Medical Innovation In the Flat World

In the 1960s, Dr. Raul Perez, an obstetrician and gynecologist, immigrated to America from Cuba, and came to St. Louis. He “had a problem with acid reflux and went for treatment to the Mayo Clinic in Arizona, where he was helped by an Indian-American doctor, V. K. Sharma.” Then, during one of his follow-up appointments, Dr. Sharma mentioned the idea of using a pacemaker-like device to control the muscle that would choke off acid reflux.

Fortunately, Dr. Perez had met Dan Burkhardt, a local investor and together, they created a medical venture fund in 1997 called Oakwood Medical Investors, according to a recent New York Times Op-Ed.

The three of these men—Burkhardt, Perez and Sharma—were then joined by Bevil Hogg — a South African and one of the early founders of the Trek Bicycle Corporation — who became C.E.O. This group of men was able to raise the initial funds to develop the technology.

Using their momentum, they acquired the help of “two Israelis, Shai Pollicker, a medical engineer, and Dr. Edy Soffer, a prominent gastroenterologist.” They joined a Seattle-based engineering team (led by an Australian) to help with the design, while a company in Uruguay specializing in pacemakers is building the prototype.

Eventually, all of this work turned into EndoStim, “a little start-up company” that is developing a proprietary implantable medical device to treat acid reflux.  Acclaimed author Thomas Friedman (The World Is Flat) was intrigued by this company because he described it as “the epitome of the new kind of start-ups we need to propel our economy: a mix of new immigrants, using old money to innovate in a flat world.”

What Friedman found so interesting about this “very lean start-up” was that the principals “take advantage of all the tools of the flat world — teleconferencing, e-mail, the Internet and faxes — to access the best expertise and low-cost, high-quality manufacturing anywhere.” He described these techniques as “the latest in venture investing,” which he called “cloud manufacturing.”

These new kinds of start-ups came in response to the aftermath of the banking crisis. Companies responded by becoming “more capital-efficient, much smarter in accessing worldwide talent and quicker to market in order to do more with less,” and taking advantage of technology.  

The benefits of having these kinds of start-ups are significant for medical device and pharmaceutical companies. For example, with clinical trials for EndoStim already being conducted in India and Chile, this company has shown that rapid advances in health and medicine can be achieved while still retaining “superb surgeons with high levels of skill, enthusiasm for the project, an interest in research and reasonable costs.”

So, “what’s in it for America?” The fact that companies like EndoStim are bringing venture money and core innovation to America means that if all goes as planned the company’s tiny headquarters in St. Louis will grow much larger. This will be huge for jobs and future research and development because St. Louis is where the best jobs — top management, marketing, design — and shareholders will be, and where innovation is sparked and capital is raised still matters.

Accordingly, Congress look to reduce the regulatory burden of bringing medical innovation to market.  Most “great concepts” rarely get a chance because of the barriers to entry the government has placed on medical therapies.

As a result, we applaud the work of this company because as Mr. Friedman notes, “by spawning thousands of EndoStims — thousands — will we generate breakthrough medical treatments and the kind of good new jobs to keep raising our standard of living.”

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