Area Development
According to The Wall Street Journal, healthcare spending in the United States will exceed $4 trillion by 2017, nearly doubling the 2007 amount. Much of this growth is driven by an aging baby boomer population that wants to stay healthy and active and has high expectations for medical technology that will help them do it.

The global medical device and diagnostics market is estimated at about $260 billion. The United States is the largest producer and consumer of medical devices in the world. The Advanced Medical Technology Association (AMTA) estimates the U.S. medical device market alone generated about $85 billion in sales in 2006 and forecasts that the industry will grow at an annual pace of 8 to 10 percent.

U.S. manufacturers are known for their innovation, especially in designing products that rely on advanced materials, nanocomponents, and micromechanical engineering. "The U.S. medical device industry is steering toward taking healthcare to the next level through advancements in technology relating to artivicual organs, biomaterials, robotics, electronics, and instrumentation," says Archana Swathy, a researcher with the consulting firm Frost and Sullivan, which tracks the industry.

Venture capital firms have also been investing heavily in medical device technology, to the tune of about $2.7 billion in 2006. "2007 was also a solid year for investment in medical devices," says Ahmed Enany, president and CEO of the Southern California Biomedical Council. "Investors are paying more attention to devices because of the downturn in pharmaceuticals, and more venture capital is being invested in medical device IPOs."

Investors are especially keen on cardiovascular devices, deep-brain stimulation devices, neurostimulators, and orthopedic technology, especially for herniated spinal disks - technology geared toward helping aging baby boomers with their ailments.

"Orthopedics continues to be a strong growth industry," says Bob Durgin, corporate vice president for global quality and clinical and regulatory affairs for Biomet, a Warsaw, Indiana, medical device firm. "Most of our products assist an aging demographic that wants to maintain an active lifestyle. Knee replacement devices - such as the Oxford Knee, our partial-knee device - are in high demand and growing at a rate exceeding 10 percent a year." Spinal devices is another hot segment of the market, with an annual growth of about 20 percent and driven by cutting-edge research in bone growth factors and fusion biologics.

Another strong trend is the emphasis on combination products - an estimated 30 percent of new biomed products being developed are "combo products" that embed medical devices in pharmaceutical or biologic components. This market was valued at nearly $6 billion in 2004 and is expected to grow at an annual rate of 10 percent through 2009 to nearly $10 billion. Some of these technologies include drug-eluting stents, steroid-eluting electrodes, and coatings and surface-treatment processes for implantable devices.

The U.S. Market
With more than 6,000 medical device companies, the United States is by far the largest producer of medical devices in North America. It is well known for its ability to continually design, develop, and commercialize innovative medical devices.

Business has been booming - for example, AMTA reports an 80 percent increase in patents for breakthrough medical technologies over the last decade. Investment in research and development has more than doubled during the 1990s and now stands at nearly 12 percent of sales (more than four times that of the average manufacturer). Because of this commitment to research and development, an increasing number of venture capital firms are investing the U.S. medical device market.

More than 411,000 workers are employed in the medical device industry in the United States. Leading states include California, Minnesota, Florida, Massachusetts, New York, and Pennsylvania. Well-established, internationally famous clusters are located in Minneapolis/St. Paul, Minnesota; Los Angeles, California; Philadelphia, Pennsylvania; Raleigh-Durham-Chapel Hill, North Carolina; and Boston, Massachusetts.

However, there is a growing trend in the industry of locating new facilities away from key clusters, which results in significantly lower labor costs because local resources are not being shared by a group of similar companies. Therefore, medical device firms are starting to explore lesser-known cities that have the labor, infrastructure, university support, transportation, and distribution needs they are looking for. According a recent Battelle/BIO study, a number of smaller cities are aggressively developing research assets, talent, and tech-transfer capabilities to attract biomed/biotech firms.

Arizona has growing medical device cluster. About 4,500 Arizonians are employed with medical device companies. Key players are W.L. Gore and Associates and Machine Solutions in Flagstaff, and Medtronic in Tempe. According to Battelle/BIO, Flagstaff is one of the top small metropolitan cities that has the necessary infrastructure and work force to support medical device manufacturing. Flagstaff is building a $3.6 million high-tech incubator and also plans to construct the 200,000-square-foot Flagstaff Science and Technology Park.

Tampa Bay has a robust medical technology cluster that employs 11 percent of the local work force. The University of South Florida (USF) offers the nation's first graduate certificate in medial device regulations and operates the largest microelectromechanical systems center and research center in the Southeast. Major players are Restorative Care, Linvatec, NDH Medical, Bausch and Lomb, MTS Medication Technologies, and World Precision Instruments. Research institutes such as the H. Lee Moffitt Cancer Center and Research Institute and the USF Nanomaterials and Nanomanufacturing Research Center have found Florida's older citizens to be a willing test market for new discoveries.

Indiana recently ranked among the nation's top 10 states for medical technology, according to another AMTA survey. The survey placed Indiana second in the nation for the number of new jobs created. Three of top five orthopedic device companies in the world - Zimmer, DePuy, and Biomet - are located in Warsaw, Indiana; other medical device companies are located in Bloomington and Indianapolis.

The Canadian Market
Canada is the second-largest producer in North America. About 1,500 companies design and manufacture a variety of medical devices, including medical imaging and radiation therapy equipment, specialty devices for cardiovascular and orthopedic purposes, dental implants, diagnostic kits, reagents, and assistive devices valued at more than CAN$6 billion annually. Over 35,000 Canadians are employed in the industry, which is enjoying a rate of growth similar to that in the U.S. (exports are increasing at a rate of about 10 percent annually).

More than 80 percent of the industry is located in Ontario and Québec. Ontario clusters are centered on major universities in Toronto, London, Ottawa, Kingston, and Guelph; clusters in Québec are in Montréal and Québec City. Key research centers include the Natural Sciences and Engineering Research Council and the National Research Council's (NRC) Center for Commercialization of Biomedical Technology. Another world-class research organization, the NRC's Institute for Biodiagnostics in Winnipeg, Manitoba, employs 200 researchers and conducts about CAN$15 million in R&D and tech transfer every year. Important research areas are biosystems, biomedical informatics, cardiac studies, magnetic resonance technology, and spectroscopy.

The Puerto Rican Market
Long-regarded for its high-tech manufacturing expertise, Puerto Rico has a flourishing medical device cluster, led by global companies like Baxter, Biomet, Medtronic, Stryker, and U.S. Surgical. European companies with operations in Puerto Rico include B. Braun, Unilever, and Roche. Exports of medical devices exceed $2 billion annually. Puerto Rico ranks eighth internationally in shipments of medical and scientific devices.

Manufacturers are attracted to Puerto Rico because of its excellent university system and highly skilled and educated (and lower-cost) work force. With over 30 years of life sciences manufacturing history, Puerto Rico also has a high-quality pool of experienced managerial talent with highly valuable regulatory experience.

The Mexican Market
The medical device sector is a vital part of the Mexican economy, especially in the maquiladoras along the northern border with the United States. According to the U.S. Department of Commerce, trade in life sciences products between the United States and Mexico increased an average of 15 percent per year between 2003 and 2006. Today, the value of life sciences goods traded between the two countries is about $3 billion.

The big advantage of manufacturing in Mexico is, of course, lower labor costs. Steve Colantuoni, director of market research and communications for The Offshore Group, a maquiladora organization in Mexico that works with medical device manufacturers, says the average operating cost per hour for their medical device and related industry clients is about $7 per hour.

Future Trends
On the regulatory side, one of the top issues affecting the industry will be complying with the new FDA Amendment Act of September 2007. "If properly implemented, the framework for performance goals and related interactive review processes established by the act should streamline the review process, reducing the time to market for new technologies that will benefit patients," says Durgin.

Over the short term the North American market will likely also see more outsourcing. Besides saving money, manufacturing offshore provides another competitive edge in that products can be launched much more quickly. In a recent poll by Medical Product Outsourcing, more than half of the respondents indicated outsourcing is essential to strategic growth. However, despite these advantages, many medical device companies are reluctant to outsource because they worry about losing control of quality - not just the costs of dealing with defective equipment, but the possibly huge legal settlements for some companies if, for example, the failure of an outsourced implantable device leads to the serious injury or death of patients.