Medical Device Daily Contributing Writer

According to a study just released by the University of Massachusetts Donahue Institute (Boston), medical devices are one of the fastest growing segments of exports in that state's economy, and the life science field is second only to healthcare as the state's leading job creator.

The study, commissioned by the Massachusetts Medical Device Industry Council (Boston) in conjunction with by PricewaterhouseCoopers, the Massachusetts Technology Collaborative (Westborough, Massachusetts) and the New England Healthcare Institute (Cambridge, Massachusetts), finds that medical devices comprised 10.5% of totals total exports of the state in 2006 and brought in about $2.5 billion and that $1 of every $10 brought into Massachusetts from export sales is from medical devices.

The report, titled "Super Cluster: Ideas, perspectives and updates from the Massachusetts life sciences industry," estimates that the medical device industry generated $8.3 billion in economic activity and employed nearly 50,000 directly and indirectly in the state.

The report was compiled from an online survey conducted in the winter of 2007 and reflecting responses from 105 individuals in 92 organizations.

Gerry McDougall, a partner in charge of the health sciences practice at PricewaterhouseCoopers, told Medical Device Daily that the "super cluster" terminology applies not only to the companies that are involved in developing devices, diagnostics, biotechnology and pharmaceuticals, but also to the teaching hospitals, academic institutions and venture capitalists "that make it a vibrant cluster." The density of learning institutions, particularly in the Boston area, he added "is a unique asset globally."

The last time an assessment of the industry was done in 2004, medical devices made up $2.1 billion of the state's exports, and the industry's total economic impact was $7.3 billion. Globalization and demand for health are services and products worldwide contributed significantly to the growth, according to Michael Goodman, director of economic and public policy research at the UMass Donahue Institute.

"We're in an era where slow but steady improvements in other parts of the world are also playing themselves out as an economic driver here in this country through growing demand for these kinds of products," Goodman told the Boston Business Journal.

On a national level, Massachusetts' medical device exports represented 9% of total industry exports in the U.S. in 2006. Goodman said Massachusetts faces its biggest competition in the industry from, not surprisingly, Minnesota and California, areas with strong capacity in biotech and the life sciences.

The research, according to Goodman, found Massachusetts ranks second behind Minnesota for total per-capita employment in the medical device sector. Factors such as access to research-oriented hospitals and a well-educated workforce, qualities all three states possess, are critical to innovation in the medical device field.

"Oftentimes medical practitioners develop new techniques and devices in their practice and then companies market the technology," said Goodman. "Medical device firms want to be in close proximity to those on the cutting edge of excellence."

Massachusetts leads the U.S. in the number of life science patents and share of government research funding on a per capita basis, and life sciences firms are expanding both R&D and manufacturing capacity inside the state.

"I thought that it was astronomical that 99% of the life sciences firms that do R&D expect to maintain or increase their activities over the next few years," McDougall told MDD.

The report also found that Massachusetts ranks second behind California in total venture capital financing of life sciences companies and number of deals. The state's 43% growth in venture investments in 2006 far surpassed the 10% growth for California. Coupled with Massachusetts' large share of National Institutes of Health funding, this has helped fuel innovation in the state, the report said.

Despite the success of Massachusetts' life sciences industry, the study provided some warnings — that future growth may be hampered by the state's high cost of living, shortage of affordable housing, transportation issues resulting in long commutes, a diminishing pipeline of math and science students and the high cost of doing business in the state.

"First and foremost, this report is a celebration of Massachusetts' success and the important role its life sciences sector is playing in new approaches to human health," said James Connolly, PricewaterhouseCoopers partner and Boston Life Sciences Assurance practice leader. "But it also should be a call to action. Other states and foreign countries recognize the value of the life sciences as an economic engine of growth and are aggressively luring firms and talent. Many of these states are seeing faster job growth than Massachusetts. While it would be difficult to replicate Massachusetts' strengths, it's not impossible, and we should never be complacent."

The report noted that almost every state in the country and many foreign nations now have economic stimulus packages to expand their life sciences capabilities. Eight- five percent of more than 100 Massachusetts' life sciences leaders surveyed by PricewaterhouseCoopers said they believe the state legislature should endorse a bond referendum to support future growth of the industry.

"Though the life sciences industry is a significant and growing component of the Commonwealth's economy, Massachusetts life sciences leadership is not a foregone conclusion," said Wendy Everett, president of the New England Healthcare Institute. "Given increasing global and national competition, the future prosperity of the industry and the state will depend on development of a strategic long-term plan to address systemic challenges such as education and infrastructure. We need concerted commitment to promote the growth of this industry and forge stronger partnerships between the public and private sectors."

McDougall suggested that one way to maintain high levels of new development in the state is through encouraging growth through economic stimulus packages "outside the metropolitan area of Boston." He said this would be particularly doable for the "manufacturing side of the equation where you don't have [the need for] those high-end PhD-type positions as you have on the R&D side."

While the Super Cluster report identifies major challenges, it found that there is significant opportunity for Massachusetts to maintain its leadership position. Almost three-quarters of survey respondents said Massachusetts will be able to maintain its leadership position as a biotechnology/R&D center of excellence in the U.S.