MEDICAL-DEVICE FIRMS ADD POSITIONS; ARIZONA BUCKS BIOTECH INDUSTRY'S NATIONAL TREND OF SHRINKING EMPLOYMENT
BYLINE: Ken Alltucker, The Arizona Republic
Arizona's push for the bioscience holy grail focuses on luring top scientists to perform cutting-edge research on diseases such as cancer and Alzheimer's.
With enough time and money, Arizona's burgeoning bio industry expects to yield more high-wage jobs through research breakthroughs, better medical care and agricultural advances.
But a lesser-known piece of the state's biotech puzzle is in full bloom, generating several thousand jobs and driving the economies of areas such as Flagstaff and Tempe.
About 4,500 Arizonans design and make miniature medical devices that keep hearts pumping, blood flowing and lungs breathing for patients around the world.
Arizona's medical-device industry offers a blue-collar aspect to biotech. Many positions are in manufacturing, not the white lab coat jobs that Arizona's investment in the biosciences promises to produce. But making medical devices requires a high degree of technical skill and design know-how, and it's an industry that economic-development types hope to tap even more for its potential of creating high-wage jobs.
"For a long time we focused our biotechnology efforts on things like research and drug development and partially neglected the opportunity around medical devices," said Troy Ignelzi, vice president of emerging technologies for the Greater Phoenix Economic Council, the region's principal recruiter of new jobs and industry.
"This is something we are just starting to figure out," he said. "How do we go about doing this better?"
The medical-device industry is a strength identified by Arizona's Biosciences Roadmap, a technology to-do list developed by Battelle Technology Partnership Practice in 2002 and funded by the Flinn Foundation.
The Roadmap's annual update issued last month showed Arizona's medical-device sector employs about 4,500 and is adding jobs as the nation's overall employment in the industry is declining.
Arizona's medical-device employment soared 12.4 percent since 2001. Two companies, W.L. Gore & Associates in Flagstaff and Medtronic in Tempe, together employ about 3,100, driving the state's overall medical-device employment. Several smaller companies have emerged, too, developing devices that help stroke victims regain coordination and cardiac patients unclog arteries.
The state's growth in this area came as the nation overall lost more than 10,000 jobs in the medical-device sector during the past four years, a 2.5 percent decline.
Some attribute the nation's medical-device job decline to technology and the pressure to produce medical devices with less expense, with some major companies sending jobs overseas or outsourcing them to reduce labor costs. These medical-device jobs haven't been offshored as quickly as other industries such as computer-chip manufacturing, in part because of stringent regulatory and safety controls on these devices that are often inserted in humans.
Yet local economic-development officials who seek to protect Arizona's medical device job base acknowledge that companies face pressure to cut costs. "A lot of (medical-device) manufacturing is stagnant in the U.S.," Ignelzi said. "We want to go after the research side. We're trying to work closely with our assets."
Flourishing in Flagstaff
There's no better example of a stable medical-device industry than Flagstaff. The mountain city in northern Arizona ranks among the nation's leaders in its concentration of medical-device jobs.
The main reason: W.L. Gore & Associates.
Gore relocated a division to Flagstaff more than three decades ago after founder Bill Gore passed through town while scouting West Coast sites for a manufacturing plant. After a hiking trip in Flagstaff with his wife, he purchased a large chunk of land and started operations there.
Today, Gore employs about 1,600 at its two Flagstaff campuses, which will include a soon-to-be-completed manufacturing site. The company makes dozens of medical devices in Flagstaff, everything from stents that open clogged arteries to grafts that replace damaged blood vessels to several devices that help stroke patients.
Because the medical-devices segment is one of the fastest growers for Gore, a privately held company with annual revenue of about $2 billion, the company consistently adds jobs to Flagstaff, said Thom O'Hara, a Gore divisional marketing leader.
Several former Gore employees have branched off on their own to form tech companies in the city.
"If you look at a startup technology company that has begun in Flagstaff, a good deal of the (founders) will have Gore on their resume," said Stephanie McKinney, president and chief executive officer of the Greater Flagstaff Economic Council. In 1999, Dan Kasprzyk and Thomas Motsenbocker left Gore after their jobs were transferred to Delaware and launched Machine Solutions Inc., which makes catheter and stent testing equipment and sells products to companies such as Medtronic and Johnson & Johnson. The company collects annual revenue of about $15 million and employs 70 in Flagstaff with plans to add 40 marketing, manufacturing and engineering positions this year.
"We have some big projects we'll need to staff," said Kasprzyk, the company's president and chief executive officer. "We've had significant growth."
Despite Flagstaff's strong growth, Gore and others say it can be a challenge to recruit workers, particularly since air travel is spotty and affordable housing is tough to find, according to O'Hara.
Tech jobs in Tempe
Medtronic Microelectronics Center, Arizona's other medical-device powerhouse, has grown rapidly in the past three years, too, adding 250 to 300 employees to its roster of 1,600 in Tempe.
The Tempe campus is an important one for Minneapolis-based Medtronic, producing miniature electronic devices that power devices used to treat or assist a wide range of surgical procedures for diseases of the brain, heart and other organs. Medtronic is looking to expand its work in Tempe, pursuing devices for patients with spinal injuries or diabetes.
"We continue to look at emerging technologies," said Bob Enderle, Medtronic's director of diversity and community relations.
Enderle said Medtronic typically generates about 70 percent of the company's $11.3 billion in annual revenue from products that have been developed over the past two years. That places a high premium on innovation and investment in biomedical research, Enderle said.
About 50 percent of the company's Tempe workforce consists of engineers and support technicians, and 30 percent hold manufacturing jobs. Administrative and support staff make up the remainder. Because of the company's heavy reliance on technical employees, Enderle said it relies on a study stream of employees from Arizona State University and local colleges.
Outsourcing trend
Several analysts predict that more medical companies will farm out some basic manufacturing work to other companies, either in the United States or abroad, that can make products more efficiently.
A 2006 report by Frost & Sullivan predicted that more medical companies will send manufacturing work abroad to save money and to tap the large international markets, particularly China and India.
Johnson & Johnson was among the U.S. pioneers in this regard, slashing more than 5,800 manufacturing jobs and simultaneously hiring 1,700 engineers nearly a decade ago. The company wanted to shift its efforts to thinking up and developing devices rather than plowing money into manufacturing, and the strategy has paid off. Johnson & Johnson's revenue has grown at a brisk pace, and it was the first company to bring to market a drug-coated stent.
Still, medical companies are reluctant to outsource such work because of fears about lowering quality. An implantable medical device that fails can mean life or death for a patient, unlike a computer or a toaster.
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Industry job patterns
Arizona's medical-device industry has added jobs while the nation as a whole has lost workers in the field.
Here are the 2005 employment numbers compared with 2001:
Arizona: 4,502 employees, +12.4 percent.
United States: 416,286, -2.5 percent.
Source: Battelle Technology Partnership Practice
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Reach the reporter at ken.alltucker@arizonarepublic.com or (602)444-8285 or www.bizblogs.azcentral.com.