Subcontractors fuel expansion of medical technology in Costa Rica

Medical device manufacturing is flourishing in this Central American country, spurred by a multitude of incentives.

This year, there is a wave of expansion of contract manufacturers of medical technology in Costa Rica.

Medtech OEMs have made the Central American company a manufacturing hub since the 1990s. Major companies operating there are Abbott, Bayer, Boston Scientific, Cardinal Health, Edwards Lifesciences, Hologic, Medtronic, Philips, Smith + Nephew and Wright Medical. Eight of them are among Costa Rica’s top 20 exporters, accounting for nearly $ 2.7 million in medical device exports in 2019, or 73% of the total.

Costa Rica’s Medtech OEMs want their suppliers to be nearby, making the Central American country a magnet for subcontractors. The addition of medtech sterilization facilities in Costa Rica – BeamOne (now Steris) in 2009 and Sterigenics in 2013 – also helped stimulate contract manufacturing. Before that, manufacturers had to ship products to the United States for sterilization, according to Pilar Madrigal, director of investment advice for CINDÉ, Costa Rica’s investment promotion agency.

Why Costa Rica?

The Costa Rican government has worked hard to attract and retain medical technology companies, which value its political and economic stability, tax incentives, and highly skilled workforce. The government abolished its army in 1948 following a civil war, turning its attention to developing political stability and promoting education, environmental protection, public health and human rights. national and cultural preservation.

The absence of an army makes it possible each year to fund all the public universities in the country, explained Madrigal. Medical design and subcontracting in a recent interview.

Costa Rica offers tax incentives to foreign manufacturers under the Free Trade Area regime, a law that exempts companies from a high percentage of income taxes, export and import duties, municipal taxes and value-added taxes, depending on the size of their investment in the country.

“It really covers a whole scenario that can pretty much give you tax-exempt status for at least eight years,” Madrigal said. “If companies reinvest and continue to grow and reinvest in other types of processes or the same, they can apply for a renewal of these tax benefits. Companies have been operating under this tax system for years.

Costa Rica also has free trade with the United States, China, and the European Union. Most of the foreign companies operating in Costa Rica are from the United States and ship most of their products there, Madrigal said. But even that is changing, with some companies exporting to the Netherlands to ship them to the rest of the EU and even Asia and Australia.

The tax incentives are great, but several contract manufacturers have said MDO that the quality of employees, their education and training, are the main attraction. Costa Rican children are learning English in kindergarten, another incentive to attract American businesses, according to Madrigal.

“It’s a great ROI opportunity, but most of them talk about talent,” she said.

Look back and forward

Bob Stoesser knows this well. Stoesser’s contract manufacturing business in California had a customer (ArthroCare, since acquired by Smith + Nephew) who had set up an appliance assembly operation in Costa Rica and wanted to develop a local supply chain. Stoesser said MDO that he worked with a good friend who had a casting factory in Costa Rica to open his own site in 2003.

Subcontractor SMC (Somerset, Wisconsin) purchased Stoesser Industries in 2008, making Stoesser a vice president. SMC’s customers include some of Costa Rica’s largest OEMs, and the company also manufactures finished devices there for export to the United States.

SMC employs more than 200 people in Alajuela, Costa Rica, and is poised to invest at least $ 20 million to double the size of its assembly and injection molding operations to 120,000 square feet. This is the company’s third expansion in 10 years.

“I’m sure to say that this latest investment and expansion is not our last in Costa Rica,” Stoesser said. “We see this growth happening on an ongoing basis, and other OEMs continue to move operations to Costa Rica. They need our support. This is a good thing.”

Anthony Amador was president of the interventional device manufacturer Biomerics’ plant in Cartago, Costa Rica for eight years, including under different owners. But he’s been working in medtech for 20 years and has seen a lot of changes.

“Even with the COVID pandemic that we’ve been through, medical devices have grown,” Amador said. “All businesses have grown, hired. I think in the future it will grow a lot more.

Biomerics has been in Cartago for six years. Previously, it grew from 20,000 to 50,000 square feet and is now building a 100,000 square foot factory there.

The Salt Lake City-based company initially limited its production in Costa Rica to existing parts, contrast media, and anesthesia lines – high-volume, labor-intensive manufacturing that costs less than in d ‘other countries. According to Chris Richardson, director of sales and marketing, it is now advancing its technical capabilities there to include tube extrusion, injection molding, laser metal processing and advanced production of catheter rods.

More extensions

Here are some other expanding subcontractors in Costa Rica:

• Freudenberg Medical (Beverly, Mass.) Adds 8,600 square feet to its Alajuela plant, including an additional ISO Class 7 cleanroom for catheter fabrication and assembly, molding, extrusion and packaging , as well as additional offices. Freudenberg opened a shared service center in Alajuela in 2020 to provide IT and accounting services specific to its operations in North America. “This has proven to be a great location to hire people skilled in IT, accounting and engineering,” said CEO Max Kley. “We are very satisfied with the quality of the talents that we have been able to integrate.
• Micro-laser manufacturer Resonetics (Nashua, NH) moved to Costa Rica in 2016. Its factory in the Coyol Free Zone business park in Alajuela has become the company’s most productive site, operating 24 hours a day. 24/7 and focusing on components and sub-assembly production for export and for the local medical device industry. Resonetics announced in April that it had rented more space in Coyol Park to more than double its production. Employees manufacture components there, primarily using laser processing, cutting, blading and welding. The expansion will allow Resonetics to add centerless grinding and nitinol processing capabilities, according to CEO Tom Burns. “I think Costa Rica is becoming more and more attractive,” Burns said. “Success breeds success. “
• Viant Medical announced in April that it has completed a major expansion of its manufacturing facility in Heredia. Expansion adds 14,000 square feet of ISO Class 8 cleanroom molding and assembly space and reallocates 16,000 feet² additional warehouse, office and support capacity, for a total of 180,000 sq. ft.² through four buildings. Viant added 15 molding machines and two-stage molding capacity, which complement the liquid silicone rubber molding operation added in 2020. The company plans to create 300 jobs by 2021. The expansion and l hiring will cost up to $ 4 million. “The main (reason) is their intellectual capital,” COO Sean Crowley said of the company’s decision to expand into Costa Rica. “The capacity of the employee base there is important.”

Crowley added that the country has more to offer medical technology companies, including sterilization and trained employees. “It’s just not something you could find if you had to move to another country with cheaper labor. “