Puerto Rico Attracts Device-Industry Investment

Originally Published MDDI November 2004

NEWSTRENDS

Puerto Rico Attracts Device-Industry Investment

Erik Swain

Tax advantages and a skilled but cost-effective workforce have prompted several device companies to expand operations in Puerto Rico.
In September, the Puerto Rico Industrial Development Company (PRIDCO; New York City) announced that four device companies had committed to increasing the size and, in some cases, the number of their Puerto Rico facilities. The projects are expected to create 955 jobs. The firms will invest $30 million in physical plants, machinery, and equipment.

Becton Dickinson and Co. (Franklin Lakes, NJ) announced plans to expand its plant in Las Piedras. The firm is expected to invest $8.6 million and add 105 jobs in an effort to increase production of surgical scalpels and knives.

Ethicon Inc. (Somerville, NJ), a Johnson & Johnson company, is building a new plant in San Lorenzo to manufacture sutures and other products. It intends to invest $7.7 million and create 400 jobs over the next 18 months.

St. Jude Medical Inc. (St. Paul, MN) plans to boost manufacturing of pacemakers and cardiac catheters at its plants in Caguas. It aims to add 150 jobs and invest $3 million.

United States Surgical (Norwalk, CT), a division of Tyco Healthcare Group LP, says it will bolster its facility in Ponce, where it manufactures surgical instruments and sutures. It has committed to creating 400 jobs and spending $10.4 million on the upgrade.

The device industry constitutes a large portion of Puerto Rico's scientific instruments sector, which, according to PRIDCO, comprises 67 plants and 15,112 jobs. It exported products worth $1.8 billion in fiscal year 2003, up 30% from 2002, including 50% of the pacemakers and defibrillators sold in the United States.

One reason Puerto Rico is attractive to the device industry is the island's maximum 7% corporate income tax, says Marie Robert, PRIDCO's deputy executive director of new business development. Depending on the level of investment and other factors, the rate can go as low as 0%, she notes. Also, in many cases, firms can get reduced municipal and property taxes.

Another factor is that because the island has attracted life sciences manufacturing for about 40 years, it has developed a well-educated workforce that understands its intricacies. “We rank sixth in the world in higher-education enrollment [per capita], and confer 9000 degrees per year in science and engineering alone,” Robert says. “Our workers know things like GMPs and validation, and they understand how to operate within an FDA-regulated facility. Companies wouldn't have stayed for 40 years if all we had to offer were tax advantages.”

A third advantage, she says, is that as a U.S. territory, all U.S. rights, rules, and regulations apply in Puerto Rico except those concerning taxes. This is one reason why there have been an increasing number of clinical trials conducted on the island, she notes.

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