A company that was once the poster child for the joys of living and doing business in Ohio now may have become a cautionary tale about a weakness in the state’s much-celebrated Third Frontier program.
IntElect Medical was launched in 2004 with a piece of a $7.6 million Third Frontier grant to the Cleveland Clinic for brain neoromodulation research. Earlier this year the company made a stealthy move to Boston that it didn’t publicize.
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Now that the neuromodulation company is about to be sold — a deal that will no doubt enrich IntElect’s management team, not to mention Cleveland Clinic and personnel there who helped form the company — it’s fair to ask if the Third Frontier grant to the company was a good investment by the state. (It’s important to note that the Third Frontier money didn’t go directly to IntElect. Rather the grant went to the Clinic, which used an unknown amount to help IntElect get started.)
Ironically, Intelect and its CEO Vince Owens star in an advertisement sponsored by the state of Ohio on its OhioMeansBusiness Web site. The ad tells the story of how medical device industry veteran Owens, who’d previously worked in Boston and Minneapolis, came to Ohio to work with IntElect. And along the way, Owens came to appreciate the simple pleasures of living in good ol’ Flyover Country, discovering that he could lead a happy (and cheap!) life amongst we humble, God-fearing Midwestern folk.
“Happily, Vince and his family have found life comfortably uncomplicated in Ohio,” the ad intones, next to an image of a smiling Owens playing football with a child who’s presumably his son on a lush, green field in the midst of a golden autumn day. And the fact that IntElect was launched with state funding no doubt only added to Ohio’s appeal to the company. Who doesn’t like free money?
No wonder IntElect didn’t issue a press release or any formal communication when it pulled up stakes for Boston earlier this year. (Owens hasn’t returned calls from MedCity News. A Cleveland Clinic spokesman didn’t return a call.) Officials from the Ohio Department of Development, which administers the Third Frontier program, weren’t aware that IntElect had relocated to Boston.
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There’s absolutely no question that Third Frontier as a whole has been great for Ohio’s biomedical industry, having helped create thousands of jobs and millions in income tax revenues for the state.
And IntElect no doubt provided the same benefits to Ohio’s taxpayers — while it was here. Now, however, any jobs the company creates aren’t likely to come in Ohio. Sure, some Clinic doctors, executives and other investors will get a hefty payday that will be subject to state taxes, and royalties from any sales IntElect ever makes would likely flow back to those same people.
But a wealth-generating tool for a few socioeconomic elites who are probably already fairly wealthy isn’t how Third Frontier was sold to Ohio taxpayers. For the public, the No. 1 issue is and probably always will be (in Ohio, at least) jobs.
There are an increasing number of states infatuated with the Third Frontier approach and similar economic development plans. The IntElect affair presents a strong case for tying such grants to some sort of assurance that all recipient companies remain in the granting state to create jobs. A spokeswoman for the Ohio Department of Development said the state does have “claw back” authority that would allow it to seek repayment from companies that fail to live up to the conditions attached to their funding. But that authority only exists for “direct” recipients of grants. Because IntElect’s money came through Cleveland Clinic, the state would have no authority to claw back any of the cash from IntElect, the spokeswoman said.
Third Frontier advocates may argue that IntElect is merely one that got away, a small scar on the nearly pristine face of a large program that’s essential to restoring (the hope of) prosperity in a state that’s been battered by the loss of hundreds of thousands of manufacturing jobs over recent decades. And they’re probably right.
But it’s tough to argue that IntElect has done enough for the state to justify its free money from Ohio taxpayers.
