Blood Money? Entreprenuers Create Market For Blood.
Forbes has a fascinating story about Ben Bowman and David Mitchell, two medical entreprenuers who recently started General Blood, a blood distribution business:
Using one person's blood to heal another is an idea that's been around for centuries. But the first network of collection centers originated in 1930, after Moscow surgeon Sergei Yudin resuscitated a young man who'd slashed his wrists by injecting him with 420cc of blood from a cadaver. It wasn't until World War II that the staggering demand for blood gave rise to a network of regional U.S. distributors, which is still in place today. The system leads to all kinds of imbalances. A pint of blood might cost a hospital $210 in Wisconsin but $265 in New Jersey.
Bowman, 33, can offer pints at an average price of $229. He's contracted with donation centers along the Interstate 35 corridor—from Laredo, Tex. toDuluth, Minn.—to ship blood by FedEx to hospitals that have agreements with General Blood. Bowman and 30-year-old cofounder David Mitchell guarantee delivery of the mix of types (O+, AB and B–) that hospitals prefer for local populations; blood types vary somewhat by ethnicity (see graphic).
His experience in supply-chain management taught Bowman to squeeze more efficiency out of blood distribution. Before getting his M.B.A. from the University of Minnesota he worked at his parents' company, Magnum Machining, which finishes high-precision parts for John Deere and Emerson Electric. He opened a maquinaria near Deere's factory in Torreón, Mexico. Mitchell, a pal from business school, was an investment advisor for Wells Fargo.
The two had little trouble raising a total $52,000 (some of it their own) in the spring of 2010 or another $675,000 in a series A round with Minnesota investors last July. Certification from the feds, to buy and sell blood that meets FDA standards, proved a snap. All they needed was to open up the tubes and let the blood start flowing, right?
"Selling into hospitals is like storming a castle," says Mitchell. "They're not built to buy efficiently. There's so many different stakeholders in each decision that nobody owns a project."
Part of the idea behind the business is to challenge what Bowman and Mitchell see as an inefficient and outdated status quo dominated by the Red Cross:
They're quick to point out the American Red Cross' leaky record on service. Since 2003 the FDA has fined it $46 million for not meeting blood safety laws, including mismanaging certain blood products and violating best manufacturing practices.
owman and Mitchell also note the waste in the current system. Government data suggest that 5% to 14% of donated pints are discarded every year. Some spoil in shipping—red blood cells have a shelf life of 42 days, platelets 5 days—some are wasted at hospitals.
They're also banking on an ambitious plan to offer the first online blood exchange.
Ultimately the idea is to introduce market pricing into a system that doesn't have it. For folks like Bowman and Mitchell, there's money to be made, but for the rest of us, there's the potential for a system providers better, more consistent access to blood that can be used for medical purposes.