Cost of Private Banking

In 2002, the price range was a factor of five, from approximately $350 to $1750. As of 2004, the range has narrowed to a factor of two, from roughly $900 to $1800 (see the 2004 update at the bottom of the page).

This is the most burning question that consumers have about this industry. Readers write to me about it all the time. For years, the expensive banks have been saying that it costs approx. $1,000 to process a cord blood sample properly, and anyone charging less is skipping tests and cutting corners. Not surprisingly, the more economical banks deny this, saying that they accept a lower profit margin, and that they reduce processing costs by taking advantage of economies of scale.

Who should we believe? I cannot give a definitive answer about a specific bank, but this page summarizes what I have been able to learn about the true costs of processing and storing cord blood.

The 1996 fee per unit released for transplant:

• $15,300 at the New York Blood Center Placental Blood Program
• $21,500 at the US National Marrow Donor Program
• $14,175 the average of 15 European national marrow donor registries
  Reference: Sirchia, G. et al., June 1999, Transfusion, 39(6):645-650

Some 2002 prices:

• $32,256 for cord blood from the University of Colorado
  Reference: Univ. of Colorado Hospital statistics for the NMDP
• $50,555 for bone marrow through the University of Colorado
  Reference: Univ. of Colorado Hospital statistics for the NMDP
• 16.060 Euro for cord blood from Australian Bone Marrow Donor Registry
  Reference: Australian cord blood fee schedule in Excel

Obviously these numbers are very different from private banking fees. The business model of a non-profit donor registry is drastically different from that of a private bank, even aside from the profit motive of a private bank. The private bank charges each customer a fee for processing and storing a sample. The donor registry only collects a fee when a sample is released for transplant. Therefore, the donor registry must charge enough for those few transplants to cover all the costs of maintaining the bank. A reasonable cost model anticipates five UCB transplants per population of 1 million per year.

Because not-for-profit registries are affiliated with public research institutions, they do not regard their operating costs as proprietary information.

For example, the Italian equivalent of the US National Marrow Donor Program (theirs is called GRACE = Gruppo per la Raccolta e Amplificazione delle Cellule Ematopoietiche, or Group for the Collection and Expansion of Hematopoietic Cells) has published several papers in the medical journal Transfusion which analyze the optimum strategy for operating a public cord blood registry.

Cost per UCB unit of laboratory tests and procedures

Tests performed on all samples at time of banking	US$ (1996)
ABO and Rh type	8.82
HLA class I (serology)	170.00
HLA-DRB1 low-resolution genomic typing	243.00
Complete blood clount (CBC)	3.65
Hepatitis B surface antigen (Mom+Baby)	12.59
Anti-HIV 1-2 (Mom+Baby)	20.00
Antibody to Hepatitis C virus (Mom+Baby)	20.00
Treponema pallidum hemagglutination assay (Mom+Baby)	7.88
Anaerobic and aerobic bacterial cultures	26.00
Mother's exam & interview at 6 months	14.71

Tests performed on potential transplant samples	US$ (1996)
IgG and IgM toxoplasma antibodies	17.64
IgG and IgM cytomegalovirus (CMV) antibodies	18.82
Antibody to human T-lymphotropic virus type I/II (Mom+Baby)	143.53
HLA-DRB1 low-resolution genomic typing (Mom+Baby)	486.00
Complete blood clount (CBC)	3.65
Anaerobic and aerobic bacterial cultures	26.00

Reference: Table 2 of Sirchia, G. et al., June 1999, Transfusion, 39(6):645-650. "Costs of umbilical cord blood units released for transplantation"

Absolutely NOT.

At non-profit registries, laboratory labor and testing account for over 70% of total cost. When a blood product is stored for public use it is subjected to very rigorous testing. A sample that fails any test would be "discarded" (actually, used for research instead of banked). About half of samples are rejected simply because they are low volume. Many of these tests are skipped by private banks, and they don't have a stringent minimum volume. If the day ever comes that you want to transplant a private sample, you may find that the transplant physician does not want to use it because it fails a test (ex: presence of contaminating bacteria, or Hepatitis virus, etc.)

Also bear in mind that samples in a public donor registry all undergo HLA-typing, which is expensive (it costs hundreds of dollars for a single test, but is cheaper with a volume discount). None of the private banks still perform HLA-typing.

Comparison of Non-Profit -versus- Private Banking Cost Factors

	Donor Registry	Private Bank
income source	samples released for transplant	each sample processed and stored
pays rent?	yes: overhead on research grant	yes: commercial property
pays staff?	yes	yes
advertise services?	minimal	major budget item
seeks profit?	no	yes
rigorous sample testing	always	varies

Not necessarily. If the bank does a high volume of business, so that there are constantly samples to process, then it makes sense to streamline operations. But if the bank does not maintain a high volume of business, they will be paying salaries while technicians sit idle. In that case it makes more sense to out-source the processing to a blood bank which has the necessary equipment and trained personnel.

Although parents like the idea of their baby's blood going to a facility that is specifically designed for cord blood, in fact the handling and processing is very similar to other routine procedures at blood banks. It could even be argued that a full-service blood bank is more likely to pay the salaries to maintain a staff of highly trained technicians. The only element of cord blood processing that is distinct is that the samples should be stored in a separate freezer, designed for long-term stability.


Staffing costs: Assume that the goal is to break even on costs after 10 years, and all storage is centralized in one bank (model C of Sirchia et al.).

Year 1-3

2 PhD's	salary US $51,529 each
6 technicians	salary US $30,118 each

Year 4-10

1 PhD	salary US $51,529 each
5 technicians	salary US $30,118 each

Cost of equipment and disposables at Milano (Italy) Cord Blood Bank

Item	US$ (1996)
1 liquid nitrogen tank	17,647.00
1 controlled rate freezer	17,647.00
1 tube sealer	17,647.00
1 microscope	1,176.00
1 personal computer	1,941.00
1 printer	1,176.00
Other start-up equipment: centrifuges, incubators, sterile flow hoods, etc.	141,176.00
Collection bag	21.76
Freezing bag	23.52
Transfer bag	5.29
Annual cost of other materials in years 1-3	82,518.00
Annual cost of other materials in years 4-10	6,918.00

Reference: Table 3 of Sirchia, G. et al., June 1999, Transfusion, 39(6):645-650. "Costs of umbilical cord blood units released for transplantation"

Yes! Here's how I "do the math": Take the total operating budget of the initial years during which the bank accumulates its inventory, and divide it by the number of samples (data for years 1-3 in Table 4 of Sirchia et al.). For a network of seven banks each holding 1500 samples, this yields $975 per sample. For a single central bank holding 10,000 samples this yields

$865 per sample (in 1996 dollars).

Bear in mind, this is a rock-bottom limit because:

• No private business can afford to wait 10 years to break even. A private bank starts out small and can't get any volume discounts until they build a steady stream of customers.
• Sirchia et al. assumed the public bank was housed in a hospital, and did not factor in the costs of renting or purchasing laboratory space.
• Private banks spend a significant portion of their budget on advertising.
• My conclusion is that the minimum cost of processing a sample properly is close to a thousand dollars.

In shopping for a bargain, I think it is crucial for consumers to be wary of cutting too many corners. If the sample fails standard tests, why should you bank it and pay for annual storage?

All banks have raised prices repeatedly and dramatically over the past year and a half (written Sept 2004), so that there are no more cheap deals on cord blood banking. The reason, in a word, is LITIGATION: There are several on-going lawsuits which are costing private banks substantial legal fees, and those costs are being passed on to parents.

A major drain on the industry are the lawsuits over the PharmaStem patents (see reports on the news page). This adds to consumer cost, either as royalties paid to PharmaStem or lawyers paid to fight PharmaStem, without adding to consumer value.

There are several smaller lawsuits going on, filed either as political actions against private banking or on behalf of disgruntled consumers. (see reports on the news page). The net result is to wipe out the ability of banks to offer no-frills packages. In fact, it is difficult for any company to survive in this market with a low mark-up, given the need to maintain a legal war chest.