What is the long-term impact of Covid-19 on the medtech sector?

Dr. Andreas Ostrowicki, managing director of BGS Beta-Gamma-Service in Germany, a company that specialises in the sterilisation of medical devices using beta and gamma rays, considers the long-term impact of Covid-19 on the medical technology sector.

The economy is suffering under the unprecedented cutbacks the coronavirus pandemic is causing. Weaknesses in existing structures and business models are revealing themselves in the crisis, and processes of change and reorientations are well underway, but the long-term impact on the medical technology sector remains unknown.

Which challenges is the medical technology sector currently struggling with during this crisis?

Due to closed borders, existing supply chains have decelerated, been interrupted, or have broken down entirely. The supply of critical medical consumables is stagnating, just as is the production of more complex medical devices in some cases. Existing dependencies on suppliers are blatantly obvious, above all in the form of extremely long response times due to great distances to the manufacturing country, and unfortunately, time and again in the form of questionable quality standards.

It is now becoming apparent that the relocation of productions to the Far East goes hand in hand with the loss of manufacturing expertise in our own country. As a result, the industry is thus less capable of acting the way it would like to.

In some cases, there have even been extreme price increases in the last weeks due to the shortage of products. The rise in prices, in turn, casts doubt on the savings achieved by outsourcing production.

Which trends do you expect in your sector as a result of the Covid-19 pandemic?

The Covid-19 pandemic is permanently changing our approach in dealing with critical suppliers. Security of supply and quality are again becoming more important than the price.

From my point of view, it is highly probable that there will be a fundamental structural change in the industrial production processes as a lesson learned from the coronavirus crisis.

In the future, I expect a relocation of numerous productions – not only for the healthcare sector - from the Far East back to Europe or back to one’s own country. Politicians are called upon here to assume responsibility, support the expansion of production capacities of the manufacturers concerned, and to make production in one’s own country more attractive. Overall, I believe the trend will go in the direction of a broader supplier structure – not only in terms of medical products.

What are your expectations on this topic for the European Union (EU) going forward?

In my opinion, the EU should assume the task of pursuing a strategic autonomy of supply with regards to critical products in the future. Together with upholding production expertise, this would also offer the possibility of a further technological optimisation of these products.

Another benefit of such ‘self-supply’ would be to retain the added value within the EU. There are definitely countries here too with low manufacturing costs that could profit from such industries. The advantages would most certainly be faster delivery times and an assured quality standard.

The aspect of supply security should, however, not only be seen from the viewpoint of the wealthy or large EU members that may be supplied preferentially, but also from the perspective of the smaller and less industrialised countries. These countries probably have significantly greater difficulties in procuring critical products.