BBI Senior

CLEVELAND, Ohio The odds against a new medical technology ever making it to market in the U.S. or abroad are staggering, with a mind-boggling gantlet of challenges that must be run in order to see an idea through from conception to commercialized product. A unique panel at last month's 2003 Medical Innovation Summit sponsored by the Cleveland Clinic Foundation and held at the InterContinental Hotel's MBNA Conference Center here represented virtually every facet of the team necessary to get a new medical technology off the ground and into the hospital. It included a clinician, an inventor, a venture capitalist and a representative of the manufacturing and industry side of the equation.

"All of us are coming with a different perspective of what we're going to do," said the clinician and moderator of the group, Delos Cosgrove, MD, chairman of the department of thoracic and cardiovascular surgery at the Cleveland Clinic. From his perspective, the rate of change within the industry and the world in general has taken on a frenetic pace in the past several decades. "More new knowledge has been created within the past 40 years than in the previous 5,000," Cosgrove said, and at that rate, the current amount of knowledge doubles every 2 years. He said this explosion of knowledge "makes most techniques obsolete in about seven years, so we're talking about a relatively short run for new technology."

Even though this new technology may be short-lived, the importance that it has for society cannot be underestimated. "From 1970 to 1990, the growth in life expectancy equaled $57 trillion," Cosgrove said. "This improvement in health accounted for half of the gain in the standard of living in the last 50 years." The new technology is especially important now, he said. In his field, Cosgrove said, patients are dying less from acute cardiac events such as myocardial infarction than from chronic conditions such as congestive heart failure. The cost of heart failure is staggering, he said, representing the largest DRG (diagnosis related group) in the country at close to $38 billion or 5.4% of the total U.S. healthcare budget.

Representing the inventor's perspective was the colorful Tom Fogarty, MD, co-founder and senior partner of Three Arch Partners (Portola Valley, California). Fogarty, the inventor of the Fogarty clamp and numerous other medical devices that are in everyday use around the globe, holds more than 120 patents and helped found 30 companies. Fogarty said that many barriers exist to getting an invention commercialized and those barriers, be they regulatory or otherwise, have only increased over time.

Presenting a timeline of inventions he has been involved with since 1960 that illustrate some of the difficulties inventors now face, Fogarty cited his involvement in 1960 with the development of one of the first balloon catheters. The time from when he came up with the idea until it was first used in a patient was just two months, and the cost of the device was based only on time and materials, which he joked were "either borrowed, recycled or stolen." And the majority of the $12,000 spent in the development of the device "went to a patent attorney."

Contrast that, Fogarty said, with the recently approved Cypher drug-eluting stent from Cordis (Miami Lakes, Florida), which he said took nearly 52 months from the time of concept to approval, and the dollars spent on the device, drug and coating totaled close to $800 million. "I think this acceleration exceeds the inflation rate," he deadpanned. One issue, he said, is that some of the technology itself has gotten more complex. Another problem is that physicians are reluctant to replace the traditional instruments of their profession that they have been taught to use with the latest technology.

Flaws in reimbursement system

Another great and obvious barrier is reimbursement: "If people don't pay, physicians won't do it." Fogarty said this is a flawed system, "since doctors get paid for doing what is old technology and struggling with getting paid for new technology rather than being rewarded for being paid for new technology that ultimately benefits the patient."

The other issue is the regulatory rate, not just from the FDA but also from hospital evaluation committees. The problem, as Fogarty sees it, is that "the pace and complexity of technological change has outstripped the capacity and the resources of the [U.S.] regulatory bodies."

If the regulatory path and the reimbursement path are in question, funding for a new medical technology also is in question. Speaking from the venture capitalist perspective on the issue was Jack Laserohn, a general partner at The Vertical Group (Summit, New Jersey). While he said he likes the path that FDA Commissioner Mark McClellan is on, he disagreed with a comment McClellan made in his presentation on the opening day of the conference. "He did make a comment that I was struck by, and I think others were struck by, which was that the PMA [premarket approval] applications for medical devices were down significantly in the last couple of years, and he attributed this to our inability to invent and to bring new ideas from the research university to the marketplace," Laserohn said.

He said that out of the hundreds and hundreds of venture capital-backed companies that have been funded in the life sector, only about 60 or 70 can be categorized as being successful. And of that number, about half had an exit value of less than $100 million. Most alarming of all, he said, was that 80% of all venture-backed medical device companies are not successful. "At best, it's a return of capital; at worst, you lose all of your investment." Laserohn said, "Increased cost and [clinical trial] failures and uncertainty are primarily, not exclusively, attributable to a significantly more restrictive and tougher FDA regulatory environment."

On the industry side, Edward Ludwig, chairman, president and chief executive officer of BD (Becton Dickinson and Co.; Franklin Lakes, New Jersey), said that while his company is around 106 years old, it is continuously innovating and becoming increasingly diverse. He said that there are several ways his mature company is making itself more attractive to inventors with new and innovative ideas. Perhaps the most interesting is its offering of incubator space to life science companies.

In addition to funding, Ludwig noted that BD also offers other types of "care and feeding," including management consulting, R&D collaborations, regulatory advice and expertise involving clinical trial structure. "One of the things that's offered here, if they can sell us on the idea, is it's that first level of acceptance noted by Tom [Fogarty] and also allows them to prove and validate their concept." Thus far, he said, eight of these small companies have emerged from their incubator experience "and are now on their own, more self-contained and I think moving more rapidly down that pathway of innovation."

Ludwig also noted that the company provides innovation through BD Ventures, its own early-stage venture fund whose mission is to invest in seed and early-stage medical products. "This exposes us to emerging technologies being developed in an entrepreneurial setting, and in turn, companies we invested in benefit from our expertise in product development, clinical trials, manufacturing and commercialization," he said.

The chief executive officer of another mature medical products company make that a really big company addressed the future of innovation given the difficulties in bringing a new technology to market. As William Weldon, chairman and chief executive officer of medical products behemoth Johnson & Johnson (J&J; New Brunswick, New Jersey), posed the question while serving as a luncheon speaker during the conference, "How do we translate medical breakthroughs through innovation that are really within our grasp, and how do we make that accessible to patient care?"

There are no simple answers, but Weldon framed a concise response: "It's clear that society must forge a balance that enhances access, manages cost but also rewards true innovation that will enhance the lives of patients today and into the future."

Foreseeing a golden era for health

He said that if one looks at the unprecedented speed with which scientists and engineers are unraveling the mysteries of health and disease, developing new materials and instrumentation and pushing the boundaries of computerization, "the future looks very bright." Endeavors such as genomics, medical imaging and robotics are all starting to deliver on their promise, and Weldon said there could be a time in the foreseeable future when there will be cures for Alzheimer's disease, cancer and diabetes. "The next 10 years could be a golden era for health," he said.

At J&J alone, he noted that the sectors in which his company participates medical technology, pharmaceuticals and biotechnology are investing more than $50 billion every year in research and development. "But even as we push the boundaries of medical knowledge and develop better therapies, society's ability to make these products accessible continues to stymie the best minds throughout the world," Weldon said.

The problem, he said, lies in society's contradictory, ambiguous and tension-filled view of health and healthcare. Everyone wants better healthcare, but who should pay for it? Beneath these tensions runs a fault line between the ideal that good health should be a basic human right and the reality that healthcare, like every human endeavor, works within a basic economic framework.

With the increasing political problems that new healthcare technology must face, Weldon said people sometimes forget what the technology is all about that is, improving the lives of patients. Medical innovation, he said, leads to more accurate diagnosis, more innovative treatments, faster return to work, reduced disability, increased physician productivity, shorter hospital stays and fewer hospital errors.

While noting that healthcare spending has increased substantially and that new technology tends to cost more than its older predecessors, Weldon said that, contrary to much public commentary, healthcare spending is higher "primarily because many more people are benefiting from medical innovations. Utilization and not healthcare pricing is driving the rise in healthcare costs."

As for factors that stifle medical innovation, he said that in the device industry, while development is faster and costs generally lower, product lifecycles are so short that it is possible to be supplanted by new technology even before reimbursement is available. Other countries in the world do not enjoy the same quality of healthcare because the incentive to innovate is stifled by price and access controls, he said. Those same controls, if implemented in the U.S., would "have a profound impact on the future of biomedical innovation."

Faced with a lower-reward future, Weldon said, "it's reasonable to expect that innovative companies in the U.S. will move to the same low-risk strategies we see in Europe." That would lead to incremental innovations that are assured rather than transformational ones that are risky, he said. "In other words, companies would not strive for a home run they would continue to be satisfied with singles."

Weldon said that when innovation stops, "it's the patients who suffer." The push to introduce more price and access controls in this country could have the same chilling effect that they have produced on innovation in Europe and other places where such restrictions are allowed, he said.

What needs to be done to secure a healthy future for the world's population, he said, is to assure a future that enhances access, manages cost and rewards innovation. "As we look at the theme of [this] conference, convergence, one takeaway is that all of us medical innovation companies, patient advocates, policymakers and others must put aside narrow concerns and come together, or converge, in the service of patients," Weldon said.

For its part, he said the med-tech industry needs to recognize that all healthcare innovations are not equal. Some products deliver modest advantages over their predecessors, while others are truly revolutionary. "Placing emphasis on serious diseases is both good business and the highest expression of our mission," Weldon said.

As for the regulatory side, he noted that it's clear the system still operates within a budgetary and financial framework that reflects the 1960s. Referring to the current "silo approach" to healthcare, with individual budgets for different sectors, Weldon said that "should give way to a more integrated approach if we are to ever identify and appreciate the great value innovation is delivering to society."

'Tightrope walk' between costs, care

The nation's top regulator said during his appearance at the conference that this is a "critical time" for medical innovation. FDA Commissioner Mark McClellan said that such innovation is a tightrope walk between recouping the investment in developing new technology and making the resulting products affordable in a time of unprecedented concerns about the cost of healthcare. McClellan discussed the future of healthcare and the pathways that the various stakeholders involved in the process will have to pursue in order to gain U.S. clearance for new products. "Now more than ever," he said, "we need an effective dialogue and effective action on turning new technologies into the safest, most effective patient care possible."

A number of economists, among which McClellan can count himself by virtue of his PhD in that field, have looked at this issue and have estimated that the value to society of the longer and better lives that have resulted from translating new biomedical knowledge into steps to prevent and slow diseases "is worth literally many trillions of dollars in better health." He said that according to many estimates, the value of medical innovation over the past half century "equals or exceeds the value of innovation in all other sectors of the American economy combined."

While many of these past breakthroughs have been phenomenal, McClellan said he believes many of the most important innovations "probably still lie ahead," including devices that can better improve or replace cardiac function, engineered tissues that provide accurate glucose regulation for patients with diabetes and better targeted cancer cures based on genomic insights.

While all these and other new potential healthcare innovations are exciting, he said that delivering on that promise of what he called the "Biomedical Century" is not a sure thing by any means.

With all of the achievements have come unprecedented concerns about the cost of healthcare, and in particular, about rising spending on these new medical technologies. Aside from cost, McClellan noted that there is increasing difficulty in bringing new medical technologies to patients who can safely benefit from them. The challenge in turning good ideas in the lab into "safe and effective treatments for patients," he said, is to make these innovations more affordable so that people can continue to benefit from these new technologies and at the same time, "encourage improvement in the process for developing these technologies and protecting the incentive to innovate."

If the impact of information technology is any guide, McClellan said he believes it may be a decade or longer of increased research and development investments before a measurable impact is realized in productivity the actual way that services are provided to patients in this country. At the same time, he said that the FDA is seeing fewer new product applications than at any time in more than a decade.

To help reduce costs and enable needed new treatments to reach patients, he said it would be necessary to improve the pathway for developing safe and effective new medical products by making it as clear, fast and cost-effective as possible. In order to lower costs, McClellan said that the industry must adopt the methods of other high-tech industries such as the semiconductor industry. "This means developing better and more timely information on the risks and benefits of medical treatment after they're approved, so that people can make fully informed decisions about using treatments to get the greatest value possible from them."

One successful method that has helped speed up the product review and approval process in the pharmaceutical and biologics sectors, he said, is the implementation of user fees by the FDA. While acknowledging that the newly initiated user fee structure for medical devices has gotten off to a "rocky start," McClellan said that the FDA is "fully committed to making this new medical device user fee work effectively." He said the agency is well on its way to identifying a way to get that program established. "We think that ... for the user fees that companies are now paying in for medical devices, we are going to achieve our performance goals."

Turning 'bumpy path' into 'smooth highway'

McClellan cautioned companies not to lay the blame for the slowdown in submissions solely on the FDA. He said that despite his agency's best efforts to achieve unprecedented levels of review performance, "this isn't going to dramatically change the picture of a decline in the number of new-product applications coming in to us at FDA." He said that on average, review times make up less than 10% of the total time for developing new treatments. McClellan said he believes the problem is that even though there is much more innovation taking place today in how scientists are discovering potentially valuable new treatments, and even though the FDA "is working more efficiently than ever before," there is comparatively less innovation making it into the process of developing new treatments more efficiently. "The critical path has a vast canyon between promising lab discoveries and testing in people."

One key to helping speed up the development process, he said, is to share the FDA's vast data and experience with the world of technology developers, since ultimately all developmental roads lead to the agency and the approval process. "We need to turn that long and bumpy and uncertain critical path into a bright and smooth and well-marked highway."

The head of the medical device sector's largest trade group would welcome smoothing out that bumpy road, but also wishes the industry's innovative products would be valued more highly. While moderating a panel discussion on the availability of healthcare and what industry leaders can do about it, Pamela Bailey, president of the Advanced Medical Technology Association (AdvaMed; Washington), said the story of medical technology is the story of innovation "that is continuously improving our healthcare system." But the value of such innovation has "too often been understated in what tends to be a public short-term focus on cost."

She said that in order assure that such innovation continues, it is essential for a truly competitive market to flourish that can attract capital from investors, produce innovative technologies that are safe and effective, and ensure that those treatments are available to the physicians and patients who need them the most. Bailey said that healthcare innovation "helps us to live longer, healthier and less expensively," adding that it's "also making it possible for workers to return to their jobs faster and healthier, saving employers billions of dollars."

Bailey identified five core building blocks of a competitive market to stimulate rapid patient access to medical technology innovations. The first is private sector investment, which she termed the "engine of innovation and economic growth." The second block is research and development (R&D). Another is the ability to efficiently realize a "reasonable return" on that capital and research investment. Post-market approval regulations make up the fourth block, and "must not be overly burdensome or unpredictable." And lastly comes pricing polices. "They must be predictable, transparent and consistent," she said.

Traversing pathway from concept to market

Timothy Ring, chairman and chief executive officer of C.R. Bard (Murray Hill, New Jersey), outlined ways that a company can swiftly execute the pathway from concept to market. He said his company has tripled the number of R&D initiatives in the past couple of years and committed a very substantial increase to its level of spending this year to more than 50% of what it spent two years ago. However, he said that getting to market first with innovative products does not in and of itself guarantee market success. "Getting to market first with a product that meets or anticipates your customers' needs is the winning strategy."

Ring outlined the best practices his company has identified in its new product development process. First, he said, a company needs to spend considerable time analyzing "what your customers' needs are." Next, you have to ask what the product design needs to be to penetrate that market. After developing prototypes, you then need to develop samples depending on customers' preferences. Such models can now be quickly via computer modeling. "We can refine the design quickly and we can work out the financial risks up front by knowing we're going to be in the market with the right product," Ring said. "Now speed means precision." After showing the models to various thought leaders, a company should have an idea about which choice of its three or four models is the winner, he said.

According to Ring, a critical component of an expeditious R&D process is "having the ability to make the product for human use in close proximity to your prototyping capability." To achieve success, "a focused effort on the front end, identifying the needs and requirements up front with the proper resources, minimizes the potential for changes along the way and ensures that the right product gets launched, thereby maximizing the potential for success," he said.

Dane Miller, PhD, president and CEO of Biomet (Warsaw, Indiana), discussed what innovation has brought to his field and spoke about the regulatory bumps along the way to achieving those goals. Using total joint replacement, a field his company is heavily involved with, as an example of the progress of innovative technology, Miller said that in 1973, when total joint replacement first entered the scene, the average operating room time was about 140 minutes, with an average hospitalization following surgery of 12 days. By 1993, that time had dropped to about 65 minutes in the operating room and about 5 days of hospitalization post-surgery. This year, the average time for a skilled surgeon to perform in the OR has dropped to 45 minutes or less, followed by four or fewer days of hospitalization. "This has occurred due to the partnership between hospitals, surgeons and the orthopedic manufacturer," Miller said.

A daunting issue that confronts the healthcare industry, he said, is that of medical malpractice, in which he included the cost of product liability for the manufacturer. This year, it is estimated that this country will spend about $50 billion on the costs of medical malpractice and product liability expense and another $50 billion will be spent on "defensive" medicine. "This is an astounding figure in that it accounts to almost $400 per American today spent annually on things that I would argue do very little to contribute to healthcare in this country," Miller said. He called this phenomenon "the regulatory and reimbursement disconnect."

Miller said the healthcare system in this country will have to change from the "What, me worry?" view that assumes that significant gains in technological improvement will be coupled with massive gains in the economy, an outcome that he said is not very likely. The more likely situation he sees is one in which employer-based health plans will probably be phased out and medical savings accounts will become the standard. Additionally, retirement age will continue to increase and as Americans become healthier in old age, "we will be able to work longer."

Michael Mussallem, president and chief executive officer of Edwards Lifesciences (Irvine, California), looked at medical technology innovation from a global perspective, acknowledging that "medical technology is so expensive that it almost takes global implementation of technology to be able to afford to pay for the implementation." He said that the reality of our world is that there is a tremendous need for new technology and that need is going to grow fast, driven by the aging of the global population and the need for treating an increase in chronic diseases, those that require much more care than in the treatment of acute diseases.

Mussallem said that in 1990, infectious diseases were the main culprit, "and as we play forward we're going to see our world that is one that is going to suffer from chronic diseases," such as ischemic heart disease, major depression, cerebral vascular disease and chronic obstructive disorders. These are the conditions that we're going to be challenged to treat and we're going to continue to see them for decades to come."

He said there is a direct correlation between the global economy and how much healthcare is delivered. "As we innovate, we do enhance outcomes, and as those outcomes are improved, we do increase the capacity for care, and the health improvements that result from that really do drive productivity."

Focusing on the 'new health economy'

Another session at the Innovation Summit emphasized the need to speed up the process of innovation and the increasing complexities that globalization brings to that equation, with two presenters from the health sciences practice of Ernst & Young (E&Y) discussing how scientific and technological advances continue to redefine the field of medicine.

Richard Marrapese said that while many great discoveries are initiated in a laboratory setting, "the development and dissemination of discoveries is made up of other innovators outside the laboratory research environment." Generally, he noted that the concerted effort of the health science sector, which includes medical technology, pharmaceutical and biotechnology companies and the healthcare provider community, are integral to this development and dissemination of new discoveries in the field. Marrapese referred to the convergence of these various sectors as the "new health economy."

He said one important factor that will definitely have an impact on the speed of new technology development, as well as its adaptation, is the rise in the increase of the uninsured. Recently released U.S. census information shows that the nearly 43 million Americans, or about 15% of the population, currently do not have health insurance. This is largely attributable to the current economic environment as well as the rise in healthcare costs, which is driving payors, primarily employers, to look at alternative means of financing healthcare and generally results in a reduction of benefits. A primary factor for the healthcare insurance cost increase has been the cost of new drugs. However, Marrapese noted that in the 1990s, the increasing utilization of medical services was a primary driver for those rising costs.

Since 1999, patient safety and quality have become increasingly important issues, he said, and all the aforementioned groups with a stake in healthcare are coming together to address those issues. "Everyone is increasingly focused on evaluating the quality and cost-effectiveness of the care of providing," Marrapese said, adding that the "emphasis is moving toward evidence- or outcomes-based medicine, and this movement clearly raises the bar for innovation and poses a new challenge to generate sufficient data necessary to support the adoption of new technologies."

The two new primary variables that will drive change in the industry are data and demographics, he said, citing baby boomers as a prime example of "the demographic, economic and political sea change in the incentives of health science innovation."

These changes will require cooperation among the health science sectors not only within the U.S., but around the world as well, Marrapese said. "Patients' demand for innovation is almost insatiable," he said, "and as we move into 21st century, consumers are taking a much more active role in understanding and purchasing their healthcare needs. Innovations will have to address the demands and expectations of a fundamentally different patient, certainly a much better informed consumer."

Exploring in more detail the impact of medical innovation on the field of medicine was E&Y's Michael Hildreth, who traced the dramatic advances in the field in recent time. "The technological advances we have seen in the past 200 years have had a profound impact on the practice of medicine, of course, and this trend is likely to accelerate from our point of view in the foreseeable future," he said.

Today, he said, more previously unmet medical needs are being diagnosed and treated than ever before, and less invasive surgical tools have allowed patients to recover more quickly and place less financial burden on the healthcare system. Additionally, combination devices, such as drug-coated stents, "show great promise combing device and drug in an implantable solution." And certainly, he noted, innovation in diagnostics, devices, drugs and information technology "have assisted in the dramatic increase in life expectancy here in the U.S."

As an example of how far we have come, Hildreth pointed out that life expectancy for a child born in 1900 was 45; today it is around 77, "and the day when life expectancy could hit triple digits is certainly on the horizon."

Importantly, he noted that innovation not only has contributed to an enhanced longevity, but also has contributed to the quality of all that extra time here on the planet. Hildreth argued that the economic model that says a strong economy makes a nation stronger in terms of its health, wealth and education is outdated. The alternative analysis that he posited is one in which "improvements in the average health of a nations' citizenry drive those strong economies fueled by economic contributions of a healthy workforce, a workforce that spends less days out at home on absentee days; that is more productive when they are at work."

The key takeaway message, he said, is that investment in science does yield innovative medical technologies, "and those technologies redefine patient outcomes." Hildreth added that if those redefined patient outcomes lead to better health, and, therefore, more productive individuals, "then the economy is lifted, there is more capital to be reinvested in additional scientific development, which leads to even greater medical development, and so on and so on."

To successfully commercialize a new medical device today, he said, it is likely to take "several million dollars and five years." That compares favorably to the hundreds of millions of dollars and nearly a decade needed to successfully commercialize an innovative drug therapy.

At the heart of many successful centers of excellence like the Cleveland Clinic and its CCF Innovations arm, said Hildreth, is a strong spirit of entrepreneurship, including the recognition that innovators, researchers and clinicians may come up with the ideas, "but that commercial partners are needed to turn those ideas into products."

Those partners may be the larger medical products companies, who either license, acquire or help financially nurture products under development, but many innovators particularly those at early and mid-stage levels turn to venture capitalists. A panel on the last day of the three-day conference focused on venture capital's role, with panel moderator Keith Kerman, MD, managing director of Primus Venture Funds (Cleveland, Ohio), saying that, while the achievements of the VC industry in healthcare are not well known, "The market has recognized [its] value." While down from its peak, he said that healthcare venture capital investing was still on pace for more than $4 billion this year after totaling some $5 billion last year. Kerman said healthcare's portion of the entire venture capital pie has "really climbed significantly" over the past several years as investors have raced away from the Internet and telecommunications debris.

Samuel Colella, co-founder and managing director of Versant Ventures (Menlo Park, California), said that the U.S. has one of the best systems in the world for the propagation of medical innovation. "We're starting with a basis of excellent concepts and genius ideas," he said. There is an abundance of funding mechanisms in this country, he said. "Between government funding as well as angel funding, there are many opportunities." Angel funding, in particular, "actually funds more [projects] than venture capitalists do."

Colella said he believes American venture capitalists possess the knowledge to take a product out of the laboratory and build a company around the concept, a characteristic that he said is "not matched in the world." And, he said, "there are incentives and rewards for people that do this."

Colella said he does not like the traditional incubator model, but noted that he has had success with early-stage organizations. What it takes to make these early models succeed, he said, are some very talented entrepreneurs who also possess a great sense of science and "have a nose for innovation." The second ingredient they need is a deep-pocketed venture capitalist, which affords an organization the time to identify the right technologies. The third need is a close working relationship with a VC firm. "VCs see a lot of deals; we'll see 4,000 propositions each year," Colella said. He said he has found just five such companies that he thinks have fit the mold for success with this type of model in the nearly 20 years he has been in the business.

When asked if a new business development function is needed, Bill Sanford, executive founder and retired chairman of Steris (Mentor, Ohio) and current chairman of BioEnterprise (Cleveland, Ohio), said he agreed with Colella that the traditional incubator system has not worked well. "I've always had the belief that all deserving deals get funded. If it didn't get funded, it didn't deserve it for a number of reasons," he said. At all stages of development, but particularly the very early stage, Sanford said he often looks to the passion and talent of the entrepreneur putting the project together as a good indicator of an idea's potential success.

Asked if sufficient VC capital is available for healthcare, Harry Rein, senior advisor at Foundation Medical Partners (Cleveland, Ohio), said that there has never really been an absence of capital and in fact, it has been amazingly consistent, as have been the returns in the sector. Colella said he believes the amount of overall money out there is appropriate. The problem, as he sees it, is that too much money has been spent in the early stages of development, and not enough in the mezzanine and later stages. "We're out of balance," he said. "We just don't have enough money in the later stages."

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