Medical Device Link.

Originally Published EMDM November/December 2001

INDUSTRY NEWS

Securing a Future for Ireland’s Device Industry

Members of government and industry met at MEDTEC Ireland to debate how medical device OEMS can help keep the Celtic tiger roaring amid economic uncertainties

Norbert Sparrow

An Tánaiste and Minister of Enterprise, Trade, and Employment Mary Harney participated in a roundtable discussion with members of industry and development agencies at MEDTEC Ireland.

What challenges face the medical device industry in Ireland in the years ahead? How profoundly will the worldwide economic downturn, further aggravated by the events of 11 September, affect Irish device OEMs? Is the shift in focus from commodity manufacturing to R&D having a real impact on industry? These were some of the points addressed during a roundtable discussion that brought together An Tánaiste and Minister of Enterprise, Trade, and Employment Mary Harney with industry executives and representatives of business development agencies. The consensus at the invitation-only event was that the device industry had a solid footing within Ireland, but that an emphasis on R&D activities is vital to building for the future. Organized by Canon Communications llc, the exchange was held on 19 September during the MEDTEC Ireland Regional Conference and Tabletop Exposition in Galway.

“So far—touch wood—we have been doing very well,” said Martin Cronin, director of operations at Investment and Development Agency Ireland. “The main reason is that six of the top 10 medical device companies in the world have substantial operations here.” Ireland has reaped significant rewards from the acquisitions and growth strategies pursued by those multinationals, he noted.

In turn, their subsuppliers located in Ireland have benefited as well, according to Dick Lenehan of Enterprise Ireland (Dublin). “We surveyed a number of our companies at the beginning of the year and they were projecting 20 to 25% growth for the current year. We have not yet seen any signs of a turndown from those types of companies,” he added. “That probably reflects the healthcare sector itself, which is more recession-proof than other elements within the economy.”

Engineering Growth

Although the healthcare sector remains vibrant, its future growth in Ireland will take a slightly different tack, according to Bernard Collins, chairman of the Irish Medical Devices Association (Dublin) and a vice president at Boston Scientific. “Companies originally came here for reasons of employee availability, costs, and taxes,” said Collins. “And while taxes are still an issue, we are now a medium-cost rather than low-cost [labour market].” Increased labour costs have been offset by the emergence of additional capabilities in recent years, noted Collins, who cited the increased availability of experienced senior management personnel and the proven ability of established companies to adopt new technologies while retaining flexibility and responsiveness to service. “The medical device sector will continue to grow in Ireland,” he stressed, “but probably in a different direction than the past.” That direction, suggested Tánaiste Harney, will involve a greater reliance on engineering acumen than has been the case in the past.

“Of the 76 foreign [device] companies in Ireland, about 35 have an R&D function. The challenge for us is to increase that amount,” said Harney. “We need to have a more integrated sector [that encompasses] R&D, customer support, and technical backup, not just manufacturing.”

Although labour costs are rising, Harney pointed out that several factors that have attracted device companies to Ireland in the past remain relevant today. “We have the lowest corporate tax rate in all of Europe,” she stressed, “and we guarantee that it will not rise above 12.5% before 2025. We also have the capacity within our education system to produce the highly skilled [workforce] that is required by this sector. And the small size of the country means that there is a very good relationship among the main players in industry, government, and education,” she added.

Economic Aftershocks

The aftermath of the terrorist attacks on the United States does create economic uncertainties, acknowledged Harney. “Anything that affects confidence will lead to uncertainty, which will delay decision making. I don’t envisage this is a time when people will be making big strategic decisions about the future,” she said. Ireland has benefited immensely from free trade and a globalized economy, Harney noted, but that can be a double-edged sword. “We trade about 150 to 160% of our gross national product, so we’re very dependent on world conditions,” she confided.

“There are concerns in that we are an island and part of the supply chain on the periphery of Europe,” concurred Tom McCabe, vice president and managing director at Boston Scientific (Galway, Ireland). “We don’t know what actions are going to be taken in the next few weeks, months, or years, and my concerns from a business perspective revolve around the changes we might see in transportation, inventory supply management, and materials supply,” said McCabe. “Our dependency is on the United States and [other] overseas [markets]. In the last couple of days, the supply chain was severely interrupted by the events,” he noted. “I hope there won’t be any further interruptions in the supply chain, because that could damage us.”

Notwithstanding global circumstances over which Ireland has little control, industry, political leaders, and development agencies are joining forces to encourage home-based R&D activities, which they see as central to Ireland’s device industry.

“If the medical device industry is to progress in Ireland, we need to move very quickly in that direction,” stressed Collins. That may be true, but don’t minimize the obstacles, cautioned McCabe. Foremost among those challenges is the creation of a talent pool.

The Science Track

“We need to find a way to attract people like those who are spearheading innovation on the West Coast of the United States,” said McCabe, “and it’s difficult to get them to come and live in Ireland.” The alternative, he suggested, is to foster an appropriate mindset among the Irish population at a very early stage by getting children involved in the sciences.

“Science and medical technology are intermeshed, and we need to create a partnership between industry, medicine, and the government to enable us to progress. Boston Scientific has a big R&D presence in Ireland that has grown over the last several years,” he noted, “and [the Irish facility] plays a pivotal role in the company’s pipeline of products.” Many of the people employed by Boston Scientific are products of the Irish education system, noted McCabe. “We have a very solid R&D community developing products and processes, so that is very real to us, but I do think we need to make it easier to achieve those results,” he added.

One avenue to consider, according to McCabe, involves incentives that will attract the right calibre of people to come to Ireland. “Our approach to incentivizing scientists and senior executives is different from the United States and other well-developed countries, and that is something we need to look at.”

While much remains to be done, Cronin commented that the growth of R&D among Ireland-based companies is a very real phenomenon. He cited several subsuppliers who have visited Ireland in view of setting up manufacturing operations and who, upon concluding their visit, expressed an interest in setting up an engineering division as well. “They see engineering groups at their customer companies here, and they realize that they will have to deal with them,” said Cronin.

And that is good news for the Irish device industry. Tánaiste Harney put the stakes in stark relief during the roundtable discussion. “We won’t be able to compete with low-cost economies. We can compete in terms of productivity, but not in terms of basic manufacturing activities,” she said. “We must—to use the cliché—move up the value chain and get more companies involved in product development and R&D.”

Copyright ©2001 European Medical Device Manufacturer