Originally Published MPMN April 2009

REGIONAL ROUNDUP

Medtech Industry: Happy to Live in Massachusetts

Among the most-prominent players in the medical device industry is Massachusetts. The reasons for this are manifold: "We have a large number of world-class research institutions spinning out new technology; teaching hospitals that are providing clinical expertise for the development of these products; and a trained, skilled workforce, thanks to the educational institutions in the area," remarks Thomas J. Sommer, president of the Massachusetts Medical Device Industry Council (MassMedic; Boston).

In addition to these critical assets, Massachusetts has a long history of precision engineering and instrument making that has made the state a hub for the defense, computer, information-communications, and life sciences industries. It also has a strong venture-capital community that supports emerging medical technologies.

The annual output of American medical device companies grew from $10 billion in 1979 to more than $90 billion in 2004, reported a 2006 study published by MassBenchmarks, a journal on the Massachusetts economy published by the University of Massachusetts Donahue Institute (UMass; Amherst, MA) in cooperation with the Federal Reserve Bank of Boston. And, according to U.S. Department of Commerce data, Massachusetts was ranked within the top five medical device manufacturing states in both per capita and absolute terms in the areas of employment, payroll, value of shipments, and value-added.

The hothouse growth of the medical device manufacturing industry in the Bay State is reflected in the state's export figures. While total exports grew by 18% between 1998 and 2003, medical device exports grew by 78%. In 2006, medical devices made up 10.5% of the state's total exports, amounting to $2.5 billion, according to a 2007 UMass Donahue Institute report commissioned by MassMedic. And $1 of every $10 entering the state from export sales came from the sale of medical devices, most of which were shipped to Western Europe and Asia. Michael Goodman, director of economic and public policy research at the UMass Donahue Institute, stated, "On a national level, Massachusetts' medical device exports represented 9% of total industry exports from the United States in 2006."

Facing stiff competition from California and Minnesota, Massachusetts ranked second behind Minnesota for total per capita employment in the medical device sector in 2006. The UMass report also emphasized that the industry generated $8.3 billion in economic activity and relied on direct and indirect employment of nearly 50,000 people. More recently, however, employment in the medical device manufacturing sector dropped off to 22,000 by 2008, reflecting job cuts at major medical device companies such as Boston Scientific Corp. (Natick, MA).

Even in the midst of the most severe economic downturn since the Great Depression, however, medical device manufacturers have indicated that they are planning to expand or move within Massachusetts by 2010, according to a survey of MassMedic's membership conducted last year by Northeastern University's Center for Urban and Regional Policy (Boston). For many businesses, having a good place to live, as well as access to amenities and research institutions, outweighed the state's relatively high taxes, land costs, and cost of living. Of those companies that responded to the survey, 51% said that they are considering an expansion in Massachusetts.

Massachusetts legislators have also grappled with how to offset the high cost of doing business in the state. In 2006, for example, they passed an economic stimulus bill that allows medical device manufacturers to claim a 100% credit for user-fee payments to FDA for the agency to review products developed or slated for manufacture in the state.

Some of the state's institutions are also lending a hand to the industry. Inventors and executives from the state's smaller device companies can turn to the Massachusetts Medical Device Development Center (M2D2; Lowell, MA) for access to researchers and resources at the UMass campuses in Lowell and Worcester. M2D2 assists companies in meeting FDA standards that regulate medical device design and controls, materials selection, materials procurement and control, prototype development, process development validation, and all stages of clinical trials. Similarly, the John Adams Innovation Institute (Westborough, MA) has awarded funds to a program that aids new medical device entrepreneurs. Launched in 2007 by MassMedic to provide mentors to executives of Massachusetts medical device start-ups, the program planned to work with up to 12 new entrepreneurs by the end of 2008.

All of these initiatives hold promise for the future of the state's medtech industry. "This supports our sense that the medical device industry is happy to be here," stresses MassMedic's Sommer. "Despite some higher costs, it is planning to grow."

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