Leading medical devices exporter in Mexico's health sector experiences rapid growth

With the expansion of hospital infrastructure through the awarding of private-partnership contracts for hospitals and the growing tendency for public health providers to outsource procedures to private clinics, the market for medical devices in Mexico is buoyant. “Many in the health sector in Mexico have the perception that the investment priority is all about the pharmaceutical industry which is not the case,” Fernando Oliveros, vice-president and general manager of Medtronic, a device manufacturer, told OBG. “Some of the most pressing needs are in hospital equipment and medical devices, which play fundamental roles in simultaneously increasing treatment capacity and driving efficiency to expand access to care.”

Market

Many of the world’s leading manufacturers of medical apparatus – including Medtronic, Kimberly Clark, Siemens and Cardinal Health care – already have manufacturing bases in Mexico, many of them were established in the 1990s and 2000s. According to data from ProMéxico, the national investment agency, in 2015 there were 2393 economic units specialising in medical devices with industry clusters gathered around Mexico City, Jalisco and Guanajuato. The largest cluster, however, is located in Baja California, near the US border, which accounts for a third of total sector exports.

The industry provided jobs for 151,595 people in 2015, according to National Institute of Statistics and Geography data. Since 2009 the total value of medical devices produced in Mexico has nearly doubled from $8.57bn to $15.46bn in 2015. Over the same period exports – from over 600 exporter companies – grew from $5.14bn to $8.41bn, making Mexico Latin America’s leading exporter of medical devices and the largest supplier to the US, which absorbs over 90% of sector exports. It is also the world’s third largest exporter of tubular suture needles, the fourth exporter of medical, surgical and dental furniture and the sixth largest exporter globally of syringes.

Registration

The easing of regulatory approvals for medical devices has given a boost to the segment. In January 2015 the Federal Commission for the Protection from Sanitary Risk (Comisión Federal para la Protección contra Riesgos Sanitarios, COFEPRIS), the regulatory authority, excluded 573 products from classification as medical devices, thereby exempting them from the requirement to register with the agency before selling to the public.

Firms looking to register their devices in Mexico can follow two processes. Those with existing approvals from regulatory bodies in the US, Canada or Japan can apply via the equivalency review process, a streamlined system that requires the submission of less detailed technical information than the standard process and less paperwork. The standard review procedure must be followed for those devices without registrations in the aforementioned countries.

A registration dossier must be submitted containing technical information and testing results. For a fee, applications can be processed by third-party review, whereby a local company reviews and approves or declines the application. The third-party review process tends to take between three to six months compared to 12 to 18 months via the standard review process. Since February 2016 COFEPRIS has worked towards greater standardisation of third-party review with a goal to reduce approval times further.

A Place To Build

In addition to its streamlined registration process, Mexico also offers international medical device manufacturers the same benefits that other industries have taken advantage of in recent years. There is an ample supply of qualified labour, with 115,000 engineering, manufacturing and construction graduates entering the workforce each year and 777 educational programmes relating to biomedicine, according to ProMéxico.

According to KPMG’s “Competitive Alternatives 2016” report, medical devices are on average 21.2% cheaper to manufacture in the Mexico than in the US. Finally, the availability of key supply chain components, particularly electronics, is facilitated by the presence of manufacturers focussed around the country’s industry clusters. In June 2016 Taiwanese electronics firm Foxconn announced that it would expand its electronics manufacturing services to the medical devices market through its facility in Tijuana.

Investment

From 2005 to 2014 the Mexican medical devices segment attracted $1.7bn in foreign direct investment of which 88% originated from the US. The next largest investors over the period were Italy ($101m), Germany ($88m) and Spain ($28m). During this period 17 companies invested in 13 expansion projects and six new investments.

In April 2015 the US firm Medline completed its second expansion project at its facilities in the Oradel Industrial Park in Nuevo Laredo, where it has had an office since the 1980s and began manufacturing in 2002. The expansion added 20,903 sq metres of area and 800 direct jobs to the facility. In August 2016 Icelandic firm Össur, which produces non-invasive orthopaedic equipment announced it would spend $8m on the upgrade of its manufacturing plant in Tijuana, installing machinery to improve the precision of its products. CODAN, a German medical device manufacturer, also announced that it would build a new production plant in Tijuana for the development of transfusion and infusion systems for $9m.

Innovation

Mexico has successfully moved up the value chain from Class I devices, which include bandages, examination gloves and handheld instruments and from Class II devices such as wheelchairs and hypodermic needles and into Class III products, which are of substantial importance to preventing of human health such as pacemakers, defibrillators and HIV diagnostic tests. “In the health care sector new technologies are the key to maintaining progress in planning systems, day-to-day running of services,” Martin Ferrari, country manager for Drager, told OBG. “If the adequate systems are implemented, this can reduce costs by up to 30%. The objective should be a change of paradigm and a move towards of policy of integrated services which will undoubtedly save money and improve services.”

However, while most of the major medical devices have manufacturing facilities in Mexico, at present most research and development (R&D) of new technologies takes place in the US or Europe. That is slowly changing as companies across the world come to recognise the benefits of developing research and innovation centres on Mexican soil.

In October 2015 Flex, a cross-sector manufacturing company that is based out of Singapore, opened a medical device production facility and research and development centre in Tijuana. The facility employs approximately 2400 workers and provides devices to help diagnose a range of medical conditions.