Health Affairs, 25, no. 3 (2006): w104-w113 (Published online 14 March 2006) doi: 10.1377/hlthaff.25.w104 © 2006 by Project HOPE	New Online   McAllen, TX & Beyond: An Expert Roundtable   Geography & Reform   Medicaid or Insurance Exchange?   Siren Song of New GME   Public Plan Option: Pro & Con

This Article Abstract Full Text Submit a response to this article Services E-mail this article to a friend Alert me to new issues of the journal

I N T E R V I E W :
M A N N  &  C O Y E
 
14 March 2006  
  

Confessions Of A Serial Entrepreneur:
A Conversation With Alfred E. Mann

A physicist turned medical-device inventor reflects
on the benefits of technology innovation in a health system
that is poorly prepared to cope with costs and deployment.


by Molly Joel Coye


ABSTRACT:

In this wide-ranging interview, Alfred Mann describes the activities of several medical technology enterprises with which he is engaged. Several of them are companies that he formed; one is a nonprofit foundation, the Alfred E. Mann Foundation for Biomedical Engineering, founded to establish research-oriented institutes on a dozen university campuses and support their work in developing marketable innovations. Mann discusses the need to consider the cost implications of technology, in the context of U.S. health system reform, and describes several important innovations that have emerged from his companies over the years. [Health Affairs 25 (2006): w104–w113 (published online 14 March 2006; 10.1377/hlthaff.25.w104)]

Molly Joel Coye: Dr. Mann, you are well known as a multibillion-dollar serial entrepreneur, having founded and led a number of successful companies focused on different clinical problems, including cardiac pacemakers at Pacesetter Systems and insulin pumps and glucose sensors at MiniMed. You currently hold the position of co-CEO of Advanced Bionics, which develops, manufactures, and markets cochlear implants to treat profound deafness, and implantable neurostimulation systems for pain, spasticity, and other indications. Is there a business model that is key to successful entrepreneurship in medical device development? You have had a remarkable career, and we’re very curious to understand your business proposition as you initiate these different enterprises.

Alfred E. Mann: My basic strategy is to try to find a market that is underserved, where preferably there are few competitors—maybe one dominant company—because usually in such cases the technology is easy to trump. So the idea is to look for a market where a clinical need exists and then build a better product—a better mousetrap, so to speak.

Challenging Dominant Technologies

Coye: That’s a fascinating point about entering a market led by a dominant company, because it fits with the Christensen argument made in The Innovator’s Dilemma, about disruptive technologies—that it’s easier to come in unsuspected from the periphery of a field with something truly innovative. Can you tell us about one of these companies, describing the dominant technology and how it challenged accepted wisdom?

Mann: Let me give an example. In Advanced Bionics we were producing a cochlear implant, and the business was moving along very nicely, but I felt that for the company to remain strong and independent, it needed to diversify. And so we began to look at other places where we could use our technology a little differently. We reasoned that a cochlear implant is, after all, the most sophisticated of all neurostimulators. So we looked for neural markets that we felt were underserved, and we decided that spinal cord stimulation could be an interesting opportunity to pursue. This was a market dominated by one company, where the technology was not meeting market needs. And it was an area where we felt that if we could come up with disruptive technology, we would change the marketplace.

Of course, we performed our due diligence, speaking to the clinicians and evaluating the obstacles such as intellectual property to make sure that there was room. In that case, we looked at some 2,300 patents and narrowed it down to 800. Then we narrowed that down to about 100 and studied them very carefully. We decided that the market in spinal cord stimulation was one we could pursue. So we put a team together and developed what is really a disruptive technology. In the first year in a business that doesn’t change very rapidly, we captured about 25 percent of the market.

Coye: Can you explain the function of neurostimulation in more detail for Health Affairs readers?

Mann: In spinal cord stimulation, what you’re trying to do is mask the pain signal. If you have, for example, pain in your leg, your leg sends a signal to your brain, and your brain says that your leg hurts. You feel the pain, and while you recognize it as being in the leg, the signal itself is really recognized in the brain. In treating the pain, the physician stimulates the spinal cord at a location in the spinal cord along the conduction path of the pain signal going to the brain. A neurostimulator “jams” the pain signal much like can be done to a radio signal. So when a signal gets to the brain, the brain can’t recognize it and thus ignores the signal—it recognizes it as sort of parasthesia. The patient feels a cooling sensation, but the pain is masked.

The major problem with the existing spinal cord stimulation technologies was that it was difficult to identify the particular location to best stimulate to get maximum relief. So we came up with a technology that enables doing that very well, and very rapidly. As as result, patients do much better. We also made the device rechargeable, because some patients with the competitive implanted devices needed replacement surgery every year or two; and the devices rarely lasted more than three or four years. We produced a device that delivered better outcomes and that could last essentially a lifetime.

Cost Considerations

Coye: That’s impressive. Let’s move on to a tougher set of questions. Rising health care costs consume 16 percent of the nation’s economic output—the highest proportion ever—and there is continuing debate within Congress about the reasons for this. Beginning with the high cost of pharmaceuticals, do you have any comments on this issue?

Mann: This is a serious problem, but it has been created, frankly, more by our government than by anything else, driven by the hurdles of getting a drug to market. It typically takes ten to twelve years or more from the time the initial discovery is made to the time that the product is commercialized. The patent life is only twenty years from filing for that initial discovery. So companies have only maybe eight years, more or less, before the patent runs out, to recapture their investment in development costs. Now, due to generic availability, the developing basic research companies who have created these drugs have to recover their investment in only a few years. And of course, since only a small portion of drugs that enter the development cycle become successful commercially, companies even have to cover the costs of those that fail. Companies that manufacture generic drugs don’t have that problem, since they only copy and manufacture the successful drugs and do not shoulder any of the development costs. But they don’t price their products according to cost; they simply discount the existing prices. Generic drug availability has caused enormous escalation in the cost of new drugs.

Drug And Device Approval

Coye: What about the pricing of devices? Devices traditionally have been allowed into the market in Europe earlier than in the United States. Has that been your experience?

Mann: Historically the regulatory approval process for devices in Europe has been more rapid than in the United States, although it’s getting a little tougher than it used to be. There seems to be an effort to harmonize regulatory processes around the globe, particularly in Europe and the United States. This is making approval a somewhat more challenging task.

Coye: What are some substantive reasons why approval in the United States should take longer than it does in Europe?

Mann: It’s because of the difference in regulatory processes used. In Europe you essentially have independent companies that contract to do the regulatory review of devices. And that happens relatively quickly, because they do it a totally different way than here in the United States. I’m not sure that we should change the system we have here, though. I think that it works pretty well. I think that the drug review process is a lot more difficult than the device review process. The device program, I think, runs reasonably effectively, and it isn’t outrageously costly.

Coye: How prepared do you think the FDA [U.S. Food and Drug Administration] is for hybrid, or combination, products that are going to cross over between devices and biotechnology or pharmaceuticals?

Mann: Some of the things that I’m involved in today are combination products. Depending on the primary mode of action, the regulatory process for a drug-device, drug-biologic, or device-biologic product begins with assignment for regulatory evaluation by the new Office of Combination Products to one of the three product centers such as CDRH [Center for Devices and Radiological Health], the device agency. At MiniMed, the approval process for our implantable insulin pump was managed by the device center, but they sought input from the drug side of the FDA. At MannKind [Mann’s biopharmaceutical company], we have a technology especially valuable for treating type II diabetes, which is managed by the drug side, but the device side provides some advice and counsel.

Coye: Do you believe that the FDA is doing a good job of negotiating through the combination or hybrid products?

Mann: It’s not easy, and the restrictions imposed by law don’t always help. The agency faces some limitations, and although it’s not simple, they’re attempting to accelerate the process. I had a discussion with Janet Woodcock [FDA deputy commissioner for operations] a few weeks ago. They have a program now where they’re trying to make a real difference in accelerating the approval process, on the basis of more modern science, rather than the tenets that were in place thirty or forty years ago, when these regulatory processes were initiated.

Coye: Let’s talk about some of the proposals for changing the phasing of trials—particularly drug trials. There is much discussion about expanded postmarketing [Phase IV] requirements for data acquisition in order to better understand applications in distinct populations and for varied indications. Do you think that this kind of change is a good idea?

Mann: If there were an increase in Phase IV clinical trial requirements, including more market surveillance in return for a decrease in the follow-up requirement of Phase III trials, that might make sense. But if we simply demand additional market surveillance following commercialization, we’re just going to continue to escalate the costs.

Balancing Costs And Innovation

Coye: Most experts agree that the most important challenges facing our health care system are rapidly increasing costs coupled with the rising number of uninsured people. Medical technology is one of the major drivers. How can our society balance innovation with seemingly uncontrolled cost increases, and what is the responsibility of medical device manufacturers to hold the line on costs?

Mann: We have to look at a more basic question: How does our society deal with the change in Americans’ life expectancy? When Social Security was passed, life expectancy was around fifty-two years, and there were twenty people working for every person on Social Security. Today life expectancy is around seventy-nine years, and the ratio of workers to retirees is approaching three to one. That cannot work. We keep trying to apply quick fixes to the system, but a quick solution will not address the fundamental issue. At some point, the people in government need to recognize that the only solution to Social Security and health care costs is to raise the retirement age; however, this is not politically acceptable. People are living longer, and as they do, their health care costs go up. We’re curing people now of many diseases and returning them to society. Each time we do this, it raises costs.

Coye: You seem to imply that the answer isn’t to limit the pipeline of technologies, but rather that everybody will have to keep working in order to afford them. So my son is going to be working to support my devices as I get older. Is this the future that you envision for us?

Mann: I don’t see another solution, frankly. Just shutting off the pipeline is not the solution, because this will, in effect, shorten people’s lives, or they will desire to die younger, because their quality of life will be reduced.

Coye: In addition to the obvious problem of having to finance the cost of care—not just for baby boomers but for all age groups—we also have the problem of access to care. Many of the products and devices that you have developed are a tremendous boon across all age groups and economic strata. Some devices clearly make access to care more affordable by bringing down the cost of monitoring chronic diseases. Conceivably, some of these devices actually do make diseases more manageable, even for people without a lot of resources. Is that an important criterion that should perhaps guide some additional funding for innovation?

Mann: The ever increasing number of Americans without insurance is a serious problem that needs to be managed effectively. One aspect that is not considered is the overall costs of the disease. For example, at Advanced Bionics, we make a cochlear implant that restores essentially normal hearing, even to the profoundly deaf. So if a cochlear implant is implanted in a young child, say by the age of one, the implant, surgery, hospitalization, audiology, and follow-up care for maybe twenty years will cost about $60,000. Federal law mandates that a deaf child have access to a school for the deaf. The cost of this schooling varies from state to state, but on average it costs somewhere near $500,000 extra for kindergarten through the twelfth grade. If one compared the $60,000 cost of the implant with the $500,000 cost of education, one would decide to provide cochlear implants. And of course this is just economics; it does not address the increased quality of life for the child. But we don’t even have this discussion, because the money must come from different sources—although ultimately from the public.

Coye: Earlier you stated that we should look at the whole span of an illness, whether it’s a lifetime or an episode, and the savings that could result if we fully deployed some of the innovations that already exist. This would seem to be a sensible use of resources. Can you give some examples from your companies?

Mann: MannKind Corporation is a biopharmaceutical company with two divisions. In one division, our key product is for diabetes. Injecting insulin is the most effective way to manage diabetes, even type II diabetes. Of course, compliance is a problem, since insulin today is injected, but people don’t like injections. There also is a huge risk of hypoglycemia with insulin therapy. A whole host of other drugs are coming to market; many are on the market already for use in type II diabetes. Some drugs force the pancreas to produce more insulin, and some try to lower the body’s resistance to insulin that develops especially in type II diabetes. There are other drugs coming that do other things, like trying to stretch out the digestion period for a meal. They are all trying to address the limitations of current insulin therapies.

Over the last decade or so, there’s been growing interest in what is called pulmonary insulin delivery, where people breathe in a powder or an aerosol of insulin into the lungs. The lungs have an enormous surface area—the size of a tennis court, if you stretch it all out flat—and are designed for transfer. So there’s a lot of opportunity for delivering drugs through the lungs. If we could eliminate injections, people would be much more interested in insulin therapy. The first of these therapies was just approved—a drug called Exubera, delivered through an inhaling machine that’s about the size of a standard bottle of wine. It has been developed by a company called Nektar Therapeutics, and it’s going to be marketed by Pfizer primarily. This is a fine product, but it doesn’t do anything more than what existing fast-acting insulin analogs do, and it has all of the same risks—even a little more hypoglycemia risk than some other therapies.

At MannKind, we are working on a therapy to deliver insulin that is unique because it’s so fast. This therapy requires no dose adjustment for meals, produces normal or even less-than-normal excursions after a meal, and has essentially no risk of severe hypoglycemia. In addition, the delivery device is very small and light—it easily fits in the palm of the patient’s hand. We believe this device will facilitate compliance. We have studied this system in quite a few people. We’ve seen absolutely no weight gain so far in any of our studies, and we’ve seen no effect on lung functioning, either. This is a simple therapy that can be managed by general practitioners, because it has virtually no risk. We believe that it will provide significant value to the diabetic population, and to our shareholders as well.

Coye: This could be a real contribution. But what about cost?

Mann: The cost of dealing with diabetes in this country was estimated to be $132 billion in 2002. That doesn’t include some of the costs of maybe 40 percent of cardiovascular disease that is traceable to diabetes. And it doesn’t include the forty-one million people with pre-diabetes or metabolic syndrome. So we’re talking about an enormous cost to our country. If we could only control diabetes, we could save more than $100–$150 billion a year, and in the process create a far better quality of life for many people.

Aspects Of Entrepreneurialism

Coye: You have achieved remarkable results with a whole string of companies. I think that “serial entrepreneurialism” is a good term for it. Let me ask about the short-term focus of Wall Street, because you’ve sold a number of companies and have taken others public.

Mann: I’ve taken two companies public, and I’ve sold seven. I actually founded all but two of the fourteen or fifteen companies that I’ve started.

Coye: Wall Street’s demands on public companies for increasing profit rates and the need for predictable, full, and visible pipelines dictate that the capital formation process have a short-term focus. But what is the effect of this on resource allocation for developing medical device technology?

Mann: It’s a major challenge, because the larger companies have such a short-term focus, and this is dictated by the expectations of Wall Street for progressively increasing profits every quarter. How is a company that’s, say, doing $10 or $20 billion a year, going to grow at double digits every year? It’s very, very difficult. And so these companies tend to look to acquiring later-stage development programs. They’re not really interested in acquiring early-stage products. The venture capitalists have so much money in their portfolios now that they can’t deal with the management requirements of very early-stage programs, either. So now many of the early-stage ventures are funded by angel investors who usually don’t really understand the business; they are often friends who don’t really know how they can help, and perhaps can’t even help.

At least the venture capitalists have experience that can guide young companies. One of the major challenges is that most early-stage companies that are initiated fail. They encounter what they call the “Valley of Death,” trying to get a product from the basic technology to a product level. In our current system, the process does not work well.

New Institutes

Coye: We are all aware that a huge amount of investment capital is perched in the wings, looking for investments, and that it has been very thin pickings for investors. You have recently committed over $1 billion of your personal resources to a new philanthropic foundation, the Alfred E. Mann Foundation for Biomedical Engineering, to create twelve industrial product development organizations devoted to the life sciences. These institutes are being established on the campuses of elite research universities with staff including product development engineers and scientists from industry and academia. Are the institutes setting up a translational research capability to prepare products for commercial development?

Mann: Not really research. What I’m doing is setting up, in effect, an industrial development team on a university campus that selects various projects that it is capable of dealing with and for which it has the resources, interest, and commitment to perform. An institute will develop, say, a device perhaps through the clinical trials, or a drug through Phase II, because drug trials are so costly. At this point, when the institute has created a product and proved its value, the product will get licensed out to either an existing or a start-up company. That will generate a much better return for the university and for the inventor, and it can bring important technologies to the market that would perhaps never make it otherwise. In fact, that’s why I’m creating these institutes: to try to take the basic intellectual property from universities and translate it into success.

The plan is to create an industrial development organization—not academics; these are people from industry who have had experience developing products. They will be housed on or near the campus and will have access to the university’s intellectual property. There will be a limited number of projects because, with a $100 million endowment, you can’t do a lot. But they will follow a process like that I just described. The purpose is to get products across the so-called Valley of Death—to realize more of the value that exists at later stages.

Coye: How do you think this will work, once a center develops one or two products and gets them licensed, and the products enter the market? Will this be a revolving loan fund, in a sense, with a return to the institutes that will keep generating the capacity for continued funding and work?

Mann: Oh yes. A share of the income that comes to the institute from a successful product goes to the inventor, who gets a smaller portion than from the university, but probably a much higher amount than he or she would get otherwise. The balance is divided between the institute, the general fund of the university, and the funding foundation. The purpose for having a small part go to the funding foundation is to enable concentration on very important projects that may exist at one institute as opposed to another, and to encourage collaboration. The idea is to try to create a perpetual endowment that will continue to fund these activities into the future.

I’ve had a bit of experience with this; in 1985 I created the Alfred Mann Foundation—a freestanding foundation that has generated products that are providing approximately $210 million in return to the foundation, which is more than double my initial endowment. I hope the university-based institutes will do as well.

For example, one of the exciting things that the foundation has developed is a complete neurostimulator that is not much larger than a grain of rice. It actually does more than some of the existing neurostimulators do that are fifty or a hundred times as large. This little neurostimulator is inserted without surgery and is rechargeable.

Coye: The Alfred Mann Foundation developed this?

Mann: Yes, and it licensed it out; the product is being manufactured by Advanced Bionics, which is now part of Boston Scientific. This company is using these “bions” for migraine headaches, urge incontinence, and several other applications. The foundation is enhancing this technology so that these devices will be able to “talk” to each other. We have now implanted a preliminary system of half a dozen bions in six people in England who are hemiplegic from stroke. They are able now to move their arms and their hands—maybe not normally, but they can function with their limbs. The most exciting thing, to me, is that two of the first four patients, who’ve had the devices now for several months, had been paralyzed for years but have retrained their brains and are now operating without stimulation.

Starting A Company

Coye: You’ve mentioned several times the two emerging-stage companies that you’re most involved in now, Advanced Bionics and MannKind. I expect that after many decades of working in this field, you did some things differently in starting these companies. What did you get to apply in MannKind or Advanced Bionics that you didn’t, perhaps, in your earlier companies?

Mann: MannKind is quite different from my earlier endeavors because it’s a pharmaceutical company, and this was the first time I have ever moved into what is truly a pharmaceutical environment. A couple of years ago I was being interviewed by a magazine reporter, who asked me, “For most of your career you’ve been involved in medical devices. Why now have you gone into a pharmaceutical venture?” And I answered him, “If you had a chance to play a role in curing cancer, wouldn’t you want to be involved?” And that turned out to be his story. The problem, though, was that MannKind was about to go public, and the SEC [U.S. Securities and Exchange Commission] doesn’t like this kind of prior publicity.

Coye: In the quiet period.

Mann: Yes. Fortunately, we got through it, but it was a bit scary for a while.

Coye: So what cancer pharmaceuticals are you developing?

Mann: We’re working on therapeutic vaccines, and we are doing things quite differently. This is not something I invented myself, because a lot of the companies I created, I founded and got them moving in one direction or another. In this case, when I was at Mini-Med, some people came to the company needing a pump for a cancer vaccine program. We had a team that evaluated these kinds of requests. They investigated it, and the team was pretty impressed. One of the three guys involved in this project is a Nobel laureate. He was perhaps the father of what has become therapeutic vaccines. People began to look at therapeutic vaccines as the best answer for cancer because, after all, if you get one’s immune system to kill a cancer cell wherever it is in the body, wouldn’t that be a better solution? But the early results weren’t so good: 15–20 percent of the people responded, but there were not many cures. And so investigators lost interest; they got frustrated and started looking at other approaches. But this new team felt that they had figured out what was wrong.

When I heard about the project, I looked into it, and I told them, “You don’t only need a small amount of money to do this test—what you need is a partner.” We decided to invest in their company, and we worked out a deal that involved a whole series of milestones—a little bit of money at each step of the way. I took it to my board of directors, described the opportunity, and told them of all the financial arrangements. One of my board members, who is very experienced in biotech, said, “Cancer? Cancer is a rat hole. It’s a sink for money. People are throwing billions of dollars at cancer, and nobody’s won.” Remember, this was seven or eight years ago—so this statement might have been more true then than it is now. There was a brief board discussion, and then a vote. The president and I voted yes, but the other seven members of the board voted no. I was furious. So I went through it all again, and I said, “Look, we can afford this. To say that we can’t do it because other people have failed is not good enough for me.”

I said, “People have tried for decades to build a continuous glucose sensor, and everybody’s failed. But we’ve done it, and it’s going to be a billion-dollar product for this company.” So I asked, “Why is this different? If you said, ‘Go get me a team of experts,’ and if this team of experts looked at it and said no, that I’d accept. But to say we can’t do it just because other people have failed, that I won’t accept. I want you to reconsider. But if you won’t let the company do it, I want you to let me do it.” And so there was a brief discussion, and one of the directors said, “Will we still supply the pumps?” I said, “Of course.” So they said, “Go ahead—you do it.” That was how I got involved in this thing. I was very impressed with the work that was going on. And we’ve done some remarkable things since. I’m very excited about it, but there’s no guarantee. Therapeutic vaccines are tough, but we have created a more significant response than anybody’s ever done before. We have actually marshaled more than a million times more T-cells. We had earlier done some small trials in melanoma using single antigens, with some remarkable results. But we couldn’t really make any claims from those trials. Based on several changes in FDA regulations, we were able to return to the lab and have now created four antigen vaccines. We still have almost another year to finish all of the preclinical tests, but we’re going to start trials on vaccines for five cancers beginning later this year.

Coye: Including melanoma?

Mann: Yes. We’re going to start with ovarian cancer, although we are probably going to address a more broad scale, because one of our vaccines will work on several cancers.

Developing Marketable Products

Coye: Let’s go back for a moment to the universities where you’re placing your institutes, and university research in general. Research at the best universities is very good of course, but you’ve noted an interesting pattern: The federal government spends about $41 billion on the research budgets for these universities, yet the same universities receive only about $1.4 billion a year from licensing fees, and $1.1 billion from royalties for sales related to the original research. Why are research expenditures by these top-tier institutions so much greater than the income generated?

Mann: You have identified precisely why our new foundation is creating these new institutes: because academics and even the technology-transfer people at most universities do not understand how to develop a basic technology into a product. That is, again, why they call the process the “Valley of Death.” The whole idea is to bring people in who know how to develop products and have them create a product from the basic technology. There’s no excuse for having a 5 or 6 percent return on investment. At the Alfred Mann Foundation, we’re looking for well over a 25 percent per year return on investment.

Coye: The federal government also invests substantial amounts in DARPA [the Defense Agency Research Projects Agency] and other major research laboratories, such as Sandia National Lab and Lawrence Livermore Lab. For decades they have pioneered some of the most exciting research in clinical medicine information and communication technologies. But their researchers are often frustrated that so few of their findings have been developed for commercial markets. Have you considered harvesting some of this very good research?

Mann: That’s a fascinating question; you’re very perceptive. About a year and a half ago, I was asked to give a talk at what was called a Presidential Forum on my technology-transfer concept of creating these institutes. It sort of caught fire among some of the people from the government who were in this meeting, and they are now talking to me about creating one of my institutes at the National Institutes of Health [NIH]. The only problem is that they spend more than $3 billion just for intramural research at the NIH, and I don’t think $100 million is going to be enough. So I’m trying to figure out how I can build up a large enough endowment to make it work at the NIH.

Coye: Most of the products that your companies have brought to market have taken off pretty quickly. It sounds like they found a large market and have been successful. Some innovations are clearly beneficial but don’t take off quite so quickly—chronic disease monitoring devices, for example. They are relatively inexpensive, reduce the use of emergency departments and hospitals, and improve quality of life and patient satisfaction and yet, because of the complexity of our reimbursement system and other factors, are adopted slowly. Is there anything from your experience that could help guide policymakers in thinking about how to bring more beneficial technologies to market and achieve real penetration?

Mann: Reimbursement is a challenge. Mark McClellan at the CMS [Centers for Medicare and Medicaid Services] is trying to find ways of providing appropriate reimbursement at the government level and is, I think, doing a very good job. But budgeting limitations are escalating. Private insurers typically resist any kind of increase in cost, because they don’t really look at the long-term picture. They look at just the next two or three years, or even one year, and they figure that the patient is going to move to another insurer after that, so why should they worry about any long-term benefits? The health care system in this country is in need of significant reform to meet our evolving needs.

Coye: The focus on “evidence-based” medicine sets up a challenging standard for true medical innovations, because it presupposes enough clinical use to meet the appropriate standards of evidence, such as large randomized trials, long-term patient registries, which are often beyond the financial reach of small companies. What are your thoughts on how one reconciles true innovation with adoption into evidence-based clinical practice?

Mann: There ought to be a major expansion of postmarketing data gathering, as the basis for these kinds of decisions. It’s tough, because device companies are usually relatively small, and it’s hard for them to afford the kinds of studies that are necessary.

Coye: Conceivably, with broader postmarket surveillance requirements established in return for earlier approvals, some of the costs of trials would be defrayed by reimbursement for care, coverage of the devices, and coverage for the care itself. Hopefully, that would make this a little more feasible.

Mann: Well, it would help, but usually the devices are priced to provide a reasonable return on the manufacturing costs and to recoup the investment in a product’s development. Now you would have to add in the costs of collecting data afterward, so it’s a question of how these companies could afford that without increasing prices.

Coye: Where this takes us, then, is to the possibility that if public and private purchasers and payers collaborated to consider the potential value of technologies still in the pipeline—still in the premarket period—they might coordinate their support for trials for technologies that are very promising, instead of leaving it up to the inventors or the companies developing products to seek the financing. Some good ideas, presumably, have been stalled at that point. Do you have a comment?

Mann: Frankly, I think that most ideas are stalled and don’t get to market—even good ideas—because of the challenges and the costs of the process. I spoke earlier about MannKind’s programs in diabetes and cancer therapies: Those trials cost hundreds of millions of dollars. Fortunately, I’m in a position to support a large part of that, but if this were a typical small company, we would never have been able to do this, and while we may have been able to find a partner to support some of the programs, very likely these technologies would have died.

Coye: That’s a very good point. Both of those are biotech or pharmaceutical, or a combination product. Are there any reasonable number of potentially beneficial device products that don’t make it to market because of the cost?

Mann: Whether there are really valuable technologies, that I can’t answer, because I haven’t really studied them. I do know, though, that many companies—usually smaller companies—start devices but never get a product to market. It’s a real challenge.

Coye: One of the companies we haven’t talked about so far is Second Sight, which is fairly unusual. Why did you take that on?

Mann: At Advanced Bionics, we were creating good-quality hearing for deaf people. I asked myself one day, “Could we possibly help the blind?” I realized that we couldn’t very well do it in Advanced Bionics, so I planned to develop a visual prosthesis in my foundation. I had been involved with a fellow who owns an airplane engine company who happens to be blind. When I decided to do this, I called him up and said, “Sam, I’m going to try to develop a visual prosthesis in my foundation. Would you help me fund it?” He said, “I’ll be happy to help you fund it, but I want it done in a company, not in an academic institution, because I want it in my lifetime.” So we created Second Sight. This is the only company where I later brought in a venture capitalist. I did this in the last round, not because we needed the money, but because I had met Bill Link from Versant Ventures, and I was very impressed with him, and I knew I could learn something from him. So I thought it was worth bringing him into the organization. He has indeed made a difference.

Regarding the technology itself, we had no idea if it was going to work. Some preliminary studies were done at Johns Hopkins, where single and small numbers of electrodes were acutely inserted in blind people. From these, we got an idea of what was needed, and then we developed a first-generation system, not expecting that it would ever become a commercially viable product. We thought we’d have to go to the third or fourth generation before we’d have a viable product. But the patients we tested it in did remarkably well. I’ll never forget the first patient—a seventy-four-year-old fellow who had been blind for more than fifty years. We implanted the device and did some studies. Then we brought him into a room one day. He sat down in a chair; we closed the door, turned on his system, and projected a big L on the wall. We asked him what he saw, and he said, “Nothing, really.” Our hopes sank. And then he added, “All I see is just a couple of lines—one goes like this, and one goes like that,” as he moved one hand vertically and the other one horizontally.

People said, You need to commercialize this. I said, No, it’s not nearly good enough. But they insisted—it is certainly a lot better than a seeing eye dog and a cane. Yet we were pretty far along in the second-generation system that will be implanted in the first patient in just a couple of months—we were so close that we decided to wait. The second-generation system is much superior in so many ways. We learned a lot from that first system; I’m now very encouraged because I see the technology and what we can do to make it even better. In the next few years we’ll be able to provide maybe not perfect sight to blind people, but sight good enough so that people will be able to function effectively.

Coye: This is remarkable—whether you developed new products yourself or identified research under way, you’ve had an extraordinary hit rate. My last question, and maybe the best question of all, is this: What do you attribute that to? You are a physicist with a master’s degree from UCLA. What led you to understand clinical medicine and devices, and eventually cancer and biopharmaceuticals, well enough to achieve this success rate?

Mann: I really don’t know. I’ve been very fortunate, and I’ve made some good decisions. I have had the good fortune to join with committed people who have worked with me to help others and create value for all constituents.

This interview is the second in a series of interviews with leaders in the biomedical sector, sponsored by the nonprofit Institute for Health Technology Studies, or InHealth, which recognizes that innovation in medical technology plays a vital role in better and more cost-effective health care. The series will focus on individuals who are either innovators in their own right or in a position to foster novel research.

Alfred Mann is chairman of the board and chief executive officer (CEO) of MannKind Corporation; chairman and co-CEO of Advanced Bionics Corporation; and chairman of the Alfred E. Mann Foundation for Biomedical Engineering, all of which are located in Valencia, California. Molly Joel Coye (mcoye{at}healthtech.org) is the CEO and founder of the Health Technology Center in San Francisco, California.

DOI: 10.1377/hlthaff.25.w104
©2006 Project HOPE–The People-to-People Health Foundation, Inc.