Before KC can become a translational-research hub, a November 5 measure tests sales-tax tolerance
Getting to Lynda Bonewald’s office requires navigating a maze of windowless corridors on an upper floor of the University of Missouri–Kansas City’s School of Dentistry.
Past the door, her Hospital Hill work space is no place for the claustrophobic. It’s an unassuming little room, out of proportion with Bonewald’s status as one of the nation’s better-regarded scientists in her field.
The splendidly named UMKC science researcher has made her career studying bones, earning particular acclaim with her inquiries into the osteocyte, a bone cell that, prior to her work, was thought to be almost without function. Bonewald’s fellow researchers admonished her for wasting time on osteocytes.
She ignored those warnings.
“I pursued it anyway because I couldn’t believe that cell wasn’t important,” Bonewald says. She has been at it since 1993, when she saw another researcher’s image of the spaceship-shaped cell; over the past 20 years, she has helped prove that the cells are among the most important elements in human-bone biology.
These days, one of Bonewald’s most important studies is the development of new bone cement for fixing broken limbs or securing prosthetics such as hip replacements. The bone cements that have been on the market for the past 40 years are toxic. Bonewald is chasing a safe replacement. If successful through clinical trials, the result of her work could represent a researcher’s holy grail, a discovery that could improve lives and make millions.
And while the physical route to Bonewald’s office is labyrinthine, federal research funding has found a clearer path to her doorstep, given the high regard for her work.
Last year, she received an $8.3 million grant from the National Institutes of Health to study how bones and muscles relate to each other in order to find out why both lose mass as humans age.
She knows she’s fortunate to get this help when political infighting and a broke federal government have pinched NIH grants. What has historically been a thick artery for research dollars has had its budget cut $1.7 billion since the passage of the Budget Control Act of 2011. Current NIH biomedical research is $4.7 billion less than 2003 funding levels, according to the Federation of American Societies for Experimental Biology.
“It’s really disheartening to see what’s happening to my colleagues,” Bonewald says.
That’s why Bonewald, a member of the Kansas City Area Life Sciences Institute, is among those lobbying Jackson County voters to pass a November 5 ballot measure to increase the sales tax by a half-cent.
Doing so would raise $800 million over 20 years to fund what’s called “translational research,” the type of work Bonewald does: building on basic research in order to find treatments that can be sold to patients. That revenue would go to a newly formed Jackson County Institute for Translational Medicine; half would then be administered for research at Children’s Mercy Hospital, with most of the rest split evenly among St. Luke’s Health System and UMKC.
Advocates for the tax say the steady, reliable stream of money it would generate could be parlayed into more research dollars from other sources and could lead to major medical-research breakthroughs in Jackson County. It could, they say, put this area on the research map at a level similar to Boston and San Diego.
But the proposal has some scratching their heads, unaccustomed to a measure that would direct sales tax away from its usual destinations, including public safety and badly needed infrastructure.
Sales tax in Kansas City is already among the highest in the Midwest, and it already disproportionately affects the poorest residents of one of the least wealthy counties in the metro, a place where nearly one in four people between the ages of 18 and 64 don’t have access to health insurance. At those residents’ expense, money from the tax increase would funnel into a speculative venture (medical research comes with no guarantees) and fund well-paid scientists.
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Compounding skepticism about the tax is the way it has been trotted out, splashed publicly for the first time on the front page of the August 8 edition of The Kansas City Star, less than three months before voting.
But little organized opposition has emerged so far.
Perhaps Jackson County voters are fine with paying more sales tax so that local researchers can look for new medical treatments. (The pro-tax TV ads that show kids and seniors in hospital rooms don’t do much to explain translational research, but they tug the heartstrings.) Or maybe marching out a big, complicated proposal just weeks before an off-year Election Day is supposed to short-circuit the kind of discussion that could push against the tax.
The proposal basically goes like this: If the tax passes, $40 million a year for the next 20 years will mostly fund translational medical research.
Translational research is what happens after basic research. For example, basic research might focus on figuring out which gene mutations trigger a type of cancer. Translational medical research uses that knowledge to develop treatments for that type of cancer, put them through clinical trials and, if successful, bring them to market. Patients get medicine, and pharmaceutical companies make millions, if not billions.
The $40 million a year would flow through a Jackson County Institute for Translational Medicine. The institute at Hospital Hill would use half of that annual $40 million for research by Children’s Mercy Hospital, while 20 percent would be earmarked for research at UMKC, and another 20 percent for St. Luke’s. The rest would go to vaguely defined grants and research-training programs offered through the Metropolitan Community College system.
Backers of the proposal are betting that the research might lead to those pharmaceutical billions. If a discovery makes money, 20 percent of the net revenue from its sales are supposed to come back to Jackson County for various purposes, such as public health, or back to the JCITM itself.
The idea that Jackson County residents would pay for this type of research is a new concept for the public at large, but the measure’s planners have been developing it for years. The opportunity they had hoped for came when another Jackson County initiative, a large-scale mass-transit proposal shopped around for the past few years by Jackson County Executive Mike Sanders, went off the rails earlier this year.
Jackson County’s pursuit of funding for medical research goes back as far as 2007. But you wouldn’t have known it from the Jackson County Legislature’s August 26 meeting, when elected officials were asked to put the $800 million tax (more, if you count inflation) on the November 5 ballot.
Securing a vote that day was important to tax advocates, who wouldn’t have another audience with the Jackson County Legislature before the deadline for adding their measure this year.
In the basement of the Independence Courthouse Annex on that hot, sweaty day, Legislature chairman Greg Grounds leaned toward his microphone and told an unusually packed crowd (mostly media and tax proponents) that the noon meeting would start late. Bureaucrats were still trying to type up the ballot and ordinance language to meet several changes requested by legislators since the tax proposal’s public airing the week before.
The ballot information made it to the legislators, but some additional specifics needed to be pinned down.
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Seated before the legislators were Wayne Carter, president and CEO of the Kansas City Area Life Sciences Institute (a research proponent), and Pete Levi, a Polsinelli lawyer doing pro bono work for the KCALSI.
Dan Tarwater, a longtime county legislator, asked Levi what would happen if one of the hospitals or UMKC successfully marketed a medical treatment that had already been in development before the tax passed. Could the institutions make some argument to keep some of the profits from the treatment?
“What’s to stop an institution, from them saying, ‘We were 50 percent of the way there,'” Tarwater asked. “So we [Jackson County] get 20 percent of the 50 percent? What is going to happen?”
Levi punted.
“That will have to be one of the first things ironed out and presented to the board of directors. I can’t give you an exact answer today,” Levi said. “Right now, there’s no particular device, no particular drug we can identify that’s currently being developed or marketed.”
An early copy of the proposed ballot language stated that 20 percent of profits from the commercialization of treatments developed in Jackson County would go back to the county’s health-care foundation. But no reference to that 20 percent appears in the ballot language that legislators approved.
Levi tells The Pitch in an e-mail that the 20-percent profit-redirection language was taken out because it seemed confusing. He adds that because Jackson County Executive Sanders signed a memorandum of understanding — also signed by all the parties involved, such as Children’s Mercy, St. Luke’s and UMKC — the language can’t be changed without the approval of all involved.
The Pitch wrote back to Levi, asking if the memorandum of understanding is a legally binding document, thus ensuring that the 20 percent would indeed go back to the county. Levi did not respond.
Brad Bradshaw, a physician, lawyer and leading opponent of the tax, doesn’t think it is binding.
One of the main parties pushing for the tax is the Civic Council of Greater Kansas City, a nonprofit organization of local business executives who pool their influence and finances for various causes.
That they’ve played a role in pushing the tax so close to the voting date has been an annoyance to other civic types.
“I think it’s a sign of very bad acting on the Civic Council’s part that they do this in such a way that it comes out in August for approval in November, giving us no time to talk about it,” says Crosby Kemper III, CEO of the Kansas City Public Library.
Tax proponents zeroed in on the November 5 ballot after Sanders announced that he wouldn’t put his transit proposal up for a vote this year. Sanders couldn’t work out agreements with railway companies to share their tracks for a commuter rail system. But why not put the research tax on the April 2014 ballot, when there could be more time for discussion?
That April ballot may have some other issues, like the proposed Kansas City Charter revision.
Levi says having the vote in November allows the public to focus on one issue.
“There has also been so much energy to make this happen, putting it off until April, there was a chance for that energy to dissipate,” Levi tells The Pitch.
Mark Jorgenson, president of U.S. Bank in Kansas City and a member of the Civic Council’s executive committee, acknowledges the skepticism about the research tax’s timing.
“I understand the cynicism and if not involved, I would harbor some of the same thoughts,” Jorgenson tells The Pitch. “Something like this, with as many partners, is complicated in terms of trying to put together the right organizational arrangement. You’ve got Children’s Mercy, you’ve got UMKC, you’ve got St. Luke’s, you’ve got Jackson County. You’ve got a lot of constituencies, and it takes awhile to make sure what you’re putting together makes sense.”
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The research tax bears resemblance to the 2011 sales-tax increase for the Kansas City Zoo. The zoo tax was also scheduled for an off-year election with no other high-profile causes or campaign races that typically draw voters in large numbers.
Off-year, single-issue elections typically yield low turnout, especially for opponents of a measure; the zoo tax brought out only 11 percent of Jackson County voters, 63 percent of whom approved the sales tax to bring penguins to the zoo.
People such as Kemper weren’t the only ones caught off guard by the timing of the research-tax announcement. Blue Springs residents are the only voters who have two decisions to make on November 5. City officials there have worked for about a year to get a half-cent sales-tax increase to finance that community’s chronically underfunded parks and recreation program.
Dale Carter, a Blue Springs City Council member (no relation to Wayne Carter), tells The Pitch that he had no idea the research tax was coming, while the city had been in discussions with Sanders about his transit-tax idea for years.
“I’m very concerned it’s going to have a negative impact on a tax we’ve been working on for some time,” Carter says.
Speaking of transit, enthusiasts for Sanders’ commuter-rail plan were also floored that the Jackson County executive made a play for a research tax after working for three years on trying to get commuter rail on the ballot.
“We were a little bit surprised by this decision to go after a half-cent sales tax for health care,” says Kite Singleton, chairman of the Kansas City Regional Transit Alliance.
Sanders, through a spokesman, declined to be interviewed for this story.
Before Wayne Carter moved to the Midwest, he lived with his family in Connecticut, close to Pfizer, where he worked as the pharmaceutical company’s director of translational research.
While Carter was there, his team developed a voice acoustic technology that could interpret the sounds of a speaker’s voice and give a reasonable prediction of the person’s risk for Parkinson’s disease. But Pfizer deemed that the Parkinson’s market was not large enough and didn’t pursue the development further.
Major drug companies like Pfizer shy away from products or treatments that won’t generate around $1 billion a year in revenue.
Carter tells The Pitch that major pharmaceutical companies that do translational medical research invest only in treatments that are reasonably sure to make plenty of money, leaving out more speculative ventures.
“It is so expensive for a company like Pfizer or Novartis to get a drug on the market,” Carter says over coffee at Union Station, which houses the KCALSI offices. “They’re looking for that next massive blockbuster drug that will create revenue for the next 15 to 17 years.”
That means much of translational research has become the province of university and medical-center researchers.
“Just like the federal government, the pharmaceutical industry is going through a bit of a change as far as it runs its business,” says Stephen Kingsmore, a genomic researcher at Children’s Mercy Hospital. “Pharma is trying to reinvent itself in a number of ways to be more profitable. Traditionally, it was a powerhouse of basic research. Increasingly, they’ve become more marketing majors as opposed to research majors.”
Kingsmore is considered one of the leading genomic researchers in the United States and beyond. He directs Children’s Mercy Hospital’s Center for Pediatric Genomic Medicine, where his staff is able to sequence the genes of a newborn child or a toddler in two days, at a cost of $10,000. By contrast, sequencing a human’s genes took more than 15 years and $3 billion the first time it was done, in 2003.
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Rapid gene sequencing is important for treating newborns and toddlers with genetic disorders. Without a fast method of sequencing their genes, diagnosing a specific disorder is something of a crapshoot.
The Scottish-born researcher came to Kansas City from New Mexico’s National Center for Genomic Researchers. Children’s Mercy invested more than $10 million to get his team up and running.
Kingsmore says Kansas City had little in the way of a reputation for medical research when he was in New Mexico.
“It was zero. I knew nothing about it,” he says. “When people think of powerhouses in medical research and biotech, they think of the East Coast and West Coast — Kansas City was a flyover region when it came to genomics. Now we’re recognized as a leader.”
Last month, Kingsmore’s team received a $5.8 million NIH grant for genomic sequencing for children. Like Bonewald, Kingsmore understands his good fortune. As recently as 2000, he says, grant applications had about a 33 percent success rate. Today, only about 9 percent of applications end up with funding, a decline due largely to federal cutbacks in research.
“If you think about it, you need to put in 11 applications to win one,” Kingsmore says. “That’s above and beyond what most people are able to do.”
A September 24 NIH report indicates that the United States has slashed its scientific research-and-development funding 5 percent this year, thanks to sequestration. At the same time, China’s spending went up 15 percent. Germany, Japan and South Korea also have added to their research-and-development outlays.
Sequestration’s effects have been noticeable here.
At the University of Kansas Medical Center, researchers received $53 million in NIH grants for fiscal year 2013, down $3.5 million from the year before.
Kingsmore would like to see Jackson County voters approve the sales tax for medical research, for long-term and short-term reasons. His $5.8 million NIH grant was preceded by $1 million in seed funding from the William T. Kemper Foundation. He believes the two are related.
“If you don’t have the $1 million, the chance of getting the $6 million is much, much less,” Kingsmore says.
Without the Stowers Institute for Medical Research, no one today would be talking about a translational research tax.
The Kansas City research complex was first envisioned in 1994 with a $2 billion endowment from American Century Investments founder Jim Stowers and his wife, Virginia, both cancer survivors.
The thing about the Stowers Institute, however, is that it almost exclusively conducts basic research.
In 2007, the KCALSI’s scientific advisory board (made up of top researchers from such places as Harvard University and the University of California–Berkeley) told KCALSI officials that they needed to figure out a way to capitalize on the opportunity presented by the Stowers Institute — namely, finding a way to translate the institute’s basic research.
But not much got done that year. Or in 2008. Or in 2009.
“By year 2010, they said, ‘Are you guys listening to us?’ ” Wayne Carter tells The Pitch.
Some members of the local civic community decided upon sales tax as the best way to fund the research after contemplating property tax or establishing a research foundation.
Advocates for the tax say they’re not aware of another place in the country that would cull sales taxes for translational medical research, but the idea isn’t without precedent.
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In 2004, California voters passed Proposition 71 to publicly fund stem-cell research through the state’s sale of up to $3 billion in bonds.
Closer to home, Johnson County voters in 2008 agreed to spring for a one-eighth-cent sales-tax increase to fund what was called the Johnson County Education Research Triangle.
As its name suggests, the JCERT tax funded three specific projects. JCERT pumped money into developing the Kansas State University Innovation Campus in Olathe; the Business, Engineering, Science and Technology Building at KU’s Overland Park Edwards Campus; and the KU Clinical Research Center in Fairway.
The JCERT tax played a significant role in KU’s snagging the National Cancer Institute designation, a recognition that’s expected to yield more cancer-research positions at KU and more funding for those researchers’ work.
But critics of the Jackson County research proposal see fault in its use of sales tax, often considered a regressive tax because it has a disproportionate effect on poorer areas of the county, areas where people have enough trouble as it is accessing health care.
The tax increase would boost some areas of Jackson County into the stratosphere of Midwest sales-tax rates. Omaha’s sales-tax rate is 7 percent. Minneapolis’ is 7.75 percent. Chicago’s sales-tax rate is 9.25 percent on general merchandise. Jackson County’s base sales-tax rate is already 8.35 percent, but Kansas City’s sales tax in downtown’s south loop has gone up to 10.35 percent now that the streetcar transportation development district has kicked in. With the research tax, that would swell to 10.85 percent.
“You have to add everything else in,” says Kemper, who is also chairman of the Show-Me Institute, a Missouri libertarian think tank. “Taxes not only go out of your pocket — it drives up the cost of food, it drives up the cost of everything else. The only places we are looking good on taxes is food and cigarettes. We should probably be raising our taxes there.”
The chief financial officer for Washington, D.C., every year prepares a report comparing that city’s tax burden with other major cities across the country. Its 2011 report ranks Kansas City’s tax burden No. 15 in the United States for a hypothetical family of three on an income of $25,000. That’s one position ahead of New York City and three positions ahead of Detroit, a city that earlier this year declared the largest municipal bankruptcy in U.S. history.
Steve Glorioso, a longtime local political operative who these days is one of the minds behind pro-medical-tax Committee for Research, Treatments and Cures, takes exception to the “regressive” adjective. “All local taxes are regressive — sales tax, property tax, earnings tax in Kansas City,” he says.
Or, as the notes he took with him to meet with the Star‘s editorial board say, “The only really non-regressive tax is the federal income tax. Especially when you include the earned income tax credit.”
But some sales taxes that pay for public goods, like safety and infrastructure, are scheduled to go back before voters in the coming years. Will those sales taxes be renewed if the medical-research tax has already pushed sales tax into the double digits?
Advocates envision Jackson County getting a return on voters’ investment — if the three institutes benefiting from the tax can develop treatments or cures.
“What I would tell you is, you’re probably not looking at all your costs,” says UMKC Chancellor Leo Morton when asked how the university justifies a regressive tax for medical research. “What would you pay to have your child lead a healthier life? Is that worth the investment?”
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Cures and treatments can take a long time to develop and bring to market after years of clinical trials and regulatory approvals, a fact that tax advocates acknowledge. So any return on Jackson County’s investment could be several years in the making, assuming local researchers discover a medical breakthrough and bring it to market.
“It’s hard to say to a researcher, ‘You will have a discovery by the end of the month,’ ” Morton says. “We just have to believe it can happen here because it has happened here.
“It’s not a bet. It would be a gamble if it had never happened before.”
Brad Bradshaw started his professional life as a doctor. When he saw how sloppy doctors could be, he became a lawyer, representing patients in medical malpractice suits.
He learned both professions at UMKC, but now he’s something of a thorn in his alma mater’s side. And he’s not making friends with St. Luke’s Health System, Children’s Mercy Hospital or other civic interests hoping to pass the research tax.
He has funded Citizens for Responsible Research, nominally an opposition group to the research tax, with about $100,000 of his own money. So far, his is the primary opposition to the research-tax proposal, the only entity airing TV ads against the measure.
Bradshaw’s critics seize on the fact that he lives in Springfield, Missouri. (He practices there and in St. Louis; his KC office is on the Country Club Plaza.)
“It’s perplexing as to why an out-of-town lawyer who makes part of his living suing hospitals would want to deny Jackson County citizens the opportunity to improve their lives through advanced medical research and healthcare,” campaign spokesman Pat O’Neill said in a statement to The Pitch. (He sent the same note to the Star for its piece on Bradshaw.)
Bradshaw wanted to put a statewide sales-tax proposal for medical research on the ballot in 2015 or 2016, a measure that he says would raise 10 times more money than the Jackson County proposal and generate more meaningful research.
“Jackson County’s proposal doesn’t raise near enough money,” he says. “One-half cent statewide would generate $400 million a year.”
Bradshaw calls the Jackson County proposal venture capital for private corporations. And St. Luke’s and Children’s Mercy are indeed big-dollar organizations. Children’s Mercy, for example, reported $816.8 million in revenue in fiscal year 2011, $13.2 million after expenses. Its fund balance is $519 million.
David Westbrook, a vice president of strategy and innovation for Children’s Mercy, defends the hospital’s half-billion-dollar-plus fund balance. The hospital needs that money, he says, to maintain its standing with ratings agencies, which assign the equivalent of a personal credit score to companies and organizations.
“That amount of cash we keep in the bank is there to protect us against aberrations that can take place in the market,” Westbrook told The Pitch in September.
The Pitch still had questions for Westbrook about the hospital’s finances, but Westbrook ended the interview and said he had a meeting coming up that would last 30 minutes.
“I’ll call you back,” he said.
He never did, nor did he respond to follow-up messages.
