Makeshift Medtech Meccas
Medical device and life-sciences manufacturing clusters are surfacing in the most unconventional places, leaving traditional healthcare strongholds to rely on little more than their reputations for survival.
It’s the start of a new workweek—the last before the unofficial end of summer—and Joan Koerber-Walker is headed to a business meeting in Flagstaff, Ariz. She is driving north from Phoenix on Interstate 17, the main road that connects the two cities via Coconino National Forest, a 1.85 million-acre smorgasbord of flatlands, deserts, mesas, Ponderosa Pine forests, alpine tundra and volcano peaks. Near Sedona, the highway approaches the edge of the Mogollon Rim, a giant, slanting escarpment of volcanic and sedimentary rock and pine.
On this particular morning, the road is empty, leaving Koerber-Walker free to absorb the natural beauty of the landscape without any distractions.
“I’m driving up into the mountains, through majestic Ponderosa Pine forests. As I’m going up, on the side of the road, there’s incredible cacti and the flora are reaching for the sky,” she said. “The sun is hitting the mountains and the ridges, and it’s turning all different colors. The desert is in bloom and it’s absolutely beautiful. I’m surrounded right now by mountains and vistas most people will only see in a picture book.”
The desire to live and work amid picture-book vistas, mountain ranges and flowering deserts may partly explain the explosive growth in population in the Grand Canyon State over the last several decades. Between 1990 and 2010, Arizona’s population skyrocketed 74.4 percent, according to U.S. CensusBureau figures. While the Great Recession and housing downturn have slowed that growth lately, the state nevertheless recorded an impressive 25 percent jump in total residents between 2000 and 2010.
With its dry, sunny climate, natural beauty and laid-back lifestyle, Arizona certainly has become a melting pot of sorts for both foreign and domestic residents seeking refuge from cold, snowy winters (or gloomy, gray rainy seasons), hectic commutes, weather-related cataclysms (sorry, dust storms don’t count), pricey real estate, or the hum-drum nuances of everyday life.
In recent years, however, Arizona has proven itself to be more than just a pretty state. It has cultivated medical device and life-sciences industry clusters that are beginning to rival the more traditional medtech hubs of Southern California, Massachusetts, the Twin Cities area of Minnesota, and Florida. While these regional medtech monarchs are in little danger of being overthrown anytime soon, their support system steadily is being chipped away as cities, counties and states better known for their touristy vacation spots or delicious delicacies launch special programs, invest funds or tout their research and development prowess in an attempt to establish thriving hotspots of biomedical innovation.
Arizona, for instance, overhauled its commercial tax laws earlier this year and created new business incentives to spur economic development and entice more companies to the state. The Arizona Competitiveness Package—signed into law in mid-February—increases the electable state corporate income-tax sales factor, reduces the corporate income tax to 4.9 percent starting in 2014, and increases the Research & Development tax credit by 10 percent. In addition, the overhaul provides corporate tax credits of up to $9,000 for each qualifying new job and accelerates the depreciation schedule for business personal property (the idea there is to spur new equipment purchases and other capital investments).
Besides jumpstarting the state’s economy, the new business incentives are designed to build upon Arizona’s solid foundation in medical research, bioimaging and bioinformatics, infectious disease and cancer treatment. Each of the state’s three major universities act as a research center, with Arizona State ranked among the top 10 in the nation for the number of inventions disclosed per $1 million of research spending.
The presence of a branch of the Mayo Clinic and such medical technology behemoths as Medtronic Inc. (in Tempe), W.L. Gore & Associates Inc. (nestled in the mountains of Flagstaff), Agilent Technologies Inc. (in Chandler) and Ventana Medical Systems Inc. (in Tucson) has resulted in a strong network of skilled healthcare workers, scientists and researchers in Arizona, particularly in the areas of neuroscience, bioengineering, diabetes, genomic science and cardiovascular development. Such genius helped nurture the development of homegrown SynCardia Systems Inc., a Tucson-based firm that invented a total artificial heart approved by the U.S. Food and Drug Administration, Health Canada and European Union regulators. Originally used as a permanent replacement organ, SynCardia’s Total Artificial Heart currently is approved as a bridge to human heart transplants for patients suffering from end-stage biventricular failure. More than 950 artificial hearts have been implanted in patients worldwide,according to the 10-year-old company.
Naturally, economic development executives are proud of SynCardia’s accomplishments. But they are equally as proud of the factors they believe helped spawn the innovation: the “spirit of collaboration” in Arizona’s life-sciences sector and the scientific freedom the state reputedly gives its medical researchers.
“One thing that medical device researchers like about Greater Phoenix is we’re always trying something new,” agreed Barry Broome, president and CEO of the Greater Phoenix Economic Council.
“When you’re in a place like Greater Phoenix and you’re in healthcare, the biggest challenge is not being in San Francisco [Calif.] or Boston [Mass.]. When people start asking why they should relocate or start a company here, one of the things we tell them is this: We are a little bit behind the curve than a place like Boston but that is a good thing if a medtech researcher wants to do something different because people here are very receptive to modern and groundbreaking ideas. Traditional medtech markets may have a more mature reputation, and their research may be more robust from an aggregate standpoint, but they are probably not more innovative.”
Maybe not, but it still can bedifficult to compete with reputedinnovation epicenters such as Stanford University, the MassachusettsInstitute of Technology and morerecently, the Medical Devices Center at the University of Minnesota.
Koerber-Walker, however, isn’t convinced the state is at a disadvantage in the field of medical technology research. She contends that Arizona has something far better than reputation—a spirit of collaboration not found anywhere else in the country.
“There’s a collaborative spirit that is ingrained in the culture here in Arizona,” noted Koerbler-Walker, president and CEO of the Arizona BioIndustry Association, a Scottsdale-based trade group formed to help grow the state’s bioscience community. “We live in a desert. For generations, you could not succeed if you did not learn how to work through a partnership. You don’t see the competition or the unwillingness to share information here that you see in some of the more established markets. We share resources here. When you share resources and collaborate, you move forward faster. In Arizona, we know how to work together.”
Texas: From High-Techto Biotech
Much to Koerbler-Walker’s dismay, a similar spirit of collaboration exists nearby in the Lone Star State, where a declining semiconductor industry, a strong network of highly regarded hospitals and generous incentive packages from the government contributed to a 35.5 percent increase in the number of life-sciences companies between 2001 and 2008. As a result, job creation in the industry exploded in the middle part of the decade, growing by 8,600 positions annually between 2003 and 2009 for a five-year annual growth rate of 14 percent, according to figures from the Austin-based advocacy group Texas Healthcare & Bioscience Institute.
The life-sciences industry in Central Texas has grown more moderately than other regions but it’s been bolstered by a solid base of companies, hospitals and research centers. The life-sciences cluster in the Austin area not only boasts medical technology giants such as St. Jude Medical Inc., Thermo Fisher Scientific Inc., Hospira and Medtronic Inc., but also a significant number of orthopedic firms (ArthroCare Corp., DJO Surgical, Hangar Orthopedic Group Inc., Minimus Spine Inc., Spinal Restoration Inc., Spine360, Wenzel Spine Inc., Zimmer Spine and Zimmer Orthobiologics), giving the Warsaw, Ind., area a run for its money.
“The Austin area has always been known for high-tech, clean energy and more recently, digital media,” Charisse Bodisch, vice president of economic development for the Austin Chamber of Commerce, told Medical Product Outsourcing. “But the life-sciences industry over the last couple of years has really just started to explode. Hangar Orthopedic relocated its corporate headquarters here last year from Maryland, and one of the big reasons was the environment here. We have a community where you can really grow a life-sciences company.”
Austin breeds its life-sciences firms in much the same way it nurtures other types of businesses: through networking, incubator programs, funding, and a heaping dose of Southern hospitality. The University of Texas-Austin and Texas State University, for instance, both have created offices to help life-sciences and medical equipment manufacturers commercialize their ideas. Help with financing is available through the state’s Emerging Technology Fund, a program established in 2005 to prevent innovative concepts from leaving Texas. In the three most recent fiscal years for which statistics currently are available (Sept. 1, 2007 through Aug. 31, 2010), the Texas Emerging Technology Fund (TETF) handed out 113 grants totaling $259.5 million. Jonathan W.Taylor, TETF director, credits the program with attracting researchers to the state, helping secure more matching grant money from outside sources and shepherding promising companies through the early stages of development between discovery and demonstrable product, when “traditional sources of financing are few and far between.”
Once financing has been secured, life-sciences companies can tap into the knowledge and network of two of the nation’s largest healthcare systems—Ascension Health (parent company of the Seton Family of Hospitals) and HCA (parent firm of St. David’s Healthcare)—to conduct scientific research and/or participate in a clinical trial.
“There are a lot of places in the country that sound great to go to but it can be very difficult to get in the door to talk to somebody, whether it be at a university or a hospital. You’ve got to know the right people to get in the door,” Bodisch explained. “Austin is a very open environment. When we’re working with a company and having a meeting, we might invite some existing companies in the area, some people from the universities and people from the technology incubators so that a company can immediately get networked and get connected. And any question can be answered with a simple phone call. If a company is wondering who they can contact at a particular hospital system to see how they can work with patients or tap into a clinical trial, or do some research, the answer is just a phone call away. It’s just an incredible environment and that kind of networking and collaboration spurs growth.”
Bouncing Back from Loss in Michigan
Last month, Health.com, a website devoted to medicine, wellness, diet, nutrition, fitness, recipes and weight loss-related issues, published a list of the 10 most depressing states in America. Michigan was among them: “Few states have been as battered by the economic downturn as Michigan,” the website's brief write-up on the state read. “With unemployment as high as 20 percent in some counties, it’s not surprising that residents might be feeling distressed.”
Granted, it was difficult not to feel some distress during the Great Recession. And, Michigan certainly was affected more than other areas of the country (the state lost more than 332,000 jobs in the recession, and the unemployment rate still hovered around 16 percent this past winter). But residents in the Great Lake State are resilient, and they’ve managed to find the silver lining in a very dark, very angry storm cloud.
That silver lining has come in the form of heart stents, needles, pharmaceuticals and other life-sciences products. Recognizing the imprudence of relying on the dying automotive industry for future growth, lawmakers and economic development executives mapped out a plan over the last several years to create a flourishing medical device and life-sciences sector (see sidebar below). One of the key components of the plan was a restructuring of the state business tax and better access to funding through programs such as Pure Michigan Business Connect, a $3 billion public-private initiative that matches startup companies and developing firms with those that can provide necessary financing. The program is a pivotal piece of the “economic gardening” approach Gov. Rick Snyder and Michigan Economic Development Corporation leaders are taking to shift the state’s focus from business attraction to business retention.
“The difficult part about attracting business is figuring out who is looking and when,” said Kevin McLeod, vice president of Southwest Michigan First, an economic development organization covering the Kalamazoo area. “We try to have great relationships with some of the site decision influencers around the country but the reality is that Michigan is not the first place that people think of when they want to relocate or start a business. We need to change that.”
The state is doing its best to change that kind of thinking with more effective relocation/business development incentives, tighter partnerships between the educational community and industry, and the launch of an incubator program designed to help medicaldevice companies turn their ideas for new technology into bankable products. Universities are doing their part as well, adding graduate and undergraduate degrees in life sciences-related studies to ensure the industry continues to grow in the future. Grand Valley StateUniversity (GVSU), for example, debuted its biomedical engineering graduate degree this month for both part-time and full-time students. The program, which includes a focus on the design, research and development of medical devices, has a maximum 30-student capacity per year.
The Allendale-based school launched the graduate program just two years after adding a minor in biomedical engineering to its undergraduate engineering degrees. Developed with support from local companies and the West Michigan Medical Device Consortium, the program is backed by a grant of nearly $700,000 from the National Science Foundation that pays for equipment and startup costs.
“My dream is the program becomes embedded in the community of medical device companies and we’re making a difference by starting companies and growing companies,” GVSU engineering professor John Farris, who developed the program with professor Samhita Rhodes, told mlive.com, a 24/7 news, information and social interaction network. “We’d like to be a place where innovation happens.”
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There was a time not too long ago when medical device manufacturing and advances in life sciences occurred mostly in certain parts of the United States. The Minneapolis-St. Paul, Minn., area was renowned worldwide for its advancements in medical technology, particularly cardiovascular care. The Massachusetts Institute of Technology, on the other hand, carved out a reputation for fascinating scientific discoveries and groundbreaking clinical trials. And with little competition, the town of Warsaw, Ind., home to 12,415 people, effortlessly transformed itself into the world’s orthopedics capital. But the world has changed. Globalization, recessions, near-Depressions and a decline in the traditionally strong manufacturing sectors of airplanes and automobiles have led a growing number of states to build biomedical clusters of their own to compete with the older, more traditional locales. The result has been a fierce battle between the haves (places like Southern California, Florida, the Midwest and Massachusetts) and the have-nots (alternative hotspots such as Arizona, Texas and Michigan) for supremacy. While the longstanding rulers have given up some ground recently, they are not about to go away quietly. As one industry expert told MPO: “The life-sciences industry is very competitive. Building a successful life-sciences cluster is not easy. You can’t just rely on reputation. You have to identify the elements needed for a successful life-sciences industry and then make sure they are available. Otherwise, you’re going to lose out to the competition. And trust me, there’s a lot of competition out there.”
Survivor: Michigan –How a Faltering Industryis Reinventing Itself
Most people love a good comeback story. As a society, we tend to build up our heroes—regardless of entitlement—knock them down, and then cheer them on as they stagger toward redemption. Such an iniquitous process can be both vexing and frustrating, but it is one of the only ways of effectively weeding out the false idols from those truly deserving of our worship.