David Mitchell and Ben Bowman, co-founders of Minneapolis-based General Blood, are trying to reenergize what they believe to be a stagnant industry by buying blood from areas with excess capacity (mostly in the Midwest) and selling it to hospitals and clinics running short of those precious corpuscles (largely on the coasts).
To Mitchell and Bowman, blood is a commodity as well as a life-giving fluid—so why not make the market for it work better?
// How did you and Ben Bowman come up with the idea for General Blood?
Ben had been doing research on the blood industry since 2007. The genesis was figuring out how to increase yields for blood banks when they do blood donations. If a blood bank goes to a high school and the drive is unsuccessful, then they’ve just spent marketing money on an unsuccessful drive. If it’s overly successful, now they have all these expiration dates on the blood units. So banks are always looking for that perfect amount of blood. It’s hard to do. You can’t pay donors—you have to strum on their heartstrings and see what happens.
// What do you offer that traditional blood suppliers—the Red Cross and other blood banks—don’t?
We offer hospitals a secondary supplier for a critical input, at a lower price in many cases, and with no problems with allocation. In some parts of the country, allocation is a big problem where they have a standing order for 100 units and 60 show up. Most of their blood is single-sourced, and if that supplier doesn’t have enough, they’re out of luck. What does that mean? Cancelled surgeries, inferior care. If you don’t have a critical input like blood, the ramifications are severe.
// Why the excess of donated blood in Middle America?
On a per capita basis, people in the Midwest tend to give more blood than people on the coasts. There are a lot of reasons for that. There are higher immigrant populations on the coasts, and many immigrants are deferred from donating—not because they are immigrants—but because of where they’re from. If you were born in an African country, forget about it. If you’ve lived abroad for many years, forget about it. But if you’re giving blood in Des Moines, chances are you grew up near Des Moines. Land and labor are much cheaper in the Midwest than on the coasts. And when the pastor says during church that there’s going to be a blood drive, most people in the congregation sign up.
// What challenges have you been facing?
We’re upsetting an industry that has been relatively stagnant for the last 60 years. The reality is that blood is already being shipped around the country, but in a closed system that stifles competition and props up blood banks whose operations are not as efficient as others, to the detriment of hospitals, insurers and, ultimately, tax payers, because Medicare is the largest payer in the country. The blood centers, both the Red Cross and the community blood banks, have their territory staked out. They’re nonprofits, and they want to benefit their communities. But they think they’re fine the way they are. Only 10 percent of the hospitals in the country have dual suppliers. When you’re a 100 percent supplier, you have all the power. And when somebody else comes along and tries to take some of that power away, you’re going to do what you can to protect it. So the biggest competitive challenge we face is to get the hospitals to realize that they ultimately are the customer—and they do not have to stand for the “take it or leave it” deals they often get because there is such a lack of competition.