The state is home to premier research institutions and one of the densest concentrations of medtech firms in the country.

No mistake about it: Massachusetts has one of the strongest life science industries of any region--in the United States or globally. That's not exactly news unto itself, as the state has long had a leadership role in this space.

A 2008 report from PwC titled "Super Cluster" shared that assessment as well but stressed the need for more government support to keep the sector competitive. That year, Governor Deval Patrick signed into law a $1 billion package to support the industry over a ten-year period. To date, $350 million of that funding has been invested. Third-party contributors have matched the funding with more than $1 billion of their own money.

"The big-picture story is that four or five years ago, we were viewed as one of the leaders in the life sciences," says Angus McQuilken, vice president for communications and marketing at the Massachusetts Life Sciences Center (Waltham; www.masslifesciences.com). "Nearly five years later, we are now recognized as the global leader in the field."

Tom Sommer, president of the Massachusetts Medical Device Industry Council (MassMEDIC; Boston; www.massmedic.com) shares that sentiment. "We have the nation's largest biotechnology cluster and the second-largest medical device cluster in the same small state.What was missing before was strong government support," he says. "The Patrick administration certainly met the challenge and has started to really make serious and collaborative efforts with industry and provide financing and grant support for medical research and company development. I think that has certainly augmented our status."

In addition to government support, Sommer cites a skilled workforce, its aptitude for science and research, and a strong funding climate as important elements in the state's strength in life sciences.

The state's strength in all three of these areas is impressive. Massachusetts has the best-educated workforce in the United States, according to a study by The Chronicle of Higher Education, which analyzed 2010 data. The greater Boston area itself plays an important role in terms of research and funding. "In the city of Boston, we have 14 of the 16 teaching hospitals that are located in the state," Sommer says. "Those teaching hospitals attract 60% of all the National Institutes of Health (NIH) funding that goes to teaching hospitals in the United States. And the NIH funding isn't subject to political pressure or lobbying. The hospitals are judged on their merits without the knowledge of the applicants."

Last year, Massachusetts received 11.3% of all NIH funding, more than every other state except California. Per capita, the attracts more NIH funding than any other state. In 2012, research projects based in the state won 5105 NIH awards, amounting to $2.47 billion in funding. For the past 17 years, Boston has received the largest share of NIH funding of any city in the country, amounting to $23.4 billion in awards over that period of time.

Two of the state's most famous educational institutions, Harvard University and Massachusetts Institute of Technology (MIT), are located in Cambridge--just across the Charles River from Boston. The two universities help attract substantial R&D funding to the city. In fact, while Silicon Valley attracts $1.3 billion in R&D spending annually, according to the National Science Foundation, $4 billion is invested each year in Cambridge.

A Thriving Medtech Industry

The medtech industry is especially strong in Massachusetts. Medical devices are the state's biggest export, comprising 13% of its international trade. The Commonwealth has the second-largest number of medtech firms in the country, behind California. In all, more than 400 medtech firms call Massachusetts home, including the likes of heavyweights such as Boston Scientific (Natick), Covidien (Mansfield), and Johnson & Johnson's DePuy (Raynham). In addition, the state boasts a sizable number of startups as well as medium-sized firms.

The medtech sector employs more than 24,000 people; more than 55,000 of the state's residents work for suppliers to the medtech sector, according to MassMEDIC. In all, the industry is responsible for more than 80,000 jobs. "There is also a vibrant supply base that has been built up over many years that services the medtech industry," Sommer says. "We have service suppliers and contract manufacturers, component manufacturers, and product developers--all servicing the medical device industry."

Geography Matters

The majority of the state's medical device development and manufacturing industry is based in the Eastern half of the state along the two major ring roads that encircle Boston--Route 128 and Route 495. Device companies and suppliers to them are, however, located in nearly every single state region.

"When visitors from, say, China come to visit us to see how our cluster is structured, they ask if they can see one of our bio parks," McQuilken comments. "But we view our entire state as a bio park." While it is certainly the case that Cambridge is the heart of the state's innovation cluster in life sciences, many of the larger companies in particular are choosing to locate in other parts of the state. Boston Scientific, for example, just announced that it is moving its corporate headquarters from Natick, which is about 30 miles outside of Boston, to Marlborough, which is farther out. "We are seeing growth in concentric rings around the innovation centers of Boston and Cambridge," McQuilken adds. "This means that a lot of the jobs that are being created are accessible to people all over the state."

The greater Boston area, however, continues to be anchored by a number of medtech industry giants--a number of which are European organizations that have chosen to locate their U.S. headquarters in the greater Boston area. "When the Pilgrims landed, the Europeans could come to the Boston area as their entry to America and go from there. In a similar way, Boston benefits from having a number of headquarters for several of the larger medtech European companies based in the area," says David Dykeman, a patent attorney and co-chair of the intellectual property department in the Boston office of the international law firm of Greenberg Traurig (Boston; www.gtlaw.com). Prominent examples of those companies include Smith & Nephew (London) and Covidien (Dublin), as well as Philips Healthcare (Best, the Netherlands), Dräger (Lübeck, Germany), and Straumann AG (Basel, Switzerland).

There has been a continuing trend for small to medium-sized international companies to locate their U.S. headquarters or subsidiaries in Massachusetts. "A good recent example of that is ARGO Medical Technologies based in Israel," McQuilken says. "They have created a robotic exoskeleton that allows people with lower-limb paralysis to walk. They are interested in entering the U.S. market and have located their domestic headquarters in Marlborough."

Looking Ahead

The state is well positioned to remain a medtech powerhouse in both the near and long term. "Still, we recognize that when you are the leader in any field, others are going to try to catch up," McQuilken says. Thus, his organization is working to help keep the state's workforce competitive. "We want to make sure we continue to build on our pool of talent so companies can continue to develop their products and bring them to market."

Other concerns include cost containment efforts posed by sequestration and the Affordable Care Act (ACA). "Certainly, in Massachusetts, a reduction in NIH funding due to sequestration is going to be felt profoundly here in the teaching hospital community in this current fiscal year," Sommer says.

In several ways, the device firms based in the state have an edge over other domestic companies because of their experience in responding to cost-containment efforts. Take, for instance, the "Physician Payments Sunshine Act," component of the ACA. "We in Massachusetts have been used to reporting payments to physicians--in fact, to a much longer list of healthcare providers--as a result of a law that was passed here in 2008: our so called 'Gift Ban' law," Sommer says. The state's healthcare reform bill, which served as a model for the ACA, was passed in 2006.

Still, healthcare cost-containment efforts are worrisome. "One of our major concerns was that under payment reform [specified by state law], there would be no incentive to use new medical technology because of its cost," Sommer notes. "Our concern was that this would have an impact on the innovative nature of the industry, as well as the fact that some of the new medical technologies are being designed with the idea of actually saving the healthcare system money," he says. "The idea that medical technologies fit into a new payment methodology is very important for local medical device companies."

Brian Buntz is the editor-in-chief of MPMN. Follow him on Twitter at @brian_buntz.