Banking on Biotech
OHSU President Peter Kohlerís Prescription for Oregon: Opportunity or Gamble?
By Jim Pasero
you’re looking for my poetry books,” says the former college
English major, Dr. Peter Kohler. “You won’t find them, they’e
A favorite poet? “It’s either Emily Dickinson or T.S. Eliot.
Eliot wrote a poem about Charlottesville, Virginia—words about decay
and rotting in the hot summer weather. When I was an undergraduate I stayed
there one hot summer and all I could think about was that poem.”
“Decay and rot” are anything but descriptive of the 14 years
that Dr. Kohler has been the President of the Oregon Health & Sciences
University (OHSU); rather it’s been a tenure marked by progress
and growth. Since Kohler took over the presidency of OHSU in 1988, he
has doubled the number of employees on “Pill Hill” to more
than 11,000, tripled the number of campus acres. The number of buildings
has doubled to 33, and the dollar amount of NIH grants has increased by
During Peter Kohler’s decade and a half tenure OHSU emerged in 1995
from a state-owned teaching hospital to a public corporation. Kohler also
continued the work begun by his predecessor Dr. Leonard Laster and Tektronix
founder Howard Vollum to make OHSU a world-class research institution.
This world-class status was most dramatically underscored two years ago
when OHSU’s Dr. Brian Drucker invented the drug Gleevec, which treats
leukemia and gastrointestinal tumors (Gleevec is being manufactured by
the European drug company Novartis).
Portland City Commissioner Jim Franscesconi traveled to Bologna, Italy
this fall as part of the sister city exchange program and noted the growing
international stature of OHSU because of Drucker’s invention. “I
was in Bologna and I talked about Drucker and they knew all about it.”
Under Dr. Kohler, OHSU has embarked on the largest capital campaign in
the state’s history, the half billion-dollar Oregon Opportunity
campaign. The campaign includes $200 million in public funds approved
by a state ballot measure in May of 2002, and $300 million in private
philanthropy, spearheaded by Jim Rudd, the CEO of Ferguson Wellman, a
Portland-based capital management firm. Despite a slow economy, OHSU is
halfway to their goal in private funding. And two new buildings are currently
under construction on Pill Hill, a 300,000-sq. ft. patient care building,
and a 250,000-sq. ft. research building to house biotech wet labs.
Along with the new buildings on OHSU’s Marquam Hill campus, the
university is also planning to build a new river campus, located near
Portland’s Willamette River, in the North Macadam area. OHSU plans
to connect the two campuses by an aerial tram. A design competition to
create the OHSU tram is currently underway among more than a dozen worldwide
architectural companies that specialize in aerial trams.
OHSU’s aggressive plans for growth and the city’s cooperation
in streamlining and fast-forwarding the regulatory processes are not without
controversy. Kohler and OHSU, which also owns a 300-acre campus in Hillsboro,
home to the National Oregon Primate Research Center, have sold these growth
plans to state and city leaders based on their projections for being a
significant “player” in the emerging biotech industry.
What is biotech? It is, according to the Wall Street Journal, “a
field where companies generally seek to produce drugs through genetic
science.” The gamble that Portland will be a future biotech center,
with dozens of high-tech spin-off companies reacting in synergy with a
world class research center, requires a significant financial commitment
in both public and private dollars to OHSU and the North Macadam neighborhood.
Again, the plans are not without controversy, especially now that OHSU
is eliminating 200 jobs and is currently operating in the red.
One of the region’s most important venture capitalists, Ralph Shaw,
who is also chairman of the Governor?s Council of Economic Advisors, has
emerged as the leading critic/realist of OHSU’s Oregon Opportunity
campaign. Shaw’s willingness to step out front in the critic’s
role has taken courage, especially in a predominantly one-newspaper town,
where ideas can march in lockstep. Shaw is not alone in his efforts. He’s
been aided by the work of Portland State University economics professor,
Joe Cortright. Last year, Cortright compiled a report for Washington DC’s
Brookings Institution, entitled, “Signs of Life: The Growth of Biotechnology
Centers in the U.S.” Cortright’s report is skeptical of Portland’s
chances of being a significant “player” in the biotech industry.
More about Shaw and Cortright later.
Adding to Shaw and Cortright’s criticism of OHSU’s big plans,
have been the words of the school’s newly hired biotechnology “czar,”
Dr. William New Jr., who late last month managed to step on the institution?s
own message when he told The Portland Tribune: “OHSU officials are
suffering from ‘delusions of national grandeur’ in trying
to establish Oregon as a major biotechnology center research center...
Oregon is 20
to 25 years behind Boston, the San Francisco Bay Area and other leading
biotechnology centers when it
comes to developing ‘all that great glamour stuff’ in genetic
But for the Mayor of Portland, Vera Katz, who has seen her tenure badly
damaged by the city’s persistent economic decline, a thriving biotech
center in North Macadam, no matter how long the odds, could be
just the solution to the city’s slow economic pace—somewhere
between molasses and quicksand—which has business leaders anxious.
Says Commissioner Francesconi about the Mayor’s willingness to green
light the OHSU planning process, “It is true—the Mayor does
want this as her legacy.” And if there is anyone capable of selling
a proposal of “big ambitions” during down economic times,
it is OHSU’s President Peter Kohler, whom former Sen. Mark O. Hatfield
describes as a person with “an easy manner, who communicates well
and is committed to this institution.”
Kohler is a diplomat, a politician. He has tremendous skill in attracting
talent, convincing people to come here,” says Sen. Hatfield, who
has worked closely with Kohler for more than a decade. Hatfield describes
their past working relationship this way: “Dr. Kohler would come
see me in Washington and we would get caught up and I would see the contribution
we were making on the Hill.” One of the things Kohler and Hatfield
talked about according to the Senator: “What they were doing with
the Research Triangle in North Carolina. And Dr. Kohler would ask, why
Maybe the Portland area can become America’s next Research Triangle,
but regardless of OHSU’s selling
job, several factors are starting to work against this promise.
For starters, the national and international growth climate for biotech
companies is currently not strong: Writes Wall Street Journal Reporter
David Hamilton in a recent front-page story about the counter-cyclical
success of two biotech companies, Amgen and Genentech:
“A quarter-century after the industry’s birth, most companies
are still unprofitable ventures that can take a decade or more to win
regulatory approval for experimental drugs. Overall, stocks in the sector
have fallen 41 percent this year as the 2000 biotech-stock bubble continued
to deflate, forcing many cash-burning start-ups to search for fresh investment.”
“...They (Amgen and Genentech) are a stark contrast to the traditional
pharmaceutical industry, whose giants are having increasing difficulty
turning research into new medications and face tough competition from
generic drugs as well.”
The second reality check for OHSU and those supporting a significant biotech
industry in Portland is the Brookings report, in which Joe Cortright makes
a couple of strong points against OHSU’s future success:
“During the past two decades the founding of biotech firms appears
to have become more concentrated into relatively fewer metropolitan region
areas. Five metropolitan areas accounted for?about 56 percent of the firms
founded in the 1990s...the nine leading biotechnology centers may account
for a smaller share of NIH funding and patenting than they did two decades
ago, but they now account for a larger share of new biotechnology businesses.”
To sum up Cortright’s report, if you’re not one of the nine
largest cities in the country, you really can’t play this game.
Dr. Kohler and OHSU disagree and don’t believe that Portland is
either too small or too late in the biotech game. Yet, according to Joe
Cortright, the nine largest centers of biotech average over $800 million
a year in NIH and other research grants. OHSU, in contrast, averages just
over $200 million. For Cortright, this makes Portland noncompetitive.
In terms of grants, OHSU’s $200 million plus in annual research
grants puts the city right in the middle of the 51 cities analyzed by
Cortright and his co-author
Lois Davis, OHSU’s Vice President for Public Affairs and Marketing
and former Chief of Staff to U.S. Sen. Ron Wyden, says that “Joe
Cortright is wrong, he’s just wrong. Oregon is a state known for
doing what can’t be done, and Joe is no biotech expert. Talk to
an expert and they will tell you that Oregon is not too late for
Cortright points at least tangentially to another weakness in the Portland
economy’s ability to support biotech: “By far the most important
source of start-up capital for the biotech industry is organized venture
capital.” Kohler admits this is a weakness in the region’s
economy and it is backed up by a December Oregonian headline, “State’s
biotech firms trail others in growth.” Joe Rojas-Burke reports:
“Oregon’s biological and medical technology companies lag
their national counterparts in revenue growth according to an industry
survey...the results are the latest to suggest that the state’s
drive to promote biotechnology continues to face stiff challenges as biotech
jobs and money increasingly concentrate in long-entrenched regional centers
such as Boston, San Diego, and Seattle.”
Cortright sounds another negative note for Portland’s future chances
when he says, “Biotechnology is highly concentrated within those
metropolitan areas that combine a strong research capacity with the ability
to convert research into substantial commercial activity.”
At this point Dr. Kohler steps in to argue that the glass should be seen
as half full rather than half empty.
Oregon already possesses a fine research university, says Dr. Kohler,
and through expansion and increased NIH grants will soon support an environment
that will create a “critical mass” that encourages commercial
activity—the model is the University of Washington.
“My goal for the institution, OHSU, is that I want it to be healthy,”
says Kohler. “Today we’re 29th in the nation in NIH grants;
we were 89th in the 1980s. What we’re trying to accomplish is something
where you have to make constant progress. We have done some calculations
and we are going to move into the top 20. We need to get over $300 million
a year in research grants. Now it’s $220 million. In the early 80s
we were at $15 million. So we have some targets we can hit.
“Ralph Shaw and Joe Cortright are skeptical, which is fine, but
we won’t get there if we declare defeat. We need a research building,
a chemical building, and we need to recruit aggressively, but the biggest
thing we need is space to grow. The reason we want the North Macadam campus
is that it is very important that the campus hold together. The science
must be strong so that we can have a clustering effect, that critical
mass. Shaw and Cortright are seeing the problems more than they are seeing
the opportunities. Yes, there are big hurdles to overcome in creating
a culture of biotech—access to capital is one. Venture capitalists
have withdrawn from everything right now, even
Commissioner Franscesconi backs up Dr. Kohler on the city and the state
helping OHSU build a North Macadam campus. “This is high risk stuff,”
says the Commissioner, “but it’s worth doing.”
OHSU’s Dan Dorsa has some perspective on the possibility of creating
Seattle-style biotech growth in Portland, because until recently Dorsa
was Associate Dean of Research at University of Washington. “I came
to OHSU from UW because the state of Oregon is going forward with “Oregon
Opportunity” dollars. Washington state is not helping; they are
not investing in the future. I was excited about the opportunity to come
here and help grow a major institution in the heart of this city. UW gets
$600 million in NIH grants; $300 million go to the school of medicine.
They have spun out 100 companies. Last year OHSU spun out four companies
that were directly related to the activities of the OHSU faculty. True,
our research base needs to grow, but we have a strategic plan to grow
it...and we need available lab space for those companies.”
Don Mazziotti is the Executive Director of the Portland Development Commission.
He’s also the point person overseeing negotiations between the city,
the private sector. At stake? Who pays what share of
the estimated $288 million in new services needed
to develop the North Macadam campus and neighborhood. Mazziotti is bullish
on Portland’s chances for a thriving biotech community.
“Ralph Shaw and Joe Cortright believe in mixing
apples and oranges,” says Mazziotti.
Their economic critiques of Portland’s chances for a biotech sector
are accurate, but what we’re looking at
is a bioscience area in North Macadam. It’s a broader term and includes
medical information, medical appliances, and toxicology. Biotech is genetic
engineering for pharmaceutical companies, and we probably won’t
get a big drug company here.”
Commissioner Francesconi agrees, “It will be hard to land a drug
“Joe Cortright’s research,” says Mazziotti, “is
formed on biotech, not focused on biosciences. I saw the Brookings report
and I discussed the contrast. In Oregon we only have 106 biotech companies
and 3,000 employees. That is small compared to California or Massachusetts
or Pennsylvania. But the reality is that OHSU will be one of the largest
academic medical centers on the West Coast. We believe that alone is sufficient
to cause tremendous growth, and with other research institutions located
in our area, OGI, PSU, Providence, that will create a center of gravity
that doesn’t exist now, just as we did in electronics.
“I was Secretary of Commerce in Pennsylvania (in the mid-1980s)
and we put a lot of state money into an area of the central part of the
state,” says Mazziotti. “When we started, people thought we
were wasting money. Today, Merck along with Penn State University employs
25,000-30,000 people in the industry.”
Lesley Halleck, OHSU’s provost, has seen the growth firsthand. “People
come here now and say, this is good for my career. Eleven years ago it
felt more isolated...but now we have a rich environment of mid-career
people. We now have the sciences that make it an exciting place to come.”
And again the model for growth is Seattle, says Halleck, “We are
right at the point that UW was when they began to spawn a lot of companies.
We’re reaching a point now of critical mass.” Critical mass
meaning economic synergy.
Ralph Shaw isn’t so certain about OHSU’s big dreams. Shaw
believes that OHSU has oversold/fabricated the number of biotech jobs
their expansion will create in the next ten years. Shaw’s outspokenness
has occasioned at least one phone call from an OHSU foundation member
telling him to limit his criticism because “This is beginning to
really hurt us.” Shaw’s criticisms our sharp and he reasons
that when you take on a hospital you’re going to get some heat.
After all, says Shaw, “Who can be against the cure for cancer?”
Shaw is also out to prove that the Seattle model for biotech is not worth
Here is the essence of Shaw’s critique on OHSU’s vision and
what city and state officials have bought off on:
“Estimates for the number of people employed by OHSU and the biotech
industry promised in the future range from 10,000 to as high as 20,000.
It is interesting to note that Seattle, considered to be one of the six
leading biotech centers in the United States, employs less than 6,000
people in the biotech industry. Perhaps if one wants to count pharmacists
and pharmaceutical salesman in Oregon’s future biotechnology workforce,
we could get to that number, but I don’t think that is what Oregon’s
taxpayers would accept as a meaningful return on more than $200 million
in state and local borrowings and the estimated $300 million in philanthropy
that is being—for OHSU alone.”
“Keep in mind that OHSU already spends more than $150 million annually
on medical R & D. Where are the companies that have been created from
that expenditure of wealth? After more than 16 years of futilely trying
to find an attractive biotech company in Oregon to invest in, I cannot
offer any encouragement that the future will be any more productive.”
Commissioner Francesconi responds: “There isn’t anyone in
economics I respect more than Ralph, but I think he’s being too
negative.” Like Mazziotti, Commissioner Francesconi believes that
Ralph Shaw is looking too narrowly at the biotech field. “There’s
medical devices, medical information, etc.,” says the commissioner.
OHSU’s new biotechnology czar William New partially reinforces Francesconi’s
point. New told the Tribune: “The state would be better off by directing
their efforts—at least for now-on the medical device business rather
than drug development.”
Hold on, says Shaw: “Medical devices are not a big business, because
they are very expensive and a lot of regulations and FDA approval and
Counters Commissioner Francesconi, “Ralph’s defining the problem,
but I need some solutions.”
Shaw remains turned off at the estimates. “Originally I was told
there would 20,000 jobs by government officials. I said that was off the
wall, and then I was told the number was 10,000.
“I have nothing against biotech or OHSU-OHSU does a fine job-but
we’re talking about putting our entire seed capital and bond rating,
our ability to service debt, on economic numbers that don’t support
it. The cost of being wrong could be high. In my opinion, in order to
get the funding, promises were made that were so far from right in my
interpretation of reality that I was shocked that people didn’t
question these promises.
“I was told that OHSU expansion would create four drugs selling
over a billion each in ten years. I said gee that’s terrific. The
only problem is—there are only three drugs in the industry that
are doing a billion apiece.”
Shaw then makes a critical point about our elected officials.
“I understand,” says Shaw, “that it’s Dr. Kohler’s
responsibility to make his institution what it can be. But it is also
the responsibility of those in government, those making investments in
the billions that will benefit the broad population, to analyze whether
what they’re (OHSU) saying is accurate. There needs to be some logic,
some common sense to the decisions made by people who seek public office.
Elected officials have to lead by asking...my sense is that our elected
officials didn’t ask for a full analysis; instead they asked for
an agreement that will support certain assumptions.”
Lois Davis counters and reiterates OHSU’s position that Shaw is
being a skunk at the party. “The biotech industry is a $47 billion
industry. If we capture only one percent, it would be a billion dollars.
We wouldn’t want to turn our back on that. You can’t predict...they
say the glass is half empty, but the glass is half full.”
Ken Novack, CEO of Schnitzer Steel and soon to be the chairman of the
Portland Business Alliance, is another member of Portland’s business
community who sees the process as unrealistic, only this time not from
the strategic side, but from the planning side. Novack, like Shaw, is
pessimistic about the long-term future of the Portland economy, and doesn’t
expect Schnitzer to be making significant investments in the area for
possibly as long as ten years.
OHSU’s General Counsel, has been the point person working with the
mayor’s office in planning the North Macadam campus. Recently, Stadum
and the city negotiated a compromise on who would pay for the tram, which
appears to be mutually acceptable, which is a relief to OHSU, especially
since Commissioners Saltzman, Leonard and Francesconi were lining up
against having the city pay for construction of the aerial tram.
negotiated a deal with the city that would allow OHSU to construct 250-300
ft. high buildings in the North Macadam neighborhood
in return for a 150-foot greenway on the riverfront.
pretty comfortable where the city is ending up on these code issues,”
says Stadum. “We agreed to a fairly wide greenway because we thought
we could get enough in height capacity.” The reason they wanted
the height? Says Stadum, “If you want research labs you have to
have space to grow. A company might want to build a 300 ft. building—the
floor-to-floor ratio might be 16 ft. rather than 12 ft. If the city wants
to support the development of a bioscience corridor, they can’t
prescribe tight limits that prevent it.”
Novack, whose company owns property in North Macadam, and who has seen
city planners bungle future developments firsthand, isn’t sure that
any of this conversation between OHSU and the city about exchanging greenway
for higher buildings really matters. (Schnitzer is currently doing new
business in Seattle.)
Novack recounts a conversation he had with head city planner Gil Kelly
trying to explain the needs that a biotech company might have. “Biotech
companies know what they want and they will go to an area where they can
get it. We went to Gil Kelly and said these things are the things that
you need to attract companies and his view is that Portland is
so exciting that they’ll just come here?well that’s b.s.”
Adds Novack, “Homer Williams thinks he can build big buildings down
in North Macadam, but he’s basically just trading dollars. If you
want to stimulate private capital you have to ask yourself, what’s
private capital looking for?”
Novack believes biotech companies are looking for these things in this
1)A major research institution
2) The amount of NIH grants for individual scientists and the ability
for turning research into commercial viability
6)Physical availability of space
adds, “The piece I know something about is space. The space demands
seem to be inconsistent. Because of the kinds of criteria by the city’s
planning process, which makes that a negative, the space is a negative.”
How so a negative?
1)”Biotech companies have huge air handling needs; they want air
pressure that is going out and not in.” In other words, eco-roofs
don’t work (the city likes eco-roofs).
2)”Biotech companies are security conscious, therefore, they want
to occupy 100 percent of the building, so they don’t want ground
3)”The big debate with the city is over more setbacks for higher
buildings, but biotech companies don’t want to share, they want
lower squatty buildings.
4)”Because biotech companies are nervous about security, they want
to be in the suburbs, not downtown.”
When asked about Novack’s concerns about the planning process, Commissioner
Francesconi replied, “In San Diego biotech companies are located
in higher buildings,” but he also noted Novack’s concerns
and added again that the North Macadam plan is “high-risk stuff.
We don’t need another PGE Park on our hands.”
Days after Randy Leonard’s election to the city council in November,
OHSU leaders and consultants, including Dr. Kohler, Steve Janik, Steve
Stadum and Lois West invited the new commissioner up to the Marquam Hill
campus to probe his views on OHSU’s expansion. Says Leonard of that
meeting, “The meeting changed my mind. I initially thought OHSU’s
expansion to North Macadam was not the best use of the property, but when
I asked if other developers were interested, what I heard was that they
weren’t. After talking with OHSU, I was able to get myself interested.”
But there’s a price for his support. Leonard says, “If OHSU
wants to be a real business, then I am going to treat them like a real
business. They can’t jump back and forth and that’s why I
think they should start paying a city payroll tax. That would be about
$2 million a year.” The commissioner also mentioned that he was
one of only two state legislators to originally vote against OHSU transitioning
from a state agency to a public corporation.
When asked about the almost $300 million dollars the city through the
Portland Development Commission and developers would have to spend to
upgrade transportation infrastructure and basic services for the North
Macadam area, Leonard responded, “That sounds like jobs, lots of
But it’s the long-term permanence of those jobs that has Ralph Shaw
concerned and has Ken Novack comment that it sounds “like trading
Ann Thayer in a September issue of “Chemical and Engineering”
magazine writes about the pressure cities face in producing thriving biotech
According to the Biotechnology Industry Organization more than 40 states
have initiatives betting on biotech, with 16 using tobacco industry settlements
to help fuel their development plans. At BIO’s annual meetings in
June, about 130 cities, states, regions, and counties were promoting their
efforts and locales.
Beguiled by seeing US biotech industry revenues triple and employment
more than double over the past decade, these would-be developers seem
unfazed by the near-doubling in the industry’s net loss. If the
prospect of losing money weren’t enough, Brookings and others conclude
that the likelihood for spawning a prosperous tech center is slim. And,
they add, even those that can claim success have seen only modest economic
Which is why, according to Ralph Shaw, “I asked them to send me
a business plan, but I never got one.”
For Dr. Kohler and OHSU that’s a lot of hurdles to overcome. Throw
in a controversial tram that has the neighborhood pitted against the hospital
on top of biotech promises and you’ve got what Commissioner Francesconi
some pretty “high-risk stuff.”
Even Sen. Hatfield, who adores OHSU, acknowledges the controversy over
the tram and says, “Dr. Kohler just raised the question, how will
we transport people? He said we could do it here at North Macadam if we
had a transportation plan, and then came the tram suggestion and the city
said you share the cost. It got dropped in our laps. I’m sorry we
got on the tram thing. All of a sudden it looks like it was our proposal.
We do have property on the west side, but the city made a partnership,
and I’m sure it will work out fine. But I don’t feel like
the university should be juxtaposed against neighborhoods.”
“Enough with the problems,” says Francesconi. “I need
some solutions. I support this, but I need to know how it’s going
Shaw explains a time when economic synergy actually happened in our area,
and the size and scale it can take: “In the mid-90s, we started
to see semiconductor companies from Japan and elsewhere move to Oregon.
We had in one year more capital expenditures in Oregon by the electronics
industry than the entire rest of the United States combined.”
In an article published in a December edition of the Seattle Post-Intelligencer
Puget Sound venture capitalist Chad Waite sounds a lot like Ralph Shaw
in his critique of Seattle’s biotech industry—and this in
a city which already hosts the fourth largest biotech company in the country,
Immunex, which did more than a half billion dollars in sales in ‘99.
(Immunex was recently purchased by Amgen of Thousand Oaks, Calif.)
Says the Seattle PI of Waite: “OVP’s Chad Waite, who has nearly
a quarter-century of venture capital experience, said there are “slim
pickings” in health care and biotechnology in the Pacific Northwest.
That led OVP (Waite’s company) to stop making investments in the
sector earlier this year, a decision also motivated by lackluster returns.
But the software industry-anchored by Microsoft-is a different story,
he said. There are still plenty of opportunities to find interesting software
Ironically—maybe even maddingly so to Dr. Kohler and his other bosses—OHSU’s
new biotechnology “czar” William New echoes Ralph Shaw with
these thoughts in the Portland Tribune, “Oregon’s focus ought
to be electronics, computer hardware, and software, wireless-the technology
tool kit.” Newcomer William New is definitely not
Maybe this is why Ralph Shaw is so critical of The Oregon Opportunity
Campaign: “You’re taking dollars away from other opportunities.
We have here in this state a couple of industries in which our companies
are among the world leaders. Computer-aided electronic engineering is
one such industry—Mentor Graphics is the third largest company in
the world and both Synopsis and Cadence Systems have offices in Oregon.
If we took even five percent of what we’re going to spend on The
Oregon Opportunity Campaign and put it into educational programs we could
bring in the highest quality professors and students. We could build a
center of excellence in an area of electronics and grow jobs at a fairly
rapid pace. We could also do this in Display Technology/Flat Panels,”
says Shaw, “taking advantage of capabilities of companies like Clarity,
Sharp Labs, and Planar Systems.”
Maybe that’s the solution Commissioner Francesconi wants.
Having so far weathered well the criticism of OHSU’s plans, Dr.
Kohler is sticking to his script and his dreams for OHSU expansion, and
so far he’s doing a remarkable job selling the state and the city
on the University.
“The relationship between the thriving Seattle biotech industry
and the University of Washington is a case in point...I think it is particularly
interesting to note that the rate of company development has increased
over time, as UW’s total research grew. In other words, it is important
for a research institution to reach a certain size, sometimes referred
to as critical mass, at which point returns on investment become even
higher. For instance, the UW experience show that company development
really began to take off after 1991, as UW crossed the $300 million threshold
in federal research dollars. At OHSU, we are beginning to approach critical
Approaching critical mass. Will OHSU reach critical mass? Will a thriving
biotech industry happen in Portland, Oregon?
Maybe so, maybe no—but it’s a gamble that state government,
city government, private philanthropists and OHSU?s Dr. Kohler are planning
Sidebar 1: Background—Dr.
· Undergraduate degree from University of Virginia—1959
· Medical degree from Duke University—1963
· National Institute of Health in Bethesda, Maryland—1965–73
· Chief of the Endocrinology Division, Department of Medicine,
Baylor College of Medicine, Houston, Texas—1973–77
· Edited: “Diagnosis and Treatment of Pituitary Tumors”
a standard in the field of Endocrinology, 1973.
· Dean of Medicine, University of Arkansas—1977–86
· Dean of the Medical School, University of Texas Health Science
Center, San Antonio, Texas—1986–88
· President, OHSU—1988–current
· Four children-(a son that’s a nurse, and a wife that “hates
going to doctors.”)
2: Friends in High Places
Along the way as President of OHSU, Dr.
Peter Kohler has been tested as a leader but he’s been aided by
some solid relationships
with people in positions to be helpful, the most prominent being former
U.S. Sen. Mark O. Hatfield.
The relationship between Dr. Kohler and Sen. Hatfield became an integral
part of the growth of OHSU, as research awards, primarily NIH grants,
grew from $43 million in ‘90 to $220 million today. Sen. Hatfield
chaired the Senate Appropriations Committee from 1980-86 and again from
1994-96, and describes one of his best moments in the U.S. Senate coming
when he stopped a 15 percent cut in NIH funding in ’94 which had
already past the US House of Representatives. Hatfield also remembers
the art of working the Senate’s Appropriations Committee process:
“Sen. Warren Magnuson
(D-WA) was chairman of the Appropriations Committee in the ’60s
when I got my slot
on the committee. He was a delightful personality, and he told me what
we do in
the Northwest is diversify our interests, translated: three for him and
one for me.
After he gave his farewell address—when he’d been defeated
in 1980 (by Slade Gordon) and
I succeeded him and became chairman—I told him that I served at
the feet of the
master, what is good for Oregon is good for Washington, translated: five
for me and
one for you.”
SIDEBAR 3: PETER KOHLER’S
Dan Dorsa, Vice President for Research at OHSU, talks about Dr. Kohler’s
strength as a leader. “He’s a physician, he’s a researcher,
and he’s competed for NIH grants. That’s not usually true
of university presidents.” Here are some of the challenges that
this unusually talented university president has faced and will continue
to face in the future:
STRIKES—Dr. Kohler has been tested many times as
President of OHSU. He’s presided over the institution during a bitter
58-day nursing strike in the fall of ‘01. In the end, Dr. Kohler
stepped in during two all-night sessions to settle the strike-a strike
partially driven by the expenses OHSU incurred having to be the lone area
hospital to offer its nurses Oregon’s PERS retirement plan.
ANIMAL RIGHTS ACTIVISTS—
Dr. Kohler also managed to navigate OHSU through the hassles of the animal
rights movement and their protests against The Oregon National Primate
Research Center. Part of the animal rights campaign against
the primate center concerned an animal rights activist, Matt Rossell,
who got a job caring for the monkeys only to tell a story of animal abuse
in a four-part Willamette Week expose on OHSU’s Primate Center.
OHSU was later exonerated by the federal government for its treatment
of monkeys. Dr. Susan Smith who runs the primate center says, “Once
bad information is out there it never really goes away, no matter what
the USDA says. That?s the impact of the internet on our lives.”
Dr. Kohler saw the bad information about OHSU continue when KATU’s
Eric Mason reported on animal abuse at the primate center, using footage
from a different testing center not even located in Oregon. The footage
showed a species that the primate center doesn’t even own, yet the
news story implied that the abuse was going on at the Hillsboro campus.
Mason’s story prompted an unprecedented letter of rebuke from Dr.
Kohler to the station manager of KATU.
NURSING SHORTAGES—Dr. Kohler is also preoccupied
by a severe nursing shortage in Oregon and the nation. According to Kate
Potempa, Dean of OHSU’s Nursing School, “Enrollment needs
to double by 2005 or people will die because of lack of nurses since hospitals
will be forced to close their doors.”
RISING HELATH CARE COSTS—Another issue on Dr. Kohler’s
mind is the return to double-digit increases in health care costs because
of the limitations of managed care to hold prices down. Dr. Kohler hired
Dr. Chris Cassell as Dean of the Medical School. Dr. Cassell also sits
on the board of the National Institute of Medicine (The National Institute
of Medicine has been tasked by HHS Secretary Tommy Thompson to come up
with better and cheaper ways to deliver health care).
Kohler is also being tested now that Kaiser has pulled out of former Gov.
Kitzhaber’s Oregon Health Plan, leaving OHSU as the sole provider
for OHP patients. These issues consume Dr. Kohler’s day.
CHANGING STATUS—In ’95 Dr. Kohler’s business
leadership was tested when he led the conversion of OHSU from a state
agency to a public corporation. It was tested again when he helped lead
the merger of OHSU and the Oregon Graduate Institute, so that OHSU researchers
could take better statistical advantage of the completion of the Human
Genome Project. And it was tested again with the passage of The Oregon
Opportunity campaign in the ‘01 Legislature.
BIOTECH—But perhaps at no time will
Dr. Kohler’s leadership be tested more than now as OHSU prepares
to make the leap to a North Macadam Campus. The rationale for the expansion
is based on OHSU projections/
promises that public and private investment will make Oregon a commercial
player in the nation’s biotech field. Kohler has done a good job
convincing state and local politicians of the biotech promise.