Clusters and partnerships:

the integration of the medtech industry

Unlike pharma, the medtech industry depends on the collaboration of smaller specialist companies. Michelle Dalton of Medilink WM looks at how the industry’s stars can form chains and galaxies to light up the healthcare sky.

The pharmaceutical industry is dominated by big business, in which there are only a handful of key global players. And often the needs of pharmaceutical shareholders, rather than improving human health, can appear to be the driving force as earnings are based on the patenting of new drugs.
A very different picture can be found in the UK medical technologies sector. While there are several big name companies with a major stake in the market – notably Smith & Nephew, Huntleigh Healthcare and Stryker – the industry is in fact ‘run’ by the higher percentage of small specialist companies working very hard (albeit often independently) to deliver their product to end users.
The sheer number of SME companies (Small to Medium Enterprise, characterised by less than 250 employees and £25 million in turnover) balances out the purchasing strength of the larger players, creating a more even playing field through the process of clustering. Medilink UK, representing SME medical clusters in England, Scotland, Wales and Northern Ireland, has a membership of over 1,200 companies with a significant proportion of their turnover in medtech.
The UK’s public organisations – UK Trade and Investment, regional development agencies and even local city councils – have realised the value of clustering, and are using this technique to promote the strengths of the UK sector overseas.

Partnering opportunities created by the NHS

The NHS Purchasing & Supply Agency (PASA) currently negotiates around 3,000 contracts with 1,700 suppliers, worth in the region of £4 billion a year. NHS procurement involves introducing competition to certain markets, identifying new products and suppliers, monitoring quality, ensuring continuity of supply and negotiating the best possible terms, which include the use of national contracts, collaborative hubs and regional purchasing.
To achieve its purchasing aims, the NHS needs to ensure that markets remain attractive to suppliers by effectively managing the supplier base. A large proportion of NHS business is conducted with SMEs. The NHS has made public its commitment to providing help and support to small and new businesses in order to encourage competition and ensure that the marketplace is accessible to all suppliers. Conversely, and increasingly, major NHS procurements are conducted through confederations made up of NHS Trusts. These confederations ‘club together’ for mutual benefit, pooling their information, expertise and resources – all designed to achieve purchasing savings and reduce costs.
So we have a situation in which a large number of smaller medtech companies are selling directly to the NHS, and being encouraged to do so – but at the same time, the NHS is trying to drive down prices through its current cost-saving measures. This puts the smaller companies at much greater risk than the multinationals, which are better able to absorb the loss of revenue through other income streams.
Because of the increased financial pressure on NHS purchasing and procurement, there is a greater need for partnering of SMEs in order to provide cost-effective solutions to the purchasing and procurement community. This should also lead to greater opportunities for SMEs to become more competitive with large multinationals and their subsidiaries in terms of quality, innovation, price and service. This situation has created a role for a marketing-led organisation with a branded licence – such as Medilink UK – to team up with manufacturers of medical products in order to supply directly to the NHS.

Bring in your friends from the outside

The majority of the funding available to companies in the R&D arena is intended to encourage collaborative partnering with universities: businesses working with academics to develop new products and services. This is the goal of the Knowledge Transfer Networks (KTN) and the Health Technology Portal, both of which have open calls for papers for companies working within the medical sector.
However, the need of healthcare professionals for innovative products and disruptive technologies has led to partnering and subcontracting arrangements that open up the supply to companies not currently in the medical and healthcare sector. The cluster model of collaborative interaction between a few or many companies has led to integration of technology from other industries into devices, sharing of information and expertise, and blurring of the lines between medtech, biotech and pharma in order to offer the NHS the best possible access to the best possible products. Keeping in mind the sensitive nature of these arrangements, some examples can be broadly described as:

• drug-eluting stents: a technology company has integrated expertise from a metal manufacturer
• ointment-impregnated pyjamas: textiles, technology and marketing companies have integrated

Subcontracting has led to many traditional manufacturers breaking into this market, and lending their expertise to product designers in order to deliver a cutting-edge product:

• a bed hoist company working with a specialist anti-microbial coatings and materials company to produce a mechanical device designed not to cross-infect (as long as the nurses wash their hands!)
• a metal component manufacturer and designer working with a drug delivery company to create aesthetically pleasing drug delivery devices
• a textiles company working with a materials manufacturer to develop special glue for wound dressings.

  “Our involvement with Medilink West Midlands over the last few years has definitely raised Clamason’s profile and accelerated our marketing efforts through the navigational help with government bodies, securing funding and tradeshow assistance they have provided us. We’re proof that active clusters work for business.”

Links for your company

Medilinks are membership organisations that work actively to increase the viability of the sector by giving local companies a competitive edge through direct business support, relevant commercial opportunities and personal introductions to prospective clients.
Medilinks operate regionally and feed into a national cluster that has developed immense credibility, and is now regarded as the voice of the medical technology SME community.
Medilink UK brings together regional support organisations in Scotland, Wales, Northern Ireland and most of the regions within England (there are still some regions without a formal support organisation).

A cluster in action

Recent research conducted among the 500 companies that make up the West Midlands medtech cluster shows that the medical and healthcare companies in the West Midlands are nearly all SMEs, with only a few companies having more than 250 employees.
This research also shows that in general, these companies are looking ahead: over the next five years, they expect to develop new products or services and enter new markets. The new markets most often cited are in the UK, Europe and the USA.
In a recent phone survey, 110 of these companies stressed the importance of the West Midlands cluster to the development of their business. They identified three determining characteristics of a beneficial cluster:
1. Who drives it and encourages
participation and opportunities.
2. Who actively participates.
3. Opportunities for networking, information sharing and brainstorming.
“Clustering works when companies actively participate and viable commercial opportunities arise,” notes Philip Salt, Chief Executive of Salts Healthcare. “But a lot has to do with who is encouraging the activity and their ability to talk with companies and see natural synergies. In the West Midlands we are lucky because our cluster is extremely active, spans the entire supply chain from materials and design companies right through to end products and the NHS, and real business opportunities come out of it.”

Working together

Medilink West Midlands launched a membership service in May 2003 to harness the strength of this cluster and use it to create additional and wider-reaching commercial opportunities. For example, it has:

• Provided a subsidised trade show stand at the internally-acclaimed Medica and ComPaMed trade shows and the local MDT show, generating sales leads for companies such as Albion Spring, AK Industries, Clamason and MCS Medical.
• Given introductions to potential suppliers of DNA analysis for key forensic services.
• Set up a one-to-one meeting with the Chinese manufacturer and distributor KDL for Kimal Manufacturing, resulting in signed contracts.
• Forwarded a distribution opportunity to a local company, which has secured an exclusive distribution contract for contactless soap dispensers.
• Encouraged the local manufacture of a previously imported foot bath: facilitated talks and identified an appropriate West Midlands manufacturer, who now has an exclusive contract.
• Assisted with the securing of product development funds for SDD Seating Technology and Intelligent Medical Microsystems.

This is just a brief list of regional and national successes – enough to show you that being involved in a local medtech cluster that encourages partnerships and opportunities is a necessary element in your marketing and sales plan.

Michelle Dalton is the Communications Director of Medilink West Midlands.