Medical Device Sector Is Key to the Keystone State's Lehigh Valley

Originally Published MPMN September 2009

REGIONAL FOCUS: Pennsylvania

Medical Device Sector Is Key to the Keystone State's Lehigh Valley
 

From rust belt to high-tech hub, Pennsylvania's east is becoming one of the country's leading medical device manufacturing centers
 

Bob Michaels
 

A century ago, Pennsylvania was synonymous with industry. From Pittsburgh in the West to Bethlehem in the East, the commonwealth was dotted with coal mines, oil fields, steel mills, and textile and apparel factories. While traditional industrial manufacturing in Pennsylvania has declined over the decades, the service sectors have flourished. With a gross state product totaling $533 billion in 2008, among the largest in the United States, a lion's share of economic output has been concentrated in general services. And of all the service industries, some of the fastest growing ones are concentrated in the medical and health fields.

In 2005, Pennsylvania was ranked among the top-five U.S. states for medical device employment. Two years later, the Philadelphia metropolitan area ranked number three in the country in terms of total employment in the bioscience fields, including medical devices and equipment; drugs and pharmaceuticals; and research, testing, and medical laboratories. At the same time, 80% of the world's pharmaceutical companies were present in the region, which was also among the top-10 metropolitan areas for medical device and equipment employment. For Pennsylvania, the times they are a-changin'.
From Heavy Industry to High-Tech Haven

Less than an hour's drive from Philadelphia and about an hour and a half from New York City is one of the Mid-Atlantic region's up-and-coming biotech hubs: the Lehigh Valley. Between 1990 and 2003, medical device manufacturing was the seventh largest net jobs producer in the area. With a population of 635,000, two interstate highways, and an international airport, the area is well served by 11 colleges and universities that support a skilled workforce and a host of medical device firms and component suppliers. Boasting a medical device manufacturing base that fabricates a multitude of products, from electronic parts and tubing to IV components and vascular systems, the region is home to a variety of suppliers and OEM giants such as Olympus (Center Valley, PA; www.olympusamerica.com), a provider of medical-imaging technology.

One supplier to the medical device industry in the area is Fluortek (Easton, PA; www.fluortek.com). Offering PTFE and thermoplastic extrusions, braid-reinforced catheter tubing, heat-shrink tubing, and component assembly services, the company provides a range of contract manufacturing services. Founded in 1980, the ISO 13485:2003-certified vendor boasts more than 50,000 sq ft of manufacturing space.
There are several advantages to being a medical component outsourcing company in eastern Pennsylvania, comments Karen Werkheiser, Fluortek's sales development manager. "The area provides good colleges nearby to provide an educated workforce. We also have good logistics--a shipping corridor in close proximity to New York City and Philadelphia--without major congestion. In addition, real estate and utilities costs are affordable, and business and real estate taxes are reasonable."
Located just down the road from Fluortek, B. Braun Inc. (Bethlehem, PA; www.bbraunusa.com) is headquartered in the same town that used to be home to Bethlehem Steel, once one of the country's largest steel manufacturers. While the old rusting steel mill along the Lehigh River is being converted into a tourist destination complete with a casino, museum, concert hall, shopping mall, and hotel, B. Braun is choosing to make use of the region's resources by providing a large palette of offerings to the medical device industry.
Delivering a range of contract manufacturing capabilities, the B. Braun OEM Div. serves device makers by designing, assembling, and packaging Class II and Class III medical devices. The company manufactures thousands of standard and specialty items, from components to custom trays. Services available for outsourcing include design and development, project management, manufacturing, packaging, sterilization, private labeling, and quality control.
"The Lehigh Valley area has an outstanding work ethic and pride," says Tom Black, B. Braun's vice president of sales and marketing. "The area also has a heritage of manufacturing." Like Fluortek's Werkheimer, he agrees that the area represents a logistical goldmine. "We enjoy proximity to pharmaceutical and medical device companies in the greater Philadelphia and metro New Jersey markets. With many transportation options, the region is a major distribution hub with ready access to highways, ports in New Jersey and Delaware, rail, and air transportation." B. Braun resides within a day's drive of nearly two-thirds of its customers and within reach of major U.S. markets.
Although Lehigh Valley's heavy industry is a thing of the past, its long history in the area is up front and personal for many people who live and work there. Coming from a family of steelworkers, Joe Horvath, vice president and general manager of Sanbor Corp. (Allentown, PA; www.sanbor.com), comments, "From the perspective of the old industrial base, Sanbor really started toward the end of the decline in the Lehigh Valley. Bethlehem Steel had already wound down. Caterpillar was nearing its end. Mack Truck manufacturing had pretty much already moved south."
Founded 20 years ago, the company flourished in the new environment. While its interconnect division manufactures electronic cable assemblies for a variety of industries, including medical, its medical division provides targeted manufacturing and assembly services that include printed circuit board assembly, plastics molding, and hardware assembly for such products as patient monitors, handheld instruments, and single-use disposables. With manufacturing facilities in China, Sanbor maintains its headquarters in Allentown, in addition to engineering, customer service, sales, and marketing departments.
Lehigh Valley Goes to School
For local manufacturers, one of the region's most important assets is its colleges and universities. B. Braun's Black emphasizes that excellent educational institutions from Boston to Washington, DC, including Lehigh University (Bethlehem, PA; www.lehigh.edu) within miles of its Bethlehem headquarters, are a boon to the medical device manufacturing industry.
A plethora of colleges and universities in the region support the industry's demand for a skilled, trained, and scientifically educated workforce, Werkheiser remarks. In addition to local institutions such as Lehigh University, Northampton Community College (Bethlehem, PA; www.northampton.edu), and Muhlenberg College (Allentown, PA; www.muhlenberg.edu), schools near the Lehigh Valley with biomedical engineering programs include Drexel University (Philadelphia; www.drexel.edu) and the University of Pennsylvania (Philadelphia; www.upenn.edu). Related programs are also offered at Pennsylvania State University (University Park, PA; www.psu.edu), with campuses throughout the commonwealth, and across the state at Carnegie Mellon University (Pittsburgh; www.cmu.edu) and the University of Pittsburgh (www.pitt.edu). Over the state line in nearby New Jersey are Rutgers University (New Brunswick; www.rutgers.edu) and the New Jersey Institute of Technology (Newark; www.njit.edu), many graduates of which work in Pennsylvania's medical device industry.
"Fluortek has received technical support from Lehigh University students on several occasions and from Muhlenberg College," Werkheiser remarks. "It also maintains a collaborative relationship with the New Jersey Institute of Technology." The school is the alma mater of the company's R&D manager. In the last two years, the supplier's R&D department has also sponsored interns from Lafayette College (Easton, PA; www.lafayette.edu) and Rutgers University.
More than 50,000 students are enrolled at various colleges, universities, and technical training schools throughout the Lehigh Valley. The center of the life sciences industry in the region, however, is Lehigh University, the area's only research university. While the university was geared historically toward serving the steel industry in the Lehigh Valley, its focus has shifted as steel has disappeared and biotech has fluorished. Today, chemicals and life sciences are two particular areas of interest at the university. In recent years, Lehigh University has committed itself to increased participation in the life sciences, backing it up with significant investment activity.
In addition to Lehigh University, Northampton Community College plays a prominent role in supporting life sciences activity in the area.
Offering a biotechnology associate degree, the college is involved in life sciences workforce training that provides area businesses with experienced personnel.
Incubators Seed Start-Ups
Administered by the Lehigh Valley Economic Development Corp. (LVEDC; Bethlehem, PA; www.lehighvalley.org), the Southside Bethlehem Keystone Innovation Zone (KIZ) partners with local educational institutions to prepare students for participation in industry. "KIZs create 'knowledge neighborhoods' close to colleges and universities," remarks Margaret McConnell, LVEDC's director of marketing and communication. "In the case of the Southside Bethlehem KIZ, we partner with Lehigh University and Northampton Community College." The KIZ helps entrepreneurs and college graduates that work for business start-ups so that they remain in the area. Consisting of 14 partner organizations, the KIZ has funded more than $450,000 in technology-transfer grants to 24 start-ups, leveraging more than $11,000,000 in total investment.
"The KIZ offers incentives for medical device companies, including technology-transfer grants for start-ups and paid undergraduate and graduate student internships," McConnell explains. "Right now, we have at least five companies in the medical device area developing their products here in the zone. We are also working on a second incubator for companies to complement the Ben Franklin incubator."
The Ben Franklin Technology Partners of Northeastern Pennsylvania (BFTP/NEP; nep.benfranklin.org) supports early-stage technology firms and established manufacturers with funding, people, technology, university connections, and other resources. Serving a 21-county area, it is headquartered on the campus of Lehigh University and has regional offices in Lewisburg, Reading, and Wilkes-Barre.  
All three organizations have helped to revitalize the local economy, says Sanbor's Horvath. "In the '90s, they brought in a lot of high-tech industry, some of which was already here. These organizations provide a lot of seed money for a lot of venture capital and start-up companies." For example, Sanbor is working on a project with a local start-up, providing prototypes and preparing to begin production for a product developed in association with BFTP/NEP.
An array of companies in the Lehigh Valley--from start-ups to mature manufacturers--fabricate products for the medical device, diagnostics, biological, and pharmaceutical sectors, engaging in R&D, manufacturing, packaging, and distribution. If the dead hulk of Bethlehem Steel's former mill on the Lehigh River came to symbolize the decline of the Lehigh Valley at the end of the last century, the growth of the biotech industry in the region represents its potential future.

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