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Denver South
Healthcare
-
Life
Sciences Development Study


Paper 1: Introduction and Overview
of the Super Cluster

(2011)














December

13
th

2011

Commissioned by

South East Business Partnership







South Denver
Biomedical Healthcare
Sector Roadmap (2011
)


Copyright 201
1
: Innovation Economics LLC


P a g e

|
1

TABLE OF CONTENTS

Introduction

________________________________
___________________________

2

Section

1
:
Super Cluster Overview

________________________________
_________

2

Section 1.1

Defining
Biome
dical Healthcare

________________________________

4

Section 1.2

Healthcare
Industry

Overview

________________________________
_

5

Section 1.3

Biop
harmaceutical
Industry

Overview

__________________________

13

Section 1.4

Medical Device
Industry Overview

_____________________________

21



South Denver
Biomedical Healthcare
Sector Roadmap (2011
)


Copyright 201
1
: Innovation Economics LLC


P a g e

|
2

South Denver
Health and Life Science Sector Roadmap

(201
1
)


Introduction

Innovation Economics was commissioned by
South East Business Partnership

(
SEBP
) to undertake a
review of
economic development
o
pportunities

and challenges in health care and life science in South
Metro Denver

(
SMD
)
and identify strategic pathways for regional growth and prosperity
.

The
South
Metro Denver
subregion
is defined as
comprising
Arapahoe County and

Douglas County
. Data in the
study is also broken
into
Health Corridor areas

to better identify areas of
specialist concentration in the
Front Range and

Metro Denver r
egion as
a whole.

Structure of the Report

The Roadmap comprises three areas of analysis
a
s
illustrated V
enn diagram below
.
Analysis area
one

sets
out to understand the

South Metro Denver region in terms of biomedical healthcare sector strengths,
opportunities and challenges.
Analysis two examines
national competition for biomedical healthcare
investment and development
; particularly in terms of high growth industries and regions. The third area
reviews

macro drivers of change that are influencing the strategic decisions of medical
-
related businesses
and government funded
facilities
. U
nderstandi
ng the
future
direction of
investment and development
activity
in the sector

is
crucial
key for developing effective economic development
and
strategies
.



Sector Roadmap
research objectives:



Determine South Metro biomedical healthcare
comparative advantages
.



Assessing the state and competitiveness of Colorado industry relative to other regions.



Identify
which fast growing industries have driven development

in leading
the
regions
.




Map the global
drivers of sector change
that regional industry must address to
be competitive.



Identify regional challenges and
o
pportunities

that industry must address to succeed.



Test initial findings and possible strategies for growth

with regional industry stakeholders
.



Define a set of roadmap strategies, action steps and
participating stakeholders.


Drivers of
sector change

Competition
for industry
investment &
development

Regional
assets,
challenges &
opportunities

Companies in the US biomedical
healthcare sector face a variety of
political, regulatory,
economic, social
and technological challenges to growth
and consolidation. Drivers of change
include new federal regulation to drive
down costs, high risk of litigation,
inflating cost and time taken to launch
new drugs and medical devices,
market saturati
on, shrinking
investment capital and competition for
high
-
skilled employees etc.

Identifying economic development
opportunities for South Metro Denver
in biomedical healthcare requires us to
better understand the current and
changing landscape of sector
co
mpetition and development.

Biomedical

Healthcare


Scope of

Analysis

South Denver
Biomedical Healthcare
Sector Roadmap (2011
)


Copyright 201
1
: Innovation Economics LLC


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3

Chapter
1
:
National

Sector

Overview






















KEY MESSAGES



As one of the largest in
dustries in the United States, H
ealthcare provided 19.2 million jobs in
2011
.



Colorado accounted for 1.5%

share of national jobs
, Metro Denver for 1.04% and South Metro
Denver for 0.26% (Arapahoe County 0.21% and Douglas County 0.05%).



The b
iomedical

biotechnical research and manufacturing sector is eight times smaller than
healthcare at 2.4 million jobs in 2011.

REGIONAL STRENGT
HS



Colorado a
nd the Metro Denver
both have a higher concentration in biomedical

biotechnical
jobs than in healthcare
; with
2%
share state
-
wide and 1.4% share for metro
-
wide.

REGIONAL OPPORTUNITIES



Biomedical Healthcare
has strong linkages to a
number of high
-
wage knowledge
-
intensive
supporting industries
, including
h
ealth insurance and financial planning,
research

and
development
,
higher

education and training,
and
legal
, technical and professional services
.



Education and healthcare, finance an
d insurance and professional and business services are
forecast to be
the top three supersectors to lead growth in the coming decade.



The Biomedical Healthcare sector has potential to be a catalyst for wider regional growth.



Ten of the 20 fastest growing occupations
in the coming decade
are healthcare related.



Colorado and South Metro Denver has a particular opportunity to leverage its strength in
information technology to become a hub for a new wave of medical IT solutions.



Healthcare will generate 3.8 million new jobs nationally between 2011 and 2021, more than any
other industry, largely in response to rapid growth in the elderly population. Colorado is
recognized as one of the fastest aging states in the nation and is fore
cast to add 57,000 jobs by
2021. Metro Denver will add 41,000 and South Metro Denver 12,500 new jobs in the same
period.


SOUTH METRO CHALLENGES



South Metro Denver has

a lower presence of biomedical
biotechnical
industry with
0.23% of
national jobs compare
d to

0.28% of
national
population in 2011.



Biomedical
biotechnical is forecast to generate 347,000 new jobs nationally between 2011 and
2021; eleven times fewer than the 3.8 million new jobs created in healthcare.



Of this Colorado is forecast to add 3,800

(1.1%), Metro Denver 3,400 (1%) and South Metro
Denver 1,800 (0.5%). Colorado is forec
ast to capture fewer biomedical
biotechnical jobs in the
coming decade.




South Denver
Biomedical Healthcare
Sector Roadmap (2011
)


Copyright 201
1
: Innovation Economics LLC


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4

Chart

1.1
:
National
Economic
Growth
Forecast by
Industry

Supersector (2011 to 2021)


1.1

Biomedical Healthcare Sector

Overview


The biomedical healthcare sector
is an interlinked combination of mature and
younger

industries
. The
sector is

composed of
three

primary segments, long regarded separate and distinct, but which are more
and more being viewed as increasingly interrelated. The
three

segments are
Bio
pharmaceuticals
(
subsectors biomedical and pharmaceuticals)
, Medical Devices and Health Services (
which can be
segment
ed by

inpatient and outpatient

services
). The biopharmaceuticals and medical devices industries
develop products and services for the healthcare sector
to

diagnose, treat, and administer care
to
pa
tients
.

The biomedical healthcare sector comprises biotechnologies dedicated to the treatment of human beings
,
and does not include agriculture, animal or industrial focused biotechnology (g
reen biotechnology

and
white biotechnology
)
.
The biomedical

industry is divided into the following activities:



Red biotechnology, which belongs under
the biomedical or
life sciences

sector
;



Services, such as contract research, contract manufacturing, bioinformatics and functional genomics.

Chart

1
.2

depicts the relationship between
subclusters in biomedical healthcare for the top 15 states in
the nation and for Colorado
.

The
biomedical healthcare

industry in

Colorado
is close to half as large as
the industry presence in the
top 15 states in the nation for
Biomedical Healthcare
;
with 237,000 sector
jobs compared to 548,000 as the median size for the
top 15 states
.

Employment is
most
notably smaller in the
biopharmaceuticals clusters and to a lesser extent in
health
services an
d. In medical devices Colorado has a
better

showing with 13,400 employed
in the sector
compared to a media size of 18,300

for the top 15 states
.



Professional and

business services


Financial



activities

Education

and

health

services

South Denver
Biomedical Healthcare
Sector Roadmap (2011
)


Copyright 201
1
: Innovation Economics LLC


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5

Chart

1.2
:
Comparing
State Biome
dical Healthcare

Cl
usters by Employment

(2008)


Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness,
Harvard Business School

(2008)


1.2 Healthcare Sector Overview

1.2
.a
Health Sector
Organization

and Innovation

Table
1.
3
:
Distribution of Employment and Establishments in Health Services by Industry Sector
(2008)

Industry segment

Employment

Establishments

Total

100

100

Ambulatory healthcare services

42.6

87.3

Offices of physicians

17

36

Home healthcare services

7.2

3.7

Offices of dentists

6.2

20.4

Offices of other health practitioners

4.7

19.6

Outpatient care centers

4

3.6

Other ambulatory healthcare services

1.8

1.4

Medical and diagnostic laboratories

1.6

2.4







Hospitals

34.6

1.3

General medical and
surgical hospitals

32.5

1

Other specialty hospitals

1.4

0.2

Psychiatric and substance abuse hospitals

0.7

0.1







Nursing and residential care facilities

22.8

11.4

Nursing care facilities

12.2

2.8

Community care facilities for the elderly

5.2

3.5

Residential mental health facilities

4.1

4

Other residential care facilities

1.3

1.1

SOURCE: BLS Quarterly Census of Employment and Wages, 2008.

0
100,000
200,000
300,000
400,000
500,000
600,000
Median Top 15 Regions
Colorado
Medical Devices Cluster
Biopharmaceuticals Cluster
Health Services Cluster
221,645

528,930

2,032

13,440

18,337

9,838

South Denver
Biomedical Healthcare
Sector Roadmap (2011
)


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: Innovation Economics LLC


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About 595,800 establishments make up the healthcare industry; they vary greatly in terms of size,
staffing
patterns, and organizational structures. About 76 percent of healthcare establishments are offices
of physicians, dentists, or other health practitioners. Although hospitals constitute only 1 percent of all
healthcare establishments, they employ 35 percent

of all workers (Table 1.3).

The healthcare industry includes establ
ishments ranging from small

private practices of physicians who
employ only one medical assistant to busy inner
-
city hospitals that provide thousands of diverse jobs. In
2008, around 48 pe
rcent of non
-
hospital healthcare establishments employed fewer than five workers. In
contrast, 72 percent of hospital employees were in establishments with more than 1,000 workers.

The
healthcare industry consists of the following segments:

Hospitals.

Hosp
itals
are intensive users of technology, durable and non
-
durable goods used

in a range
of settings from diagnostic services, to
surgery

and
continuous nursing care. Some hospitals specialize in
treatment of the mentally ill, cancer patients, or children. H
ospital
-
based care
has primarily been on an
inpatient (overnight)

basis. As hospitals work to improve efficiency, care continues to shift from an
inpatient to outpatient basis.
Traditionally not leaders in innovation hospital are predicted to become
more a
ctive in driving innovation in healthcare. Recently, three of the nation’s leading hospital companies
and two major hospital systems


together representing more than 400 hospitals throughout the United
States invested in the Heritage Healthcare Innovation

Fund L.P., a strategic venture fund focused on
investments in businesses that improve the delivery of health care services.

“Hospitals must be the leaders and incubators of health care innovation in this era of fundamental
change,” said Wayne T. Smith, C
hairman, President and CEO of Community Health Systems, Inc., the
largest publicly traded hospital company in the nation with 126 affiliated hospitals in 29 states. “This
fund allows our industry to champion real and practical innovation that will improve
the quality of
care, service and efficiency.”

Nursing and residential care facilities.

Care facilities can be categorized between skilled nursing
facilities and more residential facilities with patients needing less assistance.
Traditionally n
ursing care
facilities provide inpatient nursing, rehabilitation, and health
-
related personal care to those who need
continuous nursing care, but do not require hospital services. Nursing aides
typically
provide the vast
majority of direct care.
As a resul
t of the trend toward more rapid discharge from hospitals following
acute care episodes, many skilled nursing care facilities have expanded their post
-
acute care and
rehabilitation services.

In skilled nursing facilities there has been an increased
interest and investment in various forms of
technology that can make the care provided both technically more effective and at the same time more
likely to assure a high quality of residential life.

M
odern medicine’s ability to manage chronic disease and
in
crease life expectancy have greatly impacted the need for skilled nursing services, as well as the need
for expertise in the care of residents who reflect the increasing prevalenc
e of certain forms of dementia.

Offices of physicians.

About 36 percent of al
l healthcare establishments fall into this industry segment.
Physicians and surgeons practice privately or in groups of practitioners who have the same or different
specialties. Many physicians and surgeons prefer to join group practices because they affor
d backup
coverage, reduce overhead expenses, and facilitate consultation with peers. Physicians and surgeons are
increasingly working as salaried employees of group medical practices, clinics, or integrated health
systems.

Physician inventors working today

to develop, test and market medical devices travel a road strewn with
a great deal more regulatory twists and turns.
In addition, the
cost of getting their inventions to market
has become
exponentially more expensive. Still, regulators, manufacturers and
providers all agree that
physicia
ns are essential to innovation.

“The basic premise is: Doctors are the end
-
users of products, and they have a sense of what it takes
to fill unmet needs,” says Wayne Poll, medical director of clinical innovation for the Ohi
oHealth
South Denver
Biomedical Healthcare
Sector Roadmap (2011
)


Copyright 201
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: Innovation Economics LLC


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Research & Innovation Institute, a medical
-
technology incubator that helps clinicians develop their
products from prototype to market

(
GoogleNews.com, June 14, 2010, by Shawn Rhea
)
.

A growing number of states are also doing their part to spawn inno
vation. Maryland, Massachusetts, Ohio
and Pennsylvania have each established incubators where fledgling medical
-
products entrepreneurs can
tap a variety of resources, including patent lawyers, business advisers and engineers, who help physician
inventors d
evelop th
eir products and raise capital.

P
hysicians typically take one of two paths into the
world of medical
-
product innovation: either as a medical
-
institution faculty member involved with
research and development of a technology, or as a “quintessential

garage tinkerer” who independently
develops a technology.

Either way, innovators who want to see their inventions through to the
commercialization stage often lack the financial and market
-
development resources to do so.
In this

first
phase

of development
, it’s not typically equity investors, but angel investors

and

family and friends who
are willing
to
offer
support.


“What often happens is the id
ea reaches the valley of death,

… a novice innovator will
develop a
technology that gets a patent, but then th
ey don’t get it to the point

that it’s in a marketable form


says
Stephen McCarthy, co
-
director of the Massachusetts Medical Device Development Center.

The
three
year
-
old organization, known as M2D2, is a state
-
funded medical technology incubator at the
University of Massachusetts
’ Lowell and Worcester campuses (
GoogleNews.com, June 14, 2010, by
Shawn Rhea
)
.

The Maryland Industrial Partnerships program, known as MIPS, is a state
-

and privately funded incubator
at the University of Maryland that provides s
imilar assistance to in
-
state medical innovators. “We provide
proof
-
of
-
concept money for physicians to do translational research,” says MIPS Director Martha Connolly.

Innovators who gain MIPS backing typically receive $100,000 to $200,000 as well as other
support
services. The organization’s Venture

Accelerator program, for example, helps fledgling medical innovators
create business plans and secure angel funding and interim executive leadership. A second initiative
called the Technology Advancement Program

helps startups grow their staffs up to 20 people. It also will
provide laboratory and office space, and lend assistance getting a product to market once it receives
regulatory approval.

But p
racticing physician
s can face

conflict
-
of
-
interest
issues

based
on
physician
-
ownership rules
passed

in
the late 1980s.

P
hysician innovators have opted to walk away from their clinical practices so they can
avoid such issues and focus specifically on product development.

“The crush of having to care for your
patients can sap your creativity in terms of innovation,”
says
Wayne
Poll, a urology surgeon, inventor and
founder of the medical
-
device firm Minimally Invasive Devices in Columbus, Ohio
. “Also, there’s
something about

the fear of making a mistake with your
patients that throws cold water on your
creativity, since the assumption is that the first version of your device is not going to be perfect.”

Home healthcare services.

Skilled nursing or medical care is sometimes pr
ovided in the home, under a
physician's supervision. Home healthcare services are provided mainly to the elderly. The development of
in
-
home medical technologies

(such as portable equipment for diagnosis only previously available in
hospital settings)
,
substantial cost savings, and patients' preference for care in the home have helped
change this once
-
small segment of the industry into one of the fastest growing healthcare services.

The
role of home
-
based care in the nation's health care system is likely

to grow based on pressures to save
costs and because of consumer preference for at home care.

The

home health industry
is developing n
ew care models
and
utilizing technology advances to further
demonstrate the home health industry’s increasing clinica
l s
ophistication
.
However there is some
resistance
(
with impacts on
reimbursement) of technology applications in the home health sector as a
means of improving outcomes and controlling costs. Groups such as the Alliance for Home Health Quality
and Innovation
are working to gain regulatory, industry and public approval for expanding the
allowable
range of medical treatment offered by
home health industry

providers
.

South Denver
Biomedical Healthcare
Sector Roadmap (2011
)


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1
: Innovation Economics LLC


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Offices of other health practitioners.

This includes the offices of chiropractors, optometrists,
podiatrists, occupational and physical therapists, psychologists, audiologists, speech
-
language
pathologists, dietitians, and other health practitioners. Demand for the services of this segment is related
to the ability of patients to pay, either directly
or through health insurance. Hospitals and nursing facilities
may contract out for these services. This segment also includes the offices of practitioners of alternative
medicine, such as acupuncturists, homeopaths, hypnotherapists, and naturopaths.

The
se
ctor ranked as 4th most profitable in 2010 behind
(i)
Accounting, Tax
, Bookkeeping, and Payroll
Services,
(ii)
Offices of Dentists,
and (iii)
Legal Services
, a
ccording to financial software company
Sageworks' analysis of tens of thousands of private compan
ies in 97 industries
.
The sector also recorded
the second strongest sales growth
at 7.25%

from 2009 to 2010
(Bloomberg BusinessWeek, August 22,
2011)
. Nationally the sector is estimated to account for 113,010 firms employing 614,171. In 2010 the
average es
tablishment employed just over five staff.

C
omplementary and alternative medicine

(CAM)
is a notable growth industry
.
In 1993, 34% of
Americans reported using some type of CAM (e.g., supplements, massage therapy, prayer, and so on).
That number has almost

doubled to 62% by 2002.

Americans spend $47 billion a year

of their own
money

for CAM therapies, chiropractors, acupuncturists, and massage therapists.

In 2007, according to
the American Hospital Association, 20.8% of community hospitals offered some type

of care or treatment
not based on traditional Western allopathic medicine. That’s up from 8.6% of reporting hospitals that
offered those services in 1998.

The 1990s saw rapid growth of integrative medicine centers at major
research institutions, and the m
ajority of U.S. cancer centers now offer some form of complementary
therapy

(The Hospitalist, January 2010, Gretchen Henkel)
.

A barrier to development is
that complementary and alternative medicine practitioners and physicians are
not licensed in
all stat
es. This prevents them from diagnosing and treating patients openly, without
supervision from a qualified medical doctor (MD).
In 2005 the state of California approved
professional
licensing
for the practice
of naturopathic medicine

bringing the total to 1
5 states
.

In 2011 the Colorado
legislature voted
for the fourth time to block
the licensing of
naturopaths
.


Ambulatory healthcare services.
This segment includes outpatient care center and medical and
diagnostic laboratories. These establishments are diverse including kidney dialysis centers, outpatient
mental health and substance abuse centers, blood and organ banks, and medical labs that ana
lyze blood,
do diagnostic imaging, and perform other clinical tests.
DaVita, the nation's second
-
largest dialysis
provider relocated to Denver in 2010 from California.

Outpatient Care Centers continue to grow strongly recording the strongest sales growth o
f 97 industries
from 2009 to 2010 at 8.76% (Bloomberg BusinessWeek, August 22, 2011) according to financial software
company Sageworks' analysis of tens of thousands of private companies. The sector ranked as 7th most
profitable in 2010 with a net profit m
argin of 12.1%. The sector is estimated to account for 14,444 firms
employing 695,863. In 2010 the average establishment employed forty eight staff.

Recent developments.

In the rapidly changing healthcare industry, technological advances have made
many new

procedures and methods of diagnosis and treatment possible. Clinical developments, such as
infection control, less invasive surgical techniques, advances in reproductive technology, and gene
therapy for cancer treatment, continue to increase the longevity

and improve the quality of life of many
Americans. Advances in medical technology also have improved the survival rates of trauma victims and
the severely ill, who need extensive care from therapists and social workers as well as other support
personnel.

In addition, advances in information technology have a perceived improvement on patient care and
worker efficiency. Devices such as hand
-
held computers are used
to
record a patient’s medical history.
Information on vital signs and orders for tests are tran
sferred electronically to a main database; this
process eliminates the need for paper and reduces recordkeeping errors. Adoption of electronic health
records is, however, relatively low presently.

South Denver
Biomedical Healthcare
Sector Roadmap (2011
)


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1
: Innovation Economics LLC


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Cost containment also is shaping the healthcare industry,
as shown by the growing emphasis on
providing services on an outpatient, ambulatory basis; limiting unnecessary or low
-
priority services; and
stressing preventive care, which reduces the potential cost of undiagnosed, untreated medical conditions.
Enrollme
nt in managed care programs

predominantly preferred provider organizations, health
maintenance organizations, and hybrid plans such as point
-
of
-
service programs

continues to grow.
These prepaid plans provide comprehensive coverage to members and control he
alth insurance costs by
emphasizing preventive care. Cost effectiveness also is improved with the increased use of integrated
delivery systems, which combine two or more segments of the industry to increase efficiency through the
streamlining of functions,

primarily financial and managerial. These changes will continue to reshape not
only the nature of the healthcare workforce, but also the manner in which healthcare is provided.

Various healthcare reforms are presently
being implemented or
under consideration. These reforms may
affect the number of people covered by some form of health insurance, the number of people being
treated by healthcare providers, and the number and type of healthcare procedures that will be
performed.
Political oppo
sition to current healthcare reforms could result in the repeal of President
Obama’s Affordable Healthcare Act. Regulatory uncertainty may act to hinder business
planning and
investment.

1.2
.b
Occupations and
Working Conditions

Many workers in the healthcare industry are on part
-
time schedules. Part
-
time workers made up about 20
percent of the healthcare workforce as a whole in 2008, but accounted for 37 percent of workers in
offices of dentists and 32 percent of those in offices

of other health practitioners. Many healthcare
establishments operate around the clock and need staff at all hours. Shift work is common in some
occupations, such as registered nurses. It is not uncommon for healthcare workers hold more than one
part
-
time

job. In 2008, the incidence of occupational injury and illness in hospitals was higher than the
average for private industry overall. Nursing care facilities had an even higher rate.

Healthcare firms employ large numbers of workers in professional and se
rvice occupations. Together,
these two occupational groups account for 76 percent of jobs in the industry (table 2). The next largest
share of jobs, 18 percent, is in office and administrative support. Management, business, and financial
operations occupat
ions account for only 4 percent of employment. Other occupations in healthcare made
up only 2 percent of the total.

Professional occupations, such as
physicians and surgeons, dentists, registered nurses, social workers,

and
physical therapists
, usually req
uire at least a bachelor's degree in a specialized field or higher
education in a specific health field, although
registered nurses

also may enter through associate degree
or diploma programs. Professional workers often have high levels of responsibility a
nd complex duties. In
addition to providing services, these workers may supervise other workers or conduct research. Some
professional occupations, such as medical and health services managers, have little to no contact with
patients.

Health technologists
and technicians work in many fast
-
growing occupations, such as
medical records
and health information technicians, diagnostic medical sonographers, radiologic technologists and
technicians,
and
dental hygienists
. These workers may operate medical equipment

and assist health
diagnosing and treating practitioners. These technologists and technicians are typically graduates of 1
-
year or 2
-
year postsecondary training programs. Service occupations attract many workers with little or
no specialized education or t
raining. For instance, some of these workers are
nursing aides, home health
aides, building cleaning workers, dental assistants, medical assistants,

and
personal and home care aides
.
Nursing
or

home health aides

provide health
-
related services for ill, inj
ured, disabled, elderly, or infirm
individuals either in institutions or in their homes. Each segment of the healthcare industry provides a
different mix of wage and salary health
-
related jobs.



South Denver
Biomedical Healthcare
Sector Roadmap (2011
)


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1
: Innovation Economics LLC


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10

Table 1.3
:
Employment of Wage and Salary workers in
Healthcare, 2008 and Projected Change,
2008
-
2018 (Employment in thousands)

Occupation

Employment, 2008

Percent Change,

Number

Percent

2008
-
18

All Occupations

14,336.00

100

22.5

Management, business, and financial occupations

614.6

4.3

16.8


Professional and related occupations

6,283.90

43.8

22.5

Counselors

171.3

1.2

22.6

Social workers

206.7

1.4

19.5

Dietitians and nutritionists

35.5

0.3

9.8

Pharmacists

67.5

0.5

14

Physicians and surgeons

512.5

3.6

26

Physician assistants

66.2

0.5

41.3

Registered nurses

2,192.40

15.3

23.4

Clinical laboratory technologists and technicians

278.8

1.9

14

Emergency medical technicians and paramedics

142.1

1

9.2

Licensed practical and licensed vocational nurses

619.1

4.3

21.9


Office and administrative
support occupations

2,540.30

17.7

19.7

Billing and posting clerks and machine operators

194.8

1.4

19.7

Receptionists and information clerks

386.3

2.7

16.1

Secretaries and administrative assistants

770.7

5.4

26.5

NOTE: Columns may not add to total due
to omission of occupations with small employment.




SOURCE: BLS National Employment Matrix, 2008
-
18.

Hospitals.

Hospitals employ workers with all levels of education and training, thereby providing a wider
variety of opportunities than is offered by other

segments of the healthcare industry. About 28 percent of
hospital workers are registered nurses. Hospitals also employ many physicians and surgeons, therapists,
and social workers. About 21 percent of hospital jobs are in a service occupation, such as nur
sing,
psychiatric, and home health aides, or building cleaning workers. Hospitals also employ large numbers of
office and administrative support workers.

Nursing and residential care facilities.

About 63 percent of nursing and residential care facility job
s
are in service occupations, primarily nursing, psychiatric, and home health aides. Professional and
administrative support occupations make up a much smaller percentage of employment in this segment,
compared with other parts of the healthcare industry.
Federal law requires nursing facilities to have
licensed personnel on hand 24 hours a day and to maintain an appropriate level of care.

Offices of physicians.

Many of the jobs in offices of physicians are in professional and related
occupations, primarily
physicians, surgeons, and registered nurses. About 37 percent of all jobs, however,
are in office and administrative support occupations, such as receptionists and information clerks.

Home healthcare services.

About 59 percent of jobs in this segment are i
n service occupations, mostly
home health aides and personal and home care aides. Nursing and therapist jobs also account for
substantial shares of employment in this segment.

Offices of other health practitioners.

About 42 percent of jobs in this industry

segment are
professional and related occupations, including physical therapists, occupational therapists, dispensing
opticians, and chiropractors. Healthcare practitioners and technical occupations and office and
administrative support occupations also ac
counted for a significant portion of all jobs

35 percent and 31
percent, respectively.

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Ambulatory healthcare services.

Outpatient care centers employed high percentages of professional
and related workers like counselors and registered nurses. Medical and
diagnostic laboratories
predominantly employ clinical laboratory and radiological technologists and technicians. Emergency
medical technicians and paramedics are also employed in ambulatory services.

1.2.c
Training and Advancement

A wide variety of
people with various educational backgrounds are necessary for the healthcare industry
to function. The healthcare industry employs some highly educated occupations that often require many
years of training beyond graduate school. However, most of the occup
ations in the healthcare industry
require less than four years of college.

A variety of postsecondary programs provide specialized training for jobs in healthcare. People interested
in a career as a health diagnosing and treating practitioner

such as physi
cians and surgeons,
optometrists, physical therapists, or audiologists

should be prepared to complete graduate school
coupled with many years of education and training beyond college. A few healthcare workers need
bachelor’s degrees like social workers, he
alth service managers, and some RNs. A majority of the
technologist and technician occupations require a certificate or an associate degree; these programs
usually have both classroom and clinical instruction and last about 2 years.

The healthcare industr
y also provides many job opportunities for people without specialized training
beyond high school. In fact, 47 percent of workers in nursing and residential care facilities have a high
school diploma or less, as do 20 percent of workers in hospitals.

Some
healthcare establishments provide on
-
the
-
job or classroom training, as well as continuing
education. Most healthcare workers that do not have postsecondary healthcare training and work directly
with patients will receive some on
-
the
-
job training. These occ
upations include nursing aides, orderlies,
and attendants; psychiatric aides; home health aides; physical therapist aides; and EKG technicians.
Hospitals are more likely than other facilities to have the resources and incentive to provide training
programs

and advancement opportunities to their employees. In other segments of healthcare, the
variety of positions and advancement opportunities are more limited. Many of the healthcare jobs that
are regulated by State licensure require healthcare professionals
to complete continuing education at
regular intervals to maintain valid licensure.

1.2.d Industry Outlook

Healthcare will generate 3.2 million new wage and salary jobs between 2008 and 2018, more than any
other industry, largely in response to rapid grow
th in the elderly population. Ten of the twenty fastest
growing occupations are related to healthcare. Many job openings should arise in all healthcare
employment settings as a result of employment growth and the need to replace workers who retire or
leave

their jobs for other reasons.

Employment change.

Wage and salary employment in the healthcare industry is projected to increase
22 percent through 2018, compared with 11 percent for a
ll industries combined
. Employment growth is
expected to account for ab
out 22 percent of all wage and salary jobs added to the economy over the
2008
-
18 period

(Table 1.4)
. Projected rates of employment growth for the various segments of the
industry range from 10 percent in hospitals, the largest and slowest growing industry
segment, to 46
percent in the much smaller home healthcare services.




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Table 1.4
:
Employment in healthcare by industry segment, 2008 and projected change,

2008
-
2018 (Employment in thousands)

Industry segment

2008

Employment

2008
-
18

Total

change

2008
-
18

Percent change

Healthcare, total

14,336

3,225.6

22.5





Offices of physicians

2,266

772.6

34.1

Nursing and residential care facilities

3,008

637.7

21.2

Hospitals, public and private

5,667

572.4

10.1

Home healthcare services

958

441.6

46.1

Offices of other health practitioners

629

259.7

41.3

Offices of dentists

819

233.4

28.5

Outpatient care centers

533

205.5

38.6

Medical and diagnostic laboratories

219

87.0

39.8

Other ambulatory healthcare services

239

16.2

6.8

SOURCE: BLS National
Employment Matrix, 2008
-
18

Employment in healthcare will continue to grow due to many contributing factors. The proportion of the
population in older age groups will grow faster than the total population between 2008 and 2018. In
addition, older persons ha
ve a higher incidence of injury and illness and often take longer to heal from
maladies. As a result, demand for healthcare will increase, especially in employment settings specializing
in gerontology care for the elderly. Employment in home healthcare and

nursing and residential care
should increase rapidly as life expectancies rise, and families are less able to care for their elder family
members and rely more on long
-
term care facilities.

Advances in medical technology will continue to improve the surv
ival rate of severely ill and injured
patients, who will then need extensive therapy and care. New technologies will continue to enable earlier
diagnoses of many diseases which often increases the ability to treat conditions that were previously not
treata
ble. Industry growth also will occur as a result of the shift from inpatient to less expensive
outpatient and home healthcare because of improvements in diagnostic tests and surgical procedures,
along with patients' desires to be treated at home.

Many of t
he occupations projected to grow the fastest in the economy are concentrated in the healthcare
industry. For example, over the 2008
-
18 period, total employment of home health aides is projected to
increase by 50 percent, medical assistants by 34 percent, p
hysical therapist assistants by 33 percent, and
physician assistants by 39 percent.

Rapid growth is expected for workers in occupations concentrated outside the inpatient hospital sector,
such as pharmacy technicians and personal and home care aides. Becau
se of cost pressures, many
healthcare facilities will adjust their staffing patterns to reduce labor costs. Where patient care demands
and regulations allow, healthcare facilities will substitute lower paid providers and will cross
-
train their
workforces.

Many facilities have cut the number of middle managers, while simultaneously creating new managerial
positions as the facilities diversify. Traditional inpatient hospital positions are no longer the only option for
many future healthcare workers; persons
seeking a career in the field must be willing to work in various
employment settings. Hospitals will be the slowest growing segment within the healthcare industry
because of efforts to control hospital costs and the increasing use of outpatient clinics and

other
alternative care sites.

Demand for dental care will rise due to greater retention of natural teeth by middle
-
aged and older
persons, greater awareness of the importance of dental care, and an increased ability to pay for services.
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Dentists will use
support personnel such as dental hygienists and assistants to help meet their increased
workloads.

1.2.e

Industry Earnings

Average earnings of nonsupervisory workers in most healthcare segments are higher than the average
for all private industry, with h
ospital workers earning considerably more than the average and those
employed in nursing and residential care facilities and home healthcare services earning less (table
1.5
).
Average earnings often are higher in hospitals because the percentage of jobs re
quiring higher levels of
education and training is greater than in other segments. Those segments of the industry with lower
earnings employ large numbers of part
-
time service workers.

Table 1.5: Average earnings and hours of nonsupervisory workers in
healthcare by industry
segment, 2008

Industry segment

Earnings

Weekly

hours

Hourly

Weekly

Total, private industry

$18.08

$608

33.6


Healthcare

sector average

20.38

678

33.2

Hospitals, public and private

23.99

866

36.1

Medical and diagnostic
laboratories

23.21

804

34.6

Offices of dentists

22.36

613

27.4

Offices of physicians

22.09

732

33.1

Outpatient care centers

21.13

718

34
.0

Offices of other health practitioners

19.35

543

28
.0

Home healthcare services

16.17

478

29.6

Other ambulatory
healthcare services

15.76

571

36.3

Nursing and residential care facilities

13.7
0

439

32.1

SOURCE: BLS Current Employment Statistics, 2008.

1.3
Biop
harmaceutical Sector Overview


The biomedical industry is composed of four primary segments, long regarded separate and distinct, but
which are now considered as fundamentally convergent and increasingly interrelated. The
pharmaceutical
segment

is the industry’s mainstay and is composed

of large, fully integrated, global players. The
biotechnology segment
is an upstart, having emerged commercially only 30 years ago, but is increasingly
the engine of innovation in biomedicine. The
medical device segment
is much older than biotech, but is
composed of many fewer players, and owing to the nature of its products, exemplifies the life
-
saving
power of “convergence”: a marriage of engineering know
-
how and biomedical science. The
diagnostics
segment

has grown up along mainstream pharmaceuticals, a
nd has acquired a new dynamism and
centrality since the advent of the genomics revolution.

1.3
.a
Biop
harmaceutical Sector

Industry
Organization



Production occupations and professional and related occupations each account for more than a
quarter of all
workers in the industry.



Earnings are higher than in other manufacturing industries.



Job prospects should be favorable for life scientists, particularly those with a doctoral degree.

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The pharmaceutical and medicine manufacturing industry develops and
produces a variety of medicinal
and other health
-
related products that save the lives of millions of people from various diseases and
permits many people suffering from illness to recover to lead productive lives.

Goods and services.

Thousands of medicatio
ns are available today for diagnostic, preventive, and
therapeutic uses. In addition to aiding in the treatment of infectious diseases such as pneumonia,
tuberculosis, malaria, influenza, and sexually transmitted diseases, these medicines also help prevent

and
treat cardiovascular disease, asthma, diabetes, hepatitis, cystic fibrosis, and cancer. For example, anti
-
nausea drugs help cancer patients endure chemotherapy; clot
-
buster drugs help stroke patients avoid
brain damage; and psychoactive drugs reduce t
he severity of mental illness for many people. Antibiotics
and vaccines have dramatically reduced the occurrences of such diseases as diphtheria, syphilis, and
whooping cough. Discoveries in veterinary drugs have controlled various diseases, some of which
are
transmissible to humans.

The U.S. pharmaceutical industry has achieved worldwide prominence through research and development
(R&D) on new drugs, and spends a relatively high proportion of its revenue on R&D compared with other
industries. Each year, ph
armaceutical industry testing involves millions of compounds, yet may eventually
yield fewer than 100 new prescription medicines.

For the majority of firms in this industry, the actual manufacture of drugs is the last stage in a lengthy
process that begins

with scientific research to discover new products and to improve or modify existing
ones. The R&D departments in pharmaceutical and medicine manufacturing firms start this process by
seeking and rapidly testing libraries of thousands to millions of new ch
emical compounds with the
potential to prevent, combat, or alleviate symptoms of diseases or other health problems. Scientists use
sophisticated techniques, including computer simulation, combinatorial chemistry, and high
-
throughput
screening (HTS), to has
ten and simplify the discovery of potentially useful new compounds.

Most firms devote a substantial portion of their R&D budgets to applied research, using scientific
knowledge to develop a drug targeted to a specific use. For example, an R&D unit may foc
us on
developing a compound that will effectively slow the advance of breast cancer. If the discovery phase
yields promising compounds, technical teams then attempt to develop a safe and effective product based
on the discoveries.

To test new products in d
evelopment, a research method called "screening" is used. To screen an
antibiotic, for example, a sample is first placed in a bacterial culture. If the antibiotic is effective, it is next
tested on infected laboratory animals. Laboratory animals also are u
sed to study the safety and efficacy
of the new drug. A new drug is selected for testing on humans only if it either promises to have
therapeutic advantages over drugs already in use or is safer. Drug screening is a laborious and costly
process

only 1 in e
very 5,000 to 10,000 compounds screened eventually becomes an approved drug.

After laboratory screening, firms conduct clinical investigations, or "trials," of the drug on human patients.
Human clinical trials normally take place in three phases. First, me
dical scientists administer the drug to a
small group of healthy volunteers to determine and adjust dosage levels, and monitor for side effects. If
a drug appears useful and safe, additional tests are conducted in two more phases, each phase using a
succes
sively larger group of volunteers or carefully selected patients. The final round of testing often
involves a very large panel, sometimes upwards of 10,000 individuals.

After a drug successfully passes animal and clinical tests, the U.S. Food and Drug Admi
nistration's (FDA)
Center for Drug Evaluation and Research (CDER) must review the drug's performance on human patients
before approving the substance for commercial use. The entire process, from the first discovery of a
promising new compound to FDA approv
al, can take over a decade and cost hundreds of millions of
dollars.

After FDA approval, problems of production methods and costs must be worked out before manufacturing
begins. If the original laboratory process of preparing and compounding the ingredien
ts is complex and
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too expensive, pharmacists, chemists, chemical engineers, packaging engineers, and production
specialists are assigned to develop a manufacturing process economically adaptable to mass production.
After the drug is marketed, new productio
n methods may be developed to incorporate new technology or
to transfer the manufacturing operation to a new production site.

Most pharmaceutical production plants are highly automated. Milling and micronizing machines, which
pulverize substances into extr
emely fine particles, are used to reduce bulk chemicals to the required size.
These finished chemicals are combined and processed further in mixing machines. The mixed ingredients
may then be mechanically capsulated, pressed into tablets, or made into solu
tions. Quality control and
quality assurance are vital in this industry.

Industry organization.

The pharmaceutical and medicine manufacturing industry consists of over
2,500 places of employment, located throughout the country. R&
D laboratories perform the work of drug
discovery and development, while manufacturing plants produce the final drugs for consumers. Most R&D
laboratories are located separately from manufacturing plants, but some labs and production plants are
integrated.


There are three main types of pharmaceutical companies. Large, or mainline, pharmaceutical companies
are established firms that have many approved drugs already on the market. These companies often
have significant numbers of R&D laboratories and manufac
turing plants throughout the Nation and
around the world. In contrast, smaller pharmaceutical companies are usually newer firms that often do
not have any approved drugs on the market. As a result, these firms almost exclusively perform R&D. In
addition to

developing their own drugs, some small pharmaceutical companies perform contract research
for other pharmaceutical companies. Finally, generic pharmaceutical companies manufacture drugs that
are no longer protected by patents. Because their products are a
ll established drugs, they devote fewer
resources to R&D and more to manufacturing.

Recent developments.

Advances in biotechnology are transforming drug discovery and development.
Bioinformatics, a branch of biotechnology using information technologies to
work with biological data like
DNA, is a particularly dynamic new area of work. Scientists have learned a great deal about human
genes, but the real work

translating that knowledge into viable new drugs

has only recently begun. So
far, millions of people h
ave benefited from medicines and vaccines developed through biotechnology, and
several hundred new biotechnologically
-
derived medicines are currently in the pipeline. These new
medicines, all of which are in human clinical trials or awaiting FDA approval,
include drugs for cancer,
infectious diseases, autoimmune diseases, neurologic disorders, and HIV/AIDS and related conditions.

Many new drugs are expected to be developed in the coming years. Advances in technology and the
knowledge of how cells work will

allow pharmaceutical and medicine manufacturing makers to become
more efficient in the drug discovery process. New technology allows life scientists to test millions of drug
candidates far more rapidly than in the past. Other new technology, such as regen
erative therapy, also
will allow the natural healing process to work faster, or enable the regrowth of missing or damaged
tissue. In addition, technology based on the study of genes is being explored to develop vaccines to
prevent or treat diseases that ha
ve eluded traditional vaccines, such as AIDS, malaria, tuberculosis, and
cervical cancer.

Advances in manufacturing processes are also impacting the industry. While pharmaceutical
manufacturers have long devoted resources to new drug development as a sour
ce for future profits, firms
are increasingly realizing that improvements throughout the drug pipeline are needed to stay competitive.
Along with other manufacturing industries, pharmaceutical manufacturers are realizing that quality
products can best be p
roduced when quality improvements occur at all stages and when processes are
continually updated with the latest technologies and methods. Controlling the product flow through the
supply chain also ensures that valuable resources do not sit idle but are pu
t to work, and that final
products reach consumers without delay.

1.3.b
Occupations and Work Environment

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Table 1.6
:
Employment of wage and salary workers in pharmaceutical and medicine
manufacturing, 2008 and projected change, 2008
-
2018. (Employment in
thousands)

Occupation

Employment, 2008

Percent
Change,
2008
-
18

Number

Percent

All occupations

289.8

100

6.1


Management, business, and financial occupations

51.9

17.9

3.9

Top executives

6.7

2.3

-
6.6

Industrial production managers

4.5

1.5

1.7

Natural sciences managers

4.7

1.6

1.8

Accountants and auditors

2.8

1

5.3

Professional and related occupations

91.1

31.4

9.8

Computer specialists

11.3

3.9

4.3

Engineers

9.4

3.2

22.9

Biochemists and biophysicists

6.7

2.3

22.2

Microbiologists

3.1

1.1

1.5

Medical scientists, except epidemiologists

14

4.8

22.1

Chemists

16.4

5.7

1.8

Biological technicians

5.4

1.9

1.7

Chemical technicians

9.4

3.3

1.7

Sales and related occupations

6.9

2.4

-
3.8

Sales rep
s.:
wholesale
, manufacturing, technl.,
scientific

products

4.6

1.6

-
5.4

Office and administrative support occupations

31.4

10.8

-
1.6

Customer service representatives

3.2

1.1

11.9

Shipping, receiving, and traffic clerks

3.5

1.2

-
8.4

Secretaries and administrative assistants

8.6

3

-
1

Installation,
maintenance, and repair occupations

12.4

4.3

9.2

Industrial machinery mechanics

3.4

1.2

20

Maintenance and repair workers, general

5.2

1.8

5

Production occupations

79.5

27.5

9.3

First
-
line supervisors/managers of
production and operations

8

2.8

1.8

Team assemblers

3.8

1.3

3.9

Chemical processing machine setters, operators, and tenders

13.2

4.6

7.5

Mixing and blending machine setters, operators, and tenders

12.8

4.4

41.9

Inspectors, testers, sorters, samplers, and weighers

8.1

2.8

1.8

Packaging
and filling machine operators and tenders

21.6

7.4

1.8

Transportation and material moving occupations

12.1

4.2

-
7.5

Laborers and material movers, hand

9.4

3.3

-
10.3

NOTE: Columns may not add to total due to omission of occupations with small employment.

SOURCE: BLS National Employment Matrix, 2008
-
18.

Employment.
Pharmaceutical and medicine manufacturing provided 289,800 wage and salary jobs in
2008. Pharmaceutical and medicine manufacturing establishments usually employ many workers. About
87 percent of this industry's jobs in 2008 were in establishments that empl
oyed more than 100 workers.
Over half of all jobs are in California, New Jersey, Puerto Rico, Pennsylvania, and New York.

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Under the North American Industry Classification System (NAICS), workers in research and development
(R&D) establishments that are no
t part of a manufacturing facility are included in a separate industry

research and development in the physical, engineering, and life sciences.
A

large proportion of
pharmaceutical industry
-
related R&D workers are not included in the
manufacturing
employm
ent data.

Occupations in the industry.

About 31 percent of all jobs in the pharmaceutical and medicine
manufacturing industry are in professional and related occupations, mostly scientists and science
technicians. About 27 percent of jobs are in productio
n occupations, including both low skilled and high
skilled jobs. The remaining jobs are primarily management, and office and administrative support
occupations (table 1
.6
).

Professional and related occupations.

Scientists, engineers, and technicians conduc
t research to
develop new drugs. Others work to streamline production methods and improve environmental and
quality control. Life scientists are among the largest scientific occupations in this industry. Most of these
scientists are
biological
and
medical
scientists

who produce new drugs using biotechnology to recombine
the genetic material of animals or plants. Biological scientists normally specialize in a particular area.
Biologists

and

bacteriologists

study the effect of chemical agents on infected anim
als.
Biochemists

study
the action of drugs on body processes by analyzing the chemical combination and reactions involved in
metabolism, reproduction, and heredity.
Microbiologists

grow strains of microorganisms that produce
antibiotics.
Physiologists

inve
stigate the effect of drugs on body functions and vital processes.
Pharmacologists

and
zoologists

study the effects of drugs on animals.
Virologists

grow viruses, and
develop vaccines and test them in animals.
Botanists
, with their special knowledge of plant life, contribute
to the discovery of botanical ingredients for drugs. Other biological scientists include
pathologists
, who
study normal and abnormal cells or tissues, and
toxicologists
, who are concerned with safety
, dosage
levels, and the compatibility of different drugs.
Medical scientists
, who also may be physicians, conduct
clinical research, test products, and oversee human clinical trials.

The work of physical scientists, particularly
chemists
, also is importan
t in the development of new drugs.
Combinatorial

and
computational chemists

create molecules and test them rapidly for desirable
properties.
Organic chemists
, often using combinatorial chemistry
,

then combine new compounds for
biological testing.
Physical
chemists

separate and identify substances, determine molecular structure,
help create new compounds, and improve manufacturing processes.
Radiochemists

trace the course of
drugs through body organs and tissues.
Pharmaceutical chemists

set standards and spe
cifications for the
form of products and for storage conditions; they also see that drug labeling and literature meet the
requirements of State and Federal laws.
Analytical chemists

test raw and intermediate materials and
finished products for quality.

Sci
ence technicians, such as
biological

and
chemical technicians
, play an important part in research and
development of new medicines. They set up, operate, and maintain laboratory equipment, monitor
experiments, analyze data, and record and interpret results
. Science technicians usually work under the
supervision of scientists or engineers.

Although engineers account for a small fraction of scientific and technical workers, they make significant
contributions toward improving quality control and production ef
ficiency.
Chemical engineers

design
equipment and devise manufacturing processes.
Bioprocess engineers
, who are similar to chemical
engineers, design fermentation vats and various bioreactors for microorganisms that will produce a given
product.
Industrial

engineers

plan equipment layout and workflow to maintain efficient use of plant
facilities.

Production occupations.

Among the larger of the production occupations,
assemblers and fabricators

perform various assembly tasks in teams, rotating through the di
fferent tasks rather than specializing in a
single task. They also may decide how the work is to be assigned and how different tasks are to be
performed.

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Other production workers specialize in one part of the production process.
Chemical processing machine

setters, operators, and tenders
, such as
pharmaceutical operators
, control machines that produce tablets,
capsules, ointments, and medical solutions. Included among these operators are
mixing and blending
machine setters, operators, and tenders
, who tend
milling and grinding machines that reduce mixtures to
particles of designated sizes.
Extruding, forming, pressing, and compacting machine setters, operators,
and tenders

tend tanks and kettles in which solutions are mixed and compounded to make up creams,
ointments, liquid medications, and powders.
Crushing, grinding, polishing, mixing, and blending workers

operate machines that compress ingredients into tablets.
Coating, painting, and spraying machine setters,
operators, and tenders
, often called capsule c
oaters, control a battery of machines that apply coatings
that flavor, color, preserve, or add medication to tablets, or control disintegration time. Throughout the
production process,
inspectors, testers, sorters, samplers, and weighers

ensure consistency

and quality.
Tablet testers,
for example, inspect tablets for hardness, chipping, and weight to assure conformity with
specifications. After the drug is prepared and inspected, it is bottled or otherwise packaged by
packaging
and filling machine operators

and tenders
.

Plant workers who do not operate or maintain equipment perform a variety of other tasks. Some drive
industrial trucks or tractors to move materials around the plant, load and unload trucks and railroad cars,
or package products and materials

by hand.

Other occupations.

At the top of the managerial group are executives who make policy decisions
concerning matters of finance, marketing, and research. Other managerial workers include
natural
sciences managers

and
industrial production managers.

Workers in office and administrative support occupations include
secretaries and administrative
assistants, general office clerks
, and others who keep records on personnel, payroll, raw materials, sales,
and shipments.

Sales representatives
,
wholesale and

manufacturing,

describe their company's products to physicians,
pharmacists, dentists, and health services administrators. These workers serve as lines of communication
between their companies and clients.

1.3.c Training and Advancement

Training requireme
nts for jobs in the pharmaceutical and medicine manufacturing industry range from a
few hours of on
-
the
-
job training to years of formal education plus job experience. However, because of
the large number of workers in professional occupations, bachelor’s a
nd graduate degrees are common.

Scientific and engineering occupations.

A bachelor of science degree is typically the minimum
requirement for these workers, although scientists involved in research and development usually have a
master's or doctoral degree. A doctoral degree is generally the minimum requirement for medical
sci
entists, and those who administer drug or gene therapy to patients in clinical trials must have a
medical degree. Because biotechnology is not one discipline, but the interaction of several disciplines, the
best preparation for work in biotechnology is tra
ining in a traditional biological science, such as genetics,
molecular biology, biochemistry, virology, or biochemical engineering. Individuals with a scientific
background and several years of industry experience may eventually advance to managerial posit
ions.
Some companies offer training programs to help scientists and engineers keep abreast of new
developments in their fields and to develop administrative skills. These programs may include meetings
and seminars with consultants from various fields. Many

companies encourage scientists and engineers to
further their education; some companies provide financial assistance or full reimbursement of expenses
for this purpose. Publication of scientific papers also is encouraged.

Science technician occupations.

To fill these jobs, most companies prefer to hire graduates of
technical institutes or community colleges or those who have completed college courses in chemistry,
biology, mathematics, or engineering. Some companies, however, require science technicians t
o hold a
bachelor's degree in a biological or chemical science. In many firms, newly hired workers begin as
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laboratory helpers or aides, performing routine jobs such as cleaning and arranging bottles, test tubes,
and other equipment.

The experience require
d for higher
-
level technician jobs varies from company to company. Usually,
employees advance over a number of years from assistant technician, to technician, to senior technician,
and then to technical associate, or supervisory technician.

Production occu
pations.

Manufacturers usually hire inexperienced workers and train them on the job,
although workers with some postsecondary training, particularly in manufacturing, are preferred.
Beginners in production jobs assist experienced workers and learn to opera
te processing equipment. With
experience, employees may advance to more skilled jobs in their departments.

The industry places a heavy emphasis on continuing education for employees, and many firms provide
classroom training in safety, environmental and qu
ality control, and technological advances. Many
companies encourage production workers to take courses related to their jobs at local schools and
technical institutes. College courses in chemistry and related areas are particularly encouraged for highly
sk
illed production workers who operate sophisticated equipment. Some companies reimburse workers for
part, or all, of their tuition. Skilled production workers with leadership ability may advance to supervisory
positions.

Sales and related occupations.

Pharm
aceutical manufacturing companies prefer to hire college
graduates, particularly those with strong scientific backgrounds. In addition to a 4
-
year degree, most
newly employed pharmaceutical sales representatives complete rigorous formal training programs
r
evolving around their company's product lines.

1.3.d Industry Outlook

Employment is expected to increase as demand for drugs continues to grow. Prospects should be
favorable, particularly for life scientists with a doctoral degree.

Employment change.

Th
e number of wage and salary jobs in pharmaceutical and medicine
manufacturing is expected to increase by 6 percent over the 2008
-
18 period, compared with 11 percent
projected for all industries combined. Even during fluctuating economic conditions, demand
is expected
to remain strong for this industry's products, including the diagnostics used in hospitals, laboratories, and
homes, the vaccines used routinely on infants and children, analgesics and other symptom
-
easing drugs;
antibiotics and other drugs for

life
-
threatening diseases, and "lifestyle" drugs for the treatment of nonlife
-
threatening conditions.

The use of drugs, particularly antibiotics and vaccines, has helped to eradicate or limit a number of
deadly diseases, but many others, such as cancer, A
lzheimer's, and heart disease, continue to elude
cures. Ongoing research and the manufacture of new products to combat these and other diseases will
continue to contribute to employment growth. Demand also is expected to increase as the population
expands
because many of the pharmaceutical and medicine manufacturing industry's products are related
to preventive or routine healthcare, rather than just illness. The growing number of older people, who
tend to consume more of all types of healthcare services, w
ill further stimulate demand

along with the
growth of both public and private health insurance programs, which increasingly cover the cost of drugs
and medicines.

Another factor propelling demand is the increasing popularity of "lifestyle" drugs. These dru
gs treat
symptoms of chronic nonlife
-
threatening conditions resulting from aging or genetic predisposition and can
enhance one's self
-
confidence or physical appearance. Other factors expected to increase the demand for
drugs include greater personal income

and the rising health consciousness and expectations of the
general public.

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Despite the increasing demand for drugs, several factors will limit employment growth in the industry.
Drug producers and buyers are placing more emphasis on cost effectiveness, d
ue to the extremely high
costs of developing new drugs. Competition from the producers of generic drugs also will put pressure on
many firms in this industry as more brand
-
name drug patents expire. On the manufacturing side,
continuing improvements in manu
facturing processes will improve productivity in pharmaceutical plants,
while many companies are also manufacturing more of their products overseas.

Strong demand is anticipated for professional occupations

especially for life and physical scientists
enga
ged in R&D, the backbone of the pharmaceutical and medicine manufacturing industry. Much of the
basic biological research done in recent years has resulted in new knowledge, including the successful
identification of genes. Life and physical scientists wil
l be needed to take this knowledge to the next
stage, which is to understand how certain genes function so that gene therapies can be developed to
treat diseases. Computer specialists such as systems analysts, biostatisticians, and computer support
special
ists also will be in demand as disciplines such as biology, chemistry, and electronics continue to
converge and become more interdisciplinary, creating demand in rapidly emerging fields such as
bioinformatics and nanotechnology.

Steady demand also is proj
ected for production occupations. Employment of office and administrative
support workers is expected to grow more slowly than the industry as a whole, as companies streamline
operations and increasingly rely on computers.

1.3.e Industry Earnings

Indust
ry earnings.

Earnings of workers in the pharmaceutical and medicine manufacturing industry are
higher than the average for all manufacturing industries. In 2008, production or nonsupervisory workers
in this industry averaged $821 a week, while those in all

manufacturing industries averaged $724 a week.
Wages in selected occupations in pharmaceutical and medicine manufacturing appear in table 2.

Table 1.7
:
Median hourly wages of the largest occupations in pharmaceutical and medicine
manufacturing, 2008

Occupation

Pharmaceutical
and medicine
manufacturing

All industries

Biochemists and biophysicists

$42.59

$39.83

Medical scientists, except epidemiologists

42.07

34.9
0

Chemists

31.98

31.84

First
-
line supervisors/managers of production and operati
ons

28.91

24.25

Chemical technicians

21.72

20.25

Chemical equipment operators and tenders

20.98

21.76

Biological technicians

19.88

18.46

Inspectors, testers, sorters, samplers, and weighers

16.78

15.02

Mixing and blending machine setters, operators, and
tenders

15.31

15.04

Packaging and filling machine operators and tenders

13.36

11.73

SOURCE: BLS Occupational E
mployment Statistics, May 2008.




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1.4 Medical Device
Industry

Overview

1.4.a Industry Organization

The United States
medical device
manufacturing sector is a highly diversified industry that produces a
range of products designed to diagnose and treat patients in healthcare systems worldwide. Medical
devices differ from drugs in that they do not achieve their intended use through chemic
al reaction and
are not metabolized in the body. Medical devices range in nature and complexity from simple tongue
depressors and bandages to complex programmable pacemakers and sophisticated imaging systems.


Key Products
: The key products that comprise t
he medical devices industry, include, surgical appliances
and supplies, surgical and medical instruments, electro
-
medical equipment, in
-
vitro diagnostic
substances, irradiation apparatus, dental and ophthalmic goods.


NAICS Codes
: The following North Ameri
can Industry Classification System (NAICS) codes comprise the
medical devices industry that is covered by the Office of Health and Consumer Goods (OHCG):


325413 In
-
Vitro Diagnostic Substances Manufacturing

334510 Electro
-
medical and Electrotherapeutic
Apparatus Manufacturing

334517 Irradiation Apparatus Manufacturing

339112 Surgical and Medical Instrument Manufacturing

339113 Surgical Appliances and Supplies Manufacturing

339114 Dental Equipment and Supplies Manufacturing

339115 Ophthalmic Goods Manufac
turing




In
-
vitro diagnostic substances (IVDs) (NAIC 325413); about 10 percent of the total measured by
value of shipment (VOS) for medical devices include chemical, biological or radioactive
substances used for diagnostic tests performed in test tubes, Pet
ri dishes, machines, and other
diagnostic test
-
type devices.




Electro
-
medical equipment (NAIC 334510) manufacturers, the third
-
largest subsector accounts
for about 19 percent of VOS, produce a variety of powered devices, including pacemakers,
patient
-
monit
oring systems, MRI machines, diagnostic imaging equipment (including informatics
equipment), and ultrasonic scanning devices.




Irradiation apparatus (NAIC 334517; accounts for about 8 percent of VOS includes X
-
ray devices
and other diagnostic imaging, as w
ell as computed tomography equipment (CT).




Surgical and medical instruments (NAIC 339112) are the second
-
largest subgroup (about 26
percent of VOS) of the medical device industry. The category includes anesthesia apparatus,
orthopedic instruments, optical

diagnostic apparatus, blood transfusion device, syringes,
hypodermic needles, and catheters.




Surgical appliances and supplies (NAIC 339113) is the largest U.S. medical device subsector,
about 28 percent of the total measured by VOS. The category covers a

wide range of products,
including artificial joints and limbs, stents, orthopedic appliances, surgical dressings, disposable
surgical drapes, hydrotherapy appliances, surgical kits, rubber medical and surgical gloves, and
wheelchairs.




Dental equipment an
d supplies (NAIC 339114; about 5 percent of total measured by VOS
consists of equipment, instruments, and supplies used by dentists, dental hygienists, and
laboratories. Specific products include dental hand instruments, plaster, drills, amalgams,
cements,

sterilizers and dental chairs.


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Ophthalmic goods (NAIC 339115; about 5 percent of total measured by VOS include eyeglass
frames, lenses and related optical and magnification products. Dental laboratories (NAIC 339116;
about 4% of total measured by VOS
include crowns, dentures, bridges and other orthodontic
products.


1.4.b Industry
Characteristics

and Competitiveness


Industry Characteristics


The U.S. medical devices industry is known for producing high quality products using

advanced
technology
resulting from significant investment in research and development (R&D).

There were approximately 5,300 medical device companies in the U.S. in 2007]1, mostly small

and
medium
-
sized enterprises (SMEs). In 2007, approximately 73 percent of medical device

co
mpanies had
fewer than 20 employees, with15 percent having as many as 100 employees2.

Medical device companies
are located throughout the country, but are mainly concentrated in

specific regions known for other high
-
technology industries, such as microelec
tronics and

biotechnology. The states with the highest number of
medical device companies include

California, Florida, New York, Pennsylvania, Michigan, Massachusetts,
Illinois, Minnesota and

Georgia.


In 2007, the total value of industry shipments for U.S
.


manufactured medical devices

covered by the
NAICS categories identified above was valued at
$
98 billion, and in prior years

had experienced
approximately 6 percent annual growth. Median state medical technology jobs

paid 15% more than the
average U.S.
manufacturing job. In 2007, the medical device industry

employed more than 365,000
people in the U.S., earning an average annual wage of

approximately $60,000. In addition, the U.S. holds
a competitive advantage in several

complementary industries on which

the medical device industry relies,
namely microelectronics,

telecommunications, instrumentati
on, biotechnology, and software
d
evelopment.



Note:
The $98 billion shipment figure only includes medical devices from companies whose primary
production reside
s within the seven NAICS industries described above; several billion dollars of additional
shipments likely are secondary products for companies classified under other NAICS industry codes.


Major U.S. medical device companies include Medtronic®, GE Health
care

Technologies®, Johnson &
Johnson®, St. Jude®, Boston Scientific®, Baxter®, Becton

Dickinson®, Beckman Coulter®, Abbott
Labs® and Stryker Corporation®. In addition, the

following trade associations closely follow the medical
device industry: Advanced
Medical

Technology Association (AdvaMed), Medical Device Manufacturers
Association (MDMA),

Medical Imaging Technology Association (MITA), Dental Trade Alliance (DTA) and
the

International Association of Medical Equipment Remarketers & Servicers (IAMERS).


Announcements of progress in medical technology that allow for earlier detection of

diseases and more
effective treatment options are now almost daily occurrences. Particularly

notable technological advances
in the industry in recent years included new dev
elopments in

neurology (e.g. deep
-
brain
-
stimulation
devices for treating symptoms of Parkinson's), cardiology

(e.g. artificial device designed to replace
diseased heart valves) and Health IT (e.g. "data

liquidity" to facilitate information sharing, wireles
s
telemedicine devices, systems designed to

track the cardiac activity of patients with implanted medical
devices). Scientists have used nanosensors

for the quick detection of cancers through blood tests, with
nano
-
material also enabling

the release of med
icine at targeted organs. Collaborations have led to
advances in biomarkers,

robotic assistance, implantable electronic devices, liquid bandages/wound
dressings and

ingestible diagnostic devices (capsules).


Minimally invasive surgery has also seen major g
ains
-

an exciting example of this trend

is an endoscopic
technique that integrates nontechnology and diagnostic imaging. Capsule

endoscopy, which involves
swallowing a tiny wireless camera pill that takes thousands of

pictures as it travels through the di
gestive
track, gives physicians more detailed information

about hard to navigate sections of the digestive tract
compared with earlier endoscopic

technologies. The ability to navigate and detect conditions in the small
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intestine is the most

promising aspec
t of this new technology; providing physicians with greater ability to
diagnose

conditions such as intestinal tumors and Chrohn’s disease.


Domestic Competitiveness


Domestic Competitiveness:
U.S. medical device companies are highly regarded globally for their
i
nnovations and

high technology products. Investment in medical device R&D more than doubled during
the

1990s, and R&D investment in the domestic sector remains more than twice the averag
e for all

U.S.
manufacturers overall. The medical device sector also continues to benefit from a new

generation of
materials, manufacturing processes, and technology, such as nanotechnology and

micro
-
electro
-
mechanical systems (MEMS). Since the industry is

fueled by innovation and the

ongoing quest for better
ways of treating or diagnosing medical problems, future growth

prospects for this sector remain positive.


The medical device sector was better positioned than some other industries to weather the

rece
nt
economic downturn. Biotech and medical
-
device companies in California, for example,

were able to
employ more than 280,000 workers and commercialize 1,754 medical products in

2009 despite the
economic downturn, according to a report released by trade gro
up BayBio. In

2010 medical device
companies will likely see continued gains from an improving economy and

a clearer view of healthcare
reform. However, the industry
is having
to contend with certain

new challenges including strengthened
regulatory oversigh
t, efforts at cost containment and an

anticipated multibillion
-
dollar tax as part of
healthcare reform legislation.


Global Competitiveness


The U.S. is the largest consumer of medical devices and leads the world in the production

of medical
devices. The
U.S. has a medical device market valued at more than $100 billion in

2008, roughly 42
percent of the world’s total. U.S. exports of medical devices in the key product

categories identified in
Section I (excluding IVDs) was valued at approximately $31.4 bil
lion in

2008 and imports were valued at
$33.6 billion.


Over the past decade the value of imported medical devices has steadily increased,

gradually eroding the
previous trade surplus. The majority of imports are lower tech products,

e.g. surgical gloves a
nd
instruments. Continuing shifts in trade patterns have resulted in China

emerging as a significant export of
lower tech equipment and supplies to the U.S.

The surgical and medical instruments category comprises
the largest trade category

within the medic
al device sector. This category includes numerous price
-
sensitive lower

technology

devices where imports can be more easily substituted than with higher
technology

medical device products. While exports of surgical and medical instruments grew 61.54
percen
t

from 2002 to 2007, imports more than doubled over the same period.


Most of the other product categories (NAICS) have shown steady growth in both exports

and imports
between 2002 and 2007. For example, imports of dental equipment [
NAIC
339114]

doubled in

that
period, and exports grew by over 50 percent. Ophthalmic goods [
NAIC
339115],

on the other hand, have
experienced smaller growth rates, with imports growing by 59.2 percent

and exports by 32.7 percent.


The U.S. medical device industry is expected to
remain highly competitive globally, due

in part to national
characteristics that facilitate bringing new and innovative technologies to

market. An increasing number
of multinational firms are seeking regulatory approval for their

products in more countries

worldwide.
These firms are focusing greater attention on

international sales, joint ventures, and mergers and
acquisitions.


Global demand for medical devices is being driven by increasing expenditures and

greater attention to
health care by developing ma
rkets, construction of hospitals and clinics, and

establishment of public
health insurance. In addition, global demand should continue to grow

due to aging populations in major
markets, new and significant emerging markets and rising

global income levels i
n developing countries.
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Further, global harmonization of standards and

regulatory requirements should help facilitate overall
market growth.


The U.S., European Union (E.U.), Japan and Canada are extremely large and lucrative

medical device
markets; howeve
r, they are mature markets with stable but relatively low (3


5

percent) annual growth
rates. In order to facilitate expansion, medical device companies

recognize that they must look
increasingly at developing countries to drive future growth. For

example
, demand for medical devices in
China and India is growing at double digit growth rates

compared to developed countries, albeit from a
low base.For the medical device industry to fully realize its potential in developing markets,

standards and
criteria for

regulatory approval, risk management, and quality must be improved

and most importantly
harmonized to meet global international best practices based upon Global

Harmonization Task Force
(GHTF) guidance documents.


1.4.c Industry Drivers


Regulatory

Drivers


The medical device industry is a highly regulated sector of the economy, and regulatory

environments,
both at home and abroad, have significant implications for the industry’s

performance. Accordingly, the
U.S. medical device industry devotes cons
iderable resources

toward product approval processes, clinical
trials, user fees and plant audits/inspections. The

U.S. Food and Drug Administration’s Center for Devices
for Radiological Health

(USFDA/CDRH) governs the regulatory oversight of medical devic
es. The USFDA
maintains

three risk categories that determine the type and depth of review necessary for the marketing
of

medical devices.


The USFDA will have a considerable increase in both responsibilities and resources in

the coming years.
Budget legisl
ation for fiscal year 2009 contained more than $2 billion for the

USFDA
--

a $325 million
increase over the FDA's FY 2008 appropriations. About $43 million is

for the Center for Devices and
Radiological Health and activities in the medical
-
device field.

The USFDA is working toward increasing the
number of electronic applications for

approval and has published proposed rules that would require
electronic reporting of post
-
market

medical device adverse events. The Sentinel Initiative calls for a
national el
ectronic system that

would allow the agency to search existing databases for safety
information on medical products

approved by the USFDA.

The FDA has also proposed streamlining current good manufacturing

practice standards for combination
products in ord
er to prevent the "…inconsistent or differing

application of such requirements that could
affect product safety and the public health”.


The USFDA is also re
-
examining the “510(k)” process, an approval process for medical

devices that are
substantially equ
ivalent to other products already authorized for sale on the

marketplace. The USFDA is
evaluating the 510 (k) process in an attempt to remove vague or

nontransparent requirements and
determine whether it should restrict the types of products that

can pursu
e a 510 (k) clearance track.


In 2009 the U.S. Government Accountability Office (GAO) published a study on the

USFDA’s 510(k)
process at the request of Congress. The study recommended that HHS direct

the USFDA to issue
regulations for a limited group of cl
ass III “pre
-
amendment” devices which

currently enter the market
through the 510(k) process. The GAO determined that the devices

should either be “down
-
classified” or
re
-
evaluated through the more stringent pre
-
market

approval (PMA) process as class III pr
oducts.


Devices that would be affected include external

counter
-
pulsating devices, implanted blood access
devices, intra
-
aortic balloon and control

systems, automated external defibrillators, pedicle screw spinal
systems, and certain types of

artificial
hip joints. As a result of the GAO study, USFDA issued an order in
April 2009

requiring the manufacturers of class III pre
-
amendment devices to submit information

demonstrating the safety and effectiveness of their device. While the GAO report does not mak
e

any
fundamental recommendations about the 510 (k) process, continued discussion and scrutiny

of the
process is expected in 2010. A committee within the Institute of Medicine, an

independent, nonprofit
organization that works outside of government to prov
ide unbiased and

authoritative advice to decision
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makers and the public, is assessing whether the 510(k) clearance

process sufficiently protects patients
and promotes public health.



In addition, the USFDA has been working closely with relevant stakeholde
rs to

implement a Unique
Device Identifier (UDI) system for medical devices. This system was

mandated by Food and Drug
Administration Amendment Act (FDAAA) in September 2007 and

is expected to be introduced in 2010.
The potential benefits of a UDI system i
nclude: reduction

in medical errors, improved adverse event
reporting (AER) and post
-
market surveillance

(tracking medical devices once they have been used in the
market), and streamlined process for

carrying out product recalls. The USFDA held a public wo
rkshop in
February 2009 to discuss

UDI implementation with relevant stakeholder holders such as healthcare
providers, medical

device manufactures and patient groups. In addition, with the cooperation of several

manufacturers and hospitals, the USFDA held a

pilot study in the third quarter of 2009 to test a

UDI
database. While the USFDA is still working on the regulation for implementation, USFDA

representatives
have indicated that they will begin mandating UDI implementation to the highest

risk class of
devices and
gradually expand to all categories.


Another key regulatory development is an announcement by the FDA in August 2009

that beginning
February 2011 medical device manufacturers, importers and facilities would be

required to submit
Adverse Event R
eports (AERs) to CDRH electronically. Currently, CDRH

receives most incident reports on
paper which then needs to be input into the Manufacturer and

User Facility Device Experience (MAUDE)
database. The FDA says the existing process is not

only costly, but

hinders CDRH’s ability to review safety
data quickly to uncover potential public

health problems. USFDA has posted information about this new
initiative to its website.


Non
-
Regulatory
Drivers


There are a number of key non
-
regulatory areas that significa
ntly impact the viability of

the U.S. medical
device industry, ranging from financial investments to legislative changes to

innovation and product
convergence.




Reimbursement:
Valuation and reimbursement of products by public and private sector

financial
entities are crucial to the success of the medical device industry. The U.S.

market is so large that
reimbursement decisions made in the U.S. have the potential to

impact the viability of
manufacturing the product for other markets. In the U.S., there are

several government
organizations that are involved in establishing reimbursement rates.

The Department of Health
and Human Services’ Center for Medical and Medicaid

Services (HHS/CMS) administers both the
Medicaid and Medicare program that covers

the reimb
ursement of medical devices. In addition,
the Veterans Administration is the

key agency responsible for negotiating an agreement with
manufacturers/distributors of

medical devices (Federal Supply Schedules) for procurement of
medical devices by

certain gov
ernment agencies.




Healthcare Reform
: In March, 2010, the U.S. House of Representatives passed the

Patient
Protection and Affordable Care Act (H.R. 3590). The bill had been previously

approved by the
Senate in December, 2009 and was subsequently signed int
o law by

President Obama. Health
care reform will have a wide ranging impact and will impose

new mandates on individuals,
employers, medical service providers and health products

manufacturers.




Comparative Effectiveness
: As policy
-
makers contend with risi
ng healthcare costs it is

likely that
some form of comparative effectiveness, a system based on the relative

benefits a product
delivers, will be implemented or expanded both in the U.S. and abroad.

Comparative
effectiveness employs research that compares
the clinical effectiveness of

different drugs,
devices and procedures with an eye toward improving quality of care.

However, issues remain as
to who should conduct the research or when and how cost

effectiveness

should be factored in.


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Attracting Venture
Capital
: Small to medium enterprises (SMEs) with limited earnings

in the early
stages of development, and the medical device sector is particularly reliant on

venture capital
funding. Venture capitalists need a predictable system in order to assess

risk, a
nd when
uncertainties prevent access to venture capital funds, there tends to be a

fall
-
off in innovative
activity. The downturn in the U.S. economy which accelerated in

late 2008 took a toll on the
valuation of medical device start
-
ups seeking injections
of

capital. A number of venture capital
firms, including some long time investors, began

withdrawing from early
-
stage investing as the
economic slump deepened, choosing

instead to hold on to capital until higher levels of certainty
asset valuations return.

While

the medical device sector fared somewhat better than others
during the economic

downturn of 2009 reports have been mixed. Medical
-
device makers raised
$628 million

in venture funding during the second quarter 2009, a 38% increase over the second

qua
rter of 2008 according to a report by PricewaterhouseCoopers and the National

Venture
Capital Association (NVCA). A subsequent release from the NVCA, however,

reported that
members of NVCA invested nearly $617 million in device companies in the

third quart
er of 2009,
down from $890 million for the same period in 2008. While the

recession likely played a primary
role in the decrease, extended product approval periods

and stricter insurance reimbursement
policies may have
a
lso kept some investors away.




Group

Purchasing Organizations (GPOs)
: GPOs negotiate contracts with health product

suppliers
on behalf of cooperatives of healthcare facilities. The role that GPOs play in

the health care
system has come under scrutiny by Congress in recent years. With the

eco
nomic downturn in
recent years the bond between hospitals and GPOs seems to be

strengthening. The recession
prompted some hospitals to enact cost
-
cutting initiatives,

including in the area of product
procurement. Hospital materials management

departments h
ave been empowered by
administrators to make money
-
saving decisions.

For the future, products that provide superior
clinical value and contain costs will likely

attract investors.




Industry Consolidation
-

Mergers and Acquisitions
: In the medical device in
dustry small

firms
faced with devoting significant resources to innovations often merge with larger

firms with the
financial resources necessary to bring products to market. The results was

mutually beneficial
-

larger firms receive the benefit of the new
technology and,

therefore, maintain market share;
small firms can afford to continue to produce and get

the benefit of the large firms devoting
resources to continued incremental improvements

that are crucial in the industry. This trend has
continued in pa
rt due to economic realities

in 2009 led to further consolidation in the medical
device sector, both in terms of

company mergers, companies combining profit centers and
companies outsourcing for

greater efficiencies. Two prominent examples: in 2009 Abbott
Labs
and Covidien made

significant acquisitions adding to their product
p
ortfolio while Medtronic took
major

steps to consolidate its various businesses into two major groups. International joint

venture designed to develop health care technologies and est
ablishing local research and

development capabilities have also grown in size and significance. Asia


notably China

and Korea


have been the site of a number of collaborations with U.S. firms. Some

firms are also
gravitating toward a launch in Europe fol
lowed by a move to the U.S. or

perhaps a move to China
or India. It definitely adds a level of complexity to the

development process.




Demographics
: Marked increases in the average age of U.S. and foreign populations has

already
influencing the direction o
f the medical device industry through the changing

health needs of
senior citizens and shifts in thinking on how and where they will be

treated. As pressures mount
to contain costs, expensive and/or extended stays in

healthcare facilities will be discourag
ed and
healthcare will be increasingly delivered in

alternative settings such as nursing homes, hospices,
and, especially, the patient’s own

home. Home health
-
care is one of the fastest growing
segments of the industry, and is

branching out into new areas.

What used to be limited to only
the lowest technology

products is now encompassing a proliferation of high technology medical
devices that are

intended to be used by unskilled health care workers or patients. In addition,

demographics and technological ad
vances will continue to increase demand for advanced

medical
device products (such as pacemakers and
d
efibrillators) well into the 21
st

century.

South Denver
Biomedical Healthcare
Sector Roadmap (2011
)


Copyright 201
1
: Innovation Economics LLC


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27




Health Information Technologies (HIT):
The 2009 American Recovery and

Reinvestment Act
(ARRA) appropriated
approximately $19 billion towards increased

utilization of Health IT,
including requiring “meaningful use” of electronic health records

(EHRs), and new governance
boards for setting Health IT policy and standards. ARRA

also conferred statutory authority up
on
the HHS Office of the National Coordinator for

Health IT (ONC). Development and application of
relevant Health IT standards

(including increasing medical device interoperability) has been an
ongoing focus of key

stakeholders since 2005. At the end of 20
09, ONC published draft rules for
public

comment specifying the conditions where federal programs will reimburse for

meaningful
use” of EHRs. The use of HIT
-
related medical devices alone, however, will

not provide all of the
promising synergies and benefit
s for delivering effective and

efficient healthcare. Reviewing
treatment and decision
-
making processes, while

expanding the range of services available to
patients, are additional elements that will

enable the medical device industry to play an
increasingl
y critical role in the rollout of

Health IT.




Product Convergence:
As medical device and biotechnology products converge, medical

devices will
act as delivery systems for pharmaceutical treatments and research resulting

from genetic
engineering and
biotechnology research. Many industry experts view the

impending convergence of
medical devices with biotechnology and nanotechnology with

cautious optimism, but also warn that if
the regulatory and reimbursement issues are not

addressed problems will ensu
e as convergence
takes place.