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Thursday, 23 February 2012 09:15

Can Michigan become life sciences, medicine hub? State faces fierce competition in battle for high-tech jobs

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Can Michigan become life sciences, medicine hub? State faces fierce competition in battle for high-tech jobs PHOTO: John Lacko
MICHIGAN — The state stands to add 27,000 new life science jobs by 2020, according to a report issued last month by the Business Leaders for Michigan. On the other hand, life science professionals and economists counter by saying these robust job projections may be overly optimistic.

BLM said it based its assumptions on what it called the cutting-edge hospital systems and medical research centers in both east and West Michigan. To create even more jobs, BLM said the state has the assets to become a life sciences hub and to attract both patients and talent from around the world.

The bio-pharma industry employed more than 20,000 people directly in the state in 2008 and resulted in another 75,000 jobs in related industries, the BLM report says. It contributed $8 billion directly to Michigan’s state output and seeded a further $12 billion in revenue in related industries.

“One place to start is with bio-pharma products,” the BLM report stated. “This area has a strong cluster effect and a great potential for further growth, and we could jumpstart it by cultivating an incubation hub for bio-pharma. Accelerating efforts would help foster more startups and encourage them into profitability, and create the broader connections across the entrepreneurial community to help this industry grow in Michigan.”

BLM also said Michigan should concentrate on developing bioscience engineering services, which are growing at a much faster rate than products. The biopharmaceutical service industry provides more jobs across the nation than the manufacturing of drugs does, and national employment in the sector rose by more than 50 percent from 2004 to 2008.

“We should concentrate our efforts on becoming a center of excellence for such services. Specifically, that means developing research, testing and medical lab services to serve the broader life science industry,” the BLM report concluded.

But George Erickcek, senior research analyst at the W.E. Upjohn Institute for Employment Research, said some of the assumptions made in the report seem optimistic.

“With life science tourism, the key is to distinguish between growth related to demographics of the state,” said Erickcek. “The state is getting older, and we will demand more health services in the next decade. This has nothing to do with attracting new health care dollars to the state.”

The reality is Michigan’s health care centers, primarily Ann Arbor and Grand Rapids, must compete for the same medical tourism dollars that world-renowned institutions — such as Mayo Clinic and Cleveland Clinic — try to attract. “That will be far more challenging,” he said.

Erickcek said none of these competitors for health care tourism dollars are standing still. They, like Michigan, are making advancements in what they offer. But what may be a more workable strategy for Michigan is to specialize in treatment areas, such as the heart, which affects older people much more than younger ones. Michigan could capitalize on, for example, the Spectrum Health Fred and Lena Meijer Heart Center in Grand Rapids and the cardiac care provided in Kalamazoo in the Bronson Hospital system. But for the strategy to work, the systems need to attract significant numbers of patients from outside their respective metropolitan areas, Erickcek cautions.

Life SciencesA Spectrum Health official would not speak on the record with MiBiz, but noted the system wants to make its Grand Rapids facilities a destination for health care. No data about patients from outside the region was available by press time. On the other hand, Candice Elders, communications specialist at Bronson Healthcare Group, said “medical tourism is not a strategy we have been or are planning to pursue.” Instead, Bronson focuses on drawing patients from its 10-county service area including Berrien, St. Joseph, Branch, Van Buren, Allegan, Kalamazoo, Calhoun, Barry, Eaton and Cass counties.

Another driver of job growth predicted by BLM in its report will come from research and development done at bio-pharma and biotech hubs in the state. Erickcek also questioned these assumptions. He pointed out when Pfizer acquired Kalamazoo-based Pharmacia, which had merged nearly two decades ago with the Upjohn Company, most of the research and development was shifted to Pfizer corporate headquarters in Connecticut.

“We still have Dow’s corporate headquarters in Midland,” Erickcek said. “But almost all of the pharmaceutical industry is based outside Michigan. In that industry, proximity to corporate headquarters is the key element to where the high paying R&D jobs are located.”

Paul IselyProfessor Paul Isely, chairman of the economics department at Grand Valley State University, agreed with Erickcek that Michigan does indeed face a lot of competition for life sciences, biotech and bio-pharma jobs. But he said Michigan does have some advantages, including more than 5,500 life sciences college graduates each year, a huge resource pool of knowledge at state companies and universities, and a rapidly developing venture capital hub around Ann Arbor that actively invests in life sciences and pharma start ups.

Life science-oriented VC investors are not confined just to the Ann Arbor area. Kalamazoo-based Apjohn Ventures, co-founded by Donald Parfet, has an extensive portfolio of bio-pharmaceutical and biomedical companies. Parfet says he agrees with many of the BLM’s conclusions in the report, particularly with the ability to attract patients from outside the state.

“People more and more are looking for the best quality health care and are willing to travel for it,” he said. “If Michigan offers the highest quality care, the latest technology and the best outcome, people will come here.”

He said his take on BLM’s strategy is to build on the strong talent and capabilities in the life sciences sector that exist in Michigan and create stronger points of attraction for further investment in the life sciences industry, not only from VC investors in the state, but outside the state as well.

“The state has proven that putting capital into this industry and investing in great ideas has allowed for a lot of intellectual property to be created in the state and elsewhere to be drawn to startup companies in Michigan, to established companies in the state, and even enable companies here to acquire equipment to attract other companies,” Parfet said. “I’m very much in favor of those programs. We’re seeing a lot of expansion in the life science industry as a result of these MEDC programs to invest in promising technologies and promising companies.”

Parfet said private investors get very interested in biotechnologies as they mature. A little boost from state government or economic development agencies can achieve a milestone that allows that public investment to be leveraged by private equity finance. He said a dollar invested by the Michigan Economic Development Corporation results in multiple investments by the private sector.

“The private investor is drawn to great ideas and can place its capital anywhere in the world,” Parfet said. “Michigan becomes quite competitive when it can attract the worldwide investor.”

Rich Cook, former CEO of X-Rite and now the venture center director for the West Michigan Science & Technology Initiative, said the state still has to make a lot of improvements in life sciences policies to make Michigan a more attractive investment opportunity.

“Michigan has very strong anti-competitive clauses that prevent people from moving between companies,” Cook said. “Without movement, you don’t get the spin off; you don’t get the job growth. Life science has a lot of job potential. There are lots of patients here because of our strong university health programs.”

But Cook also poked some holes in the BLM data, which is drawn from 2008 and 2009. He said a lot of jobs that existed in Michigan then left the state when Pfizer pulled out of Ann Arbor and Holland and shifted its animal health strategy in Kalamazoo. Generic drug maker Perrigo Co., based in Allegan, has begun to fill that void.

“We can get some of those jobs we lost back in pharma,” Cook said. “It’s an area we have a competitive advantage. Research and development is an area we have a lot of success (that we’re) seeing happen in West Michigan. R&D is supported by groups like WMSTI.”

“Medical tourism, too: We have some high-end hospitals and research hospitals and have the ability to leverage it correctly,” he said. “But we’re seeing teaching hospitals start to water it down a bit. Not sure if that is positive or negative, but certainly a change is happening there.”

Mike Brennan is Senior Technology Writer at MiBiz. His day job is Editor & Publisher of MITechNews.com.

Read 1636 times Last modified on Sunday, 12 August 2012 14:52

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