Cover Story: Shot In The Arm

July 7, 2017 No Comments
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Precision Manufacturers Boost Med-Tech Industry

by Nancy Huddleston

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toc_features50pxPrecision manufacturers are providing a shot in the arm to the state’s med-tech business, as they contract with medical device manufacturers like Medtronic, 3M, Boston Scientific, and St. Jude to produce miniscule parts that provide the lifesaving links to make Minnesota’s Medical Alley an extraordinary powerhouse on the global market.

As a result, Minnesota is a leader in many facets of the booming medical device industry.

  • With its 2,048 patents as of June 2016, Minnesota’s #1 ranking tops California (1,766), Washington (232), Germany (220) and Israel (213). The latest statistics from Minnesota Department of Employment and Economic Development (DEED) show that Minnesota has more patents in light, thermal, and electrical surgery applications than does any other location worldwide.
  • In electromedical and electrotherapeutic apparatus manufacturing, the supply chain fulfilled 96 percent of the demand, compared to a 73 percent average in other life science-focused metro areas (the Bay Area, Boston, Chicago, Denver, Houston, New York/New Jersey, Philadelphia, Raleigh, San Diego, and Seattle), according to the Medical Alley Association.
  • The Medical Alley supply chain met 83 percent of demand for surgical and medical instrument manufacturing compared to an average of 59 percent (for the same geographies).
  • As a result of the state’s leadership in engineering processes and quality control, FDA 510K clearances are 26 percent faster in Minnesota than is the U.S. average – a 30-day advantage.
  • Minnesota leads the nation in FDA pre-market approvals – 6.5 months, faster than is the U.S. average.

Working in the Medical Alley
Ask any one of Minnesota’s precision manufacturers what has changed since they got into the medical manufacturing business and the universal answer is everything – from the parts they manufacturer, to the supply line, to regulations, and to cost expectations.

“Everything is smaller and has changed for outpatient surgery and designed to be minimally invasive to squeeze more into a smaller space,” said Jim Stertz, Director of Metrology/Technology for Lowell Inc., in Brooklyn Park.

“When we started out, our customers’ versions of supplier controls, approvals, and validation was a matter of getting our name on their supplier list,” explained Steve Kalina, President, Dynamic Group, in Ramsey. “FDA and ISO changes, as well as controls from a liability standpoint, have dramatically changed the relationship between us and our OEM customers, as well as with our suppliers.”

Metal Craft Machine & Engineering in Elk River has been in the medical manufacturing space since the mid-1980s and CEO Trisha Mowry said there are many more controls placed on manufacturing today to regulate and control the manufacturing process.

“These restrictions reduce the ability to be flexible and reactive to customer needs and changes,” said Mowry. “It also drives up costs and lead times which brings me to the next change: more for less. The expectation is that we must provide more documentation detail, for already tightly-controlled processes in short lead times on demand, all for a reduced cost and included year-over-year cost reductions.”

Greg Thomas, National Sales Manager, and Bruce Mullenbach, Program Manager, at Lou-Rich Inc., in Albert Lea, agree, but pointed out that although Original Equipment Manufacturers (OEMs) expect better pricing, there’s a flip side: investment in automation has created greater efficiencies in cycle times.

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The Secret to Success
“Precision manufacturers are Minnesota’s secret weapon, when it comes to medical devices,” said Frank Jaskulke, Vice President of Member Services for the Medical Alley Association, “There are a lot of opportunities to get a medical device made, but there’s a greater opportunity here because any supplier in the world can draw a 15-mile circle around a major medical device maker in Minnesota, and they can find their entire supply chain in that circle.”

Some of the world’s major medical device companies – nearly 700 of them – have headquarters or major operations here. Coloplast, Smiths Medical, Starkey Hearing Technologies, Integer Medical, Cardiovascular Systems Inc., and Vascular Solutions Inc. have helped to make the state’s Medical Alley a breeding ground for innovation in all aspects of med-tech.

The industry includes not only medical device manufacturers, but also those that make medical equipment, surgical and medical instruments, ophthalmic goods, electromedical and electrotherapeutic apparatuses, and businesses associated with dental laboratories.

Although the Fortune 500 companies garner most of the attention, “they know they need precision manufacturers and that they can get the ‘pick of the litter’ here in Minnesota” because of the close proximity to so many contract manufacturers, said Jaskulke. “Every single piece of a medical device – from beginning to end – can be made here in Minnesota.”

In 2015, Minnesota’s legacy of developing innovative medical devices earned Medical Alley a geographic place in the Smithsonian Institute’s “Places of Invention” at the National Museum of American History in Washington, D.C. The six areas chosen for the exhibit have contributed major business and technological innovation to the world and are places that represent something more than a single invention or collection of companies.

Although the region is described as roughly from Rochester through the Twin Cities, and all the way to Duluth, Jaskulke said there’s no place in Minnesota that has not been touched by medical device firms, biotech firms, hospitals, and research institutions. This is supported by employment statistics in which the state is ranked #1 in employment concentration with 29,219 jobs and #2 in total employment in 2015, according to DEED. The location quotient for Minnesota is 3.90, meaning the state average is greater than the normal average.

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Staying #1
Being #1 and staying #1 are two different things and, although Minnesota offers many advantages for med-tech companies, future investments are needed in the trade, and workforce demands need to keep up with the ever-changing industry.

Two years ago, the U.S. Department of Commerce named Minnesota’s med-tech sector an official “Manufacturing Community,” which takes into account the “strength of the state’s development plan, the potential for impact to communities, and the deep-seated partnerships between public and private sectors.” As an Investing in Manufacturing Communities Partnership (IMCP) community, the focus is to “help drive a resurgence in manufacturing in the U.S. by encouraging the development of comprehensive, long-term economic development strategies.”

The Minnesota Medical Manufacturing Partnership (MMMP), led by the economic development group, GreaterMSP, is working on that task. Six working groups have been formed to develop strategies for workforce and training, supplier network, research and innovation, infrastructure and site development, trade and investment, and operational improvement and capital access. The MMMP is working to elevate the state’s reputation amongst potential med-tech investors and give local projects a place at the table with 11 federal agencies that have access to $1 billion in economic development assistance.

Additionally, investments in the med-tech industry are critical to keeping the state in the forefront of the industry. According to statistics compiled by the Medical Alley Association, in 2016:

  • $420.3 million was raised in health tech investments: $252.2 million in medical device, $127.3 million in digital heath, $30 million in pharma and bio, and $9.7 million in other.
  • Of the $252.2 million in medical device investments, the leading investors were CVRx ($57.5 million), Torax Medical ($25 million), Osprey Medical ($21.3 million), and Minnetronix ($20 million).

Another boost has been the repeal of the federal medical device excise tax. In 2015, former President Barack Obama signed into law a two-year moratorium on the tax, which was set to expire on December 31. The repeal has continued to garner bipartisan support, and one of President Donald Trump’s first executive orders called for a deferral of the tax on makers of medical devices, products, or medications.
“The tax made it harder to invest in new product development,” pointed out Jaskulke, “When the repeal hit, it was if a weight was lifted off the state. We’re seeing a quick uptick – in small to big companies.”
For precision manufacturers, the IMCP designation and the investments in the medical device industry have created countless opportunities for growth.

“This all creates a self-perpetuating environment,” said Stertz when asked about how the work done at Lowell ties into the larger med-tech picture, “The more technology, the more resources, and the more influence Minnesota has in the industry brings in more work.”

And as devices change, more opportunities are created for Lowell to come up with better methods to help process medical parts. “We’re always looking to advance technology to do more of what we do; to do it better, faster and at a better cost,” Stertz said.

The same is true at Dynamic Group.

“Making products for medical and dental optimizes our ability to control the design and manufacturing processes of the mold-build and the final device,” Kalina explained. “Our high precision and tight controls were a great reason to take on the challenge of medical, and being ISO 13485 certified and FDA registered allows us to provide a seamless process from design for manufacturability through validations and full production.”

While finding innovative ways to meet growing demands and reduce costs are always top of mind for Mowry in her role at Metal Craft Machine & Engineering, there’s something more. “Making the products, machining and bringing them to life is the fun part,” she said, “It truly is everything else that is the greatest challenge.”

Stertz couldn’t agree more.

Lowell began making cardiovascular implants 10 years ago, primarily the LVAD (left ventricular assist devices) and Stertz often serves as the host for people who tour the company because they have received the device.

“What we do is pretty critical because these people wouldn’t be here without the parts we make,” he said, “It gives value to what we do. We show them how their device is made and introduce them to the people who make those parts. It gives the machinists a lot of satisfaction to see how they have made a difference in someone’s life.”

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Manufacturing Opportunities
For medical equipment manufacturers like Lou-Rich, the manufacturing process to create parts for MRI, CAT scan, and mobile X-ray machines is straightforward. “In their world, there’s a lot more changes because of technology,” said Mullenbach, “And as their technology and demands change, we try and meet their manufacturing needs with increased capacity.”

This is constantly driven by the global sourcing pressure, explained Thomas. “It’s a big world and there is a lot of competition offshore and in other global markets. So, we leverage what we’ve learned at Lou-Rich. We drive waste out of the machining process. We watch our cycle times. We make investments in automation and parts to help us become more efficient.”

With 40 years of tooling involvement and 23 years of making products for medical device OEMs, Dynamic Group has a unique perspective on how precision manufacturers meet the demands of medical manufacturing.

“It’s not about just building a part, you must do it efficiently,” said Kalina. “The OEMs realize what we can do goes beyond the device design. They need manufacturers for their ingenuity, process controls, quality control, and costs management over the life of the production process. Minnesota’s precision manufacturers bring it all.”

Metal Craft is involved in contract manufacturing of custom surgical instruments and implants. Mowry said the company’s early device manufacturing was a combination of projects that couldn’t be done (typically the new design and startup companies) or projects that required high precision.
That early investment into medical manufacturing has paid off. “As a contract manufacturer, we have earned a reputation for quality and valued-added service, providing manufacturing that other shops would shy away from,” Mowry explained.

Lowell intentionally made the pivot to medical device manufacturing in the late 1990s when company leaders saw that there seemed to be fewer opportunities in the aerospace field. That was 1995, when 80 percent of the company’s contract manufacturing work was in aerospace and the rest was in defense and miscellaneous areas. Today, 98 percent of the company’s work is in medical devices, primarily in components for spinal implants and cardiovascular devices.

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On the Horizon
As the medical device industry continues to evolve, the leaders at the Medical Alley Association are mindful of the collaborative environment that formed Minnesota’s medical device industry. Dr. Walt Lillehei, a heart surgeon, and Earl Bakken, an engineer, worked together to fix a problem – to develop a pacemaker that would work without being plugged in. Bakken designed the battery-powered pacemaker, and the next day, Lillehei hooked it up to the already-implanted lead wires from a prior product.

It’s that desire to fix a problem that continues to propel future developments in med-tech. With 3-D printed medical parts and continued advancements in the hearing aid, electro-magnetic, biologic, orthopedics, and dental fields, the possibilities are endless.pm_endmarkblue-e1320337140493

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NANCY HUDDLESTON is the editor and publications manager for the Precision Manufacturing Journal. She can be reached at nancy@mpma.com.

Copyright © 2017 Minnesota Precision Manufacturing Association. For permission to use or reprint this article please contact Nancy Huddleston, publications manager for Precision Manufacturing Journal.

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