People who make a living creating innovative medical devices—whether it’s an ultrasound diagnostic tool, a stent to prop open clogged arteries, or an MRI machine—are an unhappy bunch these days.

Let us count the ways, as described in the second annual medical device industry analysis being released today by Ernst & Young. Because unemployment is up, people are losing their employer-sponsored health insurance. That means patients are postponing elective medical procedures, and hospitals and government payers are tightening their budgets. A powerful U.S. Senator, Max Baucus, wants to raise $40 billion in taxes on the medical device industry; healthcare reformers like President Obama are talking about comparative effectiveness studies that would add time and expense to device development; and lawmakers are considering whether to require companies to disclose all gifts and payments to doctors who help develop and buy their products.

Those are the megatrends medical device companies have to deal with in this recession, but what does the data say about how they’re being affected? Here are some highlights that caught my eye in this 60-page report:

—Despite the recession, revenues of publicly traded medical technology companies in the U.S. and Europe actually climbed 11 percent to $289 billion (although the growth was only about half that much when factoring out foreign-exchange rate fluctuations and acquisitions).

—While Johnson & Johnson, Medtronic, and Boston Scientific appear to be performing fine, that’s not so much the case for the smaller players that create most of the innovations the big boys acquire to keep growing. U.S. and European medical technology companies saw total industry financing drop 38 percent in 2008—although when E&Y subtracted two big European deals, the numbers looked a lot worse, with financing down 44 percent in Europe and 53 percent in the U.S. “One area where the growing chasm between medtech’s haves and have-nots is most visible is in fundraising,” the report says.

—Mergers and acquisitions, which are usually the only way medical device startups can make returns for their investors, showed a big-time decline in 2008. There were just 79 deals in 2008, down about 41 percent from the prior year.

—The IPO market was basically flat-lining, with medical device companies raising a puny …Next Page »

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The American Recovery and Reinvestment Act of 2009 (ARRA, or “the stimulus”) totaled approximately $787 billion. Of this, approximately $21.5 billion (2.7 percent) was for the support of R&D—$18 billion for the conduct of research and $3.5 billion for facilities and equipment.

Why R&D as part of the stimulus? Because it employs people (that’s what we do with federal research grant funding), but more importantly, because it lays the foundation for America’s world leadership. Consider my own field, computer science: just about every sector of the information technology industry can trace its roots to innovations arising from federally-sponsored research. The challenges that our nation faces today—in information technology, energy, health care, transportation, and other fields – will only be surmounted with a vigorous program of R&D.

ARRA R&D funding was distributed across the full spectrum of federal science agencies. The National Institutes of Health (NIH) received the lion’s share: $10.4 billion. The National Science Foundation (NSF) was next, at $2.9 billion, followed by the Department of Energy (DoE), at $2.4 billion, and others. Awards are only just beginning to be made—quality is ensured through a highly competitive peer-reviewed proposal process that inserts some unavoidable delay in the loop.

So, how’s it going? NIH is the only agency with an easily accessible database of ARRA R&D awards. As The Seattle Times recently reported, the University of Washington currently is tied with the University of Michigan for the largest dollar value of first-year ARRA R&D awards from NIH: $99 million. (Most research awards extend over multiple years, but the NIH database reports only the first year of funding.)

It’s worth reflecting on how remarkable this is. Here are the numbers for a dozen top-ranked institutions nationally:

First-Year NIH ARRA Research Funding for
12 Universities With Top Research Medical Schools
As of 10/5/2009

Annually for several decades, the University of Washington has ranked among the top few institutions in the nation in federal research obligations—research at UW brings $1 billion to the state annually, employing thousands and enriching the education of thousands more. This NIH ARRA research award performance is consistent. However, despite this extraordinary performance, lack of institutional diversity hurts Washington State overall. Our state has 385 NIH ARRA research awards: 241 to UW, 48 to the Hutch, 21 to Seattle Childrens, and a total of 75 to all other organizations. California, by contrast, has received 1,708 awards; Massachusetts 1,226; New York 1,136; Pennsylvania 807; Texas 668; North Carolina 556; Illinois 502; Maryland 476; Ohio 449; Michigan 395.

What’s the bottom line? America’s competitiveness, and Washington State’s competitiveness, will be dramatically enhanced by R&D funds awarded as part of the stimulus. Our ability to tackle society’s grand challenges depends on it.

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Every second year, the Technology Alliance gathers policymakers and leaders from the innovation community at a retreat designed to explore issues affecting Washington’s technology sector and to map out strategies to increase our state’s long-term competitiveness. We organize the retreat around what we call the “three drivers” of a vibrant innovation economy: excellent K-12 and higher education systems; strong research capacity at our public and private research institutions and companies; and a robust entrepreneurial climate that nurtures the growth of young startups generating new technologies, services and jobs in our state.

This year’s conversation was all about talent.

Much has been made by our organization and others about the need to increase our students’ college and work readiness; to improve science and math teaching and learning in our schools; and to invest in high-impact, high-demand programs at our public universities. These have been priorities of our organization and our partners in the innovation community for a long time. Now, it’s time to get serious. Washington is at a crossroads. We have the framework to enact meaningful education reform with the enactment of Senate Bill 2261, and the design of an important new tool to track student progress and teacher effectiveness through a longitudinal data system.

The latter is particularly important when one considers the data we heard at the retreat, and a lack of awareness on the part of many in our state who could help drive change. Here are just a few key points we heard during our retreat that everyone in this state should know:

• According to Postsecondary Opportunity, our education pipeline isn’t so much leaking as it is hemorrhaging: for every 100 students who start 9th grade, only 69 graduate from high school four years later; only 33 of those enter college the following fall; only 24 return sophomore year; and only 17 earn a four-year degree within 6 years of enrollment. We start with 100 high school freshmen, and we get 17 college graduates. Seventeen.

• Meanwhile, we were told that 80-90 percent of parents surveyed expect that their kids will get a bachelor’s degree. That is particularly sad when you remember that our high school graduation requirements do not, at present, align with the minimum requirements to enter our public baccalaureate institutions.

• Kati Haycock, president of The Education Trust, shared sobering data on our performance internationally. We in the tech community know we are competing not just with other states but with the rest of the world. We don’t do well: in the 2006 PISA test given to 15-year-old students in 26 OECD countries, the United States ranked 22nd in mathematics and 19th in science.

• In higher education attainment, the U.S. is one of only two OECD nations (out of 30) in which today’s young people are less educated than their parents.

• Teacher quality matters more than anything else. Studies …Next Page »

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Biotechnology companies who’ve taken time to focus on politics over the last few years have focused most of their attention on national-level issues. That’s understandable given the renewal of the Prescription Drug User Fee Act that controls FDA deadlines for reviewing new drug applications, legislation that would make it possible for makers of cheaper “biosimilar” drugs to compete with innovative companies, and now proposals to extend healthcare coverage to all Americans.

Each of these issues has an obvious impact on future business and biotech executives have significant lobbying support on these issues. National and state-level business organizations like the Biotechnology Industry Organization (BIO) have identified key issues, provided access to key lawmakers, and created plug-and-play messaging suitable to their respective issues.

That sort of assistance crumbles when the focus shifts closer to home, at the city level. Most biotech executives don’t spend any significant time concentrating on local issues, and I happen to think this is a dangerous trend that must be reversed.

Here in Seattle, city leaders have extolled the virtues of biotech. Seattle’s South Lake Union neighborhood has been given particular attention, with goals of creating a hub for scientific research, biotech companies, and global health to compete with other such clusters across the country.

That sounds great, until you look at the specifics. Local developers have done a good job of building and/or planning buildings for this purpose. However, the city is behind on infrastructure spending and there is not enough electrical power infrastructure in place to support all the lab space being created. That’s an obvious operational problem that Seattle’s city hall missed, but not all local issues so clearly affect biotech companies.

Here in the greater Seattle area we haven’t figured out how to fund and operate convenient transit service, even within the city limits. Traffic in the main east/west arterial (Mercer Street) in our future biotech center is miserable and has been miserable for decades. The current plan to address this will make the streetscape more attractive, which is a good thing since drivers will be spending more time looking at it. The current plan actually increases east/west traffic time on the corridor. Seattle schools perhaps can no longer be termed in “disarray,” but nobody is satisfied with the quality of education, particularly science education, across the system.

These issues are important because if biotech executives want their companies to grow, they have to be able to attract and retain great people. Seattle already has a recruiting handicap …Next Page »

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Imagine the following scenario for a minute: A middle-aged man books a round trip ticket from San Francisco to Shanghai. His reservation indicates this will be a short trip; he is going to be in China less than one full day. Upon arrival at the airport in Shanghai, the immigration control officer asks him “What has brought you to China?” The man looks sickly, is sweating profusely, and appears much older than the 54 years indicated on his passport. Knowing this question was going to be asked, he has been carefully thinking over his answer during the 14-hour flight. “I’m here to buy drugs,” he confesses.

At this point, you’re probably thinking he’ll be marched off to some dank prison cell, never to be heard from again. You would be wrong. Instead, he’s told, “Welcome to China!” and after clearing customs, he heads to a large medical institute located on the Bund by the Huangpu River. Here, he will get his first injection of the generic biologic drug that has led him to this ancient land, along with a yearlong supply to take (actually, smuggle) back home.

Why would someone travel 6,200 miles to buy drugs when they are available here in the U.S.? For the same reason people now are traveling to India, Thailand, or South Africa for heart surgery, hip replacement, or some cosmetic procedure – affordability. They have no (or limited) insurance coverage, and the costs of their treatment are significantly less in other countries. An estimated 750,000 Americans went overseas to have medical procedures done in 2007, according to Wikipedia, saving the recipients a great deal of money and costing the U.S. health industry billions in lost revenue. The cost of the surgery overseas can be one-tenth the cost of having the surgery done in the U.S., even factoring in the travel expense. Similarly, biologics can be every bit as expensive as heart surgery or hip replacement. Treatments for rheumatoid arthritis, cancer, hemophilia, or rare enzyme deficiencies can cost tens of thousands, even hundreds of thousands of dollars a year.

As I’ve discussed in a previous Xconomy piece, generic versions of biologic drugs are not currently for sale in the U.S. Even worse for patients who would benefit from these, regulatory authorities are still in the process of formulating a pathway that would allow the approval of generic biologics. So what’s the likelihood of my scenario above coming to pass? Will shopping overseas for biologics come to resemble the trend of traveling for cut-priced surgery? Here are the key factors involved:

Insurance—For the sake of our discussion, this is a non-issue. If your insurance covered your biologics, then you wouldn’t be leaving the country in the first place to purchase these drugs overseas.

Availability—Just because a biologic is available in the U.S. doesn’t mean that you are going to be able to buy a version of it overseas. Foreign manufacturers, like American ones, will likely choose to make drugs based on their potential profitability as well as whether or not they have patent …Next Page »

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The biotech industry enjoys a lot of political clout in Washington D.C. and state capitals largely because it attracts highly educated people into high-paying jobs. But I spotted an intriguing bit of data this week that suggests biotech workers aren’t really taking home nearly as much money as some of the industry’s lobbyists and political allies would like people to believe.

The median salary for biotech jobs in the Pacific Northwest was $60,520 in 2008, according to data collected by Phil Ness, the owner of Seattle-based Info.Resource, a company that operates websites for biotech associations in all 50 states. That’s nowhere near the $81,499 average annual salary figure for Washington state biotech workers that was touted earlier this spring by a group sponsored by the Pharmaceutical Research and Manufacturers of America (PhRMA).

The higher of the two wage figures, as you might expect, gets a lot more publicity from industry advocates, although Gov. Chris Gregoire has recently started backing off on her public statements about biotechnology as a regional catalyst for high-wage jobs. Even so, her Web site still states, “This industry will offer many Washingtonians family-wage jobs while finding cures for some of the world’s most dreaded diseases.”

The savvy reader will notice immediately that I’m comparing two different surveys with different methodologies, which is an apples-and-oranges comparison. Fair point. But it’s still worth hearing about the Ness study, especially since the higher salary figure tends to get so much more mainstream press attention.

Ness used a simple model to arrive at his median salary figure of about $60,000. His websites provide links to open job listings in Washington, Oregon, Idaho, Montana, and the Canadian provinces of British Columbia and Alberta. He asked the employers in those places to voluntarily provide him an actual salary range of the open job, as long as he kept the employer’s name blinded in the analysis. Only a small percentage—less than 10 percent—agreed to provide the range, but when they did, Ness settled on the midpoint within the range that was provided, and pooled together data from 360 actual job openings. Although his survey cast a wide net across states and provinces, about 90 percent of the openings were in Washington state, Ness says.

He also found some interesting disparities in terms of what skills are in demand, and which ones aren’t. Essentially, people with more commercial skills, like quality assurance for manufacturing, can make significantly more than entry-level scientists with pricey graduate school educations. Here are some average salaries Ness found for common biotech jobs:

—Clinical research associate—$69,278 …Next Page »

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I am quite often asked, in some form or another, “What can [STATE][LOCAL] government do to spur on an innovation-based economy in [SEATTLE][WASHINGTON]?”

Well, as I said on a panel at the Technology Alliance meeting in Leavenworth yesterday, the single biggest correlate to the strength of an innovative biotechnology industry in any geography is the quality of the major research institutions. The two heavyweight biotech hubs are Boston and the San Francisco Bay Area. No surprise there:

—in Boston, there are Harvard, MIT, Tufts, Boston University, and various smaller but world-renowned research institutes such as the Whitehead and the Broad; and,

—in the Bay Area, there are Stanford, UC Berkeley, and UC San Francisco.

Seattle and San Diego probably represent the next tier, with UW, the Hutch, Institute for Systems Biology, and others in Seattle, and UC San Diego, The Scripps Research Institute, Salk Institute, and others in San Diego.

If the quality of the major research institutions is the critical correlate, then anything that can be done to bolster the quality of that research would represent at least one highly fruitful way in which to improve Seattle’s competitiveness as a biotechnology center. One way to bolster research is to create additional funds for researchers already in place, and the state of Washington has already done that with the creation of the Life Sciences Discovery Fund. However, I would argue that an even better use of these or any funds brought to bear in this effort should be utilized instead to attract and endow chairs for “rockstar” researchers who have made their names elsewhere. Doing this is a highly-focused, high-profile activity that will have the ripple effect of bringing with them:

—already established quivers filled with grant funding;

—high-profile reputations, raising the profile and reputation of our research institutions (with many additional ripple effects like future recruitment of faculty and top students); and,

—top-notch students and post-docs.

Done right, this focused approach will do far more, with its continued “ripple-on-a-ripple” effect in the long term to solidify and bolster the productivity and profile of our research institutions than almost anything I have seen that is currently being done here or elsewhere.

One fantastic, if not polarizing, example of this involves Lee Hood’s recruitment to the University of Washington. Without saying much about the who’s and where’s of the people and money behind recruiting a superstar of Lee’s stature from Caltech to start a new department of Molecular Biotechnology at the University of Washington in 1992, nobody can dispute the huge positive effect Lee’s presence has had on biotech in Seattle, reaching well beyond the entrepreneurs and scientists who trained under Lee at UW, the faculty that he played a part in recruiting, and the companies that he and those students and faculty have gone on to start.

If we the people of Washington want Seattle to be a sustainable and robust world center of biotechnology, then we need to let our state and local governments know that they should consider committing long-term funding (endowment) of prestigious chairs and professorships at our research institutions which those institutions can use to attract true impact-making superstars of basic life science research. A handful or two of such hires will go far further to cement and grow the innovation-based biotechnology industry here for decades to come.

[Editor's note: this editorial is also running on the OVP blog.]

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Health care reform discussions almost always revolve around health insurance, as if care and insurance are synonymous. Understanding the difference can lead to the delivery of better care for less money, and help break the health care reform logjam in Congress.

An amendment introduced this week by U.S. Senator Maria Cantwell to America’s Healthy Future Act, currently being considered by the Senate Finance Committee, understands the difference. Senator Cantwell’s amendment would provide for coverage in a ‘direct primary care medical home’ plan, provided that plan is coupled with a quality wrap-around insurance program to cover non-primary care services.

What are direct primary care medical homes? They are primary care practices offering patients comprehensive primary care coverage outside of the traditional insurance system. They provide preventive and primary care, as well as chronic disease management and coordination of care with specialists and hospitals. Patients who elect this health care delivery model pay a flat monthly fee (ranging from $49 to $79 at my affiliated practice, Seattle-based Qliance Medical Group) for unlimited access to a primary care physician. This monthly fee covers everything from regular check-ups, women’s health exams, sprained ankles and broken arms to flu shots, and arthritis or diabetes management.

Direct primary care medical homes are already accomplishing what everyone wants health care reform to do:

• Lower costs

• Improve access

• Increase the quality of care

As a nation, we spend over $2 trillion a year on health care. We want to improve access, lower costs and expand quality coverage to the almost 50 million people who are currently uninsured – but we need to find a way to do this without breaking the bank.

There are ways to lower the overall cost of health care. An astonishing 40 percent of every dollar spent on primary care goes toward paperwork – either on the provider or insurer side – to complete the insurance reimbursement process. By eliminating the insurance payment mechanism and forming a direct relationship between a provider and patient, direct primary care medical homes have more resources available to spend on patient care.

The savings allow practices to offer more providers and longer office hours, even opening seven days per week. Smaller patient loads enable …Next Page »

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Gov. Chris Gregoire has been in the thick of the health care reform talks in the other Washington. To hear her tell the story, she has been talking with President Obama’s top health policy aide, Nancy Ann DeParle, U.S. Health Secretary Kathleen Sebelius, House Speaker Nancy Pelosi, and one of the leading Senators on health reform, Senator Max Baucus of Montana.

Gregoire has been so busy with the DC power elite, and dealing with a recent economic report that said the state’s economy has hit “rock bottom,” that I heard some scuttle she might try to phone it in at her own annual Governor’s Life Sciences Summit in Seattle this morning.

But there she was at McCaw Hall in Seattle at 8 am, letting a crowd of at least 100 people brought to together by the Washington Biotechnology & Biomedical Association know she’s still a believer in their work to build up the state’s cluster of companies that develop new drugs, medical devices, and diagnostics.

“We ought to remain committed to the Life Sciences Discovery Fund and what it can do for the public,” Gregoire said.

This spring, Gregoire and the legislature gave skeptics some reason to doubt the state’s commitment, when the fund was dealt a 41 percent cut over the current two-year budget cycle. The program, which pays for research projects in the state that have commercial potential, was originally projected to be a 10-year, $350 million program that uses money from the state’s tobacco settlement. But the Life Sciences Discovery Fund will now get $19.5 million per year over the next two years because of the state’s budget cuts, said executive director Lee Huntsman.

Interestingly, Gregoire’s justification for the program appears to have shifted. For years, this program was sold as an engine of job creation and prosperity for Washington state—which is finding it increasingly tough to pass the straight-face test when the unemployment rate has topped 9 percent, and even some of the strongest life sciences companies have been slashing payrolls. This morning, Gregoire shifted her message to talk more about the payoff for human health.

She told one anecdote about a police officer, Ray Blackwell. He suffered a brain hemorrhage that’s often fatal, but he survived after being treated by David Newell, the executive director of the Swedish Neuroscience Institute in Seattle. Newell was one of the early winners of state grant support—$169,532—to treat intracranial hemorrhages with an experimental procedures that uses a catheter loaded with enhanced ultrasound, combined with a common clot-busting drug, to gently dissolve the clot over a 24-hour period without causing complications.

The story has two local angles because not only is Newell a local doc getting state support …Next Page »

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Portland, OR-based Jive Software announced it is providing the social networking and collaboration software for National Journal Group’s 3121, a professional networking tool designed for U.S. congressional members and staff. Financial terms were not disclosed. Jive works with a number of U.S. government agencies, including NASA, the Army, the Air Force Medical Service, and members of the intelligence community.

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One of Seattle’s medical device industry pioneers has a beautiful view of Lake Washington from his home office in Kirkland, but a few minutes after I arrived, he was steaming mad.

“Our government rewards dummies and punishes geniuses,” says David Auth, the inventor of a less-invasive way to clear out blockages in arteries, called Rotablator. “GM is a dumb company, and has been for 35 years, and yet they get a bailout. The medical device industry in this country is one of the absolutely most competitive industries we have. All the great medical devices have come from U.S. companies. And so we tax them $4 billion a year?”

I had kicked this hornet’s nest by asking Auth straight-up about his thoughts on the recently proposed $40 billion tax increase on medical device companies. The industry was horrified last week by a proposal from Montana Democrat Max Baucus, the influential chairman of the U.S. Senate Finance Committee, that calls for taxing medical device companies for $40 billion over the next decade.

Boston Scientific’s CEO, Ray Elliott, called it “nonsensical,” and joked that he planned to throw tea bags into Boston Harbor in protest. Bernstein Research analyst Derrick Sung estimates that the proposal could cut the industry’s earnings per share by 5 to 10 percent a year.

Auth,68, has an influential point of view, because he’s something of a godfather in the Seattle medical device industry, as an inventor and an angel investor. He’s a former University of Washington professor who founded Redmond, WA-based Heart Technology, took it public, and sold it to Boston Scientific for $500 million in 1995. Since then, he’s donated millions to the UW, and put more of his own money into other local device companies, like Kirkland, WA-based Pathway Medical Technologies and Redmond, WA-based CoAptus Medical. He was elected to the National Academy of Engineering earlier this year, and serves on the boards of nine different medical device companies along the West Coast.

The proposal by Sen. Baucus compounds what has been an agonizing year for medical device companies, both locally and nationally. The FDA has been gradually becoming more demanding that device companies do larger, more expensive clinical trials than in the past, Auth says. More and more often, he’s seeing examples of the FDA saying one thing to a company about requirements for FDA approval, waiting for the desired data to roll in, and then telling companies it’s not enough.

This means that it is taking longer, and costing more money, to get a medical device approved in the U.S., Auth says. It’s causing venture capitalists to …Next Page »

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Why would a Big Pharma company want to remake itself as a biotech? In a recent Xconomy piece, I discussed the changes in Roche’s corporate culture brought on by their recent acquisition of Genentech, along with recommendations for creating an innovative biotech research culture. What I didn’t have the space to dive into was a discussion of why Roche is attempting to transform itself from Big Pharma to biotech (OK, Big Biotech). The answer can be summed up in one word. Biologics. Here’s how I see it all coming together:

Biologics are Hot, Hot, Hot

Plant-based drugs have been used by cultures around the world for thousands of years. Drugs based on chemical synthesis have been with us since the latter half of the 1800s. Now, the era of biologics—genetically engineered protein drugs made in living cells—is upon us. Biologics now account for 20 percent of the global drug market, according to market research firm IMS Health. In 2000, only one biologic made the top ten list of worldwide drug sales (Amgen’s recombinant erythropoietin in 4th place). By 2008, five of the top 10 drugs in sales were biologics, and by 2014 biologics are expected to occupy six of the top ten positions, according to EP Vantage.

The trend is clear: worldwide sales of biologics are on track to hit the $100 billion level by 2011. As recently as 35 years ago there were no recombinant protein drugs in the marketplace. Today the marketplace contains many types of recombinant proteins, including growth factors, monoclonal antibodies, soluble receptors, clotting factors, replacement enzymes, vaccine components, and immune system stimulators. Biologics comprise about 25 percent of new drugs, according to the Washington Post, and accounted for about 16 percent of total prescription drug spending in 2008, according to IMS Health.

Small molecules, however are not likely to go away anytime soon, because they retain …Next Page »

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Steven Chu was once a young turk scientist in the late 1970s at Bell Labs, the hothouse that gave the world the transistor, satellites, and all sorts of other high tech inventions. Now that he’s the U.S. Secretary of Energy, overseeing 30,000 government scientists and engineers around the country, Chu is drawing on his own formative experience to wrestle with an enormous problem he simply calls “the Energy Challenge.”

I traveled from Seattle across the Cascades yesterday to Richland, WA to hear Chu, the Nobel Laureate tapped earlier this year by President Obama to help craft a new U.S. energy policy. This was his first visit to the Pacific Northwest National Laboratory, one of the nation’s 21 national labs and technology centers overseen by the U.S. Department of Energy. He spoke at an auditorium with 300 scientists and engineers before taking a tour of projects at the lab. He didn’t take any questions from the media.

Chu’s 50-minute talk (see the video here) was part-narrative on the history of global climate change, part-political manifesto, part-physics lecture, and part-pep rally. The energy problems he’s facing are familiar to anyone who watches the TV news. The way he frames it, the U.S. depends on oil for too much of its energy supply. It’s a situation that’s giving rise to geopolitical conflicts and is making the world warmer, leading to flooding and droughts that are threatening to destabilize many countries, and will likely make them “spawning grounds” for terrorists.

One way the nation can get out of this predicament is through science, but not just traditional university science, Chu told the crowd. The national laboratories have an opportunity to make groundbreaking fundamental discoveries, even while being mission-driven for things like national security, or toxic cleanup, just as Bell Labs made fundamental discoveries while delivering products to AT&T, its parent company, Chu told the crowd. The national labs can collaborate across disciplines, which Chu says is something that seldom happens in universities because they corral researchers within departments, which he calls “stovepipes.”

“What can be the new Bell Labs, the new Lincoln Labs?” Chu asked. “The national labs have an opportunity to step up to the plate. It’s a great national facility. Think hard about using it.”

He reminisced a little bit about his experience at the famed Bell Labs in the late 1970s. He showed a slide of some of his colleagues, who were all just hungry young researchers like him, who hadn’t yet padded their resumes with much to brag about. “Two-thirds of us ended up in the National Academy of Sciences, and five of us won Nobels. We were hired young and we grew up together. It was a special place.”

The Richland lab, which has an $881 million annual operating budget and 4,300 scientists, engineers and staff, certainly worked hard to roll out the red carpet for Chu. Scientists at the lab showed off …Next Page »

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I was born and grew up in Japan and have first-hand experience as both a doctor and a patient in my native country—a nation that offers universal health care coverage to its citizens. I have also been a patient, an academic researcher and a biotech entrepreneur here in the United States, my home for the past 10 years. These experiences have helped me to compare and contrast and to see the advantages and disadvantages of both countries’ healthcare systems. My work as an entrepreneur has also led me to examine these systems’ effects on innovation in the biotechnology and pharmaceutical sectors.

In thinking more closely about health care, I have come to several conclusions. First, access to quality health care coverage for all people is key. Second, any health care reform implemented here in the United States should not negatively impact the high quality of care that the U.S. is known to provide and that U.S. citizens enjoy. Third, it is also very important that any health care reform not come at the expense of cutting-edge research and medical advances that could spur the next generation of safe and effective treatments.

Japan has embraced universal health care coverage and it has been relatively cost-effective for that country. We know that Japan is spending only about the half of the amount on health care compared to the United States in terms of percentage of GDP; however, it is important to note that individual out-of-pocket costs are not that different.

Also, the patient experience is vastly different. In the United States, private health insurance providers dictate which hospital you can go to and what kind of treatment you can access. In Japan, regardless of what type of insurance you have, everyone is covered. Individuals can select to see almost any doctor they would like, and their co-pay is often 30 percent but there is a cap of approximately $700 per month. However, my experience is that Japanese patients have a trade-off – they only see their doctor for three minutes (usually after three hours of waiting). I have also seen first-hand that doctors are overworked and underpaid relative to other industries. For example, currently in Japan, there is a dramatic decrease in the number of doctors who are willing to become pediatricians or OB-GYNs due to the challenging work environment. While the clear benefit is that everyone is insured in Japan, there is the downside: the average quality of medicine does not rival …Next Page »

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Health care reform took a turn for the better when members of key committees in both the U.S. Senate and House of Representatives recently recommended an approval pathway for biosimilars—products that attempt to be similar to an innovator biologic drug—while also preserving the hope for future medical treatments. Specifically, the committees agreed that to preserve medical innovation, biotech medicines should receive a reasonable 12 years of exclusive rights to their research data (also called “data exclusivity”) before a biosimilar may reference it for their own abbreviated approval. This period of time will act to preserve the research and development of breakthrough therapies for diseases like cancer, Alzheimer’s, and multiple sclerosis.

This is not simply a technical policy matter, but an important aspect of health care reform that is vital to the future development of new and better medicines. Amgen recognizes and supports a responsible, science-based regulatory pathway for biosimilars that ensures patient safety, follows sound science, demonstrates comparable efficacy — and as currently recognized by the Senate Health, Education, Labor and Pensions (HELP) Committee and House Energy and Commerce Committee — provides fair incentives for continued development of treatments for serious diseases.

We believe that a reasonable approval pathway for biosimilars will have a positive impact on our local and national economies. Washington state is a leader in biotechnology, and a biosimilar policy that preserves incentives for innovation will help ensure that our state can continue to be a leader in breakthrough medical innovation. Amgen is the largest private biotech employer in the region, providing approximately 900 jobs. The workforce we employ is highly educated, passionate about our mission to help patients, and dedicated to enriching the communities in which we live and work. Amgen’s Seattle-area laboratories are the largest commercial biotech facilities in the Pacific Northwest, representing a more than $600 million investment in biotechnology infrastructure.

The recent Senate and House committee decisions are also positive news for patients suffering from many types of crippling and life-threatening conditions who depend on the scientific breakthroughs that can only come from continued biotechnology research. As we frame changes to our health care policies, we must take care to preserve the innovation in biotechnology that holds the promise for future treatments for these patients.

Congress must also be mindful of the patient safety issues that are also at the heart of the biosimilars debate. It is essential that a scientifically-sound process is in place at the FDA to approve drugs that are similar, but not identical, to existing biotechnology medicines. Biologics are large, complex molecules, much larger and more complex than chemical molecules found in pills. You might visualize …Next Page »

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Qliance Medical Management, the Seattle-based company that doesn’t accept health insurance for primary care medical services, has raised $4 million in venture capital to expand its practice in Washington and to other states around the country.

The financing was led by Seattle-based Second Avenue Partners, and also included New Atlantic Ventures and Clear Fir Partners. Qliance, founded in 2006, has now raised a total of $7.5 million since it started.

We first profiled Qliance back in December. The company is pursuing a simple and disruptive idea to the U.S. healthcare system. It runs what it calls a “direct practice” in downtown Seattle, which freezes out health insurers and deals directly with patients. The patient hands over a credit card, and agrees to pay a $39 to $79 monthly membership fee to Qliance for unrestricted use of its primary care medical services. The model allows Qliance to avoid spending excessive time haggling with insurers, and lets the doctors see fewer patients. That frees up the company’s physicians to spend 30 to 60 minutes with each patient instead of less than 15 minutes for their peers who accept insurance, CEO Norm Wu said in our original profile.

“We see the Qliance direct primary care model as an important transformational option to health care reform that is easily scalable for other communities across the U.S.,” said Nick Hanauer, managing partner of Second Avenue Partners, in a statement. “Their innovative health care model reduces costs dramatically for individuals and businesses while delivering exceptional care and access for patients.”

The Qliance model doesn’t cover all the specialized services that some patients …Next Page »

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Washington state gets more than $1 billion every year from the federal government to support biomedical research, which makes a lot of entrepreneurs wonder why there aren’t more startups being spun out each year. Now a couple of well-known Northwest life sciences entrepreneurs, Tom Ranken and Bob Wilcox, want to take a little more money from Uncle Sam and put it to work advancing that research a little further, by building biotech and medical device companies.

This concept, called Bionager (pronounced BI-on-uh-jer), is still very much at a fledgling stage. Ranken and Wilcox are seeking ways to get the federal government to pump in $10 million to get it off the ground. The goal will be to help finance promising research with commercial potential through the so-called “Valley of Death” where ideas die, because they lack enough proof to win venture capital support to shepherd them through the perilous phases of product development.

The vision is for Bionager to be a for-profit corporation that pools money from the federal government and private investors, who will take equity stakes in startup companies. Unlike many ill-fated incubators run by government economic development groups that seek to create jobs, or real estate developers who seek to fill up lab space, Bionager will seek to generate investment returns, Ranken says. It hopes to make seed investments of $100,000 to $300,000 to each company, and to cut off funding fast if the work doesn’t hit pre-established milestones set by a board with commercial expertise, he says. Once Bionager “separates the wheat from the chaff,” then the startups will be ready to capture the next round of private investment they might otherwise never get.

“This will be a little bit of capital to get you started,” says Wilcox, a former vice president of product development at Bothell, WA-based Ekos, an ultrasound technology company. But as Ranken adds, this isn’t supposed to be some doe-eyed, well-meaning, yet ineffective effort. Bionager intends to offer expert contacts to help get companies going, a firm set of business milestones, and a tight schedule to achieve them. “We’re going to be ruthless,” Ranken says.

Ranken’s past jobs have included stints as president of the Washington Biotechnology and Biomedical Association, and founding CEO of Seattle-based computational biology company VizX Labs. He has complained loudly for years about the “funding gap” he sees as a roadblock to sparking more innovation in the Northwest.

To do something constructive about it, he and Wilcox have sought to establish a five-member board of directors, which includes themselves; WBBA president Chris Rivera; James Severson, vice president of Kirkland, WA-based Veratect; and H. Stewart Parker, the founder and CEO of Seattle-based Targeted Genetics.

Ranken and Wilcox have been pounding the pavement …Next Page »

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Tell me if this makes sense to you:

—If I buy a diamond, I can own it for as long as I like;

—If I produce a brand name for a product, provided that I trademark it, I can own it for as long as I would like, until and unless it becomes “generic” (like the term “escalator”, which actually started as a brand name);

—If I write a novel, provided that I copyright protect it, I can own it until I die, and my heirs can maintain those rights for 70 years longer; but,

—If I invent a drug, even if I protect that intellectual property to the full extent of U.S. patent law, I can only own it for 20 years from the date I file for a patent on it.

I can own a tangible good forever, I can own a trademark virtually forever, I can own a copyright for my entire life plus 70 years. But property which is more intrinsically a part of me – my idea, my invention, the product of my intellect – I am only allowed to own that for 20 years after I reveal it to the patent office.

Rationally, it seems obvious that all property – whether tangible or intellectual – should be subject to the same rules and laws of ownership. If you can own a gemstone forever, you should be able to own an invention forever. In fact, if a society wishes to impose differential standards for ownership rights to different types of property, wouldn’t it make more sense that preferential treatment be given to those items which are the product of your talent, your creativity, your self, over those things which you earn or purchase based upon that product of your efforts? The logical extension of this argument, in any free society, is that you should be able to own all property, whether purchased or invented, physical or ethereal, for as long as you wish. Patents, trademarks, copyrights, title – all should be perpetual.

And yet, even in the United States, the country most devoted to free markets and property rights, we live with these irrational, illogical, and even unethical limitations upon intellectual property ownership. In fact, when you hear lawmakers, lobbyists, and pundits talk about patent reform, particularly in regards to drugs, the direction that is most often espoused is to further tighten and shorten the patent protection available to inventors. How did we get here? What would cause a free society like ours …Next Page »

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It’s not every day you get to watch a U.S. senator swallow a swirling ball of liquid nitrogen-cooled foam (yuzu-flavored, no less). Talk about a palate cleanser.

That was just one stop along a rather surreal press tour and ribbon-cutting ceremony this morning at the Intellectual Ventures Laboratory in Bellevue, WA, as Sen. Maria Cantwell got a personal tour of the lab from company co-founder and chief executive Nathan Myhrvold. “The point of the lab is to do prototyping and do research around our inventions,” Myhrvold said. “We never know exactly what we’ll need, so we have to have a lot of capabilities.”

(Among these is a unique way of doing ribbon-cutting, as you’ll see on the next page. All photos courtesy of McKenzie Funk.)

The wide range of capabilities at Intellectual Ventures was on display in a series of lab demos. The tour included glimpses of an expansive cooking-science station (site of the palate cleanser) and setups for doing epidemiological computer modeling of malaria outbreaks; diagnosing malaria by laser light (instead of a blood sample); designing electricity-free vaccine containers that can withstand 105 °F exposure in Africa for six months; and photographing mosquito wingbeats at ultra-high speed (27,000 frames per second). Then came the coup de grace—bug-zapping lasers that work as a “photonic fence” against mosquitoes and agricultural pests (the live-demo lasers were non-lethal and just for show, shooting 50 bugs per second). OK, maybe not the most practical technology yet, but it’s certainly a striking demo.

The lab hasn’t changed much since I saw it last summer; it still has about 30 full-time employees. But overall, Intellectual Ventures has grown to more than 500 staff members, up from 400-some employees earlier this year. The company has also leased space across the street from the lab for a new supercomputing center, presumably to help its researchers perform large computer simulations for epidemiology studies and other complex problems.

Sen. Cantwell, a Democrat who’s midway through her second term for Washington state, asked Myhrvold what Intellectual Ventures is doing for this state’s economy. “We’re going to try to keep …Next Page »

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It’s a good day for Vivek Bhaskaran. The co-founder of Seattle-based Survey Analytics, a marketing and customer relations startup that has been bootstrapped since 2004, has just scored a big win with the White House. The company’s software platform for hosting and managing feedback communities (engaging customers and gathering unsolicited feedback), called IdeaScale, is being used to power the U.S. government’s Open Government Dialogue site. Financial terms of the partnership were not announced.

Today, the National Academy of Public Administration, White House Office of Science and Technology Policy, and IdeaScale launched the site to solicit ideas from the public on how the federal government can become more transparent, participatory, and collaborative. This online brainstorming session will enable the White House to hear people’s most important ideas on open government—including innovative approaches to policy, specific project suggestions (including government-wide or agency-specific ideas), and any examples and stories relating to law, policy, technology, culture, and practice.

Using this Web platform, people can share their ideas and recommendations for how to make government more open, as well as vote on others’ proposed ideas. Originally designed for companies to engage with their customers, IdeaScale has gotten “a ton of traction,” Bhaskaran says. “With collaboration feedback, people and customers can hear each other while they give feedback.”

Back on January 21, President Obama issued the Memorandum on Transparency and Open Government, stating his goal of implementing sweeping changes in the level of participation and openness in government.

Last July, IdeaScale powered AskTheSpeaker.org, a crowdsourcing application used at a political conference in Austin, TX, where House Speaker Nancy Pelosi was presenting. That led to the White House contacting Survey Analytics about using IdeaScale to help with the open government directive. “Their job is to come up with directives to be more open and transparent,” Bhaskaran says.

The current brainstorming session will provide ideas for two more stages of collaboration, Bhaskaran says. Next, a discussion phase will occur where the top-rated ideas will be explored further. Finally, a draft phase will be started, where anyone in the public can help edit the language for the final recommendations.

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