The Irish Medical Technology Manufacturing Industry: Notes From an Expert
SA: What makes Ireland an important country in the medtech manufacturing sector in Europe and globally?
SK: As many as 17 of the top 25 medtech companies are based in Ireland, with Europe’s premier cluster of device companies based throughout the west and south west regions. Examples of global companies with substantial operations include Abbott, Bausch + Lomb, Boston Scientific, Covidien, Johnson & Johnson, Medtronic and Stryker. The sector employs over 25,000 people in 250 companies and generates sales in excess of €7.9 billion (US$10.7 billion) annually.
This continued investment has stimulated the emergence of an indigenous cluster of over 100 innovation-led companies along the entire medtech value chain—from R&D intensive technologies, to proprietary products, contract design and manufacturing, packaging and sterilisation. This has positioned Ireland as a world-class centre of excellence for medical devices.
SA: What are Ireland’s key strengths?
SK: Ireland’s strengths are as follows. We have a plentiful pool of talent—our predominantly young workforce is capable, adaptable, mobile and committed to achievement. The median population age is 35, the lowest in the EU. We have a good track record—over 1,000 multinational companies have already chosen Ireland as their strategic European base.
In terms of taxation Ireland’s corporation tax rate is 12.5%. And as far as technology is concerned, a significant level of state investment in R&D helps ensure the country stays at the forefront of innovation.
Ireland leads in the skills race with a higher percentage of third level graduates [graduates of higher education institutes like universities, colleges and technical institutes] than averages in the UK, the US and the OECD. An EIU [Economist Intelligence Unit] benchmarking competitiveness report ranks Dublin as the best city in the world for human capital. Ireland’s workforce is dynamic and flexible, we can work in multi-disciplinary teams and with different cultures.
Companies located in Ireland benefit from barrier-free access to over 500 million consumers in Europe, one of the largest markets in the world (approximately 23% of global GDP). English is the universal spoken language. The country is a highly developed multi-cultural community and a leading member of the Eurozone.
SA: Tell me about some key characteristics of Ireland’s industry as well as the growth areas.
SK: Three sectors are particularly prominent in Ireland—cardiovascular, orthopaedics and diagnostics. As much as 80 percent of global stent production is carried out in Ireland, with significant investment by Abbott, Boston Scientific, and Medtronic. The Galway Medical Devices Centre of Excellence (GMedTech) is actively focused on cardiovascular research in four key research topics: abdominal aortic aneurysms; cranial aneurysms; coronary artery disease and the venous system. Other areas of research include the human musculoskeletal system, dentistry, urology and reconstructive surgery.
In orthopaedics, Ireland hosts manufacturing facilities by industry leaders Stryker, DePuy, Zimmer and Tornier.
Ireland also boasts an incredibly strong services and contract research and manufacturing base. In fact, 50% of the companies located here are in the business to business space.
Europe’s favourable regulatory environment plays a key role in attracting foreign direct investment in medtech to the country. Medical technology companies based in Ireland operate to the highest international quality standards—for example European, US and Japanese regulations. Their needs are understood by regulation agencies who work closely with them in order to achieve trouble free start-ups. In addition, certification agencies in Ireland operate in accordance with European and global standard procedures.
SA: What are the main influences in medical technology?
SK: Ireland is one of the most favoured European destinations for foreign direct investment and, at 12.5%, has one of the most competitive corporate tax rate in the EU. Ireland also provides a tax credit of 25% of capital and revenue spend on qualifying R&D. In the most recent Budget, the Government has committed to further enhancements to make credit ever more attractive.
Compared with other geographical areas, the procedure for obtaining approval to commercialise new products is clearly defined in the EU member states. Europe has been and will very likely remain an important platform for clinical development and a key source of new medical technologies. In addition, Europe is the geographical area in which medical technology companies are generally first to launch new products and procedures. As such, EU member states benefit from a comparably early and fast adoption of new technologies.
SA: What challenges does Ireland face in terms of its medical device manufacturing sector?
SK:. The medical technology industry globally is evolving at an incredible pace. The challenges, which range from reimbursement and regulation to supply chain and finance, are already impacting enormously on the sector here in Ireland, presenting both opportunities and challenges. Understanding global drivers and adapting business models will be key to continued success here in Ireland.
SA: Tell me first about how the sector can better understand global drivers and adopt new business models.
SK: It is crucial that a focus is maintained on sustaining the jobs already in existence in manufacturing. There will always be a constant churn in employment as firms re-structure globalised operations and adapt to economic circumstance. Multiple strategies exist to offset market challenges and drive growth. These are underpinned by the need to develop cost effective products, manage operating costs and product pricing to offset margin pressures and improve operational capabilities. IMDA have a very active operational excellence working group which is supporting the development of capabilities and benchmarking across the sector.
Global drivers of change impact upon market growth and present opportunities for Ireland’s manufacturing firms. These drivers have been identified for the sector in the report published by IMDA and Deloitte Med Tech Ireland, Business Foresight Strategy published earlier this year. These include expanding patient base, growth in emerging markets, innovation to address unmet needs and emergence of medical apps. Growth in mergers and acquisitions and convergence of technology can also be key drivers.
SA: And what about pricing and reimbursement pressures?
SK: Pricing and reimbursement will continue to be a challenge as governments, private payers, patients and competitors exert pricing pressures across different product categories. Furthermore, there are reimbursement and taxation challenges elsewhere, for example the US medical device tax and more stringent EU and US product approval and safety oversight. We expect medical device manufacturers to be faced with constrained sales margins but this will affect companies all over the world.
SA: And negative press?
SK: The medical devices and diagnostic industry has seen a number of instances of negative publicity in recent times. European patients have benefitted from a long track record of safe and effective products, despite the recent aberration involving fraudulently altered breast implants. IMDA along with our industry colleagues in Europe have long called for a strengthening and enhancement of the regulatory environment across Europe and we welcome the majority of measures outlined in the Commission’s proposals to the MDD and IVD Directives adopted by the European Parliament on October 22, 2013 (see page 8), as certain aspects of the current system need meaningful enhancement to improve safety, reflect changed expectations and technological advances.
Whilst shorter term adoption of legislative proposals is desirable, it is critical that the final agreement strikes the appropriate balance between maintaining the internationally recognised strengths of the current European regulatory framework whilst addressing aspects of the current system that need enhancement. At the end of the day everyone wants the same result—safe and effective devices to treat patients and the ability to innovate to find new and better methods and devices to treat future patients. The Parliament vote now sets the scene for meaningful and productive discussions to take place between the Parliament, Commission and Council to allow Europe to stay at the forefront of medical device technology.
SA: Tell me about Ireland’s relationship with the medical device industry in the USA?
SK: Now, Ireland is one of the top destinations in Europe for US FDI and benefits in the form of over 115,000 jobs. The new EU-US relationship is the biggest in the world with around €2 billion of goods and services traded every day between the two.
The possible implications for Ireland are fairly clear. With one of the strongest investment and trade relationships with the US, Ireland and companies in Ireland are likely to be benefit hugely from increased opportunities and ease of investment, easier regulatory recognition for pharmaceutical and medical device products and new public procurement opportunities.
Ultimately, we would expect to see an increase in the volume of trade in goods and services with the EU, as well as significant convergence of a number of standards.
Last year nearly half of all medtech exports from Ireland were US bound. As many as 17 of the world’s top 25 medtech companies are located in Ireland, many of which are US corporations.
Our government agencies have also developed very strong linkages with a number of world renowned hospitals within the US including the Cleveland Clinic—a non-profit multispecialty academic medical centre—rated as one of the top four hospitals in the USA and located in Cleveland, Ohio.
SA: Like most countries Ireland was a casualty of the credit crisis and required a bailout to help its economy recover. Where are things up to?
SK: Ireland is recovering from a very deep downturn. The economy returned to growth in 2011 for the first time in four years. Relatively strong growth is expected over the medium-term and the economy’s underlying strengths remain intact, with gains in competitiveness. The EU/IMF bailout programme is on track and return to markets is underway.
SA: Sounds promising. I know it’s been a tough few years. What have been the biggest gains?
SK: Ireland’s cost competitiveness has achieved some hard won gains during the crisis. The European Commission has noted that Ireland has recorded a rather steep fall in unit labour costs
(ULC) and that by 2014 Irish nominal unit labour costs will have fallen by almost 13% from the 2008 peak. This is impressive compared to much smaller falls in Spain (-6.4%) and Portugal (-4.1%) and rising nominal unit labour costs in Italy (10.7%) and Germany (12.7%).
There has been a significant policy response, with public support. We are on track to correct the excessive deficit by 2015. There has been a determined approach to banking issues, a large improvement in competitiveness and good government employment.
SA: What’s the outlook for the future?
SK: The World Bank compiles an annual global ranking of the ease with which companies can do business in a country. In 2012 Ireland ranked 15th out of 185 countries and 5th in the EU. Ireland was ranked in the top ten in terms of the ease of starting a business, paying taxes, protecting investors and resolving insolvency. In comparison Germany was placed 21st while all other programme countries were place 50th or substantially above. These gains have been reflected in growing exports, particularly in high tech sectors, a growing share of world trade, and Ireland’s emergence from the bailout process later this year.
SA: I’m told there have been some unexpected positive benefits?
SK: From a medtech perspective, manufactures have been forced to increase comptitiveness and have stripped out inefficiencies. Many are now concentrating their resources on core technologies—a lot are now looking to outsource technologies which are peripheral—and this represents a very strong opportunity for design and contract manufacturers. These companies are becoming an increasingly important part of the value stream, heightening their importance.
SA: Tell me about the steps the government has taken to help the industry.
SK: The Irish government is committed to enhancing manufacturing competitiveness. It has established a cross sectorial manufacturing forum with representatives from many stakeholders to work collaboratively to develop the infrastructure, competencies and skillsets here.
There is a strong future for manufacturing in Ireland, which has been recognised by our companies who have invested heavily here and by our government agencies who have identified it as a strategic area for the country.
The Irish government is currently addressing cost competitiveness, but recognises that this alone will not be sufficient to ensure Ireland’s manufacturing sector remains to the forefront internationally. The Forfás Manufacturing 2020 report identifies a need for a national step change initiative, which will assist companies at the firm level, specific to its stage of development and scale to:
- Enhance productivity and competitiveness—to embrace lean principles, sustainable (green) models and to embed ICT;
- Deepen engagement in innovation;
- To internationalise—to connect to the customer and expand into new markets; and
- Stimulate collaboration, peer learning and new ways of working.
The report also identifies the need to work towards promoting manufacturing as a strong career prospect and have sanctioned a number of programmes to promote the uptake of Science, Technology, Engineering and Maths (STEM) in our primary and secondary education system.
A number of med tech companies are partners in the government funded Irish Centre for Manufacturing Research (ICMR), a consortium of leading Irish manufacturers collaborating to conduct embedded research and innovation. The industry-led research agenda is designed to deliver the breakthrough solutions required to maintain partners’ competitive edge.
More recently, the government has also recognised manufacturing competitiveness as a key research theme under its recent Science Foundation Ireland Research Centres Call to support engineering technologies for manufacturing and pilot production. SFI Research Centres link scientists and engineers in partnerships across academia and industry to address crucial research questions, foster the development of new and existing Irish-based technology companies, attract industry that could make an important contribution to Ireland and its economy, and expand educational and career opportunities in Ireland in science and engineering.
SA: Tell me about R&D. Which institutions should readers be aware of?
SK: The Irish government has committed to an €8.2 billion investment in science and technology research up until 2013, funding centres of excellence like the €15 million Regenerative Medicine Institute (REMEDI), a world-class biomedical research centre focusing on gene therapy and stem cell research, and the €23 million Biomedical Diagnostics Institute (BDI), a multidisciplinary research institute focused on the development of next generation biomedical diagnostic devices.
With a network of over 200 industry partners and customers worldwide, the Tyndall National Institute, a leading research centre in information and communications technology, generates around €30 million income each year. As much as 85% of this total is from competitively won contracts nationally and internationally. Tyndall is also a lead partner in European research programmes in its core areas of ICT, communications, energy, health and the environment worth €44 millionn, including €6 millionn accruing to industry in Ireland (from Framework 7).
Over the past eight years CRANN, based at Trinity College Dublin, has established a track record of research excellence in both nanoscience and materials science. This has placed Ireland on the map internationally and Ireland’s ranking of 6th and 8th in the world for nanotechnology and materials respectively are due to CRANN. Operating as an open access mode, this infrastructure provides a platform for large-scale collaborative programmes with industry.
SA: A key strength of the industry on the US East Coast is a strong interface between research institutions, manufacturers and clinicians. Is there a similar dynamic in Ireland?
SK: For this sector, engagement between industry and the hospital research system is a fundamental part of the innovation process. Especially important is the role of clinicians as ‘in-market’ experts that can help to identify real world issues and opportunities, as is the involvement of patients in well managed clinical investigation.
The clinical research infrastructure in Ireland has transformed over the past ten years and we have seen an increase in the number of clinical studies being carried out that required competent authority approval in Ireland. A number of key measures taken by government to drive the way towards a connected, responsive and transparent clinical research infrastructure in Ireland include:
- The establishment of seven clinical research facilities as key loci for expertise and capacity in Irish teaching hospitals;
- The drive to establish clinical networks in strategic therapeutic disease areas. The networks provide a platform where relevant stakeholders can access and utilise the infrastructure, expertise and culture required to optimally support patient-focused research studies in strategic disease areas. An example includes the National Cardiovascular and Stroke Research Network (NCSRN);
- The establishment of the Irish Clinical Research Infrastructure Network and a dedicated Clinical Trial Liaison Officer to provide support to researchers, SMEs and multinational companies who want to engage with the clinical research community in order to conduct their clinical trial here; and
- The establishment of a Healthcare Innovation Hub to bring together healthcare companies, the health system and academia, in order to help such companies move faster on developing products and services.
SA: Tell me more about the Healthcare Innovation Hub.
SK: The project is based on international models—such as the North Carolina Research Triangle in the USA. The idea is to help healthcare companies deliver commercial products and services more quickly by giving them access to Ireland’s health service in order to test products in a real-life environment. The project will allow the health service to become more efficient by enabling the Health Service Executive and hospitals to engage and participate with companies that are creating solutions. This is a national collaborative venture between Enterprise Ireland, IDA Ireland, Science Foundation Ireland, the HSE, Cork Institute of Technology and University College Cork. The hub is being driven by the Department of Jobs, Enterprise and Innovation and the Department of Health.