Don’t Discard the Disposables Market
Excerpted from Modern Plastics Worldwide, May 2006 • Copyright © 2006 Canon Communications LLC

Matt Jamison, director of the plastics and packaging group at P&M Corporate Finance, sums up the future of the plastics medical disposables market quickly: “It’s fantastic.” A longer explanation, reaching the same conclusion, is found in a report his firm wrote and distributed among its customers last month. Jamison spoke with Modern Plastics Worldwide shortly before the report’s publication.

Plastics account for about one-third of all medical disposables, said Jamison, and their market share increases steadily. Plastics benefit from being lightweight and impervious to breakage; also, infection concerns with reusable products — often not made of plastics — have some pharmaceuticals firms shifting to disposable products. Demographics — an aging population with increasing medical needs in many countries — gives “a certain buoyancy to the entire medical market” and especially that for disposables, he said, as more healthcare is self-delivered at home and away from hospitals or doctors.

P&M Corporate Finance (Southfield, MI) is the investment banking arm of Plante & Moran, a management consulting firm. P&M divides the market for plastic medical disposables into four categories: injectable, catheters and tubing, inhalation/dry powder inhalers, and surgical/lab products. Though Jamison admits its difficult to put an exact figure on the market’s value, P&M reckons the plastics portion alone is worth $18 billion/yr.

Among good news for processors is that medical device OEMs are following the path already tread by carmakers, with outsourcing of manufacturing increasingly the rage. Currently about 40% of the market’s value stems from goods made by sub-suppliers to OEMs, but he said that figure could easily climb to 60% by 2011. Processors with an urge to grow also hold good cards as private equity firms are flush with cash and “they are increasingly focused on medical manufacturing,” he said. Mergers and acquisitions are becoming common, he said, adding, “We’re just at the tip of the iceberg in this space.”

Offshore competition (for North American processors) is a growing reality, Jamison said, especially for less complex products. But the more a lawsuit can cost if a product fails, the much greater likelihood that major pharmaceuticals firms (most of the majors are in North America and Western Europe) will rely on processors close to home.

Where is that home? Jamison said in North America the hotspots for plastics processing for this market remain the West Coast, especially California, Minneapolis, MN, and the area around Boston. But he says that as more processors, including many automotive parts processors in the Midwest, add medical parts processing to their quivers, the number of competitors in that region and others will increase.

Jamison says PVC, PP, and PS continue to account for the bulk of plastic medical disposables, but consumption of engineering thermoplastics in the market is surging and helping processors replace metals, glass and ceramics. Raw materials cost as a percentage of total product cost is much lower than for most plastics products, so that suppliers are keen to enter the market and be paid list price, he notes. MD