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Pioneers of the Medical Device Industry in Minnesota Oral History

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Pioneers of the Medical Device Industry in Minnesota Oral History Thomas E. Holloran Narrator David Rhees Interviewer July 16, 1998 At the University of St. Thomas Minneapolis, Minnesota DR: This is David Rhees, and I’m here with Thomas Holloran, in his office at the University of St. Thomas, in downtown Minneapolis, and today’sIndustry date is July 16, 1998. Tom, thanks very much for agreeing to talk to me today. Project TH: Dave, it’s nice to see you again. Device DR: As I mentioned earlier, I thought we’d just start chronologically,Society and, of course, we want to focus on your role in the medical device industry. That’s the purpose of the interview, but it’s nice to start off with some generalHistory biographical background. So if you don’t mind, just kind of giving your vital statistics, as it were, and how you got up to the point where you became involved Medicalwith Medtronic. Oral TH: Sure. I was born Septemberthe 27, 1929, in Minneapolis. My parents had been married a relatively short time, but married later in life,Historical and I was an only child. I went through the Minneapolis publicof school system, I went to Margaret Fuller grade school, Ramsey Junior High, and Washburn High School, and then I started at the University of Minnesota. DR: I’m curious. WhereMinnesota did you live in Minneapolis? in TH: InPioneers south Minneapolis, Minnesota on 48th and Garfield, for almost that whole time. DR: That’s three blocks from where I live now. TH: What’s your address now, then? DR: On 48th, between Pillsbury and Wentworth. TH: Oh, sure. I know just where you live. In fact, one of my earlier jobs was behind the soda fountain at the pharmacy that used to be on the corner of 48th and Nicollet 17 [Avenue]. DR: Oh, really? Wow. TH: And I also worked for the YMCA as a (Grade) Y leader and then a camp counselor, and they used to be above the drugstore on that corner. Subsequently they built a small branch. Oh, sure, so that’s my old neighborhood. DR: Well, wonderful. That’s a nice neighborhood. TH: So that’s where I grew up, and when I finished high school, I went to the University of Minnesota. They had a program at the University of Minnesota where you could either enter law school after you had a baccalaureate degree, and law school was three years, or you could enter law school at the end of two years of pre-law, andIndustry law school was then four years. Being short on money, that’s the choice I made, and so I moved at the end of my second year at the University of Minnesota into law school. Project I also was in an enlisted role in the Navy reserve, Deviceand they came along with a program where you could go two summers to midshipmen’s school, and when you received a four-year degree, you were commissioned. I did that, and receivedSociety a Navy commission at the end of my fourth year of college, when I still had two years of law school left. History It’s a confusing chronology, but the Korean War started about that time, and when I had one year of law school left, I got activatedMedical in the Navy during the Korean War. I gave a ring to Patty, who I knew I really wanted Oralto marry, and in the belief that I might get reasonable duty. I instead wentthe to sea for a couple of years, and we got married when I got out, when I had a year of law school left. Historical of I edited the law review in law school, and went on in my last year to be a clerk for one of the justices on the state Supreme Court. Then when I finished law school in 1955, I thought about several possibilities of practice. One was with a firm that is still around, called the Dorsey andMinnesota Whitney firm today. I thought it was unmanageably large. It had thirty-five lawyersin then. I think it has over 300 now. And I was persuaded by, actually, a friendPioneers from the neighborhood Minnesota you’re describing, to come join them at the Fredrikson and Byron firm, which had a little different name then, but I was the fourth lawyer in that group, so it was a very small group of lawyers, and that’s where I began to practice law in 1955. DR: And so it wasn’t too long after that you came into contact with Earl Bakken. TH: No. Within two years of that—my memory is a little fuzzy as to whether it was 1957 or ’58, but I think it was ’57, they came into our law office, “they” being Earl and his partner, Palmer Hermunslie, to be incorporated. Actually, I think the basic reason they 18 came into the law firm was to have a buy-sell agreement in case something happened to one or the other of them. They were married to sisters and they were referred by a life insurance man to do some planning, and I suspect it was based on a line that sold an awful lot of insurance at that time, that is, insurance that would underlie a buy-sell agreement, and the line was, “if something happened to your partner, do you want to be in business with his widow?” And so it was to do a buy-sell agreement, and part of making that easier was to be incorporated. DR: And of course, that came to pass, unfortunately, when Palmer died. TH: That’s right. Although there were significant chapters between that, and Palmer had almost no Medtronic stock at the time of his death, which is anotherIndustry tragedy that we can talk about, if you like. So that’s when I first met Earl and Palmer. I remember that they Projecthad been in business for eight years, I believe, and I think the first balance Devicesheet and financial statement showed something in the forty thousand dollar range as revenues they’d had for the year before. There were the two of them and two employees. They were still Societyoperating out of the garage on, I think it was 19-1/2 Street, off Central Avenue in northeast Minneapolis. History DR: So you became their lawyer for their general needs? Medical TH: It started out that way. They were a veryOral small company. They did not require a lot of work, but early in the relationship,the it must have been in 1958 or ’59, Palmer came in one morning and asked if I could draw a patentHistorical license agreement. I didn’t tell him I’d never drawn a patent licenseof agreement before. I asked him how soon he wanted it, and he wanted it in about two hours. He was in conversations with Bill Greatbatch and Dr. William Chardack about licensing their patent application, I guess it was at that point, for an implantable pacemaker. Minnesota So, I quickly putin together a license agreement, which Palmer took to Buffalo and talked to ChardackPioneers and Greatbatch. Minnesota It was not only a license agreement for the patent application, but it was a name license agreement, which they insisted on, to call whatever implantable product Medtronic made, a Chardack-Greatbatch pacemaker. Then I think within a week or ten days, I went with Palmer to Buffalo, and in the Airways Motel, at the edge of the airport, the license agreement was signed and that put Medtronic in the implantable pacing business. DR: Did they ever have problems with that agreement? And it was about a ten-year agreement, right? 19 TH: Yes, there were issues that started right from the beginning with it, because the agreement required, since from Chardack and Greatbatch’s perspective their name was on it, that they keep design control of the product. So for the period of existence of that agreement, there were periodic design review meetings, and any engineering changes that were made in the product were required to be approved by the two of them. So it was a quite awkward agreement, and impinged on what would normally be the natural engineering control that Medtronic would wish for and have. It had quite a high license payment. The license payment was 10 percent of the revenue of the products covered by the agreement. DR: That’s unusual. TH: But no one envisioned the kind of market that grew. In fact, in one of those periods of time when Medtronic was going broke, which must have beenIndustry in 1961 or so, I went with Earl to Indianapolis. The thought was, the most sensible thing to do was to sell the company, and the conversation was with the Mallory Battery Company, which was supplying Medtronic with its batteries. The offer was, “Would youProject buy us for a million dollars?” Mallory hired the Arthur D. Little Company,Device who told them, “Don’t buy it. There will never be a market for this product.” So the idea that this 10 percent of the product was going to turn into something very large just wasn’t envisioned.Society But over time, we, in exchange for shares, reducedHistory the license to seven and a half percent, if I recall it right. And ultimately bought out for, I believe, for shares of stock, the positions in the licensing agreement,Medical both the name and patent of Greatbatch and Chardack. And both of them, I think, not Oralhaving a lot of confidence in where the company was going, fairly quicklythe sold their shares.
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