Indianapolis Business Journal gathered leaders in the state’s life sciences industry for a Power Breakfast panel discussion July 25.
Panel members included Ron Henriksen, president and CEO, EndGenitor Technologies Inc.; Elizabeth Hart-Wells, assistant vice president and director, Purdue University Office Of Technology Commercialization; and David Johnson, president and CEO, BioCrossroads. Also joining the discussion was Dr. David S. Wilkes, executive associate dean for research affairs; August M. Watanabe professor of medical research, professor of medicine, microbiology and immunology at the Indiana University School of Medicine; and Pete R. Yonkman, executive vice president, strategic business units, Cook Medical. The discussion was led by IBJ life sciences reporter J.K. Wall.
The following is an unedited transcript of the discussion.
WALL: I'll start off with kind of looking back. Earlier this year we marked a bit of a milestone in the life sciences here in Indiana with the 10-year anniversary of BioCrossroads. When that was formed in 2002, it was kind of a significant step in some of the major life sciences institutions in the state, Lilly and IU and Purdue and many others getting together and putting some resources behind encouraging entrepreneurial activity and more entrepreneurial activity in the life sciences, and I want to ask all the panelists if they can look back 10 years and say what in your mind is the biggest accomplishment that's happened in that time here in Indiana and at the same time what's the biggest challenge that remains yet to be tackled? Ron, can you kick that off?
HENRIKSEN: I would say, I don't know if it's here in Indiana only, but I think the understanding and the knowledge of the human genome, which is the base of all the things we're doing today, had to be one of the great things and now we know about the general sequence, we're able to identify individual variants, identify microRNA, which is becoming more and more important, by the way, it has your little code on the corner of your RNA that says how long you're probably going to live if you don't have an accident or something, but that's coming in very quickly, right now it's a very hot area, and we've got this thing, the transcriptionally active gene, we just understand so much more about mechanisms of how this all works than we did before. Do you want me to do challenge, too?
WALL: Sure, throw it out there.
HENRIKSEN: The challenge is you've got all of this information just coming in from everywhere, you know, the universities, companies like Lilly and Cook and so forth, so what do you do with it, how do you get your arms around it, how do you make it useful, and that really is going to be an ongoing challenge, I think. You know, the technology of the information system maybe hasn't kept up with the technology of the biology.
WALL: Who else has thoughts? David?
JOHNSON: J.K., Ron is much more substantive with his response to your question than I will be. By the way, I remember 10 years ago going to visit Ron when Ron was one of about five people who thought there might be some real potential with developing this sector here. My answer to your question would be that I think in the last 10 years we've gotten our act together and it's a pretty good act. At the BioConference, that Mr. Jones who's our representative from the state, a couple weeks back in Boston and there was a report card put out by Bio/Battelle that showed that Indiana's number 1 no matter how you rank states in the life sciences right now, number 1 in terms of the absolute number of employees, number 1 in terms of how fast the number of jobs here are growing in that sector, number 1 in the concentration of industry that we have in the state, just 1's all across the board, and there are fewer than 10 states that are in that first tier. So all of a sudden we are the envy of other states when it comes to having our act together, even though there's an awful lot of stuff we need to do, and I thought about that and I looked at that report and I recalled a time about 10 years ago when another reporter, who no longer is with the Indianapolis Business Journal, but who was very skeptical about our ability to organize anything here, got his hands on a Brookings Institution report looking at biotech centers of the US and called me up with some measure of glee and said "You guys aren't on this, nothing's going on," and I said "Just wait." So, you know, we are now, no matter whose index it is, no matter what kinds of reports you get, we are being validated all the time for what we're doing. The biggest challenge is what do we do next? You know, when you've got 1's all across the board and you're in the top tier all the way across, the next direction is not a positive one if it's down, so we need to figure out how to up our game and that, I believe, is going to involve a lot more work with the basic assets we have here, all of which are in place for tremendous growth, and a heck of a lot more smart, focused collaboration involving the industry here and academia here and we'll probably have a chance to talk more about how to do that.
WALL: Okay. Dr. Wilkes, did you have thoughts?
WILKES: Yeah, I think to Ron's point, the human genome's been a major asset and being able to map that. That absolutely gets us on the eave of really doing personalized medicine to me, really tailored medical care, the best drugs for, you know, for a particular individual's genetic makeup, and I see that overall, it's in its infancy, but I think that's going to be a huge opportunity going forward. I think on the challenge side, although we are rated very highly, as David mentions, you know, going through the new company start-up environment is pretty challenging and having done that firsthand I think the short answer of early stage capital is a rate-limiting step for us and still the monies, the venture monies, are concentrated on the coasts, there are great opportunities here, but as a community I think we need to figure out a way that we can invest in early ventures and that's not a Series A money per se but the smaller capital that would help a number of ventures get started.
WALL: Peter, Libby, do you have thoughts on this question?
HART-WELLS: Yeah, I'll answer from the perspective of more the fundamental research, not surprisingly. I have two thoughts for the last 10 years, one Ron alluded to, which is information technology, that particular field has advanced exponentially and is converging into other industries, which I think is positive. I also think that there has been more trending in the fundamental research funding for multidisciplinary work and I also think that's a positive trend that's feeding into a number of sectors, including the life sciences, who are benefiting from that multidisciplinary research.
WALL: And then can you give an example of that multidisciplinary research?
HART-WELLS: So the CTSI, we'll say, for example, is a collaboration among IU, Purdue and Notre Dame and that's a National Cancer Institute, National Institutes of Health cost-share, federal-funded program, so that converges core competencies of these three research institutes into each other to generate new ideas, new basic fundamental research that's leveraging the strengths at different universities. You wouldn't necessarily have seen that 15, 20 years ago.
WALL: And do you see another challenge ahead? If not, —
HART-WELLS: I'm in the Technology Commercialization Office, so we do nothing but see challenges.
WALL: See them every day. Pete, do you have any thoughts?
YONKMAN: 10 years ago I had been in the industry for a year, so I don't really know what I was doing back then, but I think if I look at today, though, what's interesting, I would echo some of the sentiments up here, if you have conversations — We have conversations with people, the money people in Chicago or in New York, and they have a tremendous respect for what has been built in Indianapolis, I think as we all do, they understand what the assets here and what all of that is. I think the biggest challenge will be how do you attract money from outside of Indianapolis and from outside states to come to Indiana and take advantage of what's been built here. I mean in the last 10 years you've seen, I've seen, tremendous change and you've seen the level of sophistication of all of the various entities, whether it's government or industry or the start-up founders. That key will be to raise that profile and then to be able to get people interested to come and be a part of what's happening here in Indiana, I think.
WALL: Well, and on funding, I'm sure no one has other thoughts on funding but it came up a couple times already, the environment certainly changed a lot in the last few years, the amount of money going into life sciences, venture capital as one measurement went down and kind of bounced back up last year and seems to be going down again this year. Why is that happening and what needs to be done in Indiana to try to improve the situation as much as possible. Ron?
HENRIKSEN: This isn't a question answered just for Indiana, but I've done a lot of thinking about this and talked to several people. You know, if you look at how the industry has done, in many ways we're not as good as we thought we were going to be at this point in time. I'm old enough to have been around in about 1992, and 20 years ago, when biotech was just really starting to roll, you know, we had promises of structured-based drugs and all kinds of new technologies, no exotic — we're not going to look at exotic plants and that sort of stuff, we're going to redesign things, and I look at today where we are and some people think that the whole industry is languishing and that's for a couple of reasons, an appalling number of recent drug candidates into the FDA have failed clinical trials, some promising new technologies that were expected to improve drug discovery have not worked as well, and on top of that then the FDA has tightened its criteria, they're taking a very, very cautious stance on things and they're not approving drugs that would've gone through quite easily four or five years ago, so we're not really sure what's all behind that, whether it's part of Obamacare or not, I'm not sure, and so many of the investors, the venture capital investors who have funded a lot of this are deserting the venture capital space for these kinds of companies and they're going with other safer returns, and the key about that is that historically the companies, and I've run three of them, that start out that way with VC money, with small ideas, if they prove out, those are the raw material for companies like Lilly and other pharma companies to replace their drugs that are going off patent with those new start-up drugs, so the whole cycle might be slowing down and I am really concerned about it.
WALL: That the big pharma companies may not have enough companies to acquire or license?
HENRIKSEN: Yeah, they've normally been pulling in great ideas and new drugs from these small guys and if the small guys are not around it's going to be a problem.
WALL: Who else has thoughts on funding?
JOHNSON: You know, and I agree with what Ron's saying on that. You know, I would say the science is getting harder that people are trying to pursue. You know, many, many, many of the companies out there, start-up companies, they are cancer companies, for example, and there's probably nothing harder than developing a new cancer drug, and the venture returns have not been in this environment all with the limited partners who are more conservative right now investing in the cycle, that's all investors are just everywhere right now, they're wanting to see a more sure, certain, early return, what we're seeing in the venture network, you and I were talking a little bit about this at breakfast, is the venture firms, even those who claim they invest early, are looking suspiciously like they're investing later and later in the cycle, so that the problem that David has identified in terms of getting early and seed stage capital is really becoming critically important and it is a challenge for us here, it's a challenge for everybody everywhere. I spend a lot of time still out in San Diego and it's a challenge for the companies out there as well. We're just going to have to become better at finding new and creative sources of funding than we did. Mercifully here in Indiana at least another cool thing that's happened in the last 10 years that we just didn't have a decade ago is the emergence of a very healthy market of angel investors, individuals who can actually understand the risk of this sector, they're willing to participate in it and who are really driving the success, oftentimes making all the difference for the success in a number of our early companies. I think, David, you've had good experience with that as well.
YONKMAN: An interesting point that you raised in the beginning is that it's getting harder, so we had this conversation the other day with some of the folks that we're partnering with to develop new technologies and it used to be, at least in the device world, there were a lot of simple new technologies, when I say "simple," relatively speaking, but mechanical based technologies or a catheter-based technology, they're becoming much more multidisciplinary, the solutions that are having to be developed, they involve biologics, they involve drugs or they involve other sciences, and so the ability for any one company to bring all of that together I think is really difficult, and so the collaboration element of this becomes extremely important, which is why I think this room is so important because I think if you look at the future of how you're going to develop technologies, it's so expensive, it's so difficult and there's so much expertise that has to be brought to bear you almost can't do it by yourself, and I think if we work together I think that might help solve the funding issues because if you have a collaborative development between industry and, you know, the health care industry, whether that's insurance companies or hospitals, I think people are going to be more interested in funding it if the stakeholders have already bought in and have already understood the need for the solution.
WALL: Dr. Wilkes, you're living this with your couple companies, you know, and you started ImmuneWorks, what, five years ago and Canal BioSciences last year. How has the environment changed from an entrepreneur's perspective?
WILKES: Well, having seen the valley of death, it's not pretty, it's a pretty challenging environment. You know, back then, so six years ago or so when we got started, we were fortunate enough to land some angel investors and then also with BioCrossroads and the state through IEDC were also investors, but going forward at this point it's clear to us and I think clear to everyone in the room that for novel technologies that are really at a very early stage, you're in a catch-22. In order for pharma to pick that up, if pharma wants to see something developed a little bit more further or further along the lines so you get a little bit more proof of concept and in order to get to that most of the discoveries and most of the discoveries in terms of therapeutics are coming out of academia, but that may be funded by federal grants and the grants only pay for perhaps identification of something that may be novel but the next step to get it to the point where industry may be interested in it there's really no money to do that and that's where the early stage in capital comes in. And I agree with Pete that there's probably strength in numbers, so to the degree that we could build better partnerships between industry and academia, with an eye towards the regulatory piece, so even after something is licensed and brought to the clinic, if we know beforehand what the insurers think about in terms of reimbursement, that can only streamline the process, so I think it needs to be multidisciplinary and done in a way that's much different than we typically do it today.
WALL: This collaboration or multi- disciplinary approach, are we going to not see the classic story of a company starts and does drug discovery or does device development and then can raise enough money from outside investors and stay independent all the way through, sort of like Endocyte which had an IPO, two public offerings last year, does that model go away, will we ever see that again or could that come back at some later time?
HENRIKSEN: I think you're going to need a more friendly public market. Even if Endocyte were doing it today, they might not be quite as good as the time they went out.
JOHNSON: Well, and I agree, you might see that but it's certainly going to be a rarer story, and if you talk to Mike Sherman at Endocyte, his way of characterizing their IPO is it was just another financing event. You know, an IPO used to be everybody sits back, celebrates success and goes on to the next company. For Endocyte it was a way to access the public capital markets at a very good time and as it turns out at a good price and they continue to do that. You know, we are seeing, and there's several of our portfolio companies' CEOs here today, I don't think we're working with anybody right now who is not actively in discussions or in relationships with strategic partners at the same time that they're seeking venture investment and that's even becoming true in Pete's world in the device area where start-up companies there, this was unheard of three or four years ago even, but where start-up companies there are being encouraged by outside investors, venture investors, to think about early on forming strategic relationships, both because that partner can absorb some of the cost and risk and also because that partner can validate to the investors that the risk is worth taking for those people coming in, so I think you're going to see a much more complex partnered strategy moving forward. That can turn out real well. Marcadia Biotech was a partnered company that had a spectacular exit and continues to do some wonderful sponsored research with its partners to this very today and Dr. DiMarchi's lab in Bloomington, but it's a very different model from what we all thought we were buying into a few years ago.
HART-WELLS: I would just add, let's take the Endocyte example since you brought it up. They did go through the IPO but more recently a co-development partnership was forged with Merck and in a big way I think those types of strategic partnerships are what David's referring to in the health care industry and we're going to, as these spin out, start to look at exit strategies, you're going to have to become more creative of what that means. The co-development partnership that Endocyte forged had all the nice "bio bucks" that we like to see associated with that, but at the end of the day it was to absorb risk and there's just a lot of risk in this industry and that's not going to change and I think you could argue there's a certain amount of risk that's healthy for the consumer and then, you know, at what point does that fulcrum of the balance shift the other way where there's too much risk and we're culling from the herd real valuable properties that the consumer and patients can benefit from, so I actually think that the co-development partnership and strategic partnerships are what you're going to see and that co- development partnership is actually only for a piece of the pipeline at Endocyte, right, so they still have several other products under clinical development, and I think that that type, that concept, is marching its way all the way up the value chain, including at universities. So I kind of go back to my original comment which these strategic partnerships, even in the discovery space, are probably something you'll see continuing to trend up.
WALL: And that would be discoveries at the university level partnering with a large drug or device company even very early on?
HART-WELLS: Well, let me give you a real example. The engineering technologies that are prolific at Purdue need to be complemented in the life science with clinical input, otherwise how do you know if it's usable, right, or a whole host of other really important questions that need to get answered to de-risk that opportunity for an entrepreneur or an investor or set of investors. So, yes, I think in the life sciences that's something that we need to do better at universities or collaborate on those technologies where they're synergistic, so the sum, right, is greater than the part, so I think that that's something that we would reach out to the other universities to forge those types of partnerships and hopefully that value-add will propagate down the chain.
WALL: Does anyone else have thoughts on this? Well, on this point, Ron, you at EndGenitor did a partnership with Cook Group. Can you talk briefly about why you did that and how that's helping your company?
HENRIKSEN: Well, first of all I've respected them. I've known Cook for a long time since I've been in this state and respect the company tremendously and I knew that they were thinking about looking at opportunities in stem cells and so we got together with a couple of the Cook guys that we knew early on and tossed this idea around and now really they are our major partner and they've really — As we look forward going through the marketplace eventually with these cells, which continue to perform very well, we're going to do it with Cook and it's a great opportunity for us and we don't have to go out and scramble around for a lot of, you know, third and fourth round money now and so it makes us able to concentrate on the science and bringing things forward, and I've found the Cook people really fun to work with, actually.
WALL: Well, a couple times as we've been talking people have mentioned the FDA, and I'm sure no one has thoughts on the FDA. I think Pete Yonkman has a few, though. The medical device industry has been in a bit of uncertainty, I guess, as the FDA has considered whether to redo one of its regulatory pathways to bring a product to market. Can you talk about what's been going on there and how that's affected just decision- making in Cook and even in its peer companies.
YONKMAN: Yeah, I think it's probably the biggest challenge that all of us face going forward is how are we going to survive and negotiate and navigate an ever-increasing regulatory bureaucracy and burden and balancing the risk that comes along, the balance of risk and benefit to patients, as a society how are we going to deal with that risk because right now we're in the mode, it seems like from our perspective, where there's this ever-increasing burden and the bar is being raised ever higher and higher. It almost feels like we're becoming sort of a zero-tolerance society and I think the risk to that, though, and there's benefits to being zero risk, but the other balance risk is that you end up with slow innovation and you slow the ability to bring technologies to patients that people get a lot of benefit from, so I think fundamentally we have to come to grips with what is that balance that we want to strike and how are we going to navigate that. You know, I look at some of these smaller companies and I have no idea how they go about understanding and bringing to bear the regulatory sophistication that has to be in place. The fastest growing area of our company every year is the regulatory group and, you know, that tells you something because, you know, is that what we want to create is the fastest growing regulatory team? You would hope that would be in R&D and other areas. I don't know what the answer is. I think that, again, it goes back to we have to develop a partnership not only within Indiana but also with Washington, so there has to be an understanding of are we about just being adversaries or are we trying to do something here for a joint benefit to patients and I think that's been lost in all of this, that there's a feeling that there has to be an adversarial relationship in order for a regulatory structure to be successful and I hope we can change that so that we can actually say how do we go about creating the best, most efficient and safest regulatory environment for the US and I don't think that's the conversation that's happening right now.
HENRIKSEN: Can I add on to that?
WALL: Go ahead, Ron.
HENRIKSEN: I'm on the board of directors of a company in San Diego called Cytori Therapeutics, also another type of stem cell, and they were so frustrated with the FDA and the way the FDA was trying to manipulate them that they actually sued the FDA to follow its own directives and procedures and processes and do it, you know, because they were just holding back the cell and they were not letting the company move ahead, and so they sued them and now they've just reconciled and things are moving ahead. That shows how drastic they had to get to get this moved, and I don't know really where the power for all of this comes from and whether it's, as I said, the Obama Administration or what, but we've seen a relaxation out in San Diego on this and I think they're starting to work together.
WALL: David Johnson.
JOHNSON: You know, it's a tough question. On the one hand having a rigorous if it were truly rules-based FDA you could argue is one of the real strengths of the US marketplace, you know, that along with strong intellectual property protection and some years at least of pretty decent capital market, good regulatory policies, that this is the place to develop and introduce new drugs and devices and diagnostic products, but of course this is no longer the place where a lot of that is happening and people are doing more and more of this work overseas and it's particularly true of our colleagues I think in the device business. Part of the issue, in addition to what Pete and Ron are talking about here, is just getting certainty right now with what the rules actually are and in the device area I don't think that we know that, and so if you are a start-up company in this environment whereby I would say most of our seed fund investments that we put into companies go to help them begin to build a regulatory strategy because that's what they've got to have to get a new drug or device going forward, it's real hard to know what the target is because it's real hard to know what the rules are, so certainly we're hopeful that the FDA is finally going to tell us how they view the 510(k), for example, in the device and diagnostic area and begin to give a little bit more certainty as to what the rules of the road are, and then I think we need to have a serious conversation both here and nationally about the value of innovation and how that gets balanced with safety in their deliberations and that's a debate that has not been pressed enough I think by our policy-makers yet.
WALL: Dr. Wilkes.
WILKES: Yeah, I think part of the challenge with dealing with the FDA and having sat across the table from the FDA as we were going through the regulatory process is one of saying I think we've set some false expectations and I think it really comes at the level of what the public expects from us as health care providers. So I'm a pulmonary and critical care physician and when interacting with patients there is a real expectation that what you're going to do is going to work and that it's going to work without any adverse events because we build things as such and we have the latest and greatest technologies, but everything is about risk versus benefit and I don't think that we communicate that very well, and in the absence of that good communication I think we've set the expectation that whatever you're going to do must work right and it must work right the first time or there are going to be issues and then the individuals, either the company or whomever, is vilified when something goes wrong, even with the best of intentions. So to some degree there may need to be, I would suggest, a marketing campaign to understand that, you know, to let the public know that, you know, we are not infallible in that we've reached a point where we're developing therapeutics where the therapeutic window may be very narrow. I think the great gains in the development of therapeutics and in many respects, I can't comment on devices, that's not the world that I know very well, but for many other therapeutics, you know, the low-hanging fruit has been had and that the next step going forward gets very tricky in order to find those really well-defined targets and so the margin of error gets much more slim when you're talking about very specific therapeutics, but if we don't educate the public that that's what we're looking at, then I think that we're at risk for creating, you know, more ill will and hence the FDA becomes even more protective of the public in terms of letting drugs getting through the pipeline.
YONKMAN: I can give you an example of something that affects Indiana and it's happening right now. We have a technology that's sort of deep in our pipeline that we've been looking at that we think is a really important technology and it will have a lot of benefit for patients. The challenge with it is that it's probably a hundred million to 200 million dollar market worldwide and there are only certain patients that are affected by this but the benefit that we can bring to those patients is really important, and the challenge has been we know the level of the regulatory burden will be so high in the US that we just can't sustain the cost to bring that product to market. We've made the decision that "Okay, well, let's bring it to the rest of the world because we can afford to go into Europe, we can afford to take it to Asia." The unintended consequence I think of this and the risk that you identified is that what will happen is that technology will be developed in Asia because that's where we'll be doing the work with it, then the know-how and the expertise will end up in Asia, and ultimately the manufacturing could end up in Asia because that's where the expertise and the know-how and all the people who have worked on this project will be residing, so it's a real threat to what I think all of us are trying to build in Indiana and to be able to drive that innovation that happens here locally because if you have to do your work early on in the process outside the US that tends to move the later parts of that commercialization process outside the US as well.
WALL: Libby, do you have any thoughts on this?
HART-WELLS: I circle back to the gentlemen who have been commenting about a 500 million dollar patient population that one hospital serves and Indiana is a state of around six million people, so if we're going to compete globally, we are going to have to pull together in creative ways that we haven't done so before. I think the example that Pete just gave is real, we certainly are seeing that with our licensings at Purdue. We would prefer that they prop up jobs here in the United States, more preferentially here in Indiana, but the costs of doing so are prohibitive if your goal is to actually end up in the marketplace, so I think it is a real challenge and it's one that's going to take more than one discussion to solve.
WALL: And have you seen more licenses going to companies that intend to commercialize out of the US?
HART-WELLS: Yes, we have.
WALL: Another topic. There is, for a lot of reasons, kind of increasing cost pressures on medical products, medical innovations, probably looking forward to here in the US that we will get increasingly pressured and it certainly is happening around the world. I think the number of patients that need treatments versus the number of people to support those costs, those ratios are getting squeezed and there are other factors kind of ratcheting down how much health plans, both public and private, can pay for products. How is that changing things for people trying to produce medical innovations? Are they pursuing different kinds of innovations than before, are they changing the way they pursue them or all of the above? Who wants to jump in on that question? David Johnson.
JOHNSON: I'll start. I think it has two paradoxical effects. On the one hand I think it's driving up the stakes for innovation, so, you know, it's no accident in an environment where cost is becoming increasingly a factor, that, for example, cancer drugs are what people are looking at because the feeling is that's a huge unmet medical need, if someone can come up with something that really works there, it will be paid for and reimbursed because it's so badly needed and because people who have the disease are so eager for the treatment to try to remediate it, and what that means also is that a lot of the iterative innovations, sort of the incremental or even me-too products that have come out over the past 10 or 15 years, are probably disfavored in this market and that's both good and bad, I mean we're going to end up with perhaps skipping to the stuff that's more valuable but we're also going to see a lot of things that we need go by the wayside and there are whole areas of care where you just hope that people don't say "The current standard of care and treatment is good enough, we don't need to continue to innovate in that." The development of new cardiovascular drugs, for example, is an area where you really worry that the cost pressures and comparative effectiveness research, for example, going on in that field is something where people say, well, the current use of statins and other things is good enough to treat people with cholesterol problems and basically research in that area is not going to be rewarded going forward, so there's a lot of balancing that's going to take place and a lot of shaking out still in this cost-constraint environment. Again, if the rules become more certain, I suspect we'll find people who figure out how to benefit even in this environment.
YONKMAN: You know, sometimes in these discussions we can sometimes focus on the negative and I know I do that, too, but I think this is an opportunity, Indiana has a unique opportunity that I haven't seen anywhere else in the world, really. There is cost pressure coming into the development process and we have to understand that there are more patients coming into the system and fewer resources to treat those patients, so how are we going to do that? The only way to do that is to become more efficient and to solve problems around the cost issue, around how do you get patients to a hospital more efficiently, and that's where I think Indiana has an opportunity because the problems that need to be solved aren't just clinical problems anymore, they're also efficiency problems, so how do you decrease infection associated with procedures, how do you reduce the amount of time that a patient has to be in the OR? Well, these aren't really areas that we have access to directly. A lot of you in this room have access to those issues, you have access to the cost issues, you have access to procedural efficiency issues or knowledge about how systems work. Through a collaboration and an openness I think between our groups, between industry and academia and other areas, insurance and those sorts of things, we can get together and solve different types of problems, that's the biggest change that I've seen in the last few years is that our variables for development used to be how do we solve a clinical problem, now it's sometimes how do we solve an economic problem, and those require different levels of expertise.
WALL: Who else has thoughts on this? Dr. Wilkes.
WILKES: To Pete's point, one of the things that we've launched at the medical school is Innovation and the Implementation Science Initiative to get to what you were just describing here. It's not so much devices or therapeutics but how do we deliver care, you know, better, faster, and cheaper and that will impact what we can do, I mean that just affects the entire amount of money that's available to work with, and those areas in and of themselves are maybe marketable items so that you could develop a new way of delivering care in a more efficient way, maybe decreasing OR time and things of that sort, may have attached intellectual property that goes along with that which then also becomes a marketable item, and so that's another area. Although we talk about devices and therapeutics, the area of implementation science is newer but growing very, very quickly and there's — In fact, on the federal landscape it's the only new source of federal research dollars, 1.1 billion dollars, exactly, that are available to study that, but again in order to make that work it requires partnerships with the hospitals and medical schools, insurers, device makers and others in order to figure out how we may implement care in a better way and we see that as a major upside opportunity.
WALL: And can you give an example of how essentially a procedure might be patented at least in part?
WILKES: So if there is a way care plans can be developed for specific types of diagnostics, one major example might be in the area of congestive heart failure, so in the model of the Accountable Care Organization, and IU Health is now an ACO, you are financially disadvantaged if you have repeated admissions to the hospital for a given diagnosis. It turns out that across the United States the most common readmission diagnosis is for congestive heart failure and that is in part because the care is fragmented from the hospital to discharge to home, to ancillary care providers who have to care for the patient at home, and so if systems can be developed whereby, and it may be even software, checks and balances in order to know that you're monitoring certain aspects of the patient's weight, their diet and others that might be predictors of them coming back to the hospital, I mean that type of technology may have IP associated with it and that's something that everybody is trying to sort out right now because in an ACO model of care the more admissions don't mean more revenue in, they actually will take money out of the system.
HART-WELLS: I want to follow up. David mentioned that example of readmission. So I was on a panel, a judging panel for a National Policy Challenge in three departments, Health and Human Services, Education and Energy, and one of the ideas that came out of the southwestern United States addressed this issue of readmission and this was a creative idea that came out of one of the competing health networks down in Arizona and that was to use the resource of veterans who were trained as medics in active duty and then returned home to — I forget what they were called, but they were almost friends, really, who were assigned to a patient and you were tasked to make sure they made their doctor visit and they made sure that they took their medication on time, so it was kind of a quasi-hospice approach but leveraging the expertise that the troops have to fill a void that addressed a cost issue for that network and they had done a pilot for about a year, I guess it was, and it was actually quite effective, so that's an example of a new idea to address the kind of problems that David mentioned and those are the kinds of things we're going to have to be thinking about.
HENRIKSEN: Yeah, I spent four years in the Navy and I had a high regard for the returning of the corpsmen there, the hospital corpsmen, they were very well trained and I can see how this would be useful.
WALL: All right, well, we're going to go to audience questions now, and the first couple we have I'll combine together, but they're both about kind of workforce/human capital issues, and one is what is the panel's perspective on the challenge facing the state related to human capital, that is attracting or retaining talent in the life sciences sector, and someone else put it this way, is workforce keeping pace with the life sciences industry? What are the talent gaps that we still have in Indiana? Who wants to tackle that one?
JOHNSON: Certainly talent at the end of the day is what drives all of this and there is a need, certainly, at every level for us to be a net importer of talent from other parts of the country and the world to continue to make this sector grow. We also need to get better at the talent stream that we're putting out into our new companies and start-ups which have been in many cases tremendously benefited by the early retirements of people, from larger industry going out and really doing great service in terms of working with start-ups, but we're going to have to have our own supply chain of new entrepreneurial talent to buttress that as well and we're getting better at that, there's a lot more of that here than there was a few years ago, but we have a lot greater need. With regard to the industry, I think Pete could certainly address that and others can address it far better than I can, but my sense is that we need to be very mindful of how industry needs are changing, we need to do a much more tailored job, frankly, of suiting our undergraduates, vocational graduates, and even graduate school professionals to meeting the needs of this industry as they're changing. We've got a great base, educational base here, particularly at the university and vocational level, but probably more work to do in terms of really matching supply and demand right now.
WALL: Dr. Wilkes.
WILKES: To David's point and actually developing a cadre of individuals who can meet the needs of the marketplace I think is a very key element. You know, the intellectual capital piece is critical and so at the medical school, for example, and many of you in the room know this, the straight, pure sciences training pathway where we turn out a PhD who either goes in the industry or stays in academia or goes into a career path of teaching in higher education, I think we need to develop and actually we're having discussions about this and Merv Yoder, who's in the room here, is actively involved with this, is developing post-doctoral training pathways that lead to entrepreneurship because those individuals will have a science background. If you're able to couple that with the business and legal background, then we can start to develop the next corps of entrepreneurs who may not do the science per se but could actually lead the technologists and move things along in the pipeline, so I see that as a real opportunity. It's not something that's been done widely but with the strengths of the universities that we have here and the biotech base that we have here I think we're poised to take advantage of opportunities like that.
HART-WELLS: I'll just add that at Purdue there have been over the years a number of efforts to cross-fertilize education for interested students who have kind of more than a monochromatic focus in science or engineering, so name one program, for example, is with the PREP program, and that's an acronym and I don't know what that stands, something about post-doctoral something, but the Kauffman Foundation actually funds that program and we were in a meeting just a few days ago with one of the fellows who's a graduate student and he is in the basic medical sciences but has a interest because he's heard of the words enough around campus in "patenting" and, you know, "What's all this business start-up stuff about? I want to learn more" and that's why this program is there. He may or may not go start a company but he's going to have a transferrable skill-set that's going to make him relatively unique right now in the workforce when he's done and defends that PhD. So there are a number of those types of programs at Purdue and I think a general recognition and maybe some energy mobilization around the value of creating a workforce with a transferrable skill-set that's across disciplines. Whether it's business, whether it's regulatory, I would argue that's not something that has been infused in certain curriculums, so I think that there is a good momentum in that direction and should continue to be a focus for the research institutes at least.
WALL: A similar question that was asked here is are there other things that the universities are doing to work directly with industry to address the needs of the life sciences industry and we've obviously had a couple come up here, but are there others that should be noted or does anyone want to say something that should be done that isn't being done?
HART-WELLS: So I can, you know, sound like a commercial all day if you'd like. There's a lot of things going on up in West Lafayette. Bridge-building to networks that are outside of West Lafayette, honestly, to tap expertise of the alums, no matter where they are in the world, so there are a number of initiatives, there's an entrepreneurship task force that was assembled largely as a result of the College of Engineering's dean focusing that, wanting to have that industry element infused into the engineering education. The Burton D. Morgan Center for Entrepreneurship has a number of programs, there's been an uptick in student business plan competitions across the country, including those being funded by different federal agencies just recognizing kind of part of the Startup America Initiative to give people opportunity. Whether they come to those opportunities or not is their choice but to put those opportunities out there and put some public visibility and some esteem around them. I know there's certainly a number of industrial affiliate boards across campus at Purdue in different departments, different colleges, most of the Dean's Advisory Councils, I think we have the dean from College of Science here and those Advisory Councils are oftentimes more than sprinkled with industry components, alumni who have been very successful in business and bring that expertise back to help inform the education curriculum so that there is contemporaneous workforce development of the students that are graduating with degrees, and I am sure there's parallels to that in the other research institutes around Indiana with a focus on innovation and ingenuity.
JOHNSON: J.K., you mentioned cost pressures and certainly we're at a time where both industry is having to look at how it augments its research besides just going out and hiring every bit of research talent it needs under one roof and likewise our friends in academia are looking at a time where federal funding for academic research is at best pretty stable and people are worried it might even go down, so there's a natural fit between the academic sector, which this state has an abundance, for a small state we are really blessed to have three great research universities and I would add the University of Notre Dame to that equation, as well as a statewide medical school, one of the biggest in the country, and we are also blessed to have in a small state one of the richest concentrations of industry, an R&D-driven industry of any place in the US, that's why we do so well in these rankings, so the question is how can we do better at getting the academic bench and the industry bench together. David participated in this. We have just completed a study that Battelle conducted for us to look at ways we can have better collaborations, that's on our website, it's an interesting discussion and exploration of our assets which are substantial and suggest a number of new collaborative activities around drug discovery, on medical technology, around plant science and certainly around health information technology and all the informatics that drive this that we all need to be spending a lot more time working together on and I suspect we will.
WALL: Another question goes back to talking about regulatory challenges and it is how much of the regulatory issues are driven by rampant lawsuits, and I might add to that, if so what can or should be done about it?
YONKMAN: I'll take a stab at that. I always tell people I'm a recovering lawyer, so I have some experience with that. So you're only one step away from going back. It's interesting, in the last 10 years you've clearly seen an increased interest in the life sciences industries from the plaintiffs bar but also what's happened is as we raise the bar on what is a successful product, what's a successful device or what's a successful drug and as we talked about before we're sort of devaluing the benefit and highlighting more the risk on things, that's sort of an invitation to plaintiff's attorneys, but they tend to be doing less work to substantiate what their claims are. It's an interesting phenomenon, I'd say. The rise of the internet sort of "Have you been injured by this product? You know, there are lawsuits being filed all the time with nothing more than that claim form coming in from the internet, and so I think there's a responsibility that we have, that the legal community has and the plaintiff's bar has to are they really about helping their clients and these people who have been harmed legitimately or are they just about trying to find the most amount of lawsuits they can find and I think that's going to have to be addressed because, clearly, it adds to the cost of health care, there's no doubt.
WALL: Does anyone else want to jump in on that? Okay. We have a couple questions related to economic development, and one is it's clear that Indiana supports keeping talent here as well as building companies. Is there or should there be an additional effort to attract, establish life sciences companies to Indiana? David Johnson, that's for you.
JOHNSON: Sure. We're not going to grow the sector that way, we're going to grow the sector by growing who we have here and doing some of the things we're talking about here this morning. We're going to grow the sector by growing the market and by growing innovation and by deepening collaboration. We've got plenty to work with but we always can use more and so strategic recruitments, which certainly Governor Daniels has been extremely good at, for example, looking at pharmaceutical logistics, going out and getting someone like Medco or Express Scripts to come in here to be in that market, which is a smart market for them to be in, makes huge sense, it adds to our industry, it adds to our base, it makes us an even more interesting place to be, but the idea that we're going to go out and steal another major pharmaceutical or device or diagnostic company, A, it's not going to happen and, B, it doesn't need to happen, we've got the base we need to build on.
HENRIKSEN: I agree with Dave and I'd say that if you push that too far, you end with some border wars between Illinois and some of those states.
JOHNSON: And, J.K., just one more thing, I'm interested, if we're going to be recruiting from outside the state, I'd like us to be recruiting talent because that is something we ought to be looking at, we ought to be looking at that in corporate settings and university settings and I know you guys are doing that all the time.
YONKMAN: I would ask for help from this group because you guys were talking about the talent issue. From an industry perspective, from my perspective, it's more practical, so I agree with all the things that were said, but I think people view, in their 20s and their 30s, they come to school in Indiana and then they go away and then they come back to raise a family. We have the hardest time recruiting and keeping talent in their mid 20s to their early 30s and that's across Indiana, and I don't know, maybe there are groups but maybe there are ways to connect these folks to be able to build a support group around the community. I look around the room today and I don't see a lot of 20-year-olds in the room, maybe you are, maybe I'm just not — I can't see. I'm going to be in trouble. But I think that's something that maybe you guys could help with and I think this group can help with is create a group to connect these folks so that we would have a better retention rate.
JOHNSON: And I've got to say real quick, Indy Hub, which we did help create here in the central Indiana area, does a lot of that, not just in the life science area but across young professional networking, because you're exactly right, 25 to 35 is the critical age and we need to make sure that we keep people here.
WALL: Okay. Dr. Wilkes.
WILKES: We're aggressively recruiting mid-level physician scientists on purpose to fill that, and to the notion of creating border wars, yeah, we're in an active corporate raiding and we'll admit that. We've been successful.
WALL: Another economic development question. Does our Indiana Economic Development Corporation have the expertise and the finances to assist the development process in life sciences, so this isn't attracting companies but developing companies, does IEDC have the resources, the expertise, and the finances to assist in that? David Johnson, do you want to handle that?
JOHNSON: I thought I might get a pass on that.
WALL: You're the former economic development attorney.
JOHNSON: Yeah, you know, Indiana is not a state like the state of Ohio which went out and issued three billion dollars worth of bonds to go out and finance its technology sector. Indiana constitutionally can't do that, the state can't borrow money, and there are many good things that come from not being able to borrow money, including probably a stronger economy in many respects, but this is an expensive sector to build, so it comes down to what's the best role for the state to play in it. Probably not really as a provider of venture capital, although the 21 Fund and some of the start-up and seed funding that the state has had in the past have been very helpful, but here the private sector has really come together to try to build a venture capital presence in a way that's unique from the rest of the country. I think what the state can be doing is, frankly, to do more for our colleagues at the research universities and to put even more assets into that, into both IU School of Medicine and Purdue in terms of giving us more of that talent and more of those programs to try to commercialize and build and develop here. Again, the IEDC has done a good job selecting this sector, really focusing on it as a vertical, with limited resources, but I'm hoping that those resources continue to get directed more toward our academic colleagues going forward and as well as some additional commercialization funding for trying to deal with this.
WALL: Who else has thoughts on this? You're going to let David twist in the wind on that one?
HENRIKSEN: He answered it well.
WALL: Okay, well, we'll ask one last question from the audience and then we'll wrap up here. Indiana has characteristics which are uniquely poised to lead in health care broadly, a large medical school, a statewide health care network, a major pharmaceutical company, a major diagnostic company, several major device companies and a major health insurance group and major research universities. The question is why do we not have a larger voice in US health care policy? Does anyone have thoughts on that?
JOHNSON: I'll get shot for starting another one of these. I think in a way we haven't exercised that voice, but I applaud especially our friends at Cook and the orthopedic companies, medical device, who have organized us and caused us all to get much more in our game to focus on that industry in the state and what it means, and I should also include our friends at Roche in that, too, because they're very much a part of this discussion, and what you've ended up seeing, for example, is a congressional field hearing here last fall where, for the first time, our stake in this economy as a medical device center for the US and for the world we're finally starting to talk about it, we're finally starting to advocate and push it. We have been way too modest at the federal advocacy level in understanding what we have and what's at stake, what we could lose, what we need to gain, and I'm very hopeful that our — it starts with the Governor, but also with our congressional delegation, we've got some people right now who are very focused on that and on the need to do a lot more, so this is an area where we have been missing in action but I think we're starting to step up to the plate.
YONKMAN: It's a little bit of an Indiana/ —
JOHNSON: It is.
YONKMAN: — midwest kind of —
JOHNSON: It is.
YONKMAN: — humbleness —
YONKMAN: — thing that I don't know — You know, culturally I think we have exactly the right attitude and the right fundamentals and beliefs, especially in the health care industry. I think Indiana-based companies, more so than others, really are about patients and they're about doing the right thing and there's a genuineness to it and I think sometimes that gets — people are almost afraid to embrace that and have that be reflected in our voice than other places and I think if we are able to look at ourselves and say "You know, we bring something different to the table than other places in the world," that we'll start to have a larger voice and be willing to sort of, not to be aggressive about it, but be more outspoken and more forward, I think.
WALL: Does anyone else have some thoughts on this? All right, well, thanks to all of you.