Will the Medtech Industry Change Under A Biden Presidency?

While COVID-19 has hogged the spotlight, other topics could turn out to be more contentious in the relationship between Mexico and the US. One of them is President-elect Joe Biden’s plan to move production of medical equipment back to the US to boost the domestic supply chain. The campaign promises to do so influenced the polls, as four of the top seven US medtech hubs (California, Massachusetts, Minnesota and Washington) turned blue during the 2020 elections.

According to Biden’s website, “while medical supplies and equipment are our most pressing and urgent needs, US supply chain risks are not limited to these items. The US needs to close supply chain vulnerabilities across a range of critical products on which the US is dangerously dependent on foreign suppliers.”

Mexico plays a key role in the medical device industry as the eighth-largest exporter of medical devices. The country is the top exporter in Latin America and the largest supplier to the US. In 2017, Mexico exported US$9.4 billion in medical devices, most of them to the US, followed by Italy, Germany and France. That same year, Mexico’s medical device sector received US$161 million in direct foreign investment. The sector has been labeled a promoter of well-being and social progress by AMID.

Mexico is considered a hub for medical devices manufacturing. Its link with the US has played a significant role in the commercial relations of both countries and in the economic prosperity of the Mexican northern border as Tijuana, Baja California, hosts production plants of 60 of the largest medical devices’ companies, including Smiths, Tyco Healthcare, Cardinal Health and Medtronic.

USMCA negotiations presented a good opportunity to strengthen exports as Mexico’s competitiveness lays on its manufacturing costs, which are around a 25 percent lower than in the US and smaller than those of BRIC countries. Moreover, Mexico has many federal programs for the sector, including the Refund of Import Taxes to Exporters (Drawback), Sector Promotion Programs (PROSEC) and the Manufacturing Industry, Maquiladora and Export Services (IMMEX) program, as well as associations and chambers like CANACINTRA, CANIFARMA, ANAFAM and AMIIF. Seven out of 10 exported medical devices are surgical, dental or veterinary instruments and devices. The remainder are orthopedic, mechanotherapy, for respiratory therapy and massage articles and devices.

It is yet early to know how Biden’s campaign promise could impact the Mexico’s medical devices production but he has suggested some “critical products” would be key to the US supply chains although he has not specified which are those.