New England's medical device industry has benefited from an influx of public money from the state of Massachusetts. The states' 10-year Massachusetts Life Sciences Initiative has crossed the halfway point.
So how is Massachusetts, New England's leading medical device hub, faring? To learn more, we reached out to Tim Bowe, the CEO of technology consulting and product development firm Foliage, Inc. (Burlington, MA), which does considerable business with the medical device industry.
In this interview, Bowe covers everything from the impact of the Affordable Care Act on the medtech industry to how the Massachusetts medtech industry stacks up against other states with sizable medtech industries like California and Minnesota. As for the Affordable Care Act, Bowe notes that it could open up whole new business pathways for the medical device industry
MPMN: How is Massachusetts doing when it comes to medtech? Is it becoming more important versus Minnesota and California? Less important?
Tim Bowe: Foliage has a client base that spans the United States and Europe. As such, our interactions with many medical device companies validate a continued desire to invest in core technology and product development. Massachusetts’ medtech industry appears to be quite strong with a continued flow of new, innovative companies introducing new technology and an on-going investment cycle of more established brands. The California and upper Midwest are healthy as well, but we have not seen a significant difference between Massachusetts and California. We have not been exposed to as many early-stage companies in Minnesota, but the established companies continue to invest.
The dramatic changes to the healthcare sector as a result of the Affordable Care Act and the cost pressures applied to device costs by the combination of the financial constraints on governments and the increased influence of emerging markets plays to the natural advantages of both Massachusetts and California. The pressure to change the business value proposition by driving the cost of the hardware down, while moving more value off the box and into remote or cloud-based services requires access to a large number of experienced software engineers – with skills outside of embedded control. The vibrancy of the system- and cloud-based software industries around Boston and San Francisco has created a perfect environment for medical device companies to reach out and quickly find teams that can help conceptualize and develop these next-generation products. Obviously, there is a pool of these engineers in Minnesota, but the comparatively larger pools in Boston and San Francisco is providing a localized advantage.
MPMN: How is the $1 billion Life Sciences Initiative in the state doing? Is it helping out?
Bowe: The Massachusetts life sciences industry is extremely healthy and vibrant. Centered in Cambridge, the concentration of life sciences companies is impressive, with large investments in additional lab and office space supporting the continued growth of the product pipelines. Massachusetts has supported this investment and it does seem to be paying off, though it is always difficult to say what is an underlying causality.
MPMN: All of the Boston Scientific restructuring ― is it hurting or helping the local medtech industry?
Bowe: Boston Scientific has, obviously, struggled over the recent past.
As one of the two largest medical device manufacturers/companies in the world and with their world headquarters here in Massachusetts, Boston Scientific is a significant contributor to the local medtech industry. They have a history of rebounding and their continued investment in early- to mid-stage companies prior to acquisition indicates to me that they will continue to be a bellwether in this industry. However, with the vibrancy of the overall economy in the Greater Boston area, there does not seem to be any impact to the Massachusetts local industry overall.
MPMN: What are some of the most exciting medtech companies in New England?
Bowe: Foliage works across a broad swath of the medical technology sector. As such, some of the most promising and innovative medtech development we’re seeing is also fairly distributed across different sectors. In the area of brain monitoring and traumatic brain injury (TBI), Bio-Signal and Evoke come to mind. With the CDC citing “at least 1.7 million TBIs occurring annually,” we see a lot of growth potential for companies already focused in this market segment as well as tremendous opportunities for early- to mid-stage start-ups.
We’re seeing some very interesting developments in the pharma and device sectors as more and more partnerships are arising with companies focusing on developing combination medical devices. Combo med devices that provide monitoring and drug delivery for diabetes management are catching our attention. Two exciting New England companies in this space include Echo and CeQur.
Advances in the treatment of heart failure are being attributed to breakthrough technologies in implantable devices. U.S. demand for implantable devices is forecasted to reach $52 billion in 2015, increasing 7.7% annually. This is a market segment to watch and we have our eyes on Thoratec and Heartware—both with very innovative approaches to treating heart failure.
MPMN: How much do Harvard and MIT help? Mass General is one of the top-ranked hospitals in the U.S., so how much does its presence help, as well?
Bowe: There is a rapid evolution under way within the medtech industry. Having exciting technology is no longer sufficient over the long run. Technology is required to develop both the hardware technology, and also to develop an extended infrastructure that allows complete integration into the overall ecosystem. Connections with cloud-based systems that add value either by storing, analyzing or reporting results are core capabilities of most emerging solutions. Allowing more data to be accessed by patients and their medical providers is a key element to be considered at the outset of product conceptualization. The ability to configure products to add value across different price points in different geographies while limiting manufacturing costs is required to have cost effective production and to protect margins. Connectivity to EMR systems, collection of data for population management, and informing payers is an emerging need for products to both adhere to and take advantage of the industry changes due to ACA.
Underlying all of this is the ability to conceptualize and develop increasingly complex products with much more focus on extensive software systems. Being successful in the new med-tech market also requires the ability to develop new technology very quickly to take advantage of shorter market windows for new products.
This requires access to a large number of talented young engineers and scientists that are steeped in the emerging technologies. The next-generation of medical products is going to look more like mobile applications than the medical devices that have been developed over the past twenty years. Massachusetts’s access to Harvard and MIT, to say nothing of WPI, Boston University, Boston College, and Northeastern among 20 other world-class universities, provides access to this critical resource in a way that few regions can match.
This academic concentration, coupled with access to Mass General, Beth Israel Deaconess, Brigham and Women’s and Tufts Medical Center gives a tremendous opportunity for emerging technology to connect directly with some of the best hospitals and doctors in the country.
All of this has clearly underpinned the strength of the local medtech industry in Massachusetts.
MPMN: Before there was Obamacare, there was Romneycare. How much does it help that Massachusetts has had an Affordable Care Act-like health industry much longer than the rest of the country?
Bowe: The impact of the ACA on the medical industry is very hard to overstate. While all of the rancor and focus has been on the insurance mandate, little focus has been given to the fundamental changes to how the industry can now create more sophisticated care models based on more complete patient information, mapped to more detailed diagnoses captured in ICD-10 and more complete capture of specific care plans.
This has blown open an entirely new market in the healthcare industry, allowing the rise of small innovative companies that build population management products that pull all this data together for the first time. The medtech industry is now adjusting to the reality that some of the greatest value from their products may be related to the data that their products generate. How to capture this data and the process of converting data to value – both clinical and business is having a profound impact on most companies in this space.
Massachusetts has dealt with the impact of increased connectivity required by and provided for by early adoption of universal care. Also, the fact that this has been an accepted fact in Massachusetts for eight years has also allowed many of these companies to move more quickly to capitalize on the opportunities created by ACA.
MPMN: Cost-of-living and tax issues― are they going to suffocate the Massachusetts medtech industry. Or is it such an amazing place to be based with tons of talent that companies are simply willing to swallow the extra costs.
Bowe: Cost of living is always an issue and a problem for both Massachusetts and California. However, the incredible vibrancy of the industry in both these markets has allowed companies to continue to import talent from the rest of the world. Foliage grew last year by 35%. In order to do so, we relocated a large number of employees from across the US even though the cost of real estate in Greater Boston is among the highest in the country. Our local clients have also successfully attracted talent from Minnesota, Illinois, Florida and New York. I think as long as the challenge is there, talent will follow the opportunity it affords.
Published in MPMN, March/April 2014, Volume 30, No. 2
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