I’m often asked what precipitated the downsizing of Pfizer in Michigan, and in particular, its decision to close the Ann Arbor R&D facility. Indeed, a member of the state’s congressional delegation inquired that of me just week and a half ago whiles both of us attended the Mackinac Policy Conference.
Obviously, the true answer lies within the hallowed corporate halls of Pfizer in Manhattan, but it’s safe to say that a number of elements perhaps contributed to their decision-making. In essence, it’s the business and regulatory environment here in Michigan.
The pharmaceutical industry has been targeted by state and federal lawmakers in Michigan who favor more restrictions on companies arguably on behalf of Michigan consumers. In past years, the focus has been on drug reimportation and pricing. More recently, the push has been to open the flood gates to frivolous litigation by repealing the state’s FDA drug immunity laws, and create added bureaucracy to oversee unreasonable drug disclosure and marketing restrictions. The latter is currently working its way through the House and would require pharmaceutical sales reps to register with the state, disclose any incentives, support and promotions to physicians and pharmacists of over $50, and institute fines of $500,000 for violations.
Talk about a disincentive for companies to do business in the state! Throw in the new MBT that is causing considerable bottom-line headaches for companies large and small, especially those in the contract services sector, and you begin to appreciate how tough it is for life science companies to succeed.
Michigan legislators need to learn that a more favorable regulatory environment and finding ways to help life science companies lower the costs of research and development, and thereby lowering the cost of the pharmaceuticals themselves, will better serve their constituents in the longer run. Michigan will continue to be viewed as an unfavorable business climate in which to build and expand their research facilities and manufacturing sites as long as Michigan’s legislators continue to estrange the pharmaceutical industry. Lower drug costs might play well at election time, but they do not serve Michigan’s future.
If we truly want to deliver on the rhetoric heard at the Mackinac Policy Conference and provide resources, incentives and support to our life science companies, than legislators should turn to more constructive reform. Certainly, that’s a message that I carry on behalf of MichBio and its member companies any time I interact with policymakers. Some get it, many more don’t. MichBio will continue to further educate legislators through its Biotech Legislative Caucus and other means like last week’s PhRMA Capitol Day, and direct interactions.
Other states and countries learned long ago to foster linkages between industry, academic research centers, and the investment community. Most importantly, Michigan’s competitors understand that it’s good business sense to make easily accessible all of the resources necessary for a start up company to succeed. We have many of the resources available to make this happen too, and now only need the political will to foster a more positive regulatory environment and business-friendly inducements.
Many in the entrepreneurial biosciences community often lament about the inadequate availability of venture capital and other investment funding in Michigan to grow pre-seed and seed stage companies. Business leaders remain unconvinced that Michigan will become competitive in the life sciences, but they point to start-up funds for life sciences entrepreneurs as the most effective strategy for making Michigan a major player in that sector.
The state, and for that matter the Midwest region, still suffers relative insignificance in the venture capital world ($105.4 million invested in Michigan vs $29.4 billion nationally in 2007) despite recent efforts by the state to establish a number of fund-to-funds, along with an increase in the number of venture capital firms and the size of their capital funding. While this bodes well for growing technology sectors like life sciences, it still means that start-up companies must look towards the east and west coasts primarily when searching for funding.
We can point to numerous examples where newly minted companies, born from intellectual property developed at a Michigan academic institution, have had to move to the coasts and follow the money trail. What’s it going to take to insure that home-grown biotech firms can stay in the state, have access to adequate capital investment and relevant resources, and thus insure their long-term commercialization viability?
In a word – success! Success breeds more success. Investors will flock to where there are winners. So more investment capital in Michigan will only occur on the heels of visible wins like Neogen, Esperion Therapeutics, QuatRx Pharmaceuticals, Asterand, and others. As they build successes, it will create the kind of maturity that will provide the capital influx necessary to sustain other start-ups and get the larger businesses to stay and create more jobs themselves.
The availability of venture capital in Michigan is a necessary component if the state and Midwest region are to become a biotechnology powerhouse. However, it’s a catch-22 situation isn’t it? One can’t get the capital without a nucleus of success, but the industry growth can’t occur without sufficient investment – will we succeed?
What must Michigan do to enhance and sustain a leadership role in the biosciences?
Many in the state – policymakers, academic research and industry leaders, and others – claim often that Michigan has all the right ingredients for success in this technology sector. So why is it that we don’t appear year after year in the top tier of states recognized for having a robust life science industry?
The answer is simple – lack of vision and leadership in moving the industry sector forward and insure that there is 1) broad commitment for support, 2) active promotion to insure the region’s visibility as a life sciences hub, and 3) consistency in the resources available to the industry for its commercialization activities and growth.
Commitment begins with having a long-term strategic plan – in essence, a roadmap that would guide and expand the industry. States that have achieved prominence typically have followed a thoughtful path and developed appropriate resources, initiatives and incentives of which many are designed to be sector-specific.
Above all, successful states have learned to be patient given the lengthy maturation period for bioscience companies, and not abandon efforts when outcomes are perceived to be either lacking or moving too slowly.Thus, MichBio, the statewide trade association for the biosciences industry, has goals to develop a viable roadmap with the input of stakeholders from around the state, conduct an asset map analysis to ascertain infrastructure and capabilities, and develop a more robust business database to help companies in identifying resources and enhancing Michigan-based business to business development opportunities.
Michigan must do more to better promote its capabilities, infrastructure and resources in the biosciences. The fact is that the state suffers from an image problem despite such initiatives like the "Michigan Upper Hand" campaign starring Jeff Daniels that has created quite a buzz in other states and countries. The state needs to educate the public about successful entrepreneurial ventures. However, that campaign must be complemented with other ongoing, on-the-ground efforts – collateral materials, web resources, databases, referral centers, etc. – here in the state so that our own companies can easily access information, advice, and facilitation that will enhance operations, R&D efforts, and business development opportunities.
Lastly, the state needs to be consistent in the resources that are provided to both start-up and established companies alike. Changes in eligibility requirements for funding sources, diminution in funding levels in favor of other technology sectors, and raiding of dedicated funding streams as short-term budgetary stopgaps, are only a few examples of how messages of inconsistency and confusion are developed. These, together with commonly-held negative perceptions of the state in terms of business environment, economic fortunes, and livable communities give rise the impression that Michigan is not serious about evolving itself into a knowledge-based economy that is competitive on the global stage.
It will take bold, proactive strategies, coupled with a collective effort on the part of our leaders in government, economic development, the life sciences industry, academic research organizations, technology transfer groups, as well as the investment and broader business communities, to move Michigan forward in the life sciences sector.
The real question is whether we have the will and fortitude to make the tough decisions and place the state’s biosciences industry on a path to success.