PATH, Fueled by Bill Gates’ Fortune, Builds Global Health Hothouse in Seattle

2/4/09Follow @xconomy

Bill and Melinda Gates don’t give their money away to just anybody who comes along with an impressive resume and a good cause. So why has the world’s largest charitable foundation seen fit to give $1.3 billion of its fortune to a little-known Seattle-based nonprofit called PATH?

PATH, which has raked in the second-largest amount of Gates Foundation grants of any organization behind the vaccine group GAVI, is one of the biggest success stories of the Seattle innovation community in the past decade. Since CEO and president Chris Elias joined in September 2000, PATH has grown from 240 employees to 775. Its annual budget has soared from $41million to $240 million. It has formed partnerships with 60 biotech and pharmaceutical companies, and most public health bodies in the world that count, from the World Health Organization on down.

The organization, formerly known as the Program for Appropriate Technology in Health, sometimes struggles to explain what it does in a tight little Madison Avenue slogan. But essentially it seeks out clever, affordable technologies, and partnerships with clever entrepreneurs, to help improve the health of have-nots around the world. This vision plays itself out in a dizzying number of ways. PATH finances promising vaccine candidates, whether it’s for bird flu or other infectious bugs like pneumococcal disease that kills infants. It is working with entrepreneurs to develop fortified rice to so that people get more nutrition from a staple food. It is developing practical ways to purify water. It is helping ensure doctors get trained in a cheap, simple way to fix broken bones, so that people don’t languish in traction for months. It has pioneered the use of a sticker on vaccine vials that changes color if a vaccine goes bad. It serves as clearinghouse for the Gates Foundation-funded effort to eradicate malaria from the globe.

“We’ve really kind of grown up together with the Gates Foundation,” says Elias, whom I visited in his office. “We’ve grown dramatically.”

PATH got its start in Seattle in 1977 with a grant from the Ford Foundation to try to implement new contraceptive technologies that were developed for rich countries, but weren’t getting where they were needed in poor countries, Elias says. By about 1980, PATH’s founders realized that applying its model—of brokering deals between for-profit companies with innovative ideas and public health agencies with the means to get them to people in need—was a model that might work for expanding the use of diagnostics, drugs, devices, vaccines. Almost two-thirds of its budget comes from foundations, and the next biggest percentage, about 21 percent, comes from the U.S. government.

The people at PATH spend their time thinking about something most people in the U.S. are fortunate enough to never even consider—how to meet basic human health needs that the free market is unable to fulfill.

“The markets are very efficient ways of producing innovation where they work, where there’s a predictable demand and a system for delivery and financing. As imperfect as it is here in the U.S., that exists,” Elias says. “In poor countries, the market often fails. Either the market is unpredictable, or it’s not there. People are too poor. People who live on $1 a day can’t afford to buy products that will make anybody a significant margin.”

So there you have it, one of the world’s biggest fundamental problems, creating an enormous gap between haves and have-nots. Unsolvable, right?

They don’t seem to think so at PATH. In the face of such daunting problems, I wanted to know, what is PATH’s secret? What is the insight that has turned this place into one of the hottest nodes in the world of social entrepreneurship, in a vast sleepy sea of traditional nonprofits?

The answer, as near as I could tell, was in PATH’s people and how they are organized. PATH is organized project by project, with small semi-autonomous teams of a dozen or so people who always have three kinds of skills, Elias says. There’s always a technologist, who understands the technical aspects of, say, malaria vaccines. Then there’s a program staffer, who might be a nurse who has lived and worked in the country that needs the product, like Kenya. Then there’s a business development person, usually with an MBA, or at least five years’ experience working in a biotech or medical device company, who understands how to put together a deal that will cajole a for-profit partner to get on board. If engineers were together in a room by themselves, they’d come up with “cool” stuff that might not be workable, Elias says. Getting all those diverse skills together in a room is what can work, and what’s unusual, he says.

Plenty of for-profit companies have multi-disciplinary teams set up to solve problems, and there’s nothing written in the law that stops them from forming partnerships with the WHO, for example. Then again, there are huge cultural barriers between innovative entrepreneurial life sciences companies and huge government bureaucracies, Elias says. PATH aims to play a role as broker between these two worlds. About one-third of the people PATH hired in the last year came from jobs in for-profit industry. That background makes them more likely to be able to put together a deal between a government agency and business that makes sense for both parties, he says.

PATH can attribute its effectiveness to three main things, says Steve Davis, the former CEO of Seattle digital image company Corbis and a board member of PATH, in an e-mail. He credits the leadership of Elias, the organization’s omnivorous interests in a wide range of global health projects, and a willingness to do deals with partners of all kinds who have skills needed to do the job.

“Chris’ vision, strategic sensibility, humble confidence, professionalism and ability to engage with, and relate to, all sorts of folks around the globe and the organization, is a major reason for our success,” Davis says. “PATH is also unique as a private non-governmental organization in its enormous breadth of focus – from vaccination discovery work to low-tech water solutions, to behavior change models, to gender equity work, and a lot in between.”

“I sit on (too) many corporate and non-profit boards, and none of them are as sophisticated in their thinking about finances, management, culture or business models as PATH,” Davis says.

Of course, nothing is perfect. Elias has been worrying lately about the same things that worry business leaders-many of them associated with the global economic crisis. He’s particularly concerned that the U.S. government will cut its foreign assistance budget, causing his organization and others to lose momentum, just as progress is being made. He cited sub-Saharan Africa, where about five percent of AIDS patients were getting anti-retroviral medicines to manage the disease five years ago: while that number has soared to more than 30 percent, largely because of support from Uncle Sam, he doesn’t want to see those numbers go backwards.

“Given that there is no natural constituency for foreign assistance in the U.S. voting public, you worry,” Elias says. “It’s vulnerable, and it’s coming to a critical moment in the scale-up of success. We’ve built a virtuous cycle of implementation leading to results, leading to reduced mortality, leading to better commitment of political will and resources to help. One of the things that worries me is that the momentum will stall or go backwards, and the resuscitation will take much longer.”

A related, equally big worry is from what he calls the “innovation pile-up.” The fear is that so many new vaccines, drugs, and diagnostics have entered the R&D pipeline that if many of these things pan out, they could overwhelm the meager public health delivery systems in the developing world. If, say, a great new malaria vaccine gets developed and sits on the shelf, it would spell big trouble. “We wouldn’t have any credibility then in asking companies to work with us on the next technology,” Elias says. “We also wouldn’t be able to recruit skeptical companies to work with us. They’d look at this, and say not enough people used it. We need to go the whole way from development to delivery of new innovations.”

There may well be no other organization in the world with quite the same model and scope as PATH. Some organizations apply the same public-private partnership model that builds a portfolio of ideas against specific diseases, including the New York-based International AIDS Vaccine Initiative and Geneva-based Medicines for Malaria Venture. PATH doesn’t overlap with those groups, because it doesn’t work on HIV vaccines or malaria drugs, Elias says.

One other thing I wanted to know was whether Elias worries that PATH might be spreading itself too thin, or whether it will lose its edge by getting too big and bureaucratic. This didn’t seem to worry him very much. He thinks the organization can keep growing, as long as it continues to attract top talent from business, public health, and academia. The organization has 16 entrepreneurial business units, all of manageable sizes and with a fair degree of autonomy, Elias says. When it grows, it adds new teams in new countries, with the same nimble structure, he says.

“We’ve tried to avoid becoming bureaucratic and protect the entrepreneurial innovation capability of our teams. If we couldn’t do that, we might get overstretched and take on too much,” Elias says. “If we can’t find entrepreneurial, highly motivated people to staff these programs, we won’t be able to deliver.”

The health needs of people in the developing world are so vast, it’s hard to imagine any organization developing enough horsepower to take them all on, entrepreneurial spirit or not. Yet PATH intends to keep growing, Elias says, as long as it can continue to build its base of support, or until somebody else can do it better, or it gets so big that its growth is unmanageable.

“We can, and are, working to reduce that inequity through applying innovation in ways that lead to affordable health solutions that are accessible by everybody,” Elias says. “We have a long way to go. It’s a long-term vision. It’s a long-term vision to think about equitable access to health care in the U.S., let alone globally. But we’re making progress.”

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