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State of the Art

Originally Published MPMN September 2002

REGIONAL FOCUS

State of the Art

Introducing an occasional series reporting on regions with a tradition of medical device manufacturing. First stop: Minnesota's Medical Alley.

Norbert Sparrow


(click to enlarge)

More than 800 registered device firms are located along a 300-mile corridor in Minnesota that stretches from Rochester in the south, through Minneapolis and St. Paul, to the north of the state. Known as Medical Alley, the region is the largest producer per capita of medical equipment in the United States. This concentration of industry has spawned a vast network of suppliers uniquely attuned to the needs of device OEMs. In this occasional series devoted to our nation's centers of medical technology, MPMN reports on how and why the device industry took root in the region, and the way in which area suppliers are helping it to meet current and future challenges.

A Med-Tech Mind Set

In the beginning, there was Medtronic . . . or maybe not. Conventional wisdom and a cursory overview of the history of the device industry in Minnesota suggest that the medical device powerhouse laid the groundwork for Medical Alley. But although Medtronic played a pivotal role in the regional emergence of the medical device sector, a number of other factors should not be overlooked, say local industry experts.

The internationally renowned Mayo Clinic in Rochester instilled in the populace a med-tech mind set early in the last century. "Physicians from the Mayo Clinic, as well as staff from the University of Minnesota, collaborated with engineers and entrepreneurs," says Don Gerhardt, president and CEO of Medical Alley, a trade association that represents more than 250 member organizations involved in healthcare activities. The current industrial landscape of the region was shaped by "those two organizations' inventiveness and drive for quality," says Gerhardt, "which was ultimately transferred to the adventuresome side of entrepreneurship."

The presence of information technology companies during that industry's early days also had an effect, according to Gary Tapp, a senior partner at outsourcing firm MedTech Development. "Medical tends to follow high tech," says Tapp, "and Minnesota was a high-tech community for a long time. In many ways, it still is."

To understand why the device industry flourished here, says Dale Olseth, CEO of the surface-treatment technology firm Surmodics and former CEO of Medtronic, one must take into account the character and values of Minnesotans. "This part of the world has its roots in the cultures of northern Europe, which have always had a strong work ethic," says Olseth. "We square the corners. There are no fast bucks here," he adds, citing 3M as a prime example. (The company is currently celebrating the centennial of its founding as the Minnesota Mining and Manufacturing Company in Two Harbors.)

"3M has never been what I would call a sexy company, but it squares the corners—it does things right. It has always looked after its people," says Olseth. "That has spawned a culture that works well with healthcare, where you want quality products and organizations." Medtronic was a beneficiary of this culture, and has helped to perpetuate it. Few know the company's history better than Olseth, who managed Medtronic's finances in the early 1960s, eventually taking it public, and served as CEO from 1976 to 1986. It's an experience he recalls fondly.

Earl Bakken, an electrical engineer who founded Medtronic as a medical equipment repair company in 1949 with partner Palmer Hermundslie, was a visionary, says Olseth. "The people at Medtronic were do-gooders, and I mean that in the best sense," Olseth says. "We wanted to do good." That ethos came directly from Bakken, he adds. "I used to have to balance his checkbook," says Olseth. "He just wasn't able to deal with it. His mind was on bigger things."

Bakken and Hermundslie initially set up shop in a 600-sq-ft Minneapolis garage. In one month during its first year, the company grossed $8 for the repair of a centrifuge.

Realizing that they had to diversify if they wanted to survive, the partners began representing medical equipment manufacturers in the upper Midwest. As they made their rounds, they became acquainted with medical practitioners and researchers throughout the area, who began asking Medtronic engineers to modify existing equipment and build custom devices for special tests.

An encounter with C. Walton Lillehei, MD, a pioneer in open-heart surgery at the University of Minnesota's medical school, proved to be a seminal event in the company's history. Bulky ac-operated pacemakers were the norm in the mid-1950s, and Lillehei and his colleagues teamed up with Medtonic engineers to develop a better system. Bakken created a wearable, external-battery-powered device that revolutionized medical technology. Many more innovations followed, and today the firm is a $6.5 billion medical technology multinational.

An Abundance of Suppliers

Precision coils and assemblies that are integrated into a range of medical devices, primarily to strengthen catheters, are supplied by St. Paul–based Vadnais Technologies.

The presence of Medtronic, St. Jude, Guidant, and several hundred other innovative device OEMs has fostered the development of a pool of suppliers offering an array of services. Many have developed a technological skill set and in-depth understanding of regulatory requirements that have made them players in the global supply chain.

The reputation of the region is such that Ireland-based Creganna Medical Devices, a supplier of metal and plastic components and subassemblies, opened its North American sales office in the Minneapolis area. Citing the concentration of medical device companies, the region's tradition of manufacturing acumen, and its central location, "Minneapolis is excellent in every respect," says president of sales and marketing Eoin O'Madagain.

When MedSource Technologies was incorporated in 1998 and embarked on a series of acquisitions to build a comprehensive outsourcing company catering to the device industry, it chose Minnetonka as its headquarters. For a company promoting the outsourcing model to device OEMs, it made eminent sense to set up shop in the device industry's heartland. The strategy has been a tremendous success, says Steve Mogensen, director of sales operations.

"Historically, the device industry has been vertically integrated," says Mogensen. "People were not willing to give up final control of a finished device, especially a Class III device." But the sector has undergone substantial change in the past few years, he adds. "Many larger companies have figured out that they're really good at R&D activities and sales and marketing, but that it doesn't make a lot of sense to spend capital on a building and machinery, and to hire a bunch of people to manufacture widgets. That is not their core competency," Mogensen explains.

MedSource has integrated an array of expertise and manufacturing capabilities so that OEMs can channel resources on their key activities. The company's services span development and design, prototyping, manufacturing, assembly, packaging and sterilization, and distribution.

Golden Valley–based MedTech Development is also an advocate of the outsourcing model, but it took a slightly different tack than MedSource.

"The company began about 11 years ago as a medical device project management company," says senior partner Gary Tapp. "Our job was to go to companies and educate them about quality project management." Eventually the firm began taking over projects that were not part of their customers' mainstream product lines. "We took that concept and put more of a structure around it," says Tapp, thereby evolving into a "group of companies, each a leader in its field, under one roof."

The company's philosophy, says director of business development Ron Schlenker, is to take the strategic sourcing mentality and orient it toward product development. "We implement the management philosophy and process, from intellectual property and contract manufacturing to distribution, across different organizations," says Schlenker. The organization comprises more than 25 CRO consultants, 135 engineers, and 110 manufacturing professionals, and it has contributed to the development of numerous medical products, including more than 80 types of stents and delivery systems.

These companies and more than a dozen other area suppliers are profiled in the following pages of this Regional Focus section (hundreds more can be found in our on-line suppliers directory at www.devicelink.com). Regardless of the product or service that you are sourcing, you will almost certainly find a company in Medical Alley with the expertise and capabilities to meet your requirements.

Copyright ©2002 Medical Product Manufacturing News

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