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Charity's new business; Red Cross for-profit venture targets mad cow pathogens

April 22, 2002 Modern Healthcare by Cinda Becker
No one is sure what causes ''mad cow disease'' in humans, but the American Red Cross is betting it can prevent transmission of the ailment through the blood supply.

The nation's largest charity has embarked on its first-ever for-profit venture, a biotechnology company focused on researching, developing and commercializing diagnostic and removal systems for blood pathogens that may cause Transmissible Spongiform Encephalopathies, commonly called mad cow disease.Red Cross officials quietly announced the deal earlier this month and already predict that in the beginning, it will be a money-losing proposition. The Red Cross spends $1.7 billion each year on biomedical services to supply half of the nation's blood needs. New tests always add to the overall cost of blood. Although the research is only theoretical, it marks another effort to ensure the safety of the nation's blood supply, Red Cross officials said.

The Red Cross is partnering with publicly traded ProMetic Life Sciences, Montreal, in the privately held joint venture Pathogen Removal and Diagnostic Technologies. The Red Cross said it owns a 51% stake in PRDT, based in Falls Church, Va. Officials declined to disclose other financial details of the deal.

But Chris Lamb, the Red Cross' vice president and chief operating officer of plasma services, said the Red Cross is not projecting any profits. If and when the company successfully develops a diagnostic test or system for removing pathogens from the blood, the proceeds would be folded back into research ''to improve safety and availability of blood,'' he said.

The venture arrives at a tumultuous time for the seemingly always-controversial Red Cross. The Food and Drug Administration has asked a federal court to hold the blood supplier in contempt for a violation-pocked safety record dating back to a 1993 consent decree (Dec. 17, 2001, p. 10). A hearing on the request has not been scheduled. In addition, citing a decade of break-even operations, the Red Cross raised its blood prices by as much as 31% last summer in the hope of thickening the margin to 5%.

The charity is still without a permanent leader after the unceremonious departure last year of Bernadine Healy, M.D., amidst a firestorm of criticism over the Red Cross' handling of donations in the wake of Sept. 11.

Taking the position that it's far better to be safe than sorry when it comes to mad cow disease and the nation's blood supply, the Red Cross in essence is investing in the search for and arrest of an unidentified culprit that may not even have committed a crime. But the Red Cross has long been in the forefront of a call for stricter donor standards in light of concerns that the disease could be transmitted through blood.

''Could'' is the operative word. The human form of the disease, variant Creutzfeldt-Jakob disease, is not known to have been transmitted by blood transfusion, and no cases of either mad cow or its human form have been reported in the U.S. However, ProMetic and Red Cross officials note that ''animal models suggest that transmission by blood products may be possible.''

Meanwhile, precautionary measures that severely restrict blood donors who have spent time in Europe, where there have been cases of mad cow disease, are poised to hamper blood supplies even more. America's Blood Centers, which represents independent blood centers that supply the other half of the nation's blood needs, said it expects to lose 5% of its volunteer blood donors when new FDA guidelines go into effect on May 31, deferring donors who lived in the United Kingdom three months or more, and on Oct. 31, deferring donors who lived anywhere in Europe for five years or more.

''Hopefully, a new test, a new procedure or the ProMetic filter (to remove pathogens from the blood) will eliminate the need to defer donors,'' said Celso Bianco, M.D., America's Blood Centers' executive vice president.

Bianco said he welcomed any scientific breakthrough and wishes PRDT good luck. But if he sounds slightly skeptical, it is because so little has been published on ProMetic's research until now, he said.

''We don't know much about this system that this company is developing, but the subject is very, very important,'' Bianco said. ''I assume the Red Cross did due diligence, but that is all I know about it.''

Even before its partnership with ProMetic, the Red Cross had expended a considerable amount of research money and time-five or six years-on mad cow, Lamb said. Although he could not say exactly how much the group has spent on mad cow research, the charity's audited financial statement for 2001 indicated it spent $34 million on research and development in all areas that year. The mad cow-related research has been focused on ensuring a safe blood supply. ''We want to be as proactive as possible,'' Lamb said.

PRDT was formed because ''we felt we wanted to take the research to another level,'' Lamb said. A commercial partner who would focus almost exclusively on the issue seemed ''like the best way to bring this forward,'' he said.

Lamb conceded that PRDT's research strategy-finding a way to remove pathogens that may not be an issue-may sound counterintuitive. ''But in some sense removal systems may be an easier target,'' Lamb said. ''We have an obligation to be as aggressive as possible on an issue like this. It is what the American public expects.''

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