What’s Working in Washington EXTRA is an opportunity for us to discuss an issue of particular interest to the region. We’re talking today about life science, biotechnology, medical devices, and how these industries are successful and well-represented represented here in the D.C. region. Joining us to discuss the growth of these sectors are two experts: Richard Bendis, president & CEO of BioHealth Innovation Incorporated, and Jeff Gallagher, CEO of Virginia Biotechnology Association, or VABio.

ABERMAN: Well, it’s absolutely incredible. We were all together three and half weeks or so ago, at a big industry dinner. I must say, I came away day thinking that there is, first of all, a big unspoken story here, which is that we’re one of the leading life science regions in the United States. I’m not sure how many people know that. Tell me a bit about the region. Rich, I’ll start with you. You’re in the middle of helping to build companies here. What’s your sense of what’s going on here?

BENDIS: Jonathan, first, let’s define the region. This region didn’t have a brand until a couple years ago, like Silicon Valley, or Route 128. So, AstraZeneca MedImmune decided to get a group of industry leaders together to say, how we brand this region? What differentiates us from other regions in the United States? And over a six month period, VABio, which was involved with Jeff Gallagher and a number of other participants, came up with a name: BioHealth Capital Region. And it’s Biohealth, not Biotech, it’s not life sciences.

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The reason we’re using the word BioHealth is that it best describes what the assets are within this region, and everybody in the world wants to be a biotechnology leading cluster. But do you realize how much money it takes to create a new MedImmune or a new Human Genome Sciences, or an AmGen? One and a half to two billion dollars. Biohealth, though, is bio, pharma, medical device, biomarkers, tools, healthcare analytics, hospital information systems, data analytics, mobile apps. So, if you look at that in spades in this region, between Virginia, D.C., and Maryland, we have all of that represented; but in this region, they haven’t worked together.

So, what we’re trying to do with the BioHealth Capital Region now, is to find a way for more collaboration, educate people about the assets and the resources that exist here, find ways to partner, eliminate the artificial geographical boundaries which we have, which are bridges and rivers, state and county and city lines, and find ways to have everyone utilize these assets for the best, to where we get the greatest economic benefit, and the best good, socially, to help patients within the healthcare industry.

ABERMAN: I’ll come back to the types of technologies in a moment, but Jeff, what’s your perspective, sitting as you are in Virginia, and leading one of the primary organizations in the region to promote the industry?

GALLAGHER: One of the fascinating opportunities we have here is, I think we sit, Jonathan, at this convergence of where technology is coming together. Digital technology, and the traditional life sciences, and medicine; folks’ sense of “let’s try to keep people healthy rather than treat disease.” And there’s a convergence, and a revolution, going on with how we consider this whole space. This whole space, which is at least twenty percent of the GDP. So, with a rush of technology, a change of frameworks, the openness, there’s a sense that those who are innovative, and who act on it, are going to be able to be the leaders of the next coming decades.

Plus, this is not just a local competition between states or districts, or even East and West Coast. This is a global competition. We work in our offices down in Blacksburg, or Richmond, or Bethesda, and there are people who are doing everything they can in Guangzhou, and in Berlin, to find the very same cures and answers. And people want them, people need them. We need these things urgently. What we have is, we’ve said the disruptive force of change, in a positive way, traditionally in this country, is brought by the private sector. So, this is a private sector-lead effort to say that the folks on the other side of the river from me, they’re not my competitors, they’re my strategic resources. They’re my allies, and that together, we can create a globally competitive region.

We have it in the individual firms, across the various disciplines that Rich mentioned. So digital and pharma, et cetera, by many of the firms in Maryland, and D.C., and Virginia. But remember, we are in a unique region, not just in the United States, but in the world. The center of public health is here. The center of the regulation of the medical industry. The FDA is followed by everybody. The USPTO, the most sought-after patents in the world, are ten miles down the road. So, everything that it takes to make real the promise of innovation for health, for your children and mine, and people all around the globe, all those ingredients are here, as they are nowhere else in the world.

BENDIS: To pick up on the statistics that Jeff is talking about there, we have over 800 companies within the biohealth industry within the BioHealth Capital Region. And he talked about public and private, as well as academic resources. HHS, headquartered in Washington D.C.. NIH has 27 different disease-specific institutes for research, with 6,000 scientists, and gets $3.1 billion dollars a year, annually, for intramural research, and that research is conducted right in the capital region here. They also fund, throughout the United States, another $27 billion dollars of life science, or biohealth research, throughout the United States, but it comes out of this region. Jeff mentioned the FDA, but also in the region is CMS, the center for Medicare and Medicaid Services.

ABERMAN: And that’s a big deal for reimbursement. If you’re not going to get paid, you can’t do anything.

BENDIS: You’re right. So, at the end of the day, if you want to do quality world-cutting research, you have NIH, plus you have Johns Hopkins, University System of Maryland, University of Virginia, George Mason, GW, Georgetown, in this region. And basically, between those academic institutions, you’re talking about another three billion dollars of life science research. And with the federal labs, also within this region, which we have counted 59, they get twelve billion dollars worth of federal research annually. So, if you look at the amount of money, which is unique to this region, we have over $15 billion a year, annually, coming into the region, it’s reproduced every year on an annual basis, which is not like any other place in the United States, or in the world.

ABERMAN: What I find really interesting about what you just described to me, Jeff and Rich, is that, if you both were software people, I would have heard exactly the same thing, which leads me to think that there is a particular model of D.C. innovation that we should, perhaps, talk about. Let’s do that after we take a break.

[Musical Interlude]

ABERMAN: Over the last few years, I’ve done a fair bit of research around the region, and I’ve concluded that many of our most successful software companies, and technology companies, are generally ones that benefit proximity to the regulators, from proximity to understanding where the world is going. I look at companies like Capital One, that grew in the credit industry because of their proximity to regulators. The wireless industry, Sprint Nextel, and I could go on from there. Jeff Gallagher, it sounded to me like the same thing is true for the biohealth industry.

GALLAGHER: That’s very much true, Jonathan. It’s a highly regulated industry, and it’s regulated not only by the FDA, but this reimbursement wall we talked about earlier, and intellectual property protection, which is so important. So, when I was running my little company, we’d shlep up to PTO to have a lot of little meetings. It took me an hour and a half from Richmond and back. And, if you’re in greater Washington, in this BioHealth Capital Region, you can get over there and back, and have a lot of small, intermediate step meetings, and have a much better relationship with the regulators. Same with the FDA.

The one that is paramount today, really, and not thought of much, though, is the reimbursement, as you mentioned earlier. We have a phrase that innovation ends up as the mosquito on the windshield of CMS, so many times. And it’s because innovation moves so fast, responding to needs with this technology convergence I was telling you about, but the system, the governmental system for allowing regulation in Medicare, and then privates follow that, and down at the state level in Medicaid, that is so much more slow. So, you can have a new therapy or a device, which is, even if it’s going to slash the ultimate cost of treatment to that person, in the system, it doesn’t have a reimbursement code. And it’s a cumbersome process to do that.

Well, we, and others, are working all the time on trying to create a new system within CMS, or at the state level. A system which is more open to innovative co-development, for example. And, to your point, where in the world are you going to find the sophisticated, nuanced, experienced expertise of people who are going to be able to crack this really big problem, than in the greater Washington area?

ABERMAN: What you’re talking about, as I recall from the life science companies that I’ve worked with, is that’s there’s basically three big regulatory hurdles. One is, you want to get a patent, for distinctiveness, because this is often hard science. This isn’t Facebook for cats. This is hard, and you want to protect it, and it’s amenable to patent, and that takes time. Second is, if you’re going to be doing something that’s going to have an effect on somebody’s health, the Federal Drug Administration will have an opinion about it, and there are various processes that you have to go through.

And the third is, you talk about reimbursement, the issue is, fundamentally, the largest concentrated healthcare market, aged people, Medicare, and also Medicaid, both of those programs, you don’t get repaid for providing something unless it falls within what you call a reimbursable code. You can’t just wake up one day, drink a bunch of Red Bull, and start a life science company, right Rich?

BENDIS: That’s true, Jonathan. As we stay on this theme a little bit, what difference differentiates the BioHealth Capital Region is, people from Boston and San Francisco have to come to this region to interact with the FDA. They have to come to this region to, basically, do quality research at the NIH. They have to come to this region to evaluate the pricing of their new technology or service that they are going to provide, which they hope can be reimbursed by Medicare or Medicaid. If it doesn’t get reimbursed, then, probably, you’re not going to get an investment from a venture capital firm, because they will prove that you don’t really have a market for your product if there’s no one to pay for it.

So, at the end of the day, all of these people have to get on airplanes, to come and interact with all of these things we take for granted in our region. Whereas we get on the Metro, we get in our cars as Jeff was saying, and drive up. We can interact with all of these agencies, which have an impact on the future of our businesses—small companies, single-individual entrepreneurs have the ability to interact with the FDA. They’re willing to meet with people. You don’t have to be intimidated by them. They open the doors, and they will give you advice on the direction to go.

Same thing with the CMS—they will do the same thing. So, I think we underestimate the power of our region that we have in the BioHealth Capital Region. And all the other people realize that they have to travel to us in order to progress their technology, their science, or their product, to get it into the marketplace. We need to promote that more here, Jonathan.

ABERMAN: Which is why, in part, MedImmune and others have come up with this brand we’re all now using, the BioHealth Capital Region. It’s about promoting the unique aspects of this place.

BENDIS: That’s true. The other thing is, every cluster in the United States, or the world, it used to start off by trying to be the number one biotechnology cluster, and every state created a biotechnology program. Now that every state has one, guess what? There’s only four or five or six regions in the United States that have the assets to truly become a taught performer within the biohealth industry, as we position it. So, currently, we are ranked number five out of the top regions in the United States, on all the metrics people use, which would relate to funding, research, education levels, companies, jobs, in the biohealth industry.

Our goal that we determined for this BioHealth Capital Region, with the help of AstraZeneca MedImmune, is to be a top three by 2023, which means we have five more years, and we want to grow two more spots. Right now, you’ve got Boston, San Francisco, you’ve got San Diego, New York, and Research Triangle. We think, and we know, we can definitely pass Research Triangle and New York, and we will be a top three reach in the United States in five years.

ABERMAN: Now that we’ve laid down that gauntlet, Jeff Gallagher, it seems to me that one of the distinguishing characteristics that both of you touched on earlier is that biohealth is no longer just working on the cellular level, biotechnology, or working with chemical compounds, pharmaceuticals. It’s much broader. It’s software, and other different things. Is that what gives this region a particular advantage?

GALLAGHER: Yeah, it gives it a great advantage. Let me just throw out one example, a company that I know well, which is over in Northern Virginia. Vibrant Health recently, two years ago, was awarded a large grant from NIH to build out a portion of the IT platform which is going to support the All Of Us program. The All Of Us program was President Obama’s precision medicine initiative, a million-cohort study, which will be longitudinal.

Vibrant was asked not to build out the electronic health records, nor the bioinformatics, which exist, but to add the third leg of the stool, which is going to be necessary with the kind of research and medicine that we want to practice going forward, and that is the mobile data, the digital data, the lifestyle data, the environmental data that comes in through the phone. It comes in though thirty different kinds of phones, or the sensors on your clothes, or your watch. They’re building that out to bring it in, and to integrate all those data together, and it’ll will be the framework by which, really, the data of the future, by which we will determine interventions for our health, and treatment of our sickness, is going to be put together.

They’re setting standards for the globe right now, and it’s that intersection of digital, and mobile, and health, and of course, you look down the Dulles corridor, and you look across the river into Maryland. There’s company after company that cannot only capture, they can massage and manage and make sense of that data—that’s where we’ve got an extraordinary advantage.

ABERMAN: This has been such an exciting conversation so far. I know so many really interesting companies here in the region, and I I’d like to hear about one or two more of them after the break.

[Musical Interlude]

ABERMAN: Rich, give me another example of a company that is indicative of how you see this region growing biohealth companies.

BENDIS: Jonathan, one of the companies that I was not familiar with, that I drove by almost every day in Rockville, Maryland, is the Emmes Corporation. It’s a clinical research organization that has performed work on over a thousand clinical trials for every major pharma company in the world. They’re located in Rockville, they have 600 employees. They’re hiring fifteen people a month—and guess what kind of people they need. They don’t need research scientists.

They need data scientists. They need data analysts. So, when we were talking about convergence, and biohealth rather than biotech, data is extremely important, and everything that we do, whether it’s in a healthcare system, whether it’s an pharma company, whether it’s a medical device company, and that data has to be analyzed, so that it can be utilized to get products into the marketplace, branded appropriately, priced appropriately. That’s what the Emmes Corporation does. And Anne Lindblad, a female CEO within our region, would be another great guest for you someday.

ABERMAN: Well, I hope to get her some day. She’s a great example of a entrepreneur, somebody who’s been here for a while, doing various things, and exactly what we’ve talked about many times, the quality of the talent. So, we talked about, so far, the industry, business aspects, regulatory and so forth. Jeff Gallagher, there’s another big part of the sequence that’s really unique. The academic part, right? Tell me about that.

GALLAGHER: Looked across the entire region, the two states and the District. There are many extraordinary universities. Many of them participating, really, at the top of the nation in biomedical research already, and others on the way there. Really two strategic things, if you will, about the universities and how they play into this vision of the BioHealth Capital Region. Number one is, I think it’s fair to say, and I would say it to the face of our sisters and brothers in academia, that we have to help them learn how to bend their behavior to collaborating with industry better, and really collaborating with one another better.

The great opportunities, the transformative opportunities in science and research, are ones no single institution can do anymore. And so, these large-scale collaborations to meet the great unmet challenges, are where we need to go to take that lead up. The other thing I’d say is, at least from the Virginia perspective, Johnathan, I think it’s fair to say that, out of the five major research universities in Virginia, of course one is up in Northern Virginia, Mason, but the others, it’s part of each one of their strategic plan to play more actively and have a greater presence in the Greater Washington Area.

Some are building campuses, some are making collaborations, say UVA with the Inova Center for Personalized Health. Each one of them sees that, without giving up their unique identity, where they are, and their history, tradition, et cetera, that they need to be here, because they’re plugged in. Plugged in to the opportunities, both in the private sector, the government, and with other research universities. So, those are the two big trends.

ABERMAN: And again, I could point to the same thing happening in, say, cybersecurity, with new initiatives around creating more cyber centers, with other universities coming to the region. This is clearly a very interesting time, and exciting time, for the region, which leads me to the last thing I want to ask you about. There’s an opportunity coming up for all of us to get together and learn more about this industry, and really start to drive these companies forward to get to that top three goal that you and the other leaders in the region have set.

BENDIS: Traditionally, Virginia would have conferences, D.C. might have a conference, Maryland might have a conference, but we didn’t do anything to get everyone together. About four years ago, there was an idea that was put forth of having a BioHealth Capital Region Forum, and not have it as traditional service providers, but have CEOs, and C-level executives come to talk about the state of the industry, and meet one another.

So, on April 23rd and 24th, at MedImmune, we are going to have about 1000 people, over those two days, talking about the big issues and big opportunities for the BioHealth Capital Region, and it’s an annual event getting all of these people to talk to one another, and a lot of business occurs at this event, because people didn’t know what other people were doing within the region, and it’s an opportunity for each other to develop new client relationships as well.

ABERMAN: Jeff, any quick comment on that?

GALLAGHER: Just that the very first time that we did this, people looked around at one another and said, “I didn’t even know you existed.” And now, we’re at a point where we’re building an agenda, and people are looking forward to it, because, “hey, let’s drive the region forward in this way: A, B, C and D.”

ABERMAN: What I love about this, fellas is that, ultimately, this is like the MetroNow Initiative, or similar things that are going on regionally, where the business community has taken the mantle to say, “you know what? we are a leader—let’s lead.” I love this story, and I’m looking forward to seeing you at this conference. I’ll be there, too. I encourage everybody listening: if you want to get to know, or be part of, one of the most important industries in the world, and an industry that we actually have a leading position in, you want to come and be part of this community.

With that, I want to thank my guests, Rich Bendis, CEO of BioHealth Innovation, which is a leading innovation intermediary for the healthcare industry in our region, and maybe in the United States; and Jeff Gallagher, CEO of the Virginia Biotechnology Association. Gentlemen, this was a really fun What’s Working in Washington EXTRA. Thanks for joining me today.

GALLAGHER: My pleasure.

BENDIS: Thanks, Jonathan, and remember: top three by 2023.

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