Massachusetts is one of the top five medtech hubs in the world in terms of manufacturing and innovation, according to Mark Bonifacio. As the owner of Bonifacio Consulting Services (BCS; Natick MA), a consultancy dedicated to medical manufacturing and outsourcing, and co-founder of Apec, a medtech contract manufacturer that was sold to Helix Medical, Bonifacio knows a bit about the industry. He may be slightly biased given his geographical base, but he's not alone in touting the state's medical device manufacturing credentials. In its recent countdown of medtech innovation hubs, sister publication MPMN placed the Boston/Cambridge area at the top, calling it "one of the most important areas on the planet for medical research."
A confluence of factors have established and solidified the state's standing as a medtech Mecca, but what is perhaps most instructive is the way in which the present and the future are an extension of the past. Here are five reasons why Massachusetts continues to set the mold for medical manufacturing.
1. Manufacturing clusters are in the state's DNA
"Throughout its economic history, Massachusetts has experienced the emergence, growth to national leadership, and decline of regional concentrations of related firms and organizations known as clusters, wrote Michael Best in an article published in MassBenchmarks back in 2006. He cites textiles, shipbuilding, footwear, and microcomputers among the state's historical industrial hubs to frame a conversation about the "emergence of a new cluster right before our eyes: the medical device sector." Best is professor emeritus at the University of Massachusetts Lowell.
The medtech cluster in Massachusetts is second in the nation only to California, with more than 400 medical device firms calling the state home. These companies range from well-known multinationals such as Boston Scientific and Johnson & Johnson's DePuy to a multitude of startups.
Massachusetts employed more than 24,000 people in the medtech sector in 2008, according to a study published by Deloitte in 2011. Taking into account a 3.4 multiplier effect, Deloitte estimates that industry has directly and indirectly created approximately 82,500 jobs. In fact, that number is probably greater, according to Thomas Sommer, President of MassMEDIC, an organization representing medical device manufacturers, suppliers and associated groups in Massachusetts and the surrounding region. "Battelle published a report in 2012, and it pegged the multiplier effect in Massachusetts at four jobs for every person employed in the medical device sector. That would put the total number at more than 100,000."
As plastics play an increasingly central role in the development of medical technology, it helps that the plastics processing industry has a profound presence in the region. "The plastics manufacturing tradition started here in the Leominster/Wilmington area," says John Witkowski, General Manager, Clinton Operations, Drug Delivery and Diagnostics, Nypro (Clinton, MA). "We have a manufacturing infrastructure that has evolved over more than a century, with a long tradition of moldmaking and molding expertise." That combined with a legacy of precision engineering and instrument making applied to various sectors, has served the medtech cluster well. One example is the defense industry, which was "very important to the state economy for a long time," says Sommer. "As that declined, we found that the workforce and its expertise transferred very nicely to the life sciences."
|Boston hosts the BIOMEDevice and PLASTEC New England events on March 26 and 27, 2014, at the Boston Convention and Exhibition Center. Visitor information is available on the respective websites: BIOMEDevice Boston and PLASTEC New England.|
2. Keeping innovation alive
In addition to world-class hospitals that have attracted considerable national R&D funding and created opportunities for medical device companies to innovate and grow, as noted by Best, the state can also point to Cambridge, which has become an incubator for life science development, says Bonifacio. Supportive government programs have contributed significantly to maintaining a sustainable industrial base and furthering innovation. One that gets high praise is the Life Sciences Initiative (LSI), a 10-year program that was inaugurated in 2008.
|Image courtesy Albright Technologies.|
"You remember 2008, right?" asks Bonifacio. The dawn of the Great Recession was not a propitious time for telling voters that we should launch a $1 billion fund using tax dollars. "Governor Deval Patrick got a lot of flack for proposing that, but he insisted that we needed to hunker down and do what we are good at," says Bonifacio. By most accounts, his stimulus has paid off.
By the summer of 2012, the LSI had directly invested or committed almost $468 million and had attracted more than $1.2 billion in additional third-party investments, reports MPMN. Moreover, the Massachusetts Life Sciences Center, which administers the program, notes that nearly 30 companies announced plans to expand within or into Massachusetts during fiscal year 2013. Sommer calls LSI a "unique program within the United States and a real asset contributing in a meaningful way to the state economy."
Bonifacio also cites the Massachusetts Medical Device Development Center as a valuable resource for smaller medical device companies. It provides reasonably priced services in business planning, prototype development, and clinical assistance while giving companies access to world-class researchers and resources at the Lowell and Worcester campuses of the University of Massachusetts.
3. An abundance of intellectual capital
"Massachusetts is in the top tier of the United States in the number of engineering graduates," says Sommer. In fact, the Deloitte study noted that almost half of state residents have a college degree, placing the state first in the nation.
The importance of a skilled pool of talent cannot be overemphasized, says Bonifacio. "Other areas are trying to get medtech clusters off the ground. Florida and the Memphis area come to mind. But as attractive as the financial incentives might be, at the end of the day, medical device manufacturers have to ask themselves if they are going to find the human resources they need on site," says Bonifacio.
Nypro's Witkowski praises U Mass Lowell, "which has one of the top three plastics engineering programs in the country. That generates a pool of talent for companies such as ours."
Nypro also does its part to nurture interest in a career in plastics and provide the tools for professional development through Nypro University. The curriculum, which can be accessed online, includes the Master Molder program, which is reportedly one of the only accredited molding programs in the country. "Even our competitors send people here," laughs Witkowski.
This is no time for complacency, however, especially if the much touted manufacturing renaissance is to become more than a rhetorical flourish. "My pet peeve," says Bonifacio, "is that we have ignored manufacturing for so long in this country and told people over and over that all of those jobs are going to China, Vietnam, and eastern Europe. That has created a talent vacuum in some respects, especially in the technician area. We need people who can program robots and maintain high-tech machining centers. I advocate a return to apprenticeship programs," says Bonifacio.
A skills gap? Yes and no, says Jeffrey Thumm, who was recently appointed president of Albright Technologies (Leominster, MA), a supplier of implantable medical silicone parts. "Boston's main industry is education and life sciences." Although there is no lack of well-educated people, "it's the training needed for specific industries that is a challenge," says the 40-year veteran of the medical device sector. "No one wakes up and decides to be a silicone molder. It's such a niche industry with specialized knowledge," he notes, and it's in areas like this where a skills gap might well exist.
4. Thinking locally, acting globally
Mirroring national statistics, Massachusetts has a positive trade balance in medical technology. Medical devices account for more than 10% of total state exports; between 2001 and 2010, those exports have outpaced aggregate state exports by a CAGR of 11% versus 4.6%, according to the Donahue Institute. Europe gets the lion's share of medical technology made in Massachusetts. In a virtuous circle, European medical device manufacturers return the favor by choosing the region to establish US subsidiaries.
European companies that have established the state as their US base of operations include Covidien, headquartered in Ireland, Smith & Nephew (London), and Philips Healthcare (Best, Netherlands).
Although Nypro is a global company—even more so since it was acquired by Jabil in 2013—it has deep roots in the state. It continues to enjoy solid growth, and to extend those roots.
"We added 200,000 square feet of space in Devens, MA, at a former solar power plant last year," says Witkowski, adding to the 650,000 square feet of space at the Clinton campus. The vertically integrated company has expanded its product and service portfolio, as well. "We recently started loading prefilled cartridges onto medical devices and shipping them to final customers. We don't do the aseptic filling, but handle just about everything else," says Witkowski.
5. A template for a new healthcare delivery model
While there are nuances, it's fair to say that much of the Affordable Care Act drew its inspiration from healthcare reform signed into Massachusetts law in 2006 by then-governor Mitt Romney. That gives companies and individuals within the state a certain perspective and, in some ways, a leg up on the rest of us. Without casting the state as the proverbial canary in the coalmine, stakeholders have some concerns.
Thumm says that business is healthy at Albright, "but the medical device industry is about to be hit with a triple whammy: reimbursement, the device tax, and [the ramifications of] the Affordable Care Act." He singles out the 2.3% medical device excise tax as especially problematic as the tax "hits the top line of revenue. It will affect R&D especially hard."
One thing that Massachusetts has learned from healthcare reform, says Sommer, is that demand for medical devices will not increase simply because more people are covered by health insurance. "Many of the new enrollees are young people, and they won't be needing coronary implants or hip and knee replacements for some time. The sales increase we were expecting did not materialize." In addition to that, device manufacturers are grappling with payment reform, he adds.
"Companies are seeing a new model for selling into the healthcare delivery system," says Sommer. "Doctors used to make purchasing decisions, and that is now shifting to folks in the C suite, who are looking at other factors than safety and efficacy, and seeking ways to reduce healthcare costs."
It's a lesson for the learning as the ACA transforms healthcare economics across the country, a path that Massachusetts, in some ways, pioneered.