Manufacturing Devices In The Rollercoaster UK Market

Manufacturing Devices In The Rollercoaster UK Market

This article was published in December 2023
by Medtech Insight as part of its 2024 Outlook content at
Interview by Ashley Yeo @ashleypyeo

A scale-up strategy is the missing link in the UK Manufacturing Devices industry, claims business research organization CPI. Own brand and contract medical manufacturer and packaging company Pennine Healthcare, and longstanding medical device CDMO Renfrew Group International, give their take on the environment for manufacturers and the opportunities for strengthening the industry base.

A report issued in fall 2023 by UK research organization CPI was the latest initiative to highlight the need for better long-term support for medtech industry manufacturing. It proposes a strategy for scale-up.

Its focus is the UK, and its recommendations are designed to galvanize the national system into supportive decision-making. But the principles can be applied to the established medical devices industry, which is dominated by small and medium-sized enterprises (SMEs), in any geography.

The report, Challenges and Opportunities for UK HealthTech Manufacturing Scale-Up, is a follow up to an Innovate UK-commissioned survey, published in late winter 2022-23 under the Health Technology Regulatory and Innovation Programme.

Medtech regulation was a major theme of that first report, which, like the follow up, had input from the Association of British HealthTech Industries (ABHI). It engaged with 350 stakeholders, representing around 8% of the 4,353 UK medtech businesses. It found that SMEs need a simple regulatory roadmap.

The later report focused on the challenges of scale-up, and sampled the experiences of around 100 manufacturers and other stakeholders over a two-month period.

The devices manufacturing ecosystem, including CMMOs and CMOs, has welcomed the report while observing that its focus could be widened.

Pennine Healthcareis a Derby, UK-based commercial contract medical manufacturer and packaging company that exports to some 50 countries. It is a market authorization holder for a range of devices.

The company’s CEO is Graeme Cameron, formerly a director at B. Braun Medical Inc.. He said: “The report identifies the challenges we talk about all the time. There’s a workforce and skills gap for all manufacturers, and we see resilience as a significant issue.”

In addition, costs have risen to stressful levels. “Within healthcare we have seen a 40%+ inflationary rise at product input level in the past 24 months, including compounds, cardboard boxes and packaging,” Cameron continued.

“We must add to that the rise in energy costs, the cost to ensure environmental sustainability and the plastic tax cost,” he said. Companies will also assume a further rise in costs when the UK living wage is increased in 2024. These cost increases are hard to pass on in a taxpayer-funded health system. “There have been some ups and downs in the UK – it’s been a real rollercoaster market,” Cameron said.

CPI’s report on the UK manufacturing ecosystem represents an effort to understand, document and highlight the key barriers faced by medical device SMEs in particular, which account for 85% of the industry base.

A better tax regime would help [UK innovators] compete with overseas competitors” – Mike Phillips

The study, overseen by CPI director of market strategy Alex Cole, is a sober analysis of the potential for and weaknesses surrounding medtech manufacturing scale up in the UK.

The research pointed to a missing connection between initial device concept and manufacturing, which, the report said, was stifling innovators from successfully upscaling novel healthtech ideas into high-value businesses and applications.

It further highlighted poor regulatory knowledge among SMEs, low access to proof of concept or translational funding, a lack of mid-volume manufacturing capabilities, a risk-aversiveness and/or short-termism in the private sector towards innovation, low awareness of national innovation system support and a lack of incentives within academia to commercialize research.

Mike Phillips, design development director at innovation and design consultancy and CDMO Renfrew Group International, agreed that many of the report’s findings are true, and hoped that useful conclusions would be drawn. But a big question for him is: How funding can be directed towards the private sector to enable it to improve what is needed?

“The industry loses a lot in translation before we get to higher-volume production and commercial products,” he said. “Britain has great strengths at the innovation end, but more support for the private sector is needed – and perhaps a better tax regime to help it compete with overseas competitors.”

Phillips suggested more funding should be put towards the discovery of market opportunities and meeting unmet needs at the “problem end.” He observed that the AHSNs, now 10 years old, were conceived to fund and prompt innovation, but their focus tends to major on adoption. Meanwhile, the UK’s Catapult Centres do not have much crossover with industrial strategy.

A Long-Term HealthTech Strategy Mooted

The main recommendation of the report is that the UK government develops a future “long-term healthtech strategy” which includes reference to manufacturing scale up. The issue was debated at the 2023 annual conference of the ABHI, where it was suggested that a future strategy could for example be an augmentation of the current Life Sciences Vision or the Medical Technology Strategy, being developed by Medtech Directorate.

Respondents to the CPI survey initiative observed that the ecosystem of manufacturers in the UK is fragmented and disjointed. Technology developers (TDs) find it difficult to identify suitable companies to engage with, and often tend to look internationally. Support for companies navigating the ecosystem does exist, but this too is criticized for being too fragmented and/or regionalized.

“The UK manufacturing scale-up ecosystem together with support structures needs to be mobilized and linked through unifying interventions, to enable TDs to find the stakeholders they need to progress efficiently and at pace,” the report stated.

It further said:

  • TDs need strong and specific support with funding and investment as they move closer to market; Grant and finance options, such as VC and PE, do not support TDs throughout the whole product development lifecycle;
  • The ecosystem must maximize public: private financing partnerships to reduce risk. The industry faces unusual cashflow constraints and time-delays in the scale-up phase pre-market due to regulatory requirements;
  • Skill shortages in engineering, software and other technical aspects are impacting manufacturing scaleup. Industry and training providers should engage to help develop the required skills and courses; and Upskilling in scale-up manufacturing requirements is needed.

CPI’s research also identified significant infrastructure capability and capacity gaps, particularly for clean rooms, wet and dry lab space and high-quality industrial units. Existing facilities are commonly oversubscribed and not always available under the terms required (e.g., short-term lets) for scale-up use, it said.

However, Pennine’s Cameron observed − in view of “resilience” having become such a significant issue post-COVID – that a number of manufacturers have cleanroom space that could be better utilized. “We are building more opportunities within that space,” he said, adding that the government could do more to support UK manufacturing in ways that are needed.

Pennine, an employee-owned trust, has its own cleanrooms on a 150,000sq foot manufacturing site in Derby. The company, marking 60 years as a medical device company in 2023, distributes to some 50 countries.

Cameron sees as vital more central funding support for the UK manufacturing sector to investment in machinery. He said: “For us, there is very clear business case to invest in automation that would allow us to compete better with the Far East.” But finding channels to get the support and investment needed is at present a challenge, he admitted.

Nevertheless, Pennine has strong roots in the UK and remains supportive of the National Health Service and its needs, even if that position comes with an economic cost. “The company will often support NHS needs even to the detriment of ourselves, and we find we can’t simply cancel NHS orders or pull products if they’re not economically viable as patients’ lives would be placed a risk.”

Complying with the stricter regulatory requirements of the EU Medical Device Regulation is a different matter. Here, Pennine spent half a million pounds to move its entire portfolio from the former EU directive to the new more stringent regulation in a timely manner. But the steep rise in the cost of compliance meant it had to drop six product portfolios. Many other organizations have had to do likewise, Cameron notes.

He believes tax credits would be a good option in an ecosystem that could feed off such opportunities. Mechanisms like grants to enable investment in the equipment and automation would help to overcome some of the current workforce challenges.

In the global market, UK manufacturers are coming up against competitors whose cost and tax bases are often much lower in their own geographies.

Renfrew’s Phillips voices a similar position about the need for more support for UK device innovators. One section of the CPI report notes that SMEs want more support for scale-up and manufacturing for their UK operations. There is a lack of options to do this, but support for reshoring/onshoring would be one avenue of approach.

Phillips says the UK should spend more on the innovation end of the ecosystem and ensure the resulting solutions have orders placed for them. “Pre-commercial procurement and procurement of innovation are the crux − it’s probably the piece that’s missing in the UK,” he said. “The UK should pay for the innovations to be adopted. As it stands, we’re not allowing our potential to be developed.”

Renfrew Group International is accredited to ISO 13485:2016 and ISO 9001:2015. It does medical research models, prototypes and simulations with user groups and gathers evidence from perception studies or multicentered trials to evaluate stakeholder interactions.

We do need to think about how we can do things differently in the UK” – Graeme Cameron

The company has a studio lab complex and factory at Leicester headquarters. In production terms, it is geared towards flexible manufacturing of niche products (up to 5,000 units) to support design and contract manufacturing before products go to high-volume manufacturing.

R&D tax credits would be a useful vehicle, Phillips reiterated, but for Renfrew, the UK’s current efforts to support innovation and manufacturing are not fully addressing the problem. The CPI report is documenting but not addressing the problems that SMEs, in particular, are experiencing.

Cameron feels that adoption is one of the most pressing topics for medtechs. “We all have to work together to ensure health is an asset,” he said, “but we have to have a reasonable commercial return to do that.”

He added: “We do need to think about how we can do things differently in the UK,” and raised ideas around procuring for innovation and using risk- and gain-sharing models and pay-for-performance, rather than sticking to a baseline of lowest cost.