Creating J&J's Cardiology Franchise: An Interview with Marv Woodall

In this interview, Marv Woodall, the architect of Johnson & Johnson's cardiology business, reflects on the ups and downs of building a stent business, integrating a hostile takeover, and why--despite all their success--stents have not met their original goal.

The architect of J&J’s cardiology business reflects on the ups and downs of building a stent business, integrating a hostile takeover, and why—despite all their success—stents have not met their original goal.

by Stephen Levin

Johnson & Johnson has been among the leaders in interventional cardiology devices for so long that its presence is seen as one of the immutable forces in the industry. It would be hard to imagine a cardiology market without J&J. That image owes largely to the fact that the company pioneered the development and commercialization of coronary stents, one of the device industry’s few true blockbuster products.

But many people may not recall that J&J was not among the first wave of companies to capitalize on the initial interventional cardiology boom that resulted from the introduction of balloon angioplasty, the procedure that essentially created this new clinical specialty. J&J was late to the party, lacking any cardiology products or market presence until 1988, 10 years after the first coronary angioplasty was performed in the US. At that point, the company’s senior management decided they needed to enter the cardiology market and tabbed Marvin L. Woodall, a rising young executive who had come up through the sales ranks to run several businesses at J&J, to head this new undertaking, which was initially called Johnson & Johnson Interventional Systems (JJIS).

Woodall ran this group for 13 years, managing through some of the most tumultuous product markets in the industry’s history. Most striking, of course, is the phenomenal success of the Palmaz-Schatz stent, the first coronary stent approved in the US. This product introduction created a blockbuster market for these devices that J&J initially had to itself, only to eventually lose its market domination just as dramatically. Woodall also laid the foundation for J&J’s re-emergence as the leader in the stent market by creating the product development program that led to the company introducing Cypher, the first drug-eluting stent, after his retirement.

Woodall recognized that J&J could not achieve the market leadership position it sought in cardiology through internal R&D alone. He spearheaded efforts to acquire several of the then-leading cardiology companies, including ACS and Boston Scientific Corp., only to be frustrated when nearly completed deals for both fell through. That left Woodall with a difficult decision because the only remaining major player in this space, Cordis Corp., was an unwilling acquiree. Convinced that Cordis was J&J’s last best hope to establish the larger company as a major presence in this market, Woodall launched the first successful hostile takeover in the device industry. The deal ultimately enabled JJIS to achieve its goal of becoming a market leader in cardiology, but only after managing through a difficult integration period that hampered the parent company’s overall product development efforts, contributing to its losing leadership in the stent market.

The successes that Woodall pioneered in his tenure running J&J’s cardiology business were not limited to product innovations. He also initiated the use of evidence-based medicine, along with reimbursement efforts and health economics data to support the company’s new product introductions. Among the accomplishments these efforts produced included the first randomized clinical stent trial, and J&J becoming the first to receive incremental reimbursement from CMS for a device that had not yet been approved by FDA, the Cypher stent.

Yet Woodall acknowledges that, for all of the success that coronary stents achieved in treating restenosis, it took him several years after retiring to realize that those devices did not accomplish what he and many others had originally hoped they would: saving lives. That realization led Woodall to direct another effort at reducing cardiac mortality by starting Prescient Medical Inc., a company focused on detecting and treating vulnerable plaque. Woodall also came out of retirement to become CEO of the [Cardiovascular Research Foundation], which sponsors the annual TCT conference, the leading international interventional cardiology meeting for physicians and industry. Marv Woodall sat down with IN VIVO for the following interview, covering his career and current issues facing the cardiology industry.

Q: Let’s start by talking about your background and how you got into the medical device industry.

MARV WOODALL: Throughout my life, I’ve been an entrepreneurial kind of guy with a strong interest in sales and marketing and later in product development. I’m from Houston and went to the University of Oklahoma. When I graduated from OU, my degree was in management and finance, and I was really more interested in marketing, leading to management. My first job was as a salesman for Procter & Gamble around 1960, which is a great place to start to work out of college. P&G is very disciplined and an excellent place to learn how to do brand and product management--they wrote the book on it. I learned a lot there but found I wasn’t that interested in the grocery business or retailing in general. I answered an ad in the Lubbock, Texas Sunday paper for Johnson & Johnson looking for a sales rep. At first, they didn’t have a spot for me, but I persistently stayed in touch and about six months later, they offered me a job as a sales rep in San Antonio, so I joined J&J in 1963.

Q: Describe your early career path at J&J.

I started out as your classic J&J sales rep, selling surgical kits, dressings and equipment to hospitals and doctors in the southern half of Texas, and then held several other sales positions before they asked me to move into product management in 1968, which required me to move to New Jersey. When they asked me to take the job, I said, "Yes, if I can afford it," because my house in Texas cost $16,800 and my house near New Brunswick, New Jersey cost $32,000, and my salary was around $15,000. I like to say that I got promoted into poverty because we barely made it. Most of my friends and family in Texas thought I was crazy and that I’d be sorry that I crossed the Mason-Dixon Line but I’ve never regretted making the move.

My first job there was as an assistant product director with the Surgikos division, responsible for disposable surgical barrier packs and gowns. I eventually became group product director and continued moving up the ladder at J&J until in the mid-1970s, they asked me if I’d like to take on some international responsibility. That sounded like quite an adventure, so in 1975, me, my wife, two kids, and our dog all made our second major move, this time to Brussels to be a European marketing manager.

Q: Your career represents a dying breed, which is those executives who spend all of their professional life with one company. What was it about J&J that kept you there for all of those years?

First, I was fascinated by all of the different aspects of health care in which the company was involved. Those of us in this industry are fortunate to be developing products that improve peoples’ health, so that was very attractive. Also, I loved the caliber of the people that I worked with at J&J and their high ethical standards. What kept my interest was the variety of responsibilities and assignments at J&J. In the 37 years I was there, I had 21 jobs, 19 bosses, and we moved 14 times.

Q: After Brussels, you came back to the US, and then nearly took on another major international assignment in Russia. Talk about that next portion of your career and how you got into cardiology, which became your primary focus.

We moved to California for me to run Critikon, a critical care monitoring business, and then I took the job as president of a small ophthalmic company that J&J acquired in Horsham, Pennsylvania called Site Microsurgical. That move brought us to Doylestown, which became our primary home and is where we still live today.

J&J ended up selling that company, and in the late 1980s, when the break-up of the Soviet Union appeared imminent, they asked me to move to Moscow to run J&J’s Russian business. We were empty nesters by that time and seriously considered this opportunity, including visiting Russia. I agreed to take the job one day, and left the next day to visit our daughter, who had just graduated from Auburn University and was working in Atlanta. While we were there, somehow my secretary tracked me down on a Saturday—this was before cell phones. Bob Campbell, the number-two guy at J&J, called and said, "Marv, we don’t want you to take that job in Russia because we’re going to make a serious commitment to the field of cardiology and we’d like you to be president of J&J’s cardiology business. It’s a start-up, which we know you like, and you’ve done them before." I had started up several companies for J&J in Europe and the US, so I decided to accept their offer and forget Russia.

Q: What was the state of J&J’s cardiology business at that time?

It was a fledgling business. We had no products, just some concepts. For example, there was a group of about 20 engineers at Ethicon [Ethicon Inc. is another J&J operating company] working on what was called the Biomer project to produce a synthetic saphenous vein graft, which has always been the Holy Grail for the field of bypass surgery, but no one’s ever been able to achieve that and we weren’t able to do it either. The company didn’t know what to do with that group because they were dropping that project. There was also an idea for an atherectomy device that hadn’t been developed.

Q: What were the first projects you undertook in launching this new business?

We started planning out this new entity and, in looking at what cardiology resources J&J had, we found that Ethicon had entered into a licensing agreement with a physician named Julio Palmaz to develop a device called a balloon expandable stent.

Q: Many people don’t realize that the stent came to J&J through Ethicon. Why was that?

JJIS, the entity that eventually would be primarily responsible for the cardiology business, did not yet exist. Because Ethicon was a large, well-funded organization, they had a business development group out looking for new ideas, which is how the balloon expandable stent patent was licensed from a small group called Expanded Graft Partnership (EGP), which consisted of Drs. Julio Palmaz and Richard Schatz, and their business partner, Phil Romano.

Q: In 1988, interventional cardiology was still emerging as a clinical specialty, relying almost exclusively on balloon angioplasty, and it wasn’t at all like it is today. What was there about cardiology that attracted you to this new opportunity?

In my early days as a J&J sales rep in Houston, I called on Drs. Michael DeBakey, Denton Cooley, and other heart surgeons because one of our products was Surgicel, which was an absorbable hemostatic knitted fabric wrap that is still sold today. Dr. DeBakey needed it to wrap his first textile grafts for aortic aneurysm repair because they bled like crazy, and this product was one of the only things that could be used to immediately stop the bleeding. Through working with those surgeons I became fascinated by the circulatory system, and this experience made the cardiovascular system the most interesting part of medicine for me. Throughout my career at J&J, I learned more about cardiovascular medicine, thanks mostly to the help of many supportive physicians who became close advisors and colleagues.

Q: At that time, stents were not seen as the blockbuster product they are today. In fact, many clinicians questioned the clinical value of these devices. What was your initial view of the impact of coronary stents?

Within a few months, I became convinced that the balloon expandable stent was going to be an extremely important medical device, maybe one of the most important.

Q: What was your strategy for building J&J’s cardiology business?

The plan was to initially pursue peripheral, instead of coronary, stenting, even though we knew the big opportunity was in coronaries. The very first stent we ever manufactured and launched was the Palmaz iliac stent. In 1991, we had the first approval for an iliac stent in the US, and we were also selling them in Europe.

Q: Why did you pursue iliac stenting first?

It was a safer procedure, much less risky than coronary procedures. We wanted to gain some confidence in implanting this stainless steel tube in humans. Plus, I needed to have some revenue, and iliac stents enabled us to start generating revenue.

Q: Where did the cardiology business fit within the decentralized J&J corporate structure, and how hard a sell was it to convince upper management to keep this business going in the early years?

Not long after the decision to start a cardiology business, J&J created JJIS, which managed the interventional cardiology business from 1988 to 1996, until the acquisition of Cordis. In terms of J&J’s upper management, credit goes to Ralph Larsen, who was chairman at the time, because he and his team were staunch believers in J&J moving into new areas and cardiology was at the heart of that, along with orthopedics, which they accomplished with the acquisition of DePuy. Their long-term viewpoint and willingness to invest over $25 million per year to establish JJIS and the cardiology franchise for J&J was the key to that business’s success. Every year, I had to have a very good operational and financial plan, explaining how this new business for J&J was going to develop, and we had to demonstrate that quickly. By starting with iliac stents, that gave more credence to our story every year because when we started selling iliac stents in Europe in 1990, we were able to generate around $1 million in revenue and the next year that increased to $8 million.

Q: You were able to ramp that business up pretty quickly, weren’t you? Talk about the early growth of JJIS.

Yes, that’s right. The business grew to about $16 million in our third year and then went to something like $35 million the next year. We were doubling the business every few years from 1990 to about early 1994, when we reached the $40 million dollar range. Then we got approval for the coronary stent at 4:32 p.m., on August 3, 1994, and the ramp-up really took off. Sales that year reached $150 million pretty quickly, and they continued to increase.

Q: While many doctors initially questioned stents’ clinical value, once the device was approved, they were clamoring to use it, which created an issue for the company that alienated some physicians. Talk about how you handled the physician training process.

After we got approval, one of the very first things we had to do was secure proper training for all the interventional cardiologists who wanted to use stents, many of whom had been doubters and naysayers, but now they realized that they’d better learn how to implant stents because it was going to be a very important part of their practice. This was a huge responsibility to train 4,000 interventional cardiologists.

The week after we got approval from the FDA in August 1994, we were getting 60 to 100 phone calls per day from doctors who wanted to be trained. We had a very hard-and-fast rule: we did not ship any stents to any doctor at any hospital unless he had been trained by an authorized proctor. We took a lot of heat over that; many doctors said we were being too conservative. They simply wanted us to ship them the stents and let them figure out how to implant them. While it was hard to turn down a doctor who was irate on the phone, we had to be tough because doctors could have used them inappropriately, either through overuse or through inappropriate patient selection. But as a result of us strictly adhering to our training requirements, stents have generally been used correctly in one of the safest procedures there is today.

Q: For as successful as the coronary stent was for JJIS, the company also took a lot of heat from hospitals on the pricing front that claimed this was a budget buster for cath labs. And unlike in drug-eluting stents, where J&J was the first to receive increased reimbursement for a device that had not yet been approved, reimbursement for the first bare-metal stent lagged well behind its approval. How did you address the early pricing and reimbursement issues?

Q: After we completed the education process, the next big issue for us, of course, was reimbursement. Honestly, we didn’t know too much about reimbursement back then. One of the first things I did was assign full-time reimbursement responsibility to Paul Marshall, who was a product director. Paul’s reaction was to come into my office and ask what he’d done wrong to deserve this assignment. I told him, "Paul, I believe you're going to lead us in this field that is going to be so important to us you just cannot imagine." He said, "OK, I’ll trust you." Paul was a true pioneer in the field of medical device reimbursement, and later I hired Dr. Brian Firth to work with Paul and they did great things for the company in this area.

Q: Reimbursement became an extremely important topic for us because we were adding quite a bit of cost to the budgets in cath labs, and they were very upset even though their patients were receiving improved care. Working through J&J’s Washington office, we were able to get appointments with the right reimbursement people within the Medicare program, but things were moving very slowly. Finally, I asked for a direct meeting with Donna Shalala, who was then Secretary of Health, Education, and Welfare, to explain the technology and what it meant to Medicare patients. She granted me 30 minutes. I put on my best salesman hat that day, and at the end of 30 minutes, she said, "Thank you, I now understand what you need, and we’ll see what we can do about getting it done." Sure enough, within a year, they approved it, and that’s how we got reimbursement in the stent area.

Q: Coronary stents became one of the few true blockbuster device products, and for several years, J&J had this huge market pretty much to itself, which is an unusual dynamic in the device industry. It is also unusual for a large device company to develop such innovative technology, particularly one that was so highly criticized in clinical circles—a 1994 New England Journal of Medicine article critical of stents comes to mind. Was there something unique about J&J that enabled it to overcome those obstacles in developing the coronary stent, and how important was it that you didn’t have an existing franchise to protect in cardiology?

Yes, it was an unusual case. One of the reasons that JJIS was so successful in leading this process from the very beginning was that J&J operates under a management philosophy of decentralization, which allows the management and development teams to focus completely on an area of medicine, with minimal distraction. In this case, JJIS had no ongoing angioplasty business to defend, so we focused all of our efforts on completing the process to bring the stent to market. J&J was willing to be patient for the six or eight years we needed to complete all the research and clinical trials, and to invest a lot of money to develop this stent, even in the face of significant criticism. The company also had the resources and was willing to make the bet on this technology.

I will never forget that New England Journal of Medicine article; it was about the Wall stent’s problems in Europe and was reported by Patrick Serruys[, MD]. I was returning from a January ski trip and got paged in the Denver airport by Bob Campbell, who was then vice chairman of J&J, and who had recruited me to lead JJIS, asking me, "What is this all about?" I said, "I don’t know, let me read it." The report caused a lot of commotion, but since our product was balloon expandable, the negative clinical outcomes did not apply to us.

Another important reason why we succeeded in this field was because we were not in the angioplasty business.Had we been in the angioplasty business, stents would have been a supplemental, and in some ways a competitive, product to an angioplasty product line because one of the beautiful things about the PTCA business was that it was a frequently repeated procedure. It was like a built-in annuity.

Thinking back, it really was a unique set of circumstances that enabled J&J to succeed in developing and marketing the first, successful coronary stents. We were willing to focus on it, created a team and left them alone, weren’t worried about an existing product franchise, and were willing to spend the money—which amounted to around $100 million.

Q: J&J also pioneered the application of evidence-based medicine in medical devices through its use of randomized clinical trials for bare-metal stents, a practice that today is an essential component of new product development, especially in interventional cardiology. You were taking quite a risk conducting the first clinical trial on a bare-metal stent. Why did you adopt that strategy?

You’re right; we were willing to make that big clinical bet. One of the most important pioneering things we did was deciding to sponsor the first randomized, controlled clinical study for a device, the STRESS trial. Every other stent trial since then has been patterned after that study. Many people argued against doing the trial because if it didn’t work, then the stent project was over, whereas you could string it out for a lot of years if you didn’t have the evidence that it didn’t work. But I said, "No, I want to know as soon as possible so that if it doesn’t work, we can get out of the business right away."

Q: The coronary stent, of course, produced dramatically successful clinical results, which drove its rapid, widespread adoption. As we’ve discussed, that adoption fervor created a backlash as hospitals accused J&J of pricing the stents at a premium. Often overlooked, however, is that when competitors like Guidant and AVE eventually brought stents to market, their products were actually more expensive than yours, yet J&J was criticized for its pricing policies. Is that accurate and how did you address the pricing issue?

I’ll just say that they certainly didn’t price their stents below ours. Regarding the price, we tried to explain to our customers all of the things that we were doing from a reimbursement standpoint, and that we very much on the same side of this issue because we wanted them to be properly reimbursed. The problem was not with us but with the reimbursement system, which had not been properly educated as to the benefits of these devices and therefore was not acting appropriately. Before stents were approved, I don’t know of another instance in which hospital administrators did not take it upon themselves to seek reimbursement from their third-party payors. But when stents came along, they took it upon themselves to blame the stent company; namely, JJIS and me. Instead of beating up on Blue Cross and Prudential for not making good coverage decisions, we became the easy target of their frustration.

Q: Emerging out of this pricing issue was another area in which J&J broke new ground as a result of its success with stents. You were one of the first product companies to employ health economics as part of an overall product strategy to demonstrate the cost benefits that stents provided. How did the company get involved in that area?

Based initially on the work that Paul Marshall did, we knew that we were going to have to provide information demonstrating the cost effectiveness or savings that stents provided in order to help justify their price. Fortunately, we had met Dr. David Cohen [a physician who is among the leaders in studying the economic impact of innovative devices] early in his career, and he was very helpful in designing the health economics studies that have helped us all understand the financial dynamics of the stenting procedure.

We understood that stents were going to increase the cost of interventional procedures more than other typical products. All of a sudden, hospitals were faced with a device that cost around $1,600 each, and if the physician used three of them, that increased the cost of that procedure by around $5,000. We knew that was going to be a big deal, and that’s the reason we worked so hard to get the reimbursement. With bare-metal stents, even though we started early, in 1992, which was a couple of years before FDA approval—which many people don’t realize—it was a huge education effort and took longer than we had hoped. However, where that work ultimately paid off was when we came to introduce a drug-eluting stent. By then, people recognized the need for reimbursement, and as you noted, we were able to meet with CMS and get increased reimbursement even before the Cypher DES received FDA clearance.

Q: As quickly and dramatically as J&J came to dominate the bare-metal stent market, so too was its decline in that area. There have been many reasons offered to explain that decline. Jay Yadav, MD, a leading interventionalist, has said that it wasn’t that J&J’s next-generation stent, the Crown, was a bad product; rather, in his view, the company was listening more to thought leaders than to less-skilled doctors and the result was a stent that was less flexible and more difficult to implant for most physicians. Bob Croce, the former head of Cordis, disagrees, and said that J&J simply dropped the ball and came out with an inferior next-generation stent. In your view, what was the reason for the rapid collapse of J&J’s bare-metal stent franchise?

It was a combination of a lot of things, almost like a perfect storm situation. One, the Palmaz-Schatz stent, while it performed extremely well once you got it in place, was not all that easy to deliver. It had a sheath over it; that was part of our safety profile because we wanted to build an extremely safe product. We achieved that goal, and we didn’t have any problems with safety. In that sense, we did the right thing. However, to the cardiologists who wanted to be able to deliver stents more distally, and expand the use of stents to treat patients with multi-vessel disease or with lesions in tortuous vessels, the Palmaz-Schatz stent could not be delivered as easily as subsequent stents. That’s really all there was to it. Our stent was designed with just two straight segments with a little connecter in between. There was no curvature aspect to it. And all of our attempts to develop a more flexible stent didn’t really succeed that well.

It also was true that a lot of the effort to develop a next-generation stent was taking place during the transition from JJIS to Cordis, following J&J’s acquisition of that company. That was a very difficult transition, to say the least, and one that did not go smoothly. At the same time that we were trying to merge those two companies in 1996, Guidant and AVE were coming out with their stents, which better addressed the expanded applications that interventionalists were looking for. The JJIS/Cordis merger process did not work well, and it impeded the flow of new creativity and product development. So part of the problem can be attributed to bad timing and lack of management collaboration with the merged entity.

It’s also quite characteristic of interventional cardiology to rapidly adopt new technology. In that specialty, a two-year-old technology is considered ancient. Interventionalists were used to changing balloons, catheters, and guidewires at least every quarter, sometimes every month. They were always on the look-out for the newest product. There was never any evidence that Guidant’s Multi-Link or the AVE stent produced better clinical outcomes or lower restenosis or TLR [target lesion revascularization] rates than the Palmaz-Schatz. Ours was still the gold standard in terms of results. But meanwhile we were getting our brains beat out in the marketplace.

Q: Let’s talk about the Cordis acquisition, which took place in 1996 when you were president of JJIS. [See Deal] It has been described as the first hostile takeover in the device industry up to that point.

It was.

Q: What was it that JJIS needed from Cordis that made this deal so essential for J&J? Could you have either developed product line breadth internally or acquired it elsewhere, thereby avoiding the transition difficulties that this hostile deal brought?

We felt we couldn’t operate for a long time as a single-product company if we were going to be a serious player and compete with the other players in the angioplasty field, like ACS before it became Guidant and SciMed before it was acquired by Boston Scientific. [See Deal] Our first goal was to acquire a balloon angioplasty company. This goes all the way back to the late 1980s, when J&J tried to acquire a small company in San Diego called Versaflex that was ultimately acquired by Medtronic, much to J&J’s disappointment.

We had very serious discussions with Dale Spencer about SciMed and with Pete Nicholas about Boston Scientific. In fact, Pete Nicholas wanted to sell Boston Scientific to J&J because it was important to him that BSC’s employees be in a good place and he thought J&J would be a good fit. He had great respect for J&J and was ready to sell BSC to us in around 1994, before they went public, for a little over $900 million, but I couldn’t convince Bob Campbell to do the deal. BSC ended up going public with a market cap of $2.5 billion and then wound up buying SciMed.

Then we entered into serious discussions with Ron Dollens and his team about buying ACS. We got right down to the wire—I was standing outside the board room at J&J getting ready to make a presentation to the board to buy ACS for around $1.5 billion—when the chairman of Eli Lilly, ACS’s parent company at the time, called Ralph Larsen just before the board meeting and said Lilly decided that instead of selling ACS to J&J for what probably would have ended up being around $2 billion, they were going to spin-off the company into what became Guidant and take that company public. It was a brilliant decision on their part because they wound up taking it public and ultimately selling the company for $27 billion to BSC. [See Deal]

For J&J, that left only one company for us to buy at that time: Cordis. I spoke with Bob Strauss and the Cordis management team numerous times, trying to convince them to sell to us, but they did not want to sell the company. I finally convinced J&J that we had to buy Cordis because we had no other option in order to provide the product line breadth that we needed, and so we did the deal as a hostile acquisition.

Cordis didn’t want to be acquired, but they were a public company and we kept bidding the price up until the shareholders agreed to the deal. When we first started talking, their stock was selling in the $80 range and we ultimately paid around $105 per share in 1996, so they were very well compensated for the transaction.

Q: The difficulties didn’t stop once the deal closed because most of Cordis’ top management left after a year. How did you manage that transition and how long did it take you to turn things around?

That’s right; nearly all of Cordis’ senior management agreed to stick around for a year after the deal closed, and when that year was up, they were gone. We anticipated that would happen and tried to take steps to encourage people to stay, but it was an absolute management nightmare. We tried to put together coordinated teams of JJIS and Cordis managers, but there was zero cooperation from Cordis at the management level. It took us about four years before we had things pretty well stabilized and assignments were clear and we were starting to effectively run the business again.

Q: In addition to having an impact on your bare-metal stent business, the Cordis acquisition took place when J&J was in the middle of developing what would be the first drug-eluting stent, the Cypher. What impact did this difficult transition have on that project?

It was a bit of a distraction, but that was a long-term project, taking eight years to complete before Cypher was approved in 2003.

Q: Given the success of bare-metal stents in the 1990s, how did you arrive at the decision that the next-generation stent would be drug-eluting?

As successful as bare-metal stents were, and they were very successful—after all, they cut restenosis rates by half, reducing them from around 50% to 22%, but that still left us with a 22% restenosis rate and we wanted to get that down to 5%. At first, there were two well-known approaches that were being pursued. Both involved radiation and both ultimately turned out to be unsuccessful. There was brachytherapy, and then there was an effort to put radiation on a stent, which J&J got involved with, together with a company called IsoStent. [See Deal]

At the same time [1995], and not long after we had begun commercializing bare-metal stents, I quietly started a program at J&J to conduct research into drug-eluting stents. Initially, I hired two people to run the program: Tony Lunn, PhD, a chemical engineer who had worked for Ethicon, and Bob Falotico, a pharmacologist who worked within J&J Pharma. People don’t realize that Ethicon has tremendous polymer expertise because many of the leading sutures are polymer-based; Tony was one of the world’s top polymer scientists and Bob brought terrific expertise in the drug field.

I put those two guys together and basically told them to go into the lab and stay there—I would slip food and money under the door—and they shouldn’t come out until they came up with a very good, safe polymer to which we could attach a safe and effective drug. And after screening thousands of possibilities of drugs and polymers, that’s what they did to design the Cypher stent.

Q: In light of some of the recent concerns regarding polymers perhaps increasing the risk of thrombosis, was there ever any effort to develop a drug-eluting stent that did not include a polymer?

We believed it was necessary to have a polymer to house the eluting active drug.

Q: As we mentioned, when J&J launched the Cypher stent, the company had achieved a reimbursement breakthrough, gaining incremental reimbursement prior to the product’s FDA approval—the first time that had been done in the device industry. One of the results of that strategy was to minimize the initial price backlash the company received for DES compared with that of bare-metal stents. What did you learn from the Palmaz-Schatz experience that helped you with the launch of Cypher?

Probably the biggest difference is that, when we launched Palmaz-Schatz we didn’t have a reimbursement or health economics department. By the time we launched Cypher, we had a knowledge base in those areas that we had built over 10 years, including collecting a lot of data from the clinical trials conducted during that time. When you are able to assemble all of the health economics data supporting drug-eluting stents, particularly the fact that we were able to reduce restenosis and repeat interventional procedures from 22% to 5%, that is a huge win for everyone—patients, doctors, payors, the government, and product companies. Given the compelling clinical evidence from the studies, CMS’ proactive decision was the right thing to do, and I’m convinced that they would do it again, even for such a blockbuster device, if a company can make the kind of compelling case that J&J made on behalf of Cypher.

Q: At that point in your career, by 2001, you had headed JJIS, launched the coronary stent, overseen the Cordis acquisition, and spearheaded the development of drug-eluting stents, and you chose to retire from J&J before Cypher was approved in the US. Why did you choose to retire then and what was your next project?

I was ready to retire because I was interested in other things. I live in Doylestown, PA, and was asked to be on the board of the Lehigh Valley Hospital Network. I was very interested in that opportunity because it was fascinating to get involved with the delivery side of the health care system. Ultimately, I became chairman of that board. I was particularly fascinated by the managerial complexity associated with a major health care system. J&J is a very complex company, but the forces at play in managing health care delivery are vastly greater, I think, than managing a company on the industry side of the business. There are so many factors that you cannot control. The most important of those is pricing; you cannot set the price for your product—imagine that nightmare in industry. Then you have all the competing issues around independent physician practices and what equipment the hospital should invest in to attract those doctors. And you have to maintain quality—we had 8,000 employees—and maintain a good relationship with the community. Also, as a non-profit, you can’t lose money but you also can’t make too much money. At Lehigh Valley, we were operating so efficiently at the end of my term that the community complained we were making too much money because our bottom line had grown from $20 million to $75 million in four years. I have great admiration for hospital administrators and particularly for the leadership at the Lehigh Valley Hospital Network.

Q: By the time you retired, how big had the former JJIS business, then Cordis, become?

We grew that from zero in 1988 to a billion dollar plus business when I retired in January 2001.

Q: You started a number of new businesses within J&J, the most notable being JJIS, which became Cordis. When you retired, did you give any thought to getting involved with a device start-up company?

No, I was looking forward to working on the delivery side of health care, sharpening up my golf game, and spending more time with my family.

Q: Yet, not long after you retired from J&J, you ended up starting Prescient Medical, a cardiovascular device start-up focused on vulnerable plaque. (See "Prescient Medical’s Dual Approach to Vulnerable Plaque," IN VIVO, June 2008 (Also see "Prescient Medical's Dual Approach to Vulnerable Plaque " - In Vivo, 1 Jun, 2008.).) Since you weren’t looking to get back into the business, what led you to start Prescient?

I realized that with all we had accomplished in cardiology with stents, both bare-metal and drug-eluting, we really weren’t saving any lives. We were preventing some unnecessary surgery; we were reducing an awful lot of angina, and improving quality of life. But the stents were not dealing with the real underlying cause of sudden cardiac death. And when that realization hit me, I was quite disturbed by it. It bothered me a lot that we had gone through the whole process of developing stents from 1988 all the way through 2000 and we had missed that. We were so focused on getting those arteries open that we forgot to look at what it is inside that artery that was killing people, because not too many people ever die of angina.

Q: What was it that triggered that realization for you?

By that time [the early 2000s], many articles had been published demonstrating that, although stents were doing a great job in preventing restenosis and, in that way, had changed interventional cardiology forever, they really were not saving any lives. We did not see mortality rates falling because of stents. At first, I thought, "What are they talking about?" And then I realized that they were right. At around that same time, I was introduced to some people who were working on developing technology to detect how sudden cardiac death occurs. They asked if I would help put together a company to pursue that goal. I was really reticent at first because I knew that it was going to take up a lot of my time and I was enjoying retirement. But then I realized that, despite all the benefits of stents, they had not achieved the goal that I thought they would, which was to save lives. That’s what ultimately led me to start Prescient.

Q: You drew on your J&J experience in launching Prescient, particularly in terms of assembling an experienced management team, many of whom had worked with you to create and build the stent business. But one big difference between working at a large device company and launching a start-up is that you didn’t have to go out and raise money for projects at J&J. You took an innovative approach to funding Prescient, doing it without raising venture financing. Talk about that strategy.

That strategy emerged out of our relationship with a New York firm called Spencer Trask that has a unique approach to funding new companies. They have an incredible network of high net-worth individuals who are willing to invest in new projects. Through a combination of Spencer Trask investors, friends and other angel investors, and my own money, we raised around $50 million in four rounds for Prescient. The company has reached the point where I don’t know if we’ll be able to continue that strategy because now we need some larger blocks of money for longer periods of time to do some major clinical trials, so we are beginning to have serious discussions with some large institutional investors, which may result in the company doing a more traditional financing round.

Q: You have invested a significant amount of your own money in Prescient, but you said from the beginning that you did not want to run the company. Why is that?

One of the first things you have to realize when you start to build an organization from scratch is that you want to bring people in that are really going to accept a lot of responsibility quickly. And if they are willing to accept that responsibility, you have to be willing to give it to them. I’m a big believer in nurturing future leaders through delegation and accountability.

In my experience, there are three factors that have to come together to make good hiring decisions: you have to have the right person in the right job at the right time. And time has to do with both the time in their career, and time in the development of the company. I’ve always tried to hire people that were smarter than I am, that will work harder than I do, and that could provide better leadership than I can. If you deviate too far away from that, you get into trouble.

Hiring in a very small company is extremely important because if somebody is not going to carry their end of the load, it’s a huge problem. Whenever we were so unfortunate as to make a hiring mistake, it is much better to correct the error as soon as possible. Hiring the right people at the right time is one of the toughest parts of management, and one of the most important.

Q: In addition to being chairman of Prescient, you also recently were named CEO of the Cardiovascular Research Foundation. CRF is probably best known as the sponsor of TCT, the leading interventional cardiology clinical conference, and I know that you’ve attended every TCT meeting since its inception. How did you come to assume this position?

Back in late 1988 when I became the president of JJIS, it was suggested to me that I might want to attend a cardiology meeting in the basement of a hotel in Washington, DC. I went to the conference because I really only had a cursory understanding of what interventional cardiology was all about. After two days of listening to a doctor by the name of Martin Leon, who was then at the Washington Hospital Center, I thought that this guy knows a lot; he’s smarter than I am, he works harder than me, and I think he’s a guy I could trust. So I walked up and introduced myself and told him that I had this new job with J&J but that I didn’t have a medical background and we didn’t have any cardiologists on staff and had no one to turn to from a medical guidance standpoint, and I asked if he would help us out. He thought about it for about two minutes and said, "OK, I’ll do it." And that’s when Dr. Leon and I started what is now a 20-year relationship.

Over the years, Dr. Leon has been very helpful in providing guidance on all types of strategic decisions. Then, in the early 1990s, he was the principal investigator for the STRESS clinical trial in the US. At that point, it became clear that J&J was going to have to prepare for a major education and training effort to accompany the introduction of coronary stents. One of the company’s first efforts was to provide a grant to Washington Hospital Center to build an education facility there for interventional cardiologists and that was where CRF began. We continued to work closely together and, in 1998, CRF asked me to serve on their board of directors, and J&J approved that since CRF is a non-profit, so I’ve been on the board ever since. Then a couple of years ago, they asked me if I was interested in becoming CEO just temporarily until they could find someone to fill the position full-time. My term at Lehigh Valley was winding down and I had hired the management team for Prescient, so I agreed to take the job for a few months, and while I am still here at CRF, we plan to recruit a new, younger and smarter CEO soon.

Q: Many people only know CRF as the sponsors of the TCT conference, but its work really extends well beyond that. Talk about your role at CRF and how the organization’s mission has expanded over the years.

When I accepted the CEO role at CRF, they did not have a long range strategic plan or mission statement or even a set of goals. Now we have a mission statement, goals, and a strategic plan that provides us with a clearer idea of what the organization is all about and what we are trying to accomplish.

CRF really operates in three areas. We break them down as investigate, evaluate, and educate. It sounds easy—only three words—but it took us about six months to figure that out. Investigate refers to our preclinical work, where we investigate the early concepts behind new devices or procedures for outside organizations in our preclinical facility. Evaluate refers to our clinical trials center, where we take new concepts and move them into human clinical testing. Educate refers to the myriad educational activities, starting with TCT and all the other satellite meetings that we sponsor throughout the year. We have some involvement in around 50 meetings a year.

Q: One of the most critical issues facing the device industry is the relationship between physicians and industry, and concerns about conflicts of interest. CRF has always maintained close contacts with industry and recently received an inquiry from a Congressional committee on this issue. You had to deal with this subject when you were at J&J and now again at CRF. How do you strike the necessary balance to maintain the relationship between doctors and industry to preserve the business model that has been so effective in producing the innovation everyone wants?

The best way to strike the balance on conflict of interest between physicians and industry is through full and open disclosure. Engineers cannot design effective new medical devices without input from the physician who is going to be using that product to treat patients. Similarly, doctors can’t design new devices themselves and build prototypes without the help of engineers and industry. The two are inextricably connected and this relationship is absolutely necessary to assure the advancement of new and improved treatments for patients.

Q: As you look back on your career, did you ever imagine that stents, both bare-metal and drug-eluting, would become what some have called the biggest blockbuster devices in the history of the device industry?

Yes, particularly when it came to drug-eluting stents, we anticipated that this would be huge. After we saw the tremendous early results, we thought there was no reason why this shouldn’t continue, and it has lived up to our expectations of being an extremely important medical device.

Q: You were involved in pioneering the use of randomized clinical trials in cardiology. As a specialty, cardiology has used evidence-based medicine more than any other area to drive product adoption. Clinical trials are becoming larger and more expensive. Are you concerned that this could make it more difficult for start-ups like Prescient, and thereby inhibit device innovation?

Clearly, it is going to take cardiology companies longer and cost them more to develop products and conduct clinical trials. But evidence-based medicine is here to stay, unless and until someone develops a very novel method to prove both safety and efficacy for new technologies.