More than 2,000 medical device executives are convening in Boston this week for what’s expected to be the largest convention ever of the Advanced Medical Technology Association, and the first outside its home base of Washington, D.C.
The three-day AdvaMed 2012 event, opening Monday at the Boston Convention & Exhibition Center, will showcase the Massachusetts device sector, one of the nation’s biggest with about 24,500 employees. The trade group’s event will also spotlight an industry in transition, with companies continuing to raise money and expand in the face of pressing economic challenges in the United States and abroad.
Financing for US and European medical device makers climbed to $27.4 billion in the 12 months ending June 30, from $13.1 billion five years earlier, as investors funded products aimed at aging baby boomers.
But companies are now grappling with slowing economies, mounting cost pressures, regulatory risks, and a new federal tax on medical devices that will help pay for the national health care overhaul but could cost device makers an estimated $29 billion over the next decade.
While the business outlook is cloudy at best, competition between states and nations to attract medical technology companies is heating up. This week’s convention will be a giant arena for such lobbying efforts.
Coming less than four months after the massive Biotechnology Industry Organization gathering at the same locale, AdvaMed 2012 is considered by state officials to be another chance to recruit companies to Massachusetts and foster more collaboration between local and out-of-state firms. About 850 companies are registered to attend, some of which are on the hunt for expansion sites.
“We want to entice companies,” said Susan Windham-Bannister, president of the Massachusetts Life Sciences Center, based in Waltham. “If there are companies who are really taking a hard look at Massachusetts, we want to close the deal while they’re here.”
Massachusetts is operating a 1,200-square-foot AdvaMed pavilion from which 18 state companies and academic institutions will host exhibits. Governor Deval Patrick, who signed his 10-year, $1 billion life sciences initiative into law in 2008, is scheduled to visit the pavilion Tuesday morning to unveil an agreement with Argo Medical Technologies Ltd., an Israeli company that makes robotic restoration devices to help people with lower limb disabilities walk.
Aiding disabled people, especially veterans, will be a convention theme. AdvaMed is launching a program designed to increase the hiring of US veterans returning to civilian life. The initiative, called MedTech Veterans Program Boot Camp for Returning Heroes, will include training in writing resumes and interviewing, as well as mentoring to help vets translate their skills into jobs in the medical device sector. The Massachusetts Life Sciences Center and Danvers cardiac device maker Abiomed Inc. each have committed $25,000 to the program.
Medical devices make up the leading exports for Massachusetts, and state stalwarts such as Boston Scientific Corp., PerkinElmer Inc., Covidien PLC, and Abiomed will be well represented this week. Unlike the state’s biotech sector, which is centered in Cambridge and Boston’s western suburbs, so-called medtech companies dot the entire state, said Tom Sommer, president of the state medical device council in Boston. They also support a supplier base that includes former aerospace industry machine shops around Springfield and injection-molding businesses north of Worcester that once served the auto industry, Sommer said.
“We have a wide range of expertise and specialties in the state,” he said. “This is an opportunity for us to highlight how important medical devices are to the state economy.”
Like the traditional industrial parts makers that made a transition to medical technology, the established medical device players themselves have been retooling product offerings and reassessing strategies in response to intensifying pricing pressures worldwide.
“In the past, the recipe for success with devices was safety, effectiveness, and acute performance,” said Hank Kucheman, chief executive of device maker Boston Scientific in Natick. “Now you have to add cost effectiveness and comparative performance. You have to prove that you can lower the overall cost of health care and the cost to society.”
The laser-like focus on cost control by US health insurers and government payers is part of a broader shift to more integrated health care and reimbursement models that reward doctors and hospitals for keeping people healthy rather than for ordering procedures. In Europe, governments are scrambling to cut medical costs at a time of economic woes.
For the medical technology business, the changes have created a “new normal,” in which competitive pricing is a given and companies “are going to have to make a case that their product is improving health care outcomes for patients,” said Glen Giovannetti, the Boston-based global life sciences sector leader for the accounting and consulting firm Ernst & Young.
Giovannetti said entrepreneurial companies, a staple of the region’s life sciences cluster, may have an edge in the new environment, though even established device makers are having to adjust. Among the technologies most in demand — and welcomed by payers — are cost-saving telemedicine gear and monitoring devices, some of which allow doctors and nurses to keep tabs on patients from centralized locations. Data-crunching diagnostic equipment and mobile apps that can improve communications among companies, physicians, and patients also are popular.
Heather Keith, founder and chief executive of three-year-old Strohl Medical Technologies Inc. in Weymouth, is typical of the new type of entrepreneurs. The company is awaiting a Food and Drug Administration decision by the end of the year on its application to sell a device for detecting strokes in patients in emergency rooms. By deploying a patented algorithm that can rapidly analyze and present data to clinicians, the device helps them start treatments faster.
“It’s a definite advantage being part of the cluster that’s here in Massachusetts,” said Keith, who will be presenting on a panel at the AdvaMed convention and meeting potential investors. “The talent pool is so broad and so deep here for the people you need to get a medical device going. These aren’t college students sitting in their basement eating Ramen noodles.”