|The Pennington Biomedical Research Center has built an international reputation, and an impressive campus, but inadequate funding portends an uncertain future.|
Last fall, officials at the Pennington Biomedical Research Center delivered a financial report to the state Board of Regents that sent shock waves through higher education circles—and with good reason. The report suggests that the 25-year-old institution is facing serious financial challenges, with a zero fund balance in its reserve account, a projected year-end deficit of $365,000 and—perhaps most troubling—no money to open and operate two new buildings and a third one that's being refurbished on its 234-acre campus on Perkins Road.
That a higher education institution would go before the Regents, hat in hand, with a doomsday scenario is nothing new in Louisiana. But Pennington?
Over the past two-and-a-half decades Pennington has established itself as one of the top biomedical research institutions in the world, with a specialty in the chronic diseases—diabetes and obesity—that are now the nation's leading health threats. The center has attracted rock star-caliber scientists to its ranks and churned out studies and reports that have been published in prestigious medical journals and splashed across the headlines of mainstream media outlets. It has expended more than a quarter of a billion dollars in federal research grants since it began operating—about one-third of the total $750 million or so it has received in federal, state, private and industry support over the years—and has the added advantage of being located smack in the middle of the state with the highest obesity and diabetes rates in the country.
That Pennington should be struggling for financial survival after a quarter century of some very legitimate successes simply doesn't make sense. What has gone wrong?
“We're doing very well on one level,” says Dr. Steven Heymsfield, executive director of the center. “But [financially] it's like a cliff. … At some point we're going to plummet.”
It wasn't supposed to be this way. When Pennington opened in 1988, it promised to put Louisiana on the map of the biomedical world, something that was badly needed in a state suffering from a brain drain and an over-reliance on a dwindling oil and gas industry. The center was created with a $125 million donation from retired oil magnate C.B. “Doc” Pennington under the assumption that, if you build it, they will come.
The idea was to put in place a world-class research institution with all the bells and whistles necessary to attract top scientists and, eventually, big drug companies, food manufacturers and anyone else that wanted to capitalize on the basic research that would come out of Pennington's shiny, new labs.
Some of that has happened. The researchers have come and produce great science. Their DASH diet is considered one of the most effective in the world for lowering blood pressure. Their Diabetes Prevention Program is revolutionizing care for high-risk individuals by teaching them how to prevent the disease. Their collaborations with the Department of Defense have produced a new food ration for deployed personnel that enables them to function at peak physical and mental performance. And those are just three better-known examples.
But the economic development hasn't come, at least not in a big way, not yet, which is in large measure why Pennington continues to face financial hardships today. In sum, Pennington hasn't figured out how to make money doing federally funded basic research.
Officials with Pennington and LSU say no one really has. They argue that the technology transfer process takes time, that it can be years or decades before discoveries in the lab evolve into marketable drugs and technologies. That is true, but it is equally true that an institution can't just rely on state and federal dollars to support its operations. It needs to take its studies to the next level and actively recruit industry partners, something Pennington now concedes it hasn't done very well.
It hasn't helped that Pennington has always been something of a stepchild within the LSU System, with no students or alumni to rally around it and write a check when push comes to shove. Then there's the fact that the center has done an admittedly abysmal job of marketing itself and making folks around the state understand what it does and why it matters. As a result, lawmakers—who traditionally favor bricks-and-mortar projects over long-term, esoteric work like basic research to begin with—have felt little incentive to go to bat for Pennington and fund it at the level officials at the center believe it needs to be funded.
PENNINGTON AT A GLANCE
The Pennington Biomedical Research Center was established in 1988 with a $125 million donation from C.B. "Doc" Pennington. Located on a 234-acre campus, the center has 80 faculty, 50 postdoctoral fellows and 19 highly specialized core service facilities in the areas of diabetes, obesity and related chronic diseases. Its executive director is Dr. Steven Heymsfield, who was hired in 2010.
Since its inception, Pennington has received nearly $700 million from the following sources:
Federal grants: $269.9 million
State appropriations: $173.4 million
Private grants, contracts and donations: $254.5 million
The Pennington Medical Foundation oversees the original Pennington donation and is dedicated to buildings and facilities. Its current balance is $69 million. Its president and CEO is Bill Silvia. The Pennington Biomedical Research Foundation is the development arm charged with raising money to support the research activities at the center. Last year, it contributed approximately $2 million to operations. In the first six months of the current fiscal year, it has raised more than $1.6 million. Its director is Jennifer Winstead.
Whatever the causes, the recent financial problems have served as a serious wake-up call for Pennington, and officials with the institution are now scrambling to find a solution. They are seeking out industry partners, trying to create synergy with research programs and embarking on a rebranding and marketing campaign.
The problem is that it may be too late. In the late 1980s, Pennington was at the forefront of an industry that is now crowded and competitive. In the past 25 years, the biomedical research landscape has changed. Has Louisiana once again blown an opportunity to get out in front while other states have passed it by?
“It's true. We haven't figured out how to leverage the projects [that have come out of Pennington] … so we have to find another method. We have to be more entrepreneurial, more businesslike,” says LSU System President John Lombardi. “Other places in the world do that and have developed that, and they started out like us. … The only question for us is, do we have enough time?”
When speaking to Dr. Steven Smith, one can almost hear the clock ticking. Smith is one of those rock-star researchers, the kind of physician-scientist who lands multi million-dollar grants from the National Institute of Health. For 16 years he studied diabetes, obesity and the metabolic effects of cardiovascular disease at Pennington, research that led to new ways of identifying and testing treatments for the diseases. In 2010, he was lured away by the Sanford-Burnham Medical Research Institute in Orlando, Fla.
For Smith, it wasn't just a bigger salary that made the offer too good to refuse. It was the long-term commitment to Big-R research by a state that he says feels more welcoming and supportive. State leaders there “get” economic development, something he sees lacking in Baton Rouge and Louisiana.
“You go across the country and people have a different view of the value of high-level, biomedical research [from what] we have in Louisiana, and that is the reality that Louisiana scientists face, particularly at the Pennington,” he says. “That flavors not only how you recruit people but how you retain people.”
Retaining top researchers is key to the success of an institution like Pennington, not only because of the intellectual capital they contribute but because of the financial capital they generate. Each star researcher like Smith is a mini-engine of economic development who can bring to the institution as much as $10 million in research grants. Smith himself also creates jobs, somewhere between five and 10 well-paying, research positions, many of which are filled by local scientists. Smith's staff at Pennington included researchers with undergraduate and graduate degrees from Tulane, LSU and Southern.
“That's a key point that people really miss about research,” Smith says. “PIs [principal investigators] are really catalysts to create local job growth.”
Smith isn't the only star PI to leave Pennington for greener pastures. In the past three years, seven prominent researchers have left, most lured away for institutions that not only offer bigger salaries but have demonstrated a long-term appreciation for what basic research means to the economy.
Louisiana, on the other hand, has been cutting its appropriations to Pennington, as it has to all institutions that aren't protected with dedicated revenues. In the past three years, the state has cut Pennington's funding from $16.3 million in 2008 to $13 million last year. That may not sound so dire, until you consider that for every $1 Pennington gets from the state it generates $3 of its own, mostly from researchers like Smith and his federal grants.
“The multiplier works both ways,” says Mark Alise, Pennington's CFO. “So when you give us $1, it becomes $3. …If you take away $1, you're really taking away $3.”
The state budget cuts didn't single out Pennington, but they hit the institution at a particularly difficult time. Federal research dollars have also been declining, while the center's expenses have gone up, thanks to three new construction projects that have made Pennington house rich but cash poor. The structures include a new clinical research center, biomedical imaging center and pediatric obesity clinic, the last of which is not a new building but a renovation of an existing structure on the campus.
Ironically, all three projects were funded by a $50 million state appropriation in 2008, a year when the state was enjoying a revenue surplus. But the capital outlay did not include operating funds for the buildings, which has put Pennington officials over a barrel and left the structures only partially complete and largely unoccupied. (See the sidebar here.)
“When Jindal gave the original $50 million, it was pretty clear our base support had to go up to support those new buildings,” says Heymsfield. “In fact, not only have we not gone up, but we've gone down.”
But is it the state's job to fund Pennington's operating expenses? That question gets to the heart of the challenges Pennington continues to face, even after a quarter of a century in existence and a reputation as a world-class research institution. When “Doc” Pennington gave the original $125 million to launch the center, he made it clear that he wanted his money spent on constructing the facilities. It would be up to the institution to do the rest. The state has basically adhered to that same philosophy all along.
For some years it worked, too. Pennington was able to build a campus and attract star scientists, who did a good job of landing NIH grants and contracts to fund basic research. But in recent years, the federal government has cut back on its grants. In the early 2000s, the NIH funded the top 25% of grant proposals. Today, it funds between just 5% and 10%, which makes it significantly more competitive and challenging to keep funding levels stable.
Coupled with that is the fact that basic research as a business model can only go so far. That's because basic research is the first and least lucrative stage of a long scientific process. Clinical research and population research—where discoveries are tested not in the lab but on people—are where you start to see drugs and technologies really develop from the findings that are done at the basic research stage and pay off. For a long time, Pennington was content to busy itself almost exclusively with basic research.
“The purpose of Pennington was not to change health care in Louisiana or in the world but to do the research on which those changes in health care can take place. … And they've done a superb job at that,” Lombardi says. “It's like saying, why haven't researchers cured cancer? They do basic research that creates the knowledge that allows others to cure cancer.”
Lombardi is an advocate of Pennington. In fact, he took a lot of heat late last year for trying to soften the blow of midyear state budget cuts to all higher education institutions in the state by taking proportionally less from Pennington than from the LSU main campus. This didn't set well with officials at the main campus and, sources say, heightened tensions between Lombardi and LSU A&M Chancellor Mike Martin.
But then, Pennington has always had an unusual relationship with the LSU main campus. On one hand, it is dependent on LSU's largesse to make sure it gets an adequate appropriation. That's because it has no revenue-generating ability of its own. Unlike other institutions in the system, Pennington has no students onto whom it can pass tuition increases, no alumni it can hit up with an annual appeal.
HAS LOUISIANA DONE ITS PART?
There are those who insist state officials don't appreciate the Pennington Biomedical Research Center and haven't adequately supported it over the years. But state officials say they've been more than generous with an institution that needs to do a better job of leveraging its state dollars. More...
On the other hand, Pennington is extremely valuable to the main campus. That's because the LSU System defines Pennington as an arm of the main campus when it calculates total research expenditures, which is no small thing. Adding Pennington's research dollars—$20 million last year—to the main campus's total last year increased it by one-third to $60 million or so. Those higher dollar figures go a long way toward increasing LSU's national profile and national rankings.
“This contribution is a significant part of the LSU research profile, so it's in the main campus' interest to help Pennington,” Lombardi says. “The main campus thinks narrow. We're trying to get them to think bigger.”
If the main campus doesn't see the big-picture importance of Pennington, elected officials around the state and the public at large don't even come close. At least people in Baton Rouge have heard of Pennington, though that's likely as much because of the hot air balloon festival that was held on the grounds there for several years as anything. Few really understand what goes on there. As for folks in the rest of the state, forget it.
“This Pennington enterprise, if they have failed to do anything, it is that they have failed to explain to the state at large how valuable this place is,” Lombardi says. “It is a national treasure. You cannot go anywhere in the U.S. and say ‘obesity' and not hear the name Pennington. … They all know it. We don't know it. Louisiana doesn't know it, and this is the state with the worst obesity problem in the world.”
That's particularly a problem with state lawmakers, as they're the ones who have to justify to constituents why they're tossing state funds at an institution that, on paper at least, already looks like it's been well-cared for by the state. Gov. Bobby Jindal found that out when he backed the $50 million appropriation for Pennington in 2008.
“[The governor] told me that there's a lot of jealousy in this state, and when Pennington is given money, a lot of people react negatively,” Heymsfield says of a conversation he had earlier this year with Jindal. “He also told me his administration took a lot of heat when they gave us the surplus $50 million … because funds are so tight and we're not well-known enough and we haven't promoted ourselves well enough.”
Pennington officials are the first to concede they've done a terrible job of telling their own story. From the get-go they lacked a compelling mission statement that could resonate with the population. In a state that is already slow to grasp the long-term potential of Big-R research, that has been a nearly fatal flaw.
“Philosophically, I have always taken the position that the Legislature and the governor listen to the people and support things that the people say are important,” says Bill Silvia, who heads the Pennington Medical Foundation, which oversees the original Pennington donation and is dedicated to buildings and facilities. “So to the extent that we are not receiving the support we feel we should receive, I don't think we've communicated to people how important we are. We have only ourselves to blame.”
Rebranding the center
If there is a silver lining in all of this, it is that Pennington is getting serious about addressing its problems. For one, it's rebranding itself, embarking on a new marketing campaign that is designed to more effectively communicate to the public both inside and outside Louisiana what it does and why it matters.
That has meant shifting the focus from “nutrition and preventive medicine” to “discovering the triggers of chronic diseases and improving health throughout the lifespan.” If that sounds like a mere semantic, it is. But language is important in a mission statement because it gives an institution a selling point around which to rally others, and Pennington is selling itself, driving home the point in stylish new media kits and stump speeches foundation officials make to civic organizations, business groups and elected officials around the state.
“We've created a brand platform based on the message that our research is to discover the triggers of chronic disease,” says Jennifer Winstead, who heads the Pennington Biomedical Research Foundation, which is separate from the Pennington Medical Foundation and raises money to support research. “We're a world leader in setting the standard in obesity research and chronic disease, which can lead to so many other diseases. So our vision is to eliminate chronic disease.”
The biomedical foundation is using its new focus as the starting point for a fundraising campaign that will span the globe and target corporate partners. So far, the campaign is still in the planning stages and no target goal has been announced, but it is expected to be considerably greater than the $2.2 million the foundation raised last year to support research at the institution.
“We have engaged someone who has quite a bit of experience with global philanthropy,” says Winstead, who declines to identify the consultant. “He is helping us develop a strategy and implementation plan and to develop new partnerships and alliances with corporations that have a vested interest in the field we're working in.”
A NEW MODEL
Every dollar in state appropriations that comes into the Pennington Biomedical Research Center is leveraged to equal $3 in self-generated funds. As federal research dollars have dwindled, however, Pennington is rethinking the way it does business. Here are some of the ideas the center is developing as it looks for other ways to support itself.
Heymsfield is also taking his show on the road, though he's not selling. He's begging, trying to explain to leaders and elected officials about the seriousness of Pennington's financial situation. As a scientist, it's not easy for him to play politics and do development, but he says he's learning, setting up daily meetings with decision makers.
“I've gone down the list of every single person I know in Louisiana … and knocked on every door,” Heymsfield says. “I've been painfully honest … and there was some sense that I shouldn't cry wolf. I'm not crying wolf.”
While he's searching for funding solutions, Heymsfield is taking a practical approach and reducing expenses. He has turned off the fountain to lower the water bill, cut back on lawn care, hosted fewer educational seminars and left unfilled positions lost through attrition. So far, he hasn't had to lay off any faculty, but that could come next year.
Heymsfield and others are also working on long-term solutions that would come closer to bringing about the kind of meaningful change Pennington really needs to develop a new business model. They're trying to forge partnerships within the local and national medical and pharmaceutical industries, and find ways to get local physician practices, for instance, to move into the clinical building. They're also considering a plan to expand the LSU Health Sciences Center medical school to Baton Rouge and locate it on the Pennington campus.
As currently envisioned, the plan would increase the medical school and create a partnership with the main LSU campus that would result in a new M.D.-Ph.D. program, the first of several joint degree programs that could eventually involve the law school and business school as well. Startup costs for the expansion are estimated to be around $10 million, and annual operating costs would be between $5 million and $7 million, relatively minimal for the long-term benefits.
“When you think about the impact this could have by training between 40 and 70 new doctors a year and training new physician-scientists, it's really exciting,” says Dr. Larry Hollier, chancellor of the LSU Health Sciences Center in New Orleans. “When you talk about economic development, this would be a boon to LSU and Baton Rouge … and the LSU Health Sciences Center is firmly behind it.”
But will it be enough? Those involved in the conversations about Pennington's future say the only way the story has a happy ending is if Pennington broadens its mission beyond basic research and moves into clinical and population research on a larger scale, which will mean creating industry partnerships and working with the LSU Medical School and many others as well.
“If we come up with a plan that expands the scope of Pennington to support its core mission,” Lombardi says, “then we have a story to tell.”
That's easier said than done, and it is being undertaken at a time when the institution has fewer dollars to spend than ever on things like marketing and recruitment. But Pennington officials are determined. Heymsfield says he's tired of playing it safe and no longer concerned about whether his honesty regarding the seriousness of the situation will get him in trouble. The future of Pennington, he believes, is too important.
“The sense I have is that I shouldn't say anything,” he says. “I've followed that rule for months, and it hasn't gotten me anywhere … so saying something will probably get me nowhere, too. I guess you have to yell … but what choice do I have?"
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