22 December 2008
Nonprofit Company Develops Diagnostics for Developing World
Company’s unique business model could revolutionize medical diagnostics
Washington — Thanks to an international group of scientists, engineers, physicians and business people, a nonprofit company with a novel business model is poised to change the way patient health is monitored in the developing world.
The company, Diagnostics For All (DFA), was founded by Harvard professor George Whitesides and Hayat Sindi, a scientist from Saudi Arabia, based on technology developed in Whitesides’ laboratory.
Using inexpensive and readily available paper and adhesive tape, Whitesides and colleagues developed a small, disposable device that can be used to test bodily fluids for signs of illness. (See “Three Cents’ Worth of Paper and Tape Help Diagnose Diseases.”)
To make the test kits available in the developing world quickly, DFA’s leaders passed up potentially lucrative royalties and made the company nonprofit.
Sindi, the driving force behind commercializing the technology, assembled a team of Harvard and Massachusetts Institute of Technology students and scientists to write a business plan, which won first place in two prestigious competitions: the Harvard Business School Business Plan Competition and the MIT $100K Entrepreneurship Competition. DFA is the first nonprofit company to win the MIT competition.
Team members include Sindi, scientists Carol Waghorne and Iranian-American bioengineer Roozbeh Ghaffari; physicians Gilbert Tang, from Canada, and Krishna Yeshwant, from India; and businessman Jon Puz.
“It is hard to treat people who are outside of conventional medical settings,” said James Barber, executive director of DFA, who was hired to run the company after the Harvard and MIT competitions. He said DFA’s technology offers a “really compelling” solution for the 60 percent of people in the developing world who live in rural areas and do not have access to medical facilities.
AN URGENT PROBLEM
Sindi’s goal is to make DFA’s diagnostic technology quickly available to the developing world — the main reason to set up DFA as a nonprofit rather than a for-profit company, she told America.gov.
As a for-profit company, DFA would have to defer devoting resources to manufacturing and delivering diagnostic kits to developing countries until the company was profitable, a process that might take seven years or eight years, according to Sindi.
The team writing the DFA business plan agreed the problem of inadequate medical diagnostics needs to be addressed now, according to Gilbert Tang, a resident in cardiac surgery at the University of Toronto who worked on the business plan while a student at Harvard Business School.
Supply chain and distribution issues are “really different” in the for-profit and nonprofit markets, Tang told America.gov. For example, diagnostic test kits in sub-Saharan Africa would be subject to high levels of heat and humidity, conditions that are not a factor for the for-profit markets in the United States and Western Europe.
AN UNSUAL BUSINESS MODEL
Nonprofit companies typically rely on donations and on grants from philanthropic organizations, such as the Bill and Melinda Gates Foundation. DFA’s business plan is unusual in that it envisions using patent royalties as a sustainable income source.
In a typical arrangement, a for-profit company would pay a royalty fee to Harvard University to license the diagnostic technology. Whitesides and his colleagues, the scientists who invented the technology, would receive a percentage of the royalties.
DFA, however, is able to license Whitesides’ technology without charge. In an agreement negotiated with Harvard University, if a for-profit company wants to license the technology, DFA can negotiate royalty fees on behalf of itself and Harvard — Harvard would receive a share of the royalties, and DFA’s share would be invested in DFA.
Sindi, Tang, Whitesides and others will forgo their share of potentially lucrative royalties because, as Tang explained, the global health consequences trump loss of financial rewards. “This technology could completely transform diagnostics” in the developing world — present methods are “archaic” in comparison.
Some question whether DFA’s nonprofit model will motivate employees in the absence of financial incentives.
Barber told America.gov that the profit motive does not guarantee productivity. Profit motivation is a disciplining tool, but there are many ineffective, unproductive for-profit companies — for example, the big three U.S. automobile companies. Determination to succeed is a powerful motivator.
Hiring talented employees will not be a problem, Barber said. “We pay a reasonable wage, and people are excited. They want the personal satisfaction that comes from making a difference.”
DFA is now working to adapt Whitesides’ paper-based microfluidic technology to test for levels of proteins in the blood that are a sign of liver failure, a byproduct of some medications used to treat disease. Barber hopes to have working prototypes in 2009 and to begin pilot manufacturing programs and field tests in 2010.
In the future, Barber imagines using the technology to develop tests for kidney function and diseases such as tuberculosis, HIV and malaria.
For more information on Diagnostics For All, see the company’s Web site.
