Leveraging ‘unnatural partnerships’ for innovation success

10/19/2010 - The age of new blockbuster drugs whose research is easily financed through one-on-one corporate-university partnerships is essentially over, former U.S. Rep. Dick Gephardt told a roomful of fellow innovation leaders at the fall gathering of the Kellogg Innovation Network.

The more targeted prescriptions growing out of the Human Genome Project need a new economic model to be feasibly developed, Gephardt explained.

“If you look at the cost of drug research, you see that the [existing] economic model doesn’t work,” Gephardt said. “The problem with talking about a collaboration between private companies is very simple: It’s called intellectual property.”

Gephardt’s talk headlined the Kellogg Innovation Network’s fall gathering, which explored the theme, “Leveraging ‘Unnatural’ Partnerships for Innovation Success.” Those partnerships can include university-corporate partnerships and others where ideas and commercialization prospects are plentiful.

Gephardt, who chairs the Council for American Medical Innovation. said that given the billion-dollar-plus costs of translational research and the 90-percent failure rate in new drug development, companies will need to pool their efforts on new drugs on a larger scale.

To help move this effort forward, the Council would like to see “more robust” public incentives for innovation through tax credits, reform of approval processes for new drugs from the federal Food and Drug Administration, and greater funding for translational research from the National Institutes for Health, which received a $10 billion shot in the arm from the federal stimulus package passed in 2009.

“There’s real ferment within the industry and between industry and government to bring this about,” Gephardt said. But some in the scientific community oppose using NIH funds for anything beyond basic research, he said, while some in the pharmaceutical industry “see translational research as their area.”

Gephardt compared the consortium to one he championed as a congressman in the 1980s, called SEMATECH, that joined semiconductor companies on “neutral ground” and operated as a public-private venture from 1986-96 before going all-private. “What I’m describing is rare,” he said. “But when it applies, it really applies.”

A panel of KIN fellows moderated by KIN founder Robert C. Wolcott hashed through the set of issues that Gephardt raised. Wolcott described the dilemma by noting, “Knowledge is social. It atrophies in isolation. But profit is proprietary.”

Panelist Jorn Bang Andersen, senior counsel to the Nordic Innovation Centre, strongly suggested that any such collaboration not be entirely government run, citing a SEMATECH-like effort in Europe that was public sector-driven — and did not work well. “It stifled the market, and cost European taxpayers billions,” he said.

Panelist and alumna Blythe McGarvie ’78, CEO of Leadership for International Finance, said the private sector would like to work with government to ensure that existing research and development tax credits don’t sunset.

Gephardt responded that it’s very unlikely that will happen — but because of the “insanity” of the budget process, the issue never quite seems to go away. “R&D will never be extinguished, but the private sector … can’t bet on it,” he said.

The panel on medical innovation and the conference’s overall theme were developed in response to issues cited by KIN members, who are mostly innovation leaders and leaders at large, global companies. That’s typically how the twice-yearly dialogues come together, Wolcott said after the event.

“When I hear a topic come up multiple times, I realize there is some serious need and interest there,” he said. The “unnatural partnerships” concept arose “from hearing global managers talk over and over about creating partnerships between groups that would not naturally work together,” Wolcott added. “Big companies and small companies. Government and business. Competing companies.”

KIN dialogues focus on provocative issues with an array of participants who might not normally interact, Wolcott said. “We facilitate it and then say, ‘How does this relate to you? How can you transfer and translate some of the insights?’” he said.