Public Cord Blood Banking In The U.S.: Business Models, Sustainability And Future Possibilities

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Guest post – Public Cord Blood Banking In The U.S.: Business Models, Sustainability And Future Possibilities
World Stem Cells and Regenerative Medicine Congress USA 2013

Dr. Christopher Hillyer, President & CEO of the New York Blood Center, started off the morning with a true wake-up call for the industry.  Many have asked the question rhetorically, “Is the current public cord blood banking business model sustainable?”  Dr. Hillyer’s answer: no.

According to Dr. Hillyer, public cord blood banking defies standard business economics:

  1. It doesn’t collect what people want to buy
  2. It collects at a very high cost
  3. It transplants at a very high cost
  4. Its negative margins means there is no money to invest in innovation, invention, and infrastructure
  5. It’s facing increasing competition
  6. It is unappealing for outside capital due to negative fiscal ROI

The WMDA conducted a survey of public cord blood banks, and a majority admitted that their business model was not sustainable.  At its core, the negative economics are driven by several factors:

  1. High fixed costs, especially labor
  2. Inefficient collection and distribution (out of every 100 births eligible for cord blood donation, if 45 are able to be sent for processing, 10 will make it to storage and 0.6 to a patient)
  3. Do not manage inventory as a for-profit business would (for example, discarding and discounting unsold items)
  4. Collect all incoming cord blood without optimizing for public need (demand)
  5. Costs rising, including from higher regulatory burden

To become fiscally sustainable, public banks must decrease costs, increase distribution (revenue), or both.  Many patients in need go untreated, so clearly there is a need for banking more units to increase the quality of matches.  The world needs 1.4 million more cord blood units, and at the current cost of $5435 / unit that does not seem feasible.  Even at a cost of $2000 / unit, that translates to a funding need of $2.8 billion.  In order to meet this need, public banks may need to adapt a public/private hybrid model, which can take several different forms (fusion, chimera). Regardless of whether the blood is in separate or the same test tube, public/private partnerships can help to leverage private banks’ marketing and distribution networks.  Dr. Hillyer recommends adopting an industry standard to quantify a transplant match’s attractiveness: MCAL (match, count, age licensure).  This rubric would help facilitate public and private bank interoperability.  Irrespective of whether or not public banks migrate towards hybrid operating models, Dr. Hillyer’s message is clear: public banks must fundamentally change their business practices to survive.

Guest post by Cara Paiuk – a mother, writer, and entrepreneur who has written previously about cord blood at bankingoncordblood.com and produced infographics for Parents Guide to Cord Blood. For more information visit CaraPaiuk.com.

Comments 2

  1. Christopher Hillyer

    I commend Tim on his article and indeed, in my opinion, the current business model is not sustainable. It is important to recognize, as I tried to lay out, that some not-impossible-to-do changes and/or new developments can radically alter the future. These include: 1) increasing the per bank annual distributions and optimizing cost; 2) improving the efficacy and/or speed of engraftment of cord blood stem cells (cytokines, homing molecules, cell expansion/increased dose per unit, graft engineering including adding MSC, PBSC, etc.); and 3) creating new therapies/products that use cord blood, amongst others. These can be accomplished via a number of mechanisms including changing business practices with or without public private partnerships; forming partnerships with new business models; increasing funding for cord blood related research; crafting regulations that ensure heightened quality; and increasing government funding of extant banks. As I stated, we are in business to saves lives. More lives can be saved with a sustainable business model, again, in my opinion.

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