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Consider this one measurement: The Fralin Biomedical Research Institute at VTC had more than $31.5 million in research spending in 2019.

To put that figure in context, it is more than the research spending of all Roanoke’s 15 peer cities combined.

Then consider this: None of the infrastructure existed just a dozen years ago.

“That’s considerable growth in biomedical research and development expenditures within a decade,” says Amy Holloway, director of Ernst & Young’s Economic Development Advisory Services. “If health care remains a target of economic development, and collaborations among Carilion Clinic, Virginia Tech, and others continue, we would expect that investment to increase and economic development—whether it’s entrepreneurial startups or the attraction of new businesses—to expand as well.”

Holloway worked with the Roanoke Regional Partnership, the area’s economic development marketing arm, to develop its current strategic plan. In the broader region that encompasses Virginia Tech’s home base of Blacksburg, nearly $542 million was spent in 2019 on university research and development. Those 15 benchmark regions that include places such as Savannah, Georgia; Asheville, North Carolina; and Erie, Pennsylvania? According to the National Science Foundation Higher Education Research and Development Survey, their cumulative spending totals $29.2 million.

The figures do not yet capture the return on investments that both Carilion and Virginia Tech are making to bring more researchers, innovators, and entrepreneurs into an innovation corridor that is springing to life in a former railroad town that, until a few years ago, lacked a large state university presence within its borders.

“In terms of the lifespan of these industries and other regions, it’s sometimes decades before they reach maturity,” Holloway says. “For the Roanoke region, it’s early still, so the job numbers are not high yet, but the innovation assets—which is the starting point—show this region is off to a good start.”

Amid this success, Nancy Howell Agee, Carilion’s president and chief executive officer, feels the urge to accelerate. “Innovation is academic, it’s clinical, it’s all mixed together, and that creates real excitement for people,” she says. “The more you do, the more people want to be part of it.”

That wasn’t always the case. Carilion met much resistance when it began its transition from a collection of hospitals and primary care practices into an integrated delivery network that would offer highly specialized care.

“I would say now, more than a decade later, we’re being pushed to go faster and harder,” Agee says. “A dozen years ago, though, it was, what the heck are you doing?”

Vision and Leadership

Some of that earlier skepticism centered on Carilion’s attempt to seed a biomedical institute near its flagship Roanoke Memorial Hospital. The institute, it was hoped, would help develop and commercialize medical products.

“While that effort didn’t work out as planned, it started people thinking about the notion that Virginia Tech and Carilion, the largest employers in the western half of the state, have a mutual interest in health care,” says Ray Smoot, who was at the time chief executive officer of the university’s foundation and a Carilion Clinic board member.

“I was in the position—as a senior administrator at Virginia Tech and a Carilion director—of having oars on both sides of the boat,” says Smoot, who is regional chair for Growth and Opportunity for Virginia, better known as GO Virginia, a statewide economic development grant program that encourages regional collaboration. “That strategic vantage point gave me an understanding of how both organizations were looking at this opportunity and a perspective that allowed me to serve in a translator role.”

Virginia Tech needed a medical center to realize its vision of becoming a top-ranked research university, and Carilion needed an academic partner to realize its vision of integrated care delivery.

Charles Steger, Ph.D., then president of Virginia Tech, and Ed Murphy, M.D., then chief executive officer of Carilion, forged a public-private partnership to build both a medical school and a research institute in Roanoke.

“Their leadership was critical,” says John Dooley, who earlier this year retired as chief executive officer of the Virginia Tech Foundation. “Leadership also came from the state, which has been generous with appropriations, and local governments, which helped support the vision.”

Roanoke spent about $30 million to purchase the brownfields on which the Virginia Tech Carilion Health Sciences and Technology Campus was built. The state provided bricks-and-mortar funds.

Dooley also credits Virginia Tech and Carilion leaders with making excellent hires to run both the medical school and the research institute.

“Boy, they outdid themselves by recruiting top talent before there was even much of a product to sell,” Dooley says. “And since then, those talented leaders have been so effective in encouraging others to embrace the vision.”

One of those leaders, Michael Friedlander, Ph.D., founding executive director of the Fralin Biomedical Research Institute, believes successful, sophisticated scientists and entrepreneurs want to be part of a vibrant environment.

“That environment wasn’t here at the time,” he says. “We had to build a base that wasn’t about hype. Now we have a solid, outstanding biomedical research enterprise populated with people who have earned—or are in the process of earning—national and even international reputations in their fields. You don’t need a sales pitch and hype. What we’ve built speaks for itself.”

Dr. Friedlander credits the university and Carilion for standing up both a biomedical research institute focused on excelling in several key areas and a medical school with a major emphasis on student engagement in meaningful research with institute scientists and Carilion clinicians. The institute has grown to more than 400 faculty, staff, and students, with dozens of research teams and an extramural grant portfolio currently valued at over $140 million. Those teams have already spun out five biotechnology startup companies, winning multiple federal small business and technology transfer grants.

The partners also invested heavily in the venture while other funders, including the National Institutes of Health, had pulled back support during the Great Recession. The research institute has since doubled its size, and Virginia Tech has invested in building out its health sciences programs in Roanoke.

Carilion Chief Financial Officer Don Halliwill thinks the ability to start from scratch helped fuel success. “At academic health centers with decades if not centuries of tradition, it’s hard to effect change,” he says. “Our relative youth has allowed us to be nimble, and it’s one reason I say with confidence, and not over confidence, that the best is yet to come.”

Innovation within Carilion

While Virginia Tech was building the research side, Carilion recruited more than 700 physicians, including specialists and subspecialists, who were attracted to the opportunity to create an academic medical center. The health system expanded its footprint, enlarging Carilion’s Roanoke campus by creating institutes devoted to cardiovascular care and to orthopaedics and neurosciences, and by developing a standalone outpatient pediatric center.

Yet something was missing for serial entrepreneur Victor Iannello, Sc.D. As a Carilion Clinic board member, he sat in on interviews to help recruit department chairs.

“We were hiring many high-level people from organizations with robust research and innovation programs,” Dr. Iannello says. “They expressed the desire for those kinds of opportunities here. One reason I was talking to them was because, as an entrepreneur, I was also excited about innovation.”

Dr. Iannello looked at research dollars and the number of patents filed, and saw opportunity. “There was so much more potential here than was being realized,” he says.

After rotating off the Carilion Clinic board, Dr. Iannello submitted a proposal to develop an in-house innovation program.

“I proposed a framework for funding proof-of-concept ideas and moving them through a funnel to license technology, spin out a company, or partner with a company with the expectation that somewhere along the line it would return some financial benefit to Carilion,” he says. “This program would also serve as a way of keeping physicians engaged. These are intelligent, creative people for whom innovation provides another avenue to express themselves.”

Dr. Iannello identified Troy Keyser to lead Carilion Clinic Innovation, which launched in 2020 and has since evaluated more than 80 ideas, with 50 now in various developmental stages. The team invests up to $50,000 of milestone-based funding to ready an invention for the next stage of commercialization.

Carilion Clinic Innovation has invested in three startups, including Chorda Pharma, a company Dr. Iannello is now leading that focuses on developing opioid-free pain relievers. Projects developed by Carilion staff can also be considered for funding through Carilion and Virginia Tech’s early-stage venture capital fund.

“About six years ago, we made a major commitment with the foundation on behalf of the university and then Carilion to launch what is now known as VTC Ventures,” Dooley says. “The compelling argument is that we could nurture the innovation environment, but if we’re going to be serious about starting up companies, and spinning out the ideas from the research institute and Carilion, we’re going to have to provide some level of funding infrastructure.”

The funds offer up to $500,000 for technologies and companies in the riskiest early stages, and up to $5 million for projects further along on the commercialization path.

“It’s not as though there was a moment when we said, ‘We’ll do more innovation,’” Agee says. “It was this yearning, the sense that we needed to get in front of whatever’s new, whatever’s next, and be a part of that. It’s been evolutionary.”

Agee says while health care providers are by nature curious and quick to identify problems and solutions, the medical field as a whole is slow to adopt change. She thinks the collaborative, quick global response around COVID-19 may serve as a catalyst.

Within Carilion, the pandemic led to innovative solutions to unique problems the highly contagious virus posed, including an intubation hood and fogless face shields for Life-Guard flight crew helmets.

Agee says she’s also seen the benefits of the Center for Simulation, Research and Patient Safety, where human factors experts devise solutions, perfect designs, and test prototypes.

“We take on tools our care teams use every day and work with them to find ways to improve those tools,” she says. “The classic example is our work with a defibrillator manufacturer whose device was recalled because of its potential to fail in critical situations. Our team discovered that the problem was something so simple as having the same button for ‘on’ and ‘off.’ Hitting the button twice could present catastrophic consequences.

“It’s incredible to be able to influence changes that benefit the entire field,” Agee adds. “Innovations that make things better for patients and caregivers are very exciting.”

What’s Needed Now

“We’re not done with what we can accomplish here,” Smoot says. “The next big matter to resolve is to what extent Carilion wishes to further evolve as an academic medical center. Carilion’s primary role is providing quality care, but I think we’re going to see much more research going on across the system.”

Smoot says Carilion’s continued evolution is necessary if Virginia Tech is going to reach its full potential. “Now, that’s easier said than done,” he says. “The first thing that comes to mind is, who will pay for these positions, such as clinicians and technicians, who are engaged in research and not generating billable hours?”

Dr. Friedlander, too, is eager for Carilion to move deeper into research, finding better ways to share patient data and hiring physician scientists who both care for patients and spend time on research.

As Carilion progresses to this next level, Agee says, “We’ll look for other ways to bring in revenue, potentially through philanthropy, and we’ll work with our colleagues at the state and federal levels to find additional funding for research and innovation.”

Dr. Friedlander says it’s a long-term investment. “If you’re looking at your bottom line, it’s going to enhance your brand and your reputation, which in health care translates into referrals,” he says. “But that’s going to take at least 10 years, maybe even 20. And what does that do for the community in terms of health? It brings researchers and physicians together, so cutting-edge research is happening here. It gives your patients access to advancements now.”

Halliwill views it similarly.

“The way we spend our patients’ money is visible in the care we provide every day, whether emergency care, surgery, or delivering a baby,” he says. “But we also allocate some money toward care that will benefit patients in the future through our work in innovation. I think of this investment as a long play. We’ve already accomplished so much. Just imagine what it will be like 10 or 15 years from now.”

Beyond the Campus

In 2019, Carilion asked the University of Virginia’s Weldon Cooper Center for Public Service to measure its impact on the local economy. The center found that Carilion had contributed $3.2 billion to the state’s economy the previous year, and accounted for about 10 percent of the Roanoke region’s $17 billion gross domestic product.

The center also projected that, within a few years, the research institute will have a $465 million annual impact on the economy.

“All the nation’s cities that have developed world-class research institutes in health have benefited in an exponential way,” says Elizabeth McClanahan, who succeeded Dooley as chief executive officer of the Virginia Tech Foundation.

For its part, the City of Roanoke has designated a stretch of real estate as an innovation corridor, launched a digital platform to support collaboration among existing and prospective entrepreneurs and businesses, and supported the creation of RAMP, a business accelerator to mentor startups. The city manager meets regularly with Carilion and Virginia Tech leaders to explore what more they can do jointly. In addition, the region’s governments are working together to address transportation and housing needs to support the growth.

 “I believe the most significant changes of this century will occur at the intersection of health and technology,” Agee says. “Carilion and our region are well positioned to benefit from the many innovations that will ease the burden on providers, improve the quality of care they deliver, enhance access to care for patients, and ultimately lower the cost of care. The health care field is ripe for innovation, and I’m proud we’re helping to lead the way.”  

Written by Luanne Rife

Illustration by Señor Salme