industry. We see the doors opening more as we meet with our customers. The inquisitiveness, the curiosity and the deployment of resources to move things faster are definitely on the rise compared with past years in our experience for the people we embrace in the marketplace.

MDN: What major issues and/or challenges have impacted the medical device/medtech industry in 2011?
Myers: Business model changes in the device/medtech industry move slower than in other markets we serve at Jabil, and therefore, decisions to outsource move at a slower pace. I'm not suggesting that's a bad thing. I think part of the genesis of this is the fact that this is a highly regulated industry. The table stakes for compliance and the good reputations of our customers aspire to in the industry are vitally important to them. As compared to other industries that Jabil serves the decision to put one's trust and faith and really to back that up with the ability to verify is a big decision in this industry. While it's moving faster than it has in the past, it's still an industry that is measured in really long terms of product lifecycle. It's not an industry like consumer electronics, which basically rebuilds itself every 18 to 36 months. This is an industry that has a lot of staying power and the decisions therefore are somewhat longer and more long-term.

MDN: How will these issues and/or challenges shape the industry in 2012?
Myers: Our interest from a contract manufacturing standpoint is to advance the validation of the outsourcing model. The model becomes more robust as our customers see a demonstration that the model works. This demonstration can be in the form of product, manufacturing, or after-market services. Clearly the pace of outsourcing for us particularly in this industry is tied to our ability to demonstrate great capability both at the individual company level and more importantly as an industry. I think we as an industry have to do a better job of being compliant and demonstrating capability in doing the basics well. I'm not suggesting we don't do them well but I suggest we can do a better job of basic quality of the product, execution around supply chain, manufacturing, and delivery. The ability to be a safe pair of hands and a trusted partner when a customer contemplates potential engagement with a regulatory agency such as ANVISA (Brazil's National Health Surveillance Agency), the U.S. Food and Drug Administration (FDA), or in a customer audit, is essential. While there's evidence that the industry is moving in the right direction, the evidence in some cases is anecdotal. In this industry particularly given the stakes and the importance of doing it well, it's really important that this industry validate that we are a great alternative to our customers doing this in their internal operations.

MDN: What predictions do you have for growth in 2012 based on the industry’s performance in 2011?
Myers: If you think about the end markets from a global perspective, the appetite for access to healthcare is unmistakable whether it's a BRIC country, the United States, Latin America, etc. The consumption and need for healthcare and more effective and better devices is unmistakable. Who's going to pay for that is still a question. In some economies like Western Europe it's pretty well understood and in places like China it's still evolving. In the United States I think it's still up for debate. So I think the end market is somewhat understandable. The market overall in contract manufacturing in terms of revenue and bringing new business in will grow faster than our end customers' market. This means we'll convert more activity into the contract manufacturing outsourcing model than the overall market growth. I'm pretty comfortable that will occur. In the case of our company, we are quite certain that will occur. The thing we wish to do, obviously, is to make sure that we take every opportunity to grow quite a bit faster than the demographic growth. We hope that contract manufacturing as an industry, and Jabil particularly, will grow faster than the marketplace. From our line of sight we've got a pretty good view of how we intend to grow. From a macroeconomic perspective, anything that's going to create a change to the regulatory climate and reimbursement could change the landscape the way we see it.

We think this is an industry that's ripe for more diversified outsourcing for companies that are going to invest more heavily in core versus non-core activities and companies that are going to be better in rigorously defining core and non-core. We see the upcoming year as more opportunity than risk. We think the industry is moving in that direction. From a Jabil perspective, we've spent the last couple of years investing significantly in capabilities in our business and we've been in the middle of a pretty significant growth curve in terms of new customers. As we line up where we are right now, we feel pretty good about the business and the industry and we feel like we're well-positioned. The contract manufacturers that have gotten ahead of the curve a little bit and have made some investments in this space with capability, people, and with developing customer relationships right now are poised well to take advantage of the growth. People that are coming in now as entrants into this business are people that are not as global or people that may be more niche-oriented. However, the guys that positioned themselves two or three years ago are in a good position right now.

MDN: Please assess the general health of the medical device/medtech industry in 2011.
Myers: Again, the first thought is that it's evolving. If we look at the metrics of the industry, most companies are healthy, profitable, pay dividends, and have cash on hand. If we look backwards in our rear view mirror, these are companies that not that long ago were viewed as growth companies. They h ad great growth potential and people were betting on this industry because it was growing. I think that's evolving into a more mature industry and I think part of the psychological landscape of this industry, particularly with the large OEMs, is they're evolving into a different part of their product lifecycle. It's an industry that is starting to characterize itself more by generation of cash, stability, maturity and some of the descriptors around growth or earnings are changing a bit and that's having an effect on the whole industry, including contract manufacturers as well.

MDN: What issues and/or challenges will shape the industry in 2012?
Myers: Anything that will occur at the macroeconomic level relative to reimbursement is going to be a big deal, particularly in North America. Any change to the way devices are regulated or entered into the marketplace, whether it's a change to the 510(k) process, a change to the PMA (premarket approval application) process, or the relationship with the FDA particularly will change the industry. Globalization will continue to shape the industry in 2012. North American and Western European companies will continue to take advantage of growth in the BRIC markets and emerging economies. As we spend time with our customers, they're all interested in doing more outsourcing of non-core activities and all of them have a huge appetite regarding how we can take advantage of these emerging markets. Closer to home, at least for us, is the continuing trend for types of products and healthcare that are rapidly moving from the traditional point of care in hospitals to the point of care away from the hospitals as healthcare costs and reimbursement change the scope of the landscape. We see a trend of moving to a less invasive and easier to use self-administered types of devices. There's opportunity there, but at the same time those devices have to be foolproof for compliance and from an ease-of-use perspective.

MDN: What changes will take place in the medical device/medtech sector over the next 12 months?
Myers: From where we sit, we don't see a lot of stark or significant changes. Legislative or macroeconomic changes could certainly change that. This industry tends to evolve rather slowly compared to other industries. If we're sitting here having this same conversation 12 months from now I'm not sure there would be an "a-ha" moment. We'll acknowledge that the industry is going to embrace diversification in looking at investing activities in core and getting out of non-core activities a little more aggressively than the past. There's clearly going to be intent to be more global, not just in terms of low-cost manufacturing, but in terms of being able to penetrate those markets. And I think consolidation will be a key in this industry. If you take the top 25 healthcare companies on a global basis, I wouldn't be surprised if that number if smaller and there are a couple of acquisitions by this time next year.