From Sea to Shining Sea
Building a New Facility? From the Atlantic to the Pacific, the United States Offers Great Locales
Stacey L. Bell
Editor at Large
Cutting-edge research is one of the Spokane, Washington’s strengths. Sacred Heart Medical Center is a major training facility for robotic heart surgery. Photo courtesy of the Spokane Area Economic Development Council.
The medical devices and equipment industry employs more than 411,400 workers, accounting for nearly one third of all US bioscience jobs. This growing industry, in addition to bringing high-wage jobs to an area, also has a multiplier effect on the economy, affecting hospitals, medical centers and other businesses, noted Walter Plosila, PhD, vice president of the Technology Partnership Practice for Battelle in Cleveland, OH. Plosila also is a co-author of the April 2006 Battelle/Biotechnology Industry Organization study, Growing the Nation’s Bioscience Sector: State Bioscience Initiatives 2005.
The study found that 60% of the nation’s medical device industry employment is contained within 10 states, led by California, Minnesota, Florida, Massachusetts and New York. Sizable medical device workforces also are located in Pennsylvania, Indiana, Texas, New Jersey, Puerto Rico, Illinois and Wisconsin.
“Everyone thinks about places such as Minneapolis, Minnesota, or San Jose, California, when they think about where medical device companies are located. But companies are concentrated in areas you may not even realize,” Plosila said. He pointed out that medium MSAs (metropolitan statistical areas) such as Boulder, CO and Kalamazoo-Portage, MI, and small MSAs such as Bloomington, IN and Flagstaff, AZ also have a strong medical device presence. “Glens Falls, New York, has 16 times the national average of specialized medical device employees working in the area,” he noted.
In these smaller towns, often a single medical device company started in the area and then spun off additional firms. Soon, suppliers moved nearby to serve these OEMs, and a life sciences cluster emerged.
How much does physical location impact a company’s success? Quite a bit, experts say. However, start-up companies and established firms should look for different qualities when setting up shop.
“Still, to this day, start-ups tend to be highly concentrated around existing medical device clusters in the United States, and most of those are around universities and research centers. These companies need to be close to skilled clinicians and technicians,” explained Ross DeVol, director of regional economics at the Milken Institute in Santa Monica, CA. Areas including Greater Boston, the San Francisco Bay region, Minneapolis, Los Angeles, San Diego and Greater New York draw start-ups due to their strength in top human capital.
Companies planning to relocate or expand their manufacturing facilities still want access to a rich research base, DeVol continued, but they also look more at operational sustainability issues. That is, what is the overall cost of doing business in the area? Tax rates, regulations and the overall business climate factor heavily into the equation, as does having a strong, skilled workforce. Areas that fare well in this regard, according to DeVol, include Raleigh-Durham-Chapel Hill in North Carolina, the Tampa Bay area in Florida and Seattle, WA.
DeVol added that US cities and regions continue to work to make their communities more appealing to medical device companies in hopes of growing their clusters. “The life sciences industry is an emerging powerhouse for US global economic competitiveness in the 21st century,” he said. “Life sciences’ economic and scientific contributions propel many regions.”
Medical Product Outsourcing recently spoke with economic development experts throughout the country to learn about the new offerings and up-and-coming areas that may most appeal to today’s medical device manufacturers.
New York: Just three hours away from the major medical centers and venture capital in Boston and New York City, Glens Falls, NY is home to a concentrated cluster of medical device manufacturers.
“All of our companies started with one company that was born in the 1940s—the first US company to make cardiovascular catheters,” explained Len Fosbrook, president of the Economic Development Corp. in Glens Falls. “Medical device manufacturing is probably 50% engineering and 50% art. We have second and third generation employees here working in medical device manufacturing. Their expertise is invaluable. It can’t be taught in the classroom.”
With nearly half the US and Canadian population living within a 500-mile radius of Pittsburgh, companies can take advantage of the approximate 63% consumer buying base. Photo courtesy of MEDRAD, Inc.
Pennsylvania: When MEDRAD, Inc., headquartered in Indianola, PA, a suburb of Pittsburgh, conducted a worldwide search to find the site for its new 120,000-square-foot facility, it found the best location, ironically enough, would be practically in its own backyard.
“One of our selection criteria was ‘Where’s our market/our customers?’” explained Eric Ferchaw, global facilities director of MEDRAD. “Nearly 70% of the volume for our sterile disposable products is used in the Americas—Canada, the United States and Latin America. It turns out that western Pennsylvania is a good site for distribution. The highways, airports and significant hubs for overnight carriers let us reach our customers quickly.”
Indeed, nearly half of the US and Canadian population live within a 500-mile radius of Pittsburgh, noted Bernie McShea, senior vice president, project management for the Pittsburgh Regional Alliance. “Sixty-three percent of the consumer buying income is located within that region, and half of the combined US and Canadian output is in this area,” McShea added.
MEDRAD plans to open its new facility in late 2007 and expects smooth sailing. “There’s a good, solid workforce available, low risk to achieve start up of operations—since we understand the political issues and business culture in this environment—and the supply chain set up for our existing facilities here will work for our new facility as well, with just a few minor changes,” Ferchaw said. The new site is located in what’s known as a Keystone Opportunity Zone; the 20-acre area leaves room for future growth.
“[Pennsylvania] Governor [Edward] Rendell has instituted an $800 million stimulus package for speculative industrial site development. There are several 100-acre sites near Pittsburgh International Airport that are ready to go,” McShea said.
In addition to its strong manufacturing legacy, tax incentives, access to world-renowned innovation at Carnegie Mellon University and the University of Pittsburgh as well as a prototyping center in the University of Pittsburgh’s Swanson Center, the region also provides networking opportunities through the Pittsburgh Technology Council and the Pittsburgh Life Sciences Greenhouse. The council presents programs on topics ranging from regulatory issues to where to find funding, and PLSG runs Bio Blast, quarterly networking meetings.
North Carolina: In its quest to become a leading contender in the medical device space, Raleigh-Durham-Chapel Hill, also known as the Research Triangle, has fostered an atmosphere conducive to commercializing innovation. As proof, Jeff Denny, director of life science and technology recruitment for the Greater Raleigh Chamber of Commerce, told the story of Sicel Technologies, manufacturer of the DVS (Dose Verification System).
“An oncologist at Rex Hospital in Raleigh wanted to be able to deliver an exact amount of radiation to an exact area of the body where the tumor is located,” Denny explained. “He went to North Carolina State University [NCSU] and worked with researchers there to develop a tiny, implantable-by-injection device that projects back by RFID where radiation has been delivered and the amount of radiation delivered. They held preclinical trials at NCSU’s College of Veterinary Medicine and then turned to both local and national hospitals for clinical trials. In April of this year, Sicel Technologies received clearance from the FDA for use of the device in breast cancer patients. The Research Triangle has all of the resources in place—as well as a collaborative, cooperative environment—to ensure medical device companies can succeed.”
Redding, California is home to the Sundial Bridge in Shasta County, an area known for its low-cost electricity and technically inclined residents. Photo courtesy of Shasta County Economic Development Corporation.
Florida: Second only to California in the number of medical device companies located in the state, Florida provides manufacturers with many reasons to call the Sunshine State home. Within the Tampa Bay region, efforts have been under way for years to ensure that med-tech companies will have access to a highly skilled workforce for generations to come.
“We have a steady stream of new workers coming into the area. Sixty thousand people move to the Tampa Bay region each year—not many cities can say that,” noted Chris Steinocher, vice president of marketing and strategic direction for the Tampa Bay Partnership. He added that local universities are ensuring that residents will have the knowledge and skills most valued by the medical device industry.
The University of South Florida (USF)—the 16th largest university in the country—offers the nation’s first graduate certificate in medical device regulations. USF also is on the cutting edge of research, housing the Southeast’s largest MEMS (microelectromechanical systems) center and a research center devoted to nanomaterials and nanomanufacturing. St. Petersburg College offers a medical manufacturing degree program, and the Florida Medical Manufacturers Consortium provides a wealth of networking and educational programming.
The Tampa Bay region now has two local sterilization companies: FTSI, a gamma sterilizer, and ISL, which specializes in EO. “This is a big advantage for manufacturers coming to the area,” Steinocher noted.
The H. Lee Moffitt Cancer Center & Research Institute—one of the country’s top cancer research facilities—also has drawn to Tampa Bay a number of companies specializing in cancer treatments. Incubator facilities are adding to the number of innovations associated with the area.
“The cycle of innovation is strong here,” Steinocher said. “Research, education, innovation and technology are key to success in the medical device industry, and the Tampa Bay region is strong in all four.”
Minnesota: For years, you may recall, the 350-mile stretch from Rochester, MN through Minneapolis and St. Paul was known as Medical Alley. That description is changing to “Life Science Alley” as the area attracts yet more life science organizations. In fact, in March 2005, the Medical Alley and MNBIO organizations merged to create a single association, which changed its name to LifeScience Alley earlier this year. The new name reflects the new organization’s mission: enabling business success in the life sciences.
More than 500 FDA-registered medical technology companies are located within the area, taking advantage of a highly educated and trained workforce; college programs on nanotechnology, clinical studies and regulatory affairs; and a fully developed infrastructure, including local access to employees and consultants well versed in regulatory, clinical and reimbursement issues, IP legal firms and engineering firms.
LifeScience Alley, in conjunction with the University of St. Thomas, offers a mini-MBA in med-tech management, and it has introduced two new special interest groups that will offer programming and networking opportunities: manufacturing/quality and emerging business.
Over the next seven years, according to Don Gerhardt, president and CEO of LifeScience Alley, the Big Four in the area (Medtronic, St. Jude, Guidant/Boston Scientific, and 3M) are expected to add another 8,000 to 10,000 jobs. Within the next five years, more commuter trains and routes are planned for the corridor, allowing locals to consider working in areas that previously may have been too time consuming to reach in traffic.
“Minneapolis and Saint Paul remain magnets for the medical device industry,” Gerhardt concluded. “Some up-and-coming areas include Rochester, around the Mayo Clinic, and Saint Cloud, which is 90 miles outside of the city and has tremendous cost advantages.”
Texas: The 12 counties in north Texas, also known as the Dallas/Fort Worth Metroplex, have been a stronghold for the telecommunications and defense industries for years. Now they’d like to grow their presence in the medical device industry as well.
In 2005, the Health Industry Council surveyed the more than 100 med-tech companies based in the region to learn why they like the area. According to Council President Nancy Williams, manufacturers rated Dallas/Fort Worth highly in the following functions: skilled workforce, knowledge transfer (from other technical industries), research climate, support industries and logistics (including the world’s first industrial airport, Forth Worth Alliance Airport, which links air, intermodal, rail and trucking services), cost of living/quality of life, cost of doing business, local and dedicated incubators (in Frisco, Arlington, Fort Worth and Richardson) and funding opportunities, such as the Emerging Technology Fund created by the state legislature to commercialize new technologies.
In addition, the Medical Device Action Alliance within the council serves as a resource for companies interested in relocating to the area, putting such firms in touch with state agencies that offer tax and training incentives.
California: On May 15, the Aubrey Group, Inc. opened the doors to its new 30,000-square-foot facility in Irvine, more than doubling the manufacturing space it had at its previous location, just three miles away.
“Our niche is helping start-up companies with development and as much manufacturing as they want, and since probably 40% of all medical device start-ups in the country are in California, this is where we need to be. California is home to a large number of venture capitalists and incubators as well,” explained Steve Maylish, Aubrey Group’s director of business development.
Maylish added that the area is rich in a highly trained and skilled workforce—alleviating any need to relocate workers from other parts of the country. Numerous education and networking programs in the area are targeted directly to the medical device industry. For instance, the University of California–Irvine offers classes in medical device regulations, prototyping and manufacturing. Of course, Orange County isn’t known for low-cost land or leases.
“It’s not unusual for companies to be looking for different environments to lower their operating costs,” noted Jim Zauher, president of the Economic Development Corporation of Shasta County in Redding, CA. Shasta County is located about 200 miles north of San Francisco at the tip of the Sacramento Valley.
“California is a hotbed for medical device entrepreneurial activity. Most companies are in urban areas, particularly in Southern California, but these days more companies are looking to expand into lower-cost areas,” Zauher reported. He pointed out that land costs considerably less in Shasta County, and electricity rates are almost half the price per kilowatt hour compared with other parts of the state. Reliability is not a concern, either, since the cities of Redding and Shasta Lake own their electric utilities.
Historically, Shasta County has been a timber products manufacturing stronghold; thus, residents are experienced in technical production work. The area recently recruited a medical products distribution company that is constructing a 70,000-square-foot building, which is expected to be operational by mid-2007. The facility will serve northern and central California as well as the Pacific Northwest.
Washington: Lower costs of doing business are a huge draw for companies operating in Spokane, WA as well. The area boasts low labor and land rates, no corporate or personal income tax and low-cost utilities. Spokane is the largest city between Seattle and Minneapolis, located 18 miles west of the Idaho state line and 110 miles south of the Canadian border.
More than 500 clinical trials currently are being conducted at local hospitals and medical centers. Indeed, cutting-edge research is one of the area’s strengths. Sacred Heart Medical Center, a 623-bed facility, is a leader in heart and kidney transplant services and a major training facility for robotic heart surgery, noted Maria Vandervert, marketing and communications manager for the Spokane Area Economic Development Council. The Spokane Intercollegiate Research and Technology Institute (SIRTI) assists in the creation of new companies from technology developed at local universities and by individuals. Also, starting in 2008, the state’s Life Sciences Discovery Fund will award up to $35 million in grants annually to further companies’ bioscience research.
Towns located along US 90, starting at Spokane and then traveling eastward through Coeur d’Alene, encompass a developing corridor of medical device innovation, according to Theresa Sanders, vice president of business development for Spokane’s EDC. “Coeur d’Alene is really growing, as is Liberty Lake, which has a lot of technical resources related to data and digital. A lot of development is occurring six miles west of Spokane, in West Plains, too,” Sanders said.
In the End
Certainly, urban areas in California, Minnesota, Florida and Massachusetts continue to house the majority of medical device firms; however, manufacturers looking to lower their costs of doing business and employ workers with a legacy of skilled technical talent are increasingly locating in more rural settings.
“This mindset gives these areas of the country a role in biosciences, too, which is a good thing,” Plosila said. “The 20th century will be known for IT and digital breakthroughs. The 21st century is going to be the Bio Century.