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State's med-tech boom stalls to a crawl...

A regular correspondent sends me the following message:

"As I said, our current models for innovation are broken. Money alone will not solve the problem, even if more of it were available."

This remark was stimulated by an excellent and perceptive Star-Tribune article this Sunday:


Kevin Nickels' company has developed a new way to treat hard-to-heal wounds and, like many medical entrepreneurs, he believes the discovery can reduce suffering and save lives.

What's missing? Paying customers. Celleration has been turned down for coverage by Medica, HealthPartners, Blue Cross and Blue Shield of Minnesota and the giant federal Medicare program. "There is not enough money to go around,'' Nickels said. "Payers are saying 'Stop: We just can't afford what you're selling.'"

The result is that medical technology, long an engine of Minnesota's economy, is slowing to a crawl. The industry has shed more than 1,000 people in the past year and the chill is threatening what analysts call Minnesota's "innovation ecosystem.''

"This could have a long-term negative impact on the Twin Cities," said Mike Berman, a prominent medical device entrepreneur and investor.

"They just don't have the money to invest," said Thomas Gunderson, a longtime med-tech analyst with Piper Jaffray. Because the market for public offerings has essentially dried up, so has the expected windfall that makes investors rich.

If a device doesn't treat a chronic disease affecting a large population, their interest wanes further.

In Minnesota, venture capital investments in medical device startups fell sharply between mid-2008 and early 2009, and most of this year's money went to just one company, Atritech Inc. of Plymouth, which makes a device to prevent strokes.

"Something is fundamentally changing," said Berman, the entrepreneur. "We won't get back to the go-go years anytime soon."

Insurers used to evaluate devices solely on benefits and performance; now payers want companies to demonstrate "comparative effectiveness," O'Connell said. That's a much higher standard that requires a device maker to prove that the technology is significantly better than devices already on the market.

One reason is cost. Americans spent $2.3 trillion on health care last year, or more than 16 percent of the nation's total economic output, up from $243 billion, or 9 percent of GDP, in 1980.

Even though medical devices account for only about 1 percent of total health care spending, the government attributes a large chunk of the rise in costs to use of new technology and lack of reliable information on medical outcomes, quality of care and cost.

Speaking last year to the annual conference of the industry group Life Science Alley, Dr. Reed Tuckson, chief of medical affairs for UnitedHealth Group Inc., said the medical device industry tends to favor innovation over usefulness.

"No one can sustain the escalation of health care costs,'' Tuckson said. "There are lots of smart people here who take innovation and market it to people, so they want everything. But the innovations are more expensive than what they are replacing."

Last month, for example, Medicare declined to cover virtual colonoscopies, ruling that "there is insufficient evidence ... to conclude that screening CT colonography improves health benefits for ... average-risk Medicare beneficiaries.''

Investing in med-tech "used to be worth it," said Mark DuVal, managing partner of DuVal & Associates, a Minneapolis law firm that advises drug, food and device companies. "Should we still be in medical devices?'' he asked. "It's just not what it used to be."

And what, you might ask, are the implications of all this for the U?

Begin: rant

The people calling the shots at the U are the administration. And they are really not interested in what the faculty think about where we should be going. This is a fundamental mistake for which we are paying now and will pay in the future if this behavior continues.

Someone with a PhD in Ed Psych and a lawyer are not going to be able to make the kind of decisions necessary, especially when they do not have a technical background and are continually bamboozled by the people South of Washington Avenue.

We always seem - in our administration - to jump on something just at the point where it goes under. Because it takes our administration that long to recognize a good thing

Recall how Mark Yudof - and I love Mark Yudof - was considered to be a Hero of the Soviet Union when he pushed the cell and molecular biology business...

wtf? Faculty knew for years that this was the place to go. By the time we jumped on the bandwagon it was too late. Same for the vaunted translational research. I gather that our latest attempt to ladle gravy from this bowl has bombed and so-called improvements in personnel did not impress.

The thing about a university - as opposed to industry, and I worked at 3M for ten years - that gives us an advantage is that we can afford to take the long view. Of course this requires vision, foresight, and some TRUST in our faculty who know where the football is going to come down in a couple of years.

We SHOULD have been whacking away at nanotechnology in a serious way many years ago. Witness the bow to nanotechnology made by our chemistry chairman as he departs to be dean of science at Purdue.

We also have to walk the talk of being green. We need an almost evangelical fervor in this effort. We should use our skills in the IT area to produce and install wind, solar, etc. We should be doing serious work on green chemistry and what I will call agricultural chemistry.

Dr. Bruininks needs to have the Morris president down to talk about green things and how to lead in this area.

There are some damn smart faculty, students and staff at the U. We have shown in the past that we can innovate. We have a fantastic Institute of Technology and many great docs and researchers in the Academic Health Center. Why are we in such deep doo-doo?

You know my answer to this rhetorical question - less than stellar leadership.

Things are going to change quite a bit in this department in the next few years. For God's sake, let's make an effort to get some new, young, outside blood in here with proven ability to lead and to move things forward. Let's not make the same mistake yet again by promoting from within. Those responsible for making the present mess are not likely to clean it up in the future.

End: rant

Happy Father's Day to those appropriate!

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