An Entrepreneur Attempts to Reinvent Anesthesia

As Hurricane Sandy ravaged the East Coast last fall, knocking out power in half of Manhattan and even at New York University’s Langone Medical Center, Stephen Rudy found himself in the dark. Yet, when the power went out, Rudy wasn’t at home in Brooklyn. He was in Uganda at a 300-patient hospital in Soroti, a city roughly nine hours by car from the country’s capital of Kampala.

Standing in a small operating room, Rudy, who earned an MBA from Stanford University’s Graduate School of Business in 1984, watched as a local doctor administered anesthesia to a variety of patients: women who needed C-sections, men with hernias. The power went out about a dozen times. During one urgent C-section, the room became dark, and the surgeon simply strapped on rock climbing headlamps and continued. During another procedure, the power didn’t come back for 20 minutes. Under normal circumstances, this could have been a disaster; the patient could have woken up, or even worse, died. But not this time. “It was phenomenal to watch the surgeon and the staff,” Rudy says. “Nobody panicked.”

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A nurse attends to a pediatric case using Gradian equipment at Komfo Anokye Teaching Hospital, Kumasi, Ghana.

The reason: The staff in Soroti weren’t using conventional anesthesia machines — hydraulic, pressurized devices that require electricity to mix oxygen or some form of compressed air with the drugs that put the patients to sleep. Instead, they were using a Universal Anesthesia Machine (UAM), a device sold by Rudy’s company, Gradian, a two-year-old nonprofit, created to provide access to anesthesia in developing countries, where electricity is often unreliable. Of the 230 million surgical procedures performed each year across the globe, an estimated 15% are done without proper anesthesia. Many of these occur in developing countries where power outages are common, and acquiring a steady supply of pressurized gas is expensive. To solve this problem, the UAM borrows from an older method of delivering anesthesia that vaporizes drugs and mixes them with room air if no other oxygen source is available.

Scaling to Meet an Almost Endless Need

In the late 1990s, Paul Fenton, a British anesthesiologist, invented the UAM, but it took more than a decade for him to secure funding for the development and first deployment of the UAM. Once the financial backing came through Rudy was hired as Gradian’s CEO and from there the device took off. The pair, along with the company’s small staff and dedicated financial backers, helped reinvent the way anesthesia is delivered. Today, they are creating a market for the UAM across the developing world, and selling the machines at cost — $12,000, including shipping — to donors, governments, and NGOs. To date, hospitals and NGOs are using the machines in 10 countries, and Rudy hopes there will be many more to come. “The key issue,” he says, “is how do we scale this up? We have moved 30 of these machines, but we need to move hundreds of them. The need for these devices is almost endless.”

Gradian’s small team — they have just three full-time employees and several consultants — still have a long way to go, but for Fenton, the progress they’ve already made has been a long time coming. For years, he had witnessed a host of anesthesia and surgery-related challenges in Malawi, where he began working at a hospital in 1986. To deal with unpredictable electricity and an inadequate supply of pressurized oxygen, hospitals have long relied on makeshift devices, which, like the UAM, use drugs that don’t require a pressurized delivery system. Technically, these devices work, he says, but they’re old and unreliable, and if they break down, parts are very difficult to replace. “You really have no idea how much anesthesia you’re putting into a patient” with these older machines, Rudy says. “We’ve heard horror stories about [them] breaking down all together, and the doctors have to stop a procedure if they can, or they basically just lose a patient on the table. It’s a horrible situation.”

Fenton, a wiz of a mechanical engineer, re-jiggered these older devices and developed a prototype, which he shopped around to a variety of companies in the late 1990s. But there weren’t any takers, and for more than 10 years, the concept went nowhere.

A few years ago, however, his invention was given new life. Fenton was hired to help write curriculum for an anesthesia training program for the Nick Simons Foundation, a nonprofit dedicated to improving health care in Nepal. It’s creator, Jim Simons, a legendary mathematician and hedge fund manager, started the foundation with his wife, Marilyn, to honor their son, Nick, whose love for Nepal was cut short when he drowned in a swimming accident. During a meeting with Jim Simons in 2009, Fenton showed him a diagram of his anesthesia machine, and Simons funded five prototypes. They tested one device on hundreds of patients at a hospital in England and three others in Nepal, and the results were so encouraging that the foundation decided to create a nonprofit startup — Gradian — to develop a traditional market for the device and sell it at cost to hospitals and NGOs around the world.

Around this time, Rudy, a veteran of the medical technology industry who had spent years working at startups, was looking for something philanthropic to get involved. After applying on the jobs bulletin board at Stanford University’s Graduate School of Business, a recruiter contacted him and soon he left his life in Silicon Valley behind to become Gradian’s CEO. “My kids are in college,” he said. “My wife was looking to retire, so abruptly, we just sold the house and moved to New York without a forethought whatsoever.”

Fenton still had a number of contacts in Malawi and the country became Gradian’s first test project. To date, it’s also been its biggest success. Rudy and company started by donating a device to a hospital in need. An NGO bought another, and soon word spread that the UAM worked, that it was reliable, and that it was helping. Donors and NGOs responded by purchasing seven more devices, and word is still spreading. “It showed us that our strategy of seeding a market with some donations and transitioning to a break-even sales model has validity in at least some markets,” says Rudy. “I’m gratified by that. And by the momentum.”

In other countries, such as Uganda and Nigeria, a market has not yet developed, and Gradian’s business is donation-based. Rudy, of course, isn’t beholden to shareholders. His company doesn’t have to worry about profits, and the Simons family is in this for the long haul. Their only metric: how many patients they’re helping. “The whole idea of Gradian is to eventually break even, instead of losing money, which we’re very good at right now,” says Rudy.

Connecting Purchasers of the Device to Hospitals That Need Them

Still, the company’s mission — to make a difference and provide emergency care to developing countries that need it — is fraught with challenges. One of the major problems the company faces is a disconnect between the people and groups who have money to purchase the devices, and the hospitals that need them. “We don’t sell this machine to hospitals because our hospitals have no money,” he says. “We sell them to NGOs, and they’re typically not even in-country NGOs.”

This disconnect makes ramping up UAM sales difficult, especially as it pertains to working with both foreign governments and American agencies such as USAID. “A government might want to buy 15 anesthesia machines once every 3 years,” Rudy says. “But we’ve only been around for two. A nonprofit donor will work more quickly.”

Another major problem for Gradian has been providing proper training. Many hospitals in the developing world don’t have their own anesthesiologists, and training is typically poor. “Anesthesia is a pretty deep art,” says Rudy, especially when there are complications.

Even if someone is trained, whoever uses the device also tends to act as its chief mechanic. “The machine has been pretty robust,” Rudy says, “but getting service for machines to these hospitals has been a pretty big challenge. We’re going to places where they haven’t really used general anesthesia.”

The result has been that Gradian has been forced to fly in anesthesiologists and offer free training on the devices. “It’s hugely expensive,” Rudy says. “So the difficulty looking at this from a business model isn’t the selling part. It’s actually the logistics of delivering the machines and ensuring that when we leave, they’re well understood.”

Brain drain is another problem, as citizens who become well trained on the devices soon have opportunities to move to bigger and better jobs in less rural areas. “Our goal is for this to become self-sustaining,” says Rudy, “so you have Malawians teaching Malawians how to do this. I don’t have a magic bullet yet.”

Perhaps, but at the hospital in Soroti, as the staff scrambled in the dark, the UAM helped them complete their surgeries. “We did about six or seven surgeries that day, and they were all successful,” says Rudy. “That’s what the UAM is designed for.”