As the healthcare industry delves more deeply into a system driven by value-based care delivery, the effects of reform mandates are becoming more pronounced for children’s hospitals. Shrinking margins and financial pressures have led pediatric providers to revisit long-standing affiliation agreements and explore new modes of partnership.
A similar dynamic has unfolded with regard to research enterprises. Ongoing cuts to traditional sources of public funding are a growing concern for pediatric hospitals and their affiliated AMCs. NIH funding decreased 10% between 2010 and 2013,1 a drop felt most profoundly by smaller research centers. Public funding has recovered since that time but has yet to achieve its previous heights, leading some children’s hospitals to alleviate their financial constraints by pursuing partnerships with nontraditional sources – such as pharmaceutical and biotech companies.
On the surface, it seems like an uneasy alliance. There has traditionally been a certain distance between basic science researchers and pharmaceutical companies; and in terms of their respective cultures, that distance may look more like a chasm. In particular, academic researchers are typically unaccustomed to dealing with the demands of corporate balance sheets, investor-imposed deadlines, and bottom-line mentality of large biotech companies.
Beyond that, there are serious concerns about research motivated by profit. Some fear that pharmaceutical firms may be unwilling to fund research that doesn’t fit an obvious market need. Biotech companies are also likely to be drawn to the largest, most prestigious institutions, which does little to help early-career researchers and smaller research centers that are already struggling to compete for diminishing funds.
But there are obvious advantages to digging into pharma’s deep pockets, even if the funding comes with strings attached. Research that shows promise can lead to additional and more immediate financial support. And the private sector’s vested interest could lead to faster industry adoption of successful drugs and technology, given the financial incentive to bring new products to market.
In light of these potential benefits, efforts are under way to find common ground between science and industry. Some medical centers have begun investing in entrepreneurship training for researchers, and more than 50 medical schools and business schools across the country have created joint M.B.A. and M.D. programs.
These initiatives are timely, because collaborations between industry titans and pediatric providers have already begun. For example, Pfizer Inc., through its Centers for Therapeutic Innovation, has partnered with a variety of AMCs, including Boston Children’s Hospital, to strengthen the relationship between pharma and academia.
Such nontraditional unions are bound to be accompanied by skepticism and friction at the outset. But if these new models of funding can demonstrate value for all parties, the increased familiarity and mutual advantage could result in an optimal balance between research autonomy and private efficiencies, presenting ample opportunities for children’s hospitals that are prepared to make these ventures successful.
This post is the last in a four-part series that explores ways in which children’s hospitals are forming collaborative partnerships with physicians, health systems, academic affiliates, and research partners to thrive in a value-based healthcare environment. To learn more about emerging affiliation agreements between children’s hospitals and pharmaceutical companies, biotech firms, and venture capital firms, see ECG’s white paper titled How Collaboration Can Drive Success at Your Children’s Hospital.
1Justine Varieur Cadet, “Up All Night,” Children’s Hospitals Today, Winter 2014, pp 16–21: http://www.nxtbook.com/nxtbooks/cha/cht_2014winter/index.php?startid=17