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Brian Kenny: In the 1966 film The Fantastic Voyage starring Raquel Welch, a submarine shrinks to microscopic size and ventures into the body of an injured scientist to repair damage to his brain. Fifty years later, what once seemed fantastical may now be more science than fiction. Today we'll hear from professor Richard Hamermesh about his case entitled "Proteus Biomedical: Making Pigs Fly." I'm your host Brian Kenny, and you're listening to Cold Call.
Richard Hamermesh teaches in the MBA and Executive Education programs at Harvard Business School. He's an expert on the business issues affecting healthcare policy and delivery. Richard, welcome.
RH: Thank you, Brian.
BK: I wonder if you could start by setting up the case for us. Tell us about Mabel, who is the fictional protagonist in the beginning of this case.
RH: As you indicated, this case does have a lot of science fiction elements to it. Proteus is a company that has developed technology to put a chip inside of a pill, any pill, and that chip will send signals that can be received by complicated technology that say, you, Brian, have taken that pill at this dosage at this time. That information can be conveyed. So, pretty science fiction-type of stuff. My challenge in writing it was in how I communicate what this is, why it exists, without it sounding implausible. By the way, that's the subtitle of the case, "Making Pigs Fly." So how do you introduce this?
It turns out that in the company’s material, because I don't want to take all the credit for myself, they have some fictional examples in their marketing materials. As I read it, I said, “that's the answer to my problem.” The case starts with a future fictional case study. It is in italics so no one gets the wrong idea, and it's basically about a somewhat elderly woman who has had myocardial infarctions—heart attacks—and she is now on a whole bunch of meds trying to recover. She is a heart failure patient and she is struggling, in and out of the hospital. Magically, they give her the Band-Aid on her arm that will receive the signals, and she starts taking pills with what they call “the raisin” inside, which is nothing more than a chip to signal it. With that information, going to Mabel's doctors, going to Mabel's children, they were able to monitor whether she's taking the right drugs.
BK: In real time.
RH: Whether she's adhering [to the schedule]. Oh, and by the way, are [the drugs] working? Maybe some of the dosages are wrong. Think about in a heart failure patient, you're taking 5, 6, 7, 12 medicines. How do you know that each one has the right dosage? There are also monitors in the pill for your blood pressure, other vital signs. So, the doc, the nurse, can look and say, “we're not getting the right result here. We need to change the dosage.” In the end of the fictional account, Mabel lives happily ever after, is going to museums, Red Sox games, et cetera. My idea was, “hey, now this makes it real.”
BK: Let's talk about what inspired you to write the case.
RH: I was not looking for a far-out technology case. I was looking for a business development case. Business development—partnering deals—are critical in the Life Sciences. The amount of money needed to get any either drug, or diagnostic, or medical device to market, is so large that it is virtually impossible to raise it just from venture capital private equity markets. You need big companies to give you money to go further in return for them getting some exclusive rights for what you're doing.
BK: So, that brings me to another question about Proteus. What are they? Are they a technology company? Are they a medical device company? Are they both of those things?
RH: First of all, they are a technology company. The scientific staff and the number of patents they have accumulated on this, it's totally science-based. Your question is one of the questions I ask in class—they are a device company and very much want to be. Because if they're a pharmaceutical company, think about this: every drug that they put this chip in would have to be reapproved. If, instead, they're a device company with this chip, then you put the chip into any pill that's on the market that you obviously get permission for. But one of the big issues in the case that we discussed in class is: what should your regulatory strategy be? How do you organize business development? Which pharmaceutical companies do you go to and say, “We need to sign a deal for us to put the [chip] inside your medicine, okay?” And how do you think about this? The case lays out the whole winnowing process and criteria they set because I wanted to teach Business Development. It's a linchpin in making the Life Science arena work. It's not just throwing darts—who will do a deal with us? It's a systematic process. These guys were extremely systematic about it. So, I want to take my students through that.
Take someone who has tuberculosis. It is very important that those people take the proper antibiotics for a year and a half, okay? If not, it will reoccur and they are a threat to the community. The way you take those meds is called observed therapy. You either go into a clinic and take it, or some medical worker goes out and assures you've taken it every day. Now, if that isn't a pain—
BK: Highly inefficient.
RH: Highly inefficient and humiliating for the patient, and a huge disruption to their life. What if in that antibiotic that they're taking you put a chip in each one and it's transmitted either underneath their skin, subcutaneously, or a Band-Aid, that goes to a cell tower, and the health system knows? Their doctor knows. Pretty cool application, right? Everyone wins in this setting. The chip gets embedded in the pill, but now Proteus needs to—they just can't put their chip in random pills, they've got to negotiate a deal with those companies.
BK: But this raises other issues and I'm curious if this comes up when you discuss this in class. Big Brother's watching in a way that—
RH: Well, that is why they've been very careful in picking the areas that they do this in. On the tuberculosis example, that is not proven to be a problem because the benefits are so great. They have a human interactions group there that figures out how to motivate patients in each of these categories to adhere and to stick with it. They go into these patient groups almost like anthropologists to study. I'll give you one example: transplantation patients who've already had the transplant. These people, you may know, have to be on immunosuppressants the rest of their life or else they would reject the new liver, or the new heart, or the kidney, whatever it maybe. Now you and I would think that if there's one group that's going to comply and adhere to their medicine, it will be transplantation patients. Not true. Two things: one, except for the pain of the surgery, they wake up the next day or two and they feel like a totally new human being again. I mean, this is like—your kidneys work, you know? Your heart works. So, they feel so good it's hard to for them to get through that they need any medicine. By the way, they have a medicine cabinet full of medicines to have survived before, and they're very happy to get rid of them and not see another jar of pills again in their life. There's also a phenomenon—they have survivor's guilt. Because of the ethical issues, they are not allowed to know the identity of who it was, and who the family is. They have no way of saying thanks. What do they do? Each patient gets interviewed and asked, “What's your favorite charity? Is it AIDS in Africa? Is it cystic fibrosis? Is it ALS, Lou Gehrig's Disease?” For every 10 days they stick with the regiment, a contribution is made to that. It's pretty clever, right?
It’s amazing when you get smart people working on these things. It also shows that—this is a far-out technology. When they first showed this technology, the person who said it said, “Yeah, that's very cool. Can you also make pigs fly?”
BK: There it is.
RH: But you still need the human element here, and these guys are still in business. They have been quite successful with this. They're still a private company. They're now valued at over a billion dollars, but most of the money has come from these partnerships with pharmaceutical companies and, to some degree, device companies. So, what I have when we teach this case is the students are leaning forward in their seats, and then you sort of unwrap and guide them in the direction of how critical business development has been in all of this, how over time it's accounted for two-thirds of the money that they've raised.
BK: So along those lines, if I’m a young pharmaceutical executive out there, is there something I should be taking away from this case? Is there something that I should be thinking about in particular?
RH: I think for someone in the industry, for students who are looking to go into this as a career, I think it gives them a very good feel for what business development entails, sort of a guide for them on what they'll have to do. As in all cases, they’re forced to ask, “Hey, is this for me? Is this something that I would find intellectually challenging to do this type of work?”
BK: Richard Hamermesh, thanks for joining us on Cold Call.
RH: You're welcome.
BK: You can find this case, along with thousands of others, in the Harvard Business School case collection at HBR.org. I'm Brian Kenny. Thanks for listening to Cold Call, the official podcast of Harvard Business School.