Wests Create New $100M Investment Fund Focused on Cutting Healthcare Costs

10/19/11Follow @bvbigelow

San Diego philanthropists Gary and Mary West lifted the curtain today on a $100 million fund they have established solely to invest in “cutting-edge” medical technologies and services that offer “the potential to substantially reduce” healthcare costs.

The new West Health Investment Fund says it is targeting its investments in “early stage opportunities” with a strong preference for pre-commercial and early commercial companies. The fund, which is tied closely to the San Diego-based West Wireless Health Institute, already has invested in six startups throughout the nation, including San Diego-based Biological Dynamics and Sotera Wireless.

“Since Mary and I established the West Wireless Health Institute in 2009, we have seen literally hundreds of companies focused on innovative and low cost health care solutions that cannot find funding,” Gary West says in a statement today. “Without financial support for low-cost health care innovation, the research we do at the Institute and the work other agencies, institutions and entrepreneurs are undertaking will have a tougher path toward becoming a reality and actually lowering health care costs for the public.”

The fund comes at a time of rising apprehension about U.S. health costs, which amounted to 17.6 percent of the country’s Gross Domestic Product (GDP) in 2009—and are projected to escalate to 25 percent by 2025.

As Luke explained earlier this year, it’s no longer enough for life sciences companies to prove to federal regulators that a new medical technology is safe and effective. Cost constraints are enforcing a new reality—and a new imperative—to develop technologies that also drive down healthcare costs.

The fund says it is directing its investment returns to advance other medical research, and Gary and Mary West will not individually profit from the fund’s investments. Investment returns will instead go “to sustain the mission of philanthropic work to lower health care costs,” according to a statement released today. The Wests, who now live in suburban Rancho Santa Fe, made their fortune (estimated at more than $2 billion) from a series of Omaha, NE-based telemarketing companies.

A report by Keith Darcé today in The San Diego Union-Tribune says investment profits would be returned to the San Diego-based West Wireless Health Institute, the nonprofit medical research institute that is closely affiliated with the investment fund. The fund’s manager is Don Casey, CEO of the West Wireless Health Institute, and all of the principals identified with the fund are also senior executives at the institute. Unlike most venture funds, however, there will be no management fees and no carried interest for the fund managers, whose compensation is salaried.

Casey signaled that such a fund was in the works more than a year ago, during an open house attended by hundreds. He noted during his welcoming remarks there was an “opportunity at the West Wireless Health Institute to set up a venture fund that would serve as a beacon” for the institute’s mission. The Wests established the institute more than two years ago—and have pledged $90 million—to develop advanced wireless health technologies that can help drive down health costs.

The investment fund says its targeted areas of interest include health care technologies, data analytics, technology-enabled services, cost transparency, and interoperability—all areas that offer opportunities to transform health care delivery and lower health care costs.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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  • David

    While I fully support and appreciate efforts to reduce health care costs, this effort – even if replicated by many other well-meaning philanthropists – will do virtually nothing to lower health care costs. High health care costs are tied up not in technologies, but in administration and delivery of care. It’s a people & process problem, not a tools problem.

  • http://www.xconomy.com/author/bbigelow/ Bruce V. Bigelow

    David

    Your comment prompted me to discuss this issue with several advocates for using technology innovation — especially wireless health — to drive down the cost of health care. My follow-up is at http://bit.ly/ozQsIa

  • David Niewolny

    In response to David…I fully agree with your assessment of our healthcare system. The costs are tied up in the administration, the processes, and the delivery of care. Many other industries have been plagued by these same problems and technology has played a huge role in lowering cost while improving output. I know it’s not easy to compare healthcare to another industry. Healthcare is different, there is a human aspect that doesn’t apply to most other industries. That said, I believe that we, as a society, are finally comfortable enough with technology (we are surrounded by it) that using it within our healthcare system won’t seem so foreign and the benefits will provide a higher level of care for us all.

  • Joseph Miller

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    I have conceived of a network which will transfer information in accord with the act. Mr. Soskins agrees that it may be a solution to the secure electronic transfer problem.
    I would appreciate your help in evaluating my concept. If you want more information contact me at rujomiller@att.net.