Looking Beyond the Package

Looking Beyond the Package

As OEMs Step Up Outsourcing Efforts, Contract Packagers Provide More Services

By Ed Kensik – Associate Editor

As medical device companies increase the volume of products outsourced, they are also turning to contract service providers for help in packaging a variety of items such as kits and drug-device products. Above, a worker at B. Braun OEM/Industrial Division prepares kits for packaging. Photo courtesy of B. Braun.

As an increasing number of OEMs outsource product packaging to concentrate on core competencies and reduce costs, they are imposing a new set of challenges on contract packagers. In addition to traditional packaging services, device manufacturers are demanding more peripheral support as well.

Even so, a number of contract packagers interviewed by Medical Product Outsourcing say they continue to see strong demand in the sector, leading to double-digit revenue growth. The main reason for this rise in the level of contract packaging is that OEMs want to become leaner in a price-competitive market and are looking for ways to cut costs. Instead of spending significant funds on capital equipment and other investment to produce their own packaging, device manufacturers are realizing that it’s more cost effective to contract with a service provider. In some cases OEMs can expect broader capabilities and faster service than from in-house operations.

For contract packagers, this reliance means they have to be ready at a moment’s notice to take on new projects and be prepared with the right equipment.

“We must be able to react and respond immediately as well as deliver the results as promised,” said Scott Fetzer, general manager and vice president of Grand Rapids, MI-based Atek Medical. “Often, we are given very little advance notice.”

Outsourcing All Facets

With OEMs concentrating on core competencies and increasingly turning to lean manufacturing, contract packagers have become the beneficiaries of this trend.

“A lot of them are looking to outsource the whole thing—in some cases, even the R&D side of it, the product, source materials, etc. They are asking for design through packaging,” said Steve Larsen, medical business unit manager of West St. Paul, MN-based Tapemark.

“They’re lowering their costs by not carrying the overhead or not having to validate the material so they go to the contract packagers,” added Mary Czarnopys, the converted products marketing manager for Oshkosh, WI-based Perfecseal, a packaging supplier.

While more large OEMs are choosing to outsource packaging, some service providers say the trend typically runs in a three-year cycle. Doug Wilder, president of Edina, MN-based Quality Tech Services, said often after a company begins outsourcing its packaging needs, a management changeover within that three-year cycle will cause the company to reconsider its outsourcing strategy and move some packaging functions internally. A few years later, the company might resume outsourcing again.

Medical devices such as cannula, perfusion sets, suction devices and surgical accessories are placed in individual packages prior to printing and the application of Tyvek at Atek Medical in Grand Rapids, MI. This assembly takes place on one of two form fill seal (FFS) packaging machines, which are located in a Class 10,000 cleanroom. Photo courtesy of Atek Medical.

A number of packaging suppliers say they have noticed the shift. In the past, they pointed out, OEMs purchased the bulk of the medical packaging materials, but today, more contract packagers are doing the buying.

One trend driving growth in contract packaging is to provide a plethora of services. Many contract packagers say customers want help in many facets, from concept to launch. OEMs are increasingly demanding more non-traditional services such as design engineering, product launch support, supply chain management, sterilization control, regulatory support and others. Failing to provide all of these services to an OEM could result in the loss of a contract to a competitor.

“You can’t survive without being a one-stop shop,” said Richard Sunderland, business development manager of Smiths Medical in Gary, IN. “You’re in effect taking responsibility for all aspects for the product specifications on behalf of the customer. They’re signing up and approving it. You’re basically managing the specifications to ensure that their specs have been met.”

When OEMs realize that contract packagers can lend additional support while helping to reduce costs, they tend to pile on the demands. “The more we perform, the more they’re willing to farm out, sparking additional conversations, scheduled conference calls, emails, electronic data exchanges for scheduling and inventory allocations,” said Wilder.

But garnering the confidence of customers is no small task for contract packagers. It requires service providers to react quickly to an OEM’s myriad of demands, including last-minute job revisions, unexpected design changes, difficult packaging configurations and volume fluctuation. That’s why many contract packagers advocate being involved in a project from the beginning stages. They point out that when they are brought late into the process, there is less room for their input. In those cases, packagers need to be flexible with final product designs that can conceivably change on a daily basis.

Open Dialogue

One crucial requirement in the OEM-contract packager relationship is fostering a constant stream of communications, especially around timelines and during the production cycles. Poor communications can cause unnecessary changes later in the cycle, leading to unwanted delays and unnecessary costs.

“Any minor change can have a wide-reaching effect so you have to have constant communication,” said Justin Schroeder, director of marketing for Rockford, IL-based Anderson Packaging. “We are a big proponent of cross-functional team meetings where you have everybody together. Those [problems] that you did not think about can be addressed quickly.”

Depending on the history of the relationship, the contract packager might speak with an OEM representative on a weekly or even daily basis until the project is completed.

While customers often pressure contract packagers to make deadlines, Fetzer said there is a need to turn the tables on OEMs and make them sign an agreement to adhere to schedules. Without such an accord, customers can be overly casual with the timeframe.

“If you agree to work with us, we are going to hold you accountable just like we expect you to hold us accountable,” said Fetzer. “We have due dates that are signed, and if you miss your due date, you will get a call from us saying that you did not deliver to us.”

Fetzer added that clients are generally receptive to strict deadlines, and these contractual obligations demonstrate that a contract packager is reliable.

In addition to cooperating on deadlines, packagers and device manufacturers should collaborate as early in the production cycle as possible, said Tapemark’s Larsen. He pointed out that packaging designed without the input of the converter can cause production delays and cost increases.

“A lot of times we can save them money by being involved earlier on in the process when they are designing their package,” he said.

Early collaboration also ensures that OEMs are aware of the limits of their supplier’s packaging equipment. Just as they should be aware of design for manufacturability when developing a new medical device, manufacturers should also consider design for converting.

For packaging houses, it’s a particularly delicate balance because customers constantly push them to invest in more capabilities. Sunderland said converters need to justify costly equipment purchases and that a high volume of work is guaranteed.

The size of the customer matters, too. A project from a large OEM requiring long runs may warrant the purchase of new capital equipment while those from smaller startups may be less deserving of additional investment.

At the same time, contract packagers have an advantage over the OEM’s internal packaging department because they often have the newest technology. In some instances, outsourced converters act as testing grounds for their customers. The OEM may test a particular piece of equipment at a packaging house first before deciding to purchase it for internal use. Schroeder pointed out: “They want to see the technology first, perhaps give it a trial run or run with a contract packager for a year or two before they take it in house.”

One misconception OEMs sometimes have is the cost of installing a packaging line, some service providers point out. Often, their customers fail to account for all the ancillary costs of the install.

“Too many folks are getting caught up in the misconception that purchasing and installing a cleanroom is relatively inexpensive,” said Wilder. “You can look at just [the equipment costs] and say ‘For $100,000, we can put in this room into packaging.’ But they don’t realize all the certifications and the equipment, installation, qualifications and cleanroom monitoring that goes into it.”

Perhaps that’s one reason why outsourcing has taken root in the packaging industry. When a converter lacks the equipment for a specific project, it can outsource the work to a third party.

IoPP Medical Packaging Committee Revitalized

A little more than two-and-half years ago, the Medical Packaging Technical Committee was just a dormant portion of the Institute of Packaging Professionals (IoPP), a trade group within the packaging community. But today, the committee is a vibrant part of the association with four active task forces and more than 200 members.

Responding to demand by members to bring back the committee after a five-year hiatus, officials of the IoPP called on Curtis Larsen of DuPont Medical Packaging and John Spitzley of Medtronic to revive the inactive section.

“When we first resurrected it, we sent out a blank e-mail to all the membership of the IoPP notifying them that we were starting up the committee,” said Larsen. “Right away, I think we had over 100 responses just from the membership. Then through word of mouth and meetings, we’ve garnered the membership that we have now (approximately 300).”

The mission statement of the committee is to provide a forum to discuss technical, organizational, regulatory and problematic issues that affect the medical device packaging industry.

Larsen said the No. 1 goal for the committee is education, and it has scheduled a pair of meetings this past winter and this fall to provide its members with more information. Its most recent event was held at HealthPack 2005 in San Antonio.

“It is really an organization to bring together members of the medical device packaging technical community, exchange and discuss ideas, developments, information and issues that really affect the industry,” said Larsen.

The four task groups address issues such as sterile barrier package integrity, industry benchmarking, labeling and materials database.

Already, one task force has completed a project. The Materials Specifications Task Group compiled guidelines for a generic data sheet on different types of material components for roll stocks, papers, pouches, tubes, tapes and labels, Larsen said.

He added that the committee is looking for funding for the sterile packaging integrity committee, also referred to as the ‘hole’ group.’

“We’re trying to understand the sizes of holes in packages and what it would take to contaminate the contents of a sterile package depending on the size and shape of the hole,” said Larsen.

For more information about the committee, visit www.iopp.com.

Product Consolidation

In choosing a converting partner, OEMs these days are seeking specific competencies such as the ability to place multiple devices or a single device with accessories in one package. This helps to reduce the OEM’s costs and time to market.

Similarly, Larsen pointed out that more device manufacturers are looking for a pharmaceutical product to be packaged with a medical device. This, of course, raises the challenge for the converter.

He added that another trend is to eliminate some of the secondary packaging by having the primary packaging provide “not only the barrier that they are looking for but also being decorative enough to either be sold over the counter or in the doctor’s office without having to add more packaging.”

In addition to placing multiple devices in one package for final distribution, Sunderland said a number of OEMs want packaging for a portion of a kit that is then sent to a contract kit maker to complete.

Another service contract packagers are providing is setting up the packaging line next to the manufacturing line to eliminate some of the handling costs, said Fetzer. “You’ll have an overall reduced cycle time, which saves time and [provides] faster delivery to the customer [at a] reduced cost,” he pointed out.

One of the growing trends for packaging is combining several operations in-line. Above, packaging is combined with lamination and die cutting at Tapemark’s plant in West St. Paul, MN. Photo courtesy of Tapemark

Materials Selection

Packaging for the medical device industry these days is still focused on performance and costs. Tyvek remains the dominant substrate, especially in the U.S. for pouches and lids used to package medical devices such as pacemakers and orthopedic implants. Other popular materials are polypropylene, polyethylene terephthalate, polyester and PVC. For trays, aluminum and PETG are the preferred materials.

Mike Scholla, senior consultant for Wilmington, DE-based DuPont Medical Packaging, said Tyvek remains popular because of its strength and puncture resistance. In addition, it allows air and sterilization gases to pass through but blocks microbes from penetrating the package.

While Tyvek is the most popular material in the U.S., its share of the European market is about the same as paper. Several companies are currently developing a cheaper replacement for Tyvek because some packagers have opted for paper for cost reasons. Some of these new products feature similar qualities, including puncture resistance. One new product being marketed as a Tyvek replacement is Ovantex, which was developed by Grand Rapids, MI-based Oliver Medical.

“There are a lot of people in between who don’t want to pay the price of Tyvek but need that performance. [They] want to save a little money and still want the strength of paper. That’s the market that this product targets,” said Jeff Murak, director of sales and marketing for Oliver Medical.

However, DuPont has worked to reduce the cost of its product. A few years ago, the company released three different weights of Tyvek, Scholla said, to target various medical applications.

In other substrate developments, high demand for foil used in flexible pouching has caused a shortage, some packagers said. As a result, long lead times of up to 18 weeks can be expected.

In terms of the type of packaging used today, Leslie Love, vice president of sales and marketing for Feasterville, PA-based Tolas, said preference is shifting. A decade ago, a form, fill and seal process would have been the preferred choice, but today, “depending on the bulk of the package and the number of different items and the changeover [the products] are just staying in conventional pouches,” she said.

Although medical converters say their customers are becoming more demanding in their packaging requirements even as they pressure vendors for lower prices, the segment continues to attract investments. With margins higher than many consumer applications, medical packaging offers service providers a lucrative avenue for achieving profit and sales growth as long as they are willing to accommodate the litany of mandates OEMs are looking for these days.