Transcript of BioCentury This Week TV Episode 160
Ram Aiyar, Entrepreneur-in-Residence, NIH
Alicia Loeffler, Executive Director, Innovation and New Ventures Office, Northwestern University
Rosemarie Truman, CEO, Center for Advancing Innovation
PRODUCTS, COMPANIES, INSTITUTIONS AND PEOPLE MENTIONED
National Institutes of Health
National Institutes of Health Lung and Blood Institute
The Kauffman Foundation
Health and Human Services
National Cancer Institute
Mark Hurlbert, Executive Director, Avon Foundation
Tom Stackhouse, Association Director, Technology Transfer Center, NCI
Steve Usdin, Senior Editor
STEVE USDIN: University teams are competing for the chance to start new companies, and breast cancer patients could be the winners. We'll discuss that and other ideas for turning government-funded science into medicine. And in this week's Affordable Care Update, we'll put insurance premiums for Young Invincibles on the map. I'm Steve Usdin. Welcome to BioCentury This Week.
NARRATOR: Your trusted source for biotechnology, information, and analysis -- BioCentury This Week.
STEVE USDIN: Since World War II, government-funded research has been the driving force behind an explosion of medical breakthroughs. But discovery is only the beginning. It takes massive private sector investment, drug-making expertise, and commercial risk to turn basic science into medicine. When the handoff from government-funded research to industry is effective, the results can be breakthroughs, like drugs that turned HIV from a killer to a chronic condition, vaccines that prevent cervical cancer, a drug that prevents premature babies from a deadly respiratory infection, and the first treatment to prevent the progression of cystic fibrosis.
The successes are obvious. The question is: how many potential medical advances are stuck in government-funded labs? This week, we'll ask what can be done to turn more of this research into products that will help patients. And in this week's Affordable Care Update, we'll crisscross the U.S. and ask if insurance premiums on exchanges are low enough to attract the Young Invincibles.
I'm pleased to be joined by Alicia Loffler, Executive Director of the Innovation and New Ventures Office at Northwestern University, Rosemary Truman, CEO of the Center for Advancing Innovation, and Ram Aiyar, an Entrepreneur-in-Residence at NIH. I have the same kind of question for all three of you, which is basically you're all working to try to transform science into medical products that are going to help people. How are we doing?
Is there science that could help people that's being left behind on the lab bench, so to speak, and isn't getting to people?
ALICIA LOFFLER: Absolutely. And that's probably the most frustrating part of our jobs. In any discussion that we do that relates to commercialization of academic innovations, we need to put it in the context of the mission of research in academia, which is create new knowledge, create new ideas, and open those ideas to the public as soon as possible. And so the outcome of that mission is that our innovations become very, very, very early-stage.
When I said "early," it's very early-stage.
STEVE USDIN: They're very early-stage. So the challenge then is, how do you get that to turn into?
ALICIA LOFFLER: How do we get it into a stage in which we'll be attractive for commercialization?
STEVE USDIN: We're going to talk about that. Rosemary, you've spent a big part of your career working with NIH, working with industry. What are you seeing? Is there a lot that's being left behind?
ROSEMARY TRUMAN: Absolutely. I spent 20 years in investment banking and strategy consulting and also working with the NIH to help them to create a strategy to optimize research to commercialization. And last year, to actually put numbers to it, we had an engagement with the Kauffman Foundation to estimate out of 145 research institutes in the United States, how much is sitting on the shelf, specifically, and what would the impact be to the GDP of the United States economy.
We found that the opportunity at stake is between $1.4 trillion and $3 trillion. And that's only by commercializing 6% more innovations, inventions sitting on the shelves. So in my entire career in investment banking and strategy consulting, I've never seen numbers that big. So clearly, there's a very big opportunity.
And only for 6% more commercialization too. It's not like we're saying everything needs to get out.
STEVE USDIN: Just an incremental increase would make a tremendous difference. And Ram, so you're kind of embedded at a particular institute, the National Heart, Lung and Blood Institute. What are you seeing there?
RAM AIYAR: So firstly, there is great science there, all within NIH, specifically within NHLBI. I think the scientists and the PIs that work on the science is brilliant. They just need to be supported. They just need to be elevated from what they're doing in terms of science to understand what's actually commercially relevant.
So when you say, does a lot get left behind, the answer is yes. But some of it needs to be left behind, because it's necessarily not commercially relevant. It will not get to the patient in need or will not get to the physician in need. And so those technologies, for better or for worse, you should kill quickly.
And for the ones that are commercially relevant, you move them along. You need to give them the support. You need to give them money. You need to give them the mentorship.
You need people who have done this before to come in and chaperone these technologies forward. And once that happens, I think you'll see a lot more patient good happening. And so if within the NIH, I think their focus is public good. So I think they have their head in the right place, have science that box it up.
I think the rest of it just needs to come into place.
ROSEMARY TRUMAN: Our firm has nine partnership intermediary agreements with different institutes within the NIH as well as the NIH overall. And what we've done is actually evaluate 4,000 of the inventions at the NIH. And we've found also a middle ground in addition to what you mentioned, which is there are some inventions that are very, very important to science, to progress science, but they're not necessarily going to be for commercial value.
But there's certainly really important science. And so it's also important to get that middle ground out into the world.
STEVE USDIN: There's also an issue about things that are important for science that some people think -- they're called research tools. They could be commercialized. And NIH really has a bias against commercializing them. Is that leaving some things behind?
ALICIA LOFFLER: For me, the most important issue is the validation aspect of this, because we really don't know whether we have anything interesting or important or potentially useful unless we validate in a robust way.
ROSEMARY TRUMAN: Or independently validated.
ALICIA LOFFLER: There's no incentive for the scientists from NIH or from academia to validate it in a robust way. Most experiments end at the lab bench. And then what do we do with them?
And those validations can be done only by people that have product development experience. And that's not a strength that NIH has or academic environments have.
STEVE USDIN: We're going to talk about that a little bit more. And we're also going to talk about a really creative effort to kickstart inventions from NIH, a contest, the breast cancer start-up challenge.
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STEVE USDIN: We're back with Alicia Loffler, Rosemary Truman, and Ram Aiyar talking about turning science into medical products. And when we took a break there, we were just about to talk about the breast cancer start-up challenge. Rosemary, can you tell us what that's about?
ROSEMARY TRUMAN: Absolutely. So I mentioned that we have this partnership intermediary agreement with the NCI. We're also working with the Avon Foundation. And we've been reviewing 10 years of the grants that they've provided to identify the gems in their portfolio. So the next step, next stage of what we're going to do is, of course, commercialize the inventions that we found.
So we found 50 inventions from the 4,000 that we reviewed from NCI. And we found about 10 from the Avon Foundation. And working with Marc Hurlbert, the Executive Director at the Avon Foundation, he's very progressive in his thinking. And Tom Stackhouse is as well at NCI.
So I came up with this idea for another way to commercialize the inventions. A little bit more background on that, we interviewed more than 300 organizations and before 10 years of analysis on every deal that's been done in B2B, angel investors, private equity, and venture capital to identify, where's the money going to go, so that we could easily match the valuable inventions we find with those who need it.
So what we found was that there's a disconnect between some of the inventions we found, especially breast cancer inventions, and those that, potential parties.
STEVE USDIN: So it's kind of orphan inventions out there that don't have a partner.
ROSEMARY TRUMAN: That don't have a partner. And also, there's no desire to in-license them from industry. So what I did was come up with this idea to create this business plan and start-up challenge. So it's a three-phase challenge. There's a letter of intent phase, business plan phase, and start-up phase.
The team structure's a bit different. It's international, by the way, in scope, so we have some teams from the UK and the Netherlands as well as several teams from the United States. The team structures are mandatorily a seasoned entrepreneur -- so someone who's actually founded a company, had at least three years of experience, in-license inventions, raised dilutive and non-dilutive capital.
Also, we're looking for legal expertise, medical and scientific expertise, and business expertise on these teams. So the teams that have come through so far, there are about 15 teams. So the timeline for the challenge is we opened it up for letters of intent on October 1. And we expect the start-ups, up to 30 start-ups, by June 13.
STEVE USDIN: We should say that you have to have university students on the team. So Alicia, Northwestern, you're going to be competing?
ALICIA LOFFLER: Yes, we are competing. And we are delighted to do that. So the reason we are doing that is that we're putting a lot of resources at Northwestern to commercialize and to do entrepreneurial activities. But the major thing is changing the culture. And the best way to change the culture of a place is through students.
The students are the ones that get into the labs. The students are the ones who add the energy in the place. So we always like to contribute in these activities, and our students have participated in many business plan competitions. And they have been very, very successful. So for us, it's a great opportunity. It's a win-win.
STEVE USDIN: So I want to switch over to Ram now. You're involved in another kind of new idea for trying to promote the commercialization of inventions out of government-funded science. What is it?
RAM AIYAR: So there's two things, actually. The first thing I want to talk about is very exciting. You saw the press release come out a couple of weeks ago. The NIH or the NHLBI specifically has given out $32 million to set up three Centers of Accelerated Innovation across California, Boston, and around the Cleveland area. And the universities have really come together to support these intermediaries.
And as we spoke about it, the requirement for an intermediary to support proof of concept clinical experiments, well, that now exists with all the infrastructure around it from a partnering perspective, from an investor perspective, from a seasoned entrepreneur perspective, and a business development perspective. So that is happening at a national stage.
And the second thing that I want to talk about is BioHealth Innovation, which I'm also a part of. We provide the hands-on entrepreneurial support to folks both within the NIH and outside NIH in Maryland. And the idea being you have good science.
Like I said, it needs to be chaperoned. So not only do we do the hands-on work. We also educate and mentor and build the culture that is required to support other entrepreneurs.
STEVE USDIN: Let's talk about that's some more and how you go from that kind of mentoring to actually having products on the market in just a moment when we come right back.
NARRATOR: Now, back to BioCentury This Week.
STEVE USDIN: We're back with Ram Aiyar, Alicia Loffler, and Rosemary Truman. I wanted to pick up on this idea of validation that we talked about earlier. What does it mean? And from your perspective, what can and is being done?
ALICIA LOFFLER: This is a big problem. Most experiments at the university end at the bench. And there is no incentive for a faculty member or a graduate student to continue validating, because there is no new knowledge usually that comes out of that validation. In the past, we will do a start-up, and the start-up will be in charge of that validation. And hopefully, they will receive venture funding or seed funding.
STEVE USDIN: But that's not happening anymore.
ALICIA LOFFLER: That's not happening anymore. And most of the start-ups that we are getting, they come back, because they cannot find funding. So that has been a big consideration for us.
STEVE USDIN: Rosemary, how does that fit into what you're doing with the start-up challenge or your other activities?
ROSEMARY TRUMAN: So what we're doing is, obviously the start-ups, when they come out of this challenge, the 30 start-ups, they're going to need mentoring and coaching, help to raise money and continue to flourish. And so we're creating a national accelerator to house these start-ups so that they will actually get all the coaching, mentoring, refining their business plans, pitching, et cetera to make sure that they are able to survive.
Obviously, we did a lot of due diligence to this point -- 4,000 to 50, 50 to 10. So we're only having 10 inventions as part of this challenge and 30 start-ups. That's what we plan on doing to try to get them through the next stage.
ALICIA LOFFLER: I actually think that there is a lot being done in mentorship and accelerators around the country. And I think that the issue is a little more profound on how to validate.
STEVE USDIN: So, Ram, you were at Sofinnova before you were --
ALICIA LOFFLER: It's not mentoring alone.
STEVE USDIN: -- doing what you're doing now. What do you think about it? What does "validation" mean, and what needs to be done?
RAM AIYAR: So I think, having investment experience, working for venture capital, and having experience working in a large pharma, from a pharma experience, usually stuff that happens in the universities, you need help, again, to say development work, not science. It's a completely different aspect. From the investment side, what is the killer experiment you need to do to show that it's an investable category?
And the Centers for Accelerated Innovation is set up exactly for that, which is you take a tech outside of the university, get the licensing part done with, do the proof of concept, killer experiment, and so on the table, you have the VC, the angel, the business development, the entrepreneur, the scientist, and a whole consortium of people who can support the technology.
We are talking about 18 technologies per year that has matched funding of 24 million for each of these centers, on top of which the NIH has given 32 million. So there's money on the table, people on the table, technologies on the table. And we just hope this actually changes the paradigm. This is a large experiment.
So we don't know if this is going to be successful. We'll find out. And between PHI and the folks at NHLBI, we're trying to facilitate that getting to the public.
ROSEMARY TRUMAN: And part of what we're doing actually will include the clinical development as well. I didn't say that, so you're actually correct on that point.
STEVE USDIN: That's the validation part?
ROSEMARY TRUMAN: Yeah, it's validation but also the clinical experiments and making sure we understand the Achilles heel and we rectify it quickly if there is one.
STEVE USDIN: So very, very, very quickly -- we're here in Washington. We talk about public policy in Washington. Congress has got a say in these things.
What would be your -- the three of you -- any recommendations for public policy changes that could advance the commercialization of science?
ROSEMARY TRUMAN: So my view is that the spend right now is highly fragmented. It's in regional pockets and individual efforts. There's great work being done everywhere. There's an opportunity to get an economy of scale across all of these national efforts and create one centralized shared pool of knowledge with regional activities to optimize the efforts. It's called an economy of scale.
You do it in strategy consulting and investment banking. But I've been doing it forever. So I think the opportunity and the actual action out of this is to create this national innovation intermediary to harness all the great efforts that are going on.
STEVE USDIN: Quickly, Alicia, what do you think?
ALICIA LOFFLER: So I agree. I have mixed feelings on whether centralization is a good thing or not.
ROSEMARY TRUMAN: This is a federated model. It's a federated --
ALICIA LOFFLER: Federated model, I agree that it --
ROSEMARY TRUMAN: It's central.
STEVE USDIN: Ram, are there things that we can learn from what's being done in other countries? Or putting out as reverse, how do we stack up? How does the United States stack up to what's happening in other countries?
RAM AIYAR: I think my experience working at Sofinnova Partners in Europe gave me a great insight into what technologies are within universities in London, Netherlands, and France, where the main centers are. I think, as of now, the U.S. is still competitive from a standpoint of great technology, commercialization in place, entrepreneurs exist, and therefore can get to the market.
Looking forward, however, if we are not able to capitalize on that, change the trend that is, right now in this decline due to funding issues, due to other policy issues, I think we need to realize that if we don't fix that trajectory, we are going to be left behind.
STEVE USDIN: And one of the concerns that I have about that is that the lag times in technology and developmental life sciences are so long that we might not realize that we're behind until it's too late to -- it'll take another generation to catch up with it. Is that a realistic concern?
ROSEMARY TRUMAN: Absolutely, because we did an analysis for the Center for Advancing Competitiveness of the United States. And we looked at a 30-year trajectory going forward, a projection of, if we stay the same, how are we going to compare to Russia, China, et cetera? In the year 2024, we lose our innovation leadership position to four of the major superpowers.
And that's not just looking at historical data and looking forward. That's also using several different variables to examine what could happen -- so some scenario analysis. So it could be a very big impact for our economy from a GDP standpoint.
STEVE USDIN: You being up a good point, which is that we're not talking about a stable environment. Countries like China, India, other countries, they're growing. In some cases, they're growing exponentially. And they're also learning from what we're doing. What are the things that we need to do to become more nimble to keep this preeminence?
ALICIA LOFFLER: I think that Bayh-Dole has been extremely helpful for the U.S. to become competitive. And that has been the edge. And as they said, our problem now is, how do we keep competitive? If we look at the number of publications, cutting-edge publications in the U.S. versus the world, we can see a slow decline in the U.S. and an increase in China -- the publications in China are escalating -- in India, et cetera.
So one way is to keep the scientists with us. In the past, people from China and India will come and study. And now, they're going back to their own countries. We are losing a lot of talent now.
STEVE USDIN: Up next, the Affordable Care Update -- will the Young Invincibles pay to play?
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STEVE USDIN: I'm joined by Chris Holt, Director of Healthcare Policy at the American Action Forum, a conservative think tank. Chris, the American Action Forum has done a study -- and you've got a map to go with it -- showing what rates in the exchanges are going to be like for the so-called Young Invincibles. What did you do in the study? What are we seeing on the map?
CHRIS HOLT: Sure. So we're very interested at the American Action Forum in how the young adults, 18 to 35-year-olds, are going to interact with this new health insurance market that opens up in 2014. The Administration has identified them as a key critical demographic in exchanges functioning properly. They say they need about 2.7 million Young Invincibles to enroll in order for the exchanges to function properly.
That's because they have lower healthcare costs, and so their premiums are able to subsidize, offset the cost that you would see in older and sicker populations. So you've mapped on here on what you think are going to be the increases in the amount that these so-called Young Invincibles, 30-year-old non-smokers are going to pay in these states.
STEVE USDIN: What's your point about that? What do you think that we're going to learn from this?
CHRIS HOLT: So specifically, we looked at a 30-year-old male. And we looked at the lowest cost option that he had in each state this year, 2013, and the lowest cost bronze plan that's available to him in 2014. And then we looked at the difference between those two. And what we saw across the country on average is a 260% increase in the premium for that lowest cost option.
STEVE USDIN: And I should say to start with, your numbers are a little bit different from some of the things that HHS has put out. They put out numbers for what they say the lowest-cost bronze options are going to be for a 27-year-old, which is close to a 30-year-old. And they are much lower than your numbers.
CHRIS HOLT: Right. Generally, where HHS puts out numbers, they're looking at after the subsidy. So they're taking into account how much that premium has been reduced by the subsidy.
STEVE USDIN: Then that's how much people are going have to end up paying.
CHRIS HOLT: Which we look at it at the end of our study when we look at the cost-benefit analysis.
STEVE USDIN: So anyway, so to get to the bottom line, what's your conclusion? What are people going to do? What are the behaviors going to be based on this?
CHRIS HOLT: So when you think about a 30-year-old Young Invincible, someone who's chosen not to buy insurance in the past in an insurance market that was much less friendly to that decision than this new insurance market will be, and then you look at across the board, every state shows an increase - all but seven - we looked at the District of Columbia as well.
All but seven showed increases of over 100%. And then you look at the penalty, which is only $95 in the first year. It's very small. In some cases, the cost of buying insurance is 10:1 more expensive than just paying the penalty and waiting until next year.
STEVE USDIN: But the cost of not buying insurance also means you don't have insurance. Presumably, there's going to be some effort to communicate to people, and people are going to understand that they need to have insurance. It's not like everybody is going to do a cost-benefit analysis and say, well, it's cheaper for me to get the penalty and no insurance.
CHRIS HOLT: That's true, but keep in mind we're talking about people who have chosen not to buy insurance up until this point. We're looking to insure people who have been willing to take this risk in a market that didn't ban pre-existing conditions, didn't insure guaranteed issue and actually had rates that were lower that they could pay if they wanted insurance than they have now.
STEVE USDIN: In some other early data, in Connecticut, for example, a third of the people who have signed up so far -- admittedly, it's low numbers -- have been under 35. Maybe it's because they're the only ones who can figure out how to make the thing work.
CHRIS HOLT: It's a good point, that this online exchange seems to be having problems. I did see the story on Connecticut. I didn't see a total. So I don't know how many people we're talking about.
STEVE USDIN: A couple thousand. If you're right and the Young Invincibles decide that they're not going to sign up in large numbers, that it's more cost effective for them to just pay the penalty, what happens to the Affordable Care Act as a whole?
CHRIS HOLT: Well, the exchanges won't have the risk pool they need to function. And you risk potentially turning into what's called a death spiral, where the insurance rates have to go up in each following year, because there is not enough revenue coming in to cover the cost. And so the people who maybe weren't quite so healthy start to find, wow, these rates are getting really expensive for me.
I'm just going to drop out. And you end up with a sicker and sicker pool in the exchanges.
STEVE USDIN: When will we know actually what's happening and whether this kind of death spiral you've talked about is going to happen?
CHRIS HOLT: So some first, I think, time that we will look at is the end of March, when we're done with the open enrollment. We'll see what we got in year one. And that will give us a good indication. The Administration says they need 2.7 million young adults to enroll during that time period. That will be a good checkpoint.
STEVE USDIN: Great, thanks very much. That's this week's show. I'd like to thank my guests, Alicia Loffler, Rosemarie Truman, Ram Aiyar, and Chris Holt. What do you think about what you've heard today? Share your thoughts about today's show on Twitter.
Join the conversation by using the hashtag #biocenturytv. I'm Steve Usdin. Thanks for watching.