By Matt Sullivan
Special to Delaware Business Times
Times are tough in the blood business.
Demand is falling. Well-financed startups threaten to disrupt the supply chain. Government agencies closely regulate every step of the process. Conscientious citizens may still arrive on a daily basis to donate raw materials free of charge in exchange for juice and cookies, but the process of testing, storage, and delivery remains costly. A blood center’s annual budget for medical plastics alone — tubes, bags, needles, and bandages — can easily run into the millions.
“There were 82 independent community blood organizations (across the country) when I came here six years ago,” said Roy A. Roper, president and CEO of the Blood Bank of Delmarva (BBD). “We’re down to 67, and I do happen to know of another couple of mergers in the works. So they’re shrinking, and a lot of those folks are shrinking because they didn’t have foresight or reserves. Between now and the end of the year, we’ll probably lose another three centers.”
BBD is not shrinking, however. The local blood bank has set down another path, one of strategic investment in cutting-edge technology that has put it on the crest of a wave of change that is coming to the blood industry.
First in the country
BBD is now installing the first automated testing lab in the country, one that will dramatically increase testing efficiency and capacity, allowing it to take on additional testing work from other blood banks. Thomas Jefferson University Hospital and the Hospital of the University of Pennsylvania have already signed on to have blood tested in Delaware.
The blood bank also recently signed a three-year purchase agreement with Cerus Corporation to begin using the INTERCEPT Blood System, which blocks the replication of viruses, bacteria, and parasites inside platelets and plasma and renders pathogens like Hepatitis B and C, West Nile Virus, HIV, and malaria inactive.
This change cannot be overstated. INTERCEPT doesn’t test for diseases. It neutralizes them — and it doesn’t work only on known pathogens but also on unknown, emerging pathogens that cannot be tested for. The process has been used in Europe for years but received FDA approval for use in the United States just recently, in December 2014. BBD will be one of the first two blood banks in the country to introduce the system.
“What you see at BBD is change, transition, and innovation in action,” Roper said. “And you see an organization that’s out on the front end of a lot of what is taking place in health care.”
But leading an industry has its challenges. Testing adds costs, and while few want to put a number on how much is too much to spend to ensure a safe blood supply, cost control is a factor in a post-Affordable Care Act world. Success in the modern blood industry, as in most businesses, requires cost efficiency, supply-chain optimization, and product safety — but unlike in other businesses, lives are on the line with every shipment.
“It’s doing the right thing for the patient, ” Roper said. “That’s our overarching mantra. And it’s either innovate, change, or die.”
A bit of bloody history: While physicians began experimenting with blood transfusions back in the 1600s, the first national blood collection program in the United States didn’t start until World War II. The discovery of plasmapheresis in the 1960s allowed valuable plasma to be extracted from the same donors up to two times a week, ushering in a new era of medicine and the pay-for-plasma operations of the ’60s.
“Like drilling rigs at an oil field, they sprouted wherever the resource seemed promising — around army bases and college campuses, in downtrodden neighborhoods and along the Mexican-American border,” wrote Douglas Starr in “Blood: An Epic History of Medicine and Commerce.” “(One) Los Angeles center, called Doctors Blood Bank and run by two local pathologists, paid donors in chits redeemable at a local liquor store.”
And so things continued for many years, until the AIDS crisis of the ’80s changed everything about how the industry worked, from who could donate to how rigidly every pint would be tested — adding significant costs to the process. And since the ’80s, the strategy to keep the blood supply safe has revolved around donor screening and testing.
But in April 2015, the New England Journal of Medicine published “The Safety of the Blood Supply: Time to Raise the Bar,” which advocated for widespread implementation of pathogen-reduction technologies, including the Cerus INTERCEPT Blood System: “We now have the means to protect patients from existing and emerging blood-borne threats — all we need is the will.”
“And that’s where the Blood Bank of Delmarva stands out in our experience,” said William “Obi” Greenman, CEO of Cerus Corporation. “Roy was one of the first folks who reached out to us and said it was something that really makes sense. They really wanted to offer a product that’s safe and available to their hospital customers.”
Pathogen deactivation will help eliminate some of the back-end tests and their associated costs, Roper said, while allowing platelets to get through processing faster, extending their shelf life.
“That has huge implications on your supply chain, the costs, and waste,” Roper said.
Yet the value of such technologies is not something universally agreed upon within the medical community. Frank Fattori, the assistant director of the Department of Pathology at Alfred I. duPont Hospital for Children, just returned from the AABB Symposium on Implementation of Pathogen Reduced Blood Components, where innovations like the INTERCEPT system were hotly debated — partly for the cost-benefit ratio but mostly because some medical professionals become very conservative when faced with potential changes to blood-safety protocols.
Fattori speaks highly of the Blood Bank of Delmarva and the work it does, but even he is still on the fence.
“I think this initiative is one that will eventually benefit the people who will receive transfusions,” Fattori said. “Most of what we know, we can test for. But the unknowns are out there.”
Although the medical community may be inherently cautious, the investment community is bullish on the technology. Cerus Corporation (CERS) was trading around $4.50 in late April but has a buy recommendation and a target price of $8 from MLV & Co. The stated reason? “The Blood Bank of Delmarva (BBD), which provides blood products to hospitals in Maryland, Delaware, and Virginia, signed a three-year purchase agreement for platelet and plasma.”
Innovations require discipline
Roper first came to the Blood Bank of Delmarva as the vice president of business development, bringing with him not only decades of experience in the managed care industry but also significant experience in institutional-change management and team development as a consultant.
“Innovation — people think it’s all creative, yes, but there’s a discipline. So all I did was apply the discipline of how you innovate here,” Roper said. “I use the startup analogy for my executive team to understand pace. We’re like a startup. It’s quick. That whole culture of you investigate, you do your homework, you make a decision, and you move — that’s counterintuitive to any industry that’s been very successful for a long period of time just by opening the door.”
That door has been harder to open in recent years, thanks in part to dwindling demand for blood. Blood still saves lives every day and is a vitally important part of medical procedures, a component for which no practical substitute exists. But it’s also being used less frequently, thanks to the less invasive nature of modern medicine.
“Changes in surgical techniques and transfusion protocols have had dramatic impact on the demand,” Roper said. “Years ago, if you had an open heart surgery, automatically you ordered four units of red blood cells. Today, you may order one and you may not use it. They’re doing hip surgeries without any blood at all. Those are two dramatic examples.”
BBD needed to diversify to maintain revenue streams, which is what it has done by making investments that will enable it to become a regional testing facility.
“Our revenue is up tenfold in the testing category since 2013,” Roper said. “We could potentially triple that amount in the next 18 to 24 months. We have some work to do, but we’re making the investment to be able to handle it.”
Making those investments and improving the supply chain in Delaware have proved essential to remaining competitive. Startups in the blood industry, like General Blood LLC, have tried to steal market share from existing blood banks in the past few years, with promises of quicker and cheaper supplies for hospitals by brokering blood on a national level. General Blood quickly discovered it was difficult to compete against local suppliers who could fill emergency needs quickly and shifted its company focus away from blood sales and toward consulting.
“I think (Roper) is very forward thinking,” Fattori said. “But one thing the Blood Bank of Delmarva has is an understanding of why the product is important to us — they’re truly a partner. They get it.”
In other markets where Fattori has worked, fluctuations in the blood supply have led to delayed transplant surgeries and other shortages.
“That’s never happened here with the BBD,” Fattori said. “They run a very efficient community blood center, and I say that in the truest sense of that phrase. And they’ve grown out of a focus on serving Delaware.” ♦