Virginia's new economic engine: an affordable drug hub
For most Virginians, Petersburg is a city off I-95 – a place that fell on hard times in the 80’s when manufacturing jobs disappeared. As someone who grew up in Richmond, Kyle Tucker never gave it much thought.
“That’s just the way it is," he explains. "You just don’t come down here. It’s just known as blighted and dangerous.”
But as real estate prices in his hometown rose, Tucker began hearing rumors about the city 25 miles south, and he was not alone. Mayor Samuel Parham says people have come to Petersburg from New York and Philadelphia, Washington and suburban D.C. to buy and rehab historic homes in the city’s nicest neighborhoods.
“The word is out on how much bang you can get for the buck here. I’ve met some young couples who say they bought their dream house here in Petersburg being that they’re working from home now they can live here and have the dream house that they couldn’t afford in Northern Virginia where everything is over a million dollars.”
Here, he says, that million dollar home could be had for $350,000, and people weary of big city traffic discover a whole new way of life.
“In Petersburg you’re pretty much five minutes from everywhere. Five minutes to the mall, five minutes to the hospital, five minutes to the grocery store, and once people experience that convenience they like living in a smaller city.”
But for Tucker, now an area resident and President of the Historic Petersburg Foundation, the big draw was history. In the 1600’s, English settlers sailed to Virginia’s coast and made their way up the James to found Richmond and the Appomattox to build Petersburg. Walking through the city’s Old Towne today, you come across a small lane.
“During the 1600’s this was the dividing line between English territory and Indian territory, and to go west if you were English you had to have a pass, and if you were Native American going east you had to have a pass.”
Fountains and small parks add to the charm of the city’s Old Towne, and Tucker sees history playing an important part in Petersburg’s future.
“I’ll give you a quick example. Gettysburg brings in millions of people a year, but their battle was three days, 7,500 men died at Gettysburg, and the war went on another two years after the battle was over, so it really didn’t change much. Petersburg was nine months long, 75-thousand men died here, and when Petersburg ended, that ended the Civil War."
The battlefield remains as part of the national park system, and it too has a remarkable story to tell. Union soldiers stood guard here about 100 yards from confederates plotting their next move. A recording at the site explains how troops from Pennsylvania proposed digging a tunnel and planting explosives under the southerner’s camp.
“The coal miners of the 48th Pennsylvania toiled round the clock. Using only cracker boxes, they hauled 18,000 cubic feet of dirt out of the mine and carefully spread it out of sight in the ravine behind you. After a month of dangerous, exacting work, the mine was finished. Four tons of gun powder were planted directly under a Confederate battery.”
The explosion created a massive crater, and union troops – many of them African-Americans -- marched in, only to find themselves surrounded by surviving confederates who shot them like fish in a barrel. General Grant called it the saddest affair he had witnessed in the war.
With the coming of railroads, Tucker says, the city grew.
“All the railroads had their own gauge of track, so you couldn’t take one train from one railroad and put it on another track for another railroad. You had to come to a place like this, and they’d swap all that stuff around, and that’s why at the beginning of the Civil War Petersburg was the fifth largest city in the South and the second largest city in Virginia.”
Many figures from history walked it streets – Lafayette and Lincoln, Grant and Lee, Edgar Alan Poe and a skilled African-American seamstress named Elizabeth Keckley.
“At the outbreak of the Civil War, one of her patrons – Vareena Davis, Jefferson Davis’ wife, wanted her to move to Richmond and live in the White House of the Confederacy," Tucker says. "She turned that job down so she could be the seamstress to Mrs. Lincoln, and she ended up writing a best-selling biography that provided a whole lot of insight into the personal lives of the Lincolns.”
A hundred years later, Petersburg was home to more than 50,000 people – about 40% of them African-Americans who were sick of rural life. Again, Mayor Sam Parham.
“My dad and my uncles were on the farm -- tobacco farmers, and peanut farmers and said, ‘Hey, to heck with this. I’m tired of the farm life. I’m coming to the city and get a job.’”
But in the 80’s, many manufacturing jobs moved to Asia, where labor was cheap. Petersburg’s population dropped to about 30,000 people, and history buff Kyle Tucker says that created an opportunity.
“The blessing of our lack of economic development here has been that all these old buildings have been preserved.”
But history and real estate are not the only card Petersburg has to play as it rebuilds its economy. In the next decade, the city is poised to assume a central role in medicine.
One unexpected result of the COVID pandemic was disruption of supply chains that caused shortages around the world, but even before the pandemic, this country was facing a shortage of many essential medications. Ninety percent of the pharmaceutical drugs we take are generic – and almost all of them are made overseas. Now, central Virginia is poised to change that, creating a drug hub to produce essential medications in America as Sandy Hausman reports.
This story begins in a sprawling laboratory run by Frank Gupton, a chemical engineer at the Medicines for All Institute based at Virginia Commonwealth University. Gupton got $15 million from the Gates Foundation to make three treatments for HIV cheaper.
“The goal was to reduce the cost of the drug by about 10%, so we went back and re-invented the process by which the drug could be made more efficiently, and we reduced the cost anywhere between 20 and 40 percent.”
That allowed the foundation to supply millions of people in poor countries with life-saving medication. Gates then sent $25 million to help Gupton expand his research center and lower the price of drugs for tuberculosis and malaria. Then, COVID hit, and the university went into lockdown.
“The only labs that were allowed to be working were ones that were specifically COVID-related projects.”
So Gupton called Gates and got the go ahead to focus on new drugs for treating COVID – pricy medications made by Merck, Pfizer and Gilead. Knowing those drugs would be too expensive for most consumers in third world countries, the pharmaceutical companies agreed, and Gupton’s team quickly found a way to make the Merck drug for less.
“We reduced the cost from something right around $2,000 a kilo to under $200 a kilo.”
Gupton’s approach is called flow technology – a process that replaces batch production where ingredients are added one at a time until the final drug is ready. A mistake at any point in that process means the whole batch must be thrown out according to Jeff Gallagher, executive director of the Alliance for Building Better Medicine in Richmond. With technology, he says, drugmakers monitor the result each time an ingredient is added.
“You bring in the first two and those two streams make a bigger stream, and you immediately measure: is it the right chemical, is it the right PH, is it the right temperature, are there any impurities in it, before it even goes downstream. If there’s something wrong with it, you make the adjustments you need to get it right and send it downstream. That immediately cuts half the cost + more than half the environmental waste.”
By adopting this approach, Gallagher says our country could ensure an affordable supply of essential drugs.
“The United States, over the last 30 years, has sort of forfeited a reliable source of its medicines, both to chase costs and because of environmental concerns it went offshore. Over 80% of the medicines we take are foreign sourced. In some cases, like antibiotics and antivirals, it’s almost 100%!”
And he adds that making these medications abroad created a big regulatory problem.
“Ever since COVID, so over the last two years FDA has not inspected a single plant inspection of an overseas facility anywhere in the world.”
Enter Eric Edwards, a doctor and an entrepreneur from Richmond who launched a company called Phlow – that’s P-H-L-O-W.
“Today someone will call 911 in any city, and there will be at least two or three drugs that are in shortage, not available on those ambulances. These are antibiotics, these are pain drugs, these are sedatives, these are drugs that you need to actually intubate a patient to go onto a ventilator. We’re talking about some of these drugs that are necessary to sustain life in an ICU environment, but they cost less than a bottle of water in an airport, and so there really hasn’t been an economic advantage for any company to say, ‘We’re going to spend all this money to get state-of-the-art automation to build these drugs that are already barely profitable, but someone has to try, for the health of our nation.”
So the federal government called for bids to rebuild this country’s supply of essential medications and awarded Phlow $354 million to do the job.
Phlow brought in Ampac Fine Chemicals, a California firm that makes the basic components of many medications, and they found the facility they needed in Petersburg.
“They took over an old facility that used to make Robitussin, Dimetap and ingredients for a lot of drugs people might remember back in the Whitehall-Robbins days.”
Phlow is now building an advanced manufacturing campus alongside its partners – Ampac and a non-profit drug company called Civica, which was founded by a coaltion of 1,800 hospitals. It recently announced plans to make insulin for $30 a vial – 1/10th of what the stuff costs now.
So the stage is set to create a new drug hub in America.
Virginia was long known for tobacco – a product that destroys human health. Now, the state is gearing up to save lives by building a drug hub for generics. As Sandy Hausman reports, Richmond and Petersburg are gearing up to supply the talent needed to staff a new industry in the Commonwealth.
Samuel Parham is the mayor of Petersburg – born and raised in the city known for making things. When manufacturing jobs began moving to places where labor was cheap, Petersburg fell on hard times – losing about 20,000 people, but Parham says it never lost its main selling point – location.
"Just because you have I-85, I-95 and 460 you’re right at the middle of the east coast," he explains.
It’s a straight shot north on 95 to New York and south to Florida, so three generic drug companies have now decided to locate here, and new medications could also be manufactured in this region according to Professor Frank Gupton who heads the Medicines for All Institute at Virginia Commonwealth University.
"There are two big research parks, one in Rockville, Maryland and one down in the Research Triangle Park," he says. "if you look around the country, there are lots of different research parks, but there aren’t any big development parks that will take those discoveries and move them out into the marketplace."
So Virginia is gearing up. The state approved $29 million to improve the municipal water system in Petersburg. Local colleges and universities, including Virginia State and VCU, are preparing to train hundreds of scientists, engineers and laboratory technicians.
"I cannot find a better example of an Historically Black University and a leading research university like VCU collaboratively working together to dual-track their students," says pharma executive Robby Demeria, "If you take a chemist at Virginia State and a chemical engineer from VCU, blend them together – that’s an ideal employee for Phlow."
Virginia Commonwealth has played a central role in applying for grants and planning to build the new drug hub, creating the Alliance for Building Better Medicine, talking with local leaders and drafting a 180-page plan. Jeff Gallagher is executive director of the alliance which launched quickly in the midst of the pandemic.
"On four days’ notice we could get 25 important people on a Zoom call, and we just marched through on workforce, on infrastructure, all sorts of things," he recalls. "What do we need? How could the community come together to really support this the best?
One key goal was to ensure that area residents benefit from what’s about to happen. Chandra Briggman is President and CEO of Activation Capital, a non-profit founded to promote innovation in Virginia, to grow the number of science and tech companies here and to run a large biotech park in Richmond.
"You know this is a challenge a lot of cities struggle with. How do you engage a local population in revitalization so it’s not just gentrification and they’re left out," she says. "We’re designing this with that in mind. How do we really, truly engage the local community and make them a part of this. + We have these programs that end up being on-ramps for them into this cluster in terms of training, higher-paying jobs, access to entrepreneurial training and endeavors and also being a part of something so significant for the United States + is motivating for people."
Already, Phlow’s Chief of Staff Robby Demeria says the promise of the new drug hub is yielding benefits for Petersburg.
"In November of 2021 their triple B+ bond rating was increased to A+," he says.
One of the founding drug companies – Ampac – has hired dozens of people from Petersburg and, because it’s based in California where the cost of living is higher – it’s paying Virginia employees top dollar, and the city’s mayor hopes to see more drug companies choosing to build in the area.
"They say Pharma is like fast food," he says. "If we’re McDonald's before long Burger King and Wendy’s and Hardee’s show up too."
At Activation Capital, Chandra Briggman hopes central Virginia could become a model for the nation.
"I grew up in a really small town, and I recently visited, and I see a lot of shuttered buildings and just a lot of depression. + 37:00 – If we’re able to successfully design a model for creating an innovation economy in a small region like central Virginia, that can become a template for others and how they might revitalize. So that’s what makes me excited about this whole thing, what makes me get up in the morning, every morning, and excited to work the long hours to help build this cluster."
The Alliance was one of 529 groups that applied for a regional Build Back Better Challenge Grant. The field has been narrowed to 60, and this summer 30 winners will be announced. Briggman hopes her group will be one of them, securing $100 million to accelerate the development of an affordable drug cluster in central Virginia.