The race is on to become the first and last standing among developers hoping to create a massive medical-products mart that would draw buyers from across the country to do one-stop shopping. But the efforts, which are being mounted in Cleveland, Nashville and New Yorkand together are valued at $1.7 billiondont currently appear to be rousing significant interest from purchasers or vendors.
Three compete to be medical products destination
With the economic times, no one has really been paying attention, said Curtis Rooney, president of the Health Industry Group Purchasing Association, a lobby association representing group purchasing organizations, of efforts to build the marts. Its a novelty, and right now people are so focused on whats out there in the next three months.
Despite that lack of awareness, late last month, Market Center Management Co. became the third developer to say it plans to erect a medical-products trade center, with a $300 million project slated for Nashville. Weve been looking in downtown Nashville for a little over a year and are at the point of announcing a site, said Bill Winsor, president and CEO of Market Center Management. The location, according to Winsor, was chosen because of its proximity to large providers like 833-bed Vanderbilt University Medical Center, Nashville, and HCA, which owns 162 hospitals across the country. The first phase of the 1.5 million-square-foot marketplace is targeted to open in July 2010.
The Nashville announcement followed earlier-revealed plans by Merchandise Mart Properties to build a $425 million, more than 1.5 million-square-foot marketplace in Cleveland and by the Greater New York Hospital Association subsidiary GNYHA Ventures plans to develop the $1 billion, 1.5 million-square-foot World Product Centre in midtown Manhattan.
The three competing ventures are at various stages, with Cleveland developers still negotiating the purchase of a swath of downtown waterfront property from the city and New York developers preparing to announce soon the names of nine vendors that have signed on as tenants of the Manhattan-located mart, according to spokesmen for each of the projects.
In addition to permanent vendor showrooms, the three marts would include space for healthcare-related conferences, continuing medical education activities and other events. Developers hope such activities will help attract a constant flow of buyers and sellers to their facilities.
We see the medical mart as one dimension, but in and of itself it wouldnt be successful, said Mark Falanga, senior vice president of Merchandise Mart Properties. We said we should also have a conference and convention center to drive people to the venue.
Developers of the New York mart acknowledged a similar need to expand their project beyond a sales and marketing space. We believe without the educational piece this project wont fly. There needs to be a reason for people to come here, said Lee Perlman, president of GNYHA Ventures. Perlman said he envisions the New York mart becoming a site where medical products companies will hold news conferences and issue annual earnings statements.
Perlman also sees the mart serving as a training space where, in addition to selling their wares, vendors could offer continuing medical education on the use of their products. He said he believes companies will have a growing need for such spaces in light of the stricter vendor-access rules that many academic medical centers are adopting in an effort to reduce medical-product companies influence on clinical decisions.
GNYHA Ventures hopes to complete the New York effort, unveiled in September 2008, by 2013 (Sept. 1, 2008, p. 24). The company, which is a partner in the promotional and licensing arm of the project, has no equity ownership in the World Product Centre facility. Instead, GNYHA Ventures will receive fees from real estate developer Israel Green for each tenant it recruits to the facility. Upfront revenue from the 10-year tenant leases will be used to finance construction of the project, a GNYHA Ventures spokesman said.
Despite those lofty plans, some question whether a mass marketplace for medical products will be successful. Dave Breedlove, vice president of healthcare business solutions for vascular- and surgical-device maker Cook Medical, believe such marketplaces will likely appeal only to certain types of suppliers. It would be good for capital products, but as you move toward physician preference items, not so much, he said. Thats because high-tech and high-risk devices such as those sold by Cook typically undergo extensive review by hospital purchasing boards before they are approved for purchase, and a one-stop mart would not facilitate that process.
Jocelyn Bradshaw, vice president of capital equipment services for Dallas-based group purchaser Broadlane, expressed similar doubts, saying medical marts ultimately will have to compete with long-established medical education conferences and trade shows. Such events typically are subsidiary businesses of professional medical associations, which hold great sway over clinical-purchasing decisions. If the marts are in conflict with those trade shows, then I think it will limit the number of vendors who will support both, Bradshaw said. Im a bit skeptical on whether the projects will come to fruition.
Even if timing for such a venture proves right, developers themselves acknowledge there is likely room enough for just one of the marts to be successful. I dont think there will be multiple medical product trade centers in the United States, Winsor said. I think there would be repetitive costs for suppliers to set up multiple showrooms. The concept here is to consolidate into a single point of business where buyers and vendors can come together to do business.
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