New Developments in Biotechnology: U.S.Investment in Biotechnology

July 1988

NTIS order #PB88-246939

Recommended Citation:U.S. Congress, Office of Technology Assessment, New Developments in Biotechnology:U.S. Investment in Biotechnology—Special Report, OTA-BA-360 (Washington, DC: U.S. Gov-ernment Printing Office, July 1988).

Library of Congress Catalog Card Number 88-600538

For sale by the Superintendent of DocumentsU.S. Government Printing Office, Washington, DC 20402-9325

(order form can be found in the back of this report)

Foreword

Since the discovery of recombinant DNA in the early 1970s, biotechnology has be-come an essential tool for many industries. The potential of biotechnology to improvethe Nation’s health, food supply, and the quality of the environment leads logically toquestions of whether current levels of investment in research and development, hu-man resources, and policy formulation are adequate to meet these expectations.

This special report is the fourth in a series of OTA studies being carried out underan assessment of “New Developments in Biotechnology, ” requested by the House Com-mittee on Energy and Commerce and the House Committee on Science, Space, and Tech-nology. This fourth report in the series describes the levels and types of investmentcurrently being made by the Federal, State, and private sectors. Ten major issues thataffect investment were identified. They concern levels of R&D funding, research priori-ties, interagency coordination, information requirements, training and education needs,monitoring of university-industry research, State efforts to promote biotechnology, theeffects of tax law on commercial biotechnology, the adequacy of Federal assistance forbiotechnology start-ups, and the effects of export control on biotechnology commerce.The first publication in the series was Ownership of Human Tissues and Cells, the sec-ond was Public Perceptions of Biotechnology, and the third was Field-Testing EngineeredOrganisms, A subsequent study will examine issues relevant to patenting plants, ani-mals, and micro-organisms.

OTA was assisted in preparing this study by a panel of advisors, four workshopgroups, and reviewers selected for their expertise and diverse points of view on theissues covered in the report. OTA gratefully acknowledges the contribution of eachof these individuals. As with all OTA reports, responsibility for the content of the spe-cial report is OTA’s alone. The special report does not necessarily constitute the con-sensus or endorsement of the advisory panel, the workshop groups, or the TechnologyAssessment Board.

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New Developments in BiotechnologyAdvisory Panel

Bernadine P. Healy, Panel ChairThe Cleveland Clinic Foundation

Cleveland, OH

Timothy B. AtkesonSteptoe & JohnsonWashington, DC

David BlumenthalBrigham and Women’s Hospital Corp.Cambridge, MA

Hon. Edmund G. Brown, Jr.Reavis & McGrathLos Angeles, CA

Nancy L. BucWeil, Gotshal & MangesWashington, DC

Mark F. CantleyConcertation Unit for Biotechnology in EuropeBrussels, Belgium

Alexander M. CapronUniversity of Southern CaliforniaLos Angeles, CA

Jerry D. CaulderMycogen Corp.San Diego, CA

Lawrence I. GilbertThe University of North CarolinaChapel Hill, NC

Conrad A. IstockThe University of ArizonaTucson, AZ

Edward L. KorwekHogan & HartsonWashington, DC

Tsune Kosuge*University of California, DavisDavis, CA

*Resigned February 1988.

Richard KrasnowInstitute for International EducationWashington, DC

Sheldon KrimskyTufts UniversityMedford, MA

Joshua LederbergThe Rockefeller UniversityNew York, NY

William E. MarshallPioneer Hi-Bred International, Inc.Johnston, IA

Ronald L. MeeusenSandoz Crop Protection Corp.Palo Alto, CA

Robert B. NicholasNash, Railsback, and PlesserWashington, DC

Eric J. StanbridgeUniversity of California, IrvineIrvine, CA

James M. TiedjeMichigan State UniversityEast Lansing, MI

Kynio ToriyamaNat. Fed. of Agri. Coop. Assn. of JapanTokyo, Japan

Pablo D.T. ValenzuelaChiron Corp.Emeryville, CA

Thomas E. WagnerOhio UniversityAthens, OH

NOTE: OTA is grateful for the valuable assistance and thoughtful critiques provided by the Advisory Panel members. Theviews expressed in this OTA report, however, are the sole responsibility of the Office of Technology Assessment.

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OTA Project StaffNEW DEVELOPMENTS IN BIOTECHNOLOGY: U.S. INVESTMENT

Roger C. Herdman, Assistant Director, OTA Health and Life Sciences Division

Gretchen S. Kolsrud, Biological Applications Program Manager

Gary B. Ellis, Project Director

Kathi E. Hanna, Study Director

Patricia J. Hoben, Analyst

Robyn Y. Nishimi, Analyst

Blake M. Cornish, Research Analyst

Margaret A. Anderson, Contractor

Barbara R. Williams, National Institutes of Health, Professional Development Trainee

Editor

Stephanie Forbes, Bowie MD

Support Staff

Sharon Kay Oatman, Administrative AssistantLinda S. Rayford, Secretary/Word Processing Specialist

Barbara V. Ketchum, Clerical Assistant

Contractors

Center for Survey Research, Boston, MAJack Doyle, Environmental Policy Institute, Washington, DC

Richard A. Herrett, Washington, DCJeffrey Mervis, Washington, DC

North Carolina Biotechnology Center, Research Triangle Park, NCRichard J. Patterson, Research Triangle Park, NC

Solomon Associates, Washington, DCWilliam G. Wells, George Washington University, Washington, DC

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Contents

Chapter Page1. Summary, Policy Issues, and Options for Congressional Action . . . . . . . . . . . , . . . . 3

2. Introduction and Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

3. Federal Funding of Biotechnology Research and Development. . . . . . . . . . . . . . . . . 35

4. Biotechnology in the States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

5. U.S. Commercial Biotechnology. ., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

6. Factors Affecting Commercialization and Innovation . . . . . . . . . . . . . . . . . . . . . . . . . 97

7. University-Industry Research Arrangements in Biotechnology . ................113

8. Training and Personnel Needs in Biotechnology ..., . . . . . . . . . . . . . . . . . . . . .. ...131

9. Investment in Biotechnology Applied to Human Therapeutics . ................161

IO. Investment in Biotechnology Applied to Plant Agriculture . . . . . . . . . . . . . . . . . . . .193

11. Investment in Biotechnology Applied to Hazardous Waste Management. . . . . . . . .223

AppendixA. Dedicated Biotechnology Companies by State. ..., ., . . . . . . . . . . . . . . . . . . . . .. ...255

B. Major Corporations Investing in Biotechnology . . . . . . . . . . . . . . . . . . . . . .........265

C. Training and Education Initiatives in Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . .267

D. Companies Involved in Biotechnology for Waste Degradation . .................273

E. List of Working Papers . . . . . ..., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .278

F. List of Workshops and Participants. . . . . . . . . . . . . . . . . . . . . . . .................279

G. Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ....282

H. List of Acronyms and Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...285

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........,292

Chapter 1

Summary, Policy Issues, andOptions for Congressional Action

CONTENTS

Page

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3How Much Does the United States Spend on Biotechnology? . . . . . . . . . . . . . . . 3Training and Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Campus-Industry Collaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Opportunities for Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Barriers to Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10A Closer Look at Three Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Policy Issues and Options for Congressional Action . . . . . . . . . . . . . . . . . . . . . . . . 14

TablesTable Page

l-1. Federal Support for Biotechnology Research, 1985-87 . . . . . . . . . . . . . . . . . . . 4l-2. State Allocations for Biotechnology R&D, Training, and Facilities . . . . . . . . . 9l-3. Areas of Primary R&D Focus by Biotechnology Companies . . . . . . . . . . . . . . 10

Chapter 1

Summary, Policy Issues, andOptions for Congressional Action

SUMMARY

Biotechnology can change the way we live. Ithas already provided, and promises to provide,many products never before available, as well asgreater quantities of products now in short sup-ply. Some products produced by biotechnologywill be less expensive and safer to use than thosenow produced by other means. The potential ofbiotechnology to improve the Nation’s health, foodsupply, and the quality of the environment leadslogically to questions about the adequacy of cur-rent funding levels.

This report, the fourth in a series on new de-velopments in biotechnology, analyzes the currentlevel of support for biotechnology by the FederalGovernment, by State and local governments, andby the private sector. The report is titled “U.S. In-vestment in Biotechnology;” investment indicatesexpectation that the expenditures will result insignificant benefits to society. Investment is treatedbroadly in this report to encompass financial re-sources, human resources, and industrial policies.

Any analysis, however, is confounded by widevariation in the definitions used by various sec-tors to describe biotechnology, and in the meth-ods used to account for that investment. As aconsequence, figures on expenditures are approx-imate, and the scope of investment cannot be de-termined precisely. It is important to look beyondthe numbers to the scale and diversity of effortsunderway within the United States to support re-search in biotechnology and its various applica-tions. In this report, biotechnology is broadlydefined to include any technique that uses liv-ing organisms (or parts of organisms) to makeor modify products, to improve plants or ani-mals, or to develop microorganisms for spe-cific use. This report focuses on “new biotech-nology” (e.g., recombinant DNA techniques,cell fusion, and novel bioprocessing tech-niques) rather than “old biotechnology” (e.g.,use of microorganisms for brewing and bak-ing or selective breeding in agriculture andanimal husbandry).

Several conclusions are apparent about the na-ture of U.S. investment in biotechnology.

First, in some areas, the investment level isinsufficient to meet the premise suggested bycurrent work in the area. In particular, progressin such areas as agricultural biotechnology andbiological approaches to waste disposal is hinderedby inadequate investment by the public and pri-vate sectors. In both fields, technical barriersexist because of incomplete knowledge of basicprocesses involving plants, micro-organisms, andmicrobial ecology.

Second, the regulatory process is oftenperceived to be a significant obstacle to com-mercial development of some biotechnology-related products. Whether the perceptions aredue to ambiguity, unresponsiveness, extreme cau-tion, or outright bias, confusing regulatory mech-anisms are seen by industry officials as a majorimpediment to the acquisition of knowledge andan obstacle to the economic success of future prod-ucts. On the other hand, industry officials agreethat reasonable and well designed regulations arenecessary to ensure the public health and safetyto the environment.

Third, the rate of biotechnology commer-cialization and the factors affecting that ratevary among industrial sectors. Policy issues rel-evant to the application of biotechnology to hu-man therapeutics, for example, differ from thoserelevant to plant agriculture or chemicals.

How Much Does the United StatesSpend on Biotechnology?

Twelve Federal agencies and one crossagency program spent roughly $2.7 billion infiscal year 1987 to support research and devel-opment in biotechnology-related areas (see tablel-l). The National Institutes of Health (NIH) con-tribute by far the largest share of that support,approximately $2.3 billion. Significant investment

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4

Table 1-1 .—Federal Support for Biotechnology Research, 1985-87 (current dollars in thousands)

Agency FY 1985 FY 1986 FY 1987

National Institutes of Health:Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,208,229 1,202,094 1,388,337Applied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 638,916 678,003 887,614

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,847,145 1,880,097 2,275,951

Department of Defense:Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,100 51,600 60,800Applied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,500 49,000 58,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,600 100,600 118,800

National Science Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,570 84,072 93,800

Department of Energy:Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,500 45,000 50,100Applied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,600 10,900 11,300

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,100 55,900 61,400

USDA Cooperative State Research Service . . . . . . . . . . . . . . . . . . . . . . . . . . .USDA Agricultural Research Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Agency for international Development:

Broad definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Narrow definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

National Aeronautics and Space Administration . . . . . . . . . . . . . . . . . . . . . .Veterans Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Environmental Protection Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .National Bureau of Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Food and Drug Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .National Oceanic and Atmospheric Administration. . . . . . . . . . . . . . . . . . . .Small Business Innovation Research** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48,00024,500

NA*NANA

5,4003,000

8503,0002,144

12,033

46,00027,000

46,85414,3326,4006,3653,4003,3004,7002,215

12,000

49,00035,000

43,7566,0827,2009,4005,6663,3005,8002,680

NA“NA: Not available.“*SBIR dollars are apart of the total spending reported by the above agencies. They should not be added onto total spending

SOURCE: Office of Technology Assessment, 1988.

is also being made by the Department of Defense,$119 million; the National Science Foundation,$93.8 million; and by the Department of Energy,$61.4 million. The Department of Agriculture ex-pects to fund some $84 million in biotechnologyresearch, divided between the Cooperative StateResearch Service and the Agricultural ResearchService.

Federal support of biotechnology research anddevelopment has increased minimally every yearsince 1984. Although one reason for these in-creases may be its political attractiveness to agencyofficials, a more likely explanation is that biotech-nology comprises a set of tools that have becomefully integrated into the life sciences.

Some 33 States are actively engaged in someform of promotion of biotechnology researchand development. These efforts are seen as ameans to achieve academic excellence in their col-leges and universities or as a path to economicdevelopment, or both. State investment totaled$147 million in fiscal year 1987 (l/16th the Fed-eral investment), with three States—New Jersey,

New York, and Pennsylvania—making up morethan half of that amount. The States employ vari-ous funding mechanisms to reach their goals, in-cluding issuance of bonds, direct legislative ap-propriations, allocation of State lottery funds tobiotechnology, and mandatory industry and gov-ernment matching funds.

With the oldest State program, that of NorthCarolina, only in its sixth year, it is too early tojudge the success of State efforts. The only avail-able measures of success are indirect ones, namely,the size of the budget, the number of biotechnol-ogy companies within a State’s borders, and theextent of involvement by universities and privateindustry. Although long-term, stable funding runscounter to the pattern of State investment, it isvital in the area of biotechnology. State programswith strong support from their governors appearto hold an advantage, as do those that can man-age to avoid fiscal duress, severe unemployment,and educational insufficiencies. States that havean existing base of strong research universitieshold the greatest advantage.

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The commercialization of biotechnology byU.S. industry remains healthy and competitive.OTA identified 403 American companies dedi-cated to biotechnology, and 70 establishedcorporations with significant investmentsin biotechnology. Combined, U.S. industry isspending an estimated $1.5 billion to $2.0 bil-lion annually in biotechnology research anddevelopment.

Because biotechnology has become an essentialtool for many industries, there is no such entityas “the biotechnology industry. ” Rather, it is a toolemployed by several industrial sectors, each withits own advantages and obstacles in the race tomarket. Human health care, primarily therapeu-tics and diagnostics, continues to be the focus ofmost R&D investments, with chemicals rankingsecond and agriculture third as fields of applica-tion for industrial biotechnology.

Strategic alliances between large corporationsand smaller, dedicated biotechnology companiesare increasing and are seen as a sign of financialstrength by investors. Instability in the financialmarkets may accentuate the dependence of manysmaller firms on large, established corporations.Most large corporations continue to rely on out-side sources of innovation, either a smaller firmor a university scientist, with these collaborationsbenefiting both parties. However, the developmentof in-house expertise in biotechnology is occur-ring rapidly in major U.S. corporations.

Training’ and Employment

The number of jobs in biotechnology has grownrapidly in the past decade. A 1987 OTA surveyof both dedicated biotechnology companiesand large established corporations in theUnited States yielded an estimate of 35,900 jobsin the field, of which 18,600 are for scientistsand engineers. Nevertheless, despite employ-ment growth in recent years, biotechnology is notexpected to become a major industrial employer.

Although the supply of specialists in biotech-nology appears adequate to meet current demand,shortages in particular areas will occur from timeto time. Shortages in such emerging areas as pro-tein engineering have occurred but were largelyunavoidable. Anticipated shortages of bioprocess

engineers have not yet developed, although theproblem could worsen as more biotechnologyproducts reach the later stages of commerciali-zation. Demand for expertise in plant and animaltissue culture and protein chemistry may be out-stripping supply, and a growing need for personsto assess the risks of engineered organisms re-leased into the environment has led to a shortageof microbial ecologists.

The mix of personnel at biotechnology compa-nies is changing as production and quality con-trol become more important. The 1987 OTA sur-vey of biotechnology companies found that Ph.D.scientists represent 20 percent of total personneland 28 percent of scientific personnel. A 1983 sur-vey had found that 43 percent of R&D personnelpossessed Ph.D.s. This shift has created more op-portunities for biologists and biochemists at themaster’s and bachelor’s degree levels, and will beproviding room for those with 2-year associateof applied science degrees.

Molecular biologists and immunologists consti-tute about a third of the research workers in bio-technology. For the most part, companies see an

Photo credit: Center for Biotechnology, State University of New York, Stony Brook

Recombinant DNA and other new biological techniquesare becoming well integrated into science educationand training, from high schools to postdoctoral activities.In the workshop shown here, honors-level high schoolbiology teachers are learning the techniques needed

to set up DNA laboratories in their schools.

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ample supply of scientists trained in molecularbiology, biochemistry, cell biology, and immunol-ogy as a result of the traditionally strong supportfor those fields by the National Institutes of Health.

The NIH, by far the largest Federal source offellowships and training grants, is also the largestsupporter of such training for biotechnology. NIHestimates that $70 to $80 million of its trainingfunds support graduate students working in areaseither directly or indirectly related to biotechnol-ogy, approximately 6,000 students. At the sametime, the share of NIH’s research budget devotedto training has shrunk from 18 percent in 1971to a low of less than 4 percent in 1987.

The National Science Foundation sponsorsroughly 150 predoctoral fellowships, totalingabout $8 million, in the biological and biomedicalsciences. Only 20 fellows are funded at the post-doctoral level; these are all in plant biology andenvironmental sciences, at a total cost of $2.2 mil-lion. Other Federal agencies, notably the Depart-ment of Agriculture and the National Oceanic andAtmospheric Administration, support varyingsmaller numbers of students in areas related tobiotechnology.

Based on a 1984 survey, biotechnology compa-nies provide between $8 million and $24 millionfor training grants and scholarships. Industryfunding is estimated to account for about 10 to20 percent of all money for biotechnology train-ing programs. Combined with the contributionsmade by industry to the research and salaries oftrainees at research universities, industry providesfinancial assistance to about 20 percent of bio-technology trainees.

Colleges and universities have responded fairlyrapidly to advances in biotechnology, by creat-ing a range of new programs in biotechnologytraining and education. OTA has identified 60 suchprograms at 49 different U.S. colleges and univer-sities. About three-fourths of these programs arebased at State institutions.

Seventeen States reported funding universityand college training programs in biotechnology.But complexities in accounting procedures anddisbursement of such funds mean that few canprovide exact dollar figures. For those that did

report spending on specific programs, the figuresfor fiscal year 1987 ranged from a high of $1.3million in Georgia to a low of $40,000 in Penn-sylvania.

Campus-Industry Collaboration

Collaboration between industry and academiahas always played an important role in biotech-nology research. The industrial contribution toacademic research is approximately four to fivetimes greater in biotechnology than in other fields;per dollar invested, industrially supported univer-sity research in biotechnology generates fourtimes as many patent applications as does com-pany sponsorship of other research on campus.Nearly half of biotechnology companies supportuniversity-based research. Although small com-pared to the contribution made by the FederalGovernment, that support has grown by an aver-age of 8.5 percent annually in the first half of thedecade.

The nature of this commitment appears to bechanging. Few biotechnology companies are plan-ning to invest large sums over long periods forundirected research, as was done in the early1980s by Monsanto at Washington University. Anincreasing number of cooperative arrangementsrepresent consulting and contract research ratherthan long-term partnerships.

The debate over the impact of such collabo-ration on academic science remains unre-solved. With the exception of isolated studies,little evidence exists to either substantiate or re-fute the claims that such cooperative efforts areundermining the university’s mission and inde-pendence. As this debate continues, two trade-offs bear watching:

●

●

whether losses to science or to universityvalues that result from increases in the levelof secrecy in universities are offset by net ad-ditions to knowledge that result from infu-sion of industry funds into university labora-tories; andwhether shifts in the direction of the univer-sity research agenda toward more applied andcommercially relevant projects have benefitsfor human health and economic growth thatfar outweigh the risks to basic research.

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Collaborative efforts in biotechnology pose spe-cific problems for each group of participants. Arecent survey found that faculty receiving indus-try funds are much more likely than other bio-technology faculty to report that their researchhas resulted in trade secrets and that commer-cial considerations have influenced the choice ofresearch projects. In another study, 40 percentof faculty with industrial support reported thattheir collaboration resulted in unreasonable de-lays in publication.

For industry, the major issue is whether suchcollaboration will prove fruitful and hasten thedevelopment of new products and processes. Thenature of the agreement—specifically, who nego-tiates the contract and how property rights areassigned—plays an important role in the processand is, therefore, a major concern for companiesentering into such agreements.

Added to those uncertainties is the great varia-tion among collaborative agreements. Despitethose variations, universities can take several stepswhen negotiating collaborative agreements tomaximize the benefits to all parties and minimizepotential risks. Those steps include specifying thescope of the agreement (the research area to besupported and the commitment expected fromfaculty); maintaining control over the selection,methodology, and review of the research to beundertaken; detailing the sponsor’s responsibili-ties; and spelling out in advance guidelines on pro-prietary information, publication requirements,patent rights, and income. Apart from continuedfunding of the academic research that often setsthe stage for such collaboration, the mechanicsof Federal monitoring of such relationships arenot without problems.

Any funding source has the potential to shapethe research agenda and influence those whocarry out the work. A history of Federal programs,dating from the Merrill Act of 1862 that estab-lished the land grant colleges, indicates howuniversities can be shaped by outside forces. Whilemany early fears about the influence of industrialsponsorship of biotechnology research in univer-sity laboratories have not been borne out, the sit-uation warrants monitoring. There remains suffi-cient concern about the long-term effects of such

funds on research agendas, secrecy, conflict ofinterest, and student education.

Opportunities for Development

There is tremendous variation in the waythat States and the Federal Government defineand account for biotechnology spending. Also,there is no single model by which industry fundsresearch in the field, nor is there a common ap-proach to the carrying out of commercial devel-opments of biotechnology products. At the sametime, each sector affords significant opportuni-ties to foster growth in the field.

At the Federal Level

The activities of the NIH determine to a largeextent the nature of Federal support for biotech-nology. In recent years the White House and othershave increasingly pressured NIH to expand its mis-sion and provide support for more applied re-search.

In 1986, an NIH committee began to draft guide-lines that would permit companies unprecedentedaccess to NIH resources. The guidelines, writtenin response to the Technology Transfer Act of1986 (Public Law 99-502), give companies exclu-sive licensing rights to the fruits of government-sponsored research and encourage scientists toseek commercial applications for their work. Thisopening of the laboratory doors to commercialapplication offers great promise to the biotech-nology industry, which has long relied on workconducted by NIH scientists.

Although the NIH investment in biotechnologydwarfs that of other agencies, opportunities tof o s t e r g r o w t h a b o u n d t h r o u g h o u t t h e F e d e r a l G o v -

ernment. Other agencies, such as the National Sci-ence Foundation, the National Aeronautics andSpace Administration, the Department of Energy,and the National Oceanic and Atmospheric Admin-istration, fund basic and applied research in bio-technology. Agencies with diverse missions, suchas the Departments of Defense and Agriculture,and those with regulatory missions, such as theFood and Drug Administration and the Environ-mental Protection Agency, fund biotechnology re-search relevant to their mandate.

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Photo credit: Marvin Lewiton

Undergraduate students in MIT’s Bioseparations ResearchLaboratory, funded in part by the National Science

Foundation and the National Institutes of Health.

Finally, agencies traditionally viewed as serviceoriented, such as the Veterans Administration, theAgency for International Development, and theNational Bureau of Standards, fund biotechnol-ogy research relevant to their service roles. TheNational Bureau of Standards is a partner in a jointventure with the University of Maryland andMontgomery County, MD, to develop a nationalresource for biotechnology-related measurementresearch. A plan developed at the direction of theSenate Commerce, Science, and TransportationCommittee estimated that measurement needs willadd as much as 25 percent to the costs of biotech-nology products, and the Bureau is devoting morethan 2 percent of its budget to generic appliedand basic research in this area.

The Small Business Innovation Research (SBIR)program has invested more than $36 million invarious biotechnology companies since it firstawarded grants in 1983. In fact, biotechnologyis the leading recipient of SBIR funds, which arederived from a percentage of the budget of everyFederal agency that spends at least $100 millionon extramural research. SBIR invests more in bio-technology than in information processing andmedical instrumentation.

Federal agencies report higher levels of supportfor applied work in biotechnology in fiscal years1985, 1986, and 1987, than in 1984. Yet appliedresearch support as a percentage of total R&D

support has declined (in constant dollars) acrossthe Federal research budget in the past 5 years.It is not clear, therefore, whether an actual in-crease in support for applied biotechnologyhas occurred or whether agencies have be-come more proficient at describing work asapplied and accounting for expenditures inthose areas.

By itself, greater support does not translatedirectly into successful ventures. NSF’s Engineer-ing Research Centers program expects to devotea growing share of a budget, which could reach$50 million in fiscal year 1988, to biotechnology-related work. Yet the effectiveness of the programhas not been proven, and several factors couldimpede its progress. These factors include the reli-ance in funding decisions on scientific merit overother relevant criteria, inadequate coordinationby Federal officials with State programs and thepossibility of competing initiatives, and the lackof clearly defined evaluation and monitoringcriteria.

Because Federal agencies seek an array of ap-plications from biotechnology research, a certainamount of redundancy among supported pro-grams is inevitable and probably healthy. At thesame time, the goals of various agencies might attimes be better met by increased cooperationamong agencies wishing to pool their resourceson common projects.

At the State Level

States have different expectations about theirreturn on biotechnology investments, Some spendmoney to strengthen faculties so that universitiescan better attract private business to the State.Others offer direct incentives, including facilitiesand tax advantages, to attract small firms. Regard-less of approach, successful programs rely on astrong academic and research base, sufficient lo-cal venture capital, and an unusually vigorous in-teraction among researchers, manufacturers andusers, and State authorities.

Successful State programs in biotechnologybuild on previous efforts to attract high technol-ogy industries. Thus, it is not surprising that Cali-fornia and Massachusetts lead the nation in theshare of biotechnology companies within their

9

Table 1-2.—State Allocations for Biotechnology R&D,Training, and Facilities

State FY 86 FY 87

Arizona . . . . . . . . . . . . . . . . . . . . .. .$1,170,uuuArkansas . . . . . . . . . . . . . . . . . . . . . . 757,173California . . . . . . . . . . . . . . . . . . . . . 2,500,000Colorado . . . . . . . . . . . . . . . . . . . . . . 500,000Connecticut . . . . . . . . . . . . . . . . . . . 665,000Florida . . . . . . . . . . . . . . . . . . . . . . . . 5,050,000Georgia . . . . . . . . . . . . . . . . . . . . . . . 2,600,000Idaho . . . . . . . . . . . . . . . . . . . . . . . . . 438,800Illinois . . . . . . . . . . . . . . . . . . . . . . . . 4,500,000Indiana . . . . . . . . . . . . . . . . . . . . . . . 4,000,000Iowa . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000Kansas . . . . . . . . . . . . . . . . . . . . . . . 162,000Kentucky . . . . . . . . . . . . . . . . . . . . . . 908,500Louisiana . . . . . . . . . . . . . . . . . . . . . 670,000Maryland . . . . . . . . . . . . . . . . . . . . . . 2,600,000Massachusetts. . . . . . . . . . . . . . . . . 485,000Michigan . . . . . . . . . . . . . . . . . . . . . . 6,000,000Minnesota . . . . . . . . . . . . . . . . . . . . . 1,032,000Missouri . . . . . . . . . . . . . . . . . . . . . . 1,500,000New Hampshire . . . . . . . . . . . . . . . . 150,000New Jersey . . . . . . ..............10,000,000New York . . . . . . . . . . . . . . . . . . ...34,300,000*North Carolina . . . . . . . . . . . . . . . . . 6,500,000North Dakota . . . . . . . . . . . . . . . . . . 1,643,090Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . 2,194,787Oklahoma . . . . . . . . . . . . . . . . . . . . . 1,584,000Oregon . . . . . . . . . . . . . . . . . . . . . . . 350,000Pennsylvania . . . . . . . . . . . . . . . . . . 2,848,824Tennessee . . . . . . . . . . . . . . . . . . . . NAUtah . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000Vermont . . . . . . . . . . . . . . . . . . . . . . NAVirginia . . . . . . . . . . . . . . . . . . . . . . . 1,500,000Wisconsin . . . . . . . . . . . . . . . . . . . . . 190,000NA: Not available“Indicates multi-year appropriation

$1,540,000800,000

2,500,000500,000

1,100,0007,050,0003,000,000

450,0005,000,0001,029,9043,750,000

172,000896,600

NA3,900,000

935,0004,000,0001,100,0003,700,000

450,00035.690.000’

6,900,0001,601,783

50,0001,542,000

360,00018,035,494’

800,000500,000300,000

1,750,000418,000

SOURCE. Office of Technology Assessment, 1986

boundaries, with 27 percent and 13 percent, re-spectively. (See table l-2 for levels of investmentin all States.)

An NSF program begun in 1978 to ensure greatergeographical distribution of research awards hasproven to be a springboard for biotechnologyefforts in Vermont, North Dakota, Montana, Ken-tucky, and Oklahoma. While it is too early to assessthe extent to which NSF’s EPSCoR (ExperimentalProgram to Stimulate Competitive Research) fundswill help other States gain a foothold in the field,it is clear that several States had such a purposein mind when they entered the program.

Most States are not aiming only to woo existingfirms from other States. Instead, they have turnedto nurturing in-State start-up companies in the

hope that they will benefit from the industrialgrowth of those companies. And, as more com-panies seek sites for manufacturing facilities,States that could not provide unattractive envi-ronment for R&D facilities may be able to com-pete for the manufacturing facility. Regardless ofthe approach taken, States will remain dependenton Federal research support to universities toachieve their goals in biotechnology. Those con-tributions must be tied to the existing economicand academic base within each State.

Although some States may not be able to main-tain current high levels of support for biotech-nology, sustained commitments are vital for long-term success. Unlike the changes that have comeabout from growth in other high-tech areas, stra-tegic investments in biotechnology promise totransform a State’s entire economy, not just in-crease its work force temporarily or add to itsindustrial base.

At the Commercial Level

The boom in biotechnology company formationoccurred from 1980 to 1984. During those years,approximately 60 percent of current companieswere created, with nearly 70 new firms begunin 1981 alone. Consolidation within the industryand the predominance of a few firms have slowedthe formation of new firms; nevertheless, theamount of money invested by larger, more diver-sified corporations continues to grow.

The range of companies commercializing bio-technology encompasses many traditional indus-trial sectors. They include pharmaceuticals, plantand animal agriculture, chemicals, energy, andwaste management. Table 1-3 lists the primaryemphases of biotechnology R&D of dedicated bio-technology companies and large, diversified cor-porations. Human therapeutics is the primary fo-cus of both groups.

Each sector commercializing biotechnologyfaces different financial markets, public markets,regulatory requirements, patent issues, person-nel needs, and problems in attaining product com-mercialization. As the tools of biotechnology be-come integrated into each sector, the paths tocommercialization more closely resemble thosehistorically taken for more conventional products.

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Table 1-3.—Areas of Primary R&D Focus byBiotechnology Companies

Dedicated b iotech Large, establishedResearch area companies #(%) companies #(%)

Human therapeutics . . ., 63 (21%) 14 (26%)Diagnost ics, . , . , 52 (18%) 6 (1 1%)Chemicals. . . : : : : : 20 ( 7%) 11 (21%)Plant agriculture . . . 24 ( 8%) 7 (13%)Animal agriculture ., 19 ( 6%) 4 ( 8%)Reagents ., ., . . . . . : : 34 (12%) 2 ( 4%)Waste disposal/treatment ., 3 ( 1%) 1 ( 2%)E q u i p m e n t . 12 ( 4%) 1 ( 2%)Cell culture ., . . 5 ( 2%) 1 ( 2%)Diversified ... : : 13 ( 4%) 6 (11%)Other : ~ : ... 31 (18%) o ( o%)

Total ., ., ... ... 296 (100%) 53 (loo%)SOURCE Off Ice of Technology Assessment, 1988

More than in any other high-technology indus-try, commercial biotechnology expects R&D togenerate revenues. The R&D budget for dedicatedbiotechnology companies surveyed by OTA aver-ages $4 million per firm, or more than 40 percentof anticipated revenues. For large, establishedcompanies investing in biotechnology, the annualR&D budget for biotechnology averages $11 mil-lion, a figure that represents one-fifth of their to-tal R&D expenditures. Although nearly every ma-jor corporation investing in biotechnology spendssome of its R&D budget in house, 83 percent alsospend some of their budgets on research con-ducted by outside firms or by universities.

To date, U.S. dedicated biotechnology compa-nies have raised over $4 billion from private in-vestors, according to one estimate. Yet 80 percentof that investment has been made in 10 compa-nies. Investment in health care applications ac-counts for 75 percent of all investment. Agricul-tural applications have received only 16 percentof the total investment.

Dedicated biotechnology companies financetheir research in two ways—through equity in-vestments and collaborative ventures. If uncer-tain financial markets prevail, flexibility in accessto equity may become restricted, resulting in anincrease in joint ventures with larger more estab-lished firms. Venture capital and private equityhave been the mainstay of support for start-upcompanies through 1987. As companies mature,however, they turn to public offerings. OTA founda decreased dependence on private investments,a doubling of U.S. equity holders, and a 10-fold

increase in public stock offerings in maturing com-panies over a typical 5-year period. Dedicated bio-technology firms focusing on therapeutics aremore likely to be publicly held than those in otherfields, although several agricultural biotechnol-ogy firms issued an initial public offering in 1987as they sought cash to bring their products tomarket.

Although equity investments also may comefrom individuals or financial institutions, cor-porate financing is the fastest-growing type of sup-port. Historically, equity investments by largefirms tend to be passive, giving the larger firmthe chance to keep abreast of new developments.When these investments do lead to research con-tracts and product licensing agreements, thelarger firm often handles final development, licens-ing approval, manufacturing and marketing, whilethe dedicated firm retains patent rights and re-ceives royalties for the sale of the product.

Most industrial alliances occur between U.S.companies rather than between U.S. and for-eign firms. Although collaborations with foreigncompanies may provide dedicated biotechnologyfirms with better access to international markets,there is a legitimate concern that such alliancescould reduce future revenues and growth for U.S.firms. The most common foreign collaboration,when it does occur, is with Japanese firms, over-whelmingly in the application of biotechnologyto human health care.

Barriers to Development

The growing concern that U.S. trade policytoward high-technology goods may be compromis-ing national security poses a potential threat tothe growth of biotechnology exports. Proponentsof tighter controls argue that easing restrictionswould give the Soviet Union easier access to West-ern technology. In the case of biotechnology, somefear that unrestrained exports would enhance theability of other nations to produce biological war-fare agents. On the other hand, opponents arguethat strict controls will hamper economic com-petitiveness. A technical advisory committeewithin the Department of Commerce was formedin 1985 to address the question of biotechnologyexports, but committee efforts to date have beenmarginal.

11

Photo credit: Monsanto

Genetically engineered tomato plants are shown being planted by researchers at a Monsanto-1 eased farm inJersey County, IL.

The second major factor that could hamper com-mercialization of biotechnology is regulatory un-certainty. Biotechnology faces a much differentand more stringent regulatory environment thando many other high technology industries because,among other factors, it is used by highly regu-lated industries, such as food and drugs. This envi-ronment promises to raise the cost of R&D and,thus, the amount of investment needed to mar-ket a product. One issue is whether a productproduced using biotechnology will result in highercosts for regulatory review than similar productsmade using traditional methods. This issue willbe resolved differently depending on whether theproduct is a pharmaceutical, an engineered organ-ism, or a plant.

Other potential barriers to commercializationwill also affect investment. With patent protec-tion of biotechnology products a major unresolvedissue, many companies have pursued tradesecrecy as a short term and more certain strat-

egy to assure protection of their technology. Thisstrategy is not their optimal choice. With respectto antitrust issues, OTA was unable to find anyaspect of the problem that could be consideredunique to biotechnology companies. The impacton biotechnology of the Tax Reform Act of 1986(Public Law 99-514) is not clear. Although sometax specialists believe that the revised incentivesmay affect the distribution of investment, theydo not expect them to shrink the total amountof money available. At the same time, the repealof the investment tax credit is expected to increasedramatically the tax rates in research-relatedareas. That rise is likely to have a long-term nega-tive impact on biotechnology companies.

A Closer Look at Three Sectors

This report examines three areas of researchand development in biotechnology; plant agricul-ture, human therapeutics, and hazardous waste

12

management. Each is of legislative and regulatoryinterest to the Federal Government, and eachpresents a different set of issues for debate. Differ-ences in the state-of-the-art, levels and proportionsof public and private support, the effects of regu-lation, and the degree of commercialization in eacharea illustrate the necessity of viewing biotech-nology as a diversified set of tools affecting a va-riety of sectors.

Biotechnology as applied to the development ofhuman therapeutics represents an area wherethere has been substantial Federal support of basicresearch. As a result, the knowledge base is vastand growing, the commercial aspects enticing, andthe regulatory regime similar to that applied tomore traditional approaches of drug design andmanufacturing. In contrast, plant biotechnologyfaces a smaller knowledge base due to lower levelsof Federal support for basic research in the plantsciences. The commercial applications in the fieldare less developed, although potentially highlyprofitable, and the regulatory framework new andevolving. The third case study, biotechnology asapplied to hazardous waste management, repre-sents an area of minimum R&D investment byboth the public and private sectors. As a result,the knowledge base is small and large scale appli-cation nearly nonexistent. Applications of biotech-nology in this field tend to be driven by regulation.

Human Therapeutics

Biotechnology has become an integral part ofresearch in the pharmaceutical industry, wherethe emphasis has already begun to move awayfrom technology development and toward clini-cal applications. Applications of biotechnology tothe development of human therapeutics enjoysa level of public and private funding for R&D thatgreatly exceeds that in any other sector. Such highlevels of support stem from expectations that re-combinant DNA and hybridoma technologies willbring about the development of products neverbefore available in the quantities necessary fortherapeutic applications. Contributions thus farinclude the production of naturally occurring hu-man proteins through the use of recombinantDNA technology and the production of monoclinalantibodies from rodent and human hybridoma celllines; others are expected from the available tech-

Photo credit: Centocor

Industry scientists sterilize vials for monoclinalantibodies.

nologies for making proteins function more effi-ciently and for creating proteins that do not existin nature.

In the face of such promise, it is noteworthythat only seven human therapeutics using biotech-nology have been approved for marketing in theUnited States. There are more than 400 biotech-nology-based human therapeutics in some stageof clinical trials, comprising less than 2 percentof the 25,000 active applications for investigationalnew drugs. Nevertheless, of the 20 FDA approvalsof new human therapeutics in 1986, four wereproducts of recombinant DNA or hybridoma tech-nology, This high approval rate of biotechnologyproducts is one reason why industry analystsproject billions of dollars in worldwide sales oftherapeutics made from the new technologies, andshould help to sustain or increase the level of pub-lic and private investment.

Six major factors will influence the rate ofprogress in the development of human thera-peutics:

●

●

●

●

●

●

availability of funds for research;support of personnel;regulation of products made using biotech-nology;protection of intellectual property;access to information generated by research;andgaps in basic research.

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Plant Agriculture

A critical industry in the United States, agricul-ture forms a large portion of this country’s econ-omy. Research contributes significantly to its suc-cess, with an annual rate of return on investmentestimated at between 30 and 50 percent. Biotech-nology is expected to play a major role in strength-ening this important part of the nation’s economy.Its tools have the potential to modify plants to re-sist insects and disease, grow in harsh environ-ments, provide their own nitrogen fertilizer, orbe more nutritious. The newer technologies canpotentially lower costs and accelerate the rate,precision, reliability, and scope of improvementsbeyond that possible by traditional plant breed-ing. But success in this field is by no means as-sured. Many barriers must be overcome for US,agricultural products to remain competitive inworld markets.

Of all the problems facing agricultural research,the most pressing is the need for increased Fed-eral support. Only 1.4 percent of the Departmentof Agriculture’s budget is devoted to research. Inpart, the advent of genetic engineering and re-lated biotechniques has, itself, altered the shapeand scope of U.S. agricultural research investmentdecisions. In particular, the emerging technologiespresent fundamental challenges and opportuni-ties for the public component of U.S. agriculturalresearch. Widespread commercialization of plantbiotechnology depends on breakthroughs in manytechnical areas that can come only through coop-eration with public universities, economic incen-tives from government, and a favorable regula-tory environment. The Federal Government alsoplays a major role in ensuring an adequate sup-ply of trained personnel.

Basic science advocates charge that the USDA-led system has not been on the cutting edge ofscience, and has focused research primarily onmethods for increasing yield. Other critics haveargued that the advent of the biotechnologies hasled to private sector, proprietary-dominated re-search efforts. Others point out that increased pri-vate sector research investments have uniquelycontributed to the fundamental knowledge baseand resulted in a positive economic impact.

Photo credit: Calgene

Cell and tissue culture methods are used to regenerateplant cells containing foreign genes into whole plants.

Biotechnology’s impact on the direction of agri-cultural research has also raised issues about pro-prietary interests, such as the exchange of plantbreeding materials.

Hazardous Waste Management

Waste cleanup is a substantial and growing in-dustry. But the application of biotechnology towaste disposal is still largely experimental, andthe investment is small compared with efforts inpharmaceuticals and agriculture. Its potential re-mains undeveloped due to a variety of technical,institutional, economic, and perceptual barriers,And, more so than in any other industry studiedby OTA, the research agenda for waste disposaland management is driven by regulation. The in-fluence of the regulatory regime affects, to a largedegree, the extent to which biotechnological ap-plications have been studied, Regulation shapesthe field of waste disposal and, thus, provides theimpetus for efforts to develop new methods ofpollution control. Yet fears of regulatory barriersare discouraging researchers from investigatinggenetic engineering as a way to discover poten-tially beneficial organisms.

The Environmental Protection Agency is the leadagency in conducting research and developmentin waste disposal. But EPA’s current investmentin R&D in biotechnology is not sufficient to over-come a number of technical barriers in the near

14

future. There is also a widespread feeling that EPAis biased against biological approaches to wastedisposal and unwilling to support approaches in-volving biotechnology. The field lacks credibilitybecause biological techniques were oversold dur-ing the 1970s. In addition, many biological ap-proaches take longer than incineration or exca-vation and are avoided because of a desire toaddress the problem quickly.

Funding appears to be insufficient and compara-tively unstable. The in-house research EPA fundsis of high quality, but it is at a relatively low level.At the same time, reports from individual com-panies lack credibility due to the potential conflictof interest inherent in any company-sponsoredresearch. The Federal Government must take thelead in addressing critical research areas andestablishing clearly defined cleanup standards.

Because of these factors, small start-up biotech-nology firms usually cannot afford the high finan-cial risk required to achieve progress in the field.The large initial investment needed to develop theappropriate technology, as well as the necessaryknowledge base, is another obstacle.

Photo credit.’ Ecova Corp.

Daily tilling of soil provides oxygen to naturally occurringmicrobes, enabling them to remediate hydrocarbon-contaminated soil in an enclosed, solid-phase soiltreatment facility. Current applications of biotechnologyto waste management rely on naturally occurring

microbes; the application of genetic engineeringto this field remains some years away.

Finally, public acceptance is required to imple-ment biotechnological approaches to waste dis-posal. The generic fear of genetically engineeredorganisms may be compounded by the difficultyof containing the waste to be disposed.

POLICY ISSUES AND OPTIONS FOR CONGRESSIONAL ACTION

Ten policy issues relevant to U.S. investmentin biotechnology were identified during the courseof this study. They are:

●

●

●

●

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●

●

●

●

●

Federal funding for biotechnology research;balancing support for basic and applied re-search and development;interagency cooperation in support of bio-technology;information needs and reporting requirements;training biotechnology personnel;monitoring university-industry relationshipsin biotechnology;Federal support of State programs in biotech-nology;providing financial incentives for private in-vestment in commercial biotechnology;providing direct support for start-up andscale-up in commercial biotechnology; andFederal controls on the export of biotechnol-ogy products and processes.

Associated with each policy area are several is-sues that Congress might consider, ranging fromtaking no action to making major changes. Someof the options involve direct legislative action.Others are oriented to the actions of the execu-tive branch but involve congressional oversightor direction. The order in which the issues andoptions are presented should not imply their pri-ority. The options provided for each issue are not,for the most part, mutually exclusive: adoptingone does not necessarily disqualify others in thesame category or within another category; how-ever, changes in one area could have repercus-sions in others. Finally, and of critical impor-tance, many of the issues are more germaneto certain sectors, such as human therapeutics,plant biotechnology or hazardous waste man-agement In those cases, specific issues and op-tions are presented at the end of chapters 9,10, and 11.

15

ISSUE 1: Should current levels of Federal fund-ing for biotechnology research and devel-opment be altered?

An issue central to the findings of this reportpertains to the adequacy of Federal support forR&D relevant to biotechnology. There are no ob-jective and reliable measures for determiningwhether current Federal support for biotechnol-ogy R&D is sufficient. Clearly, intensive and sus-tained Federal investment in applications of biotech-nology to the life sciences has been transformedinto commercial products in some industries muchfaster than in others. Commercial applications aremore advanced in areas such as human therapeu-tics, diagnostics, and chemicals than in plant andanimal agriculture, or bioengineering for wastedegradation. In some cases, the slow progress isdue to insufficient funds for basic research; inother cases, potential products are simply not be-ing developed because industry does not considerthe biotechnology product or process sufficientlybetter (either functionally or economically) thanthose that already exist. Furthermore, excessiveregulatory burdens or public perceptions associ-ated with applications of recombinant DNA re-search can be more important factors than un-derfunding in some biotechnology applications,most notably in plant agriculture.

Option 1.1: Take no action.

Congress may conclude that Federal levels ofinvestment in R&D over recent years have ade-quately supported the forward integration of bio-technology into many sectors, suggesting steadylevels of support as the best approach. The con-tinuance of existing funding patterns, however,will perpetuate current disparities in research em-phases.

The current focus of biotechnology applicationon human health care products is due, in part,to the steady and high levels of funding for bio-medical research. However, research applicableto medical biotechnology has moved only recentlyfrom technology development into new clinicalapplications; without Federal funding increases,this transition could be more difficult.

Maintaining the existing funding level for bio-technology research targeted to agriculture could

result in a static agricultural sector that is unableto respond to future economic, technological, andscientific needs—both domestically and interna-tionally. Basic knowledge in the plant sciences, forexample, would continue to remain in short sup-ply. The barrier to commercialization created bythis lack of knowledge would increase. Inadequatefunding could also slow some areas of researchto help alleviate surpluses, provide new optionsfor the small farmer, result in better products,and make farm practices more environmentallysound.

Biotechnology for waste management has suf-fered in recent years from a variety of fundingand institutional barriers. Its development is ina relative state of infancy compared with that ofbiotechnology in pharmaceuticals and agriculture.Without sufficient funds, adequate efficacy andefficiency demonstrations will not be carried out,and EPA is not likely to develop sufficient in-houseprofessional expertise for the assessment and reg-ulation of bioremediation techniques.

Particularly underdeveloped areas of biotech-nology research could remain stagnant in the ab-sence of additional funds. These areas include:the exploitation of marine organisms to obtain newsources of potential pharmaceuticals, industrialchemicals, and materials; and the developmentof new biotechnological applications, such as con-version of biomass to fuel and biological sensorsfor use in measurement devices and bioreactors.

Option 1.2: Decrease existing budgets.

Due to current fiscal constraints, Congress mayconclude that it is necessary to cut Federal fund-ing of biotechnology research. Such a decision ismore likely to be a consequence of overall reduc-tions in R&D budgets, of which biotechnologywould be a part. Reductions in Federal supportfor biotechnology could slow the transfer of basicresearch results to applied areas and would re-quire greater private investments in basic re-search.

Congress could determine that funding ofhealth-related applications of biotechnology is dis-proportionately high, and reduce funds in theseareas. A targeted reduction of research funds forbiotechnology applications to human health couldhave undesirable consequences for non-medical

16

sectors, however, because advances in biotech-nology continue to emerge from NIH-funded re-search that have immediate applications to agricul-ture, marine biology, the use of micro-organismsin waste management, and many other fields.

Some areas of research, currently underfunded,would suffer disproportionately. For example, Fed-eral support for biotechnology R&D in waste treat-ment is so minimal now that decreases will furtherretard new developments. If Congress determinesthat Federal investment in plant biotechnology isexcessive, it could decrease allocations for this sec-tor. However, decreased funding for agriculturalresearch and training would result.

Option 1.3: Increase existing budgets.

Congress could conclude that because of its so-cial, economic, and strategic importance, the rapiddevelopment of biotechnology and its transfer intomany sectors warrants increased Federal R&Dsupport. Increases could expand the knowledgebase necessary for applied research and devel-opment and could result in more rapid commer-cialization of biotechnology in some fields.

Funding increases in the application of biotech-nology to basic and applied research relevant tohuman health might be aimed at some of the im-portant bottlenecks, including research in proteinstructure and function, protein engineering, therole of natural chemical modifications of proteinsin protein stability and function, and developmentof novel delivery systems for protein drugs. Ad-ditional support in many of these areas shouldcontinue to yield generic applications--contribut-ing to uses in the pharmaceutical industry as wellas chemical, agricultural, and other diversified in-dustries.

Congress could determine that present spend-ing for agricultural research is insufficient. If Con-gress increases agricultural research funding,plant biotechnology is likely to benefit. The basicscience base in the plant sciences is seriouslydeficient.

Congress could provide additional funds for EPAto develop innovative waste cleanup technologies,particularly those derived from biotechnology.Without increased funds, EPA will continue to em-phasize funding of risk assessment studies onmicro-organisms containing recombinant DNA,

while other high priority projects continue to besupported at relatively low levels.

Increased funds for the application of biotech-nology to renewable biomass resources, and forthe exploitation of marine biotechnology, currentlyfunded primarily by DOE and NOAA, respectively,should enhance the United States’ role in devel-oping these novel uses.

Option 1.4: Reallocate existing funds.

Should Congress conclude that present fund-ing levels are adequate or, because of fiscal con-straints, must remain the same, then it could directthat Federal resources be reallocated. Althoughthe budgetary process works against centralizedresearch planning, Congress could decide thatpressing needs for advanced R&D in specific in-dustrial sectors warrants a shift of emphasis inresearch support. This option, however, promotesa degree of instability in patterns of research sup-port in that political and temporal influences couldoverly bias the National research agenda.

ISSUE 2: Are current emphases on basic v. ap-plied and multidisciplinary research appro-priate?

Anecdotal evidence suggests that the currentsystem of research support in the U.S. sometimesfails to fill critical gaps in basic research relatedto biotechnology and development. Gaps could befilled through additional financial support for ap-plied research, technology transfer, and increasedFederal support for multidisciplinary researchprograms.

Option 2.1: Direct Federal agencies to dedicatemore of their budgets to applied and multidis-ciplinary research in biotechnology.

This option would not necessarily require newfunds but would direct agencies to identify areasof applied research in biotechnology in whichawards could be made. Applied areas deservingincreased funding could be identified by commit-tees of peers comprised of government, academic,and industrial scientists. In addition, areas of re-search that require multidisciplinary involvementcould receive higher levels of support.

For example, at the NIH, support for individualinvestigator-directed, basic research projects in

17

disciplines underlying medical biotechnology–such as cell biology, immunology, virology, neu-robiology, structural biology, and genetics---couldbe redistributed to multidisciplinary programs in-volving researchers from several of these dis-ciplines. possible mechanisms for implementingthis approach might involve Congressional real-location of single investigator awards to centergrants (center grants are common in the categor-ical institutes but not in National Institute for Gen-eral Medical Sciences). An alternate approachwould require that NIH contribute to health-related multidisciplinary projects funded by otheragencies, such as the NSF-administered Engineer-ing Research Centers and Biological Centers Pro-grams. Congress might also reallocate NIH fundsto create centers and programs that have notmoved as rapidly as desired with funds from in-dividual agencies. Such a program is already inplace, for example, to apply new methods in struc-tural biology to AIDS vaccine development.

Historically, agricultural research has been ap-plied. The applied nature of the land grant sys-tem, combined with a decentralized structure thatincludes local agricultural experiment stations andextension services, provides a unique national ca-pacity to identify and solve local or regional prob-lems. Reallocating resources away from formula-based funding would diminish the role that eventhe smallest, poorest funded land-grant universi-ties play. Congress could protect the applied ori-entation of agricultural research by maintainingstrong formula-based funding at the expense ofcompetitive research funding, which is directedtowards basic research. Because the database forplant sciences is sparse, however, decreasingawards that foster excellence in basic researchcould hinder rapid progress in plant biotech-nology.

To support more applied work applicable to haz-ardous waste management, Congress could directEPA to devote more funds to applications researchin demonstration and evaluation. Comparativedata on the efficacy, economics, and environ-mental safety of biotechnical versus other meth-ods is lacking. Additional efforts in testing andevaluation would significantly assist industry de-velopment, resolve issues relating to efficacy ofspecific techniques, and, along with regulatorychanges, promote private sector investment.

Any effort to increase emphases on applied re-search carries the risk of harming the supportbase for basic science, the source of new ideas.Each agency needs to consider the balance of sup-port between basic and applied work within itsmission. Service-oriented agencies, such as theAgency for International Development and theVeterans Administration, report that they empha-size applied research, which best supports theirmission. Recent efforts to support more appliedand multidisciplinary research at the National Sci-ence Foundation indicate a shift in the historicalmission of that agency. Such shifts are viewed withskepticism and encouragement, depending on theobserver’s outlook.

Option 2.2: Require agencies to report on the ex-tent to which the goals of the Federal Technol-ogy Transfer Act of 1986 (Public Law 99-.502)have been met.

Under The Federal Technology Transfer Act of1986, directors of government operated Federallaboratories may enter into collaborative R&Dagreements with other Federal agencies, State andlocal governments, industrial organizations, andnonprofit organizations. Biotechnology is an areaof research currently pursued in many Federallaboratories that could be more effectively sharedwith industry and universities through active com-pliance with Public Law 99-502. As one means ofencouraging compliance with the intent of the law,Congress could request that agencies documentthe extent to which this has occurred within theirlaboratories.

ISSUE 3: Should there be more interagency co-operation in funding biotechnology R&D?

Some redundancy and duplication of effort isessential to a healthy research enterprise. How-ever, more formal cooperation between agenciesin areas of shared interest could facilitate morerapid advances in some areas of biotechnologylacking sufficient or focused support.

Option 3.1: Establish an interagency coordinat-ing body to identify areas of research that couldbe co-funded across agencies, address solutionsto filling research needs, and develop strate-gies to promote technology transfer.

Congress could conclude that this option wouldreduce some redundancy in Federal research ef-

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forts in biotechnology and promote cost savings.This type of cooperation might best be imple-mented through across agency coordinating bodythat meets regularly to discuss shared areas ofresearch interest in biotechnology. At present,such coordination is rare and informal.

Applications of biotechnology to human healthenjoy the highest levels of Federal funding. Theoverall medical biotechnology research agenda isevolving from research funded almost exclusivelyby the National Institutes of Health, with additionalcontributions from the National Science Founda-tion, the Department of Defense, and the Depart-ment of Energy. A coordinated effort by theseagencies is essential if unnecessary duplication isto be avoided and the technological gaps imped-ing medical applications of biotechnology are tobe removed.

A recently formed cooperative effort in plantsciences was initiated by the Office of Science andTechnology Policy. The Plant Science Initiative,to be co-funded by the National Science Founda-tion, the Environmental Protection Agency, andthe Department of Agriculture, aims to addressgaps in research areas of common interest to eachagency.

Advances in the use of bioengineering in wasteclean-up could benefit from this type of coordi-nated approach. For example, EPA, NIH, NSF, theDepartment of the Interior, the Department ofEnergy, and the Department of Defense have sig-nificant programs related to bioengineered wastecleanup technologies. An interagency coordinat-ing group could identify major gaps in the researchand work to prevent unnecessary duplication ofefforts by Federal agencies.

ISSUE 4: Are information requirements for in-formed decisionmaking about Federal support of biotechnology R&D and training be-ing met?

Currently, information about Federal supportfor biotechnology research and training is scat-tered and inconsistent. Systematic evaluation oftotal Federal spending and a direct comparisonof spending in specific areas across multiple agen-cies are complicated by the definition of biotech-nology each agency employs and by the methodof accounting for expenditures.

Option 4.1: Direct Secretaries and Administratorsto report regularly on biotechnology activities.

The Congress could conclude that strategicallyimportant areas, such as biotechnology, are im-portant enough to the Nation’s economic growththat a more systematic accounting of Federal in-vestment in supportive research is warranted. Au-thorization Committees could direct individualagencies to develop more routine systems ofaccounting for spending in specific areas, suchas biotechnology, so that overall trends and pos-sible necessary actions can be identified. Someagencies, such as the National Science Foundationand the National Institutes of Health have alreadyadopted such mechanisms. Regular and institu-tionalized reporting on levels of funding for re-search and training could promote a more coordi-nated approach to sett ing strategies forbiotechnology development.

Option 4.2: Direct Secretaries and Administratorsto agree upon a uniform definition of biotech-nology.

The adoption of a uniform definition could re-solve vagueness in future policy development andwould allow for more direct comparisons of re-search support across agencies.

However, Congress could decide that in the ab-sence of any comprehensive mechanism for affect-ing total Federal spending in biotechnology, thereis no sound reason to request that all agenciesfunding and conducting biotechnology R&D adopta uniform definition of biotechnology. Given thevarious and diverse missions of the agencies, flex-ibility in definition may be desirable. This argu-ment might not apply to reasons to adopt uniformterminology for the purpose of regulation. Also,given the rapid advances in research, any defini-tion would have to be flexible enough to accom-modate new technologies or would soon be ob-solete.

ISSUE S: Are Federal efforts in training andeducation for biotechnology sufficient?

Federal funds, directly and indirectly, supporta significant amount of training and education forbiotechnology. Most of these funds are directedat research rather than training, but contributeto training nonetheless.

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Option 5.1: Take no action.

Training and education for biotechnology in theUnited States is strong, successful, and well sup-ported. For the most part, personnel needs forthe industry are being met. While shortages havebeen difficult to predict in advance, they have beenshort lasting when they have occurred. By andlarge, the current system is working well, thoughadditional support in specific areas could pay offsignificantly. If Congress takes no action, theUnited States can expect to continue to enjoy highquality personnel in the biological sciences, butcertain needs may not be met and the fit betweenpersonnel needs and availability may not be optimal.

Option 5.2: Require Federal agencies to directmore funds for training.

While NIH, USDA, NSF, and other Federal agen-cies provide substantial research funds, whichcontribute indirectly to training, training grantsand fellowships are less well funded and have de-clined in recent years. In molecular biology, com-petitive training grants have effectively en-couraged university departments to establishcoherent training programs and enable moneyfrom faculty research grants to be used for re-search rather than salaries. Training grants in par-ticular areas of possible need, such as bioprocessengineering, plant molecular biology, microbialecology, and protein crystallography, could begiven special consideration.

Option 5.3: Increase funds for the National Sci-ence Foundation or other Federal agencies toprovide equipment for biotechnology educationand training programs.

Equipment and instrumentation for biotechnol-ogy training and research is expensive. Almostevery program contacted by OTA reported un-met needs for equipment and facilities. Direct Fed-eral support for R&D equipment and physicalplant has been declining, leaving many universi-ties with outmoded equipment. Direct support forinstrumentation in biotechnology could providemany programs with much needed equipment,enabling them to train students on state-of-the-art equipment used by industry. Such funds mayalso encourage researchers from related areas,such as chemistry and engineering, to collaboratein biotechnology research.

Option 5.4: Establish programs to foster the in-terdisciplinary education needed for most ap-plications of biotechnology.

Peer-reviewed, individual investigator initiatedgrants provide the bulk of funding for basic re-search but may be biased against the interdiscipli-nary nature of many research projects in biotech-nology. Interdisciplinary programs could fosterthe interaction among various fields needed to im-prove research and training for biotechnology andpromote technology transfer across fields and in-dustrial sectors. Congress could encourage agen-cies to more actively support programs that fos-ter multidisciplinary training in areas related tobiotechnology.

Option 5.5: Request the National Academy of Sci-ences to assess comprehensively future person-nel needs in biotechnology.

Given the long time needed to prepare individ-uals for careers in biotechnology, it is importantat both the national and the individual level to beable to anticipate personnel needs several yearsinto the future. The Committee on National Needsfor Biomedical and Behavioral Research Personnelof the Institute of Medicine has twice systemat-ically investigated personnel needs in biotechnol-ogy by surveying U.S. biotechnology companies.These surveys provide important information onrecruitment difficulties faced by biotechnologycompanies, assist policy makers in setting appro-priate funding levels, and enable students to makemore informed career choices. Though the Com-mittee was able to make these studies in 1983 and1985, funds were not available for a similar studyin 1987. The National Academy of Sciences couldupdate and expand this work by seeking additionalinformation from the U.S. Department of Agri-culture, the Environmental Protection Agency, andthe National Institutes of Health on medical, agri-cultural, environmental, and other personnelneeds in biotechnology and the role of predoc-toral versus postdoctoral support as it affects thepool of available biotechnology personnel.

Such personnel forecasts, however, depend onassumptions about gross national product, dem-ographic trends, government policy decisions,technological innovation, foreign activities in thefield, and other factors that cannot be known withcertainty. Given the uncertainty of many of the

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assumptions that must be considered in makingforecasts about labor demand, making such fore-casts may be futile. OTA has concluded in previ-ous reports that predictions of shortages shouldbe treated with skepticism. Market forces oftensignificantly alleviate any shortages that do de-velop. It may be that accurate forecasts of futureneeds are neither possible nor necessary.

ISSUE 6: Should Congress set guidelines foruniversity policies on industry-sponsoredresearch?

Industrial sponsorship of university-based bio-technology research has become a widespread andgenerally accepted phenomenon over the past fiveyears. These relationships have provided addi-tional resources for R&D and training in univer-sity laboratories, and appear to have facilitatedtechnology transfer into industry. Some of theearly fears concerning the potential for skewingthe research agenda toward more applied work,increased secrecy among scientists, and negativeinfluences on the educational process have notbeen realized. Yet there remains concern that ifpublic funds for basic research decline, universi-ties may become more reliant on private funds,possibly allowing some of these fears to berealized.

Option 6.1: Take no action.

Because there is little empirical evidence thatuniversity-industry relationships in biotechnologyhave had significant adverse effects, Congress mayconclude that no action is necessary, Most univer-sities whose faculty have entered into contrac-tual agreements with industry have already de-veloped institutional guidelines regulating suchagreements. These agreements appear to be satis-factory to participating parties. In addition, mostparties continue to be optimistic about the goalsof these relationships and are more comfortablewith them than they were 10 years ago. Congres-sional action might stifle interchange between aca-deme and industry.

On the other hand, most Federal research dol-lars are spent on university campuses. Allowingindividual institutions to self-police these relation-ships while continuing to receive Federal fundscould diminish public accountability.

Option 6.2: Require Federal granting agencies torequest that universities receiving Federal re-search money file guidelines for faculty-indus-try contracts as a condition of receipt of funds.

To ensure that Federal funds are not being usedto support research that becomes overly secretor proprietary, Congress could direct agencies torequire universities to submit guidelines regard-ing faculty consulting and contractual agreements.Most research universities have already developedsuch guidelines. Under this option, those that havenot would be forced to do so. While this optionwould not guarantee that undue secrecy or con-flict of interest would not occur, it would en-courage universities to set clear policies regard-ing limits of acceptability for faculty-industryinteractions. In addition, this option is consistentwith requirements that universities file statementsof assurance that other areas—such as protectionof human and animal research subjects—are be-ing monitored.

On the other hand, while this approach couldraise the accountability level of universities andscientists receiving Federal funds, it could add alayer of bureaucracy to an already burdensomegrants process.

Option 6.3: Ensure that a minimal level of facilityand equipment needs are being met by publicfunds to decrease the potential for dispropor-tionate university reliance on private funds,

Industrial sponsorship of research augmentspublic funding, but contributes only partially tothe unmet capital needs of universities. Congresscould decide that in order to avoid the conse-quences of some universities relying dispropor-tionately on industry for research funding, ade-quate levels of construction and equipment grantsshould be available through granting agencies.This option would not prohibit or discourageuniversities from seeking industrial funds butwould free them from undue reliance on the pri-vate sector.

Some would argue, however, that the privatesector should make a larger contribution touniversity research if it wants to reap its bene-fits. Increased public subsidies for university re-search will allow industry to make even less ofa contribution than it already does.

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ISSUE 7: Do State efforts in biotechnology needFederal assistance?

There are few mechanisms by which the Fed-eral Government can properly assist State pro-grams in biotechnology. Historically, those Statesreceiving large percentages of Federal researchdollars through their universities have held anadvantage over those that have received less. Inan effort to address distribution inequities, theNational Science Foundation initiated the Experi-mental Program to Stimulate Competitive Re-search (EPSCoR) to assist States in the develop-ment of science and technology programs. TheEPSCoR program has helped some States gain afoothold in biotechnology.

Option 7.1: Take no action.

Congress could conclude that Federal assistancefor State efforts in biotechnology is unwarranted.The EPSCoR program has assisted those Stateswith historically lower levels of Federal researchsupport in developing new programs in biotech-nology, as well as many other fields.

Option 7.2: Direct the NSF to consider an exten-sion of the time frame for EPSCoR grants.

Under the provisions of the current EPSCoR pro-gram, qualifying States receive 5-year continuinggrants for program development. At the end ofthe 5-year period, funding ends. Under other pro-grams at NSF, such as the Engineering ResearchCenters and the Science and Technology Centers,grant recipients demonstrating outstandingachievements are eligible for a new 5-year grantat the end of the first five years. This is not thecase in the EPSCoR program. Because it is likelyto take longer than five years to establish a newprogram at the State level, EPSCoR recipients thatcan demonstrate progress should also be eligiblefor continued funding after five years. This wouldallow the stability necessary for States to buildthe support and infrastructure required for a suc-cessful program.

ISSUE 8: Should the Tax Reform Act of 1986(Public Law 99=514) be amended to providegreater incentives and assistance for firmscommercializing biotechnology?

Option 8.1: Take no action.

The tax measures of the Tax Reform Act couldremain as they are. These provisions include: ex-tension and reduction from 25 to 20 percent ofthe R&D tax credit; repeal of the investment taxcredit for equipment investment; and abolitionof the preferential treatment for capital gains. Dueto current fiscal stress, Congress may determinethat the provisions of the Tax Reform Act of 1986are equitable. However, if as a result of some ofthese measures, the level of private investmentin biotechnology is reduced, there will be a nega-tive effect on the level of innovation. This will man-ifest itself in decreased equipment and capital in-vestment.

Option 8.2: Make the R&D tax credit a permanentpart of the U.S. Tax Code and increase it from20 percent to its original 25 percent incrementalrate.

The purpose of the tax credit is to provide anincentive to companies to increase their commit-ment to industrial R&D. The R&D tax credit wasrenewed when it expired in 1985. The credit willagain expire at the end of 1988. At this time, Con-gress could grant the R&D tax credit permanentstatus. A permanent credit would reduce the un-certainty that exists for industrial R&D plannersconcerning the credit’s future existence. In addi-tion to permanent status, Congress could restorethe credit to its original level of 25 percent. Thiswas the level adopted in the 1981 Economic Re-covery Tax Act (Public Law 97-34).

Option 8.3: Offer the R&D credit to start-up dedi-cated biotechnology companies.

The structure of the R&D credit currently pro-vides a 20 percent credit for expenditures in ex-cess of the average amount of R&D expendituresfor the previous three years. The purpose of theincremental credit is to provide incentives to com-panies to increase research expenditures. Com-panies that do not have a 3-year expenditure baseare not eligible for the R&D credit as it is cur-rently structured.

Congress could offer a refundable credit to start-up companies in the year earned. A refundabletax credit would be more valuable to biotechnol-ogy start-ups in the year earned than a tax credit

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carried forward to the years in which enough tax-able income would be earned to take advantageof the credit.

Option 8.4: Make the basic research tax credit apermanent part of the U.S. tax code.

The basic research tax credit, an incentive in-cluded in the 1986 Tax Reform Act, encouragescompanies to increase spending on basic researchat universities and other non profit research in-stitutions. It is seen as a mechanism to encouragecooperative relationships between industry anduniversities. On contractual research, the creditequals 20 percent of the company’s total contractresearch payments over a fixed base. A perma-nent credit of this sort would reduce future un-certainties associated with this tax incentive.

Option 8.5: Restore the preferential treatment ofcapital gains incurred under Research and De-velopment Limited Partnerships (RDLPs).

Under the new tax law, capital gains are treatedas ordinary income. The former treatment of cap-ital gains attracted investors to RDLPs becausethe gains from the sale of a limited partnershipwere treated better than the dividends themselves.Because RDLPs represent a large portion of theinvestment in biotechnology, Congress could rein-state the preferential treatment of capital gainsfor investors in RDLPs. This would restore incen-tive for investors to pursue this investment op-tion, thereby increasing private investment in thebiotechnology industries.

ISSUE 9: Are Federal mechanisms for assistingbiotechnology firms in obtaining the financ-ing necessary for start-up and scale-upadequate?

To date, venture capital and private equity place-ment have been the mainstay of biotechnologystart-ups. Nearly all dedicated biotechnology com-panies in existence have received venture capi-tal. As firms mature, they turn to public offer-ings and corporate equity investment as sourcesof funding. There are inherent risks to overdepen-dence on any of these sources. Venture capitalsources may become restricted because of fluc-tuations in the economy. The risks of reliance onthe public markets to finance scale-up and pro-duction may be too great for firms caught in a

downturn in the market. To ensure the continuedgrowth and maturation of biotechnology compa-nies, Congress could decide that more aggressiveaction is needed to assist biotechnology compa-nies in two critical stages—start-up and scale-up.Support of industrial innovation could, in part,finance areas of applied research and developmentnot already supported through the Federal re-search agencies.

Option 9.1: Take no action.

Congress could decide that the growth of bio-technology companies has been a result of crea-tive financing through available sources of capi-tal. Congress could conclude that sufficientinvestment capital is available to commercializebiotechnology and the Federal Government neednot intervene at this time.

Some have argued that traditional policy dis-couraging government subsidies for industrial in-novation places the United States at a disadvan-tage compared to other industrial nations, whichhave targeted funds to support industrial biotech-nology. Allowing the marketplace to remain thesole influence over the health of these industriesmay be detrimental in the long run.

Option 9.2: Direct the Small Business Administra-tion to evaluate programs under existing au-thority that could provide a source of venturecapital funding for small businesses, biotech-nology included.

The Small Business Investment Act of 1958 au-thorized the Small Business Investment Company,or SBIC Program. SBICs are privately capitalized,owned, and managed investment firms that pro-vide equity capital, long-term financing, and man-agement counsel to new and expanding small busi-ness concerns. They are licensed and regulatedby the Small Business Administration and can bor-row funds from the Government on a long-termbasis for reinvestment in small business. SBICs,however, have faced uncertain congressionalfunding and restricted access to capital markets.To insure continued availability of venture capi-tal for biotechnology, the Small Business Admin-istration, with proper authority, could form aquasi-governmental corporation that would raisemoney in the private sector to be used as a ven-ture capital fund for start-ups. The SBA could

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evaluate the success of the SBIC program andmake recommendations for its improvement.

ISSUE 10: Is the current export control systemas dictated by the Export AdministrationRegulations working efficiently in theapproval of biotechnology products forexport?

The Departments of Commerce and Defenseeach play important roles in the export controlprocess. The DOC monitors the Commodities Con-trol List (CCL) and the DoD monitors the Militar-ily Critical Technologies List. Each agency bringsto the process a different philosophy on what ex-port controls should accomplish. As more andmore biotechnology products become availablefor export, there is some concern on the part ofindustry that these products will become caughtbetween the interests of Commerce and Defense,or will become delayed due to administrative con-fusion about the required approval process forbiotechnology products.

Option 10.1: Take no action.

Congress could determine that the current ex-port control system as dictated by the ExportAdministration Regulations is working efficiently,and has achieved a sufficient balance between eco-nomic and national security interests. The 1985amendments to the Export Administration Act(EAA) addressed several issues that were not cov-ered in the original EAA. For example, foreignavailability and decontrol were two items thatwere to be emphasized by the agencies. However,little progress in the reduction of the CCL has beenmade.

Maintaining the current CCL could adverselyaffect the U.S. position overseas because it is oftenviewed by U.S. and foreign industry as encom-passing too many products and technologies, mak-ing it difficult to manage. Continued operationsunder the present system could hamper effortsto promote U.S. products abroad and penetratevaluable foreign markets. The final outcome couldbe migration of U.S. industries abroad to avoidU.S. export regulations.

Option 10.2: Congress could decide that thepresent export control system is adequate andcould request that even greater controls beenacted.

Those in favor of greater controls are concernedthat our national security would be compromisedby reduction of the CCL and decontrol of goodseven when foreign availability is documented. Onceforeign availability is documented, decontrol canbe withheld while negotiations are pursued withsupplier countries. The result has been that fewitems have completed the procedures necessaryfor decontrol and removal from the CCL.

Congress could request that the agencies in-volved in the export control process maintain stric-ter control over exports. For the biotechnologyand other high-technology industries, this couldresult in the loss of valuable overseas markets toforeign competitors in Western Europe and Ja-pan, This may also provoke overseas migrationof companies who do not want to be burdenedwith U.S. unilateral export controls.

Option 10.3: Direct the Secretary of Commerceto evaluate the efforts of the BiotechnologyTechnical Advisory Committee (TAC).

The Biotechnology TAC began in early 1985 toadvise agencies involved in export control on tech-nical matters and new developments in the bio-technology industries. The TAC can make recom-mendations to the Department of Commerce onitems to be removed from the CCL. This mecha-nism of communication between the biotechnol-ogy industries and those in charge of export con-trol policies is valuable to both parties. The TACcan give important technical information to theactors involved in controlling biotechnology ex-ports. Thus far, however, the TAC has submittedrecommendations of items to be decontrolled andhas seen no results. Because the decontrol proc-ess is often held up for national security reasons,few items have been removed because of foreignavailability. Congress could request the Depart-ment of Commerce to review the TAC, with theintent to develop recommendations for improveduse of the TAC mechanism.

Chapter 2

Introduction and Overview

CONTENTS

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Assessing U.S. Investment in Biotechnology: Layers of Complexity . . . . . . . . . . . .

Defining Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Accounting for Investment in Biotechnology: The Pitfalls . . . . . . . . . . . . . . . . . .

Organization of the Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Summary. . . . . . . . . . . . . . . . . . . . . ..., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Chapter 2 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., . . . . . . .

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Chapter 2

Introduction and Overview

INTRODUCTION

For more than four decades, American politi-cal tradition has called for strong Federal supportof basic research. In contrast, Federal support andpolicies related to applied research have beeninconsistent—more related to changing nationalsecurity needs, and more reflective of global eco-nomic competitiveness and differing politicalviews. While the debates over Federal support ofbasic research were essentially settled in theaffirmative in the late 1940s, debate over techno-logical development and application has continuedover the years, often technology by technology.In recent years, a new dimension has been addedto the debates, stimulated by the belief that theUnited States has suffered some loss of interna-tional economic competitiveness due to the rela-tive decline in its scientific and technological ca-pabilities.

This new dimension is reflected in keen inter-est in and a focus on questions related to the Fed-eral Government’s roles and policies in support-ing, affecting, and facilitating the levels andpatterns of industrial innovation. Much of this in-terest arises from the belief that the ability of theUnited States to improve and maintain its presentstandard of living depends on its ability to main-tain and enhance its competitive position in theprovision of goods and services derived from ap-plication of advanced industrial technologies. De-bates on these issues in the context of various hightechnologies, such as biotechnology, are likely tocontinue in the times immediately ahead due toconcerns about the trade deficit and U.S. indus-trial competitiveness.

Far more than an opportunity for economic pre-dominance in biotechnology is at stake. The wide-reaching potential applications of biotechnol-ogy lie close to the center of many of theworld’s major problems-malnutrition, dis-ease, energy availability and cost, and pollu-tion. Biotechnology can change both the way welive and the industrial community of the 21st cen-tury because of its potential to produce:

● products never before available,● products that are currently in short supply,● products that cost substantially less than

products made by existing methods of pro-duction,

● products that may be safer than those nowavailable, and

● products made with raw materials that maybe more plentiful and less expensive thanthose now used (4).

Policymakers are interested in biotechnologybecause of its potential for improving health, foodproduction, and environmental quality, and be-cause it is seen as a strategic industry with greatpotential for heightening U.S. international eco-nomic competitiveness. These expectations logi-cally lead to questions of whether current levelsof funding are adequate and properly focused andwhether the United States should use additionalmethods to promote research and developmentin this diverse area. As in other areas of scienceand technology, there are fundamental questionsabout the obligations and roles of various institu-tions in promoting and regulating these technol-ogies. Traditionally, basic research has beensupported by the Federal Government, appliedresearch and development has been the domainof industry, and the States have invested in both,depending upon the needs of their economies.

The ubiquitous nature of biotechnology makesit the focus of several areas of public policy. Bio-technology relies on the expertise of a multitudeof collaborative scientific and engineering dis-ciplines in both the basic and applied sciences,requiring support across a wide range of fields.The multidisciplinary nature of biotechnology hasextensive implications for governmental, educa-tional, and industrial structures, suggesting di-verse incentives for action. The allocation of re-sources to build the necessary scientific andtechnological base and to provide for the regula-tion and control of resulting products, processes,and uses is a fundamental role of government.

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The tools of biotechnology allow manipulation ofbiological organisms in ways that will greatly in-crease their utility, thereby motivating industrialapplications. Furthermore, the Nation’s educa-tional institutions are affected by biotechnologybecause of its dependence on strong research ca-pabilities, a highly skilled workforce, and its en-couragement of intersectoral relationships.

While biotechnology has taken on a “trade”status, with its own firms, newsletters, invest-ment funds, and regulations, it is not a singleindustry but a set of enabling technologiesapplicable to a wide range of industries As fullintegration of biotechniques occurs, each sectorof industry developing biotechnology-based prod-ucts will face different opportunities for and bar-riers to commercialization. The ability to recog-nize similarities and differences between sectorswill be critical to policymaking as new productsare ready for marketing and strategies for promot-ing and regulating biotechnology products are de-veloped.

Because these advances make significant com-mercial and social gains possible, government andindustry share an interest in promoting biotech-nology research and development. This report ex-

amines the current level of investment in biotech-nology research, development, and training byFederal and State Governments, industry, and col-laborative arrangements among sectors. It alsodescribes the nature of the research being fundedand identifies scientific and institutional gaps andbarriers to developing this new set of technologies.This report focuses on the positive and nega-tive financial, human, scientific, and institu-tional inputs into the development of biotech-nology. As the title of the report implies, spendingallocated to the development of biotechnology canbe considered an investment because of expecta-tions that resources so dedicated will result in fu-ture benefits. Much more difficult to assess iswhether expenditures are reasonable for futuregrowth and whether expenditures are proportion-ate to those being made in addressing other na-tional needs. Finally, to understand the reasonsfor investment in biotechnology, the ultimate prod-ucts of research and the paths to application arealso discussed in three case studies.

The following section discusses the definitionalissues surrounding biotechnology and describes

‘ the problems associated with accurately assess-ing U.S. investment in biotechnology.

ASSESSING U.S. INVESTMENT IN BIOTECHNOLOGY:LAYERS OF

In preparing this report, OTA estimated levelsand directions of U.S. investment in biotechnol-ogy by surveying Federal agencies, State agencies,and private industry. In addition, four workshopswere held with attendees from Federal, State, andlocal governments, industry, and academia (seeapp. C for workshop participants). The first work-shop, titled “Public Funding of Biotechnology Re-search and Training,” was held in September 1986(10). Representatives of Federal and State agen-cies presented budget data for biotechnology anddiscussed the implications of the varying defini-tions of terms. OTA obtained updated budget in-formation in fall 1987.

In April 1987, representatives from academiaand industry met at OTA to discuss “Collabora-tive Research Arrangements in Biotechnology” (3).In June 1987, biotechnology industrialists were

COMPLEXITY

convened to discuss “Factors Affecting Commer-cialization and Innovation in the BiotechnologyIndustry” (5). Finally, in July 1987, a workshopwas held to discuss “Public and Private SectorRoles in Funding Agricultural Biotechnology Re-search” (11).

The OTA surveys, workshops, and informal com-munications with representatives of all sectors in-terested in biotechnology revealed two methodo-logical dilemmas in assessing U.S. investment inbiotechnology: variation in the definition used todescribe biotechnology and variation in the meth-ods used to account for biotechnology investment.Each of these difficulties is discussed below.

Defining BiotechnologyIn a 1984 report, after extensive canvassing of

academicians, industrialists, and government offi-

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cials involved in biotechnology, OTA arrived attwo definitions of biotechnology. The first defini-tion is broad, encompassing both old and new bio-technology, and includes any technique that usesliving organisms (or parts of organisms) to makeor modify products, to improve plants or animals,or to develop micro-organisms for specific uses.Since the dawn of civilization, people have delib-erately selected organisms that improved agricul-ture, animal husbandry, or brewing. To differen-tiate between biotechnology using moretraditional techniques from the newer tech-niques developed in recent years, OTA uses asecond, more narrow definition of biotechnol-ogy. This definition refers only to “new” bio-technology: the industrial use of recombinantDNA, cell fusion, and novel bioprocessing tech-niques (4). As in the earlier report, the term

biotechnology, unless otherwise specified, isused here in reference to new biotechnology.

The current study focuses on R&D investmentin fields affected by new biotechnologies. Threemain areas of research relevant to biotechnology:)can be described: basic, generic applied, and ap-plied (4). Basic research involves biotechnologyby using its component tools (e.g., recombinantDNA and hybridomas) to study the different waysin which biological systems work and to identifythe mechanisms that govern how they work. In-

cluded in this category are studies that addresssuch questions as how viruses infect cells, howimmunity to pathogens is acquired, and how fer-tilized egg cells develop into highly complex andspecialized organisms. Biotechnology is used ina broad range of scientific disciplines, rangingfrom microbiology (the study of micro-organismssuch as viruses and bacteria) to biophysics (theuse of physical and chemical theories to study bio-logical processes at the molecular level). A greaterunderstanding of the mechanisms of evolution andthe resilience of ecosystems will also come fromnew biotechnology.

The phrase “generic applied research” is thoughtby some to be vague and ambiguous; however,it is useful for describing research that bridgesthe gap between basic science done mostly inuniversities and the applied, proprietary sciencedone in industry for the development of specificproducts. Various groups have coined alternativephrases, such as ‘(bridge” research, “technical” re-search, and “strategic” research. Examples ofgeneric applied biotechnology research are thedevelopment of general methods for protein engi-neering and large-scale mammalian or plant cellculturing.

Applied research is directed toward a very spe-cific goal. The use of recombinant DNA to developvaccines for specific antigens, such as malaria orthe HIV virus responsible for Acquired Immuno-deficiency Syndrome (AIDS); the transfer of her-bicide or pesticide resistance to a particular plantspecies; and the use of monoclinal antibodies aspurification tools in bioprocessing are all exam-ples of biotechnology use in applied research.

In the current political environment, where pro-motion of high technology is strongly favored, thedefinitions used for biotechnology have impor-

30

tant ramifications. The terms used to describe bio-technology can affect research funding and theregulatory treatment of potential commercialproducts. Some groups believe that any confusionabout what biotechnology is could be alleviatedby substituting more specific terms such as genetherapy, protein engineering, and bioprocess engi-neering, for the general term “biotechnology” (1).

A recent General Accounting Office (GAO) re-port, titled ‘(Biotechnology: Analysis of FederallyFunded Research” (2), used three categories to cal-culate levels of biotechnology funding at five Fed-eral agencies. They are:

1. Basic research in the sciences underlying bio-technology.

2. Applied research and technology develop-

3

ment using the new techniques of biologicalresearch. This work is done to devise, apply,or improve products and processes.Research pertinent to the regulation of bio-technology products and processes.

It is the second category–applied research—thatpresents the most confusion in determining theextent of public and private investment in biotech-nology.

Since the definition of biotechnology variesamong funding sources, figures presented with-out explanation could create myths that wouldbecome difficult to dispel. Therefore, instead ofrequesting each Federal agency to report fund-ing levels only as they pertain to a uniform defi-nition of biotechnology, OTA asked each to offerits own definition of biotechnology (see ch. 3). Forthe surveys of industry investment in biotechnol-ogy, the respondents were requested to accountfor research related to biotechnology in generaland to each of three specific categories of newbiotechnology: recombinant DNA techniques; cellfusion technology; and novel bioprocessingmethods.

Accounting for Investment inBiotechnology: The Pitfalls

Accounting for U.S. investment in biotechnol-ogy is a formidable task. As described above, thedefinitional dispute adds to the complexity of aprocess that must also recognize sectoral differ-ences in accounting and reporting. In addition,

—Photo credit: Cetus

Industrial scientist successfully clones and expressesthe E. coli methionine aminopeptidase enzyme.

within each sector—Federal, State, and private—there may be as many differences as there areparties. Within the Federal Government, OTA col-lected budget data from 11 different executiveagencies, each with its own system of accountingfor budgets and expenditures. In a survey con-ducted by OTA, 33 States reported a variety ofmechanisms for determining their level of invest-ment in biotechnology. In addition, OTA surveyedsmall, dedicated biotechnology companies andlarger, diversified and established corporationswith significant investments in biotechnology, todetermine levels of investment, areas of applica-tion, number and type of employees, and factorsaffecting commercialization. Although certainaccounting procedures are standardized in indus-try, those used in reporting R&D can be vagueand strategically motivated. Pitfalls specific to theassessment of investment in biotechnology in eachsector are summarized below.

Assessing Federal Investment

Aggregate estimates of total Federal support forbiotechnology are still rough and preliminary.

There is no easy or systematic way by whichFederal agencies can separately account fordollars being dedicated to biotechnology. Be-cause the tools developed from biotechnology havebeen fully integrated into both basic and appliedwork in so many areas of research, separatingout “biotechnology-related work” is an arduoustask with suspect results. Biotechnology drawsfrom established fields such as biology, chemis-try, and engineering, and is seldom identifiedseparately in an agency’s budget. In addition todifferences in mechanisms of accounting for spe-cific research expenditures, agencies vary in theirdefinition of biotechnology, making estimates oftotal Federal spending speculative, and cross-agency comparisons difficult to interpret.

Assessing State Investment

At the State level, few budgets list research ap-propriations in general, let alone biotechnology,as a line item in their budget. Research and de-velopment funds are derived from several linesin a budget and are directed to several recipients.Thus, undercounting or overcounting can easilyoccur, depending on the perspective or biases ofthe accountant. In addition, operating budgets forbiotechnology initiatives may be derived from sev-eral sources other than State coffers, such as Fed-eral research agencies and philanthropic organi-zations. States facing this dilemma provided OTAwith estimates of investment. Furthermore, as

with Federal reporting, the definition of biotech-nology used by the reporting States affected howfunds were accounted and programs initiated.

Assessing Private Investment

Two problems were faced in evaluating invest-ment by the private sector. First, the identifica-tion of firms investing in biotechnology isproblematic. Some firms call themselves biotech-nology companies when, in fact, they do not fallwithin the OTA definition. Other, more traditionalcompanies may be conducting important researchin biotechnology but do not consider themselvesa biotechnology firm, and do not identify them-selves as such. Large corporations may be multi-national, with several subsidiaries, making iden-tification of programs and budgets complex.

Second, even when a reliable list of firms is avail-able, gathering information from the identifiedcompanies is difficult. Firms that are privatelyheld—as defined by the Securities and ExchangeCommission-often do not divulge relevant finan-cial information, resulting in inevitable under-counting of dollars devoted to biotechnology. Inaddition, some forms of investment by publicfirms, such as research contracts or licensingagreements, need not be divulged, compoundingthe problem. Thus, any accounting of total pri-vate investment in biotechnology is likely to bean underestimate.

ORGANIZATION OF THE REPORT

This report is organized to present U.S. biotech-nology investment data in several ways. Chapters3, 4, and 5 present analyses of investment in bio-technology by the Federal Government, the States,and industry, respectively. Resources dedicatedto biotechnology and the implications of the dis-tribution and use of those resources are discussed.Chapter 6 summarizes factors affecting innova-tion and commercialization of biotechnology.Chapter 7 presents an analysis of university-industry collaboration in biotechnology as an im-portant device used to facilitate research and de-velopment. Chapter 8 presents the results of anOTA survey of U.S. training programs in biotech-nology and discusses personnel needs in indus-tries commercializing biotechnology.

Chapters 9, 10, and 11 assimilate many of theissues presented in the first eight chapters intoa specific industrial framework. Because it is dif-ficult to draw conclusions across all industries re-garding the influence of any one factor on bio-technology, OTA analyzed three industries inparticular. Chapter 9 discusses U.S. investmentin biotechniques applied to human therapeutics.The application of biotechnology to human ther-apeutics is the first and greatest growth area ofapplied biotechnology and has matured to thepoint where more traditional concerns, such aspatenting and regulation, are influencing appli-cation as much as funding levels. Chapter 10 ex-amines investment in biotechnology applied toplant agriculture and issues that affect the dollar

32

flow into R&D in that field. Plant agriculture isconsidered to be the next growth area of biotech-nology. Finally, the application of biotechnologyto hazardous waste management, as the least

technically advanced application of biotechnologyof the three fields examined, is discussed in chap-ter 11.

SUMMARY

This report is a comprehensive survey of invest -ment in biotechnology within the United States.The levels of U.S. investment in biotechnologypresented in this report are informed esti-mates. The reader is best served, however, bylooking beyond the numbers and recognizing theenormity and diversity of efforts underway withinthe United States to support research in biotech-nology and to promote its application. Becauseof the uncertainties in the estimates, relianceon the numbers alone obscures the fullpicture.

Numerous issues, other than the level and typeof

1

resources invested, direct and affect biotech-

CHAPTER 2

Miller, H .1., and Young, F. E., “Biotechnology: A ‘Sci-entific’ Term in Name Only, ” The Wall Street Jour-nal, Jan. 13, 1987.

.2. U.S. Congress, General Accounting Office,l?iotech -nologv: Ana!vsis 01” Federal@ Funded Research,RCED-86-187 (Washington, DC: September 1986).

3. LJ.S. Congress, Office of Technology Assessment,“Collaborative Research Arrangements in Biotech-nolo~v, ” transcript of workshop proceedings, Apr.23, 1987.

4. U.S. Congress, Office of Technology Assessment,Commercial Biotechnology: An International Anal-ysis, OTA-13A-218 (New York, NY: Pergamon Press,Inc., January 1984).

5. U.S. Congress, Office of Technology Assessment,“Factors Affecting Commercialization and Inno\~a -tion in the Biotechnology Industry, ” transcript ofworkshop proceedings, June 11, 1987.

6. U.S. Congress, Office of Technology Assessment,New Developments in Biotechnology: Field Test-ing of Engineered Organisms: Genetic and Ecolog-ical Issues, OTA-BA-350 (Washington, DC: U.S. Gov -

nology research and development. These factorsinclude the structure of research relationships,quality and availability of personnel, effects of reg-ulations and controls, intellectual property law,and export and trade policy. While many of thoseissues are discussed within the context of this re-port, the reader is referred to other reports inthe series New Developments in Biotechnology.They are Ownership of Human Tissues and Cells(7), Public Perceptions of Biotechnology (9), FieldTesting of Engineered Organisms: Genetic andEcological Issues (6), and Patenting Life (8).

REFERENCES

ernment Printing Office, May 1988).7. LJ.S. Congress, Office of Technology Assessment,

New Developments in Biotechnology: Ownershipof Human Tissues and Cells, OTA-BA-337 (Washing-ton, DC: U.S. Government Printing Office, March1987).

8. U.S. Congress, Office of Technology Assessment,New Deirelopments in Biotechnology: PatentingLife, forthcoming, fall 1988.

9. U.S. congress, Office of Technology Assessment,Arew Developments in Biotechnology.” Public Per-ceptions of Biotechnology, OTA-BP-BA-45 (Wash-ington, DC: U.S. Go~7ernment Printing Office, May1987),

10. U.S. Congress, Office of Technology Assessment,

11

“Public Funding of Biotechnology Research andTraining, ” transcript of workshop proceedings,Sept. 9, 1986.[J.S. Congress, Office of Technology Assessment,“Public and Private Sector Roles in Funding Agri-cultural Biotechnology Research, ” transcript ofworkshop proceedings, July 23, 1987.

Chapter 3

Federal Funding ofBiotechnology Research

and Development

“The Administration’s R&D budget, like all budgets, must not be viewed in isolation. Budgets are 'carvedout' in an environment that is influenced by external pressures and impacts, as well as internalconstraint s.”

Don I FuquaPresident, Aerospace Industries Association

Apr. 10, 1987

—

CONTENTS

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 35National Institutes of Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37National Science Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Department of Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41Department of Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42U.S. Department of Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Cooperative State Research Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44Agricultural Research Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Department of Commerce. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45National Oceanic and Atmospheric Administration. . . . . . . . . . . . . . . . . . . . . . . . 45National Bureau of Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Agency for International Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47U.S. Environmental Protection Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Veterans Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49National Aeronautics and Space Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49Food and Drug Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50Small Business Innovation Research Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Chapter 3 References. . . . . . . . . . . . . . . . . . . . .... . . . . . . . . . . . . . . . . . . . . . . . . . 52

BoxBox Page

3-A. The Biotechnology Process Engineering Center at theMassachusetts Institute of Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

FigureFigure Page

3-1. Federal Support for Biotechnology R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

TablesTable Page

3-1. Federal Support for Biotechnology Research, 1985-87 . . . . . . . . . . . . . . . . . . . 363-2. Funding of Biotechnology by Each Institute of the National

Institutes of Health: 1983-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383-3. National Science Foundation Support of Biotechnology-Related

Research in Fiscal Years 1985 and 1986 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 413-4. Department of Energy Support of Biotechnology R&D,

Fiscal Years 1985-87 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433-5 National Oceanic and Atmospheric Administration Funding for

Sea Grant Projects in Biotechnology in Fiscal Years 1978 to 1987 . . . . . . . . . 463-6. Agency for International Development Funds for Biotechnology

in Fiscal Years 1986 and 1987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

——

Chapter 3

Federal Funding of BiotechnologyResearch and Development

INTRODUCTION

Historically, the United States, both in absolutedollar amounts and as a percentage of its researchbudget, has had the largest commitment to basicresearch in biological sciences worldwide. Thevast majority of Federal research support in thebiological sciences goes to university scientists con-ducting basic research, whereas applied researchand development (R&D) has always been consid-ered the responsibility of industry. In 1984, OTAsuggested that this division of responsibility hascontributed to a widening scientific gap betweenpurely basic research funded by the Federal Gov-ernment and relatively short-term, product-spe-cific applied research funded by private indus-try. Lack of research dollars for applied fields, suchas bioprocess engineering and applied microbiol-ogy (generic applied research), was predicted tocreate a bottleneck in this country’s efforts to com-mercialize biotechnology (6).

There is no hard evidence that this has occurred.Anecdotal evidence, however, suggests that somecritical areas of generic applied research in bio-technology remain underfunded because Federalresearch agencies consider them too applied andindustry considers them too basic. As the tech-nologies are integrated into the innovative proc-esses of various industrial sectors, research needswill differ depending on the sector and its stateof advancement. There appears to be broad con-sensus that Federal funding of both basic and ap-plied research has been and will continue to becritical to the U.S. competitive position in biotech-nology.

This chapter catalogues the extent to which Fed-eral agencies are funding research in biotechnol-ogy-related areas.1 It does not, however, attempt

IThe biotechnolo~y funding data presented in this chapter co~’ersfiscal years 1985, 1986, and 1987, AH of the data available from theagencies by \larch, 1988 is included here, Fiscal year 1988 appropri-ations to the funding agencies, although available, were not includedin this report because it was not known how they would be distrib -

to evaluate the effect of Federal funding patternson the U.S. competitive position in biotechnology.In a previous report, OTA described the difficul-ties of measuring returns from investment in re-search (9). The data presented in this report pro-vide a foundation from which a careful analysisof existing strengths and weaknesses in the U.S.biotechnology research infrastructure can bederived—the first step in assessing the U.S. com-petitive position in biotechnology.

Twelve Federal agencies and one cross-agency program (the Small Business Innova-tion Research Program) have expended sub-stantial funds for biotechnology R&D in recentyears. Basic research is the primary mission ofseveral of these agencies, such as the National In-stitutes of Health (NIH) and the National ScienceFoundation (NSF). The National Aeronautics andSpace Administration (NASA), the Department ofEnergy (DOE), and the National Oceanic and At-mospheric Administration (NOAA) have large tech-nological development programs but are also sub-stantial supporters of basic research, includingbiotechnology. Other agencies with diverse mis-sions, such as the Department of Defense (DoD)and the U.S. Department of Agriculture (USDA),fund large numbers of R&D projects related tobiotechnology. In addition, agencies with substan-tial regulatory functions, such as the Food andDrug Administration (FDA) and the U.S. Environ-mental Protection Agency (EPA), fund researchrelevant to their regulatory and scientific missions.Finally, agencies traditionally viewed as serviceoriented, such as the Veterans’ Administration(VA), the National Bureau of Standards (NBS)) andthe Agency for International Development (AID),fund biotechnology research relevant to their serv-ice roles.

uted to biotechnology research projects. In certain instances, fiscalyear 1988 appropriations to certain agencies are mentioned if biq-technolo~v R&,D funded by a particular agency appeared to be af-fected substantial}.

35

36

In September 1986, OTA held a workshop on“Public Funding of Biotechnology Research andTraining” (8). Representatives from Federal agen-

cies funding biotechnology research and trainingwere invited to present an overview of their agen-cies’ activities. Participants were encouraged todiscuss the substance of the research and to beclear about the definition of biotechnology beingused to determine spending levels. Chapter 8 ad-dresses the Federal role in supporting training ofbiotechnology personnel.

Discussions during the 1986 workshop revealedthe following points:

● The diversity of work underway using thesetechnologies is remarkable, ranging from themost basic to the most applied. The tools de-veloped through biotechnology have beenfully integrated into both basic and appliedwork, making fiscal isolation of “biotechnol-ogy-related” work an arduous task. Becausebiotechnology draws from established fields

●

such as biology and engineering, it is usuallynot separately identified in an agency’sbudget. !

Agencies define biotechnology differently.How an agency defines biotechnology greatlyaffects the estimate of its investment in thetechnology. This precludes any direct com-parison of spending across agencies andmakes summing up a questionable task. Forexample, EPA’s definition of biotechnology israther narrow compared to the definitionused by NIH. Some agencies were able to pro-vide spending figures under two definitionsof biotechnology-one narrow and one broad.

This chapter presents an agency-by-agency over-view of Federal investment in biotechnology R&D.The definition used by each agency for account-ing purposes is presented for clarification. Mostagencies provided actual spending figures for fis-cal years 1985, 1986, and 1987, although somewere unable to account for biotechnology spend-ing, particularly in fiscal year 1985 (see table 3-l).

Table 3-1 .—Federal Support for Biotechnology Research, 1985-87 (current dollars in thousands)

Agency FY 1985 FY 1986 FY 1987

National Institutes of Health:Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,208,229 1,202,094 1,388,337Applied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 638,916 678,003 887,614

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,847,145 1,880,097 2,275,951

Department of Defense:Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,100 51,600 60,800Applied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,500 49,000 58,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,600 100,600 118,800

National Science Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,570 84,072 93,800

Department of Energy:Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,500 45,000 50,100Applied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,600 10,900 11,300

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,100 55,900 61,400

USDA Cooperative State Research Service. . . . . . . . . . . . . . . . . . . . . . . . . . . 48,000 46,000 49,000USDA Agricultural Research Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,500 27,000 35,000Agency for International Development:

Broad definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NA* 46,854 43,756Narrow definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NA 14,332 6,082

National Aeronautics and Space Administration . . . . . . . . . . . . . . . . . . . . . . NA 6,400 7,200Veterans Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,400 6,365 9,400Environmental Protection Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 3,400 5,666National Bureau of Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 850 3,300 3,300Food and Drug Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 4,700 5,800National Oceanic and Atmospheric Administration. . . . . . . . . . . . . . . . . . . . 2,144 2,215 2,680Small Business Innovation Research* ● . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,033 12,000 NA● NA: Not available.“ ● SBIR dollars are a part of the total spending reported by the above agencies. They should not be added on to total spending.

SOURCE: Office of Technology Assessment, 1988.

37

In some cases, estimates were provided for 1988. $2.16 billion in fiscal year 1985,$2.28 billionIn current dollars, the total Federal spending in fiscal year 1986, and approximately $2.72for biotechnology R&D was in the range of billion in fiscal year 1987.

NATIONAL INSTITUTES OF HEALTH

Biotechnology is the application of biological systems and organisms to technical and industrial proc-esses. The technologies employed in this area include: classical genetic selection and/or breeding forpurposes such as developing baker’s yeast, conventional fermentation, and vaccine development; thedirect in vitro modification of genetic material, e.g., recombinant DNA, or gene splicing, and othernovel techniques for modifying genetic material of living organisms, e.g., cell fusion and hybridomatechnology,

The bulk of support for basic biomedical researchand training crucial to the development of bio-technology has come from NIH, the governmentlargest nonmilitary research agency (see figure3-1). NIH promotes research in two categories cru-cial to the development of biotechnology: basicresearch directly related to or using the new tech-niques that comprise biotechnology, and a largerscience base of free-ranging research underlyingbiotechnology. NIH reported that $2.27 billion (38percent of the total agency R&D budget) was spentin these two areas in fiscal year 1987. Every insti-tute and research division maintains activities inthese areas although there are no designated bio-

Figure 3-1.-Federal Support f o rBiotechnology R&D

Department ofDefense 4.5%

National ScienceFoundation 3,6%

Others U.S. Department of2 8% Agriculture 3 2%

SOURCE: Office of Technology Assessment, 1988

technology programs. The proportion of fundsspent in the two categories varies across institutes,with the most concerted efforts in biotechnologybeing expended by the National Cancer Instituteand the National Institute of General Medical Sci-ences (see table 3-2 for total expenditures in bio-technology by each Institute, 1983-87).

Basic research directly related to or using thenew biotechnology includes manipulating ge-nomes, cloning DNA, using special techniques toisolate, detect and characterize DNA, creatinghybridomas and producing monoclinal antibod-ies, and using computer methods to analyze DNAand protein sequences and to design new bio-polymers. In fiscal year 1987, NIH support for re-search and training in this category totaled $888million, up $210 million over 1986 (see ch. 8 forfurther discussion of NIH support for training).

Basic research underlying the new biotechnol-ogy includes undifferentiated free-ranging inves-tigations in genetics, molecular biology (investi-gations of the genetics of organisms, studies atthe molecular level of gene replication and regu-lation), cell biology (examination at the cellular andorgan level of development, growth, and senes-cence), and immunology (analysis of the structureand function of the immune system). Support forresearch and training in these areas was estimatedat $1.39 billion in fiscal year 1987, $0.19 billionover 1986.

Data pertaining to biotechnology research fund-ing are cataloged by NIH on the basis of grantapplications or progress reports and indexed bykey words. Budget figures provided are the to-tal costs associated with the awards, includ-ing direct and indirect costs, and are not re-

38

Table 3-2.–Funding of Biotechnology by Each Institute of the National Institutes of Health: 1983-87

Year (dollars in thousands)

Institute* 1983 actual 1984 actual 1985 actual 1986 actual 1967 actual

NCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335,661 379,737 561,325 559,281 645,588NHLBI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,098 154,783 145,215 150,226 169,980NIDR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,743 14,170 20,802 21,579 22,003NIDDK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,863 224,237 161,354 163,300 246,660NINCDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,212 123,652 142,413 149,758 158,989NIAID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206,465 221,204 224,828 229,300 297,003NIGMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246,421 280,311 282,169 308,775 356,100NICHE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,928 108,065 123,673 122,837 161,215NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,080 28,792 35,225 33,780 37,695NIEHS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,941 10,918 13,438 13,714 14,556NIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,222 9,134 13,912 14,775 20,328NIAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 40,757 29,700 48,903DRR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,738 87,222 82,034 82,972 96,181NLM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 100 750

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,436,372 1,642,225 1,847,145 1,880,097 2,275,951“Institute abbreviations refer, lnorder, to the followkrg: National Cancer institute; National Heart, Lung, and Blood Institute; National Instituteof Dental Research;National institute of Diabetes and Digestive and Kidney Disease; National institute of Neurological and Communicative Disorders and Stroke; National InstituteofAllergy andlnfectious Diseases; National institute of General Medical Sciences; Nationailnstitute of Chiid Health and Human Development; National Eye Institute;National lnstltuteof Environmental Health Sciences; National lnstituteon Aging; National institute ofArthritis, Musculoskeletal andSkin Diseases; Division of ResearchResources; National Library of Medicine.

SOURCE: National institutes of Health, 1988.

lated to the proportion of recombinant DNAresearch in the total research effort. Thus,some overestimation of the amount going directlyto research probably occurs.

In recent years, there has been increasing pres-sure from the White House and others for NIHto expand its biotechnology support (1,11). NIHmaintains that it best supports the scientific basenecessary for biotechnology by approving the bestbasic research proposals submitted to the Insti-tutes for funding. At a 1985 meeting of the NIHdirector’s advisory committee, representatives ofsome of the smaller biotechnology companies ar-gued for funding by NIH of more generic appliedresearch, those areas requiring intensive capitaland posing high risk, such as bioprocessing tech-nologies. They also suggested that NIH promote“intellectual support’’ for biotechnology compa-nies, allowing NIH scientists to consult with in-dustry, a policy already in the process of changeat the time of the meeting.

In 1987, an NIH committee began drafting guide-lines that will give companies unprecedented ac-

cess to NIH resources. These guidelines are in re-sponse to the Technology Transfer Act of 1986(Public Law 99-502), which requires Federal lab-oratories and their scientists to share their workwith industry. Under the guidelines, companieswill be guaranteed exclusive licensing rights tothe fruits of any research undertaken with a gov-ernment laboratory. In addition, NIH scientists willbe encouraged to seek commercial applicationsfor their work through a system of incentives thatincludes a share of the royalties gained from prod-uct development. The opening of NIH laboratorydoors offers great promise to commercial biotech-nology, which is so reliant on research funded byNIH and research conducted by NIH scientists (2).

Other important resources for biotechnologyfirms supported by NIH are the Human MutantCell Repository, a cell bank in Camden, NJ, andGenBank®, the nucleic acid sequence data bank,which is also supported by DOE. BIONET is a re-source for providing analytical services regard-ing DNA and protein sequences.

39

NATIONAL SCIENCE FOUNDATION

Work categorized as research related to biotechnology includes activities in fundamental genetics,cell physiology, cell culture biology, basic biochemistry and enzymology, and bioprocessing engineer-ing, which are generally regarded as being directly related to the further development of biotechnology.

The National Science Foundation has as its mis-sion the support of basic research in colleges anduniversities in the United States. The NSF budgetaccounted for about 8 percent ($1.5 billion) of thefiscal year 1987 Federal nondefense budget forR&D. Approximately 94 percent of the NSF bud-get goes to basic research, with only 6 percentbeing awarded for applied research. In 1985, NSFmade its first awards in its Engineering ResearchCenters program, established to facilitate technol-ogy transfer and multidisciplinary research. One

Photo credit: Marvin Lewiton

Undergraduate students working with a 1,500-literfermenter in MIT’s Bioseparations Research Laboratory,supported in part by the National Institutes of Health

and the National Science Foundation.

of the first six centers is the Biotechnology Proc-ess Engineering Center at the Massachusetts In-stitute of Technology, which received start-upfunds of $2 million from NSF and $150,000 fromthe National Institute of General Medical Sciencesand the National Cancer Institute (both of NIH)in 1985 to investigate engineering technologies forbioprocessing (see box 3-A for further discussion).

NSF reports that it funded 1,712 biotechnologyprojects at $84 million in fiscal year 1986. Expend-itures for biotechnology R&D in fiscal year 1987stand at $93.8 million. NSF has requested $108.5million for biotechnology research in its fiscal year1988 budget.

NSF determines its biotechnology spending vaa new data collection system implemented by an

Office of Biotechnology Coordination at NSF. Pro-gram officers are required by NSF to judge all newawards for biotechnology relatedness on a sub-jective scale from none to all by one-third incre-ments. NSF specifies a category of work as relatedto biotechnology if it includes research activitiesin fundamental genetics, cell physiology, cell cul-ture biology, basic biochemistry and enzymology,and bioprocess engineering. The largest singlearea in which NSF identifies research related tobiotechnology is genetics, both prokaryotic andeukaryotic. The second largest area is regulationof gene expression.

In addition to direct research support, the NSFinstrumentation program provides a great dealof research support for instrumentation acquisi-tion; microchemical instrumentation, most com-monly used in biotechnology, is a part. Awardsin the instrumentation program are not coded forbiotechnology relatedness because use is difficultto predict and the awards are usually made togroups of individuals.

The NSF Engineering Directorate has initiateda program to support multidisciplinary groups inapplied biotechnology. This program focuses onthe application of engineering to the recent ad-vances in molecular biology, genetics, microbiol-

Box 3-A.—The Biotechnology Process Engineering Center at theMassachusetts Institute of Technology

The Biotechnology Process Engineering Center (BPEC) at the Massachusetts Institute of Technology(MIT) was established in 1985. Funding is provided by the National Science Foundation, the National Insti-tutes of Health, MIT, and industry. Contributions by NIH and NSF since 1985 are:

NIH NSF

Fiscal year 1985 . . . . . . . . . $150,000 $2,000,000Fiscal year 1986 . . . . . . . . . $100,000 $3,000,000Fiscal year 1987 . . . . . . . . . $100,000 $3,295,000

NSF will provide support for the Center for the first 5 years, after which it must be self-sufficient.NIH funds are primarily intended for undergraduate and graduate training.

Scientists at the Center come from five different departments of two schools within MIT. The Schoolof Engineering contributes faculty from the Departments of Chemical Engineering, Electrical Engineering,and Nuclear Engineering. The Departments of Applied Biological Sciences and Biology participate fromthe School of Science. The Director of the Center reports to the Dean of Engineering and works with university-comprised committees and an Industrial Advisory Board consisting of 11 biotechnology industrialists. AnOperating Committee oversees the education and research of the Center as well as the activities of theCenter’s Industrial Consortium.

The Center provides educational opportunities for both undergraduates and graduates, and trainingprograms for industrialists in courses such as fermentation technology, microbial principles of biotechnol-ogy, drug delivery, downstream processing, and modeling, simulation, and optimization. In addition, theCenter houses visiting scientists from industry who spend extended periods of time working in the labora-tories.

Foremost on the mind of those involved in the Center is the need to generate industrial sponsorship.By 1987, 15 companies had supported 16 projects totaling approximately $1.5 million. Companies can alsodonate equipment. In 1986, $770,000 worth of equipment was received. Industry donated $2,4 million forthe construction of a fermentation and downstream pilot plant located on the MIT campus that becameoperational in 1986. The pilot plant, a small but impressive facility, will handle biotechnology processesfrom fermentation to product isolation.

The Center also hopes to attract a degree of financial independence through its industrial Consortium,which provides a more formal basis for interaction and collaboration between the Center and industry.Members of the consortium pay an annual subscription fee ranging from $2,000 to $20,000 to receive infor-mation and services relating to the activities of the Center. By 1987, 50 companies had signed up.

While still in its youth, the BPEC faces impending adulthood when the Federal purse closes in 1990.Critics of the mandated fund-raising strategy are concerned that superb scientists are spending their timeon desperate attempts to raise money when they should be conducting research. Others are skeptical aboutthe ability of the Center to raise sufficient funds from an industry that has no money to spare and plentyof other places to spend it. Proponents of the Center assert that it is encouraging university-industry col-laboration in an area where critical applied research and development needs exist.

SOWICE : D.I. Wang, “Biotechnology process Engineering Center,r’ The En@”neering Research Centers: Leaders ti Change (Washinwom ~: Nati@n~i Academy ~re$% 1987). per-sonal communication, Office of the Director, Biotechnology Process Engineering Center, August 1987.

ogy, cellular physiology, and biochemistry that for up to 5 years, for research teams to advancehave made it possible to use living systems to pro- capability in biotechnology engineering and to pro-duce a wide range of economically important sub- vide a training environment for the biotechnol-stances. Up to $500)000 per year will be provided, ogies of the future.

41

NSF also funds environmental biology pertinentto biotechnology regulation ($3 million in fiscalyear 1985 and $1.9 million in fiscal year 1986),and an area called “impact of biotechnology”($255)500 in fiscal year 1985 and $241,400 in fis-cal year 1986). Bioengineering and bioprocessingresearch funds increased dramatically from$2,891,000 in fiscal year 1985 to $4,330,200 in fis-cal year 1986, Cell culture and genetics also re-ceived more funds in 1986 than in 1985, but bioe-lectronics, bioenergetics, and cell fusion receivedsignificantly less support in 1986 (see table 3-3 fora breakdown by field of spending in fiscal years1985 and 1986).

NSF officials had anticipated the emergence ofa new class of awards in the near future that willinclude greater interaction with the States for sup-porting larger biotechnology centers, a small num-ber of cooperative activities, and a small numberof “mini- centers,” which are at the university de-partmental level. Each of these centers would notnecessarily be problem oriented, but would stim-ulate cross-disciplinary research within the bio-

logical sciences. As of early 1988, the funding sta-tus of these centers was uncertain because thefiscal year 1988 budget for NSF was not at thelevel that the agency expected.

Table 3-3.—NSF Support of Biotechnology-RelatedResearch in Fiscal Years 1985 and 1986

(dollars in thousands)

Field 1985 1986Antibodies/antigens . . . . . . . . . . . . . . 3,774.8Bioconversion . . . . . . . . . . . . . . . . . . . 1,801.8Bioelectronics . . . . . . . . . . . . . . . . . . . 1,640.2Bioenergetics. . . . . . . . . . . . . . . . . . . . 5,514.4Bioengineering/bioprocessing. . . . . . 2,891.9Biomembranes. . . . . . . . . . . . . . . . . . . 4,317.5Cell regulators/cell modulators. . . . . 9,423.7Cell culture. . . . . . . . . . . . . . . . . . . . . . 2,598.7Cell fusion . . . . . . . . . . . . . . . . . . . . . . 446.8Chemistry . . . . . . . . . . . . . . . . . . . . . . . 7,732.5Environmental biology . . . . . . . . . . . . 3,010.2Enzyme structure/function. . . . . . . . . 7,099.1Genetics . . . . . . . . . . . . . . . . . . . . , . ..26,501.1Impact of biotechnology . . . . . . . . . . 255.5Reproduction . . . . . . . . . . . . . . . . . . . . 2,600.3Special resources . . . . . . . . . . . . . . . . 1,961.7

3,631.91,414.3

755.12,778.94,330.24,754.5

10,763.14,444.3

222.26,552.21,945.28,608.4

30,699.0241.4

2,384.4546.8

Total . . . . . . . . . . . . . . . . . . . . ., ., .81,570.2 84,071.9SOURCE: National Science Foundation, 1987.

DEPARTMENT OF DEFENSE

Biotechnology is defined as any technique that uses living organisms (or parts of organisms) to makeor modify products, to improve plants, or to develop micro-organisms for specific uses. The technol-ogies specifically included in this definition are recombinant DNA, novel bioprocessing techniques,cell fusion technology including hybridomas, and somatic cell genetics.

The Department of Defense supported 69 per-cent of total Federal R&Din fiscal year 1987, withan R&D budget of $40.8 billion. This is its highestshare of Federal R&D since 1962.

In 1986, DoD established a steering committeeunder the Deputy Undersecretary of Defense forResearch and Advanced Technology to examinebiotechnology policy within the agency. The com-mittee reports that the DoD effort in biotechnol-ogy is essentially divided between two branchesof the armed forces; the Army, which supportsmostly medical biotechnology; and the Navy,which supports mostly nonmedical biotechnology.The Defense Advanced Research Projects Agency(DARPA) and the Air Force also initiated a smallinvestment in nonmedical biotechnology in fiscalyear 1986. DoD intends to decrease funding levelsin medical biotechnology and increase funds fornonmedical biotechnology over the next severalyears.

DoD runs a distant second to NIH in Federalfunding of biotechnology research, havingspent the equivalent of l/20th the NIH budgetfor biotechnology in fiscal year 1987. In fiscalyear 1985, the DoD spent a total of $92.6 millionon biotechnology research ($44.1 million in basicresearch and $48.5 million in applied research).In fiscal year 1986, $100.6 million was spent ($51.6million in basic areas and $49 million in applied).In fiscal year 1987, biotechnology funding was$118.8 million ($60.8 million in basic research and$58 million in applied areas). Overall, DoD fund-ing for biotechnology research is almost evenlydivided between intramural and extramuralprograms–$27.5 million for intramural and $21million for extramural programs in fiscal year1986. Since fiscal year 1985, funding has shiftedslightly toward more extramural research. Eighty-five percent of the extramural research is con-ducted in universities. Fiscal year 1987 funding

42

include afrom theProgram

$3 million one-time carry over of fundsDefense University Research Initiative(DURIP). Proposed funding of biotech-

nology R&D for fiscal year 1988 shows only slightgrowth.

Medical biotechnology is primarily directedtoward vaccine development and diagnostic meth-odology. Targeted vaccines are those againstmilitarily relevant diseases, such as Rift Valley Fe-ver and dengue, that are not of public health con-cern in the United States but occur primarily inthird world countries. DoD and NIH cooperatein vaccine research for malaria. The diagnosticsefforts focus on use of DNA probes and mono-clonal antibodies, which have also been developedby DoD for its chemical-biological defense pro-gram to produce methods for pretreatment, an-tidotes, and enzymes for decontamination. In1986, the Army Medical Research and Develop-ment Command was largely responsible for fund-ing 57 biotechnology projects ($42 million) in thearea of chemical-biological warfare (4). In fiscalyear 1986, DoD allocated $32 million for basic re-search and $49 million for applied research inmedical biotechnology-a slight increase over thefiscal year 1985 levels ($30.3 million and $48.5 mil-lion respectively).

The nonmedical biotechnology programs in DoDare diverse. One of the areas receiving the great-est funding is materials research: biopolymers,fiber, and adhesives and intermediate compoundsfor use in composites. Other areas are pollutioncontrol, biosensors, biocorrosion and biofoulingcontrol, compliant coatings, and bimolecular elec-tronics. Research in these areas was supportedat a level of $19 million in fiscal year 1986; essen-tially all of it being basic research. This figure wasup from $13.8 million in fiscal year 1985, primar-ily due to the DURIP where four universities werefunded to do interdisciplinary research in biotech-nology as it applies to new materials and marinescience. Each program receives approximately $2million a year, with funds decreasing slightly infiscal year 1988 after the initial equipment capitali-zation. In fiscal year 1987, DoD allocated an addi-tional $1.5 million for more applied research inthese areas.

Under special programs DURIP supports thepurchase of some equipment for biotechnologyprograms. DoD estimates that about $2.1 millionwas awarded to universities in fiscal year 1985for instrumentation directly related to biotech-nology. About 15 percent of the funds are spenton industry research.

DEPARTMENT OF ENERGY

Biotechnology related research is defined as research information and methodologies that couldbe used by industrial scientists to develop the products and processes of biotechnology, and includesresearch needed as the scientific base to develop that information.

Total expenditures for biotechnology R&D inthe Department of Energy were over $61 millionin fiscal year 1987, or about 1 percent of its totalR&D budget. DOE supports both basic and ap-plied research relevant to biotechnology. Appliedresearch is supported under the Assistant Secre-tary for Conservation and Renewable Energy andthe Assistant Secretary for Fossil Energy. Theseprograms serve DOE’s mission of developing a va-riety of energy resources in an environmentallysound way. Historically, DOE has been involvedin research on the medical effects of radiation be-cause of its mandate to oversee atomic energy.Expertise in this area has expanded to other areasof human genetics, plant biology, and biomass re-sources.

Under the applied research programs of Con-servation and Renewable Energy, renewable bio-mass resources, such as woody and herbaceouscrops, are being developed. Projects include spe-cies screening, plant breeding, and tissue culturestudies ($3.5 million in fiscal year 1987). Otherstudies include the conversion of biomass to fuelethanol. Under a biocatalysis project, bioreactorsare being studied as a way to produce specialtychemicals ($5.9 million in fiscal year 1987). Bio-technology research in fossil energy includes coalcleaning, liquefaction and gasification, fuel gas up-grading, and techniques to enhance oil recoveryfrom wells. Funding in this area in fiscal year 1987was an estimated $1.9 million, down from $2.8million in fiscal year 1986. Thus, the total applied

43

research budget in biotechnology-related areasin fiscal year 1987 is estimated at $11.3 million(see table 3-4).

Research that is basic and relevant to biotech-nology is supported by the Office of Basic EnergyResearch (OBER) and the Office of Health and Envi-ronmental Research (OHER). Total support forbasic research relevant to biotechnology totaled$50.1 million in fiscal year 1987. In OBER, studiesare conducted in plant sciences, quite extensivelyin bioenergetics, photosynthesis, and control ofplant growth and development. Microbial researchis conducted dealing with mechanisms of lignocel-lulose degradation, fermentation, and microbe in-teractions. In fiscal year 1987, $16,5 million wasspent on biotechnology-relevant research in thatOffice, up from $12 million in fiscal year 1986.Thirty-three percent of the research is conductedintramurally.

OHER has programs in molecular and cellularbiology; molecular genetics, cytogenetics, andmouse genetics; structural and analytical studiesof macromolecules; and physical ecology. Muchof the biotechnology work in OHER is aimed atexplaining the molecular basis of mutagenesis andgene expression and the structure of nucleic acidsand proteins. The fiscal year 1987 budget for bio-technology in OHER was $33.6 million, modestlyincreased over fiscal year 1986. Eighty-five per-cent of the biotechnology-related research is con-ducted intramurally.

Table 3-4.-DOE Support of Biotechnology R&D,Fiscal Years 1985-87 (dollars in millions)

1985 1986 1987

Basic research:Office of Health and Environmental

Research . . . . . . . . . . . . . . . . . . . . .. ...33.1 33.0 33.6Office of Basic Energy Research . .....12.4 12.0 16.5

Subtotal . . . . . . . . . . . . . . . . . . . . .. ...45.5 45.0 50.1

Applied research:Biomass Energy Technology Division . . 5.6 5.5 5.9Energy Conservation and Utilization

Technologies . . . . . . . . . . . . . . . . . . . . . 2.0 2.6 3.5Fossil Energy. . . . . . . . . . . . . . . . . . . . . . . 2.0 2.8 1.9

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . 9.6 10.9 11.3

Total . . . . . . . . . . . . . . . . . . . . . .........55.1 55.9 61.4SOURCE: Department of Energy, 1987.

DOE labs have historically been interested inthe human genome, primarily for the purpose ofdeveloping techniques that would allow measure-ments of mutation rates in human populations.In 1986, OHER held a conference, hosted by DOE’sLos Alamos National Laboratory, to discuss thefeasibility of undertaking sequencing of the hu-man genome. Los Alamos, together with LawrenceLivermore National Laboratory has been involvedin the National Laboratory Gene Library Project,an effort to construct a chromosome-specific genelibrary from isolated human chromosomes.

DOE has proposed mapping the entire comple-ment of human chromosomes known as the hu-man genome —a massive effort ultimately requir-ing the order of each nucleotide along the DNAin each chromosome to be determined. There hasbeen considerable debate over the extent to whichsuch an effort should be undertaken by the Fed-eral Government and over which agency shouldcoordinate the effort, A subcommittee of theHealth and Environmental Advisory Committee(HERAC) of OHER strongly urged that DOE com-mit a large, multi-year, multidisciplinary under-taking to make a complete physical map of thehuman genome (10). In February 1988, a NationalResearch Council report urged funding a projectto map the entire human genome, but did notspecify which agency should lead such an initia-tive (3). Funding for the DOE initiative in map-ping the human genome began in fiscal year 1987,with $4.7 million going to 10 projects at 3 nationallaboratories and Harvard and Columbia Univer-sities. These projects are aimed at improving ex-isting methods for mapping and sequencing DNA,devising advanced computer analysis methods,and employing automation and robotics to gen-erate new tools for molecular biologists. OTA haspublished an assessment of issues relating to ahuman genome mapping initiative (7).

Biotechnology research is also conducted atother DOE labs, such as the Ames Laboratory, Ar-gonne National Laboratory, the Savannah RiverLaboratory, Brookhaven National Laboratory,Idaho National Engineering Laboratory, Oak RidgeNational Laboratory, Pacific Northwest Labora-tory, and Lawrence Berkeley Laboratory. Theseprograms are funded primarily out of OEHR’s in-tramural program.

44

U.S. DEPARTMENT OF AGRICULTURE

Because of the size and complexity of the USDA,programs in biotechnology research and traininghave been examined in the two major agenciesresponsible for R&D within the Department—the Cooperative State Research Service (CSRS) andthe Agricultural Research Service (ARS). These twoagencies differ greatly in both mission and bud-get. In addition, they define biotechnology differ-ently. Combined, they report spending $73 mil-lion on biotechnology research and developmentin fiscal year 1986. The combined budget in-creased to $84 million in fiscal year 1987 but willfall to $82 million in fiscal year 1988. CSRS andARS have been examined separately in this report.Chapter 10 presents a more thorough discussionof U.S. investment in plant agriculture as relatedto biotechnology.

Cooperative State Research Service

Biotechnology refers to the improved or modi-fied organism, microbe, plant, or animal, and ‘newresearch techniques’ or ‘technology’ refers to con-temporary ‘tools’ available to scientists for the pur-pose of biotechnology development.

CSRS is the USDA’s liaison to the State univer-sity system for the conduct of agricultural re-search. Of all Federal agencies, CSRS handles themost diverse types of research funding, includ-ing formula funds, such as the Hatch Act (1862Universities), MacIntire-Stennis Cooperative For-estry funds, Evans-Allen funds (1890 Colleges andTuskegee University), and the Animal Health andDisease Section 1433 funds. The States provideresearch funds on a matching basis, which nowexceed the requirement by about three-fold. Ofthe total State Agricultural Experiment Station(SAES) research funding, Federal formula fundsaverage 19 percent, State funds over 60 percent,and all other funds (private, Federal grants, etc. )about 20 percent. In addition, CSRS handles theSpecial Research Grant Program, Competitive Re-search Grants Program, and USDA Higher Edu-cation Fellowships. There are biotechnology pro-grams in all of these funding categories. Thediversity of funding mechanisms complicates ef-forts at developing a central data management sys-tem to track all research being done in biotech-nology.

The biotechnology research funding from CSRSfor fiscal year 1987 totaled $49 million and sup-ported nearly 2,000 individual projects. This is upfrom $46 million in fiscal year 1986. Funding forbiotechnology in 1985, however, was more thandouble that from the previous year. This was aresult of a congressional appropriation of $20 mil-lion awarded to the Competitive Grants programfor research targeted to agricultural biotech-nology.

Research projects in biotechnology include areasusing techniques such as tissue culture where spe-cific selection and directed mutagenesis has beenused, drug development through use of mono-clonal antibodies, DNA probes, DNA sequencing,and protein sequencing. Six hundred projects arebeing supported in an area labeled “fringe bio-technology,” which includes categories such as tis-sue culture for plant propagation purposes, iso-zyme isolation for speciation, classical serologicalwork for relationships or for identification, andmetabolic studies. Eleven projects being fundedare examining the economic and social effects ofbiotechnology.

The $49 million within CSRS is divided as fol-lows within each funding category: Hatch Act,$11.6 million; MacIntire-Stennis Cooperative For-estry, $231,000; 1890 Colleges and TuskegeeUniversity, $210,000; Special Research Grants, $4million; Competitive Research Grants, $28.6 mil-lion; and Animal Health and Disease, $514,000.The Forestry Competitive Research Grant Pro-gram administered by CSRS has $1.7 million forbiotechnology and is included in the precedingtotal. The preceding totals do not include biotech-nology research supported by State funding.

Agricultural Research Service

Biotechnology includes projects that use tech-niques such as gene cloning in micro-organisms,nucleic acid hybridization, biological and biochem-ical synthesis of nucleic acids and proteins, useof monoclinal antibodies, affinity column sepa-ration of antigens, use of immobilized enzymesand cells, protoplasm fusion, regeneration of plantsfrom tissue culture, transfer of embryos, genemapping, and synthesis of peptide neurohormones.

45

As its name implies, ARS is the primary researchagency within the USDA. It is the in-house agencyof USDA on intramural research programs, al-though it does spend about $20 million a year onspecific cooperative agreements. ARS conducts re-search for specific user groups within the USDA,such as the Animal and Plant Health InspectionService, Food Safety Inspection Service, and SoilConservation Service. ARS reports that it is ap-plying the new technologies, particularly the ad-vances in molecular biology, to study and under-stand fundamental biological processes and tomodify and regulate these processes for the solu-

tion of agricultural problems. ARS does not con-sider biotechnology as a discipline or area of re-search. Thus, resources are allocated to specifichigh priority problems, and biotechnology tech-niques or methodologies are used in researchprojects throughout much of the total program.

In fiscal year 1986, ARS projects using biotech-nology techniques totaled about $27 million. Theseprojects involved about 200 scientists who use bio-technology techniques. By the end of 1987 thesetotals increased to about $35 million and about350 scientists.

DEPARTMENT OF COMMERCE

National Oceanic and AtmosphericAdministration

Biotechnology is the application of scientific andengineering principles to the processing of mate-rials by biological agents to provide goods andservices.

For the past several years, the National Sea GrantCollege Program of NOAA has invested a smallbut significant share of its budget to research thatwill aid in the development of marine biotechnol-ogy. Research on marine natural products includesfundamental chemical and biological studiesdirected toward discovering novel biochemicalwhose properties make them of potential use inmedicine, medical research, and agricultural andchemical studies directed toward the developmentof industrial chemicals and materials. In fiscal year1985, 56 projects in the categories listed belowwere supported with $2,144,000 in Federal fundsand $1,361,000 in matching funds. This accountedfor roughly 5.5 percent of the Sea Grant Budget.In fiscal year 1986, total NOAA spending on bio-technology was $2,215,000 for 55 projects. Thisfigure was matched by an additional $1,702,000.In fiscal year 1987, NOAA spending on biotech-nology was at $2,680,000 for 66 projects, andmatched by an additional $1,789)000.

There are four categories of research: biochem-istry and pharmacology (up from $865,000 in fis-cal year 1986 to $916,000 in fiscal year 1987);genetic engineering (up from $624,000 in fiscalyear 1986 to $778,000 in fiscal year 1987); bio-

chemical engineering (down from $581,000 in1985 to $393,000 in 1987); and microbiology andbotany (up from $342,000 in 1986 to $593,000 infiscal year 1987) (see table 3-5). All Sea Grant re-search is conducted extramurally.

Research in biochemistry and pharmacol-ogy—the fields receiving the most funds—isdirected toward isolation, identification, and bio-logical evaluation of novel marine substances ofpotential use in medicine or industry. Two newanticancer compounds, for example, were isolatedand are under further evaluation by the NationalCancer Institute. Other research areas focus onmanipulation of the genetic complement of ani-mals or micro-organisms to produce useful diag-nostic or quality control reagents, control diseasesof marine organisms, process waste materials, andenhance the growth and competence of aquacul-tured species.

Projects categorized under “biochemical engi-neering” concern the production of materials anddevelopment of processes potentially useful in in-dustry. For example, academic scientists interestedin the nutritional role of vitamin B and itsanalogues--the cobalamins—in the biological proc-esses of the ocean have isolated from marine ani-mals novel proteins with an extraordinary affinityfor vitamin B. Subsequent studies showed the pro-teins to be cheaper and more specific reagentsfor determining vitamin B than current reagentsused in clinical chemistry. Their commercializa-tion, which is in the early collaborative stages with

46

Table 3-5.–NOAA Funding for Sea Grant Projects in Biotechnology in Fiscal Years 1978 to 1987(dollars in thousands)

Category 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987“ .

Biochemistry and pharmacology . . . . ..............382 465 440 402 525 440 671 820 865 916Genetic engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 1OOa 266 419 487 537 624 778Biochemical engineering and industrial chemicals ..206 246 349 285 454 515 540 581 384 393Microbiology and phycology . . . . . . . . . . . . . . . . . . . . . — — — 50a 1OOa 284 248 206 342 593

Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..588 711 789 837 1,345 1,658 1,946 2,144 2,215 2,680aEstimate

SOURCE: U.S. Department of Commerce, National Oceanic and Atmospheric Administration, 1988.

industry, is expected to be successful and to in-crease the sophistication of studying diseases suchas pernicious anemia and certain mental disorders.

National Bureau of Standards

Biotechnology is the application of scientific andengineering principles to the processing of mate-rials by biological agents to provide goods andservices.

The Senate Committee on Commerce, Scienceand Transportation in its report on the authori-zation of the National Bureau of Standards (NBS)for fiscal year 1985, directed NBS to prepare aplan on a national effort in measurements andstandards for biotechnology. The plan recognizedthat commercialization of biotechnology will bemeasurement intensive with an estimated cost ofup to 25 percent added to the products of bio-technology for measurement. Measurements aremade at each stage in the development of biotech-nology products, from the original design of pro-duction processes, through the acquisition of rawmaterials, to the ultimate consumption of prod-ucts in the marketplace. These measurements areprimarily chemical and physical in nature.

The Biotechnology Program at NBS is a new pro-gram, created to develop measurement methodsand standards to advance the commercializationof biotechnology in the United States. The mainfocuses of the research are:

●

●

●

development and standardization of tech-niques needed to achieve homogeneity in pro-tein samples;assessment of purity of samples produced bybiotechnological methods including primaryprotein structure determination; andaiding industry on standards problems relatedto the scale-up and automation necessary to

get biotechnology from the laboratory to thecommercial marketplace. This includes re-search in catalysis, analytical and processmeasurements, and separation technology.

In fiscal year 1985, NBS spent $850,000 to de-termine its capabilities in advance measurementin biotechnology, setting of standards, and devel-oping reference data. In fiscal year 1986, $1.9 mil-lion was allocated from the NBS Director’s com-petence fund and $1.4 million was allocated forthe new biotechnology initiative by congressionalappropriation; $411)600 of this was spent onequipment. Thus, a total of $3.3 million was allo-cated in fiscal year 1986 for biotechnology, ap-proximately 2 percent of the total NBS budget.The fiscal year 1987 budget for biotechnology re-mained at $3.3 million.

Approximately 40 percent of the research isbasic and 60 percent is generic applied. An exam-ple of generic applied research is two-dimensionalelectrophoresis, where research is needed to im-prove technique reproducibility. Another exam-ple is research on the dynamic properties of fluids,an area critical to bioengineering.

One of the most ambitious new biotechnologyprojects at NBS is a joint venture with the Univer-sity of Maryland in Montgomery County, MD. Thisventure, called the Center for Advanced Researchin Biotechnology (CARB), will combine interdis-ciplinary, biotechnology-related resources fromacademia, industry, and government in an orga-nization that will serve as a national resource forbiotechnology-related measurement research andservices (see ch. 9). There are plans to involve moreuniversities in this joint venture.

A committee within NBS has been establishedto define standards that will be needed in biotech-nology. Examples are characterization and iden-

47

tification of biomolecules, bioengineering proc- vide data needed in bioengineering is mainly fo-essing and controls, and improved x-ray and cused on fermenters, establishing equilibriumneutron data collection. constants, diffusion coefficients, and mass trans-

NBS anticipates a growing need for the devel-port coefficients needed to build from the labora-tory to the industrial bioreactor. The Center for

opment of clinical standards for testing new bio- chemical Engineering at NBS is developing sen-technology products, such as standards that areused to calibrate scientific instruments and to vali-

sors that can be used in connection with bio-

date and evaluate data. Work being done to pro- reactors.

AGENCY FOR INTERNATIONAL DEVELOPMENT

Biotechnology, broadly defined, includes any technique that uses living organisms (or parts of organ-isms) to make or modify products, to improve plants or animals, or to develop micro-organisms forspecific uses.

AID, an agency of the State Department, is theforeign assistance arm of the U.S. Governmentand is not, per se, a research agency. The Agency’smandate is to work with developing countries intheir efforts to meet basic human needs—to over-come the problems of hunger, illiteracy, disease,and early death. Technology development andtransfer, including biotechnology, is one of thebasic components in the Agency’s strategy toachieve its goal. Given the nature of this goal, theresearch supported by AID is clearly directed tothe development of specific products or systemsthat will be useful in improving human health con-ditions, agricultural production, and rural devel-opment in the developing world. AID supportsprojects in the United States and overseas. In gen-eral, AID finances research that is expected to pro-duce usable results within 3 to 5 years.

The overall research portfolio is comprised ofprojects supported from several offices withinAID, and reflect the Agency’s organization. AIDis divided into central and regional bureaus andindependent offices. Regional bureaus focus onthe needs of a specific geographic region and serveas the Washington coordinating arm of the fieldactivities conducted by AID missions. Central bu-reaus address agency-wide questions, e.g., privateenterprise. The central Bureau for Science andTechnology provides technical assistance for theentire agency, and supports and initiates world-wide programs in science and technology. Thisbureau also coordinates AID’s support of the 13International Agricultural Research Centers. Anadditional locus of research activity was estab-lished in 1980, with the creation of the Office of

the Science Advisor. The purpose of this officeis specifically to encourage an innovative and col-laborative approach to development research,technology transfer, and related capacity building.

AID tries to enter established research programsand applies its funds to direct some of the estab-lished work toward a particular problem that iscurrently underfunded. For example, a projectto develop a vaccine to rinderpest—a serious prob-

Table 3-6.—AID Funds for Biotechnology inFiscal Years 1986 and 1987

(dollars in thousands)Broad definition Narrow definition

Administrative unit 1986 1987 1986 1987

Regional Bureaus/Country MissionsThailand ., ., ., ., 4,400India:

Agricultural ., 1,617Health ... . . . . . 4,600

Latin America/Caribbean ., –Bureau for Science and Technology

Agriculture:Plants. . . . . . . . . 2,662Animals ., . . . . 1,135International AgricultureResearch Centers ... 10,000

Health:Vaccines ... ., ., . . . 9,000Diagnostics . . . . . . . . . . . 800Therapeutics ... , ., ., ., –Vectors . . . . . . . . . . . . . . . . . 1,700

Population:Contraceptive immunology 918

Office of the Science Advisor:Health ., 2,996Agriculture . . . . 7,026

Totals . . . . . . . . . . . . . . . .....46,854

2,000 1,100

1,500 4045,413 1,150

45 –

1,460 663714 898

5,000 2,000

9,400 3,0002,400 4004,300 –

— 200

1,000 918

3,099 1,0327,425 2,567

43,756 14,332

2,000

——

250

1,2152,617

6,082SOURCE: US. Agency for International Development, 1987,

48

lem in Africa—is being conducted by scientists atthe University of California at Davis, where re-search was underway prior to AID involvement.AID has supplemented the effort through addi-tional funds and is supporting postdoctoral train-ing for two African scientists so that they can con-tinue research in their native country. In anotherexample, AID has piggybacked onto a ColoradoState University (CSU) research project that is

AID provided OTA with two sets of budgetaryfigures for biotechnology activities in fiscal years1986 and 1987 (see table 3-6). One set adopts thebroader OTA definition and arrives at a total fig-ure of $46.8 million in 1986, and $43.7 million in1987 (about 3 percent of the total AID budget);the second set narrows the definition to focus spe-cifically on recombinant DNA, cell fusion, andnovel bioprocessing techniques, arriving at a to-

directed toward increasing the genetic diversity talof rice, sorghum, millet, and other crops heavily inused in underdeveloped countries. Researchersfrom developing countries are supported for a6-month training program at CSU.

figure of $14.3 million in 1986 and $6 million1987 (1 percent of the total AID budget).

U.S. ENVIRONMENTAL PROTECTION AGENCY

Biotechnology is defined generally as the use of living organisms to produce products beneficialto mankind. It is the application of biological organisms to technical and industrial processes. It in-volves the use of ‘novel’ microbes, which have been altered or manipulated by humans through tech-niques of genetic engineering.

The U.S. Environmental Protection Agency(EPA) is primarily a regulatory agency, althoughresearch programs providing a scientific basis forregulatory activities accounted for nearly 25 per-cent ($320 million) of the agency’s total budgetin fiscal year 1985. Roughly 1 percent of the R&Dbudget ($3 million) was devoted to biotechnologyresearch and biotechnology risk assessment. Themajority of those funds, approximately $2.5 million,was devoted to areas relevant to risk assessment;$500,000 was devoted to product development,most of which is relevant to risk management fordeliberate release of genetically engineered organ-isms. Total spending on biotechnology in fiscalyear 1987 increased to nearly $5.7 million from$3 million in 1985 and $3.4 million in 1986.

At EPA, biotechnology research is principallyfocused on the fate, public health, and environ-mental effects that might result from the acciden-tal or purposeful release of genetically manipu-lated organisms into the environment. Officiallyinitiated in 1985, the research program attemptsto develop the capabilities for the regulatory pro-grams within EPA to predict and thus avoid un-reasonable adverse effects on the environment.

The techniques and knowledge gained throughthe biotechnology research program are useddirectly in the risk assessment process required

to fulfill the EPA’s legislative mandates. Most ofthe risk assessment work is done at the EPA Cor-vallis Laboratory in Oregon, which focuses on ter-restrial activities, and the Gulf Breeze Laboratoryin Florida, focusing primarily on aquatic researchand product development. Eighty percent of theprogram is funded extramurally.

A major need, presently central to research pro- gram planning, is predictive risk assessmentmodels for products of manipulated microbes. Inconducting its research in this area, EPA activelycoordinates and cooperates with industry, publicinterest groups, academia, and other Federalagencies.

The use of bioengineered organisms to degradeand otherwise mediate hazardous wastes prom-ises great economic reward. EPA policy states thatthe development of these processes should be theprerogative of the private sector, To build a knowl-edge base by which to monitor these technologies,EPA is involved in limited studies of geneticallyengineered microbes for degradation of toxicwastes to better understand potential environ-mental and health effects as well as the needs forremedial action (see ch. 11). In fiscal year 1986,$589,000 was allocated for these studies; in fiscalyear 1987, $531,000. The remainder was spenton research directly related to risk assessment.

49

VETERANS ADMINISTRATION

The Veterans Administration adopted the OTA definition of biotechnology for the purpose of account -ing. Specifically, funding data were provided forclonal antibodies, and recombinant DNA.

During fiscal year 1985, the Veterans Adminis-tration (VA) Office of Research and Developmenttracked a total of 11,355 research projects con-ducted by 5,808 principal investigators in 143 hos-pitals. Most VA research concerns clinical medi-cine ($164 million of a total R&D budget of $184million in fiscal year 1985). In 1985, of the 11,355projects, the VA estimates that 100 projects wereclearly directed toward the development of bio-technology products or produced information thatmay later be incorporated into the developmentof a biotechnology product. These 100 projects

projects involving cell fusion, gene splicing, mono-

were funded at a level of $5.4 million (approxi-mately 2.9 percent of the total R&D budget).

In 1986, the number of projects directly or in-directly related to biotechnology nearly doubledto 196, with support totaling $6.36 million, or ap-proximately 3.5 percent of the total R&D budgetfor 1986. A total of 266 biotechnology projectswere funded in fiscal year 1987, with support to-taling $9.40 million, or approximately 4.2 percentof the total R&D budget.

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

Space biotechnology includes natural and manipulative processes involving biological materials, suchas cells and proteins. The changes that occur in these processes in the reduced gravity environmentare dependent on the relationship of the forces involved in the process and in the techniques used.

Biotechnology research at NASA is conductedprincipally through the Microgravity Science andApplications Program. The purposes of this pro-gram are:

●

●

●

to use the microgravity environment to en-hance certain separator processes for purifi-cation of biological materials for therapeuticand diagnostic application to diseases and tosolve basic research problems;to use the microgravity environment to en-hance crystallization of proteins and othermacromolecular materials for detailed studiesof molecular structure and to enhance pro-duction of biocompatible materials; andto obtain basic information on the effect ofthe microgravity environment on certain bio-logical processes in cells, organs, and organismssuch as cell secretion, cell-cell interaction, cellgrowth and differentiation, biorheology, andanimal and plant cell manipulations.

Funded at a level of $7.2 million in fiscal year1987, the program involves investigators from 11

universities, two NASA Centers, one research cen-ter, two industrial firms, and two Centers of Ex-cellence. The Centers of Excellence are locatedat the University City Science Center in Philadel-phia ($450,000) and the University of Arizona($450,000). The Bioprocessing and Pharmaceuti-cal Center in Philadelphia is a consortium ofuniversities looking at separation processes, cellculturing, and cell harvesting. The Center for Sep-aration Science in Arizona also investigates sepa-ration processes, primarily in the area of isoelec-tric focusing,

Of the $7.2 million, NASA spent $1.2 million onuniversity research in separation techniques, cellproductivity in reduced gravity, theoretical flowanalysis, cell culture and product harvesting inlow gravity, and biorheology; $1.9 million onuniversity funding in protein crystal growth andmacromolecular crystallography; and $3.1 millionin-house at the Marshall Space Flight Center andthe Johnson Space Flight Center on many of thepreceding areas and flight hardware development.

50

FOOD AND DRUG ADMINISTRATION

Biotechnology is the application of biological systemsprocesses.

The purpose of FDA’s research, including bio-technology-related research, is to generate andgather essential scientific information that theagency needs to make regulatory decisions. Un-der the Federal Food, Drug, and Cosmetics Act andrelated laws, the FDA is responsible for ensuringthat the Nation’s pharmaceutical, biological, med-ical devices, and radiological products are safe andeffective and that the food supply is safe and nutri-tious. To accomplish these activities, FDA uses aninstitutional research capacity that can fulfill theneeds that are unique to its regulatory mission.

Some research, for example, enables FDA to de-velop quick, accurate, sensitive, and reproduci-ble methods that can be applied in response topublic health emergencies (e.g., Tylenol tamper-ing, Listeria contamination of cheese). Other FDAresearch findings are translated into the devel-opment and approval of products critical to pub-lic health (e.g., licensure of HIV antibody test kits)or are used to enable FDA to meet long-term reg-ulatory responsibilities (e.g., risk assessment).While most of FDA’s research is performed in-house, a small portion is supported through ex-tramural grants and contracts, such as the Or-phan Product development program.

FDA research efforts, including those relatedto biotechnology, are targeted to these areas:

●

●

●

●

●

●

and organisms to technical and industrial

product testing;scientific review of new product applications;identification of hazards;development of new or improved physical,biological, toxicological, or chemical tests;determination and establishment of stand-ards, and determination of product compli-ance with those standards; andclarification of mechanisms underlying tox-icologic and pharmacologic effects-. -

FDA reported difficulty in assessing accuratelythe extent to which the agency’s research fits thebroad category of biotechnology. While many ofFDA’s research programs may use biotechnologymethods, these methods serve as a means to anend—the technology itself is not an endpoint. TheFDA spent approximately $3 million in fiscal year1985 (3,7 percent of the total R&D budget) on re-search activities that can be considered biotech-nology related. This figure rose to $4.7 millionin 1986 and $5.8 million in 1987. Most of the fund-ing increase has gone to research in the Centerfor Drugs and Biologics, involving recombinantDNA or monoclinal antibody methodologies. Theresearch projects are categorized as involving spe-cific pathogens, interferon research, research onantibodies and immunity, and related drug re-search.

SMALL BUSINESS INNOVATION RESEARCH PROGRAM

Biotechnology is a broad term that includes a number of techniques, such as genetic engineering,protein engineering, processes for making monoclinal antibodies, and other molecular biological tech-niques; the development of instruments to carry out such techniques is also included in the broaddefinition of biotechnology R&D.

Approximately $1.1 billion was awarded to small tramural research to set aside 1.25 percent (whenbusinesses by Small Business Innovation Research fully operational) of those funds for an SBIR pro-(SBIR) programs through fiscal year 1987 (5). The gram. Small businesses submit proposals in re-Small Business Development Act of 1982 (Public sponse to research topics contained in agencies’Law 97-219) established these programs to en- solicitation agreements, published at least annu-courage innovation by requiring Federal agencies ally by each participating agency.to set aside portions of their research funds tosmall businesses through special research pro- Biotechnology companies have done well bygrams. The Act requires Federal agencies that the SBIR program. The National Institutes ofspend more than $100 million annually on ex- Health, with the largest civilian research budget,

51

contributes the largest dollar amount to SBIR. NIHawarded 98 of a total of 482 SBIR grants and con-tracts to 58 biotechnology companies in fiscal year1986. The awards were worth approximately $5million.

Biotechnology companies have received asmaller proportion of the total awards from theSBIR programs of the National Science Founda-tion, the USDA, and the Department of Energy.In the years 1983-86, 10 percent of the totalawards ($36,410,000) made by all SBIR pro-grams have gone to biotechnology andmicrobiology research in entrepreneurialfirms. Three-fourths of those funds came fromNIH. Agencies include SBIR funds in their biotech-nology funding figures; thus, the SBIR contribu-

tion to biotechnology R&D is subsumed under to-tal Federal spending on biotechnology. SBIRsupport for biotechnology research surpasses sup-port for information processing, and medical in-strumentation, the next runners up.

Recipients of SBIR funds praise the program,stating that it has given them the boost neededto seek commercialization of new products. Pub-lic Law 97-219 included a sunset provision andwas scheduled to terminate October 1, 1987, butw a s r e a u t h o r i z e d f o r 5 y e a r s — u n t i l 1 9 9 3 . S B I R

funds are one of the few sources of direct Fed-eral support for applied research and developmentconducted by small companies, and the SBIR pro-gram is widely supported by dedicated biotech-nology companies in many business sectors.

SUMMARY AND CONCLUSIONS

Federal support of biotechnology researchand development exceeded $2.72 billion in fis-cal year 1987, and has not changed substan-tially in current dollars since 1985. NIH pro-vides by far the most Federal funds for both basicand applied biotechnology research, supplyingnearly 84 percent of the Federal Government’sbiotechnology research dollars. The Departmentof Defense biotechnology R&D effort consists ofan additional 4.5 percent of total spending, andthe National Science Foundation funds 3.6 per-cent. The fact that so many other agencies, in-cluding those with missions that are not primar-ily research, fund work in biotechnology atteststo its wide-reaching applications.

Diverse biotechnology applications are sup-ported by most of the Federal agencies. The DoDsupports work in materials science and medicine,while NSF funds biotechnology research applica-tions in genetics, bioelectronics, and environ-mental biology. Some redundancy, a necessary andhealthy attribute of the U.S. research infrastruc-ture, also exists across many agencies. In somecases, agencies have cooperated on projects ofcommon interest. Examples in this category areGenBank®, and programs in plant biology and vac-cine development.

From the funding data, it appears that Fed-eral agencies are supporting more appliedwork in biotechnology than was reported to

OTA in 1984. Increased attention to applicationhas been most noticeable through the success ofthe SBIR program in assisting small biotechnol-ogy companies. The National Science Foundationhopes to eventually devote additional funds toEngineering Research Centers that focus on bio-technology. NIH, DOE, and DoD also report morefunds being dedicated to applied research relatedto biotechnology. However, OTA did not requestinformation to determine whether the appar-ent increase in applied research was due to de-cisions by the agencies to target this area forincreased funds, or to their increased profi-ciency in accounting for applied work.

Some caution must be taken in interpreting theOTA totals for Federal funding of biotechnologyR&D. The fact that different agencies define bio-technology differently makes it difficult to com-pare funding across agencies. The difference indefinitions reflects the different scientific and po-litical perspectives and varied missions of the agen-cies. Some agencies, such as NSF and DOE, definebiotechnology broadly, in terms that include bio-technology applications typical of the years be-fore the development of recombinant DNA tech-nology. In contrast, agencies such as DoD, theAgricultural Research Service, and the VeteransAdministration use definitions similar to the OTAdefinition of new biotechnology (6) that includesrecombinant DNA, cell fusion, and novel bio-processing techniques. Furthermore, agencies

52

such as NIH and NSF have implemented more ef-ficient mechanisms for cataloging and account-ing for research and spending in certain areas,such as biotechnology.

The estimated $2.72 billion spent by Federalagencies in fiscal year 1987 could overshoot orundershoot the actual value, because it is not basedon a single definition. These same problems af-fect biotechnology funding figures submitted bythe individual States (ch. 4), or by different com-panies representing different industries (ch. 5).Nevertheless, totaling the dollars invested in bio-technology R&D by the Federal, State, and pri-vate sectors is the only way to compare their rela-tive contributions.

Institutionalization of a government-wide defi-nition of biotechnology could have limited value.Even if a uniform definition were adopted, agen-cies would still be likely to overcount or under-count, either because they do not have reliablesystems for accounting for biotechnology re-search, or because it is in their institutional inter-est to do so. Systematic accounting mecha-nisms on the part of each of the agenciesshould be sufficient for budgetary purposes,and given the diversity of agency missions, across-agency comparison seems pointless.

The information contained in this chapter wascollected to provide a foundation that future

CHAPTER 3

1. Culliton, B.J., “NIH Role in Biotechnology Debated, ”Science 229:147-8, July 12, 1985.

2. Gladwell, M., “NIH’s Doors Opening to Private Com-panies: New Rules Will Let Researchers ShareKnowledge,” Washington Post, Sept. 14, 1987.

3. National Academy of Sciences, National ResearchCouncil, Mapping and Sequencing the Human Ge-nome (Washington, DC: The National AcademyPress, 1988).

4. Richards, B., and Barrington, T., “Military Science:Controversy Grows Over Pentagon’s War on Bio-logical Agents,” Wall Street Journal, Sept. 17, 1986.

5. U.S. Congress, General Accounting Office, Effec-

6

tiveness of Small Business Innovation Research Pro-gram Procedures, GAO/RCED-87-63, Washington,DC, 1987.U.S. Congress, Office of Technology Assessment,Commercial Biotechnology: An International Anal-ysis, OTA-BA-218 (Elmsford, NY: Pergamon Press,Inc., January 1984).

studies can use to address a number of impor-tant policy questions pertaining to Federal fund-ing

●

●

●

●

of biotechnology R&D, including:

Are some categories of research overfundedor underfunded based on the perceived needsof the specific agencies, State and local needs,national needs, and the needs of other nations?Are expenditures sufficient to promote thegrowth of future biotechnology applications?Is the research base in biotechnology fundedby the Federal Government adequate to main-tain or enhance the U.S. competitive positioninternationally in the various industries af-fected by biotechnology R&D?Is the distribution of Federal funds amongthe various agencies and their respective mis-sions (e.g., health, agriculture, and defense)appropriate?

Obtaining answers to these questions is beyondthe scope of this report. However, the case studieson the U.S. investment in applications of biotech-nology to human therapeutics, plant agriculture,and waste management (chs. 9, 10, and 11, re-spectively) offer a deeper analysis of many of thepolicy issues relevant to these business sectors,and demonstrate how the factors influencing in-vestment in biotechnology R&D must be consid-ered on an industry-by-industry basis.

REFERENCES7. U.S. Congress, Office of Technology Assessment,

Mapping Our Genes, OTA-BA-373, (Washington,DC: U.S. Government Printing Office, April 1988).

8. U.S. Congress, Office of Technology Assessment,Public Funding of Biotechnology Research andTraining, transcript of workshop proceedings,Washington, DC, September 1986.

9. U.S. Congress, Office of Technology Assessment,Research Funding as an Investment: Can We Meas-ure the Returns? OTA-TM-SET-36 (Washington,DC: U.S. Government Printing Office, April 1986).

10. U.S. Department of Energy, Office of Health and

11

Environmental Research, Report on the Human Ge-nome Initiative for the Office of Health and Envi-ronmental Research (Washington, DC, April 1987).U.S. Department of Health and Human Services,National Institutes of Health, The NIH Role inFostering Leadership in Biotechnology, Proceed-ings of the 51st Meeting of the Advisory Commit-tee to the Director, Bethesda, MD, June 24-25, 1985.

Chapter 4

Biotechnology in the States

"We've got to do something to get this biotechnology applied in Illinois faster than it is inother countries. ”

Don HoltDirector, University of Illinois

Agricultural Experiment Station

“Biotechnology will change the world, giving us new tools in crop and livestock productionand processing. For a $35 million investment, Iowa State University officials are confidentwe will attract over $120 million in research to Iowa over the next decade. ”

Governor Terry BranstadCondition of the State Speech

January 12, 1987

“1 don’t think the people want the Biotechnology Center investing in the development ofsmall businesses and their research without doing it very carefully. ”

Gerry HancockFormer North Carolina State Senator

“Competitiveness may be a new issue to the Federal Government, but it’s old news to theStates. While the precedents for forward-looking national strategies are few and far between,the 50 State governments have long been laboratories for policy experimentation. ”

Christopher M. CoburnExecutive Director

Ohio’s Thomas Edison Program

. .

CONTENTS

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Biotechnology and Economic Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Biotechnology Promotion at the Local Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56OTA Survey of State Programs in Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Promotional and Implementation Base of State Biotechnology Programs. . . . . . 59State Expenditures in Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64Mechanisms for Raising Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66Special Incentives for Biotechnology Companies . . . . . . . . . . . . . . . . . . . . . . . . . . 67

The National Science Foundation Experimental Program To StimulateCompetitive Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71Chapter 4 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

TablesTable Page4-1. State Mechanisms for Promoting Biotechnology Development . . . . . . . . . . . . 564-2. State Activities in Biotechnology Research and Development . . . . . . . . . . . . . 584-3. States Where the University Is the Promotional Base for Biotechnology . . . . 614-4. Biotechnology Centers Receiving Some State Support . . . . . . . . . . . . . . . . . . . 634-5. State Allocations for Biotechnology R&D, Training, and Facilities . . . . . . . . . 654-6. State-by-State Distribution of Dedicated Biotechnology Companies . . . . . . . . . 68

Chapter 4

Biotechnology in the States

INTRODUCTION

In the past 20 years, State governments and lo-cal groups have increasingly used investment inhigh-technology industries as an economic devel-opment strategy. High-technology promises clean“sunrise” industries, an improved economy, newjobs, and a strengthened higher educational sys-tern. ’ Recently, many of these initiatives have fo-cused on biotechnology. States have different ex-pectations about returns from biotechnologyinvestment, which is reflected in how and wherethey spend their money. Some States, for exam-ple, spend money recruiting faculty at Stateuniversities to build a reputation that will thenattract businesses into the area. Others direct mostof their funds toward small firms, providing in-centives and facilities for start-up. Most States pur-sue a combination of goals. How the States direct

‘F’or the purposes of this discussion, OTA adopts the Departmentof I,ahor definition of “high- te(’llrlolc~g~’ “ industries, as those indus -Irif;s with a ratio of R&El expenditures to net stiles at least two timesthe akrragr for all industries.

their biotechnology efforts depends on their ex-isting industrial, educational, or natural resourcebase, and their philosophy on the role of Stategovernment in fostering small business develop-ment. Those States that are successful in nurtur-ing the biotechnology industry rely on strong aca-demic and research programs, a strong, localventure capital pool, and an unusually high levelof interaction among researchers, manufacturers,and users.

This chapter examines State investment in bio-technology. In fall 1986, OTA surveyed all 50 Statesand the territories to determine the extent towhich they are investing in new initiatives in bio-technology. OTA found a significant level of in-terest in biotechnology development at the Statelevel; 33 States have allocated funds for biotech-nology through centers of excellence, universityinitiatives, incubator facilities for new firms, orgrants for basic and applied research in biotech-nology. While most programs are too young toevaluate their success, their expectations are high.

BIOTECHNOLOGY AND ECONOMIC DEVELOPMENT

Increasingly, State programs to foster economicgrowth and employment through the promotionof high-technology development surpass thosefound at the Federal level. As recently as 1980,only 10 States had programs promoting high-technology growth (15). Six years later, at least43 States had high-technology programs, spend-ing a total of $700 million in 1986 (5). OTA foundthat 33 of those programs include biotechnology.

In many ways, States are better able to leveragesupport, influence industry, and affect educationthan the Federal Government. State governmentshave traditionally performed key functions of im-portance to national economic development, suchas basic infrastructure maintenance and improve-ment, basic and higher education, employmenttraining and skills enhancement, financing for ex-

port stimulation, and promoting technological in-novation. States are critically situated to promoteuniversity-industrial linkages that can facilitate thecommercialization of research (14).

In most States, the Governor’s executive officesfor economic planning and development, depart-ment of commerce, or department of higher edu-cation have served as catalysts for promotinguniversity-industry cooperation as a means fordevelopment. These initiatives are usually basedon an analysis of the State’s existing industrial base,and are undertaken in conjunction with moretraditional economic development activities.

Economic development activities in the Statesseek to create jobs by offering inducements tocompanies. States compete with each other by tar-

55

56

geting attractive industries. What is new aboutthese programs is their emphasis on expandingexisting markets and creating new ones by acceler-ating innovation (8). State governments are at-tracted to high-technology industry because of therapid expansion and its presumed potential to cre-ate jobs and revitalize distressed regions. Statesperceive biotechnology as a highly attractive setof industries because of its diversity of applica-tion, its dependence on a highly skilled, highly edu-cated work force, its reliance on academe, andthe short cycle from discovery to product. High-technology industries are also perceived to havefewer known environmental (and possibly occupa-tional safety) problems than traditional manufac-turing industries. This perception has changed,however, as communities face field testing of ge-netically engineered organisms and the prospectof gene therapy (13).

The rapid growth of State programs in biotech-nology is an extension of previous State effortsto attract high-technology industries. For exam-ple, the growth of the microelectronics industryin California and Massachusetts (and the subse-quent benefits accrued by those States) sent tempt-ing messages to States dealing with declines inbasic industries. Early successes with high-tech-nology development (fostered by strong univer-sities) positioned California and Massachusetts wellfor growth in biotechnology. Furthermore, pre-vious experience may well have given them thelead they now enjoy in Statewide biotechnologydevelopment. Ironically, State government involve-ment in promoting biotechnology in these twoStates was minimal until 1985, most likely due tothe lack of a need for additional catalysts.

Although California and Massachusetts housethe largest percentages of dedicated biotechnol-ogy companies (27 and 13 percent of U.S. compa-nies respectively), many other States have showna keen interest in the development of biotechnol-ogy and have undertaken major initiatives to cul-tivate the industry.

Biotechnology Promotion at theLocal Level

Some biotechnology efforts are developing orbeing initiated at the local level. The Biotechnol-

ogy Park in Worcester, MA, was initiated and orga-nized by the Worcester Chamber of Commerce,with funding assistance from local sources andthe State. The concept of a Biotechnology Centeraffiliated with the University of California at SanFrancisco was discussed by the San FranciscoChamber of Commerce and endorsed by thenMayor Dianne Feinstein.

In Texas, the competition for State preeminencein biotechnology has generated local initiatives.The Dallas Biotechnology Task Force, establishedin 1984, raises money for the Dallas BiomedicalCorporation, which will provide interim financ-ing for research projects with commercial poten-tial at the University of Texas Health Science Cen-ter in Dallas. Austin is competing with San Antonioto be the Texas center for biotechnology. San An-tonio Mayor Henry Cisneros has been promotingbiotechnology as a means to economic develop-ment and has proposed a 1,500-acre research parkto attract biotechnology firms.

Table 4.1 .—State Mechanisms for PromotingBiotechnology Development

Policy bodies:● Governor’s task forces, boards, councils, and com-

missions● State mission agencies

—Commerce/economic development—Higher education—Science and technology offices

Appropriating and granting bodies:● Legislature● Nonprofit corporations● Colleges and universities

Capital:● Financial capital:

—Seed capital funds—Venture capital partnerships—Pension funds—Grants

● Physical capital:—Land use and zoning—Research and science parks—Incubator facilities—Improvements in infrastructure

● Industrial revenue bonds

Management support:● Business advocacy programs● Government marketing programs● Data retrieval and dissemination

Education:● Kindergarten through grade 12● Colleges and universities● Worker trainingSOURCE: Office of Technology Assessment, 1988.

57

Photo credit: Thomas Morrisette, Worcester Area Chamber of Commerce

“One Biotech Park. ” This 75,000-square-foot structure is the first building completed at the 1 million square foot MassachusettsBiotechnology Research Park located in Worcester, MA. As of March 1988, the building was fully leased.

In Maryland, Montgomery County has donated$9 million worth of facilities and additional mil-lions in land to the Center for Advanced Researchin Biotechnology, which is also funded by theUniversity of Maryland and the National Bureauof Standards of the U.S. Department of Commerce.The county hopes to attract more biotechnologyfirms to its already thriving high-technology cor-ridor. With a high percentage of scientists andengineers per capita and its close proximity to sev-eral Federal laboratories and research institutions,the county believes it is well positioned for devel-opment of a biotechnology-based industry.

In New York City, Columbia University hasplanned a $200 million biotechnology researchpark to be jointly funded by the city, the State,and the university. Four buildings to house aca-demic and commercial research laboratories, of-fice space, and retail outlets are planned. Officialshope that the research park will foster the bio-technology industry in New York City, revitalize

a depressed neighborhood, and enhance theuniversity’s research capabilities.

Because dedicated biotechnology companies re-quire less physical space than traditional manu-facturing industries, cities and counties can of-fer land and low rent to companies. But cities andcounties may be somewhat more limited than theStates in what they can offer to attract these in-dustries in a significant way. In contrast, at theState level, diversity of means can promote thisindustry. Many States can support biotechnologyinitiatives through appropriations from their legis-latures or grants from nonprofit corporations.Support can take the form of financial or physi-cal capital, management assistance, or education.Traditional methods for assisting small businesses,especially those in high-technology areas, are in-creasingly used to promote biotechnology devel-opment. Table 4-1 summarizes the mechanismsOTA found States using to promote commerciali-zation of biotechnology.

58

OTA SURVEY OF STATE PROGRAMS IN BIOTECHNOLOGY

An OTA survey of State activities in biotechnol-ogy conducted in Fall 1986 found that 33 Statesand Guam directly support biotechnology activi-ties, such as research, training, or developmentof facilities for research. An additional six Statesindicated they were conducting feasibility studiesor were considering establishing a biotechnologyinitiative. The OTA survey revealed a wide rangein the intensity level of these initiatives and diver-sity in their implementation. However, all of theStates reporting intensified efforts on behalf ofbiotechnology report doing so in hope of economicdevelopment or promotion of academic excellence.

The States differ in their efforts in the follow-ing

●

●

●

●

●

●

ways:

the office, agency, or institution primarily re-sponsible for the initiation of the program;the level of funding available annually for thesupport of research, facilities, or training;the mechanisms by which funds are raised;the base and method of operation for theprogram;the substantive concentration of the pro-grams being funded; andthe extent to which incentives are offered toattract biotechnology companies.

The types of initiatives States pursue depend,in part, on the influence of these factors. There-fore, the types of initiatives reported varied greatly.Some States are pursuing one path only, othersa combination of approaches. The types of initia-tives include:

●

●

●

●

●

increased support for biotechnology researchand development (R&D) in State universitiesand by biotechnology companies (33 States),programs or funds for biotechnology train-ing at State colleges and universities (23States),financial and technical assistance for biotech-nology firms (27 States),discrete “Centers” mandated to facilitate com-munication between universities and indus-try to achieve technology transfer (28 States),andState-supported research parks and incubatorfacilities specific to biotechnology (6 States).

Table 4-2 displays the types of programs sup-ported by States active in the promotion of bio-technology research and development within theirborders.

Table 4.2.—State Activities in BiotechnologyResearch and Development

Incentives forState R&D Support Training firms

Alabama . . . . . . . . . .Alaska . . . . . . . . . . . .Arizona . . . . . . . . . . .Arkansas . . . . . . . . . .California . . . . . . . . .Colorado . . . . . . . . . .Connecticut . . . . . . .Delaware . . . . . . . . . .Florida. . . . . . . . . . . .Georgia . . . . . . . . . . .Hawaii . . . . . . . . . . . .Idaho . . . . . . . . . . . . .Illinois . . . . . . . . . . . .Indiana. . . . . . . . . . . .lowa . . . . . . . . . . . . . .Kansas. . . . . . . . . . . .Kentucky. . . . . . . . . .Louisiana . . . . . . . . .Maine. . . . . . . . . . . . .Maryland . . . . . . . . . .Massachusetts. . . . .Michigan . . . . . . . . . .Minnesota. . . . . . . . .Mississippi . . . . . . . .Missouri “. . . . . . . . . .Montana . . . . . . . . . .Nebraska. . . . . . . . . .Nevada . . . . . . . . . . .New Hampshire . . . .New Jersey. . . . . . . .New Mexico . . . . . . .New York . . . . . . . . .North Carolina ., . . .North Dakota . . . . . .Ohio. . . . . . . . . . . . . .Oklahoma . . . . . . . . .Oregon . . . . . . . . . . .Pennsylvania . . . . . .Rhode Island . . . . . .South Carolina . . . . .South Dakota . . . . . .Tennessee . . . . . . . .Texas . . . . . . . . . . . . .Utah . . . . . . . . . . . . . .Vermont . . . . . . . . . .Virginia ., . . . . . . . . .Washington . . . . . . .West Virginia . . . . . .Wisconsin . . . . . . . . .Wyoming . . . . . . . . . .SOURCE: Office of Technology Assessment, 1988.

——

—+++

++

—+—+—+——++++

———

++

++++

++

—

+

+—

+

——+++++—++——++++———++++——+———+—++—+——+—————++++++—

59

Promotional and ImplementationBase of State Biotechnology

Programs

The 33 States reporting to OTA about their bio-technology programs represent a variety of ap-proaches to the initiation and promotion of bio-technology. Although university systems play amajor role in the design and implementation ofbiotechnology centers, the initiative for a biotech-nology program in some States has come fromthe Executive Office of the Governor or the Statelegislature. The programs are often multi-faceted,and can involve direct funding of basic and ap-plied research, allocations for university facilitiesor equipment, support of faculty salaries, or di-rect or indirect assistance to biotechnology com-panies.

Governor’s Task Forces or governors with sig-nificant interest in high-technology promotionhave been the catalysts for State actions in bio-technology in Illinois, Massachusetts, Michigan,New Jersey, New York, North Carolina, and Vir-ginia. The oldest or largest biotechnology pro-grams are. those promoted by the Governor’soffice, either through a special science and tech-nology task force or commission, or through theexecutive mission agencies such as commerce oreconomic development.

One of the earliest efforts to promote biotech-nology at the State level is in North Carolina. TheNorth Carolina Biotechnology Center was foundedin 1981 under the leadership of then GovernorJames B. Hunt to “stimulate multi-institutional andmulti-disciplinary research and education pro-grams in science areas related to biotechnology.”Originally operated from the Governor’s office,this agency is now a freestanding quasi-govern-mental organization funded by a legislative ap-propriation to the North Carolina Department ofCommerce, with matching funds from industry.

The State of New Jersey has also initiated anambitious biotechnology program, stemming fromrecommendations of the Governor’s Commissionon Science and Technology. The Commission stud-ied the makeup of the New Jersey economy, ex-amined the potential of high-technology industries,and eventually recommended the establishment

and construction of a network of advanced tech-nology centers at the State’s public and privateinstitutions.

More recently, Wisconsin’s Governor establisheda special State council to accelerate economic de-velopment in biotechnology. Members of theCouncil will include the secretaries of the StateDepartments of Development, Natural Resources,and Agriculture, Trade, and Consumer Protection.The Council will be chaired by the chief execu-tive officer of Universal Foods Corporation, a largefood processing and production corporation.

Mission-oriented State agencies in the Gover-nor’s executive offices have served as catalystsfor biotechnology programs in other States. Mosttypically, biotechnology promotion has arisen fromthe Governor’s Office of Economic Affairs, Eco-nomic Development, or Department of Commerce.This is the case in Colorado, Iowa, Kansas, Mas-sachusetts, Michigan, Minnesota, Nebraska, Okla-homa, Pennsylvania, Utah, and West Virginia.Most notable of these efforts are programs in Mas-sachusetts and Pennsylvania. The Departmentsof Commerce in these two States have led the wayin devising and implementing new State initiativesto stimulate technology research and education.

In Pennsylvania, the Ben Franklin PartnershipFund, established in 1982 with a $1 million Chal-lenge Grant Program, established four advancedresearch centers. These funds provided the in-centive for Pennsylvania State University to con-struct a building to house the Penn State Biotech-nology Institute, which will receive Ben FranklinFunds. In addition, in 1987, Pennsylvania’s Gover-nor released $14 million in State funds for thePittsburgh Biomedical Research Center at theUniversity of Pittsburgh (expected by the Gover-nor’s office to be a major biotechnology researchcenter). The Biotechnology Center will be builton the 48-acre site of a former steel company plantbeside the Monongahela River. The PittsburghTechnology Center, of which the BiotechnologyCenter is a part, is expected to create more than1,600 jobs and attract $70 million in private in-vestment. Planners calculate that more than $1.2million in local tax revenue will be generated bythe Center. This is an explicit example of the ex-pectation that high-technology, biotechnology in

76-582 0 - 88 - 3 : QL 3

60

Photo credit: Biotechnology Center, University of Wisconsin-Madison

Research scientist records the progress of a protein sample on the Gas Phase Sequencer at the University of WisconsinBiotechnology Center.

particular, will play a central role in revitalizinga region historically reliant on manufacturing.

Role of the University in StateBiotechnology Programs

Universities are often important components inState economic development initiatives, particu-larly in high-technology, which requires a highlyskilled work force. The availability of skilled la-bor is the most influential factor in the regionallocation of advanced technology firms (12). Dur-ing the 1960s, U.S. universities responded to ex-ternal and internal pressures to undertake addi-tional research and problem-solving activities thatrelated to the needs of the Federal Governmentand the cities. In the 1970s, universities soughtto join with State governments to address a widearray of domestic issues. In the 1980s, universi-ties are increasingly forging new partnerships

with industry to accelerate the rate of scientificand technological innovation (2).

University service to the public is not new. Agri-culture has long been the model of federallyassisted public service by the university, throughthe Land Grant System (dating back to the Mor-rill Act of 1862). In 1962, NASA created the Sus-taining University Program (SUP) to strengthenuniversity research programs relevant to NASAmissions. SUP was phased out in 1971 after beingdeemed a failure. NASA administrators felt thatthe universities had failed to respond to NASAgoals, and observers felt that NASA’s goals wereunrealistic, “stemming from insufficient under-standing of the nature of universities” (6).

In 1967, the National Science Foundation’s (NSF)Intergovernmental Program was started to pro-mote the use of scientific and technological re-

61

sources by State and local governments. In 1977,NSF implemented the Science, Engineering, andTechnology (SSET) program to provide grants togovernors and State legislatures for plans thatwould improve their use of science and technol-ogy. Implementation funds for these plans wereinsufficiently provided and the program was aban-doned in 1981. Several of the programs the Statesnow support grew out of strengths identified un-der the SSET program.

The intent of these Federal programs was tohave university faculty take responsibility for thetransmission, as well as the generation, of theknowledge they produce. Public universities havehistorically been entangled in multiple role expec-tations: ivory tower, service station, and frontierpost (7). Philosophical differences regarding appro-priate roles for educational institutions continueto influence discussions about the effects of pub-lic expectations on the quality of the researchagenda and education.

In terms of biotechnology, the situation is nodifferent. Biotechnology owes much of itsgrowth to academic science. Not only has in-dustry turned to the university as the source ofcutting-edge research, but the States are also turn-ing to their universities as the base of their bio-technology efforts. Many States recognize thevalue of a strong university system in attractingbiotechnology companies. By creating expertisein the university system, States hope to attractand retain dedicated biotechnology companies aswell as major pharmaceutical, chemical, and agri-cultural corporations. At the least, this form ofeducational investment policy infuses the univer-sities with more resources for research and train-ing, and at the most, attracts or creates a newtechnology base in the region.

Of the 33 States reporting State-supported bio-technology programs, 28 say they will rely pri-marily on their higher education institutions forthe design and performance of biotechnology re-search and training. Early concerns about the in-fluence of commercial biotechnology on univer-sities seem not to be an issue in State-universityinitiatives (see also ch. 7). Public universities havetraditionally cooperated with their State govern-ments in programs to promote economic growth.

In 14 States, the university system has been theimpetus for creating a biotechnology program,rather than being initiated by the State legislatureor Governor’s office. This is especially true inTexas, which has no Statewide biotechnology plan,and in California, where the university system hashistorically played a dominant role. Table 4-3 listsStates where the university has been the promo-tional base for biotechnology rather than theGovernor’s office or the State legislature.

In many States, such as California, the depart-ment of higher education has led in promotingand implementing biotechnology programs, oftenindependent of Executive action. In California,State-level promotion did not occur until 1985,well after California led in the number of biotech-nology firms. The University of California (UC)System houses seven diverse biotechnology pro-grams. San Diego State University and StanfordUniversity also have centers. In addition, theUniversity of California has established a multi-year effort to address the needs of biotechnologyindustries. This program, the Biotechnology Re-search and Education Program, is designed to fa-cilitate the basic research underlying biotechnol-ogy and the training of future scientists at the ninecampuses and three affiliated National Labora-tories. Some would contend that the strength ofthe UC system has been the instrumental forcein establishing a healthy biotechnology industryin California. The climate, a large venture capitalpool, and expanding markets are additional in-ducements to industry.

In South Carolina, the push for economic de-velopment through high-technology has comelargely from its universities. In 1986, the presi-dents of the State’s three major universities an-nounced plans for a 5-year joint research programtotaling $600 million, of which a biotechnology

Table 4.3.—States Where the University Is thePromotional Base for Biotechnology

California North DakotaFlorida OhioGeorgia OregonIdaho South CarolinaLouisiana TennesseeMaryland TexasNew Hampshire WisconsinSOURCE: Office of Technology Assessment, 1988.

62

center would be a small part. In Florida, Georgia,Idaho, Louisiana, Maryland, Oregon, and Wiscon-sin, biotechnology programs have also been de-veloped primarily at the university level. Althoughbiotechnology programs have not been promotedat the State level in Oregon, the Oregon HealthSciences University, the University of Oregon, andOregon State University have spent considerablesums promoting biotechnology initiatives on theircampuses.

The university-driven approach sometimesdraws controversy. In 1987, the University ofGeorgia broke ground for a $32 million BiologicalSciences Complex dedicated to research in recom-binant DNA, molecular biology, and gene splic-ing. The Center is to be funded from the Univer-sity’s general instruction budget without any newor additional allocations from the university re-gents to cover the new positions created. As a re-sult, other areas of the university are temporar-ily underfunded, drawing criticism from bothfaculty and students.

In Maryland, the University of Maryland hasformed the Maryland Biotechnology Institute(MBI), comprised of five initiatives linked to thetwo campuses. As mentioned earlier, one center,the Center for Advanced Research in Biotechnol-ogy (CARB) has support from Montgomery County,MD ($9 million), and from the National Bureau ofStandards (NBS) of the U.S. Department of Com-merce. Although much of MBI’s funds come fromthe State through the Department of Higher Edu-cation, the Governor’s office provides no oversight.MBI plans an agenda in biotechnology R&Din theareas of agriculture, biomedicine, marine science,public policy, and protein engineering. All but theagricultural biotechnology centers were opera-tional by 1987; it took several years to get the pro-grams up and running. Critics of the late opera-tional date charged that operating a biotechnologyinitiative under the guise of economic develop-ment may not be a manageable proposition fora university to undertake without State guidance.

C e n t e r s

Centers have become popular in the perceptionof the promise they hold for promoting economicdevelopment through biotechnology R&D. Usu-ally based at universities, centers are multipur-

pose institutes created to foster interdisciplinaryresearch, intercampus cooperation, and public-private collaboration. Centers can also providetechnical and information assistance to univer-sity and industry scientists, and in some cases of-fer financial assistance to new firms. Table 4-4lists discrete university-based biotechnologycenters by State.

Centers differ in their evolution and structure.Some States with biotechnology initiatives do nothave a center, but offer other incentives for R&D,such as grants and loans to both industry andacademia. Altogether, 28 States have establishedcenters or programs devoted specifically to re-search in areas directly related to biotechnology.In most cases, State funds were dispensed to onehigher education facility for the creation of a re-search program. In some States-Colorado, Mas-sachusetts, North Carolina, Pennsylvania, andTennessee—the program is decentralized, withseveral State colleges and universities the benefi-ciaries of research and facility funds.

Not all centers that appear on paper are, as yet,operational. Many of the centers have beenfounded only within the past two years. The yearsindicated in table 4-4 represent year of founding,not year of operation. In some cases, funds havebeen authorized but not appropriated; in othercases, funds have been appropriated but not spent.Some centers are waiting for the construction offacilities and are operating ad hoc out of severaldepartments within a university. In some States,the participation of several interests—State gov-ernment, university administrators, and privatedonors—has created a complex bureaucratic net-work that has slowed action.

Table 4-4 also lists the substantive areas of con-centration in the research programs of thesecenters. In most cases, several research areas inbiotechnology are being pursued in a strategicmanner. The university’s existing departmentalstrengths, or the technological needs of the sur-rounding industrial base, provide the focus fordevelopment of specific capabilities. Newer, smallerprograms, such as Connecticut’s, have not yet tar-geted a specific area of research for funding, butwill rely on newly recruited faculty to set a pro-gram agenda.

63

Table 4-4.—Biotechnology Centers Receiving Some State Support

Arizona● Program for Excellence in Biotechnology (1986)

University of Arizona, Tucson(biomedical)

Arkansas● Biotechnology Institute (1985)

Biomass Research CenterUniversity of Arkansas, Fayetteville(cell fusion, hybridoma, and monoclinal antibody tech-nologies)

California● Biotechnology Research and Education Program (1985)● University of California

Molecular Biology Institute, Los Angeles (1985)Biotechnology Program, Davis (1986)Center for Molecular Genetics, San DiegoCenter for Genome Biology, Riverside (1984)Plant Biotechnology Unit, BerkeleyGene Research and Biotechnology Program, Irvine(1983)Marine Biotechnology Center, Santa Barbara (1989)

● Molecular Biology InstituteSan Diego State University

● Center for Molecular and Genetic MedicineStanford University

Colorado● Colorado Institute for Research in Biotechnology (1986)

University of Colorado,Colorado State University, andHealth Sciences Center(reproductive physiology, fermentation, bioprocessing,agriculture, medicine, plant genetics)

Connecticut● Biotechnology Center (1986)

University of Connecticut, StorrsGeorgia• Research Center for Biotechnology (1983)

Georgia Institute of Technology(microbial, agriculture, biomedicine, bioreactors)

● Biological Sciences Complex (1987)University of Georgia(agriculture, medicine, energy)

Illinois● Biotechnology Center (1986)

University of Illinois, Urbana-Champaign(agriculture)

● Center for Plant Molecular Biology (1987)Northern Illinois University

Indiana● Agrigenetics Research Center (1985)

Purdue University● Molecular and Cellular Biology Center (1985)

Indiana UniversityIowa● Molecular Biology Program (1986)

Iowa State University, Ames(agriculture, bioprocessing, food processing)

Kansas• Center for Bioanalytical Research (1985)

University of KansasKentucky● Biotechnology and Genetic Engineering Center (1987)

University of Kentucky, Lexington

Louisiana● Biotechnology Institute (1985)

Louisiana State UniversityMaryland. Maryland Biotechnology Institute (1984)

University of Maryland(protein folding, crystallography, marine biotechnology,biomedicine, agriculture, policy)

Massachusetts● Biotechnology Center of Excellence (1985)

Massachusetts Biotechnology Research InstituteMassachusetts State Colleges and Universities

Michigan● Michigan Biotechnology Institute (1982)

(fermentation, biomaterial products technology, wastetreatment, industrial enzyme technology)

Minnesota● Biotechnology Research Center (1983)

Plant Molecular Genetics InstituteHuman Genetics InstituteInstitute for the Advanced Studies of BiologicalProcess TechnologyUniversity of Minnesota

Missouri. Molecular Biology Program (1987)

University of Missouri, Columbia(development and aging, disease resistance, energy,environmental applications)

New Jersey● Center for Advanced Biotechnology and Medicine

(1986)Rutgers University(biomedicine, protein science, structural biology)

● Center for Agricultural Molecular Biology (1987)Rutgers Cook College

. Lewis Thomas Laboratories (1985)Princeton University

New York• Center for Medical Biotechnology (1983)

SUNY Stony Brook. Center for Biotechnology in Agriculture (1983)

Cornell UniversityNorth Carolina● North Carolina Biotechnology Center (1981)

Duke UniversityUniversity of North CarolinaNorth Carolina State University(bioelectronics, bioprocess engineering, marine,monoclinal lymphocyte technology)

Ohio• Edison Animal Biotechnology Center (1984)

Ohio University(livestock enhancement)

● Biotechnology Center (1986)Ohio State University(plant and microbial interactions, neurobiotechnology)

Oregon● Center for Gene Research and Biotechnology (1983)

Oregon State University, Corvallis● Institute of Molecular Biology (1983)

University of Oregon, Eugene

(continued on next page)

64

Table 4.4.—Biotechnology Centers Receiving Some State Support—Continued

Pennsylvania● Biotechnology Institute (1987)

University of Pittsburgh● Biotechnology institute (1984)

Pennsylvania State University(environmental microbiology, bioprocessing, plant andanimal ceil culture, bimolecular structure andfunction)

Tennessee• Tennessee Center for Biotechnology (1988)

Tennessee State University System(plant cell tissue culture, hazardous waste manage-ment, environmental toxicology, drug delivery systems)

TexasŽ Central Hybridoma Facility (NSF support 1985-1988)

University of Texas, Austin● Institute of Biosciences and Technology (1987)

Texas A&M● Institute of Biotechnology (1987)

University of Texas Health Science Center, SanAntonio

Utah● Center of Excellence in Biotechnology (1985)

Utah State University(plant and veterinary, biomedicine)

Virginia● Center for Biotechnology (1985)

Old Dominion University● Institute of Biotechnology (1985)

Medical College of Virginia of Virginia CommonwealthUniversity(vaccines, biocatalysis, diagnostics)

Wisconsin● Biotechnology Center (1984)

University of Wisconsin, Madison(fermentation, biopulping, biocomputing, hybridoma,plant cell and tissue culture, sequencing and separa-tion, enzyme improvement and production)

SOURCE: Office of Technology Assessment, 1986.

State Expenditures in Biotechnology

The States vary widely in the amount of fundsthey dedicate specifically to biotechnology. A mul-titude of problems arise if one tries to conductan accurate comparison of State spending:

● Few States list biotechnology initiatives asa distinct line item in their budget. Thosethat do, such as New Jersey, North Carolina,and Massachusetts, provide an accurate fig-ure for actual dollar support for biotechnol-ogy. In most States, however, the funds de-rive from several sources in the general fundsand are directed to several recipients. Becauseof this, undercounting or overcounting canoccur. In undercounting, for example, Statesthat fund a Center of Excellence in Biotech-nology might not count State support for bio-technology activities going on within theuniversity system but outside the Center. Forexample, although the budget for the Massa-chusetts Biotechnology Center of Excellenceonly received an appropriation of $935,000in 1987, this excludes $9 to $12 million of Stateappropriations for biotechnology activities atpublic universities and $26 million worth ofbiotechnology loan portfolios of State agen-cies. As an example of overcounting, Statesmight report that a large portion of their

●

●

●

health science budget is related to biotech-nology without systematically verifying theclaim.Most States provide the operating budgetfor a biotechnology program, but cannoteasily segregate the amount of the budgetderived solely from State coffers. Funds arecategorized by type of expenditures ratherthan source of funds. Therefore, budgetsoften reflect funds derived from State ap-propriations, private donations, and Federalgrants and contracts. With time and patiencethis information could be untangled. In theOTA survey, respondents were asked toreport on the amount of investment by theState only. Calculated estimates were pro-vided by many States in lieu of actual expend-itures.Respondents often had the difficulty facedso frequently by those asked to accountfor biotechnology activities: that of defi-nition. While some States define biotechnol-ogy narrowly, others consider spending in re-lated areas to be relevant and include thatin their figures. In all cases, respondentswere asked to use the OTA definition ofbiotechnology for accounting purposes.Some States were unable to separate fundsspent specifically on biotechnology. For

—

65

Table 4-5.—State Allocations for BiotechnologyR&D, Training, and Facilities

State FY 1986 FY 1987

Arizona. . . . . . . . . . . . . .Arkansas . . . . . . . . . . . .California . . . . . . . . . . . .Colorado . . . . . . . . . . . .Connecticut . . . . . . . . .Florida . . . . . . . . . . . . . .Georgia . . . . . . . . . . . . .Idaho . . . . . . . . . . . . . . .Illinois . . . . . . . . . . . . . .Indiana . . . . . . . . . . . . . .lowa . . . . . . . . . . . . . . . .Kansas . . . . . . . . . . . . . .Kentucky . . . . . . . . . . . .Louisiana . . . . . . . . . . . .Maryland . . . . . . . . . . . .Massachusetts . . . . . . .Michigan . . . . . . . . . . . .Minnesota . . . . . . . . . . .Missouri . . . . . . . . . . . . .New Hampshire . . . . . .New Jersey . . . . . . . . . .New York..... . . . . . . .North Carolina . . . . . . .North Dakota . . . . . . . .Ohio . . . . . . . . . . . . . . . .Oklahoma . . . . . . . . . . .Oregon . . . . . . . . . . . . . .Pennsylvania. . . . . . . . .Tennessee . . . . . . . . . . .Utah . . . . . . . . . . . . . . . .Vermont . . . . . . . . . . . . .Virginia . . . . . . . . . . . . .Wisconsin . . . . . . . . . . .

$1,170,000757,173

2,500,000500,000665,000

5,050,0002,600,000

438,8004,500,0004,000,000

500,000162,000908,500670,000

2,600,000485,000

6,000,0001,032,0001,500,000

150,00010,000,00034,300,000’6,500,0001,643,0902,194,7871,584,000

350,0002,848,824

NA110,000

N A1,500,000

190,000

$1,540,000800,000

2,500,000500,000

1,100,0007,050,0003,000,000

450,0005,000,0001,029,9043,750,000

172,000896,600

NA3,900,000

935,0004,000,0001,100,0003,700,000

450,00035,690,000’

a

6,900,0001,601,783

50,0001,542,000

360,00018,035,494

800,000500,000300,000

1,750,000418,000

NA Not availablealndicates a multi-year appropriation

SOURCEOffice of Technology Assessment 1988

example, Illinois has allocated $3 million to16 Technology Commercialization Centersthat serve other high-technology interests aswell as biotechnology. Therefore, its total re-ported budget for biotechnology can only beestimated and could be inflated or under-counted.

● Those States responding that they have nospecial programs in biotechnology couldbe subsidizing research through a re-search fund or through the usual supportof their universities. For example, Texasreports no State-level program aimed at fund-ing biotechnology, although biotechnology re-search is funded through general researchfunds available from the State. The Univer-sity of Texas, Austin, supports biotechnology

by housing the Central Hybridoma Facility,which was funded by the National ScienceFoundation at $120,000 a year until 1988when the university had to absorb the cost.Texas A&M plans to spend $24 million to buildan Institute of Biosciences and Technologyto study and market developments in biotech-nology. And Dallas billionaire H. Ross Perothas contributed to the construction of a re-search park in San Antonio that will be calledthe University of Texas Institute of Biotech-nology.

Given these caveats, table 4-5 presents levels ofdirect support for biotechnology as reported by49 States for fiscal years 1986 and 1987 (Alaskadid not respond). Support includes funding of re-search, facilities, and training.

The range for reported spending varied from$110,OOO in Utah to a $34.3 million multi-year ap-propriation by New York in fiscal year 1986. Sev-eral States emerge as the frontrunners in termsof dollars spent. New York and New Jersey sur-pass all States in spending for fiscal year 1986;North Carolina, Michigan, and Florida followed,spending over $5 million each. Pennsylvania,which spent only $2.8 million in fiscal year 1986,has accelerated its biotechnology program dra-matically in fiscal year 1987, allocating over $18million, not including matching funds of$13,212,900 in fiscal year 1986 and $32,840,503in fiscal year 1987. New Jersey increased its allo-cation more than threefold between fiscal year1986 and fiscal year 1987, from $10 million to$35.6 million: the $35.6 million allocation was fora capital building program comprised of $8.6 mil-lion in New Jersey Science and Technology Com-mission funds and the balance provided by thetwo collaborating State institutions.

New York State reported that it committed $34.3million specifically to biotechnology in fiscal year1986 and an additional $80 million on health re-search that “may or may not involve biotechnol-ogy.” According to the Executive Director of theNew York State Science and Technology Founda-tion, nearly 70 percent of those funds specific tobiotechnology are spent on research; the remainderis spent on facilities and training. In fact, $32.5million of the 1986 appropriation was for a build-

66

ing at Cornell University. The Center for MedicalBiotechnology at the State University of New York(SUNY) at Stony Brook and the Center for Biotech-nology in Agriculture at Cornell University eachreceived $1 million for research funding. In addi-tion to State funds, the Cornell center had threecorporate sponsors that signed 6-year contractstotalling $2.5 million each. The SUNY center has75 corporate sponsors, each involving specific re-search contracts. The New York Science and Tech-nology Foundation awarded $250)000 in grantsthrough its Research and Development Grants Pro-gram. Biotechnology training programs received$63,000 from the State in fiscal year 1986.

Maryland reported an allocation of $3.9 millionin fiscal year 1987. This sum excludes a $9 mil-lion loan contribution from Montgomery Countyin the form of a building to house CARB, and thelaboratory and personnel resources provided bya Partner in CARB, the National Bureau ofStandards.

It is not clear whether the high fundinglevels currently appropriated by many Stateswill be sustainable. These initially large invest-ments might represent start-up or catch-up costsfor facilities and equipment. Many States are de-pending on industry to assume a share of sup-port after the initial State appropriations. Biotech-nology initiatives are long-term investments andlikely to be viewed as justifiable areas for cutbackor elimination by State legislatures during timesof fiscal stress. For example, in fiscal year 1985,Louisiana allocated $1.53 million to the LouisianaState University System Biotechnology Institute,That funding level dropped to $270)000 in fiscalyear 1986 because of the State’s fiscal problems.Funding in the future is uncertain.

Mechanisms for Raising Funds

Most programs are funded through generalState revenues appropriated through a direct legis-lative action, or through higher education funds.Eight States have a discrete legislative appropria-tion dedicated to a Center program in biotech-nology or to a nonprofit development corpora-tion. As stated earlier, it is easier to obtainbiotechnology spending figures from these Statesbecause the funds are centralized.

Several States have taken unique approachesto raising the necessary capital for developinghigh-technology programs. In Iowa, a London-based chemical company withheld $8 million incapital investment in Iowa until the State agreedto provide $5 million a year for related biotech-nology research at Iowa State University. In re-sponse, the Iowa legislature agreed to allocate $3.5million from the State’s lottery revenues.

In Missouri, fiscal year 1987 new State lotteryrevenues were devoted to education—including$3.7 million for biotechnology research. Facilitiesat the University of Missouri-Columbia werefunded as part of a Statewide $600 million Gen-eral Obligation Bond issue.

Perhaps the most impressive bond issue was a$90 million Jobs, Science, and Technology BondIssue approved by the voters of New Jersey in1984. Of the $90 million, $35 million is targetedfor biotechnology. The bill establishes the Ad-vanced Technology Center in Biotechnology andrequires joint governance by Rutgers Universityand the University of Medicine and Dentistry ofNew Jersey. The New Jersey Commission on Sci-ence and Technology is now faced with raisingnew revenues.

In addition to floating public bonds, some Stateshave relied on proceeds from natural resourcerevenues to fund research in biotechnology andother technologically based fields. In Michigan,dedicated oil and gas revenues flow to the Michi-gan Strategic Fund, which provides support forthe Michigan Biotechnology Institute. Other sup-port comes from the State’s General Fund, whichsupports the universities. Montana funds the Mon-tana Science and Technology Alliance throughfunds appropriated from coal severance taxproceeds.

Many States, such as Pennsylvania, Massachu-setts, New York, and Ohio, require an industrymatch to supplement State appropriations, Pro-grams funded through the Pennsylvania BenFranklin Partnership are supported via a capitalfund appropriation requiring a one to one matchfrom the recipient (the actual match has been run-ning four to one). The funds designated for theUniversity of Pittsburgh Biotechnology Center, forexample, are derived from the capital budget—

the money in this case came from the State shareof real estate transfer taxes. The matching fundsare provided by a variety of organizations, mostprominently private sector firms, but universitiesprovide substantial in-kind support (11). A simi-lar matching system exists in the Thomas EdisonProgram in Ohio. Matching private sector contri-butions can include cash, state-of-the-art equip-ment, and essential personnel, and in the case ofsmall companies, use of facilities and equipment.

Special Incentives forBiotechnology Companies

Support of small business development andgrowth is a traditional State function. As a nation,the United States provides more direct supportto small business development than does any otherindustrialized country (9). State departments ofcommerce and economic development have long-standing programs designed to assist small busi-nesses. In some cases, support is offered through

technical and management assistance; in othercases the support is financial or in the form ofincentives.

Few States have special incentives or means ofsupport specifically for biotechnology companies.Rather, biotechnology firms are eligible for thesame benefits as those available to other small bus-inesses or other high-technology firms. Most Statesrecognize the need to do more than just attractfirms from other States. Instead, they’ve come tounderstand the importance of aiding existing en-trepreneurial companies. Small companies mayreceive direct assistance for expansion or R&D,or indirect assistance in the form of facilities, taxincentives, customized job training, or technicalor management support. And, as many firms planmanufacturing facilities, States may find their busi-ness climate more or less hospitable than thatoffered for R&D.

A few States already have a significant lead inattracting biotechnology firms, with 50 percent

68

Table 4-6.—State-by-State Distribution of DedicatedBiotechnology Companies

State No. firms Percent

California. . . . . . . . . . . . . . . . . . . . . . . . .Massachusetts . . . . . . . . . . . . . . . . . . . .Maryland . . . . . . . . . . . . . . . . . . . . . . . . .New Jersey . . . . . . . . . . . . . . . . . . . . . . .New York . . . . . . . . . . . . . . . . . . . . . . . .Wisconsin . . . . . . . . . . . . . . . . . . . . . . . .Connecticut . . . . . . . . . . . . . . . . . . . . . .Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . .Washington. . . . . . . . . . . . . . . . . . . . . . .Colorado . . . . . . . . . . . . . . . . . . . . . . . . .Pennsylvania. . . . . . . . . . . . . . . . . . . . . .Florida . . . . . . . . . . . . . . . . . . . . . . . . . . .Minnesota . . . . . . . . . . . . . . . . . . . . . . . .North Carolina . . . . . . . . . . . . . . . . . . . .Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Maine . . . . . . . . . . . . . . . . . . . . . . . . . . . .Oregon . . . . . . . . . . . . . . . . . . . . . . . . . . .Virginia . . . . . . . . . . . . . . . . . . . . . . . . . .Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . .Kansas . . . . . . . . . . . . . . . . . . . . . . . . . . .Michigan . . . . . . . . . . . . . . . . . . . . . . . . .Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . .Louisiana . . . . . . . . . . . . . . . . . . . . . . . . .Utah . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Arizona . . . . . . . . . . . . . . . . . . . . . . . . . .Georgia . . . . . . . . . . . . . . . . . . . . . . . . . .Missouri . . . . . . . . . . . . . . . . . . . . . . . . .Montana . . . . . . . . . . . . . . . . . . . . . . . . .Nebraska . . . . . . . . . . . . . . . . . . . . . . . . .Alabama . . . . . . . . . . . . . . . . . . . . . . . . .Arkansas . . . . . . . . . . . . . . . . . . . . . . . . .Delaware . . . . . . . . . . . . . . . . . . . . . . . . .District of Columbia . . . . . . . . . . . . . . .Hawaii . . . . . . . . . . . . . . . . . . . . . . . . . . .lowa . . . . . . . . . . . . . . . . . . . . . . . . . . . . .New Hampshire . . . . . . . . . . . . . . . . . . .New Mexico . . . . . . . . . . . . . . . . . . . . . .Rhode Island . . . . . . . . . . . . . . . . . . . . .South Carolina . . . . . . . . . . . . . . . . . . . .Tennessee . . . . . . . . . . . . . . . . . . . . . . . .West Virginia . . . . . . . . . . . . . . . . . . . . . —

1115438242016131313998

555544433322222111111111111

2713

9654333222111111

<1<1<1<1<1<1<1<1<1<1<1<1<1<1<1<1<1<1<1<1<1<1<1

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 403 100SOURCE: Office of Technology Assessment, 1988.

of dedicated biotechnology companies located injust five States. California remains the leader innumber of firms, with 111 companies, or 27 per-cent of the U.S. industry. Massachusetts is sec-ond with 54 (13 percent), followed by Marylandwith 38 (9 percent), New Jersey with 24 (6 per-cent), and New York with 20 (5 percent). Table4-6 shows the geographical distribution of dedi-cated biotechnology companies by State.

State programs are challenging the traditionalnotion of the Federal Government as the major

benefactor of the research community. For Stategovernments, support of R&D is a relatively newfunction, although the motivation is historic—economic development. Many States now offercompetitive grants programs in R&D for whichanyone can apply.

Direct Financial Assistance

Direct financing of research is but one methodof direct financial assistance for biotechnologycompanies. Direct financial assistance for expan-sion, a traditional method of small business assis-tance, is widely available through State economicdevelopment programs. Tax-exempt financing inthe form of industrial revenue bonds can lowerthe cost to borrowers. Direct loans and loan guar-antee programs are available to any business. Per-ceiving a need for unique financial assistance pro-grams for high-technology companies, many Statesrecently established programs targeted to high-technology firms. These programs maybe quasi-public corporations that provide venture capitalin the form of seed money. Arkansas, Arizona,California, Connecticut, Florida, Louisiana, Mas-sachusetts, Michigan, New York, Ohio, Pennsyl-vania, and Wisconsin all have funds for new high-technology ventures.

Development Corporations.--Numerous Stateshave established nonprofit development corpo-rations or authorities to serve as forums for andoverseers of State policies affecting high-tech-nology development. These bodies may identify,develop) and apply advanced technologies for eco-nomic growth. In some States, such as Arkansas,the Science and Technology Authority can issuebonds) own patents, and enter production con-tracts and agreements. Development corporationsaward funds to both industry and universities.

Biotechnology often benefits from these scienceand technology corporations:

• In Indiana, the Corporation for Science andTechnology awarded $4.5 million to PurdueUniversity to conduct biotechnology researchon new and improved crop strains, to improvebiotechnology training methods for students,and to create a science base attractive to thebiotechnology industry. Indiana University’sInstitute for Molecular and Cellular Biologyreceived $1.2 million from the corporation

69

●

●

●

●

to establish two research centers for mono-clonal antibody production and for gene se-quencing.Michigan has established the Michigan Stra-tegic Fund which funds up to 75 percent ofthe costs incurred in developing products andprocesses important to creating jobs in theState. Genetic engineering is one of the fourtargeted areas of this program.The Massachusetts Technology DevelopmentCorporation, a quasi-public corporationfounded in 1979, provides seed capital withother private investors and has succeeded inboosting private investment nearly 10 timesthe original amount (1). More specific to bio-technology, the Massachusetts Centers of Ex-cellence Corporation, operated from theGovernor’s Office of Economic Affairs, fundsresearch and development activities in fiveapplied fields, of which biotechnology is one.The Massachusetts Industrial Finance Agencyauthorized a $1.5 million industrial revenuebond for continued expansion of the Biotech-nology Research Park.The Center for Innovative Technology in Vir-ginia is a nonprofit corporation targeting re-search in four broad areas perceived to beimportant to Virginia’s economic future. Bio-technology is one of these four areas.The Innovation Partnership in BiotechnologyProgram in New Jersey provides nearly$500,000 to five academic research institu-tions. The funds are matched by industryfunds and in-kind services.

In many States, university-industry collabora-tion is a condition for qualifying for researchfunds. Arkansas, Connecticut, Massachusetts,Pennsylvania, Tennessee, and Virginia all haveprograms requiring that proposals be submittedas a joint venture between a university and a firm.Often, awards are made on the basis of scientificand technical merit, followed by potential eco-nomic benefit to the State. University-industryrelationships in biotechnology are discussed fur-ther in chapter 7.

Indirect Financial Assistance

States can help small businesses through a va-riety of in-kind mechanisms, such as site selec-tion assistance, customized job training, legisla-

tion to assist in capital formation, technicalassistance programs, property tax abatement, andincome tax credits.

Incubator Facilities.—Research incubators pro-vide low-cost office and laboratory space forentrepreneurs and struggling firms. Arkansas,Colorado, Illinois, Maryland, Massachusetts, andNew York have constructed or are planning toconstruct incubator facilities specifically for bio-technology companies.

The Biomass Research Center at the Universityof Arkansas, Fayetteville, operates a biotechnol-ogy business incubator. Funds for the incubatorwere awarded by the Arkansas Science and Tech-nology Authority. The Catalyst Bio Technology In-dustrial Incubator Project in Louisville, CO, is apublic-private venture involving a consortium ofcorporate research facilities and staff of theUniversity of Colorado at Boulder, Colorado StateUniversity in Fort Collins, and the Colorado Schoolof Mines.

The College of Agriculture at the University ofIllinois plans to build a business incubator at itsresearch farm where scientists from industry canuse university research to develop and marketnew farm products. Businesses will be selectedfor participation on the basis of their potentialfor developing a marketable product (within 2 to3 years) that could be manufactured in the Stateand be used to help Illinois agriculture. An 11-member committee of farmers, agribusiness rep-resentatives, and university faculty will reviewproposals to select companies. The Illinois Depart-ment of Commerce and Community Affairs hasawarded a $200,000 grant to the incubator. Theuniversity will contribute an additional $400,000.

Tax Incentives.—Taxes are important to small,expanding high-technology companies becausecash flow is critical. State and local taxes take cashfrom a company when they need it most, at theoutset of business when little or no revenues arebeing generated. Recognizing this, most States of-fer some type of tax incentive for business expan-sion. Efforts to provide incentives for high-tech-nology companies have increased recently.

In 1981, California eliminated taxes on capitalgains for investments in eligible “small businessstock” held for 3 or more years, a novel approach

70

that encouraged additional venture capital invest-ments in startups and other small businesses. TheState of Indiana allows a tax credit of 30 percenton individual investments in a venture capital pooladministered by the Indiana Corporation for In-novation Development (15). Minnesota encouragestechnology development and spin-offs by offer-ing a tax credit of 30 percent of the value of thetechnology transfer that occurs when a small busi-ness is spun off from a parent firm.

Arkansas offers State R&D tax credits, and Iowaoffers property tax abatement and State incometax credits for high-technology firms.

Information and Technical Assistance.—Ac -cording to a 1983 survey by the Council of StateGovernments, 48 States offer general business in-formation or related technical assistance (10). Thisassistance may include site location, permits, la-bor force availability, or accessibility to databases,

Increasingly, States are designing technical assis-tance programs to match innovators with inves-

tors. A venture capital network created in NewHampshire consists of databases of entrepreneursand their ideas and individuals wanting to makeinvestments. The Wisconsin Innovation Centerhelps inventors evaluate the commercial feasibil-ity of their ideas and inventions. Only one Statehas designed a program specifically for biotech-nology companies: the North Carolina Biotechnol-ogy Center has compiled a compendium of NorthCarolina scientists conducting biotechnology re-search and a list of North Carolina biotechnologycompanies and their activities.

Arizona, Kansas, and New York have programsto assist companies applying for Federal SmallBusiness Innovation Research (SBIR) dollars. In Ar-izona, the Arizona Innovation Network and Ari-zona State University have formed a consortiumthat is expected to help small technology compa-nies reap the benefits of the SBIR program. NewYork State sponsors the SBIR Promotion Program.Chapter 3 describes the extent to which SBIR fundshave been used to assist biotechnology firms.

THE NATIONAL SCIENCE FOUNDATION EXPERIMENTALPROGRAM TO STIMULATE COMPETITIVE RESEARCH

For a few States, Federal assistance has provideda new opportunity for developing biotechnology.In 1978, the National Science Board of the NationalScience Foundation (NSF) responded to concernover the geographical distribution of awards byinitiating the Experimental Program to StimulateCompetitive Research (EPSCoR). This programaims to improve the quality of the science andengineering research environment in States thatare least successful in competing for Federal R&Dawards.

The EPSCoR program is conducted in two phases:a planning Phase A and an implementation PhaseB. In Phase A, States are given nine months anda $125)000 planning grant to assess their scienceand technology base and to develop a 5-year re-search improvement plan. Phase B awardees re-ceive additional funds to enhance their scientificand technical base. Awards are based on scien-tific merit and local commitment to improving sci-ence and engineering. In the first round—1985—

NSF awarded 5-year Phase B grants ranging from$2.4 million to $2.9 million each to Arkansas,Maine, Montana, South Carolina, and West Virginia.

In 1986, the National Science Board awardedPhase B grants totaling $23.5 million to anotherset of jurisdictions—Alabama, Kentucky, Nevada,North Dakota, Oklahoma, Puerto Rico, Vermont,and Wyoming. In turn, the States and Puerto Ricopledged a total of $67.9 million to help implementtheir EPSCoR programs.

At least five States plan to use the EPSCoR fundsto build on their expertise in biotechnology:

●

●

Vermont will use the funds to create facultypositions in recombinant DNA and molecu-lar biology at the University of Vermont (4).The State plans to match the EPSCoR fundswith $300,000 to fund research projects inareas relevant to biotechnology.In North Dakota, the EPSCoR funds are con-tributing to a $250,000 program in Cellular

71

and Molecular Biology at North Dakota State ●

University (3).● The Montana Science and Technology Alli-

ance has targeted biotechnology as one ofeight technology areas under considerationfor funding.

In Oklahoma, $303)000 and $323,000 of theEPSCoR funds were spent on biotechnologyin fiscal year 1986 and fiscal year 1987 re-spectively.

● The University of Kentucky has designated While it is too early to assess the extent tobiotechnology as one of the Centers of Excel- which EPSCoR funds will help certain Stateslence in its 5-year plan and the EPSCoR plan. gain a foothold in biotechnology it is clear thatEPSCoR funds are dedicated to a Membrane biotechnology is a field some States had inSciences Research Program in a newly formed mind when developing their strategic plan forBiotechnology and Genetic Engineering Work- Phase A of the EPSCoR program.ing Group.

SUMMARY AND CONCLUSIONS

Thirty-three States reported to OTA that theyare actively engaged in some form of promotionof biotechnology research and development, asa means of academic excellence in their collegesand universities, and as a path to economic devel-opment. Six additional States are studying the fea-sibility of a special initiative within their borders.Clearly there is room for many players, and theNation will benefit from the role that States canplay in funding basic and generic applied researchin biotechnology. Whether these programs willyield returns within an acceptable policy cycle willdepend on the patience and commitment of Statepolicy makers and their public. It is inevitable thatStates will compete with each other in the racefor excellence in biotechnology. Many factors con-tribute to a firm’s decision to locate within a State.New State programs to attract firms and facultycan only address some of those factors. At best,this interstate competition will create the net ef-fect of a positive business environment in mostStates and localities. Furthermore, as biotech-nology firms establish separate manufactur-ing facilities, a new set of criteria could influ-ence site selection than was used in siting R&Dfacilities.

The early influx of Federal dollars into defenseand aerospace research in regions such as Re-search Triangle Park, Route 128, and Silicon Val-ley played a major role in establishing a success-ful high-technology economy for North Carolina,Massachusetts, and California, respectively. These

three well known regions of high-technology de-velopment owe their early growth and success,in large measure, to Federal spending for R&D.In the future, no one region or State maybe ableto dominate Federal funds in the manner theseStates have in the past. Federal research dollarsare now more widely disseminated. However,those States with universities that receive a largeshare of Federal biological and biomedical re-search funding will retain an advantage over thosethat are still struggling to establish a strong re-search capability.

It is too early to tell who the winners willbe. The only available measures of strategic po-sition to date are the age of the program, thesize of its budget, and the number of biotech-nology companies already established withina State’s borders. The oldest biotechnologyprogram–in North Carolina-is only in its seventhyear. And although it is the oldest program, it isnot funded at the highest level.

The problem of inadequate and differing per-formance measures will remain. Some States willconsider their programs a success if they achieveresearch excellence in their universities. otherswill measure success by the growth of the bio-technology industry within their borders. Ulti-mately, the success of a State initiative must bejudged from the State or local perspective. Offi-cials with a long-term view and the patience towait will realize that the benefits of investment

72

in biotechnology may be far in the future. Bio-technology is not a big employer. Small biotech-nology companies do not require large physicalplants. Biotechnology is a research-intensive fieldwith a longer lead time to the marketplace thanother fields, particularly in view of the need forregulatory review of many of its products. In thissense, biotechnology differs greatly from otherhigh-technology areas, such as microelectronics,where the time between invention and sales canbe relatively short. The real payoff to investmentin biotechnology probably will be technologicallybased. That is, strategic investment in biotechnol-ogy may yield applications (e.g., new crops, pesti-cides, or health care) that might genuinely effectchange in the State’s economic or industrial base.Thus, it will be more the application of thetechnology that transforms the economy, nota new work force or a taxable physical plant.

The mode and philosophy of economic devel-opment varies greatly from State to State. ThoseStates with the earliest and most ambitious pro-grams, such as North Carolina, Massachusetts, andNew Jersey, have all had strong leadership fromthe Governor’s office. In each of these States, theGovernor assumed the role of chief economic de-velopment officer, making a profound impression

by his personal involvement in the economic de-velopment process. State biotechnology programswith strong support from their governor couldfare better than those trying to muster resourceshaphazardly without an explicit executive en-dorsement.

Initiatives need to be keyed to each State’s ex-isting economic and academic base, The develop-ment of high-technology industry results fromclose cooperation with academic centers of ex-cellence, the availability of highly skilled labor andsufficient risk capital, aggressive venture capitalists,and proximity to Federal research dollars and fa-cilities.

Long-term research programs run counter tothe tradition of quick turn-around on State in-vestments. But States could lead all levels ofgovernment in the design of applied researchprograms and could succeed in areas wherethe Federal Government will not. For thoseStates able to sustain their investment for a pro-longed period of time, biotechnology could servethem and the Nation well. States facing fiscalstress, educational insufficiencies, and severe un-employment could find such long-term investmenta difficult prospect.

CHAPTER 4 REFERENCES

Brody, H., “The High Tech Sweepstakes: States Viefor a Slice of the Pie,” High Technology, January1985.

2. Feller, I., Universities and State Governments (NewYork, NY: Praeger Press, 1986).

3. Fischer, A. G., Dean, College of Science and Mathe-matics, North Dakota State University, Fargo, ND,persona] communication, May 1987.

4. Johnson, B., Office of Policy Research and Coordi-nation, Montpelier, VT, personal communication,May 1987.

5. Jones, B., State Technology Programs in the U. S.,The Governor’s Office of Science and Technology,Minnesota Department of Energy and EconomicDevelopment, St. Paul, MN, September 1986.

6. Lambright, W.H., and Henry, L. H., “Using Univer-sities: The NASA Experience, ” Public Policy 20:61-82, 1972.

7. Luria, S. E., and Luria, Z., “The Role of the Univer-sity: Ivory Tower, Service Station, Frontier Post, ”Daedalus 99:1, 1970.

8.

9.

10.

11.

12.

Morrison, E. F., “State and Local Efforts to Encour-age Economic Growth Through Innovation: An His-torical Perspective,” Technological Innovation:Strategies for a New Partnership, D.O. Gray, T.Solomon, and W. Hetzner (eds.) (New York, NY:North-Holland, 1986).National Governors’ Association, Technology andGrowth: State Initiatives in Technological Innova-tion (Washington, DC: National Governors’ Asso-ciation, 1983).Reinshuttle, R.J., Economic Development: A Sur-vey of State Activities (Lexington, KY: The Councilof State Governments, 1983).Tellefsen, F, R., Executive Director, Ben FranklinPartnership, Harrisburg, PA, personal communi-cation, October 1986.U.S. Congress, Joint Economic Committee, Loca-tion of High Technology Firms and Regional De-velopment, A Staff Study by Robert Premus (Wash-ington, DC: U.S. Government Printing Office, June1, 1982).

73

13. U.S. Congress, Office of Technology Assessment,New Developments in Biotechnology: Public Per-ceptions of Biotechnology, Background Paper, OTA -BP-BA-45 (Washington, DC: U.S. Government Print-ing Office, May 1987).

14. U.S. Congress, Office of Technology Assessment,Technology, Innovation, and Regional Develop-ment, Background Paper #2, Encouraging High-Technology Development, OTA-BP-STI-25 (Wash-

ington, DC: U.S. Government Printing Office, Feb-ruary 1984).

15. U.S. Congress, Office of Technology Assessment,Technology, Innovation, and Regional Development:Census of State Government Initiatives for High-Technology Industrial Development, BackgroundPaper, OTA-BP-STI-21 (Washington, DC: U.S. Gov-ernment Printing Office, May 1983).

Chapter 5

U.S. Commercial Biotechnology

"Biotech company officials are spouting projections that have no reality. They whip up thepublic's imagination every time they rinse out a petri dish.”

George SasicThomson McKinnon Securities

Changing Times 6-21-87

"Keep on dancing-—but choose partners carefully.”Peter Drake

Kidder Peabody

"I believe God created stockbrokers so they can tell biotech managers how to promote theircompanies effectively. ”

Richard A BockBear, Stearns & Co.

Bio/Technology, October

CONTENTS

PageIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77Profile of Commercial Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Formation and Growth of U.S. Commercial Biotechnology . . . . . . . . . . . . . . . . . 78Areas of Commercial Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79R&D Investment in Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Sources of Revenues .., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Financing of Dedicated Biotechnology Companies . . . . . . . . . . . . . . . . . . . . . . . . . . 82Levels of Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83Sources of Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

Collaborative Ventures in Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87U.S./Foreign Collaborative Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92Chapter 5 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

FiguresFigure Page5-1. Founding of U.S. Dedicated Biotechnology Companies, 1971-86 . . . . . . . . . . . 795-2. Mean R&D Budgets for U.S. Dedicated Biotechnology Companies . . . . . . . . . 815-3. Sources of Investment in Commercial Biotechnology . . . . . . . . . . . . . . . . . . . . 835-4. Capital Raised in Public Offerings for Biotechnology . . . . . . . . . . . . . . . . . . . . 865-5. Collaborative Ventures of U.S. Biotechnology Companies, 1981-86 ....,.... 885-6. Country of Private Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

TablesTable Page5-l. Areas of Primary R&D Focus by Biotechnology Companies . . . . . . . . . . . . . . 795-2. Levels of Financing of Dedicated Biotechnology Companies . . . . . . . . . . . . . . 835-3. Funds Raised by Dedicated Biotechnology Companies, 1980-87 . . . . . . . . . . . . 845-4. Collaborations Between U.S. Firms and Between U.S. and

Foreign Firms, 1981-86 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , ....,, . . . . 895-5. Collaborative Ventures Between U.S. Dedicated Biotechnology Companies

and Foreign Corporations, 1981-86 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 905-6. U.S./Japanese Joint Actions in Biotechnology, 1981-86 . . . . . . . . . . . . . . . . . . . 91

Chapter 5

U.S. Commercial Biotechnology

INTRODUCTION

Huge public and private investments have beenmade in biotechnology since the venture capitalcommunity first recognized the potential profit-ability of Genentech, the first dedicated commer-cial biotechnology company to go public. Sincethe formation of Genentech in 1976, several hun-dred companies have formed, and major U.S. cor-porations have invested considerable sums in re-search and development (R&D) in biotechnology.

Biotechnology has captured the interest of thepublic and Wall Street, yet both have been occa-sionally disillusioned by the risks and revised timeframes for introducing commercial products. Fi-nancial markets have reflected the turmoil of reg-ulatory uncertainties, imbalance in the public mar-kets of supply and demand of biotechnologystocks, the high value of the dollar, disinflations,and economic adjustments (25). There is no doubtthat biotechnology has arrived as an importanttool for industrial innovation; the question remainshow the private sector will divide the processes,products, and proceeds of its development andsales. The comparatively smaller biotechnologycompanies continue to provide many of the in-novative new ideas although larger, establishedcorporations are increasingly improving their in-house R&D potential. Mutually beneficial arrange-ments have been worked out between the twogroups,

For the purpose of this report, OTA designatesfirms as either dedicated biotechnology compa-nies (DBCs) or large, diversified companies em-ploying biotechniques. DBCs (referred to as newbiotechnology firms or NBFs by OTA in 1984) areentrepreneurial ventures started specifically tocommercialize innovations in biotechnology (35).Because many of these firms are no longer new,and some are quite established, the term “dedi-cated biotechnology companies” is more likely tostand the test of time than the early term NBF.Largely diversified companies commercializingbiotechnology tend to be older and pursue multi-

ple product lines, many unrelated to biotech-nology.

This chapter reports on two surveys conductedby OTA in 1987.’ The original 296 U.S. dedicatedbiotechnology companies contacted were chosenfor their direct and focused involvement in re-combinant DNA technology, monoclinal antibod-ies, and cell culture. The sample was developedfrom several directories of biotechnology firmscompiled annually, including: Sittig and NoyesDirectory of Biotechnology Companies; Waltonand Hammer Genetic Engineering and Biotech-nology Yearbook; Genetic Engineering NewsDirectory of Biotechnology Companies; Bioengi-neering News Bio1000; and SCRIP Directory ofBiotechnology Efforts in Pharmaceuticals. Of the296 companies contacted, 136, or 46 percent, re-sponded to the survey questionnaire. Survey datawere supplemented, where possible, with pressreports, annual reports, and other public infor-mation. Companies responded to questions regard-ing level of R&D investment, number and natureof employees, methods of financing, patent ex-pectations, and product lines. A list of dedicatedbiotechnology companies, identified by OTA asof January 1988, appears in appendix A. Morecompanies were identified than surveyed.

In 1987, OTA surveyed 53 large corporationsknown to be investing in biotechnology R&D ei-ther in-house or through strategic alliances withDBCs. Companies were selected from previousOTA databases, trade associations, publications,and personal communications with biotechnologyindustrialists, Companies were asked to report onthe level of investment in biotechnology R&D,commitment in terms of full-time employees,sources of innovation, existing and expected bio-technology product lines, patent applications, and

IThe North Carolina Biotechnolo&v Center conducted a surveyunder contract with OTA, of dedicated biotechnolo~v companies.The Center for Survey Research in Boston, MA, under contract withOTA, surveyed large diversified companies.

77

78

use of trade secrets. A list of corporations identi-fied by OTA as being involved in biotechnologyalso appears in appendix A.

The data collected from these two surveys arelimited. Ideally, the best way to measure invest-ment would be to first identify, then survey eachand every firm involved in biotechnology. Iden-tification of firms is itself problematic. New firmsform, and others go out of business or are ac-quired. Some firms call themselves biotechnologycompanies when, in fact, they do not meet theOTA definition. Other more traditional firms maybe conducting important research in biotechno-logical areas, but do not consider themselves bio-technology firms, and do not identify themselvesas such. Large corporations maybe multinational,with several subsidiaries, making identification ofprograms and budgets complex.

Even after compiling a reliable list, there is theadditional problem of gathering information from

the companies identified. Firms that are privatelyheld–as defined by the Securities and ExchangeCommission-often do not wish to divulge finan-cial information, inevitably resulting in under-counting. Some forms of investment by publicfirms, such as research contracts or licensingagreements, need not be divulged, compoundingthe problem. Thus, any accounting of total pri-vate investment in biotechnology is likely tobe an underestimate.

In addition to discussing the results of these sur-veys, this chapter reports on an analysis of 552collaborative ventures between U.S. firms and be-tween U.S. and foreign firms that occurred be-tween 1981 and 1986. Collaborative businessventures between U.S. firms have risen stead-ily over the pasts years, while those betweenU.S. firms and foreign firms have remainedstable.

PROFILE OF COMMERCIAL BIOTECHNOLOGY

While biotechnology has taken on a “trade” sta-tus with its own firms, newsletters, investmentfunds, and regulations, it is not a single industrybut a set of enabling technologies applicable toa wide range of industries. Thus, the term ‘(thebiotechnology industry” is somewhat of a mis-nomer. The industry is by no means homogene-ous, but comprised of many sectors, each facingits own unique advantages and hurdles.

Within the broad categories of DBCs and large,diversified corporations are many traditional in-dustrial sectors: pharmaceuticals, plant and ani-mal agriculture, chemicals, energy, waste man-agement, and ancillary industries that will supplyusers with equipment, reagents, and informationsystems. Each sector faces different financial mar-kets, public markets, regulatory requirements, in-tellectual property issues, personnel needs, andgaps in knowledge needed for commercialization.As the tools of biotechnology are integrated intovarious sectors, the barriers to commercializationmore closely resemble those facing the entire sec-tor or those historically faced by entrepreneursor multinational corporations-evidence of thegrowing maturity of biotechnology as an integral

part of modern industry. An in-depth discussionof investment and commercialization issues in hu-man therapeutics, plant agriculture, and hazard-ous waste management appears in chapters 9, 10,and 11.

Formation and Growth of U.S.Commercial Biotechnology

The boom for founding dedicated biotechnol-ogy companies occurred between 1980 and 1984.During these years, approximately 60 percent ofexisting companies were founded. Figure 5-1 il-lustrates the number of biotechnology companiesfounded per year between 1971 and 1986. Thepeak year was 1981, with nearly 70 new firmsformed.

OTA verified that, as of January 1988,403 dedi-cated biotechnology companies are in business andare actually working in the area of biotechnol-ogy. In addition to the presence of DBCs, over thepast 5 years, major U.S. corporations have increas-ingly invested large sums in in-house biotechnol-ogy research and in joint ventures, acquisitions,licensing, and marketing agreements with smaller

79

Figure 5-l. -Founding of U.S. DedicatedBiotechnology Companies, 1971-86

6 0 -

40-

20-

II

71 72 73 74 75 76 77 7 8 7 9 8 0 8 1 8 2 8 3 8 4 8 5 8 6Year

SOURCE: Off Ice of Technology Assessment, 1988.

biotechnology companies, and in research con-tracts with universities. OTA identified 70 majorcorporations with significant investments in bio-technology (see app. A) of which 53 participatedin a 1987 survey. It is important to note that someare subsidiaries of others, and others conduct theirbiotechnology research solely overseas.

The “biotechnology industry,” if measured bythe entry of new, small companies in the field,has most likely stabilized. Some analysts wouldcontend that, due to consolidation within the in-dustry and the predominance of a few firms, thenumber of viable DBCs is actually shrinking. Theindustry as measured by the amount of moneyinvested by large diversified corporations andDBCs, however, is growing.

Areas of Commercial Application

A human health care focus—therapeutics anddiagnostics-continues to dominate both biotech-nology R&D and the market in terms of volume.Human health care comprises the primary bio-technology work of 39 percent of DBCs and 37percent of large, diversified companies. Humantherapeutics clearly dominate the focus of mostfirms, large and small, Among the DBCs, thera-peutics represent the primary interests of 21 per-cent of the respondents; the percent is slightlylarger among corporate investors at 26 percent.Human diagnostics rank second as an area of R&Dfocus by DBCs (18 percent) but fourth by largercompanies (11 percent), Therapeutics and diag-nostics are considered separately because theytend to be pursued by different industries andare regulated differently by FDA (ch. 9). The strongfocus on human health care products by DBCsis not unexpected. Historically, capital availabil-ity has been greater for pharmaceuticals than forfood or agriculture because of greater market re-ward (3).

Animal health and agriculture are the focus of14 percent of DBCs and nearly 21 percent of large,diversified companies. Chemicals (commodity andspecialty such as polymers, enzymes, and addi-tives) are the focus of 7 percent of DBCs, but 21percent of the corporate sample. It is not surpris-ing that pharmaceuticals and chemicals rate firstand second as the areas of application pursuedby the latter, since the pharmaceutical and chem-ical sectors have been the most active in termsof R&D investment in biotechnology. Table 5-I

Table 5-1 .—Areas of Primary R&D Focus by Biotechnology Companies

Dedicated biotechnology companies Large, diversified companiesResearch area Number (percent) Number (percent)

Human therapeutics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 (21) 14 (26)Diagnostics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 (18) 6 (11)Chemicals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ( 7) 11 (21)Plant agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 ( 8) 7 (13)Animal agriculture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ( 6) 4 ( 8)Reagents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 (12) 2 ( 4)Waste disposal/treatment . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ( 1) 1 ( 2)Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ( 4) 1 ( 2)Cell culture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ( 2) 1 ( 2)Diversified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ( 4) 6 (11)Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 (18) o ( o)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . 296 (100) 53 (loo)SOURCE: Office of Technology Assessment, 1988.

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compares the fields of commercial application pur-sued by both groups.

The production of biotechnology reagents, suchas restriction enzymes and recombinant DNA vec-tors, also ranks high among DBCs (12 percent).It is possible that the number of biotechnologysuppliers will grow as routinization and standard-ization of many biotechnology processes occurs.Several small firms may find their niche as thesupplier of specialized reagents. The same is truefor equipment. Equally likely is the possibility thatcompanies will turn in-house for these services,requiring less dependency on outside interests.

Most DBCs that responded to the OTA surveyreported that 100 percent of their efforts are bio-technology-related. On the average they reportthat recombinant DNA technologies assist themin approximately 44 percent of their work, useof monoclinal antibodies underlies 36 percent oftheir work, and cell culture contributes to 31 per-cent of their work,

Anticipated product Lines ofCorporations Investing in Biotechnology

Table 5-I lists the areas of application investedin by U.S. corporations investing in biotechnol-ogy. Eighty-nine percent expect that they will de-velop product lines in those areas within the next5 years. Interestingly, nearly half of the corporaterepresentatives stated that the anticipated prod-uct lines were different from current productlines. Twenty-eight percent indicated that the bio-technologically derived product lines were not atall like current products, indicating a trend inusing biotechnology as a means of diversification.Forty percent felt that anticipated products de-veloped from biotechnology were similar to ex-isting products.

R&D Investment in Biotechnology

Biotechnology companies, more than others, aredriven by R&D, relying on eventual conversionof the R&D into revenues. Funding and buildingR&D will remain a key component of the busi-ness strategy of DBCs until they have productsrequiring heavy financial commitments to regu-latory review, manufacturing, and marketing.Established corporations have either created new

biotechnology R&D initiatives in-house, redirectedexisting R&D efforts, or invested in biotechnol-ogy R&D conducted by other firms or university-based scientists.

Based on responses to a 1987 survey, OTAestimates that 403 DBCs invested about $1.2billion in biotechnology R&Din 1987, and ma-jor corporations invested more than half thatamount or $0.8 billion. Because there is a goodpossibility that some double counting may oc-cur due to collaborative ventures between thetwo groups, the combined industrial invest-ment in biotechnology R&D is most likely inthe range of $1.5 to $2.0 billion in 1987. Thisestimate approximates that generated by the Na-tional Science Foundation where biotechnologyR&D performance by industry was estimated tobe $1.4 billion in 1987 (29). Industrial investmentin biotechnology R&D, therefore, is roughly two-thirds that of Federal spending.

R&D Budgets of DedicatedBio technology Companies

The R&D budgets for dedicated biotechnologycompanies surveyed by OTA had a mean of $4million per firm, or more than 40 percent of theexpected revenues. The range of responses from108 companies was $10,000 to $45 million. Themedian response was $1.5 million. Genentech, forexample, spent $80 million on R&D in 1986 (18).Skewing of the OTA data could be caused by thetherapeutics firms, which tend to have, on aver-age, R&D budgets of close to $9 million, higherthan firms in other sectors. Differences in the sizeof R&D budgets are illustrated in figure 5-2.

R&D budgets are more than four times largerin public companies than in private companies.As would be expected, R&D budgets in dollarterms increase with company size, but consumethe largest portion of expenditures for medium-size firms. This is most likely due to the highadministrative start-up costs of small firms, thediversion of funds to other activities in large com-panies, and economics of scale for R&D activities.In any event, there are numerous complexitiesinvolved in measuring R&D budgets at the firmlevel, and it is difficult to conclude whether R&Dactivity, as opposed to budgets, really varies uni-formly with firm size (23).

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Figure 5-2.-Mean R&D Budgets for U.S.Dedicated Biotechnology Companies

Animal agriculture

Plant agriculture

Reagents

Specialty chemicals

Diagnostics

Therapeutics

All companies

o 2 4 6 8 10R&D budget ($ millions)

SOURCE” Office of Technology Assessment, 1988

R&D Investment by MajorU.S. Corporations

Based on the responses of the 53 major corpo-rations responding to the OTA survey, OTA ex-trapolates that corporate investment in biotech-nology R&D approximated $0.8 billion in 1987.These companies dedicate 20 percent of their to-tal R&D expenditures to work specific to biotech-nology. Responses ranged from annual R&D ex-penditures of $10,000 to $150 million. The meanannual biotechnology R&D budget for these com-panies was $11 million in 1987.

Ninety-six percent of the respondents indicatedthat at least some of this R&D was conducted in-house, but 83 percent indicated that some of theresearch is conducted by outside firms or univer-sities. only four percent of the companies re-sponded that none of their biotechnology R&Dis conducted in-house. Thus, major corporationsare building their in-house R&D capabilities whilesimultaneously complementing their researchwith outside sources of innovation. Collaborationbetween DBCs and major corporations is discussedlater in this chapter.

Sources of Revenues

Gathering reliable information about actualsources of revenue in biotechnology companiesis a difficult task, given the small number of prod-

ucts being marketed and the multiple sources ofrevenue available to firms. Numbers concerningproducts and sales can be deceiving. Plant agri-culture seemingly leads in expected revenues be-cause firms in this area are most probably alsoseed companies that rely on sales of seeds to fundtheir R&D. Diagnostics receive only about 10 per-cent of the overall R&D investment but accountfor about 55 percent of product sales (25). Reve-nues for diagnostics also currently lead therapeu-tics in sales due to the longer testing and approvalprocess for therapeutics.

Besides being difficult to determine whether rev-enues have increased due to bigger researchagreements or sales, it is often not entirely clearto what extent biotechnology products accountfor those sales being reported. Many companiesare selling services or related products but havenot yet sold a product directly derived from theirbiotechnology R&D. To date, no biotechnologycompany has been able to report a profit solelyfrom the sale of biotechnology products (6).

Calgene is a case in point. In July 1986, Calgeneforged agreements with Procter & Gamble andPhilip Morris Co. and expanded its contracts withCampbell Soup and Rhone-Poulenc Agrochimie.It also acquired Agro Ingredients, a marketer ofspecialty plant oils and ingredients to industrialusers and food processors. Calgene also signedan agreement with Ciba-Geigy. As a result of thesenew contracts, Calgene’s product developmentrevenues jumped 217 percent. Sales, which werezero the year before, totaled $882,000 as a resultof the Agro Ingredients acquisition. Overall, Cal-gene’s total revenues rose 465 percent to $2.1 mil-lion while their net loss narrowed to $329,000from a previous year deficit (38).

Sales projections for the total industry areremarkably different, even one year into the fu-ture. One analyst predicts total industry productrevenues to be about $75 million in 1987 (31).Another projects industry sales to approach $1billion in 1987 (25). Presumably, the differencein projections can be attributed to what is beingcounted. For example, firms might include in theirrevenue totals the sale of non-biotechnology itemsor the sale of instrumentation, equipment, andsupplies essential to biotechnology R&D.

82

care products. No good data are yet available onsales in other sectors. The current list of humantherapeutics derived from biotechnology approvedfor sale is still very short: human insulin, humangrowth hormone, alpha-2 interferon, a monoclinalantibody for reversing kidney transplant rejec-tion, a hepatitis B subunit vaccine, and tPA. Mostbiotechnology products so far have been mono-clonal antibody diagnostic test kits and gene probes;there are almost 200 monoclinal-based diagnos-tic kits. Kit sales were $150 million in 1985 (1).

Again, aggregate revenue figures can be skewedby the performance of a few firms. In the firstquarter of 1987, revenues increased sharply andlosses narrowed at the leading four or five DBCs.Rises were related to either increased productsales or more extensive collaborative arrange-ments with other companies. In 1985, Genentechposted revenues of $90 million and Cetus postedat $57 million, but sales of products accountedfor only $5.1 and $1 million, respectively. Mostother companies were far behind in reported rev-enues (less than $10 million) (l).

Even one company can skew the market aver-ages. For example, of 18 companies analyzed inone study, total industry losses in the first quar-ter of 1987 were $15.3 million, but $5.4 millionof those losses belonged to Monoclinal Antibod-ies (33), Firms record net losses as they increasetheir operating costs associated with proprietaryresearch and product development.

FINANCING OF DEDICATED BIOTECHNOLOGY COMPANIES

Investors have staked more than $3 billion on in the technology. The corporate source of invest -biotechnology between 1976 and 1986 (11). It is ment is the fastest growing, rising steadily sincesignificant, however, that 80 percent of the dol- 1983 (see figure 5-3).lars have been raised by 10 companies (2). Financ-

The OTA survey of major corporations founding of biotechnology, in terms of DBCs, is quite

that 83 percent invest in R&D conducted outsideconcentrated. the company, either by DBCs, universities, or both.

Dedicated biotechnology companies have relied Corporations can invest in DBCs through equityheavily on two funding mechanisms to finance or collaborative ventures. Equity investments intheir research and development: equity invest- DBCs by large, established firms tend to be morements and joint ventures. Equity investments in passive, allowing the larger companies the oppor-DBCs maybe by individuals, small financial insti- tunity to keep abreast of new developments. Col-tutions, or corporations trying to gain a foothold laborative ventures, on the other hand, usually

83

Figure 5-3.-Sources of Investmentin Commercial Biotechnology

SOURCE: Adapted from James R Murray & Co Chicago, IL, 1986

involve R&D contracts or product licensing agree-ments, with the larger firm often handling thefinal development, approval, manufacturing, andmarketing of the product. The DBC receives royal-ties from the sale of the product and usually re-tains patent rights.

The sources of funding for DBCs tend to de-pend on company maturity and size. An increas-ing number of firms are turning to public offer-ings and corporate equity investment as theirsource of funding as they mature, but venturecapital and private equity placement are the main-stay of start-ups. Over time, the average companyshows a decreased dependence on private invest-ment, a doubling of U.S. equity holders, and a 10-fold increase in public stock offerings.

In addition, global markets have emerged,facilitating multi-source funding for the more se-cure firms. The bigger companies, such as Genen-tech and Cetus, are able to go overseas and ac-cess the Eurobond markets. In addition, theJapanese markets have opened.

Methods of financing differ from field to field.OTA found that DBCs focusing on therapeuticsare more likely to be publicly held than any othertype of firm (57 percent). Plant agriculture firmsare less often publicly held (20.8 percent), and spe-cialty chemical firms are least likely to have gonepublic (17.6 percent). In 1987, six agricultural bio-technology firms issued an initial public offering,indicating a shift toward public capital in the fu-

ture as they require additional financing to bringtheir products to the market.

Levels of Financing

Ninety-four DBCs responded in full to OTA re-quests for financial information. To date, levelsof financing are five times higher in public com-panies than in private companies. As would beexpected, financing is much higher in large com-panies (average 267 employees), exceeding thatin small companies (average 11 employees) bynearly 20-fold.

Of those companies reporting on levels of financ-ing, 73 percent appeared at $1 million to $50 mil-lion. Responses ranged from $10,000 to $320 mil-lion. The median response was $8 million. Valuesare depicted in table 5-2. Companies involved inhuman therapeutics report more than twice theaverage level of financing of all companies. Com-panies developing biotechnology reagents re-ported the least amount of financing (about one-third the average).

Sources of Investment

According to one analyst, total private invest-ment in U.S.-based biotechnology through the endof 1985 was over $4 billion (27). These figuresbreak down to 65 percent equity purchase ($2.581billion), 15 percent contract research and joint ven-ture ($578 million), 14 percent research and de-velopment limited partnerships (RDLPs) ($558 mil-lion), 6 percent grants to universities ($260 million),and 1 percent product license agreements ($4million).

Table 5-2.—Levels of Financing of DedicatedBiotechnology Companies

Level of financing ($ millions) Percent of companies

0 to 0.1 . . . . . . . . . . . . . . . . . . . . . . . . .0.1 to 0.5 . . . . . . . . . . . . . . . . . . . . . . .0.5 to 1 . . . . . . . . . . . . . . . . . . . . . . . . .1 to 5 . . . . . . . . . . . . . . . . . . . . . . . . . .5 to 10 . . . . . . . . . . . . . . . . . . . . . . . . .10 to 50 . . . . . . . . . . . . . . . . . . . . . . . .50 to 100 . . . . . . . . . . . . . . . . . . . . . . .100 plus . . . . . . . . . . . . . . . . . . . . . . . .

5.36.47.4

25.513,834.0

5.32.1

The range is $10,000 to $320,000,000.The median value is $8,000,000.

SOURCE: Office of Technology Assessment, 1988.

84

The dominant investment area is health careapplications: cancer therapeutics at 43 percent($1.7 billion), other therapeutics at 19 percent($773 million), and diagnostics at 13 percent ($519million), totaling 75 percent of all investment. Agri-cultural applications, plant and animal, have re-ceived only 16 percent of the total investment,with crop or plant improvement receiving 12 per-cent, or $479 million, and agrichemicals receiv-ing 4 percent, or $154 million (27).

Analysts are more likely to agree on levels ofinvestment than they are sales. One estimates that$3.01 billion has been raised by dedicated biotech-nology companies from 1980 to mid 1987. In-cluded in this estimate is capital raised throughmajor R&D partnerships and corporate equity in-vestments, plus convertible debt (2). The break-down per year is shown in table 5-3.

Venture Capital

Practically all DBCs in existence have been therecipients of some level of venture capital, eitherfrom institutional or corporate venture capitalists.Approximately $775 million of venture capital wasinvested in biotechnology between 1976 and 1986,but half of that investment occurred in 1981 and1982. Since 1982, an average of ten new compa-nies per year have been financed by venture cap-ital (9). Venture funding is not as sensational asit was 5 years ago, but venture funds remainedavailable until the stock market crash of October1987 (2)10). Until October 1987, OTA found noevidence that venture capital funds for biotech-nology had diminished. There is some evidence,however, that venture capitalists are more sophis-

Table 5-3.-Funds Raised by DedicatedBiotechnology Companies, 1980-87

Year Capital raised (millions)

1980 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 431981 . . . . . . . . . . . . . . . . . . . . . . . . . . 1401982 . . . . . . . . . . . . . . . . . . . . . . . . . . 2101983 . . . . . . . . . . . . . . . . . . . . . . . . . . 5421984 . . . . . . . . . . . . . . . . . . . . . . . . . . 1651985 . . . . . . . . . . . . . . . . . . . . . . . . . . 2491986 . . . . . . . . . . . . . . . . . . . . . . . . . . 9601987 (through July) . . . . . . . . . . . . . 704

Total . . . . . . . . . . . . . . . . . . . . . . . $3,013SOURCE: M. Kathy Behrens, personal communication, 1987.

ticated, and therefore more conservative, in theirinvestment choices (36).

OTA found that the percentage of DBCs rely-ing primarily on venture capital for financing (overhalf of their source of funds) dropped from 25percent in their first year of operation to 15 per-cent now. As companies grow, they maintain theiremphasis on venture capital, but increase theiruse of private equity holdings, debentures, andbank borrowings (39). Cumulatively, venture andother fund managers have provided 12 percentor $500 million of total financing. Venture funds,by the nature of their providers, tend to be shortterm, and they have served early-stage financingneeds of many companies. As the companies con-tinue to mature, venture capitalists may be lesswilling to finance forward integration.

Research and Development LimitedPartnerships (RDLPs)

An important funding mechanism for the bio-technology industries has been research and de-velopment limited partnerships (RDLPs). Almost25 percent of the dollars collectively invested inbiotechnology have come from RDLPs (22). RDLPshave been described by a Commerce Departmentofficial as being a management concept and anoff-balance-sheet funding source (24). They allowindividuals or companies to invest in a firm’s R&Dand write off the investment as an expense. In-vestors become limited partners and are entitledto royalty payments from future sales. The royal-ties are then taxed as capital gains. RDLPs pro-vide start-up companies with a source of fundingand transfer much of the risk of research and de-velopment of a new product to the limited part-ners who have acquired shares in the ventures.They are often seen as an alternative financingmechanism to venture capital companies, and pro-vide a vital source of capital for start-up com-panies.

There are obvious advantages to both the spon-soring company and its limited partners. RDLPsallow a company to avoid early negative cash flowand permit the sponsor to use its capital for otherpurposes. This is true as long as it can generateenough cash to make royalty payments to thelimited partners. Before the Tax Reform Act of

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1986 (TRA) (Public Law 99-514), RDLPs were costlyfor the Federal Government. As an RDLP projectbecame more financially successful, it representedforgone taxes to the government, because someof the royalty payments could be treated as long-term capital gains that were taxed at a lower ratethan ordinary income. If the company produceda patentable product, all of the royalty paymentsto the limited partners could be treated as capitalgains. In addition, RDLP limited partners coulduse the losses incurred to offset their personalincome, allowing RDLP investors to reduce theirtotal income and ultimately their bottom-line tax(22). Now losses can’t be used to offset incomefrom dividends and interest, rather they can onlybe used to offset passive gains from other part-nership investments. With the passage of TRA,capital gains rates were phased out, which mayhave reduced the desirability of RDLPs becausegains will now be taxed as ordinary income.

Attendees at a 1987 Industrial BiotechnologyAssociation conference agreed that despite TRA–which does not allow deductions to be used tooffset salary income—RDLPs remain as an impor-tant option in the funding of biotechnology R&D(14). Financial analysts agree that investors willneed near-term cash flow to help offset the lossof several tax advantages. In addition, biotechnol-ogy companies will have to make important deci-sions when determining the size and the contentof the RDLP.

Industry representatives told OTA that althoughthe potential size in dollar amounts of RDLPs arequite large, they are not widely available. Largercompanies closer to production and marketing ofproducts tend to use them more than smaller com-panies. Recently, companies such as Cetus, Genen-tech, and California Biotechnology have begun tobuy back the partnerships, taking a one-timecharge against earnings (and a subsequent loss)to finance the buyouts (5). Repurchasing allowsthe DBC to purchase product rights licensed tothe limited partners.

One of the more innovative approaches was re-cently offered by Cetus. Cetus wanted to forma European subsidiary for conducting clinical trialswith Cetus’ investigational drugs and use the trialswith results of these studies for product registra-

tion. Funding for this subsidiary, EuroCetus, wouldbe supplemented by a $100 million RDLP. TheRDLP was available to the public in $10,000 unitswith a minimum cutoff of $50 million. The offer-ing was terminated after $62 million was raiseddue to deteriorating market conditions. Someanalysts think this failure reflects a greater skep-ticism of investors about the ability of DBCs todevelop manufacturing and marketing capabilitiescompetitive with those of experienced and power-ful incumbents in downstream sectors (34).

It is not yet clear how well RDLPs will con-tinue to serve the R&D financing needs of theindustry. A study by Arthur Young found thatRDLPs are significant sources of funds for DBCsworking in diagnostics and agricultural biotech-nology (39). Others have argued that the marketfor RDLPs has all but dried up (15). OTA foundthat only three DBCs relied on RDLPs for morethan half their funding. It is likely that RDLPs willcontinue to be a substantial financial tool for aselect few firms.

Public Stock Offerings

Increasingly, DBCs have gone public to raise ad-ditional funds. OTA identified 82 publicly heldDBCs. Of the 60 firms typically followed by WallStreet, only 27 have been able to raise $4 millionor more at one time between 1981 and 1986 (7).

Currently, equity financing in the public mar-kets accounts for 36 percent of total financing.Genentech made a historic public offering in 1980,when its stock underwent the most rapid priceincrease in Wall Street’s history, rising from $35to $89 per share in the first 20 minutes of trad-ing. Later that year, Cetus raised $110 million inan initial public offering. The bull market in bio-technology had begun and would peak in 1983(25). More than $500 million was raised for bio-technology ventures between 1979 and 1983through public venture capital. This was followedby a period of disillusionment as investors sawthe reality of the lag time between investment andpayoff. In 1986, the public financing market againopened its arms to biotechnology; companiesraised $800 million in 1986 through public equitymarkets. In the first half of 1987, $357 million hadbeen raised through public financing, with a

86

Photo credit: Newsweek, Nov. 2, 1937

Media coverage of the 1987 stock market crash.

nearly equal amount still registered with the Secu-rities and Exchange Commission (17). Biotechnol-ogy continues to boast the highest price to earn-ings ratio of any industry (21).

Companies focusing on human therapeuticstend to have the most public stock offerings,whereas companies involved in diagnostics, rea-gents, animal agriculture, and specialty chemicalshave not gone public at the same rate. In 1987,however, five of the eight biotechnology compa-nies making initial public offerings emphasizedagriculture (17).

The market valuation for biotechnology priorto October 19, 1987 was $9 billion to $10 billion,excluding any participation by companies with di-verse businesses, such as large drug or chemicalcompanies. Three to four billion of the total mar-ket valuation went to Genentech alone. A newwave of second and third offerings swept WallStreet in 1986 and early 1987 as some of the moremature firms financed production scale-ups and

Figure 5-4.-Capital Raised in PublicOfferings for Biotechnology

Dollars (mill Ions)400

350

300

250

200

150

100

50

0Q1 Q2 Q3 Q4 Q1 Q2Q304 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

1982 1983 1984 1985 1986 1987

offerings

SOURCE: Adapted from Russell Ray; Alex, Brown & Sons, 1987.

clinical trials. Fifteen companies returned to thepublic market in 1986, raising another $390 mil-lion (15) (see figure 5-4).

In 1986, stocks appreciated in value 60 percenton average and in 1987, stock climbed another50 percent in price (25). Approval of new prod-ucts as well as the presence of takeover bidders,helped precipitate these gains. However, analystsestimate that the stock market crash of October1987 devalued biotechnology companies by 40 to60 percent on average, reducing total industrymarket capitalism to about $4.5 billion. Less flex-ible venture capital markets are likely to hurt bio-technology companies because of their capital in-tensive, cash consuming nature.

Despite the ability of biotechnology firms to raisecapital, industry losses totaled $70 million in 1985and approached $450 million in 1986. Even Genen-tech at $60 per share reported earnings of only$0.18 per share in 1986. Unlike other industrialsectors, biotechnology is dominated by a fewfirms: those able to withstand the consolidationthat occurred between 1983 and 1986. Genentechhas dominated in terms of industry revenues (30percent), market capitalization (50 percent), andproperty, plant, and equipment invested in by theindependent firms (30 percent) (25). In 1987, whenGenentech initially failed to receive FDA approvalfor tissue-plasminogen activator (tPA), more than14 million shares changed hands in a single day,with its stock plunging $11.50 a share to $36.75.

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The financial activity surrounding biotechnol-ogy depends heavily on the successes andfailures of the frontrunners.

The status of a company’s product in the regu-latory process at FDA will continue to affect stockactivity as concerned investors take profits. Whenapproval is granted expeditiously, the biotechnol-ogy group gains. If approval is delayed, stockprices slide. Meaningful operating profits willeventually be reliable indicators of a company’spotential profitability, but for most, it is still anillusory concept.

Some analysts contend that Wall Street has cre-ated a false high through hype and overpromo-tion of “star” companies or products. In August1986, Endotronics, a Minnesota-based biotechnol-ogy company, closed at its all-time high of $35.50a share—130 times the company projected earn-ings. Eight months later it traded at 75 cents. InApril 1987, it filed for bankruptcy. Critics and com-pany stockholders contend that the company wasfueled more by its promotion that its potential (31).

In addition, most public stock offerings havebeen by pharmaceutically based DBCs. Analystsare predicting more initial public offerings in theagricultural field (19). Given the uncertain reg-ulatory climate prevalent in crop and relatedmicrobial biotechnology, regulatory delayscould have a significant effect on stock prices.

Finally, the bull market that has existed since1982 has served all biotechnology well. In a bear

market, all but the top ten firms may have to faceserious constrictions on the availability of capitalthrough the public markets. As Richard Bockwrites (4):

With the first products just coming on the mar-ket, it’s obvious that biotech shares are not sell-ing due to earnings, sales, or the payout of divi-dends. . . . Financial fundamentals eventually willbe important in weighing the worth of biotechcompanies, but they are not at this juncture. Anal-ysis based on financial results alone could lowerbiotech stock prices and kill the goose that clonedthe golden egg right in the middle of Wall Street.

Debt Financing

As companies mature, debt financing has be-come an available means of financing without giv-ing up equity. A survey of firms conducted by Ar-thur Young found that 13 percent of the largercompanies made use of bank borrowings as com-pared to 3 percent of the small firms (39). Genen-tech, Cetus, and Bio-Technology General haveturned to convertible debt financing in the pastyear. DBCs may also raise capital on interest fromshort-term loans and industrial revenue bonds.

Debt financing is a sign of maturity for somefirms. Because the company is obliged to servicethe debt almost immediately, it must be in the po-sition of having products nearly ready for mar-keting. It is not a desirable method of financingfor companies still requiring high cash flows forR&D.

COLLABORATIVE VENTURES IN BIOTECHNOLOGY

Despite the predominance of a few companies, addition, large corporations are better able to with-more than 400 dedicated U.S. biotechnology com- stand the prolonged approval and marketing proc-panies remain in business operating at annual esses inevitable in the final stages of product de-losses. Alliances between DBCs and between DBCs velopment, making alliances with DBCs to acquireand large diversified corporations have become technology.an important source of funds as alternative These collaborative ventures, or strategic alli-sources become more conservative. Wall Streetrelies on corporate alliances as one indication of

ances, are associations between separate business

the value of the firm (36).entities that fall short of a formal merger, but thatunite certain agreed upon resources of each en-

Large, diversified corporations increasingly ac- tity for a limited purpose. They are an importantcess the potential benefits of these technologies means for technology transfer: few biotechnol-through their own in-house capabilities, or through ogy companies can conduct all aspects of R&Dstrategic alliances and acquisitions of DBCs. In from bench to market. Collaborative ventures may

88

involve acquisition, equity purchase, licensingagreements, marketing agreements, research con-tracts, or joint ventures.

Collaborative ventures have been essential inthe development of industrial biotechnology fortwo reasons:

●

●

They allow small biotechnology-intensivefirms to overcome resource limitations whichmay prevent them from developing or mar-keting a product themselves. Smaller firmsseem to be seeking near-term cash flow tobankroll their projected growth and gain ac-cess to the marketing capabilities of large cor-porations.They allow established companies less costlymethods to develop expertise in areas inwhich they lack in-house capability. Benefitsfor the large firms in such arrangements areprimarily access to cutting edge research andhighly trained scientists.

Collaborative ventures can create a protectiveenvironment for the external commercializationof a DBC’s research. The DBC can avoid the prob-lem of having to expose its innovation to a widerange of prospective licensees and can mitigatethe appropriability problem by having the licen-see pay for some portion of the R&D costs upfront. Through equity investments and joint ven-tures, the DBC can prevent the established firmfrom opportunistically appropriating rents on thetechnology through contractual safeguards. Man-ufacturing and marketing agreements allow theDBC to disclose far fewer scientific or technicaldetails.

To stay independent, most DBCs are strength-ening their alliances with major corporations. FewDBCs have succeeded in becoming full-fledged,fully integrated pharmaceutical or chemical houses,though many aim to do so. Corporate investmentsin public companies provided the bulk of new cap-ital for biotechnology (approximately $128 mil-lion) in the first nine months of 1985 (7). Cumula-tively, corporations have provided $2.2 billion or56 percent of funds for biotechnology through1985 (27). All indications seem to be that the per-centage will increase.

An important difference exists between the col-laborative activities of biotechnology firms andthe semiconductor firms that emerged in the earlystages of that industry. The semiconductor firmsof the 1950s did not resort to licensing and jointventures to commercialize their technology ashave biotechnology firms (34). This may be dueto the fact that the semiconductor industry wasselling largely to the Department of Defense, amarket that had much lower marketing and prod-uct introduction costs than the markets for newbiotechnology products (26).

An OTA review of 552 industrial collaborationsbetween 1981 and 1986 found a steady rise in thenumber of collaborative ventures. Collecting com-plete information on the number and nature ofcollaborations in commercial biotechnology iscomplicated by the proprietary nature of such in-formation. Companies that are publicly held usu-ally document their collaborative agreements withother industrial firms in their mandatory 10K fil-ings. However, most of the new biotechnology ven-tures are privately held firms that are under nosuch requirements. Figure 5-5 illustrates collabora-tive ventures between U.S. biotechnology com-panies and between U.S. and foreign companiesbetween 1981 and 1986.

Collaborations are not always between large cor-porations and small companies, although that isthe norm. There are about 800 firms active in bio-

Figure 5-5.-Collaborative Ventures ofU.S. Biotechnology Companies, 1981-86

Number of records80

60

4 0

20

01981 1982 1983 1984 1985 1986

Year

SOURCE: Office of Technology Assessment, 1988.

89

technology worldwide, with between 1,000 and1 )500 joint venture agreements among them, al-though it is not known how many of these arestrictly research collaborations. An estimatedthree-quarters of the agreements are betweenlarge and small firms and less than one-quarterof the agreements are international collaborations(32),

Research to date suggests that big firms aremostly gaining licenses to market products throughthese agreements, but not licenses to the technol-ogy to manufacture products. Contrary to the be-lief of many analysts who think that the trendtoward such joint venture agreements is on thewane, the number of these agreements is increas-ing, or at least remaining level (34).

In addition, although there is an increase in thenumber of collaborative ventures per year, no onetype of action (e.g., equity purchase, licensingagreement) has increased. This is true for bothU.S./U.S. agreements and U.S./foreign agreements.Table 5-4 displays the number of each type ofagreement between US. firms and between U.S.and foreign firms between 1981 and 1986. Mostrecords of agreements specify the type of action;where this was not the case, unspecified collabora-tive ventures were categorized as joint ventures.

Two companies serve as examples of the levelof activity generated by strategic alliances--Amgen(pharmaceuticals) and Calgene (agriculture). Am-gen’s March 1986 secondary offering prospectuslisted eight prominent corporate partners: John-son & Johnson, Kirin Brewery, Abbott Labora-tories, SmithKline Beckman, Eastman Kodak, Ar-bor Acres Farm, Upjohn, and Texaco. Calgene hasteamed up with Procter& Gamble, Rhone-Poulenc,

Agrochimie, Kemira Oy, Roussel-Uclaf, Ciba-Geigy,Campbell Soup, and Philip Morris (20). One inter-esting aspect of these alliances is that in both cases,the DBC has managed to negotiate separate agree-ments with proven competitors.

On the corporate side, many companies haveused major licensing strategies to move into bio-technology. Kodak signed nine deals in 1984 withbiotechnology start-ups, Kodak has signed re-search contracts with DBCs to work in areas asdiverse as cancer drugs and genetically engineeredindigo dye for blue jean manufacturers. Johnson& Johnson owns equity stakes in 11 biotechnol-ogy companies. American Cyanamid signed morethan 15 licensing agreements with DBCs over thepast five years (12).

Most U.S./U.S. collaborative ventures on recordare in the area of human therapeutics (29 per-cent) or clinical diagnostics (25 percent). MostDBCs are working in those areas and the costsof forward integration are high, making jointagreements desirable. Collaborative ventures intherapeutics are largely responsible for overallincreases in collaborative actions over the years.It is clearly the area of the most intense businessactivity.

In one study (34), R&D contracts and R&D mar-keting agreements accounted for all the collabora-tive ventures in plant biotechnology. The lack ofstraight marketing, supply, or technology trans-fer agreements in the study sample suggests thatDBCs in plant biotechnology are not carrying outR&D on their own. Of the 48 plant agricultureproduct developments listed by Paine Webber, bio-technology companies were acting without a com-mercial partner in only 8 cases (30). Some assert

Table 5-4.—Collaborations Between U.S. Firms and Between U.S. and Foreign Firms, 1981-86

U.S./U.S. (U.S./Foreign)

Type 1981 1982 1983 1984 1985 1986 Total

Joint venturea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 (3) 6 (22) 27 ( 8) 14 (17) 29 (11) 23 (16) 104 ( 77)Equity purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 (1) 7 ( 6) 3 ( 1) 8 ( 2) 9 (2) 13 ( 4) 48 ( 16)Licensing agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 (1) 4 ( 2) 4 ( 5) 6 ( 5) 8 ( 5) 4 ( 1) 30 ( 19)Marketing agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 (1) O ( 6) 2 ( 4) 5 ( 4) 8 ( 5) 13( 7) 32( 27)Research contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (2) 6 ( 3) 7 ( 1) 6 ( 3) 6 ( 5) 15 ( 4) 41 ( 18)

Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 (8) 23 (39) 43 (19) 39 (31) 60 (28) 68 (32) 255 (157)alJnspecified collaborations were categorized as joint ventures.

SOURCE:Office of Technology Assessment, 1988.

.

90

that biotechnology in plant agriculture is not ascommercially advanced as in other sectors, andthat in order to fund long-term R&D, agriculturebiotechnology companies have had to turn to cor-porate sponsors. In addition, small companies mayrely on large companies for their marketing net-work in order to reach more farmers (13).

U.S./Foreign Collaborative Ventures

As DBCs near development and production, col-laborations with foreign firms provide them accessto international markets. While this strengthensthe financial position of the DBC, there is someconcern that the enhancement of biotechnologyin foreign firms reduces the future rent-earningpotential of U.S. biotechnology (37). One protec-tion against such a loss is rigorous protection andenforcement of intellectual property and patentrights in the United States.

As shown in figure 5-5, while the number ofcollaborative ventures between biotechnologyfirms has steadily increased, the bulk of theactivity has been between U.S. companiesrather than with foreign firms. U.S. biotechnol-ogy companies have only two-thirds as many jointactions with foreign corporations as with U.S. cor-porations. U.S. private investors accounted for 90percent (or $3.7 billion) of all international bio-technology investment dollars as of 1985 (27). OTAdid not collect data on collaborative ventures be-tween foreign firms. However, many collabora-tions do not involve U.S. firms and biotechnology-based industries are developing in Western Eur-ope, Japan, and South America.

OTA found that 41 percent of U.S./foreign col-laborative ventures occurred in human therapeu-tics, 13 percent in diagnostics, and 9 percent inplant or animal agriculture.

Japanese corporations lead all other countriesin the number of collaborations arranged withU.S. biotechnology companies (see table 5-5), butdo not lead in amount of private dollars invested.Figure 5-6 displays the cumulative investments ofprivate investors by the United States, and sixspecific Western European countries. Swiss, Swed-ish, and West German corporations have beenactive collaborators with U.S. firms. In fact, col-laborations between U.S. and Japanese firms have

Table 5=5.—Collaborative Ventures BetweenU.S. Dedicated Biotechnology Companies and

Foreign Corporations, 1981-86

YearCountry 1981 1982 1983 1984 1985 1986 Total

SOURCE: Office of Technology Assessment, 1968,

dropped and leveled off in the past 3 years,whereas collaborations with companies from anincreasing number of European countries has in-creased, suggesting “internationalization” of com-merce in biotechnology.

U.S. firms have collaborated with Japanese firmsmore than any other foreign firms (8). Of the 71U.S./Japanese collaborations identified between1981 and 1986, 39 large Japanese corporations,and 43 American firms were involved. The col-laborations are overwhelmingly in the applicationof biotechnology to areas of human health care.

Figure 5-6.-Country of Private InvestorCumulative Investment

(USA is 90% of total)

USA

Germany

Switzerland

Italy

England

France

Japan

Sweden

All other

o 5 0 100 150 200 250 300 350 400Dollars (millions)

SOURCE: Adapted from James R. Murray & Co., Chicago, IL, 1986.

91

The Vice President for investment banking atNomura Securities International claims that whilemost of Japan’s biotechnological activity takesplace within its established industry, the Japanesepharmaceutical industry has been the last indus-trial entity to get involved (16). This could explainJapan’s heavy involvement with U.S. biotechnol-ogy companies. These collaborations provide anumber of business opportunities for Americanfirms, including research funding, sponsorship ofJapanese clinical trials, and marketing and distri-bution of products within Japan. Of the collabo-

rations analyzed, Japanese companies are lesslikely to engage in equity arrangements than U.S.companies collaborating together. In addition, Jap-anese firms are more likely to arrange a licensingagreement with a U.S. firm and are twice as likelyto form a marketing agreement than would befound in U.S./U.S. collaborations. These agree-ments tend to be smaller dollar-wise, explainingthe discrepancy between number of agreementsand dollars invested (28). A listing of U.S./Japa-nese collaborative agreements between 1981 and1986 appears in table 5-6,

Table 5-6.–U.S./Japanese Joint Actions in Biotechnology, 1981.86

U.S. company Japanese company Action Product

1981BiogenCollaborative ResearchEnzoGenentechHybritech

1982Bioassay SystemsBiogenBiogenBiogenBiogenBiogenBiotech Research LabCollaborative ResearchEnzoGenentechGenentechGenexGenexGenexHana BiologicsHybritechHybritechInterferon SciencesInterferon SciencesMonotech LabsTechnic lone

1983BiogenBiogenCentocorCollaborative ResearchGenentechGenentechGenexInnovax LabsIntegrated GeneticsRepligenUniversity GeneticsXenogen

Green CrossGreen CrossKintoToray IndustriesMitsubishi

Toray IndustriesFujisawaMeiji SeikaShionogiTeijinYamanouchiFujizokiGreen CrossMeiji SeikaMitsubishi ChemicalTakedaGreen CrossMitsui ToatsuYamanouchiFujizokiGreen CrossTeijinGreen CrossGreen CrossEkenFujizoki

ShionogiSuntoryToray IndustriesGreen CrossDaiichi SeiyakuMitsubishiYoshitomiSnow Brand MilkToyoboC. ItohNissho IwaiMitsui Toatsu

JEJM,RL

MJJJJ,MJE,JML,MJ?JJJE,JJJJMRL

J,LLLJJLJ,ME,MMJ

vaccineurokinaseenzymesinterferonanti-lGE kit

bioassaytPAantibioticHSAFactor Vlllanti-inflammatoryMABB-interferonHCG TesttPAB-interferonHSAurokinasetPAdiagnosticsimmunoglobulinsMABsinterferonG-interferondiagnosticsdiagnostics

IL-2T N FdiagnosticsinterferonG-interferontPAIL-2?tPAproteins?feed additives

(continued on next page)

76-582 0 - 88 - 4 : QL 3

92

Table 5-6.—U.S./Japanese Joint Actions in Biotechnology, 1981=86—Continued

U.S. company Japanese company Action Product

1984AmgenAtlantic AntibodiesBattelle DevelopmentEndotronicsGenentechGenetics instituteIntegrated GeneticsHuman Antibody TechHybritechLymphomedMolecular BiosystemsNPIPlant GeneticsQueue SystemsVentrex

1985Applied BiosystemsBiogenCalgeneCollagenGenentechMolecular GeneticsUnigene Labs

1986Bioreactor TechnologiesCyanotechDiagnostic ProductsEndotronicsGenzymeIngeneLiposome TechnologyZymogenetics

Kirin BreweryOriental YeastMitsubishiMitsuiFujisawaChugaiFujirebioKyowa HakkoToyo SodaFujisawaFunakoshiSumitomoKirin BreweryShin Meiwa IndustryFunakoshi

Japan ScientificSumitomoKurarayLederle JapanMitsubishiShionogiToyo Soda

C.ltohDaikyo Oil Co.Dainippon Ink & ChemicalNippon Chem. Indus.Nagase & Co.MitsubishiTakedaTeijin Ltd.

JMJML,MJ,MJJJ,MMMJJ,EM,LM

JJJLLML

MEMJJJRJ

erythropoietinantisera?instrumentationIymphotoxinerythropoietinDNA probediagnosticsdiagnosticsanti-pneumoniamicrospherefoodsseedBt productsMAB

reagentscolony stimulating factoragrichemicalsimplantsvaccinesveterinaryimmunization

bioreactors?immune-diagnosticshGHamylasesweeteners?blood factors

KEY: E = equity purchase M = marketing agreementJ = joint venture R = research contractL = licensing agreement

SOURCE: Office of Technology Assessment, 1988.

SUMMARY AND CONCLUSIONS

U.S. commercial biotechnology remains healthyand competitive. OTA identified 403 U.S. compa-nies dedicated to biotechnology (DBCs) and 70large, established U.S. corporations with signifi-cant investments in biotechnology. Combined,U.S. industry devoted about $1.5 to $2.0 billionto biotechnology R&D in 1987.

The shakeout predicted to occur among dedi-cated biotechnology companies has not occurred,although the frontrunners have become stronger.Financing is concentrated heavily in a few firms.Methods of financing for DBCs continue to evolveand are heavily dependent on the conditions offinancial markets. Despite industry losses and untilthe stock market decline of October 1987, com-

mercial biotechnology has been able to raise cap-ital. Financial activity depends heavily on thesuccesses and failures of the frontrunners. Mean-ingful operating profits are not yet reliable indi-cators of a company’s potential profitability. Thusfar, many companies have been able to attractfinancing based on potential alone, but it appearsthat safe and reliable products and wise market-ing strategies will eventually be the safety net forsurvival. Increasingly, large established companiesare playing a critical role in innovative researchas well as in the final stages of commercializationof biotechnology products and processes; they aremore able to bear the development, regulatory,and marketing costs of commercialization. A few

93

DBCs have successfully used the benefits of RDLPsto raise capital.

Human health care, primarily therapeuticsand diagnostics, continues to be the focus ofmost biotechnology R&D investments, both byDBCs and major corporations. The sectoralbreakdown of the industry has remained fairlyconstant since OTA last reported on commercialbiotechnology in 1984, with chemicals and agri-culture ranking second and third as the fields ofapplication of industrial biotechnology. There isevidence, however, that agriculture, plant biotech-nology in particular, is a growing field and hasbegun to attract the attention of the public finan-cial markets. A strong support industry of com-panies producing reagents, equipment, and cus-tomized processes in such areas as cell culturecontinues to grow and has been successful in gen-erating revenues. Revenues based on productsdirectly derived from biotechnology R&D remainscarce. No reliable data are available on total in-dustry sales of biotechnology products.

Strategic alliances between large corporationsand DBCs are on the rise and have become an in-dicator to Wall Street of the value of a firm. Al-though 95 percent of the large corporationsinvesting in biotechnology have in-house ca-pabilities, 83 percent also rely on outsidesources of innovation either DBCs or univer-sities There appears to be a mutual benefit tothese collaborations, and there is no indicationthat a takeover of biotechnology’s potential bycorporate interests is imminent.

While collaborations between U.S. firms are onthe rise, collaborations between U.S. firms andforeign firms seems to be declining. There weretwice as many collaborations between U.S. com-panies as between U.S. and foreign companies in1986. Of those foreign firms collaborating withU.S. companies, the breakdown is more diverse,with Japan playing less of a role and other coun-tries becoming more active.

CHAPTER 5 REFERENCES

1. Armstrong, S., “Genetic Engineering: The Business,”Christian Science Monitor, Oct. 2, 1986.

2. Behrens, M. K., partner, Robertson, Colman &Stephens, San Francisco, CA, personal communi-cations, June 1987 and August 1987.

3. Blakeslee, M. H., consultant, Longwood, Florida,personal communication, June 1987.

4. Bock, R. A., “Biotech Business Strategy: The Impor-tance of ‘Hype’, ” Bioflechnolo~ 4:865-867, 1986.

5. Chemical and Engineering News, “Genentech toBuy Out Two Research Partnerships, ” 64:5, 1986.

6. Clayton, M., “Biotech Gene-Splicers, DrugmakersStruggle to Go Commercial,” Christian Science Mon-itor, June 15, 1987.

7. Crawford, M., “Biotech Market Changing Rapidly,”

8

9

10

Science 231:12-14, 1986.Dibner, M., “Biotechnology in Pharmaceuticals: TheJapanese Challenge,” Science 229:1230-1235, 1985.Dotzler, F.J., “Seed Venture Capital for BiotechCompanies: A Review of the Past Ten Years andSpeculations on the Future)” Proceedings of BiotechSan Francisco (New York: Online Publications,1986).Drake, P., vice president, Kidder, Peabody & Co.,New York, NY, personal communication, June1987.

11. The Economist, “Biotechnology’s Hype and Hubris,”299(7442):96-97, 1986.

12. Ganns, S., “The Big Boys are Joining the BiotechParty,” Fortune 116:58-60, July 6, 1987.

13. Kenney, M., Biotechnology: The University-Indus-try Complex (New York, NY: Yale University Press,1986).

14. Klausner, A., “Analysts Optimistic on Biotech,”Bioflechno]ogy 5:200, March 1987.

15. Klausner, A., “Biotech Business Strategy: NewTrends, ’’Biol7’echnology 4:851-856, October 1986.

16. Klausner, A., ‘(Japanese Biotech: The Good with theBad,” Bio/Technolo@ 5:431, May 1987.

17. Klausner, A., “Public Markets Favor Biotech Offer-ings,” Bioflechnology 5:548, June 1987.

18. Klausner, A., “Tax Laws Won’t End R&D Partner-ships,” BiofTechno]ogy, Apr. 5, 1987.

19. Makulowich, J., “Biotech Analysts are Enthusias-tic about Industry’s Long-Term Prospects, ” GeneticEngineering News, April 1987.

20. Marcus, J. L., “Biotech Business Strategy: StrategicAlliances,” Bio~echnology 4:861-862, October1986.

21. McGraw-Hill, ‘(Biotechnology Book Value Doubledto $8 Billion in ’86, IBA Financial Meeting Told,”Biotechnology Newswatch, Feb. 16, 1987.

94

22. Meeks, B. N., “RDLPs Soon to Become FinancialDinosaurs,” Genetic Engineering News 6(8), Sep-tember 1986.

23. Merges, R., Columbia University School of Law,New York, NY, personal communication, Novem-ber 1987.

24. Merrifield, D. B., “R&D Limited Partnerships areStarting to Bridge the Invention-Translation Gap, ”Research Management 3:9-12, 1986.

25. Miller, L., “Biotechnology Monthly, ” Paine WebberHealth Care Group, February 1987.

26. Mowery, D., “Innovation, Market Structure andGovernment Policy in the American Semiconduc-tor Electronics Industry: A Survey, ” Research Pol-icy 4:293-296, 1983.

27. Murray, JR., “The First $4 Billion is the Hardest, ”BioMechnologV 4:293-296, April 1986.

28. Murray, J. R., James R. Murray & Co., Chicago, IL,personal communication, August 1987.

29. National Science Foundation, Science ResourcesStudies Highlights, NSF 88-306 (Washington, DC:National Science Foundation, Mar. 18, 1988).

30. Paine Webber Co., Biotechnology Industry: 1986Fact Book (New York, NY: Paine Webber Co., 1986).

31. Paulson, M. C., and Goldwasser, J., “Super Stocks

for Tomorrow: Biotech, ” Changing Times, pp. 24-32, June 1987.

32. Pisano, G., graduate student, University of Califor-nia at Berkeley, personal communication, 1987.

33. Storck, W., “Losses Narrow at Most BiotechnologyFirms, ” Chemical and Engineering News 65:11,1987.

34. Teece, D.J., Pisano, G. P., and Shari, W., “Joint Ven-tures and Collaboration in Biotechnology, ” unpub-lished manuscript, July 1987.

35. U.S. Congress, Office of Technology Assessment,Commercial Biotechnology: An International Anal--vsis, OTA-BA-218 (Elmsford, NY: Pergamon Press,Inc., January 1984).

36. U.S. Congress, Office of Technology Assessment,Factors Affecting Commercialization and Innova-tion in the Biotechnology IndustqY, transcript ofworkshop proceedings, Washington, DC, June1987.

37. Venture, “Asian Money,” pp. 34-38, November 1986.38. Webber, D., “Biotechnology Firms Record Substan-

tial Revenue Increases, ” Chemical and Engineer-ing News 64:17-18, 1986.

39. Young, A., Biotech 86: At the Crossroad (San Fran-cisco, CA: Arthur Young, 1986).

Chapter 6

Factors AffectingCommercialization and

Innovation in Biotechnology

"No amount of R&D funding can overcome unresolvable bureaucratic obstacles to the test-ing and use of new biotechnology. ”

Frank E. YoungFDA Commissioner, 1987

"It's difficult to imagine how biotechnology could be 'controlled. ’ “Robert Yuan

International Trade AdministrationDepartment of Commerce

Sept. 15, 1987

. ..

CONTENTS

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97Trade Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

Export Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97Other Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........100

Regulatory Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........100Patents and Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...................101

Patent and Trademark Office . . . . . . . . . . . . . . . . . . . . . . ...................103Antitrust Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......104Taxes and Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........105

Capital Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............105Stock Incentive Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...105R&D Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............,,....,107Basic Research Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............107Investment Tax Credit ., . . . . ....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..107Expensing and Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . ..................108

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................108Chapter 6 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........109

TableTable Page

6-1. Biotechnology Staff and Workload Trends in the U.S. Patent andTrademark Office, 1985-88. . . . . . . . . . . . . . . . . . . . . . . . . . ................103

Chapter 6

Factors Affecting Commercialization andInnovation in Biotechnology

INTRODUCTION

Counting dollars spent on biotechnology re-search is only one way to measure the vigor ofcommercial biotechnology. Assessing industrialpolicy is just as useful. Although the concept ofa U.S. industrial policy has been around since theNew Deal, most recently it returned to the na-tional agenda in 1983 as part of the presidentialelection campaign. Difficult to define under anycircumstances, industrial policy as it relates to bio-

TRADE

There is a growing concern in some sectors thatpursuing a trade policy that promotes high-tech-nology goods for export compromises our nationalsecurity objectives. This conflict might impede theexport of biotechnology products unless economicand national security interests become balanced.As U.S. biotechnology industries have expanded,attention has focused on international promotionand commercialization. Many believe that high-technology industries, such as those employingbiotechnology, might contribute to our economiccompetitiveness and provide a partial remedy forour current deficit crisis.

However, several aspects of U.S. unilateral con-trols have the potential to put U S. biotechnologyfirms at a competitive disadvantage relative tothose of the other members of the CoordinatingCommittee on Multilateral Export Controls (CoCom).Formed in 1949 to coordinate multilateral tradecontrols to Soviet bloc countries, CoCom has 16member nations. Because the biotechnology in-dustries are still developing, it is difficult to dis-cern exactly how much of an effect these exportcontrols and barriers to trade will actually have,

Export Controls

Export controls can impede export transactions.They restrict international technology transfer fornational security, foreign policy, or short supply

technology is nonexistent. However, several fac-tors comprising industrial policy, such as tax rules,antitrust law, trade and export policy, patent law,and the regulatory climate, can be discussed interms of their effects on biotechnology. The fol-lowing section describes policies, legal frame-works, and administrative laws affecting commer-cialization and innovation in biotechnology.

ISSUES

reasons, The National Academy of Sciences (NAS)recently estimated that in 1985, export controlscost the U.S. economy approximately $9.3 billion(24). The debate is composed of proponents whobelieve that relaxing export controls would in-crease the accessibility of Western technology forthe Soviets and opponents that believe excessivecontrols harm U.S. economic competitiveness andtrade relations (5). In the case of biotechnologyexports, some argue that unrestrained export willenhance the ability of other nations to producebiological warfare agents.

Mechanisms of Control

Controls for biotechnology exports come pri-marily under the jurisdiction of the Food and DrugAdministration (FDA), the Department of Com-merce (DOC), and the Department of Defense(DoD). Different statutes may apply to the expor-tation of a biotechnology product—the FDA’s Fed-eral Food, Drug, and Cosmetics Act (FFDCA) andits Drug Export Amendments Act (Public Law 99-660), the DOC’s Export Administration Act (EAA)(Public Law 96-72) and its amendments, and theExport Administration Act Amendments of 1985(EAAA) (Public Law 99-64). Other agencies, suchas the U.S. Department of Agriculture (USDA) orthe State Department, may be asked to review po-tential decisions, but have no direct regulatorypower under these statutes.

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98

FDA Approval

Since the passage of the Drug Export Amend-ments Act of 1986 (Public Law 99-660), FDA ap-proval is no longer a necessary requirement forexportation of drugs and biological products.These amendments abolished the law requiringFDA approval prior to exporting, giving U.S. bio-technology companies greater access to the in-ternational market. Before this law was passed,the companies either licensed their technology toforeign manufacturers, established foreign man-ufacturing facilities, or lost the business abroad.The path has been cleared substantially, thoughthe FDA still must approve the export request,and with few exceptions, the product can onlybe exported to those countries that are on a listof 21 countries specified in the Act and that havealready approved the drug. Furthermore, the ex-porter must have a written agreement from eachimporter stating that the importer will not exportthe drug to any countries that do not appear onthe list of 21 countries (15). The export licenseis subject to cancellation if the FDA finds that thecompany is not actively pursuing approval. (Seech. 9 for further discussion.)

DOC Oversight

DOC plays a large role in the export control proc-ess through its licensing system. Its activities inexport control are guided by U.S. foreign policy,national security, or supply issues. In the case ofbiotechnology, attention will most likely be focusedon exports perceived as threats to U.S. nationalsecurity (15). The DOC follows the procedures con-tained in the 600-page Export Administration Reg-ulations (24). Many products and technologiesrequire only a general license, and need no appli-cation to be exported. Referral to the CommodityControl List (CCL) is necessary for a biotechnol-ogy company to determine whether it needs toapply for a validated license for its product, andif so, what type. The CCL is published by the DOCand administered by the DOC’s Bureau of ExportAdministration. It divides goods and technologiesinto categories and also into geographic groupsaccording to a country’s level of control. Con-trolled commodities on the unclassified list arecategorized into 10 groups; groups 7 and 9 per-tain to biotechnology. Group 7 is primarily chem-ical compounds with a subgroup that includes

DNA, culture media, pharmaceutical products,proteins, and nucleotides; group 9 includes micro-organisms, viruses, bacteria, fungi, and protozoa.

If an item or technical data are included in oneof the categories of the CCL and there is evidencethat it is available abroad, it is necessary for theDOC’s Office of Foreign Availability to conductan assessment. If the item is available in sufficientquantities and is of comparable quality, the itemis supposed to be decontrolled. However, if aftera positive determination the President believes thatdecontrol will threaten national security objec-tives, a “national security override” maybe enacted(25). Attempts may then be made through nego-tiation to persuade the foreign sources to enactcontrols to eliminate the foreign availability (7).Once the determination is made, the results arepublished within 30 days in the Federal Register(25).

DoD Oversight

DoD oversees products and technologies thatappear on the Militarily Critical Technologies List(MCTL). Unlike the CCL, the MCTL is not a con-trol list; rather it provides a technical basis andguidance for DOC export decisions on technol-ogy and equipment that may be used in militarysystems (24,36). The unclassified MCTL containsfour parts—arrays of know-how; keystone man-ufacturing, inspection and test equipment; key-stone materials; and goods which could revealknow-how relevant to the U.S. military system (36).It includes biotechnology products that have dual-use status—products with both civilian and mili-tary applications. For example, bioreactors or high-capacity separating devices are dual-use technol-ogies because, in addition to their positive appli-cations, they can also be used to produce biologi-cal warfare agents (3). One of the categories withdirect relevance to biotechnology covers know-how for recombinant DNA and bioprocessing tech-nologies.

Due to the limited number of biotechnologyproducts on the market at this time, it is difficultto predict how the DOC will interpret the sectionsof the MCTL relevant to biotechnology. In addi-tion to its role in export controls, the DoD alsohas oversight in the patent law process. The De-partment is entitled to screen applications and canrequest the DOC to impose secrecy orders on

99

patents, causing them to become classified infor-mation.

Effects of Controls

Since the 1984 OTA report Commercial Biotech-nology: An International Analysis, was published,there has been little substantive change in exportcontrols and trade issues as they relate to biotech-nology. However, with more products available,the DOC will be more taxed regarding licensingapplications. According to some industry repre-sentatives, current export policies disregard theinterests of biotechnology firms, and are not al-ways administered consistently (12). The prevail-ing view in industrial circles concerned with ex-port control in biotechnology is that the issuesare worse now than they were before the 1985Amendments were passed, Some suggest that theagencies involved are inadequately staffed andpoorly trained to deal with the complexity pre-sented by biotechnology and other high-technol-ogy areas.

The DOC underwent a reorganization after thepassage of the EAAA. Issues of export control arenow handled in a newly created entity of the DOC.The Bureau of Export Administration now has itsown Under Secretary and is no longer housed un-der the International Trade Administration (ITA).The previous position of Export Administrationraised conflict of interest questions because theITA was involved with both the promotion andthe control of exports. The new level of ExportAdministration gives more visibility to the exportcontrol issues.

The decontrol of technologies on the CCL hasproved to be a contentious issue. If the DOC’s Of-fice of Foreign Availability conducts an assessmentand determines that an item is available abroad,then that item is supposed to be decontrolled. Arecent NAS study concluded that the technologydecontrol process has not been carried out effec-tively. NAS attributed this to the lack of time con-straints in the legislation and the excessive influ-ence of the DoD. It was also recommended thatthe in-house technical and analytical expertise ofthe DOC be upgraded, particularly in the areasof high-technology products and processes (24).

However, the DOC has not been totally ignorantof industry needs. In 1986, DOC responded to criti-

cisms that the controls were retarding West-Westtrade, by introducing a certified end user or “gold-card” status to approved, reliable companies inJapan and 14 European nations (24,7). These 2-year licenses speed up the export process by elim-inating the need for repeated applications forexport licenses to those buyers. Whether thisprovision is as useful to high-technology goodsexporters as originally predicted remains to beseen.

In addition, under the direction of the DOC’sBureau of Export Administration, a TechnicalAdvisory Committee (TAC) met in April of 1985for the first time. Similar TACs exist to advise onissues in computer systems, electronic instrumen-tation, semiconductors, telecommunications, andtransportation. The Biotechnology TAC includesboth biotechnology industrialists and governmentrepresentatives from the DOC, DoD, and State De-partment. Members are nominated to TAC andserve 4-year terms of office. They provide infor-mation and advice to participating agencies ontechnical matters, export regulations affecting bio-technology, issues of trade development as af-fected by the controls, worldwide availability, andnew technological developments. However, theTAC was not set up to provide members of thebiotechnology industries with information aboutthe export control process (11). It is not clear thatthe goals of TAC have been met, particularly inthe decontrol of items available abroad. At a Sep-tember 1987 meeting of the TAC, members ex-pressed some concern about the productivity oftheir efforts.

Due to expire in September of 1989, the EAAis again being discussed in Congress. The issuethat remains is whether it is possible for Congressto formulate a policy that balances U.S. foreignpolicy and national security interests while pur-suing national economic vitality. The outcome ofthis debate is important to the future success ofthe biotechnology industries, because they maybe placed at a competitive disadvantage relativeto nations without unilateral controls. The eco-nomic potential of the biotechnology industriesmay never be realized if companies cannotcomply with the procedures and restrictionsassociated with the Export AdministrationRegulations (12). Under review are several

100

aspects of the legislative proposals that apply to Other Barriersbiotechnology. These are:

Other trade barriers also affect biotechnology●

●

outlining the specific functions of the govern-ment agencies involved in the export controlprocess, thereby clarifying the DoD’s role;removing controls (licensing requirements)on low-technology items;developing and enforcing timelines for decon-trolling items that have been found outsidethe United States by the DOC’s Office of For-eign Availability; andreviewing the Commoditythe intention of reducing

products. Actual tariffs on products are rare. Non-tariff barriers, defined as “any government inter-vention affecting competition between importedand domestic goods” (33), are most likely to presentobstacles for U.S. biotechnology products abroad.The barriers to biotechnology transfer that wereidentified in the 1984 OTA report remain. Theseare standards and certification systems, subsidies,price regulation, and government procurement.

Control List with All are methods to protect a product’s domesticits size (17). market.

REGULATORY CONCERNS

In a report prepared for the Environmental Pro-tection Agency (8), market considerations werecited as dominant factors influencing industrialbiotechnology R&D strategies. However, the sta-tus of governmental regulation can become a pri-mary factor by affecting the cost, time to market,and especially the uncertainty of R&D. Thus,when regulation is untried in the marketplace,untested in the courts, or ambiguous in status andscope, the resulting set of uncertainties can be-come a dominant influence in selecting or reject-ing an R&D objective and associated businessstrategies.

Multiple tensions among uncertainty, market po-tential, and the economic factors of productioncan affect research, production, and marketingdecisions in many significant ways. Because therange of commercial opportunities for biotech-nology is uncommonly wide, regulatory uncer-tainty could be a factor driving firms away fromapplications in areas of high uncertainty to thoseof lesser uncertainty.

Interviews with a number of senior executivesin biotechnology firms revealed that a substan-tial majority of them see regulatory uncertaintyas being among their most pressing problems,including specifically the increased cost of per-forming R&D and doing business generally. TheGeneral Accounting Office (GAO) has noted thatregulatory requirements vary considerably byproduct type and by the agency charged with reg-ulatory responsibilities. Each agency employs its

own internally defined standards and procedures(32).

While the regulatory aspects of biotechnologyare covered in Field Testing Engineered Organ-isms: Genetic and Ecological Issues (34), it is im-portant to underscore the relationship of severalof these to private R&D costs and investment inbiotechnology. Analysis of a variety of reports andinterviews with key individuals in and out of gov-ernment leads to a major conclusion: from an in-dustry perspective, regulatory uncertainty loomsas a critical factor in the future of biotechnology.It is likely that biotechnology faces a muchdifferent and more stringent regulatory envi-ronment than do many other components of

Photo credit: Monsanto

Genetically engineered tomato plants are shown beingplanted by researchers at a Monsanto-based farm in

Jersey County, Illinois.

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high-technology industries, increasing thecost of R&D and the amount of total invest-ment required. In addition, the regulatoryframework encompasses several agencies,each with its own approach to approval. Atpresent, uncertainties are being resolved andambiguities identified. It is too early to assessthe effects of regulation on commercializationof biotechnology.

The international features of biotechnology reg-ulation will present additional uncertainties.Proposals to establish an international set of guide-lines under the auspices of the Organization forEconomic Cooperation and Development (OECD)have not been successful. Three U.N. organiza-tions—the U.N. Industrial Development Organiza-tion, the World Health Organization, and the U.N.Environment Program —have launched a programto establish new safety guidelines for the infantbiotechnology industry in the Third World. Min-imum safety guidelines for biotechnology are in-tended for eventual adoption by all countries (19).

Biotechnology firms are warily watching the un-folding of regulatory decisions in Europe, Japan,and the United States (38,28).

Industry representatives told OTA that biotech-nology progress will be hindered unless the Fed-eral Government pays a great deal more atten-tion to the regulatory arena, especially to riskassessment activities and programs. Former EPAAdministrator William Ruckelshaus has put thisdirectly:

The Administration must attach a high enoughvalue to maintaining our worldwide lead in thistechnology to devote enough government re-sources to its regulation so that real public con-cerns about risks can be satisfied. And that levelof attention has not yet been evident from thisAdministration (23).

Regulatory issues specific to applications of bio-technology in human therapeutics, plant agricul-ture, and waste use and pollution control are dis-cussed in chapters 9, 10, and 11.

PATENTS AND INVESTMENT

When the Supreme Court addressed the issueof patenting living organisms in Diamond v.Chakrabarty in 1980, the potential profitabilityof biotechnology became apparent to scientistsand investors. Since then, 6,000 biotechnology pat-ents have been filed with the the U.S. Patent andTrademark Office (PTO) (37). The tangle of pat-ents awaiting approval is one of the more diffi-cult dilemmas facing the industry today as moreand more products near the market. Already, pat-ent battles are being fought over interleukin-2,tissue plasminogen activator, human growth hor-mone, hybridoma technology, alpha interferon,factor VIII, and use of dual monoclinal antibodysandwich immunoassay in diagnostic test kits.There is significant uncertainty about how thecourts will interpret the claims for biotechnologypatents. Companies receiving basic product pat-ents are in court enforcing their rights againstinfringement or defending the patent grant in op-position or revocation proceedings. It is likely thatpatent litigation in biotechnology will increasegiven the complex web of partially overlapping

patent claims, the high-value products, the prob-lem of prior publication, and the fact that manycompanies are chasing the same products. Manycompanies are finding it essential to determinea product’s patent position prior to marketing (2).Chapter 9 discusses some of the difficult patentissues facing the human therapeutics industry.

This report does not attempt to assess the com-plexities of these disputes. An upcoming OTA re-port on Patenting Life will address legal issues ingreater detail. It is important to note, however,that patent uncertainty is a critical factor affect-ing commercialization in biotechnology. Compa-nies face a battle on two fronts: domestic and in-ternational. The protection of U.S. patents abroadis currently being pursued by U.S. representativesof the General Agreement on Tariffs and Trade(31).

Investors watch the biotechnology patent bat-tles and often react quickly to the latest legal de-cision. For example, in September 1986, Genen-tech’s stock dropped 10.5 points following the

—. —.

102

The patent awarded to Stanley Cohen and Herbert Boyer in 1980. This patent has since become Stanford University’stop earning patent ($1.7 million annually).

United States Patent [191 [11] 4,237,224Cohen et al. [45] Dec. 2, 1980

[54] PROCESS FOR PRODUCINGBIOLOGICALLY FUNCTIONALMOLECULAR CHIMERAS

[75] Inventors:

[73] Assignee:

[21] Appl. No.:

[22] Filed:

Stanley N. Cohen, Portola Valley;Herbert W. Boyer, Mill Valley, bothof Calif.

Board of Trustees of the LelandStanford Jr. University, Stanford,Cal if.

1,021

Jan. 4, 1979

Related U.S. Application Data[63] Continuation-in-part of Ser. No. 959,288, Nov. 9, 1978,

which is a continuation-in-part of Ser. No. 687,430,May 17, 1976, abandoned, which is a continuation-in-part of Ser. No. 520,691, Nov. 4, 1974.

[51] Int. CL~ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C12P 21/00[52] U.S. Cl. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435/68; 435/172;

435/231; 435/183; 435/317; 435/849; 435/820;435/91; 435/207; 260/1 12.5 S; 260/27R; 435/212

[58] Field of Search . . . . . . . . . . . . . . 195/1, 28 N, 28 R, 112,195/78, 79; 435/68, 172, 231, 183

[56] References CitedU.S. PATENT DOCUMENTS

3,813,316 5/1974 Chakrabarty . . . . . . . . . . . . . . . . . . . . . . 195/28 R

OTHER PUBLICATIONS

Morrow et al., Proc. Nat. Acad. Sci. USA, vol. 69, pp.3365-3369, NOV. 1972.Morrow et al., Proc. Nat. Acad. Sci. USA, vol. 71, pp.1743-1747, May 1974.Hershfield et al., Proc. Nat. Acad. Sci. USA, vol. 71,pp. 3455 et seq. (1974).Jackson et al., Proc. Nat. Acad. Sci. USA, vol. 69, pp.2904-2909, Oct. 1972.

Mertz et al., Proc. Nat. Acad. Se]. USA, vol. 69, pp.3370-3374, Nov. 1972.Cohen, et al., Proc. Nat. Acad. Sci. USA, vol. 70, pp.1293-1297, May 1973.Cohen et al., Proc. Nat. Acad. Sci. USA, vol. 70, pp.3240-3244, Nov. 1973.Chang et al., Proc. Nat. Acad. Sci, USA, vol. 71, pp.1030-1034, Apr. 1974.Ullrich et al., Science vol. 196, pp. 1313-1319, Jun.1977.Singer et al., Science Vol. 181, p. 1114 (1973).Itakura et al., Science vol. 198, pp. 1056-1063 Dec.1977.Komaroff et al., Proc. Nat. Acad. Sci. USA, vol. 75, pp.3727-3731, Aug. 1978.Chemical and Engineering News, p. 4, May 30, 1977.Chemical and Engineering News, p. 6, Sep. 11, 1978.

Primary Examiner—Alvin E. TanenholtzAttorney, Agent, or Firm--Bertram I. Rowland

[57] ABSTRACTMethod and compositions are provided for replicationand expression of exogenous genes in microorganisms.Plasmids or virus DNA are cleaved to provide linearDNA having Iigatable termini to which is inserted agene having complementary termini, to provide a bio-logically functional replicon with a desired phenotypi-cal property. The replicon is inserted into a microor-ganism cell by transformation. Isolation of the transfor-mants provides cells for replication and expression ofthe DNA molecules present in the modified plasmid.The method provides a convenient and efficient way tointroduce genetic capability into microorganisms forthe production of nucleic acids and proteins, such asmedically or commercially useful enzymes, which mayhave direct usefulness, or may find expression in theproduction of drugs, such as hormones, antibiotics, orthe like, fixation of nitrogen, fermentation, utilization ofspecific feedstocks, or the like.

14 Claims, No Drawings

SOURCE Office of Technology Licensing, Stanford University,

news that Hoffman-La Roche had sued it for in- On average, DBCs have filed fewer biotechnol-fringing a patent for human growth hormone. ogy patent applications than larger, establishedGenentech’s stock rose the previous year when firms—1.5 versus 10 applications in 1986. This isit sued Burroughs-Wellcome (PLC) for allegedly most likely due to a greater institutional capacityinfringing a British patent on tissue plasminogen to file multiple patents in the larger, more diver-activator. sified companies.

103

How the courts uphold issued patents, and in-terpret new ones, as well as how well U.S. com-panies are able to protect patents abroad, will beissues facing biotechnology forerunners in thenext few years. Uncertainty over patent protec-tion is likely to be costly and will undoubtedlyinfluence the R&D strategy of many compa-nies. In the short term, trade secrets are beingsought as an alternative route for the protectionof products. Eighty-five percent of the large cor-porations responding to the OTA survey indicatedthat they expect to pursue trade secrecy protec-tion for biotechnology lines in addition to patentprotection. While there is no time limit on tradesecret protection, disclosure terminates protec-tion. In addition, where parallel research is under-way, there is a high likelihood of simultaneous in-vention, presenting a threat to trade secrecy. Whilebiotechnology industrialists are skeptical aboutthe value of trade secrecy versus patents, theformer could bean option where inventions sim-ply are not patentable because they fail to meetthe statutory criteria of novelty, non obviousness,and utility. Trade secrecy is probably more likelyto be employed for invented processes rather thanfor products (26). Ultimately, patent protection fa-cilitates licensing transactions and is more desira-ble for many DBCs (22).

Patent and Trademark Office

At the PTO, the Biotechnology and OrganicChemistry group has experienced a turnover ofand a difficulty in acquiring patent examiners withexpertise in fields associated with biotechnology

(see table 6-1). Under these circumstances, it isabout 24 months, on the average, before proc-essing of a biotechnology patent application is ini-tiated. In contrast, 6 months is the average timethat passes before examination of patent applica-tions for conventional drugs begins (37). Thistime lag, along with an atmosphere of generaluncertainty over patent rights, may cause com-panies developing biotechnology products tofile many more patents than are typical forconventional drugs.

There are two reasons why government per-sonnel reviewing drug marketing approval or pat-ent applications become dissatisfied with their po-sitions. First, the work tends to be repetitive and

administrative, a disincentive for trained scien-tists used to more interesting and creative work.Second, these individuals are often capable ofearning substantially higher salaries in the pri-vate sector. In a rapidly evolving technology suchas biotechnology, the industrial regulatory affairsand legal offices (among others) can profit greatlyfrom the “insider’s view” of personnel trained atFederal agencies. Federal incentive programsfor trained scientists that will bring them toand keep them at these types of positions ingovernment are vital to the impact of biotech-nology on drug development, as well as toother major areas of applied biotechnology.The PTO is currently undergoing a reorganiza-tion of those groups dealing with biotechnologyproducts that is expected to reduce the time lagfor patent approvals.

Table 6-1.— Biotechnology Staff and Workload Trends in the U.S. Patent and Trademark Office, 1985-88

As of As of As of As ofJan. 1988 Jan. 1987 Jan. 1986 Jan. 1985

Examiners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 32 30 30Pending applicationsNew (not yet acted on) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,051 3,307 3,155 2,202

Tentatively rejected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,472 1,879 2,173 1,529Amended . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 384 651 445 172

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,907 5,837 5,773 3,903

Total completed (granted or abandoned in previous year) . . . . . . . . . . . . 2,190 2,044 1,573 1,171Approved applications (previous year) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 887 816 712 556Percent approved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.5 ”/0 40 ”/0 45.30/0 47.5%SOURCE Charles Van Horn, U S Patent and Trademark Off Ice, 1987

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ANTITRUST CONSIDERATIONS

OTA was unable to identify antitrust law issuesor difficulties unique to biotechnology. The largerdebate on antitrust essentially concerns economicpolicy and high technology in the framework ofglobal competition. However, as was suggested inan earlier OTA report (33), two issues should beraised with respect to biotechnology:

whether U.S. antitrust law discourages or in-hibits formation of R&D joint ventures,thereby retarding innovation and the com-petitiveness of U.S. firms in world markets;andwhether U.S. antitrust law inhibits the legiti-mate exploitation via licensing arrangementsof the technology created by R&D efforts.

American companies have traditionally avoidedcollaboration in R&D. The principle reasons seemto arise from the view that cooperation does notresult in benefits, an unwillingness to share pro-prietary data and decisionmaking, and fears ofprivate or government antitrust actions. But globalcompetition and the rising costs of performingR&D are driving some major U.S. corporationsto consider alternatives to internally generatedand financed research projects. In biotechnology,a group of companies interested in forming a con-sortium to conduct research in protein engineer-ing has met to develop plans and raise funds (18).

Since 1980, and especially since passage of theNational Cooperative Research Act of 1984 (NCRA)(Public Law 98-462), research consortia have be-gun to proliferate in various industrial sectors,especially in microelectronics (14). Both the De-partments of Commerce and Justice havepromoted and encouraged the formation of re-search consortia to cope with foreign competi-tion. However, the breadth and vagueness of theantitrust statutes, along with perceived ambiguityin the guidelines and business review proceduresused by the Justice Department, have resulted inwidely held beliefs that collaborative researchorganizations would be threatened by antitrustactions (27).

Despite underlying suspicion by industry, theJustice Department has never challenged a pureresearch joint venture under the antitrust law.Between 1950 and 1980, only three joint R&D ven-tures were challenged, and each involved signifi-cant collateral restrictions that were deemed toretard innovation (13). Further, no plaintiff hasever won an antitrust case against a member ofa collective research effort (39).

The NCRA was aimed to reduce uncertainty andthe level of risks associated with antitrust. It spe-cifically removed the threat of treble damages andmade it costly to file frivolous private antitrustactions. Further, NCRA makes it clear that a rule-of-reason analysis will be used to assess the com-petitive effects of any R&D joint venture. The rule-of-reason concept is important because it meansthat the licensing practices of an R&D joint ven-ture cannot be automatically condemned underthe so called per se illegal doctrine, but must beweighed in terms of competitive benefits and anyadverse competitive effects. Only those practicesfound on balance to be anticompetitive could besubject to enforcement action or judicial decree.

Response to NCRA seems positive. The DOC hasreported that notifications of new R&D consor-tia have been taking place at the rate of two orthree per month. OTA was informed of only oneproposed consortium in biotechnology (18). Con-sortial activity in biotechnology may be limitedfor

●

●

●

the following reasons.

Biotechnology is in an early and highly com-petitive stage, in which patentable processesand know-how are of great importance,R&D Limited Partnerships have offered bio-technology firms substantial resources as analternative to R&D consortia.Biotechnology is characterized by rapid tech-nological change, high growth, and privatecompanies with intensive internal R&D activ-ities. The need for widespread collective activ-ities may just be emerging (14).

105

TAXES AND

High-technology industries, such as biotechnol-ogy, are often characterized by higher levels ofR&D investment than other industries. Tax re-lief is one of the methods the Federal Governmentuses to reduce the financial burden on R&D-in-tensive industries. This is based on the premisethat such investment results in public benefits andin a greater rate of industrial innovation thanwould have occurred otherwise (l). Biotechnol-ogy industries rely on tax incentives because ofthe high levels of R&D necessary to develop andcommercialize products. At present, it is difficultto assess the extent to which commercializationand development decisions in the biotechnologyindustries have been affected by the Tax ReformAct of 1986 (TRA) (Public Law 99-514). The diffi-culty is due, in part, to the small number of bio-technology companies that are realizing a profit.As more products reach the marketplace, tax plan-ning will become a higher priority for them (6).Some analysts maintain that the revised tax in-centives have only affected the distribution of in-vestment, not the total amount of money avail-able for investment (21). For example, RDLPs wereoriginally predicted to disappear because the TRAvirtually abolished tax shelters. Yet interest inRDLPs has prevailed. Perhaps this is because theyno longer advertise themselves as tax shelters,rather they now emphasize their ability to pro-duce income for the limited partner.

Theories on the effect of the TRA on businessinvestment are abundant. Many in the businesscommunity believe that their tax burden has beenincreased to offset lowered individual tax rates.The TRA altered several of the investment incen-tives that were adopted under the Economic Re-covery Act of 1981 (ERTA) (Public Law 97-34). Anaim of TRA was to “level the playing field” for in-vestment, thus creating a more efficient and equi-table system (29). Several tax analysts have con-cluded that high-technology industries were notaffected as much as some other industrial sectors.The initial predictions of disaster for the biotech-nology industries resulting from TRA have abated.

Capital Gains

One of the most significant impacts of the TRAon the biotechnology industries is its effect on the

INVESTMENT

preferential treatment of capital gains. Prior tothe TRA of 1986, gains from selling stocks werepreferred over the actual stock dividends. If anasset had been held for 6 months or longer, 60percent of the gain was not taxed (30). Long-termgains were those held for more than 6 months.Under TRA, the distinction between long- andshort-term tax gains was abolished at the end of1987. Gains and income are now taxed at the samerate.

This is important to investment in the biotech-nology industries because the tax treatment of cap-ital gains was a primary attraction for investorsin both RDLPs and venture capital companies. Be-cause the returns from venture capital are mostlyin the form of capital gains, some see the venturecapital method of funding becoming unpopularto investors. For example, under the old treatmentof capital gains, 60 percent of long-term gains fromthe sale of capital assets were not taxed. The re-maining 40 percent were taxed at ordinary rates,which did not exceed 50 percent. This meant thatthe maximum tax on capital gains was 20 percent,compared to the 50 percent maximum rate on or-dinary income (4).

Stock Incentive Option

Prior to TRA, it was common for biotechnol-ogy companies to offer their employees incentivestock options. This was beneficial to the em-ployee because the gains on stock optionswere treated as capital gains rather than ordi-nary income. Because TRA now taxes anygains received from the sale of stocks as ordi-nary income, the benefits and the attractiveness of incentive stock options have beenreduced.

In a 1987 workshop held by the Industrial Bio-technology Association, biotechnology industri-alists were given ideas on how to restructure theiremployee incentive programs. Incentive programshave been important for attracting top employ-ees to small biotechnology companies. Sincesmaller companies cannot compete with the largecorporations in salaries, they had offered consid-erable incentive option packages. It is now rec-ommended that biotechnology companies offereither cash compensation or non-qualified stock

106

PUBLIC LAW 99-514–OCT. 22, 1986

Public Law 99-51499th Congress

An Act

100 STAT. 2085

To reform the internal revenue laws of the United States.Oct. 22, 1986—-—[H.R. 3838] --

Be it enacted by the Senate and House of Representatives of theUnited States of America in Congress assembled,SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 26 USC 1 et seq.

(a) SHORT TITLE.--This Act maybe cited as the “Tax Reform Act of1986”.

(b) TABLE OF C ONTENTS. —

TITLE I–INDIVIDUAL INCOME TAX PROVISIONSSubtitle A—Rate Reductions; Increase in Standard Deduction and Personal

Exemptionssec. 101. Rate reductions. .Sec. 102. Increase in standard deduction.Sec. 103. Increase in persona! exemptions.Sec. 104. Technical amendments

Subtitle B–Provisions Related to Tax CreditsSec. 111. Increase in earned income credit.Sec. 112. Repeal of credit for contributions to candidates for public office.

Subtitle C—Provisions Related to ExclusionsSec. 121. Taxation of unemployment compensation.Sec. 122. Prizes and awards.Sec. 123. Scholarships.

Subtitle D-Provisions Related to DeductionsSec. 131. Repeal of deduction for 2-earner married couples.Sec. 132. 2-percent floor on miscellaneous itemized deductions.Sec. 133. Medical expense deduction limitation increased.

Sec. 134. Repeal of deduction for State and local sales tax.Sec. 135. Repeal of deduction for adoption expenses.

Subtitle E—Miscellaneous ProvisionsSec. 141. Repeal of income averaging.Sec. 142. Limitations on deductions for meals, travel, and entertainment.Sec. 143. Changes in treatment of hobby loss, etc.Sec. 144. Deduction for mortgage interest and real property taxes allowable where

parsonage allowance or military housing allowance received.Subtitle F—Effective Dates

Sec. 151. Effective dates.TITLE II–PROVISIONS RELATING TO CAPITAL COST

Subtitle A—Depreciation ProvisionsSec. 201. Modification of accelerated cost recovery system.Sec. 202. Expensing of depreciable assets.Sec. 203. Effective dates; general transitional rules.

Subtitle B-Repeal of Regular Investment Tax CreditSec. 211. Repeal of regular investment tax credit.Sec. 212. Effective 15-year carryback of existing carryforwards of steel companies.Sec. 213. Effective 15-year carryback of existing carryforwards of qualified farmers.

Public Law 99-514, The Tax Reform Act of 1986

107

options. These options can be deducted by thecompany when sold (6).

R&D Tax Credit

The original R&D credit was first adopted un-der ERTA at a 25 percent incremental rate. It ex-pired at the end of 1985, and was extended for3 years under TRA at the lower level of 20 per-cent. In response to criticisms that the definitionof “qualified research” had caused companies toreclassify some expenditures as R&D, Congressnarrowed the definition to exclude non-researchactivities. Under TRA, “qualified research” mustbe “technological in nature” (not social science)and its applications must be useful to the taxpayerin the development of a new or improved busi-ness component (20). The R&D credit’s definitionnow places greater emphasis on innovation in re-search.

The provisions provide a 20 percent credit inexcess of the average amount of R&D expendi-tures for the previous 3 years. The incrementalnature of the credit ties it to increasing researchexpenditures rather than total expenditures madein a year, thus encouraging companies to increasetheir R&D commitment. Qualifying expendituresinclude in-house expenditures for R&D wages andsupplies and 65 percent of the amount paid forcontract research. Equipment expenditures do notqualify. The R&D tax credit has been of littleuse to many biotechnology companies becausethey are not profitable enough to generate acredit.

The credit will expire again at the end of 1988,and Congress will have to decide whether to con-tinue extending it or to make it a permanent partof the US. Tax Code. Those in favor of the credit’spermanency are also requesting a restored rateof 25 percent, arguing that the temporary statusof the credit reduces its reliability to R&Dplanners.

Basic Research Tax Credit

The basic research credit was adopted underTRA to encourage and increase spending on basicresearch at universities and other nonprofit sci-entific and grant research institutions by busi-nesses. The credit allows companies to deduct 20

percent for research grants, contributions, andcontracts under written agreement at universi-ties or nonprofit institutions. Equipment and serv-ices for basic research are not included under thiscredit; only cash funding will be eligible (20). Thiscredit differs from the R&D tax credit in that itis not tied to increased spending levels, but canbe applied to the total sum of contract payments.Provided that the payments exceed the fixed min-imum base level, a company engaged in multiyearresearch contracts can take the credit each year(10). The fixed minimum base level is referred toas the “qualified organization base period amount”and is comprised of a maintenance of effort amountplus one percent of the company’s average an-nual research.

Basic research that is eligible for this credit isnot eligible for the R&D tax credit. However, basicresearch that is not claimed under the credit be-cause it does not exceed the qualified organiza-tion base period amount, can be taken under theR&D credit as contract expenses. This credit willexpire along with the R&D tax credit at the endof 1988, at which time a decision will be madeon its impermanent status. While opponents ar-gue that these credits add to the federal budgetdeficit through revenue loss, proponents cite thebenefits to the economy of enhanced cooperationbetween private industry and universities.

Investment Tax Credit

First instituted in 1962, the investment tax credit(ITC) was one of the specific tax incentives thatthe Federal Government established to encourageinvestment in physical plants and equipment. Itallowed a company to deduct a 10 percent creditfor the cost of qualified property that was eitherconstructed or purchased.

The repeal of the ITC will adversely affect fu-ture investment in equipment. The ITC provideda considerable financial advantage to companiesand was particularly helpful for start -up compa-nies with large equipment investments. Some fi-nancial analysts believe that reduced tax rates forcorporations were supposed to compensate forthe repeal of the ITC. Lowering the tax rate ben-efits those companies large enough to qualify, butdoes little to help small biotechnology companies

108

with little or no profit. Effective tax rates in areasrelated to technological innovation and R&D in-vestment will be increased by these provisions (36).and may negatively affect the biotechnology in-dustries over time.

Expensing and Depreciation

Another area that was targeted by tax reformerswas depreciable assets. Before TRA, deductionsfor depreciable assets like equipment were oftentaken before the assets depreciated. However, un-der the new tax law depreciation rates wereslowed down for most assets, reducing the value

of the depreciation deduction from a company’staxable income. When combined with the repealedITC, the TRA may have actually increased the taxburden for equipment investment (6,9). One op-tion used by small businesses is not to take thedepreciation and instead take a tax deduction inthat year, called expensing, for equipment pur-chases. In a study on the effects of TRA on tech-nological innovation, the Congressional ResearchService called the expensing of intangible coststhe most important tax incentive for R&D spend-ing (16). Intangible costs are things such as sala-ries, supplies, R&D, and marketing; tangible costsusually refer to equipment and buildings.

SUMMARY

Issues of export controls and national securitycontinue to concern some biotechnology indus-trialists pursuing international markets. The DrugExport Amendments Act of 1986 is seen as a meansof assisting biotechnology companies in gainingaccess to foreign markets. The ultimate impactof these amendments has yet to be determined.Currently, the Department of Commerce and theDepartment of Defense are examining the rolesof the Commodity Control List and the MilitarilyCritical Technologies List on high-technology ex-ports, including biotechnology products. As bio-technology produces more products for expor-tation, industry is concerned that the licensureprocess will slow to the detriment of U.S. in-dustry.

Biotechnology has become an essential tool ofmany industries. Thus, there is no such entity as“the biotechnology industry.” Biotechnology isa tool employed by several sectors. Each sec-tor faces its own unique advantages and hur-dles in the commercialization process. As bio-technology becomes fully integrated, it is oftensubsumed into the financial markets, regula-tory requirements, patent issues, and person-nel needs faced by those industries It is evi-dent, however, that regulatory and patentuncertainty regarding biotechnology maypresent a temporary slowing of commerciali-zation as new protocols are worked out.

At present, uncertainties about Federal regula-tion are being resolved and ambiguities identified.It is likely that biotechnology faces a much differ-ent and more stringent regulatory environmentthan other high-technology sectors. It is too earlyto assess the impact of regulation on commercialbiotechnology, but it can be assumed that regula-tion will increase the cost of performing R&D anddoing business generally.

Current patent battles will set many precedentsfor future rulings. It is likely, however, that pat-ent litigation in biotechnology will increase giventhe complex web of partially overlapping patentclaims, high-value products, prior publication, andsimultaneous production of a product by manycompanies. And, as patent battles are faced do-mestically, biotechnology companies will increas-ingly confront dilemmas of international patentprotection. Finally, although trade secrecy is be-ing sought by many companies in addition to pat-ent protection, it is not the desirable route andis considered an unfortunate alternative by manybiotechnology patent attorneys.

OTA did not find evidence that the threat ofantitrust violations has impeded collaborative ef-forts in the private sector. One group of industri-alists has initiated discussions about the futureof private R&D consortia in biotechnology.

109

CHAPTER 6 REFERENCES

1. Baily, M. N., and Lawrence, R. Z., ‘(Tax Policies forInnovation and Competitiveness,” prepared for theCouncil on Research and Technology, Washington,DC, 1987.

2. Benson, R. H., “Patent Wars,” Bio/’Technologv4:1064-1070, December 1986.

3. Birkner, J., “Biotechnology Transfer-National Secu-rity Implications, ” Biotechnology in Society: PrivateInitiatives and Public Oversight (New York, NY: Per-gamon Press, 1986).

4. Bodde, D., and Webre, P., “High Technology’s Stakein Tax Reform,” Technology Review 89(5), 1986.

5. Bonker, D., “Technology Transfer, Scientific Free-dom, and National Security,” Issues in Science and7’echnologV 3:96-104, 1986.

6. Burrill, G. S., and Harem, J., “Biotechnology FirmsNeed Tax Strategies That Address Key Issues,”Genetic Engineering News 7(8):34, 1987.

7. Caldwell, D., “The Export Administration Amend-ments Act of 1985: A Reassessment and Proposa]sfor Further Reform,” Vanderbilt Journal of 7’rans -national Law, 19:811-853, 1986.

8. Coates, J. F., and Heinz, L., Regulating the Secretof Life: Making or Breaking an Industrial Revolu-tion (Washington, DC: J.F. Coates, 1985).

9. Coleman, R. G., “The Effect of Tax Reform on theBiotechnology Industry,” Genetic En@”neering News(6)4,5, April-May 1986.

10. Council on Research and Technology (CORETECH),“The New Basic Research Credit: An Incentive forResearch Institutions and Corporations, ” 198i’.

11. De La Tore, M., Attorney Advisor, Office of the Gen-eral Counsel, U.S. Department of Commerce, per-sonaI communication, 1987.

12. Edelberg, K., and Mackler, B., “Making Sense of Bi-otech Export License Applications, ” Genetic Engi-neering News 5(8):4,35, 1985.

13. Ewing, K. P., “Joint Research, Antitrust, and Inno-vation, ” Research Management, March 1981.

14. Fusfeld, H. I., and Haklisch, C. S., “Cooperative R&Dfor Competitors, ” Harvard Business Review63(6):60-76, 1985.

15. Gibbs, J. N., “Exporting Biotechnology Products: ALook at the Issues, ” Bioflechnology 5:46, January1987.

16. Gravelle, J. G., “The Effect of the Tax Reform Actof 1986 on Technological Innovation” (Washington,DC: U.S. Congress, Congressional Research Serv-ice, Feb. 17, 1987).

17. Holliday, G., and Harrison, G. J., “Export Controls”(Washington, DC: U.S. Congress, Congressional Re-search Service, Oct. 7, 1987).

18. Keystone Center Working Group, Initiative for In-ternational Competitiveness in American Biotech-nology, Keystone, CO, 1987.

19. Land, T., “U.S. to Establish Biosafety Rules for ThirdWorld Countries)” Genetic En&”neering News, Sep-tember 1986.

20. Lawrence, P. A., “Research and Development Un-der the TRA: High-Tech Companies Gain Signifi-cant Advantage, ” The Tax Advisor, pp. 764-774, Oc-tober 1987.

21. Magnusson, P., “Why Tax Reform Isn’t Taking aToll on Investment,” Business Week, p. 26, Aug.

22.

23.

24.

25

26.

27.

28.

29.

30.

31.

32.

33.

10, 1987.Merges, R. P., Julius Silver Fellow, Columbia Univer-sity School of Law, New York, NY, personal com-munication, 1987.Moore, W.J., “Genes for Sale, ” National Journal18(25): 1528-1535, 1986,National Academy of Sciences, Balancing the Na-tional Interest: U.S. National Security, Export Con-trols, and Global Economic Competition (Washing-ton, DC: National Academy Press, 1987).Pikus, I. M., “Commerce Provides Opportunity forBusiness Input to Export Controls,” pp. 20-22, Feb.29, 1988.Raines, L., Industrial Biotechnology Association,persona] communication, 1987.Schwartz, D. C., and Cooper, J. M., “Antitrust Pol-

icy and Technological Innovation: A Response, ” is-sues in Science and Technology 1(3):128-135, 1985.Sun, M., “Administration Divided Over OECD Bi-otech Plan,” Science, Aug. 30, 1985.Summers, L. H., “A Fair Tax Act That Bad for Busi-ness,” Harvard Business Review, 65(2):53-60, 1987.U.S. Congress, Congressional Budget Office, Fed-eral Support for High-Technology Industries,Washington, DC, June 1985.U.S. Congress, Congressional Budget Office, TheGATT Negotiations and U.S. Trade Policy (Wash-ington, DC: U.S. Government Printing Office, 1987).U.S. Congress, General Accounting Office, Biotech-nology: Analysis of Federally Funded Research,RCED-86-187, Washington, DC, 1986.U.S. Congress, Office of Technolo~ Assessment,Commercial Biotechnolo@: An International Anal-ysis, OTA-BA-218 (Elmsford, NY: Pergamon Press,Inc., January 1984),

34. U.S. Congress, Office of Technology Assessment,New Developments In Biotechnology: Field Test-ing Engineered Organisms: Genetic and EcologicalIssues, OTA-BA-350 (Washington, DC: GovernmentPrinting Office, May 1988).

110

35. U.S. Department of Commerce, “Status of Emerg- 37.ing Technologies: An Economic/’T’echnologicalAssessment to the Year 2000, Washington, DC, 38.June 1987.

36. U.S. Department of Defense, Office of Under See- 39.retary of Defense Acquisition, The A4ilitari[v Criti-cal Technolo@”es List (Washington, DC: October1986).

U.S. Patent and Trademark Office, personal com-munication, April 1987.Walgate, R., “Europe: A Few Cooks Too Many, ”Bio~echnology 3(12):1070, December 1985.White, L. J., “Clearing the Legal Path to Coopera-tive Research,” Technology Review 88(5):38-44,1985.

ing Walgate, Biofrechnology 3(12):1070,

Militarily 88(S):38-44,

Technologies

Chapter 7

University-IndustryResearch Arrangements

in Biotechnology

“The interaction of industry with the universities is essential to provide an effective exploita-tion of the research base. This partnership is critical to our national well-being in an increas-ingly competitive world marketplace.”

White House Science CouncilA Renewed Partnership, 1986

“There is justifiable concern that the time may be passing when an individual can producesignificant discoveries without outside support and present them as pure gifts to society. ”

Carnegie InstituteAnnual Report of the Staff: The Program in

Science Policy 1980-1981, 1982

“To the long familiar military-industrial complex a fraternal twin has been added: an academic-industrial complex through which American and multinational corporations siphon the pub-licly created resources of our universities and thereby convert publicly financed researchinto private gain. ”

Leonard Minsky“Greed in the Groves: Part 11”

The NEA Higher Education Journal, 1984

CONTENTS

PageIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...113Trends in University-Industry Research in Biotechnology ., ..................114Types of Collaborative Research Arrangements in Biotechnology . ...,........115

Research Consortia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...116Service Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......................,116

Potential Benefits of University-Industry Collaboration in Biotechnology . ......118Benefits for the Universities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........,118Benefits for Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...120

Potential Problems of University-Industry Collaboration in Biotechnology ... ...120Problems for Universities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............121Problems for Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................123

Variability in the Benefits and Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....123Variability Among Industrial Partners . . . . . . . . . . . . . . . . . . . . . . ............124Variability Among Sectors or Areas of Research . . . . . . . . . . . . . . . . . . . . . . . . .124Variability Among Universities in Their Responses to Collaborative

R e s e a r c h A r r a n g e m e n t s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 5Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , ...125Chapter p references. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....126

BoxBox Page7-A. The University of Wisconsin Biopulping Consortium . ...................117

TablesTable Page7-l. Types of University-Industry Research Arrangements in Biotechnology ....1167-2. Benefits of University-Industry Collaborations Reported

by Biotechnology Faculty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........1207-3. Risks Reported by Biotechnology Faculty . . . . . . . . . .....................122

Chapter 7

University-Industry ResearchArrangements in Biotechnology

INTRODUCTION

The joint funding, performance, and applica-tion of scientific work by academic and nonaca-demic interests is not new (9)11)18,32). Yet in re-cent years, the rapid proliferation of collaborationsin biological research, involving partnerships be-tween universities, industry, and government, hasgreatly extended the frequency, scope, and visi-bility of such activities. Attempts to commercial-ize biological techniques have occurred at an ac-celerated rate when compared to other fields,involving a much broader spectrum of expertisein its participants, and presenting a greater rangeof commercial application than discoveries in mostother disciplines.

Intellectual capital is the mainstay of biotech-nology firms, which, to date, have had little elseto market. The importance of the university sci-entist to commercial biotechnology has been wellestablished. Industrial sponsorship of universityresearch in biotechnology yields substantial ben-efits to the firms involved. Per dollar invested,industry-supported university research in biotech-nology is generating four times as many patentapplications as is other company research; 41 per-cent of the companies investing in university-basedresearch have derived trade secrets from thatwork (6).

Approximately 46 percent of biotechnologyfirms support biotechnology research in univer-sities. During 1984, the last year for which dataare available, the average Fortune 500 companyinvolved in biotechnology planned to spend $1.1million on university-directed research, while theaverage non Fortune 500 company planned tospend $106,000. All totaled, in 1984, biotechnol-ogy companies in the United States spent about$120.7 million in grants and contracts to univer-sities. The percentage of industrially sponsoreduniversity-based research in biotechnology is ap-

proximately 16 to 24 percent; higher than the aver-age 4 tos percent spent on overall industry-spon-sored campus research (3,6).

Although an increasing number of biotechnol-ogy companies are strengthening their in-houseresearch capabilities, available evidence suggeststhat the private sector will continue to seek thecutting edge provided by the Nation’s universi-ties. Direct industry support for all campus re-search has increased in constant dollar termsevery year since 1970. Between 1981 and 1984,this increase was 8.5 percent annually (22). Evenwith these increases, industry funding re-mains small compared to government supportof biotechnology research on the Nation’scampuses.

The nature of university-industry biotechnol-ogy research arrangements appears to be chang-ing. At an April 1987 OTA workshop on this topic,industry representatives predicted that few com-panies will invest large sums in universities forlong periods for directed research in biotechnol-ogy, as was done by Monsanto at WashingtonUniversity (35). As predicted in the 1984 OTA re-port on Commercial Biotechnology, an increas-ing number of university-industry arrangementsin biotechnology are developing as consulting andcontract research rather than long-term researchpartnerships (36). The predicted time course re-quired to meet industrial expectations of univer-sity research requires more pragmatic collabora-tive arrangements than in the past.

Early concerns about collaborative research ar-rangements in biotechnology, particularly thoseinvolving universities and industry, were focusedprimarily on issues of academic freedom, propri-etary information, patent rights, and other poten-tial conflicts of interest among collaborating part-

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ners. As these research arrangements have evolved,and experience has grown, some of the most wor-risome difficulties have been resolved, or neverrealized.

Concerns remain, however, about the subtle im-pacts of these collaborative arrangements. It ispossible that university-industry relationshipscould adversely affect the academic environmentof universities by inhibiting free exchange of sci-entific information, undermining interdepartmen-tal cooperation, creating conflict among peers, ordelaying or completely impeding publication ofresearch results. Furthermore, directed fundingcould indirectly affect the type of basic researchdone in universities, decreasing university scien-

tists’ interest in basic studies with no potential com-mercial payoff (3,4,6). In addition, complex andsubjective concerns remain about the effective-ness of these arrangements in meeting the needsof participating institutions, and the ability of thesenew partnerships to stimulate innovation and im-prove America’s competitiveness in biotechnology.

This chapter analyzes the structure, scope, po-tential problems, benefits, and outcomes of col-laborative research arrangements in biotechnology.It focuses primarily on U.S. university-industryresearch collaborations. (See ch. 4 for collabora-tions involving State governments; ch. 5 for col-laborative arrangements within industry.)

TRENDS IN UNIVERSITY-INDUSTRYRESEARCH IN BIOTECHNOLOGY

During the 1970s, several key factors in theuniversity environment converged to stimulateincreasing interest on the part of academic facultyand university administrators in seeking nontradi-tional funding sources. First, in many fields, re-search costs were exceeding the available fundsfrom traditional sources–government funding,university budgets, and private foundations (11).Such cost increases have been especially preva-lent in fields that require large-scale, technologi-cally advanced equipment and instruments and,consequently, the involvement of larger numbersof technicians with diverse skills (9). Constructiongrants, as well as direct Federal nondefense R&Dsupport, have fallen annually (37) providing impe-tus for the university to seek more industrialfunds.

Second, increasing Federal budget deficits, soar-ing inflation, and the change of Administrationin 1981 signaled the possibility of some changesin Federal support for university research, whichmany scientists and university administratorsfeared would result in drastically cut budgets(11,17).

During this same period, American industry wasbecoming increasingly aware that its traditionalposition of “technological supremacy” was beingchallenged on a variety of fronts, and that its com-petitive edge in many sectors was in jeopardy

(7,28,30). The growing consensus that competi-tiveness was linked to innovation, and that univer-sity research and technology transfer played a crit-ical role in the Nation’s ability to compete, ledbusiness to show greater interest in creating andstrengthening its own connections with the aca-demic community (12).

The putative decline of U.S. industrial competi-tiveness and productivity soon became a topic ofintense public concern, affecting Federal, State,and local politics (11). The assumption thatstrengthening the links between industry anduniversity research could improve America’s eco-nomic malaise gave impetus to a variety of newgovernment policy initiatives over the last dec-ade. These included:

●

●

The Patent and Trademark Amendments Actof 1980 (Public Law 96-517), which includedchanges in Federal patent laws relating touniversities. The act changed the presump-tion of title in inventions made with Federalfunds from the government to universities,small businesses, and nonprofit institutionsregardless of which agency’s funds had beenused to make the invention.The Stevenson-Wydler Technology Innova-tion Act of 1980 (Public Law 96-480) to pro-mote cooperative research and technologytransfer.

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The 1981 Economic Recovery Tax Act (ERTA)(Public Law 97-34), which provided a 25 per-cent tax credit for increases in company R&Dexpenses over and above base-year R&D ex-pense levels and for the contribution of re-search equipment to universities. Recent re-visions of the tax laws have preserved thisfavorable tax treatment for industrial supportof university research, though the benefitsare somewhat reduced (8). Under ERTA,limited partnerships formed for the purposeof supporting R&D were also eligible forfavorable tax treatment. Many biotechnologycompanies increased their funding of univer-sity research through research and develop-ment limited partnerships (RDLPs) (19). (Seech. 5 for further detail.)Relaxation of antitrust regulations throughthe National Cooperative Research Act of 1984(Public Law 98-462), in part to facilitate re-search collaborations among previously com-petitive industrial firms.Federal funding for university-industry co-operative programs and projects, for exam-ple through the National Science Foundation.Growth of State economic development pro-grams that provide incentives to promoteuniversity-industry cooperation. (See ch. 4 forfurther discussion of State programs.)

This confluence of events and policies increasedthe interest of universities, industry, and govern-ment in activities pertaining to partnershipsbetween academia and business in all fields of sci-ence. Interest in collaborative research arrange-ments in biotechnology has been keen becauseof the potential impact of the resulting productsand processes of biotechnology on a diversity of

industrial sectors, a multitude of existing andnewly proposed Federal and State funding initia-tives in this area, and an unprecedented influxof investment capital.

The trend toward academic and business part-nerships in biotechnology is expected to continue.However, the growth rate may or may not main-tain the pace witnessed in recent years. in part,the rate of future growth will depend on deci-sions that have yet to be made by industry andon the future availability of trained scientists withsignificant track records to demonstrate commer-cial potential.

Some commentators feel that industry will notcontinue to rely on universities for some of theproduction-oriented work, and that business isalready conducting most of the purely develop-mental research in house (2,14). Scale-up issuesmay differ significantly from R&D issues and maybe best handled in house. These shifts of resourceswill obviously change the nature of the collabora-tive efforts. Concerns about protecting proprie-tary research may also force industrial firms con-ducting more development and product-orientedresearch to work in house in lieu of contractingthat portion to the universities. It is likely that newtrends in university-industry arrangements willbe seen first in the field of pharmaceuticals, withless developed areas of industrial application, suchas agriculture, lagging behind. Participants in theApril 1987 OTA workshop agreed that industrieswill continue to rely on universities for cutting-edge research, technical breakthroughs, and sup-port for individual projects, the outcomes of whichwill result in potential new projects and increasedsales (35).

TYPES OF COLLABORATIVE RESEARCHARRANGEMENTS IN BIOTECHNOLOGY

University-industry research collaborations in . company: the size, structure, and profitabil-biotechnology and in other fields encompass a ity of the company, the nature of its business,diversity of approaches. The particular type of and the progressiveness of its researchinteraction that collaborating partners choose de- program;pends on their goals and institutional character- . university: the type, size, and financial healthistics (27). The relevant factors include: of the university, the relative size and stat-

—-

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ure of its science and engineering programs,and the orientation of its research and re-searchers; and

• externalities: geographic location, proximityof the collaborating institutions, regional andstate economic development initiatives, thelocation of university alumni in key industrialpositions, and the migration of universityfaculty to industry and vice versa.

Since 1980, many researchers have attemptedto develop topologies to categorize the kinds ofuniversity-industry interactions that exist. Someof these are generic to all fields (26)27); othercategorization schemes are specific to biotechnol-ogy (13)18)21,36). However, with so many radi-cally different models all passing under the samegeneral rubric of “research collaboration,” it maynever be possible to adequately encompass thefield in a simple set of categories (31).

One categorization scheme for biotechnologyresearch relationships is shown in table 7-1.

Table 7-1.—Types of University-Industry ResearchArrangements in Biotechnology

Between university and firm●

●

●

●

●

●

●

●

●

Industry-supported university research:cooperative research programs;jointly run research facilitiesOrganized consulting arrangementIndustrial liaison programsCompany equity held by universityUniversity-owned science parksEquipment donations by firmCompany licensed patent owned by universityJoint commercial venturesConsortia

Between faculty members and firmŽ Research grants and contracts● Faculty members as principal officer in firm● Faculty member on firm’s Board of Directors or Science

Advisory Board● Exclusive or non-exclusive consulting with industry. Full-time summer employment● Company equity held by faculty member

Between trainees and firm● Training grants or scholarships● Direct support of trainee’s research. Trainee salary support, summer or academic year● Exclusive or non-exclusive consulting● Informal collaborationSOURCE: Adapted from D. Blumenthal, M. Gluck, S. Epstein, et al., Universify-

Industry Relationships in Biotechnology; Implications for Federal Poli-cy, DHHS Grant #100A-83, submitted to the Office of the AssistantSecretary for Planning and Evaluation, National Institutes of Health,U.S. Department of Health and Human Services, Bethesda, MD, Mar.20, 1987.

Research Consortia

Biotechnology consortia have been developedby some university-based biotechnology centersto promote technology transfer and raise addi-tional capital. Consortia may include either onecompany and several universities, several com-panies and one university, or several companiesand several universities. Companies often repre-sent widely differing aspects of the technologyin question (e.g., large-scale and small-scale appli-cations). Research tends to be basic with little di-rect attention to commercialization, but with theimplicit or explicit assumption that commercialapplications will eventually be available for mem-ber companies to pursue independently. Federalor State Government funds often supplement in-dustry funding of these consortia.

Pennsylvania State University, for example, hashad 20 sponsoring industries for a cooperativeprogram in recombinant DNA technology and hasattracted several industrial sponsors for its Bio-technology Institute. The Center for Biotechnol-ogy Research, sponsored by Engenics Corp. (aspinoff of Stanford University) involves six othercompanies, Stanford University, the University ofCalifornia, and the Massachusetts Institute ofTechnology. The University of Wisconsin Biotech-nology Center Biopulping Consortium is describedin box 7-A. The Midwest Plant Biotechnology Con-sortium, a group of 15 universities and 30 com-panies with an interest in plant biotechnology, isdescribed in chapter 10.

Service Facilities

Service facilities are university-based operationsthat provide, for a fee, the use of equipment, fa-cilities, or expertise to either industry or univer-sity scientists. They permit universities to makeconsiderable capital investments in buildings andequipment based on the potential earnings thatcan be generated through user fees. The Wiscon-sin Biotechnology Center, the Center for AdvancedResearch in Biotechnology (CARB) of the Mary-land Biotechnology Institute, and the Center forBiotechnology at SUNY Stonybrook are examplesof service facilities.

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● In Wisconsin, the Biotechnology Center oper-ates a number of pay-back facilities. If astartup firm needs a monoclinal antibody, itcan be made at the Center for a fee, avoidingfor the firm the cost of investing in equip-ment necessary for monoclinal production.The Hybridoma Facility offers three optionsto clients desiring hybridoma production,

Photo credit: University of Wisconsin-Madison

The Protein/DNA Sequence/Synthesis Facility at theBiotechnology Center of the University of

Wisconsin-Madison.

screening, cloning, or antibody production—full service, self service (inexperienced), andself service (experienced), Another facilityoffers services in protein purification and ob-tains equipment through shared equipmentgrants. A Plant Cell and Tissue Culture Facil-ity offers instruction, protoplasm isolation andplating, media preparation, anther culture,and long-term storage of plants in test tubes.Additional facilities include the TransgenicMouse Facility, the Protein/DNA Sequenc-ing/Synthesis Facility, and the BiocomputingFacility.At CARB, advanced computer graphics capa-bilities and x-ray crystallography equipmentwill be available for companies willing to payfor structure analysis in protein engineeringand rational drug design.At the Center for Biotechnology at the StateUniversity of New York at Stonybrook, serv-ice facilities are provided by the HybridomaCenter, the Center for the Analysis and Syn-thesis of Macromolecules, and the Center forRadioligand Synthesis and Spectroscopy.

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POTENTIAL BENEFITS OFCOLLABORATION IN

Historically, the potential for new economic andsocial benefits from scientific research has helpedscientists secure funding and, at times, social stat-ure for their work (9). More recently, scientificresearch-especially collaborative research be-tween industry and universities—has been tar-geted as one of the critical elements in stimulat-ing technological innovation, enhancing industrialcompetitiveness, and in achieving sustained eco-nomic growth and development, both regionallyand nationally. In fact, nearly every statement onAmerica’s current economic predicament cites theuniversity as the source of new scientific and tech-nological breakthroughs, and university-industrypartnerships as the vehicle through which sus-tained economic recovery will be achieved (18).

Whether university-industry collaborations canmake good on these claims has yet to be deter-mined. To date, there have been no rigorous, em-pirically based, national studies of the outcomesof these collaborative arrangements. Part of theproblem is that many of these collaborations aretoo new to assess. OTA recently sponsored oneof the few studies of the outcomes of collabora-tive research arrangements in advanced materi-als, information technology, and biotechnology(31). The findings of that study suggest that com-mercial outcomes—products and processes—havebeen fairly limited to date, and that outcomes areheavily contingent on how the collaboration isstructured and managed.

One survey of industrial firms with university-industry research relationships in biotechnologyasked respondents for their list of perceived ben-efits of collaboration (3)4). Factors perceived by50 percent or more of these industrial respond-ents as benefits “to a great or some extent” (inorder of priority) were:

●

●

●

●

the likelihood of the collaboration resultingin product or process licenses;the ability of the company to keep currentwith important research;reduction in costs of mounting R&D pro-grams in a new field;enhancement of the firm’s public image; and

UNIVERSITY-INDUSTRYBIOTECHNOLOGY

● training and staff development for companyscientists.

From the university perspective, some benefitscited in another study include:

. improvement in the level of research andtraining in applied science;

● transfer of technology to industry and greaterrelevance to society; and

● assistance in offsetting uncertainties of Fed-eral R&D support (13).

Except for expectations of the profound com-mercial potential for biotechnology-related prod-ucts in a variety of sectors (e.g., agriculture, chem-icals, pharmaceuticals), many of the benefits citedare similar to ones described as motivators in otherfields of science.

Benefits for the Universities

Money, in a variety of guises, could be a pri-mary benefit to the university of industrial spon-sorship of research: money for research, theopportunity for equity participation, limited in-vestment in physical plant and facilities, and theassociated added income for faculty, Further, in-flation in the late 1970s and the fear that currentsupport for basic research would be cut forcedmany universities to tap several sources for fund-ing and equipment. Ninety percent of the univer-sities responding to a recent survey report receiv-ing some industrial funds to conduct research inbiotechnology (3,4).

Evidence suggests, however, that large capitalinfusions, such as those which occurred betweenHoechst and Massachusetts General Hospital, maybe the exception rather than the rule. In 1984,60 percent of industrially funded biotechnologyprojects at universities were funded at less than$50,000,20 percent were funded for $50-100,000,and only 20 percent were funded for over$100)000 (6).

Furthermore, it is not clear that the financialbenefits to universities, other than direct supportitself, have been realized, Eighty nine percent of

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the sampled universities realized at least one pat-ent from biotechnology research over the past 5years, but substantial income from licenses is rare,and earnings fail to exceed the cost of adminis-tering the patents and licenses. In addition, fewuniversities own equity in any biotechnology com-pany owned or founded by their faculty, and evenfewer reported any substantial appreciation insuch holdings (6). It seems unlikely, therefore,that university-industry relationships in bio-technology have or will significantly meet theunmet capital needs of universities.

The real benefit from university-industry re-search collaborations could be the capacity to dothings neither partner could do alone. Industrymay provide critical leverage to university appli-cations to Federal and private funding agencies.For many university scientists, industrial spon-sorship provides the added excitement and pres-tige that comes from working on truly cutting-edge scientific research and entering into long-term agreements with industry (2)24). Collabora-tions with industry may also help the universityretain faculty members who might otherwiseleave, and to attract new faculty and students.Industry collaborations may allow smaller, lessprestigious universities to build their research baseand to offer training opportunities for students.Since many of the small, less well known univer-sities often have trouble gaining access to researchfunds at the National Institutes of Health and else-where, the use of industrial capital to build theirresearch capability would offer great benefit.

Benefits for Faculty

In a survey of over 1,200 faculty members con-ducted at 40 major U.S. universities, approximately47 percent of biotechnology faculty reported con-sulting with an outside company, and 8 percentreported holding equity in a firm whose productsor services are directly related to their own univer-sity research. The survey also revealed that bio-technology researchers with industrial supportpublish at higher rates, patent more frequently,participate in more administrative and profes-sional activities, and earn more than colleagueswithout such support (6).

Table 7-2 summarizes the responses of biotech-nology faculty, with and without industry support,

to questions of the perceived benefits of university-industry collaborations (6). The table shows thatthe majority agreed that such arrangements in-volved less red tape than does Federal fundingand increased the rate of practical applicationsfrom basic research. The table also illustrates someinteresting differences between biotechnologyfaculty with industrial support and those not re-ceiving funding from this source.

Benefits for Students

Although the literature on the effects ofuniversity-industry collaborations in biotechnol-ogy is replete with anecdotes about the problemssuch relationships can cause for graduate and post -doctoral training, one study found that studentsdo not feel that their training is being short-changed or that the quality of their educationalexperience is being compromised (10). In fact, thestudents surveyed generally felt that “the bene-fits outweighed the risks.” There is no evidenceto date suggesting that students working in labswith industrial support are getting less guidanceor receiving insufficient faculty attention. Com-pared to colleagues without industrial support,biotechnology faculty with industrial supportseem to spend comparable amounts of time eachweek with graduate students and postdoctoral fel-lows (3)4).

Industrial sponsorship can provide increased fel-lowship opportunities and more employment op-portunities for students when they graduate. Noteveryone taught can or wishes to go into academicscience. The results of a 1985 survey of person-nel needs in biotechnology firms conducted bythe Institute of Medicine and the American Soci-ety for Microbiology revealed that there has beena substantial increase in the number of scientistsemployed in the biotechnology industry since 1983(16). (See ch. 8 for further discussion of person-nel and training.)

In addition, exposure to industrial projects canprovide students with the opportunity to conductmore research, gain knowledge of industrial ap-plications, and learn how to test hypotheses. Stu-dents funded by private firms maybe more likelythan those without industry connections to re-port patents resulting from their research (3).Those students are often offered permanent po-

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Table 7-2.—Benefits of University-Industry Collaborations Reported by Biotechnology Faculty

“To some extent or to great extent” (o/o)

Industry No industryQuestion support s u p p o r t

To what extent does industry research support:● Involve less red tape then federal funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 51’● Increase the rate of applications from basic research . . . . . . . . . . . . . . . . . . 67 52’● Provide resources not obtainable elsewhere. . . . . . . . . . . . . . . . . . . . . . . . . . . 63 36’. Enhance career opportunities for students . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 43’● Enhance scholarly productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 20’• Produce patents that increase university revenues . . . . . . . . . . . . . . . . . . . . . 41 33‘Significantly different from faculty with Industry SIJPPOfl (p< O.01).

SOURCE: D. Blumenthal. M. Gluck, K.S. Louis, et al. “University 4ndustry Research Relations in Biotechnology: Implications for the University,” Science 232:1361-1366.June 13, 1966.

sitions because of their familiarity and experiencewith industrial research problems (l).

Benefits for Industry

A 1984 survey of biotechnology companies re-vealed that the investments these companies weremaking in university research seemed to be yield-ing substantial benefits to the firms involved (3,4).Per dollar invested, university research generatedmore patent applications than company research.Whether these patent applications will result inmarketable products or processes and profits forthe sponsoring firms has yet to be determined.Collaborative research with universities consti-tutes a relatively small part of most firms’ R&Dinvestment, generally less than 10 percent. For

POTENTIAL PROBLEMSCOLLABORATION

Concerns about the commercialization of aca-demic biomedical research probably reached a ze-nith around 1981, about the same time that theHouse Committee on Science and Technology con-vened its first hearing on the subject (33). Thehearings focused on two major issues: whetheruniversity-industry research relationships violatedscientific and academic freedom and responsibil-ities, and whether these relationships best servedthe interests of the American public.

By the time the Committee convened its secondset of hearings, nearly one year later, some of theinitial controversy had subsided (34). Then Con-

an important minority, such collaborations con-stitute a significant part of their research (6).

Clearly the commercial potential in biotechnol-ogy-related processes and products is one of theprimary benefits that industry perceives it willgain through university-industry research collabo-rations, but it is not the only one that industryvalues. Industry has to master this technology todo its own research. Collaborations with univer-sities permit industry to buy in at a relatively lowcost, without having to recreate the resources andtalent already available in academia. Academic-business research relationships allow businessesto tap otherwise inaccessible brainpower, increas-ing their competitive edge. Thus, collaborationsenable industry as well as universities to accom-plish tasks neither could tackle alone.

OF UNIVERSITY-INDUSTRYIN BIOTECHNOLOGY

gressman Gore said in his opening remarks: “Wedo not view such agreements as bad per se, butrather as a development that needs to be exam-ined in detail.” However, this kind of detailed ex-amination has not taken place. With the excep-tion of a few isolated studies, little evidence existsto either substantiate or refute the largely rhe-torical claims of those who feel great harm is be-ing done to academic science as a result of thenew “university-industrial complex.”

In one study of university-industry research in-teractions, the scientists and administrators sur-veyed raised a variety of concerns (26). Most of

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the issues were not mentioned more than 25 per-cent of the time by either company or universityrepresentatives, although academic respondentsclearly raised more concerns about the researchinteractions than their industrial counterparts.Both parties expressed concern about basic vs.applied research. About 23 percent of universityrepresentatives raised concerns about academicfreedom. None of the other issues—adverse im-pacts on research quality, credibility, continuity,and the commingling of funds—appeared to beof major concern to either industry or universityrespondents.

In general, the perception of potential problemsthat can result from university-industry collabo-rations in biotechnology does not differ from thatseen in other fields. However, the degree and fre-quency with which problems are occurring is per-ceived to be intensified in biotechnology, perhapsbecause of the accelerated proliferation of thesepartnerships in a relatively short time.

Problems for Universities

Comments from analysts of university-industrycollaboration about the problems universities areexperiencing in collaborative arrangements rangefrom “the problems are many” to “the problemshave been beat to death.” At issue is whether andto what degree universities should remain de-tached from the world of business. (Some ques-tion whether this idealized (or idolized) kind ofacademic environment ever existed at all.) Yetregardless of viewpoints, observers interviewedby OTA seemed to agree that universities are in-deed being changed by their research relation-ships with industry.

one frequently cited problem concerns secrecy.Some analysts maintain that colleagues cannot ex-change information, despite its intellectual poten-tial, because of its commercial value. Others ar-gue that a delay in publication of six months makeslittle difference and that trade secrets tend to beon the production side, not the basic research side.Some contend that as corporations bring devel-opment-oriented activities in house, the secrecyissue will diminish on the campus. But in one study,25 percent of industrially supported biotechnol-ogy faculty reported that they have conducted

research that belongs to the sponsor and cannotbe published without prior consent; and 40 per-cent of faculty with industrial support reported‘hat their collaboration resulted in unreasonabledelays in publishing (3). When research ap-proaches the point of publication, the companymay request that certain pieces of informationbe withdrawn because they may reveal a tradesecret, such as the composition of a buffer, or for-mulation of a pharmaceutical compound.

Several commentators interviewed by OTA ex-pressed concern about interdepartment and in-tradepartment competition for scarce resourcesand the potential imbalances in resource alloca-tion that university-industry collaborations cancause. The possibility was raised that this compe-tition would cause some fields within the univer-sity to atrophy. For example, a $32 million Bio-logical Sciences Complex at the University ofGeorgia apparently has drawn funds, and criti-cism, from other instructional programs.

Problems for Faculty

The potential problems for universities andfaculty members engaged in collaborative arrange-ments include:

●

●

●

●

impacts on the university’s research agenda,such as the potential for professors to orienttheir research toward products that couldhave commercial value or the shifting of re-search to accommodate corporate sponsors;conflicts of interest, such as the use of univer-sity equipment for private gain or the shiftof time away from university responsibilities;exploitation of students as inexpensive laboror outright neglect of students by faculty whobecome increasingly involved in commercialprojects; andinterruptions in the free flow of informationand materials among colleagues because ofpatent-induced publication delays, tradesecrets, and other proprietary inhibitions—the “publish or profit” problem (18). Facultywith industry funds are much more likelythan other biotechnology faculty to reportthat their research has resulted in tradesecrets and that commercial considerationshave influenced their choice of researchprojects (3).

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Table 7.3.—Risks Reported by Biotechnology Faculty

“To some extent or to great extent” (o/o)

Industry No industryQuestion support supportTo what extent does industry research support pose the risk of:● Shifting too much emphasis to applied research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 78a

Ž Creating pressures for faculty to spend too much time on commercial activities . . 68 82b

● Undermining intellectual exchange and cooperating activities within departments. 44 68b

● Creating conflict between faculty who support and oppose such activities . . . . . . . 43 61b

Ž Creating unreasonable delays in the publication of new findings. . . . . . . . . . . . . . . . 40 53b

Ž Reducing the supply of talented university teachers. . . . . . . . . . . . . . . . . . . . . . . . . . . 40 51a

● Altering standards for promotion or tenure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 41b

aslgnificantly different from faculty with industry SIIPPort (p <005)bsignificantly different from faculty with industry suPPorf (p< O.01).

SOURCE: D, Blumenthal, M. Gluck, K.S. Louis, et al , “University-Industry Research Relations in Biotechnology: Implications for the University, ” Science 232.1361-1366.-.June 13, 1986

None of these problems, however, is unique touniversity-industry collaborations. The quest forgrants, prizes, and status has often led to secrecybefore research results are published.

In addition, university-industry collaborationscould cause imbalances of faculty, students, andspace, shake public confidence, and jeopardizegovernment funding (25). Furthermore, collabo-rations could threaten the scientist’s objectivity,although there is no hard evidence that academicswith industrial ties are in fact less objective in theirjudgments, or less interested in scientific truth(20,21,29). Table 7-3 presents the risks reportedby biotechnology faculty with and without indus-trial support.

The most frequently cited problems for facultyinvolved in collaborative research relationshipswith industry are the potential conflicts inherentin having mixed allegiances. The danger is thatfaculty will spend a disproportionate amount oftime on applied research and commercial inter-ests. Industry supports research that is more likelyto be applied.

Faculty members with industry support aremore than four times as likely as faculty withoutindustry support to report that their choice ofresearch topics has been influenced by the likeli-hood that the results would have commercial ap-plication (6). Although companies may selectivelysupport faculty whose research has commercialpotential, biotechnology faculty with or withoutindustry support seem to feel that industrial sup-port does shift research in applied directions.

Critics of the university’s involvement in indus-trially oriented research are concerned that themore one engages in outside commercial activi-ties, the less one devotes to university responsi-bilities. However, one study seems to suggest theopposite (3,4). Biotechnology faculty with indus-trial support exhibit enhanced productivity in sev-eral areas, including university activities, and showno significant declines in teaching time. Teach-ing time may not be an appropriate measure ofthe effects of commercial activities, since the con-tent and quality of that teaching, and the mate-rial contained in the coursework itself, may bemore relevant.

problems for Students

In a recent survey of students, over 25 percenteither received direct support from industry fortheir research (12 percent) or worked in labs ofinvestigators who received industrial funds (anadditional 15 percent) (6). There is a great dealof discussion, but little reported in the literature,about the effects of university-industry relation-ships on students and postdoctoral fellows. Thefear that students could be exploited by commer-cial priorities or the pecuniary interests of theirprofessors, and that their education and trainingmay be compromised, was often expressed in OTAinterviews with academic scientists.

One study (10) adds some empirical data to anarea in which the only evidence of problems forstudents to date has been in the form of news-paper articles and anecdotes. The study surveyed

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693 graduate students and postdoctoral fellowsat six research-intensive U.S. universities, assess-ing the effects of industry-sponsored universityresearch in the life sciences, and more specificallyin biotechnology. The study revealed that studentswith industrial support published about a thirdfewer papers, reported more significant delaysin publication, and reported inhibitions in discuss-ing their work with colleagues more frequentlythan their peers. Some students and fellows withindustrial support must work on projects chosenby industry, or provide other services to their in-dustrial sponsors. Industry-sponsored researchtends to be more applied, which may, in part, ex-plain the lower rate of publication.

Problems for Industry

Industry would appear to face few problemsfrom university-industry research collaborations.obviously, if an agreement is not viewed as suc-cessful, a company can elect to discontinue sup-port. The major concern of industry could bewhether these academic-business partnerships inbiotechnology will result in the revolutionary newproducts and processes currently envisioned.

Exclusivity is an expectation of firms sponsor-ing collaborative research. The scientist’s oruniversity’s ability (or willingness) to grant exclu-sivity may be a point of contention. Furthermore,since many parties could be involved in the col-laboration, the designation of rights may becomemore complex. As projects come to fruition inmulti-party collaborations, who negotiates the

contract with industry, who holds the con-tract, and how property rights are assignedwill be major issues facing industry, as wellas all parties involved.

One particularly problematic scenario involvesa consortium involving Federal, university, andindustrial funds. As a result of the collaboration,a company could gain title to patents based whollyor partly on Federally funded work. Existing lawrequires that patents resulting from Federallyfunded research in universities be owned by theuniversity or the Federal Government (if theuniversity has an institutional patent agreementwith the granting agency). Thus, if the univer-sity permits patent title to the company, it couldbe in violation of the law. Self-interest on the partof the university may be the best protectionagainst such a violation given the logical desirefor the university to retain patent ownership.

Findings from a 1986 industrial survey (3)4) sug-gest that companies sponsoring university re-search also perceive potential risks in university-industry relationships. Problems perceived byover 20 percent of the firms as a potential risk“to

●

●

●

●

a great or some extent” were:

poor payoff in marketable products (62percent);loss of proprietary information (58 percent);excessive monitoring and controlling effort(42 percent); anduniversity withdrawal from the relationshipbefore the firm receives anticipated benefits(21 percent).

VARIABILITY IN THE BENEFITS AND PROBLEMS

Many of the researchers and commentators whodiscuss the benefits and the problems of univer-sity-industry research collaborations in biotech-nology often speak as if academia and businesswere monolithic entities. obviously, this is not thecase. Universities vary enormously in their struc-tures, values, objectives, orientations, and re-sponses toward collaborative research. The diver-sity of U.S. industrial firms on these dimensionsis probably even greater. Consequently, the typeof university-industry research arrangement that

works for an Eastern Ivy League university maybe very different from one that fits a land grantcollege in the South or the Midwest; the motiva-tions and expected outcomes of a large multina-tional corporation that collaborates with a uni-versity—such as Monsanto’s agreement withWashington University—undoubtedly would varygreatly from those of a start-up venture like Em-bryogen and its relationships with Ohio Univer-sity. Because these differences may affect the ben-efits and problems experienced by collaborating

76-582 0 - 88 - 5 : QL 3

124

partners, analysts must go beyond the generali-ties and document some of these variations.

In a recent OTA study of collaborative researcharrangements (31), the particular type of organiza-tional structure was not highly correlated withbenefits or outcome measures; the same could besaid for problems. What is more likely—althoughadditional research is needed in this area—is thatthe potential problems for the university and itsfaculty may be tied to the degree to which a par-ticular arrangement interferes with faculty dutiesand the level—individual or institutional-at whichthe agreement is made. From an industrial pointof view, benefits are in part tied to these two fac-tors as well, but the direction of the causation isprobably reversed.

Variability Among IndustrialPartners

It is not possible to explore all the differencesamong industrial partners that can affect univer-sity-industry research collaborations in biotech-nology. Furthermore, there are times when thesame company enters into different types of agree-ments with separate universities, each character-ized by its own pattern of interactions and out-comes. An example is Monsanto’s agreements withHarvard and Washington Universities. One vari-able may be distinctive in the relationships be-tween universities and businesses—the size of thecollaborating partner.

Discussions with industrialists, both large andsmall, suggest that collaborations with small firmsseem to constitute the greatest gamble for univer-sities. Compared to larger firms, small firms aremore likely to support faculty with significant eq-uity in their companies, report the use of tradesecrets, and fund projects of very short duration.

On the other hand, the financial benefits of rela-tionships with small firms may be considerable.These arrangements seem to produce many morepatent applications per dollar invested than dorelationships with large firms (3,4). However, theapplications for patents held by universities maynot produce profitable licenses, and relationshipswith large companies seem smoother and less com-plicated with fewer conflicts of interest.

The benefits to individual scientists may begreater with large companies, which are morelikely to supply a steady stream of money overthe long term (20). However, not all the expertsinterviewed by OTA perceived small firm collabo-rations as potentially risky. Much depends on thetype of university involved and the way that in-stitution perceives its missions vis-á-vis industry(23). There may be potential risks in collaborat-ing with companies large enough to buy an aca-demic department (14).

Variability Among Sectors orAreas of Research

Little is known about sectoral variations in thenature of university-industry collaborations in bio-technology (e.g., agriculture, chemicals, pharma-ceuticals). The major sectoral differences involveorientation and focus: product vs. process. Sincecompanies are most interested in products whichcan yield the greatest potential gain, the most fre-quent and intense university-industry researchcollaborations seem to be taking place in phar-maceuticals. In agriculture, while there are pro-prietary plants, the research problems are thoughtto be more complex and the envisioned productsmore long term. Hence, the degree of collabora-tion has not been as intense. This is likely tochange. In chemicals, where the research is moreapplied, a large proportion of the research canbe done in corporate labs or through consulting,decreasing this sector’s dependence on university-industry research relationships.

Some argue that biotechnology firms have al-ready altered the nature of problem selection byacademic scientists; problems dependent on theelaboration of technique, not theory, are empha-sized. Consequently, in university-industry re-search relationships, corporations are focusingon the development of biological (e.g., enzymes,pharmaceuticals) because of the likelihood of morerapid commercial payoff. Thus, problems requir-ing that substantial theoretical obstacles be crossedbefore technical breakthroughs can be achieved(e.g., the control and transfer of nitrogen fixationin the agricultural sector) are receiving less im-mediate attention in collaborative research part-nerships.

125

Variability Among Universities inTheir Responses to Collaborative

Research Arrangements

Just as collaborative arrangements vary tremen-dously depending on their form, structure, andresearch area, universities exhibit a great deal ofdiversity in their responses to the benefits andproblems that can result from university-industryresearch relationships. Differences in responseinclude:

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●

the amount of time allowed to faculty for out-side consulting, or for the management of orinvolvement in entrepreneurial activities;the degree to which faculty can use universityequipment, facilities, and staff (including stu-dents) in nonacademic, commercial research;sanctions against, or incentives for, universi-ties to become financially involved in the start-up or spinoff ventures of faculty (e.g., equityinterests in ventures seeded, funding incu-bator centers);whether the university, industrial sponsor, orindividual scientists retain intellectual prop-erty rights or the exclusivity of such patents,licenses, and trade secrets;the amount of time deemed acceptable to de-

●

lay publications prior to or simultaneous withpatent filings; andwhether university scientists or industrialsponsors (or some combination of the two)set research priorities and the researchagenda.

There are few standards in place throughoutthe academic community on the six dimensionsjust described. Rather, each institution is meet-ing the challenge of setting its own boundariesof acceptability in ways that are consistent withits characteristic culture and mission. Some ana-lysts believe that the largest, most prestigiousuniversities must be the ones to stand up to thepotential risks of industry-university collaborationand set the standards for other institutions to fol-low (23).

Too simplistic are assumptions that a continuumcan be constructed to characterize the nature ofcollaborative research arrangements in biotech-nology and that problems would intensify as theties between academia and business intensify.Problems and benefits exist at all ends of the con-tinuum. Furthermore, rather than a linear con-tinuum, there exist multiple axes at any momentin time (e.g., type of arrangement; size of indus-trial partner; university culture; area of research).

SUMMARY AND CONCLUSIONS

In the long run, the trade-offs made betweenthe potential benefits that accrue from university-industry research collaborations in biotechnologyand the potential problems and risks associatedwith such relationships will depend on how thepublic and the policy-making community valuethe outcomes of these new partnerships. Two is-sues that must be balanced are:

whether losses to science or to universityvalues that result from increases in the levelof secrecy in universities are offset by net ad-ditions to knowledge that result from the in-fusion of industry funds into university lab-oratories; andwhether shifts in the direction of the univer-sity research agenda toward more applied andcommercially relevant projects have benefits

for human health and economic growth thatfar outweigh the risks to basic research.

University researchers are not the only onesconcerned with the trade-offs. Others have saidthat it is truly in the national interest to developnew institutional arrangements that are poten-tially capable of reducing the time lag betweenadvances made in the basic research laboratoryand the application of those advances to humanservice (33). Advocates of active university-indus-try collaboration assert that the public interestis best served when the results of research arepublished and made available to the scientific com-munity, and the academic work that is commer-cially valuable is patented and does in fact reachthe marketplace faster through collaborationsbetween the universities and the industrial com-munity.

126

In the meantime, there are measures that canbe taken to strengthen university-industry re-search relationships for all participants, and tomaximize some of their potential benefits, whileminimizing their problems and risks. Universitiesand the industrial firms involved could ease theintroduction of academic-business partnershipson campus with extensive prior discussion inwhich all relevant parties including students,faculty, university administrators, and corporateexecutives participate.

Universities can negotiate collaborative agree-ments that are consistent with the values and mis-sions of their institutions and can include as es-sential elements of any such agreement:

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●

●

the scope of the agreement (e.g., particularresearch area(s) supported; time commit-ments of faculty participants);control over the conduct of the research (e.g.,who selects areas of research, specific proj-ects, and methodologies; provisions for inter-nal and/or external advice and review);sponsor’s responsibilities (e.g., funding; staffsupport; equipment; materials contributed);treatment of proprietary information;publication requirements (e.g., pre-publica-tion review delays); andpatent rights and income (e.g., title retention;license agreements; term or life of the patent).

Once established, universities can monitor theircollaborative research relationships with indus-try and rigorously enforce:

CHAPTER 71. Bayliss, F., Department of Biology, San Francisco

State University, personal communication, October1987.

2. Blumenthal, D., Senior Vice President, Brigham andWomen’s Hospital Corporation, Boston, MA, per-sonal communication, March 1987.

3. Blumenthal, D., Epstein, S., and Maxwell, J., “Com-mercializing University Research, ” New EnglandJournal of Medicine 314(25):1621-1626, 1986.

4. Blumenthal, D., Gluck, M., Louis, K. S., et al.,“University-Industry Research Relations in Biotech-nology: Implications for the University, ” Science232:1361-1366, 1986.

●

●

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●

disclosure rules;conflict of interest statutes;limitations on excessive outside consulting byfaculty members; andsanctions against faculty that retain “full-time”status at the university and are simultane-ously executives in their own companies with“full-time” management responsibilities.

It has been suggested that Federal law or regu-lation should dictate what is considered in andout of bounds for universities in their interactionswith industry. A violation of the rules would meana cut off of Federal funding for the university inquestion (18). While such an approach is extreme,the issue of private gain from public invest-ment requires some degree of accountability.

Those who take a negative view of university-industry research relationships may be arguingfor a return to a perceived simpler time, whenacademics were academics, and businessmenwere businessmen. Times have clearly changed,and both the internal and external demands onthe university are increasing and sometimes con-flicting. Perhaps the most obvious example ofthose changes and conflicts is the ever-closing gapbetween business and academia in U.S. biotech-nology.

Even though industrial support for universityresearch in biotechnology has clearly changed thedynamics of that field at the individual and institu-tional levels, any funding source has the poten-tial of influencing the research agenda andthose that conduct the sponsored research.

REFERENCES5. Blumenthal, D., Gluck, M., Louis, K. S., et al., “In-

6.

7.

dustrial Support of University Research in Biotech-nology, “ Science 231:242-246, 1986.Blumenthal, D., Gluck, M., Epstein, S., et al.,University-Industry Relationships in Biotechnology:[replications for Federal Policy, DHHS Grant #lOOA-83, submitted to the Office of the Assistant Secre-tary for Planning and Evaluation, National Insti-tutes of Health, U.S. Department of Health andHuman Services, Bethesda, MD, Mar. 20, 1987.Business-Higher Education Forum, America's Com-petitive Challenge, 1983.

8. Crawford, M., “Tax Reform Package Jars Univer-sity R&D Sectors, ” Science 233(4767):935, 1986.

127

9. Etzkowitz, H., “Entrepreneurial Scientists and En-trepreneurial Universities in American AcademicScience,” A4inerkra, summer-autumn 1983.

10. Gluck, M. E., Blumenthal, D., and Stoto, M. A.,“University-Industry Relationships in the Life Sci-ences: Implications for Students and Post-DoctoralFellows, ” unpublished manuscript, July 14, 1986.

11. Government-University -Industry Research Round-table, A’ew Alliances and Partnerships in AmericanScience and En@”neering (1$’ashington, DC: NationalAcademy Press, 1986).

12. Gray, D. O., Solomon, T., and Hetzner, W. (eds.),7’ethnological Innovation (Amsterdam: Elsevier Sci-ence Publishers, 1986).

13. Greenstein, R. L., ‘( Industry -Uni\~ersity Relation-ships, ” paper presented at the American LawInstitute-American Bar Association meetings, Sept.22-24, 1983.

14. Ho]tzman, S. H., l’ice President, Embryogen, Athens,OH, personal communication, Feb. 26, 1987.

15, Hutt, P. B., ‘(University/Corporate Research Agree-merits, ” Biotechnology in Societev: Private Initiativesand Public Oversight, J .G. Perpich (ed. ) (London:Pergamon Press, 1986).

16. Institute of Medicine, Personnel Needs and ‘Train-ing for Biomedical and Behavioral Research (Wash-ington, DC: National Academy Press, 1985).

17. Kennedy, D., “Government Policies and the Costof Doing Research, ” Science 227:480-484, 1985.

18. Kenney, M., Biotechnology: The Universit.v-Industrial Comp]ex (New Ha\ren, CT: Ya]e Univer-sity Press, 1986).

19. Klausner, A., “Biotech Business Strategy: NewTrends,” Bio/Technology 4:851-856, 1986.

20. Krimsky, S., Department of Urban and Environ-mental Policy, Tufts University, Medford, MA, per-sonal communication, Feb. 25, 1987.

21. Krimsky, S., “The Corporate Capture of AcademicScience and Its Social Costs, ” Genetics and the Law111, Aubrey Milunsky and George J. Annas (eds.)(New York, NY: Plenum Press, 1985).

22. National Science Board, Science Indicators: The1985 Report (Washington, DC: U.S. GovernmentPrinting Office, 1985).

23. Nelson, R., School of International and Public Af-fairs, Columbia University, New York, NY, personalcommunication, Feb. 27, 1987.

24. Omenn, G., Dean, School of Public Health, Unit~er-sity of Washington, personal communication, Mar.10, 1987.

25. Omenn, G. S., “University-Corporate Relations inScience and Technology: An Analysis of SpecificI$lodels, ” Partners in the Research Enterprise:Uni\’ersit&v&orporate Relations in Science and7’echnologv, T. Langfitt, S. Hackney, A. Fishman,

and A. Golawsky (eds. ) (Philadelphia, PA: IJni\~er -sity of Pennsylvania Press, 1983).

26. Peters, L. S., and Fusfeld, H. I., “Current U.S. Uni -versity-Industry Research Connections ,“ [lni\’er-sitcv-Industry Research Relationships (Washington,DC: National Science Foundation, 1983).

27. Prager, D.J., and Omenn, G. S., “Research, Innova-tion, and University-Industry Linkages, ” Science207(4429):379-384, Jan. 25, 1980.

28. president’s Commission on Industrial Competiti\Te-ness, Global Competition, The New Reality, I’olume11 (Washington, DC: U.S. Government Printing Of-fice, January 1985).

29. Ruscio, K. P,, “The Changing Context of AcademicScience: University-Industry Relations in Biotech-nology and the Public Policy Implications, ” polic~~Studies Review 4(2):252-275, 1984.

30. Solomon, T., and Tornatzky, L. G., “Rethinking theFederal Government’s Role in Technological Inno-vation,’} Technological Innovation: Strategies fot’ aNetv Partnership, D.0. Gray, T. Solomon, and W’.Hetzner (eds.) (Amsterdam: Elsevier Science Pub-lishers, 1986).

31. Tornatzky, L. G., Solomon, T., and Eveland, J. D.,“The Literature of Collaborative Research and De-\’elopment: An Analytic Overview, ” contract doc-ument submitted to the Energy and Materials Pro-gram of the U.S. Office of Technoloqv Assessment,Dec. 18, 1986.

32. U.S. Congress, Congressional Research Service, Bio-technology: Commercialization of Academic Re-search, Issue Brief No. IB81 160, Washington, DC,Mar. 4, 1982.

33. U.S. Congress, House Committee on Science andTechnology, Commercialization of Academic Bio-medical Research, hearings before the Subcommit-tee on Investigations and Oversight, June 8-9, 1981(Washington, DC: U.S. Government Printing Office,1981).

34. LJ.S. Congress, House Committee on Science andTechnology, Universituyflndustruy Cooperation inBiotechnology, hearings before the Subcommitteeon Investigations and Oversight, June 16-17, 1982(Washington, DC: U.S. Go~rernment Printing Office,1982).

35. Office of Technology Assessment, Collaboratit’e Re-search Arrangements in Biotechnology, transcriptof workshop proceedings, Washington, DC, Apr.23, 1987.

36. U.S. Office of Technology Assessment, Commez--cial Biotechnology: An International Ana[vsis, OTA -BA-218 (Elmsford, NY: Pergamon Press, Inc., Jan-uary 1984).

37. U.S. Department of Health and Human Services,ATIH Data Book: 1986 (Bethesda, ltlD, 1986).

Chapter 8

Training andPersonnel Needsin Biotechnology

“Most of our technology walks out every night in tennis shoes.”Robert Swanson

Genentech

“The key to educating a biotechnologist is flexibility in specialized aspects of a program thatis firmly based in science and engineering.”

David PramerRutgers University

“The biotechnology revolution . . . has changed in fundamental ways how biologists andchemists regard their disciplines and therefore how those disciplines may properly be taught .“

Budget Change ProposalCalifornia State University

Center for Biotechnology Education and Research

CONTENTSP a g e

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................131Size and Future Growth of Commercial Biotechnology . . . . . . . . . . . . . . . . . . . . . .131

Current Survey Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............132Personnel Needs in Biotechnology. . . . . . . . . . . . . . . . . . . . . . . ...............133Types of Jobs Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............135Available Personnel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........135potential Shortages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........135

Education and Training for Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..138Age of Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........138Curriculum Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........139Community College Laboratory Technician Programs . . . . . . . . . . . . . . . . . . . . .140College and University Bachelor’s Level Biotechnology Programs. . ..........143Certificate Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......144University Master’s Level Biotechnology Programs . . . . . ...................145Doctoral Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........146Short Courses in Biotechnology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........147University Biotechnology Centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..147Other Curr icu lar Components o f B io technology . . . . . . . . . . . . . . . . . . . . . . . . . . 148Retraining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149Biotechnology in Secondary Schools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......149

Funding of Training Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..150Federal Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., . . . . . . . . . . . . .151State Funding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .153Industrial Funding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............153Private Philanthropy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..................153

Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., ...153Chapter p references.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..154

BoxBox Page

8-A. Scientific Positions in Biotechnology Companies . . . . . . . . . . . . . . . . . . . . . . . .134

FiguresFigure Page8-1. University Initiatives in Biotechnology Training . . . . . . . . . . . .............1398-2, Biotechnology Laboratory Technician Profile . . . . . . . . . . . . . . . . . . . . . . . . . .1418-3. Source of Funds for Biotechnology Training and Education Programs . . . ..150

TablesTable Page

8-1. Estimates of Employment in Biotechnology, 1982-87. ........,.,........1328-2. Anticipated Hiring of B.S.-Level Biotechnologists by San Diego Area

Biotechnology Firms, 1987-92 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......1368-3, Number of Scientific Employees per Biotechnology Firm, 1983-87........1388-4. Biotechnology Programs Offering Associate of Applied Science Degrees ...1408-5. Proposed Two-Year Curriculum in Biotechnology . . . . . . . . . . . . . . . . . . . . ..1428-6. Biotechnology Programs Offering Bachelor of Science Degrees . . . . . . . . . .1438-7. Programs Offering Certificates in Biotechnology . . . . . . . . . . . . . . . . . . . . ., .1458-8. Biotechnology Programs Offering Master of Science Degrees . ...........1468-9. Biotechnology Programs Offering Ph.D. Degrees . . . . . . . . . . . . . . . . . . . . . .147

8-10. Biotechnology Programs Offering Short Courses. . . . . . . . . . . . . . . . . . . . . ..148

Chapter 8

Training and Personnel Needsin Biotechnology

INTRODUCTION

The continued commercialization of biotechnol-ogy in the United States depends on trained sci-entific and technical personnel. High-technologyfirms consistently rank quality of education andthe availability of a skilled work force among themost crucial elements for success (16,30), and ac-cess to educational facilities is often pivotal in de-cisions about where to locate biotechnology firms(30).

Biotechnology is not one discipline but theinteraction of several disciplines to apply sci-entific and engineering principles to the proc-essing of materials by biological agents to pro-vide goods and services (37). Thus, currentlypracticing “biotechnologists” were not trained assuch, but were trained in such fields as molecu-lar biology, genetics, biochemistry, microbiology,botany, plant pathology, virology, biochemical engi-neering, fermentation technology, and others.Much of the training for biotechnology continuesto be in these and related areas.

Biotechnology personnel needs will change asthe industry continues to grow and mature. Theshift in emphasis from research and development(R&D) to production, for example, requires morebioprocess engineers and more technicians. Ap-plications in new industrial sectors will also changepersonnel requirements. While the pharmaceu-tical industry is currently the predominant userof biotechnology, agriculture is also a significantuser and other industrial sectors are increasinglyapplying biotechnology. Future personnel needsin biotechnology will depend on the R&D needs,the products that are produced, and the extentto which biotechnology is integrated into variousindustries. While most industry analysts and aca-demics agree that the number of biotechnologypersonnel needed will continue to grow in the next5 to 10 years, opinions vary on the specific typesof jobs that will be available and the type of train-ing required for these jobs. U.S. colleges anduniversities have responded to the perceived per-sonnel needs in biotechnology with a variety ofnew training and educational programs.

SIZE AND FUTURE GROWTH OF COMMERCIALBIOTECHNOLOGY

Few analysts expect biotechnology to generatea large number of new jobs, but its applicationsare growing rapidly and its personnel needs areoften for specific, highly trained individuals. OTAestimates the total personnel working in bio-technology for dedicated biotechnology com-panies (DBCs) and large, diversified companiesto be about 35,900, of whom 18,600 are scien-tists and engineers. While this indicates at leasta five-fold increase in employment since 1983, thetotal numbers are low when compared with otherhigh-technology sectors. Computer and data proc-essing services, for example, employed almost600)000 workers in 1986 (58).

A range of figures has been published on bio-technology employment in the past 5 years (table8-l). A 1982 report estimated the total U.S. pri-vate sector employment in “synthetic genetics” tobe 3)278) with an annual growth rate of 54 per-cent (26). Using data from a 1983 OTA/NationalAcademy of Sciences survey, OTA estimated em-ployment in U.S. biotechnology R&D work forceto be 5,000 (72). Using data from a similar surveyconducted in 1985, the Institute of Medicine (IOM)estimated that 12,000 scientists were employedin the biotechnology industry that year (39). A1986 report estimates that 15)959 scientists andtechnicians are working in biotechnology (62). The

131

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132

Table 8-1.–Estimates of Employment in Biotechnology, 1982-87

Year Source of Estimate Estimated Number Employed Employment Sectors

1982

1983

1985

1985

1986

1986

1987

1987

1987

1987

Feldman & O’MaIleya

Office of Technology Assessmentb

Institute of Medicinec

National Science Foundationd

Center for Occupational Researchand Developmentf

National Science Foundationd

U.S. Department of Commerceg

Office of Technology Assessmenth

Office of Technology Assessmentt

Office of Technology Assessment

3,278 (total employees)

5,000 (R&D employees)

12,000 (scientists only)

7,000 (scientists and engineers)

15,959 (scientists and technicians)

8,000 (scientists and engineers)

25,000 (overall employment)

13,221 (scientists and technicians)24,347 (overall employment)

5,360 (scientists and technicians) i

11,600 (overall employment)

18,581 (scientists and technicians)35,947 (total biotech employees)

Private sector

Biotechnology companies (based on to-tal of 219)

Biotechnology companies (based ontotal of 282)

Biotechnology companies and largecorporations

Biotechnology companies, (based ontotal of 242)

Biotechnology companies and largecorporations

Dedicated biotechnology companies(based on a total of 300)

Dedicated biotechnology companies(based on total of 296)

Diversified companies(based on total of 53)

Diversified and dedicated biotechnol-ogv companies

aM. Feldman and-E, p, O, Malley, The B/0/echno/ogy lnd~stry /fI Ca//forn/a, contract paper prepared for the California Commission on Industrial Innovation, Sacramento,

CA, August 19S2.-.

bus., Congress, Office of Technology As~ssment, corrrrrrerc/a/ L3/otec/rno/ogy:An /ntemationa/ Ana/ys/s, OTA-BA-218 (Elmsford, f’JY: PeQamOn press, Inc., J~Uw l~kConstitute of Medicine, Committm on National Needs for Biomedical and Behavioral Research personnel, National Academy of Sciences, Personne/ Needs and Trah’IinQ

for B/omedlca/ and Behavioral Research (1985 Report) (Washington, DC: National Academy Press, 19S5).dNational science Foundation, B/otechno/ogy Research and Development Act/~jt/es in /ndustry, Suweys of Science Resources a Series, Special Report, (NSF 86-311)

(Washington, DC: 1987).eNinety.four firms were estimated to represent two-thirds of the l~d@fy’S actiVitY.fB,F, Rinard, ~dfjca~/on for 8/o~ec~rro/ogy (Waco, TX: The Center of Occupational Research and Development, 19~).gtJ.S. Department of Commerce, International Trade Administration, 19S8 U.S. Industrial outlook (Washington, DC: Government Printing Office, January 1988),hu,s congress, Office of Technology Assessment, Sumey of Dedicated Biotechnology Companies, 1987.iu,s, Congress, Office of Technology Assessment, Survey of Diversified Corporations in Biotechnology, 1987.

National Science Foundation (NSF), however, esti-mated that only 8,000 scientists and engineersworked primarily in biotechnology as of Januaryof 1986 (56), A reason for the difference is thatNSF has assumed fewer companies are perform-ing the bulk of biotechnology R&D than the otherestimates, and NSF considered only personnel in-volved in R&D, not production (18,56). The U.S.Department of Commerce recently estimated that25,000 people worked for dedicated biotechnol-ogy companies (76). This estimate is very closeto OTA’s estimate, derived from a survey of dedi-cated biotechnology.

Current Survey Results

In the spring of 1987, OTA surveyed dedicatedbiotechnology companies (DBCs). Firms weredivided into small (1 to 20 employees), medium(21 to 100 employees), and large (101 to 1)000 em-ployees). The numbers of small and medium firms

were nearly even at 112 and 121, respectively.Only 56 companies employ 101 to 1,000 people.(See ch. 5.) The average company had 86 employ-ees, and the median response was 30. private com-panies averaged 40 employees, while public andsubsidiary companies were approximately equalin size with an average of approximately 165 em-ployees. Companies working in human therapeu-tics, plant agriculture, and human diagnosticstended to be the largest in the industry, averag-ing 120 employees. Specialty chemicals and rea-gents companies tended to be smaller, with 30 to45 employees. Chapter 5 discusses other sectoraldifferences of commercial biotechnology.

The OTA survey of DBCs found that 135 com-panies employed a total 11,597 people, of whom6,297 or 54 percent were scientific and technicalpersonnel. Extrapolating these figures to the to-tal of 296 biotechnology firms identified for thesurvey gives a total employment figure of 24)347)of which 13,221 would be scientific and techni-

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cal personnel.l A second OTA survey covered 53diversified corporations involved in biotechnol-ogy research and development. The survey showedthese 53 companies, including large chemical,pharmaceutical, and agricultural companies (seech. 5), employed 11,600 in biotechnology, of whom5,360 were scientists and engineers with advanceddegrees. OTA estimates that the current numberof scientists and engineers employed in biotech-nology is at least 15,000 to 21,000, with an addi-tional 15,000 to 1 9)000 nontechnical personnelworking for biotechnology companies. Theseranges are probably slightly lower than the ac-tual total, as not all large corporations involvedin biotechnology could be identified and surveyed,and more dedicated biotechnology companieshave been identified since the 296 were surveyed(see ch. 5 and apps. A and B).

The future rate of growth of employment inbiotechnology will depend on the success of com-panies in introducing products and services basedon biotechnology, the expansion of biotechnologyapplications in new fields such as waste manage-ment and the extraction industries, and investorconfidence in biotechnology. Companies contactedfor a survey for the Industrial Biotechnology Asso-ciation (IBA) expected their staffs to grow an aver-age of 44 percent from July 1, 1987 to June 30,1989 (38). If companies grew at their hoped forrates, the biotechnology work force would num-ber almost 58,000 by June 1989 (70). Companiesresponding to the OTA survey also reported highlevels of employment growth, averaging 27.4 per-cent over the next 5 years. In 1983, companiesexpected to increase their staffs by 42 percentduring the next 18 months. They actually in-creased their staffs by 20 percent (39). While com-panies can be expected to be optimistic, growthin biotechnology employment is indicated. Accord-ing to analysts with the Bureau of Labor Statis-

‘The of’erall mean number of employees per biotechnology com-pany (85.9) times the number of companies (296) gives a slightlyhigher number (25,426) than given here. However, the presence ofa few large companies probably skews the average too high. OTAinstead multiplied the number of small companies (1 12) times thea~’erage number of employees (11.1), the number of medium com-panies (121) times the average number of employees (55.3), the num-ber of large companies (56) times the average number of employees(267), and the number of unclassified companies (17) times the overallakrerage number of employees (85.9) to arrive at the figure of 24,347.See ch. 5 for a description of the biotechnology industry.

tics, the overall number of life scientists is expectedto grow 21 percent or 30,000 jobs between 1986and the year 2000, largely because of increasingapplications of genetics research (67).

Personnel Needs in Biotechnology

Personnel needs in biotechnology are changingwith the maturation of the industry. Each stageof development requires different activities andskills. Early stages mainly require research scien-tists and supporting laboratory technicians. Aspotential commercial products are developed, bio-process scale-up engineers, cell culture and fer-mentation specialists, separation and purificationspecialists, analytical chemists, clinical scientists,regulatory affairs experts, and financial analystsare required. When full-scale production is under-way, technicians at a variety of levels and qualitycontrol specialists are needed, as well as market-ing managers and other business specialists.

This changing mix of personnel at biotechnol-ogy companies is becoming evident. Productionand quality control positions are being added tothe R&D jobs that have been the mainstay of em-ployment. The current trend is toward hiring tech-nicians rather than Ph.D. level researchers (47).opportunities for biologists and biochemists at themaster’s and bachelor’s level (38) and perhaps evenwith 2-year associate of applied science degrees(62) will increase. Currently, according to datafrom OTA’s survey of DBCs, Ph.D. scientists rep-resent 14 percent of company personnel and 28percent of scientific personnel. This demonstratesa continuing decline in Ph.D.s as a percentage ofthe scientific work force in biotechnology. Datafrom OTA’s 1983 survey showed that 43 percentof R&D personnel held Ph.D.s., while the Insti-tute of Medicine reports that 38 percent of thescientists employed in biotechnology firms heldPh.D.s in 1985 (39).

Biotechnology firms are also shifting somewhatfrom researchers to managers and marketers (17).Many scientist/founders of the dedicated biotech-nology companies have been replaced by man-agers geared to getting products to markets ratherthan out of the laboratory (3).

Different sectors of the biotechnology industryalso have differing personnel needs. The educa-tional requirements for a position in plant genetic

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engineering are very different from those for a lar biology, genetics, microbiology, biochemistry,position in developing monoclinal antibody test immunology, and several engineering disciplines.kits. The research scientists involved must know Positions within these disciplines range from Re-different biological systems, and the technicians search Director to Technician, and qualificationsinvolved must be familiar with different lab pro- range from a Ph.D. with substantial experiencecedures and equipment. to a bachelor’s degree or, possibly, less (box 8-A).

Scientific personnel needs in biotechnology in-volve a variety of disciplines, including molecu-

.

. .

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Types of Jobs Available

Molecular biologists and immunologists consti-tute about a third of the research workers in bio-technology (82). Most molecular biologists havefocused on animal and bacterial systems becausethis research is most applicable to human health(13) and most funding for molecular biology hascome from the National Institutes of Health. Im-munologists are heavily involved in the develop-ment of hybridomas to produce monoclinal anti-bodies, More recently, the employment of plantmolecular biologists has been increasing with theredirection of agricultural research toward mo-lecular biological techniques (see ch. 10).

Bioprocess engineers, biochemists, and microbi-ologists develop methods of producing biotech-nology products in large quantities (13). The de-mand for these specialties will increase as productsare readied for production (82).

Microbiologists study bacteria, yeast, and othermicro-organisms and identify microbes with par-ticular characteristics for industrial processes (13).Microbiologists also identify optimum growth con-ditions for micro-organisms and conditions forproduction of the substance of interest.

Cell culture specialists perform similar functionsfor plant and animal cells grown in tissue culture.Tissue culture is becoming increasingly importantfor the production of useful products, and exper-tise in tissue culture is an increasingly importantskill.

Bioprocess engineers design systems to approx-imate conditions identified by the microbiologist.Bioprocess engineering is related to chemical engi-neering. One of the main tasks undertaken by bio-process engineers is the design of fermentationvats (13) and various bioreactors (55) for the micro-organisms that will produce a given product. Bio-chemists are required for the next stage of pro-duction–the recovery, purification, and qualitycontrol of a given product. Many high-value prod-ucts are extremely fragile, making purification adifficult and highly skilled task.

Available Personnel

For the most part, the available supply of lifescientists adequately meets personnel needs (2,45,48,56), though various observers have identi-fied certain specific shortages in areas such as pro-

tein chemistry (6,8,20,64), x-ray crystallography(32), bioprocess engineering (34,35,36,39,42,61,81),cell culture (7,81), quality control (21,52), and otheraspects of scale-up. Microbial ecologists are alsoseen as being in short supply (69,74). In general,companies see an ample supply of scientists trainedin molecular biology, biochemistry, cell biology,and immunology, since these areas have tradition-ally been well-funded by the National Institutesof Health (48).

There are about 66,500 Ph.D.s in the biologicalsciences work force, representing about a quar-ter of the total of this work force. Master’s de-gree holders represent another one-third of thistotal, with the rest holding bachelor’s degrees (75).The number of bachelor’s degrees awarded in thebiological sciences peaked in 1976 at 59,000 andhas declined since then. About 38,640 bachelor’sdegrees were awarded in 1984 (75).

In terms of general biological sciences, the workforce is well supplied or oversupplied. During the1980s, unemployment of recent graduates withbachelor’s degrees in biosciences has been higherthan for other science and engineering fields, ex-cept physics. The life sciences in general, and thebiosciences in particular, have been oversuppliedfor several years, relative to demand (79).

potential Shortages

Shortages in certain emerging fields, such asprotein engineering, are largely unavoidable,due both to the difficulty of predicting whichfields will have the heaviest demands and thelag time required for educational institutionsto gear up for new fields. The expense of newfaculty and new equipment prevents institutionsfrom rapidly moving into new areas. In areas witha shortage of researchers, a shortage of univer-sity instructors is usually also apparent (32,.50).For example, pharmaceutical companies are hir-ing x-ray crystallographers with expertise in bio-logical molecules from academia at a rate thatthreatens to undercut both research and train-ing of future crystallographers (32).

A shortage of microbial ecologists has resultedfrom the increased interest in the purposeful re-lease of engineered organisms into the environ-ment. Until recently, microbial ecology was a rela-tively obscure field that attracted less money andtalent than more glamorous fields such as molecu-

136

lar biology. The Environmental Protection Agency(EPA) has identified ecological risk assessment, eco-system structure and function, and ecological andtoxicological effects as priority areas (77), but EPAdoes not fund many extramural research andtraining programs. The National Science Founda-tion also supports some research, and thus train-ing, in microbial ecology (74).

Predicting future employment needs accuratelyrequires information that is often unavailable.Such predictions are necessarily speculative. Asurvey of biotechnology firms in the San Diegoarea indicates that one-third of the bachelor’s levelemployees hired during the next 5 years will workin recombinant DNA. Other areas of high antici-pated need include DNA sequencing, separationchemistry, and animal tissue culture (8) (see table8-2). Personnel specialists at a 1987 meeting of theIndustrial Biotechnology Association also pointedto basic recombinant DNA techniques as their big-gest training need (37).

A 1984 OTA report said that a potential short-age of highly trained bioprocess engineers in theUnited States “could be a bottleneck to the rapidcommercialization of biotechnology in the UnitedStates” (72). While no such shortage is evidentalmost 4 years later, biotechnology still has notbeen used to produce a large number of prod-ucts and thus there is not yet a heavy demand

Table 8-2.—Anticipated Hiring of B.S.-LevelBiotechnologists by San Diego Area Biotechnology

Firms, 1987-92a

Number expected Percent ofArea of work to be hired total

Recombinant DNA. . . . . . . . .DNA Sequencing . . . . . . . . . .Animal Tissue Culture . . . . .Separation Chemistry . . . . . .Hybridoma Technology. . . . .Virology . . . . . . . . . . . . . . . . . .Protein Synthesis . . . . . . . . .DNA Synthesis. . . . . . . . . . . .Plant Tissue Culture . . . . . . .Other (e.g., fermentation,animal model developmentand testing). . . . . . . . . . . . . . .TOTAL . . . . . . . . . . . . . . . . . . .

2921191181178452312419

29885

330/0131313

96432

3

aData rep~esent estimates for 27 organizations based on responses frOm 15. Num-bers are cumulative for the 5-year period.

SOURCE: Sanford Bernstein, San Diego State University, February 1987.

for bioprocess engineers. This is at least partlybecause biotechnology is still largely used to pro-duce high-value, low-volume products. Produc-ing high-volume, low-value products will requiremore engineering talent for successful scale-up(41). Some industry representatives fear a short-age of bioprocess engineers lies ahead as moreproducts reach the final stage of commercializa-tion (35,36). Shortages of bioprocess engineershave recently been predicted for the 1990s (61).However, most companies contacted by GeneticEngineering News, an industry trade journal, didnot expect any personnel shortages to develop dur-ing the next 5 years (48). Some biotechnology com-pany personnel managers have, however, re-ported difficulties hiring biochemical engineersat the B.S./M.S. level with cell culture or fermen-tation experience (38,29).

Since 1984, protein chemistry has emerged asa strong need (6,8,20,21,64). The knowledge ofmaking, purifying, and stabilizing proteins to theiractive form is required, especially in pharmaceu-tical applications. The need for immunologists hasalso increased, due to demand in both monoclinalantibody development and in AIDS research.

Whether or not shortages actually materializewill depend on how rapidly biotechnology prod-ucts are commercialized and how and whenuniversities and their students respond to pre-dicted manpower needs. While a shortage of bio-process engineers would be a serious bottleneckfor the industry, the actual number needed willnot be very large. Bioprocess engineering is notlabor intensive, and it has been estimated that per-sonnel requirements for bioprocessing, even af-ter firms enter mass production, will be only 10to 15 percent of the total biotechnology work force.Furthermore, technological advances, such as bio-sensors and computer-controlled continuous bio-processing, could reduce labor intensity (46,72,78).

Potential projected personnel shortagesmight also be ameliorated by mobility amongdisciplines. For example, potential shortages ofplant molecular biologists were identified severalyears ago (39,57,72). However, the field of plantmolecular biology has been able to move aheadquite rapidly in the last few years due to the largepool of molecular biology postdoctoral fellows and

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‘1

Photo credit: Calgene

Cell and tissue culture methods are used to regenerateplant cells containing foreign genes into whole plants.

trainees. While many of these scientists weretrained in animal or bacterial systems, they wereable to apply their skills and knowledge of molecu-lar genetics to plant systems. The postdoctoral poolhas thus served as a buffer, although there is stilla strong need for biotechnologists with plant ex-pertise (5).

No such postdoctoral pool exists for bioprocessengineering. The current soft market for petro-chemical engineers creates a logical pool of po-tential bioprocess engineers, should shortagesbecome acute. However, traditional chemical engi-neers have no understanding of living systems.As one engineering professor put it, “When you’vespent your whole career with nonliving systems,you just don’t get an appreciation of living sys-tems overnight” (14).

Experience in the pharmaceutical industry hasshown that chemical engineers can be retrainedin bioprocess engineering (72). However, some in-dustrialists argue that large-scale fermentation anddownstream bioprocess engineering for recom-binant organisms are radically different fromtraditional biochemical engineering techniquesand require special training. For example, recom-binant organisms are often fragile and slow pro-

ducers. Since slow producers are at greater riskof being overrun by contaminants, special tech-niques to maintain pure cultures are needed (61).In addition, pharmaceutical production is rapidlychanging from bacteria and yeast fermentationto mammalian cell culture, which requires differ-ent expertise.

universities have responded with some in-creased emphasis on bioprocess engineering, al-though new biotechnology programs emphasizeengineering less than genetic manipulation tech-niques (see “New Initiatives in Biotechnology Train-ing)” below). College students appear to be highlyresponsive to market signals (73) and can thus beexpected to seek out educational programs forvarious aspects of biotechnology to the extent thatthey perceive occupational rewards from careersin particular areas.

Belief is widespread that interdisciplinary train-ing should be increased, although opinions varyon the specific disciplines that should be included(16,23,40,72). Industrialists have referred to theneed for “life-science-oriented engineers andengineering-oriented life scientists” (61), as wellas for chemical engineers with an understandingof biosynthesis and biologists with an apprecia-tion for scale-up problems.

Different types of firms have different person-nel needs. Generally, smaller firms have a higherpercentage of Ph.D. scientists than do larger firms(24). Small firms are more likely to be concentrat-ing on relatively basic research and development,and thus have more Ph.D. research scientists.Small firms are also less likely to be involved inlarge-scale production, and thus can be expectedto have less need for technicians than larger com-panies. Some analysts have indicated that smallcompanies are less able to afford on-the-job train-ing and need someone who can get up to speedright away (68). Others have indicated the impor-tance of a broad general education, adding thatspecial skills and protocols must be learned onthe job (15). The average firm size is increasing(table 8-3), indicating that more firms will needa variety of non-Ph.D. support personnel in bothscientific and nonscientific areas.

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Table 8.3.–Number of Scientific Employees per Biotechnology Firm, 1983=87

Scientific and Technical Percent Ph.D.s inYear Employees per firm Ph.D.s per firm scientific work force Source

1983 . . . . . . . . . . . . . 22.8 12 53 Office of Technology Assessment1985 . . . . . . . . . . . . . 42.12 16 37 Institute of Medicine1987 . . . . . . . . . . . . . 42.9 12 28 Office of Technology AssessmentSOURCE: Office of Technology Assessment, 1988.

EDUCATION AND TRAINING FOR BIOTECHNOLOGY

Many academics and industry observers believethat the best preparation for biotechnology istraining in a traditional discipline, such as geneticsor plant physiology, while learning some of thetools of biotechnology. Individuals trained in tar-geted disciplines can then work in interdiscipli-nary teams on specific problems. For example,David Pramer, director of the Waksman Instituteof Microbiology at Rutgers University, wrote in1983 that:

. . . it would be unwise for universities to offereducational programs in biotechnology that arenarrowly conceived or overly professional, andit is essential for university scientists within tradi-tional academic disciplines not to abdicate a re-sponsibility to educate biotechnologists . . .

To continue to flourish, biotechnology must benourished by a steady supply of individuals whoalso are well educated in traditional disciplines . . .Since biotechnology 5 years from now may bequite different from what it is today, the key toeducating a biotechnologist is flexibility in special-ized aspects of a program that is firmly based inscience and engineering (60).

Many academics believe that new initiatives intraining and education are required by the Na-tion’s colleges and universities to meet the educa-tion and research needs of the emerging biotech-nology industry. OTA identified 60 new initiativesin biotechnology training at 49 different U.S. col-leges and universities. These programs are listedin appendix C. Forty-one of these programs re-sponded to an OTA survey requesting informa-tion about curriculum, funding, age, number andtype of students, and resources of the programs.Results of the survey give a good indication of howcolleges and universities have responded specifi-cally to new opportunities in biotechnology andshould be representative of new initiatives in bio-

technology on the Nation’s campuses. No attemptwas made to catalog the many traditional pro-grams that also provide education and trainingrelated to biotechnology. The identified programsrange from 2-year applied associate of sciencedegrees to short courses in particular biotechnol-ogies designed for professional scientists. Alsoincluded in the OTA list of new initiatives in bio-technology training and education are university-based biotechnology research centers. While thesecenters generally do not sponsor courses or grantdegrees, they do enhance biotechnology educa-tion on their campuses through access to equip-ment, faculty development, and research oppor-tunities for both graduates and undergraduates.These centers also provide a focal point for dis-cussions of how best to educate and train newbiotechnologists.

For the most part, university programs havebeen developed at the institutional level with lit-tle or no coordination or formal interaction amongthe program developers at different colleges anduniversities. Most do, however, have some formof interaction with industry. Only 7 of 41 programssaid that they did not consult industry in estab-lishing their programs. Consultations with indus-try included surveying local biotechnology com-panies and sending program proposals to industryrepresentatives for comments. While it is gener-ally too early to assess industry’s satisfaction withgraduates of these programs, most graduates haveapparently had a relatively easy time finding em-ployment in their fields.

Age of Programs

With the exception of programs in biochemicalengineering, all of the programs identified arenew: the oldest began in 1980. Of 56 programs

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for which the year of initiation is known, morethan a third were begun since 1986 or are stillin the planning stage (figure 8-l). Additional pro-grams are probably in the planning stages andmay be created in the next few years.

As figure 8-1 indicates, a large number of bio-technology programs were initiated in 1983. Thiswould indicate a 2-year lag from the year whenmore biotechnology companies were founded,1981 (see ch. 5). Two years is a relatively shorttime in which to develop curricula and approveprograms, indicating that some institutions movedquickly into biotechnology (28) or at least to iden-tify themselves with biotechnology.

There is no clear pattern of which degree levelprograms were founded first. In each year a mixof programs was initiated, aimed at a variety ofeducational levels. For the most part, communitycollege programs are newer than bachelor’s andmaster’s programs.

At the doctoral level, most programs are in bio-processing or biochemical engineering, except forthe Iowa Biotechnology Training Program’s Ph.D.in microbiology and immunology. TraditionalPh.D. programs in molecular biology, microbiol-ogy, biochemistry, and other fields relevant to bio-technology were not surveyed.

Figure 8-l. -University initiatives inBiotechnology Traininga

14 I I

10-

1980 1981 1982 1983 1984 1985 1986 1987 1988Year of initiation

aThe total number of programs shown here is 56. Biochemical engineering pro-grams are not included.

SOURCE: Office of Technology Assessment, 1966.

Curriculum Content

Recombinant DNA techniques formed the coreof many of the programs. Of 32 programs thatprovided OTA with curriculum information, 26reported coursework in recombinant DNA. Noother specific skill or technology was mentionedby more than half of the programs. Courses orskills mentioned as requirements or electives byone-third to one-half of programs include tissueculturing, hybridoma technology, immunochem-istry, bioprocess engineering, fermentation, andpurification and separation sciences.

The extent to which training in bioprocess engi-neering is available is not clear. Only a few pro-grams have in-depth faculty expertise; most ex-pertise is scattered among chemical engineering

Photo credit: Case Western Reserve University

Two undergraduate students read a DNA sequence onan autoradiograph. Such opportunities were extremelyrare at the undergraduate level several years ago, but

are becoming increasingly common.

140

departments (14). According to the National Re-search Council, fewer than 20 U.S. colleges anduniversities have meaningful biochemical engi-neering programs (55). The American Council ofEducation reported in 1985a total of 58 doctoralengineering programs in biotechnology (33). Whilemany of these programs were in departments ofchemical engineering and so most likely relevantto OTA’s definition of biotechnology, many otherswere in departments such as biomedical engineer-ing, which have less relevance to industrial bio-technology.

The currently depressed market for chemicalengineering graduates may make it difficult fordepartments to add faculty, courses, and equip-ment for bioprocess engineering. If departmentshave fewer students, they will have some diffi-culty securing the additional funds. Decidingwhich, if any, areas of traditional chemical engi-neering to reemphasize is problematic.

The vast majority of the undergraduate chemi-cal engineering curriculum is mandated by theaccreditation standards of the American Instituteof Chemical Engineers and the AccreditationBoard for Engineering and Technology. At theUniversity of Iowa, for example, students inter-ested in biochemical engineering are urged to usetheir limited electives for courses in biochemis-try, microbiology, biochemical engineering,genetics, and biology. They have also integratedbioreactors, microbial kinetics, and enzyme re-

actions to illustrate concepts and techniques intraditional chemical engineering coursework (86).

All of the training programs are laboratory-intensive, except for some of the short coursesand workshops. Academic program directors whohad contacted industry representatives about theirneeds uniformly reported that industry neededtechnicians with hands-on laboratory experienceand have designed their programs accordingly.

Many biotechnology academic programs re-ported that a shortage of protein chemists existedin the industry, or that industry needed techni-cians and bioprocess engineers with an under-standing of protein chemistry. No course specifi-cally in protein chemistry was evident in thecurricula supplied to OTA, but nearly every pro-gram required courses in biochemistry, whichwould include protein chemistry. It is not clearthe extent to which students will learn the solu-tion properties of proteins, purification and se-quencing methods, and protein synthesis withinthese programs. A course in protein chemistrywas recommended in a model curriculum for a2-year program for biotechnicians (see table 8-4).San Diego State University, however, will initiatea Certificate in Protein Engineering in the fall of1988, which will include specific courses in pro-tein engineering (22). The California State Univer-sity at Los Angeles intends to offer a course inadvanced protein chemistry (66).

Table 8-4.—Biotechnology Programs Offering Associate of Applied Science Degrees

Year ofinitiation University Program

1983 Monroe Community College Biotechnology Program1986 Central Community College Biotechnology Program1986 State University of New York, Alfred Biotechnology Program1986 Technical College of Alamance Biotechnology1987 Boston University/Metropolitan College Biotechnology Laboratory Methods1987 Madison Area Technical College Biotechnology Laboratory Technician Program1988 Becker Junior College Biotechnician Program

SOURCE: Office of Technology Assessment, 1988.

Community College Laboratory ment of biotechnology, most work was done by

Technician Programs highly educated, innovative thinkers, who oftenhad to develop new procedures as their research

The need for biotechnicians with specialized but progressed. As with all technologies, as biotech-limited training has prompted several community nology matured, more of the work has becomecolleges to institute or consider instituting biotech- routine and can be assigned to less highly trainednology training programs. Early in the develop- technicians (9,62). Figure 8-2 gives a profile of skills

141

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required by biotechnicians. Two-year training pro-grams may be appropriate for these technicians(62).

OTA has identified seven associate of appliedsciences (AAS) programs in biotechnology, sixtaught at community or junior colleges and onetaught at a state college (table 8-4). These programsare designed to fill the need for biotechnicians,(similar to the more established need of chemicaltechnicians),” although students from these pro-grams may go on to 4-year colleges. Six of theseven programs began since 1986, and the sev-enth began in 1983.

The need for biotechnicians at the AAS levelis not well established, but several analysts ex-pect it to surface soon (9,62) based on the prece-dent from other high-technology industries. Aconsortium of 2-year postsecondary schools com-missioned a study in 1986 to assess the need for2-year biotechnician training (62), Table 8-5 showsa model 2-year curriculum in biotechnology de-veloped as part of this study.

The 1986 study included a survey of biotech-nology companies and a Biotechnology Task Forceon Education, consisting of industry and academic

Table 8-5.—Proposed Two-Year Curriculumin Biotechnology

Year One Year Two

Quarter 1 Quarter 4Introduction to Biotechnology Industrial MicrobiologyTechnical Math 1: Algebra/ Computer Operations

Geometry Fundamentals of InstrumentationChemistry 1: Inorganic and ControlMolecular and Cell Biology I Analytical ChemistryTechnical Communications I Fluid Power Devices

Quarter 2 Quarter 5Technical Math II: Statistics/ Applied Genetics

Precalculus Instrumental AnalysisApplied Physics I Economics in TechnologyMolecular and Cell Biology II Biotech Internship or ProjectChemistry II: Organic Mechanical Devices and SystemsTechnical Communications II Elective

Quarter 3 Quarter 6Principles of Microbiology Protein ChemistryBiochemistry Industrial InstrumentationApplied Physics II Industrial RelationsElectronics Biotech Project or InternshipElective Technical ElectiveSOURCE: B.F. Rinard, EducatiorI for B/o@c/rrro/ogy (Waco, TX: Center for Occupa-

tional Research and Development, 1986),

members. The study produced a number of sig-nificant findings, among them:

technicians in biotechnology will be differ-ent from current technicians in other tech-nology fields, most significantly in that theywill require a broader and more interdiscipli-nary technical base;77 percent of the biotechnology companiessurveyed expected biotechnicians to have atleast a bachelor’s degree; however, since few2-year programs currently exist, the indus-try has little experience for judging the qual-ity of 2-year program graduates;based on the biotechnology industry’s presentlevel of employment of biotechnicians from2-year training programs, about 200 gradu-ates a year should be able to find placementfrom 1986 to 1995,2-year programs should be initiated in areaswith the largest markets for biotechnicians,which currently includes California, Massa-

chusetts, New Jersey, New York, and Mary-land. The need for biotechnicians exists inother parts of the country, however, and willexpand as the industry expands.

Industry appears skeptical toward the 2-yearprograms thus far. Concerns include whether 2years in college can provide the knowledge nec-essary to manage complex instrumentation andsensitive organisms (84) and that technicians with-out a theoretical understanding may not be ableto adapt to the changing needs of rapidly evolv-ing technology (84).

Industry representatives also give these reasonsfor skepticism: a current oversupply of B.S. andM.S. degreed biologists available for technicianwork; 2-year programs lack the breadth and depthof 4-year programs; and companies need the re-search background provided by B.S. and M.S. pro-grams (62).

Some reasons for reluctance in hiring gradu-ates of 2-year programs will dissipate as the dedi-cated biotechnology companies grow and mature.For example, small companies are more likely torequire their employees to assume multiple duties,some of which will require more training than2-year programs provide. As a company’s overall

143

workload and staff increases, it can divide tasksby level of skill and maybe able to employ peoplefull-time at the lower skill levels. Also, as workcontinues to shift from research and developmentto production, more of the tasks will become rou-

, tine. Larger companies may also be able to affordmore time for on-the-job training.

College and University Bachelor's LevelBiotechnology Programs

At least 11 colleges and universities have insti-tuted new bachelor’s-level programs in biotech-nology (table 8-6). Like the 2-year programs, theseprograms emphasize hands an laboratory experi-ence, but include more theoretical science andhumanities courses. Students are prepared eitherto go directly to work in industrial labs, or to en-ter master’s or doctoral programs.

The Rochester Institute of Technology (RIT) in-stituted its biotechnology program in 1983 “to pre-pare graduates to work as biotechnologists in re-search programs and development and productionfacilities in academia, government, private indus-try, and other organizations” (28). Students alsogoon to M.S. and Ph.D. programs. In addition tocourses in general biology, chemistry, biochemis-try, and molecular biology, the program requires25 courses related to biotechnology, including spe-cific courses on analytical chemical separations,mammalian tissue culture, plant tissue culture,hybridoma techniques, plant physiology, genetic

engineering, and an individual biotechnology sen-ior research project. Students are also encouragedto work in a cooperative education program forfour quarters, making the course of study a totalof 5 years instead of 4. Employers in the coopera-tive education program have included govern-ment, industry, and academic labs.

Although it is among the oldest of the new ini-tiatives in biotechnology education, the RIT pro-gram has only 45 graduates (as of spring 1988),due to the length of time required to completethe program.

Like many of the programs identified, the RITprogram consulted with industry during programplanning and implementation. RIT established aBiotechnology Advisory Council, consisting of rep-resentatives of 12 companies with interests inbiotechnology. The head of the Department of Bi-ology at RIT reports that council members “con-tinue to be involved in curriculum review in lightof the rapidly changing needs of the field, (and)in providing up-to-date information about theircompanies’ particular interests and needs” (28).

Another program in New York State is thebachelor of science degree in recombinant genetechnology offered by the State University of NewYork College at Fredonia. In addition to generalcourses in chemistry, biology, botany, and physics,the program requires courses in recombinant genetechnology, genetics, and cell and subcellular bi-ology. Initiated in 1983, the program had 43 stu-

Table 8-6.—Biotechnology Programs Offering Bachelor of Science Degrees

Year ofinitiation University Program

1980 State University of New York, Plattsburgh/W.H. In Vitro Cell Biology and BiotechnologyMiner Agricultural Center

1982 Worcester Polytechnic Institute Biotechnology1983 Cedar Crest College Genetic Engineering1983 Rochester Institute of Technology Biotechnology1983 State University of New York, Fredonia Major in Recombinant Gene Technology1984 Case Western Reserve University Concentration in Biotechnology and Genetic Engineering1986 California Polytechnic State University Biochemical Engineering1986 Cook College, Rutgers University Biotechnology a

1986 North Dakota State University Biotechnology Academic Program1987 University of Kentucky Biotechnology1988 Ferris State College Biotechnology Emphasis

%urriculum is pending approval by the State Department of Higher Education

SOURCE: Off Ice of Technology Assessment, 1988.

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dents enrolled in the spring of 1988. A total of44 students had completed the program through1986, with most going to work in academic or gov-ernment laboratories.

The oldest bachelor’s level biotechnology pro-gram identified by OTA is the In Vitro Cell Biol-ogy & Biotechnology Program, begun in 1980 bythe State University of New York at Plattsburghand the W.H. Miner Agricultural Center. The pro-gram includes both an approved major field ofstudy at Plattsburgh leading to the bachelor ofscience degree and a self-contained semester ofintensive training in techniques of biotechnology.One semester of the B.S. program consists of a15-credit-hour course of lecture and laboratorywork in tissue culture and biotechnology in resi-dence at the Miner Institute. This course is alsoopen to qualified students from other colleges anduniversities, and attracts both undergraduate andpostbaccalaureate students.

The North Dakota State University at Fargooffers a bachelor of science degree in biotech-nology in both its College of Agriculture and itsCollege of Science and Mathematics. A minor inbiotechnology is also available. In addition to tradi-tional courses, North Dakota State offers coursesin recombinant DNA, plant cell and tissue culture,animal cell culture, plant micropropagation, andprocess biochemistry. Having begun in 1986, theprogram has no graduates yet.

The University of Iowa offers B.S. as well as M.S.and Ph.D. degrees in chemical and material engi-neering with opportunities in biochemical engi-neering/biotechnology. The Iowa program pre-pares its B.S. students primarily for M.S. and Ph.D.programs.

Other existing or planned B.S. level programsin biotechnology include those at Cook College ofRutgers University, Ferris State College in Michi-gan, the University of Kentucky in Lexington, andCedar Crest College in Allentown, Pennsylvania.

Certificate Programs

Certificate programs are offered to postbac-calaureate students who wish to learn specifictechniques in biotechnology (table 8-7). Fouruniversities in the California State University sys-

Photo credit: Rochester Institute of Technology

An undergraduate student majoring in biotechnologyprepares DNA for restriction enzyme mapping.

tern offer certificates in biotechnology or relatedtechnologies to either undergraduate or postbac-calaureate students in the life sciences. Otheruniversities offer certificates at the graduate level.

Two of the most established programs are atSan Diego and San Francisco State Universities,both initiated in 1983. San Diego offers a certifi-cate in recombinant DNA technology as well asan M.S. in molecular biology and a Ph.D. in molec-ular and cellular biology. The certificate programconsists of 24 semester units of courses in radio-isotope techniques, biochemistry, bacterial genetics,molecular biology, and recombinant DNA tech-niques. An internship in a university or industriallaboratory is also required. San Diego State Univer-

—

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Table 8.7.—Programs Offering Certificates in Biotechnology

Year ofinitiation University Program

1980 W.H. Miner Agricultural Center In Vitro Cell Biology and Biotechnology1983 San Diego State University Recombinant DNA Technology1983 San Francisco State University Genetic Engineering1986 California State University at Hayward Biotechnology1986 Rutgers University Biotechnology1986 Tufts University Training Program in Biotechnology Processing1987 California State University at Los Angeles Biotechnology1988 San Diego State University Protein Engineering

Planned San Diego State University Agricultural BiotechnologySOURCE Off Ice of Technology Assessment, 1988

sity will offer a Certificate in Protein Engineeringstarting in Fall 1988, and plans to start offeringa Certificate in Agricultural Biotechnology in Fall1989 (22).

San Francisco State University offers a similarprogram. The Genetic Engineering Certificate Pro-gram is open to postbaccalaureate students ‘(whowish to become specifically competent in the con-cepts and laboratory skills of genetic engineer-ing” (65). The 13 units required for the certificatemay be used toward the 30 units required for themaster’s of science in biology. About 50 peoplehave completed the certificate program, and aboutthree-fifths are working for biotechnology com-panies. The remainder are working in universitylaboratories or are pursuing graduate degrees.

California State University at Hayward initiateda certificate program in biotechnology in 1986.The program requires one academic year to com-plete 28 quarter units of work in cell biology,molecular cloning, immunochemistry, cell culture,radiation biology, and other electives. Developersof the Hayward program consulted biotechnol-ogy companies and identified industry needs inprotein purification, immunochemistry, and cellculture.

California State University at Los Angeles starteda l-year certificate program in biotechnology inthe fall of 1987, which can be applied to a master’sdegree program. The core of the program con-sists of four courses in gene manipulation. Theprogram developers anticipate adding courses inhybridoma laboratory techniques, cell culture, andadvanced protein chemistry. The program direc-tor visited four biotechnology companies andheard the following needs expressed: employees

who bring their minds as well as their hands toa task; employees who have had research projectexperience of at least half-time intensity; and em-ployees with expert theoretical backgrounds inprotein chemistry (66).

A similar although shorter program is the Train-ing Program in Biotechnology Processing offeredby the Biotechnology Engineering Center of TuftsUniversity. Tufts offers this 15-week summer pro-gram designed to train students in biotechnologyprocessing, and to place them in positions as tech-nicians in industry. Sponsored by Tufts and a con-sortium of biotechnology companies, the programreceived start-up funds from the Bay State SkillsCorporation.

Rutgers University offers a certificate in biotech-nology to its M.S. and Ph.D. students in the De-partments of Microbiology and Chemical and Bio-chemical Engineering. In addition to the degreerequirements of their programs, students in thecertificate program must complete 15 credits froma list of courses in biotechnology, such as Chemis-try of Microbial Products and Enzyme Engineer-ing. For students in either the microbiology orthe chemical and biochemical engineering pro-gram, at least six credits must be taken outsideof the program in which the student is registered(59).

University Master’s LevelB i o t e c h n o l o g y P r o g r a m s

Master’s degree programs in biotechnology aremultidisciplinary and often interdepartmental (ta-ble 8-8). Almost all the programs preparing stu-dents for careers in bioprocessing are at the

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Table 8-8.—BiotechnoIogy Programs Offering Master of Science Degrees

Year ofinitiation

19551970198019811982198419841985198519861986198719871988

PlannedPlanned

University

Massachusetts Institute of TechnologyRutgers UniversityState University of New York, Plattsburgh/Miner lnstituteUniversity of Maryland, Baltimore CountyWorcester Polytechnic InstituteCase Western Reserve UniversityUniversity of MinnesotaUniversity of IowaUniversity of Tennessee, KnoxvilleCalifornia Polytechnic State UniversityTufts Biotechnology Engineering CenterLehigh UniversityOld Dominion UniversityUniversity of IllinoisSan Diego State UniversityUniversity of South Florida

Program

Biochemical EngineeringBiochemical EngineeringIn Vitro Cell Biology and BiotechnologyApplied Molecular BiologyBiotechnologyConcentration in Biotechnology and Genetic EngineeringMicrobial EngineeringBiochemical Engineering/BiotechnologyBiotechnologyBiochemical EngineeringBiotechnology EngineeringApplied Biological SciencesBiotechnologyBiological EngineeringBiotechnologyB.S/M.S. in Biotechnology

SOURCE: Office of Technology Assessment, 1988.

master’s and doctoral levels, and several direc-tors of these programs indicated that industry con-sidered M.S. and Ph.D. degrees to be the entrylevel in bioprocessing (63)86). The need to com-bine process engineering with a basic understand-ing of molecular biology requires advanced train-ing, according to some observers (27,71,86).

The University of Maryland, Baltimore County,has offered a master’s degree in Applied Molecu-lar Biology since 1981, with the first class gradu-ating in 1984. The degree can be earned eitherin a 2-year postbaccalaureate program or as a 5-year B.S/M.S. program. Emphasizing hands-on lab-oratory skills, the program requires a summer re-search internship, A Ph.D. program in Molecularand Cellular Biology that will use the AppliedMolecular Biology program as its core curricu-lum is under development.

Lehigh University in Bethlehem, Pennsylvania,is establishing an M.S. in applied biological science,which will provide students with hands an experi-ence in genetics, biochemistry, and bioprocess-ing. While preparation for a Ph .D. program is theprincipal goal of the program, students will alsobe prepared to work for industry. The programis sponsored by the Biology, Chemistry, and Chem-ical Engineering departments.

The University of Minnesota offers a master’sdegree in microbial engineering, which will en-able students to integrate the basic science ofmicrobiology with technological applications ofthe capacities of micro-organisms, cultured cells,

and parts thereof. The interdisciplinary programdraws on faculty from more than nine depart-ments of four colleges and institutes in the univer-sity. Begun in 1984, the first five students finishedin 1987.

San Diego State University is in the process ofestablishing a different type of master’s program,which will combine scientific instruction with cor-porate and legal instruction. The program willhave tracks in biopharmaceutical toxicology/riskassessment, venture capital and entrepreneurialbiotechnology business development, and regu-lation and biotechnology patent law (22).

Tufts University has a 5-year B.S./MS. programin chemical/biochemical engineering. The pro-gram includes all the courses required for cer-tification as a chemical engineer plus courses incell and microbe cultivation, biotechnology proc-essing lab, applied enzymology, and biochemicalengineering, Core courses are given in the earlyevening, making them accessible to people in in-dustry.

Doctoral Programs

Traditional doctoral programs in biological,chemical, and engineering sciences produced theexpertise that created today’s commercial oppor-tunities in biotechnology. Nonetheless, OTA didnot attempt to evaluate or catalog these programs,as they are well developed and have matureprofessional societies and accreditation systemsin place.

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Academic opinion is divided about the desira-bility of creating new doctoral programs in bio-technology. Increasingly, biotechnology is viewedas comprising a set of tools that can be appliedto a variety of disciplines. On the other hand, bio-technology increasingly requires interdisciplinarytraining or at least the ability to collaborate effec-tively across disciplines.

Several doctoral programs are making biotech-nology an explicit component of their curriculaand Ph.D.s in biotechnology are under consider-ation (table 8-9). Case Western Reserve Univer-sity offers a Ph.D. in biology with a concentra-tion in biotechnology and genetic engineering. Atthe University of Minnesota, a Ph.D. minor in Bio-logical Process Engineering is under development.And the University of Maryland, Baltimore County,is developing a Ph.D. program in Molecular andCellular Biology that will use courses in appliedmolecular biology as its core curriculum. Severaluniversities offer Ph.D.s in biochemical engineering.

In many areas of the life sciences, biotechnol-ogy companies are well supplied with Ph.D. sci-entists (38). The greatest need at the Ph.D. levelis biochemical and bioprocess engineering (55).

Short Courses in Biotechnology

Short courses in biotechnology, ranging froma couple of days to a couple of weeks, are a popu-lar way for scientists of various backgrounds tolearn a particular technique (table 8-10). Shorterworkshops may be centered around lectures anddemonstrations, and longer workshops will usu-ally have hands -on laboratory components.

Begun in 1982, the Center for Advanced Bio-technology Training in Cell and Molecular Biol-ogy at the Catholic University of America in Wash-ington, D.C., has one of the most established seriesof short courses. Participants are usually maturescientists seeking information and skills to assistthem in research and, to a lesser extent, in teach-ing (53). The Center has trained about 1,200 sci-entists in areas such as immunochemistry, hybri-doma/monoclinal antibody production, tissueculture, recombinant DNA methodology, proteinsequencing, and separation techniques. Coursesare funded entirely by tuition.

Rutgers University in New Jersey also offers avariety of short courses related to biotechnology.Demand from industry for these courses is high,with students coming to New Jersey from Cali-fornia and Europe to participate (60). Tufts Univer-sity and Worcester Polytechnic Institute both of-fer short courses in bioprocessing for university-level instructors.

University Biotechnology Centers

University-based biotechnology research cen-ters take many forms and have varied purposes.Examples of centers include the Center for Bio-process Engineering at MIT, the BiotechnologyProgram at Cornell, the Center for Biotechnologyat the State University of New York at Stony Brook,the University of Wisconsin Biotechnology Cen-ter, and the Penn State Biotechnology Institute.The Ohio State University is in the process of estab-lishing a biotechnology center. (See ch. 4 for anextensive listing of biotechnology centers.)

Table 8.9.—Biotechnology Programs Offering Ph.D. Degrees

Year ofinitiation University Program

1955 Massachusetts Institute of Technology Biochemical Engineering1970 Rutgers University Biochemical Engineering1982 North Carolina State University Minor in Biotechnology1984 Case Western Reserve University Concentration in Biotechnology and Genetic Engineering1985 University of Iowa Emphasis in Biochemistry/Biotechnology1986 Tufts University Biochemical/Chemical Engineering1987 Lehigh University Biochemical Engineering

Planned University of Illinois, Urbana/Champaign Biological EngineeringPlanned University of Minnesota Minor in Biological Process Engineering

SOURCE: Office of Technology Assessment, 1988.

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Table 8“10.—Biotechnoiogy Programs Offering Short Coursesa

Year ofinitiation University Program

1982 Catholic University of America Center for Advanced Training in Cell & Molecular Biology1983 American Type Culture Collection Workshops1983 State University of New York, Stony Brook Biotechnology1984 Cook College of Rutgers University Biotechnology1985 University of Minnesota Institute for Advanced Studies in Biological Process

Technology1986 Tufts University Biotechnology Engineering Center

aMan~ in~titution~ offer summer and other ~h~rt courses in fields related to biotechnology This list is only representative of some Of the more established or better

known programs.

SOURCE: Office of Technology Assessment, 1988.

Purposes of the centers frequently include con-ducting or sponsoring research, coordinating bio-technology research and training among the vari-ous university departments, providing a forumfor multidisciplinary projects, and purchasing spe-cialized equipment. Centers may also be involvedwith local biotechnology companies in technol-ogy transfer and economic development activi-ties. Some centers sponsor short courses in lab-oratory techniques for both academic andindustrial scientists.

Only two of the biotechnology centers contactedby OTA said their sole function was research. Allthe others reported that some portion of their mis-sion (usually 10 to 35 percent) was for trainingand education.

Founded in 1981, the Program in Molecular Bi-ology and Biotechnology at the University of NorthCarolina at Chapel Hill is one of the oldest pro-grams of its kind. The program sponsors workshopsand conferences designed to give researchersintensive hands-on experience in DNA technolo-gies. The program also supports core facilities im-portant for research and training in biotechnol-ogy and molecular biology. They state theirprimary purpose as “facilitating the diffusion ofmolecular technology throughout the biologicalcommunity.” Together with the North CarolinaBiotechnology Center, the program sponsors auniversity/industry cooperative research centerin monoclinal lymphocyte technology (25).

The Center for Biotechnology at the StateUniversity of New York at Stony Brook supports“programs for research and education to stimu-late a university/industry partnership and eco-nomic development” (49). Supported by more than

30 different biomedical departments, rangingfrom chemistry to medicine, the Center sponsorsseveral activities related to training and educa-tion. The Center also sponsors a variety of semi-nars and conferences on biotechnology, includ-ing a workshop cosponsored by Cold SpringHarbor Laboratory in molecular biology for sec-ondary school science teachers. The Center alsoprovides financial support for SUNY students towork in biomedical laboratories.

The University of Wisconsin Biotechnology Cen-ter is involved in a variety of training functions.It has sponsored short courses in biocomputingand sequence analysis and workshops in agricul-tural biotechnology. The Center is also workingwith the Biochemistry and Chemical EngineeringDepartments to develop a Bioprocess and Meta-bolic Engineering Training Consortium (44).

The Michigan Biotechnology Institute has an in-stitutional relationship with universities. Althoughit is a free-standing institute, it funds master’s,doctoral, and postdoctoral traineeships at Michi-gan State University, the University of Michigan,and Michigan Technological University.

Other Curricular Components ofBiotechnology

New biotechnology is being incorporated intomany traditional programs outside of the basicbiological sciences, such as chemical engineering,pharmacy, and agriculture.

The University of California at Davis, for exam-ple, has no formal curriculum in biotechnologyat the graduate or undergraduate level, but doeshave a Biotechnology Program of the College of

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Agriculture and Environmental Sciences to facili-tate research and education programs. Discipline-based majors, such as biochemistry, bacteriology,genetics, fermentation science, and engineering,are tailored by the student and his or her advisorwith the necessary electives to prepare the stu-dent for a career in biotechnology. The Biotech-nology program serves to enrich and extend ex-isting strengths by reviewing curricula andassuring that relevant courses are offered fre-quently enough.

At San Jose State University, the concentrationin biochemistry, begun in 1972, is being modifiedto reflect new requirements for biochemists. Acourse in recombinant DNA methods is now in-cluded in the chemistry curriculum, and othermodifications are being considered, A memberof the San Jose State University (SJSU) Departmentof Chemistry reflects a widely held opinion in say-ing she would “most like to see biotech methodsto be incorporated into already established lab-oratory courses as opposed to having separate spe-cialty courses. ” SJSU organized a symposium withrepresentatives of biotechnology firms to deter-mine industry’s needs and found that industry waslooking for students who are well versed in basic,fundamental principles, and are capable of prob-lem solving and independent thought more thanstudents who are specialized in sophisticated tech-niques.

Photo credit: Case Western Reserve University

An undergraduate separates myosin and myosin-light-chains, using fast protein liquid chromatography, as

part of an undergraduate biotechnology program.

Tufts University has added a course in “Front-iers in Biotechnology” to their chemical engineer-ing curriculum. The course will give chemicalengineers an overview of genetic engineering, bio-technology, and hybridoma production, with em-phasis on laboratory techniques.

OTA has no figures on the number of universi-ties that have added courses in recombinant DNAand other biotechnologies to traditional majors,but it is probably significant. Many of thesecourses are new offerings. Until recently, studentswould not have the opportunity to conduct ex-periments with recombinant DNA technology untilgraduate school. Now many of these courses havebeen introduced to undergraduates and, in somecases, high school students.

Retraining

Retraining has emerged as a significant needgiven the rapid development of new biotechniquesand the large number of researchers who receivedtheir formal training before new techniques werewidely integrated into biological research. Shortcourses described previously are a principal wayof accomplishing this retraining. In addition, mostbiotechnology companies, at least the larger ones,provide training funds for their employees. Almost9 out of 10 (88 percent) of the biotechnology com-panies surveyed reported that they provide educa-tional assistance to their employees (38).

In addition, retraining is an integral part of manycompanies’ day-today operations. Companies holdseminars, sponsor cross-department training, andestablish systems to keep their research staffsabreast of current literature (43).

Retraining is also a principal motivation for com-panies to enter into collaborative arrangementswith universities. These arrangements frequentlyallow company scientists to spend time in univer-sity laboratories, updating their skills (see ch. 7).

Biotechnology in Secondary Schools

Gradually, aspects of genetic engineering andother new biotechnology techniques have reachedhigh school classrooms. Several programs suchas the Cold Spring Harbor/SUNY Stony Brookworkshop mentioned above, have been designed

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to teach recombinant DNA techniques to second-ary school teachers. Over a dozen States are plan-ning biotechnology educational programs for highschools (10).

The North Carolina Biotechnology Center hasembarked on a 3-year Secondary Education Proj-ect to introduce biotechnology into the high schoolcurriculum. The first group of high school biol-ogy teachers was brought to the center in July1987 to conduct recombinant DNA experimentsand to develop lesson plans and materials to teachthe science, applications, and social issues of bio-technology. The University of Wisconsin Biotech-nology Center also sponsors workshops for highschool biology teachers.

Cold Spring Harbor Laboratory sponsors week-long workshops around the country to educatehigh school biology teachers in recombinant DNA

technology. The 3-month project, conducted in1987, had a goal of reaching 250 teachers. Twiceas many teachers applied as could be accepted (19).

The California Sector of the Industrial Biotech-nology Association also sponsors training in bio-technology for high school teachers at threecenters in the State (1). California has also recentlyestablished a Blue Ribbon Biotechnology Curric-ulum Advisory Committee in order to strengthenthe high school biology curriculum (4).

Biological Sciences Curriculum Study, a majorpublisher of textbooks and learning modules forhigh school students, is increasing its emphasison biotechnology in its material. A module dueout in spring 1988 covers Advances in GeneticTechnologies and includes experiments in bac-terial transformation and plant crown gall forma-tion (51).

FUNDING OF TRAINING ACTIVITIES

Traditionally, most Federal funding of biotech-nology has been directed toward research at ma-jor universities. These funds, most of which comefrom NIH, indirectly support training, thoughmainly at the graduate and postdoctoral levels.Training at the undergraduate level is supportedonly to the extent that these funds “trickle down”in the form of making equipment available, pro-viding teaching assistants, and enriching facultymembers’ abilities to teach subjects related to bio-technology,

States provide a significant amount of fund-ing for education and training in biotechnol-ogy. About three-fourths of the programs identi-fied by OTA are at State institutions, and Statesprovide, on average, almost half of the funds forthese programs. The Federal Government providesabout 20 percent of the programs’ funds (figure8-3).

It is difficult and perhaps artificial to completelyseparate training funds from research funds, asthe two activities are closely linked at U.S. univer-sities. Nonetheless, funds are frequently allocatedby State and Federal agencies with one or the otherpurpose in mind. Programs stressing educationrather than research or vice versa have different

needs, in degree if not kind, so it is useful to dis-tinguish to the extent possible funds intended foreducation as opposed to funds intended for re-search.

As biotechnology education has permeated theundergraduate and even secondary school cur-riculum, sources of funds have become morediversified. Programs responding to OTA’s sur-vey reported that significant percentages of their

Figure 8-3.-Source of Funds for BiotechnologyTraining and Education Programs

Percentage5040

30

20

100

State T u i t i o n F e d e r a l I n d u s t r y O t h e r Otherdonations

Funding source

programs offering Bachelor’s degrees

SOURCE: Office of Technology Assessment, 1988.

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funds came from State and industrial sources, aswell as from student tuition. For the 36 programsreporting their sources of funds, State govern-ments supplied the lion’s share of support, pro-viding almost half of the funds. Tuition providedthe next largest share of funds, just below one-fifth, followed closely by the Federal Government.Industry-sponsored research provided almost 10percent of program funds (figure 8-3).

The programs are costly due to expensive equip-ment and materials and generally intensive lab-oratory work. One State-subsidized program costsabout $10,000 per student (84). Three-fourths ofthe programs (29 of 41) reported unmet needsfor space or equipment.

Federal Funding

Most of the current cadre of Ph.D. biotechnol-ogists in industry and academia were supportedby Federal research or training grants when theywere trained in the various disciplines that un-dergird biotechnology (5). However, few Federalfunds are designated specifically for biotechnol-ogy training. Most agencies have no formal train-ing program; any training in biotechnology isachieved through the usual grants mechanisms.Most direct Federal support to students goes tograduate students in the form of fellowships,traineeships, and research assistantships. How-ever, Federal support for life sciences is strong,and in 1985, Federal funds were the primarysource of support for almost 20 percent of thelife science Ph.D.s, compared with less than 8 per-cent of other science and engineering fields (80).Of 35,980 full-time biological science graduate stu-dents, 10,532 received some Federal support in1984 (80). In the life sciences, enrollment rises withincreased Federal support, and drops when Fed-eral support drops. A drop in support since 1980already is reflected in a drop in the Ph.D.s awarded(80). Six Federal agencies contacted by OTA re-ported specific efforts in training for biotechnol-ogy (see ch. 3 for a full discussion of Federalfunding).

National Institutes of Health

The National Institutes of Health is by far thelargest Federal supplier of fellowships, trainee-

ships, and training grants, providing 87 percentof the funds for these activities. NSF is a distantsecond with 9.2 percent of the total (80).

Predoctoral training occurs in many fields andmany disciplines directly or indirectly related tobiotechnology. Postdoctoral traineeships havebeen funded by the National Institutes of Health(NIH) at a level of $150 to $170 million per yearin recent years. NIH estimates that $70 million in ,training funds go to students working in areaseither directly or indirectly related to biotechnol-ogy, mostly at the predoctoral level (83). Most ofthe funds come from the National Institute of Gen-eral Medical Sciences (NIGMS). In addition, NIHsupports 45 research associates in biotechnologyfor 1 to 3 years in an NIH laboratory. NIH officialsreport that the training dollar at NIH has shrunkfrom 18 percent of the research budget in 1971to less than 5 percent of the research budget infiscal year 1988. NIH supports a total of about12,000 graduate students (80), about half of whomcould be expected to be working in areas directlyrelated to biotechnology.

At a 1985 meeting of the NIH Director’s Advi-sory Committee, officials of the White House Of-fice of Science and Technology Policy suggestedthat NIH support training in biotechnology in alldisciplines, including the agricultural and physi-cal sciences. It is not surprising that NIH respondednegatively to this suggestion given the agency’sstrong tradition in the biomedical sciences. A con-sensus was reached, however, that in order forthe United States to maintain a strong lead in bio-technology there must be increased researchtraining in the basic disciplines of biotechnology—molecular genetics, biology, immunology, biochem-istry, and virology.

NIH is currently collaborating with the NationalScience Foundation to support the MassachusettsInstitute of Technology Biotechnology Center toenhance research training in bioprocess engineer-ing (see box 3-A). In addition to the predoctoraland postdoctoral fellowships available through theNational Research Service Awards Act, the NIHintramural program has recently established a re-search associateship and a biotechnology fellow-ship program through which about 40 people willbe supported to receive research training in appro-

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priate intramural biotechnology-related labora-tories. The average cost is $18,000 to $36,000 ayear per individual.

National Science Foundation

The National Science Foundation (NSF) sponsorscompetitive, peer-reviewed predoctoral fellow-ships, making 450-540 new 3-year awards eachyear from an annual appropriation of about $27million; 25-35 percent of the awards are in thebiological and biomedical sciences (55).

At the postdoctoral level, NSF funds about 20fellows in each of two areas relevant to biotech-nology-plant biology and environmental sciences–for a total of $2.2 million per year (55).

NSF also contributes to the Presidential YoungInvestigator awards, which support outstandingyoung faculty scientists at a base rate of $25,000per year for 5 years. In the biological sciences,25 recipients were named in 1984, 21 in 1985,and 10 in 1986 (55).

Other training funds within NSF are availablethrough the award structure itself, rather thanspecialized fellowships. However, research grantsare estimated to support only 0.3 trainees pergrant, due to the small size of most NSF grants(85). NSF also supports biotechnology educationthrough mechanisms such as the BiotechnologyProcess Engineering Center, which is an NSF Engi-neering Research Center at the Massachusetts In-stitute of Technology, and its support of ColdSpring Harbor Laboratories training and outreachprograms. Other programs, such as Instrumen-tation and Laboratory Improvement and Under-graduate Faculty Enhancement, also support train-ing efforts.Department of Defense

The Office of Naval Research (ONR) supportsfellowships run by the National Research Coun-cil at a level of about $400,000 annually. Approxi-mately five of the fellowships are in fields relatedto biotechnology. In addition, many graduate stu-dents are supported on contract awards, but itis not clear how many of those are in fields re-lated to biotechnology.

Department of Agriculture

The Food and Agriculture Sciences NationalNeeds Graduate Fellowship Grants program of the

Cooperative State Research Service (CSRS) sup-ported 87 doctoral degree candidates in 16 insti-tutions in fiscal year 1986, totaling approximately$1.5 million. Although figures are not available,$45 million in biotechnology research (see ch. 3)provides varying levels of support to a large num-ber of graduate students and postdoctoral fellows.It is difficult to determine the extent to which ei-ther of these programs actually supports studentsworking in areas relevant to biotechnology,

In 1984, the U.S. Department of Agriculture ini-tiated a peer-reviewed program of training grantsto university departments to support 302 predoc-toral students. Approximately 35 percent of the$5 million in training grants were in biotechnol-ogy. The same students, who had been guaran-teed 3 years of support, received an additional$5 million in 1985, but no new grants could beawarded as no additional funds were available.In 1986, funds were cut to $3 million, thus reduc-ing support for each student. A 1987 appropria-tion provided $2.8 million dollars, which will beused to fund a new crop of students for the full3 years, thus substantially reducing the numberof awards that can be made (55).

The Agricultural Research Service initiated acompetitive postdoctoral program in 1984 thatsupported 21 people for 1 to 2 years to work onspecific projects at ARS laboratories, Award re-cipients increased to 50 in 1985 and 100 in 1986.The programs’ 1986 appropriation was $4 million;about half of the fellowships involved biotechnol-ogy (55).

Agency for International Development

Training is an integral part of the AID researchprograms. Practically every AID-supported re-search project includes training and networkingamong the scientists of underdeveloped countriesand scientists in the developed world. Trainingprograms range from short workshops to longer,6-month programs. Graduate training and post-doctoral training is included in many researchactivities. About one-fifth of all AID research fund-ing is for training and networking, with the ex-ception of the International Agricultural ResearchCenters, where support for training scientistsfrom lesser-developed countries approximates 7percent.

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Other Federal Agencies

Other agencies provide some training supportthrough various funding mechanisms. The Na-tional Oceanic and Atmospheric Administrationsupports approximately 50 students on 56 projectsbroadly related to biotechnology. The NationalAeronautics and Space Administration supports50 to 55 graduate and postdoctoral students viagrants awarded to universities but has no dedi-cated money for training, The Food and DrugAdministration, Environmental Protection Agency,Veterans Administration, and Department ofEnergy have no specific programs to supporttraining.

State Funding

States provided about 45 percent of the fundsfor new initiatives in biotechnology training iden-tified by OTA. Of those States responding to a sep-arate OTA survey (see ch. 4), 17 reported that theydirectly fund training programs in biotechnologyat their State universities and colleges. Not all wereable to provide exact dollar figures, In many cases,the State department of higher education providesfunds for research and training, under which bio-technology may fall. Because these funds are dis-persed to many institutions and many depart-ments within those institutions, accounting forspending specifically on biotechnology trainingis complex.

Some States, however, were able to report onexpenditures for biotechnology training programs.The nature of the programs and the degreesoffered were not specified. Of those reporting,expenditures in fiscal year 1987 ranged from$40,000 in Pennsylvania to $1.3 million in Geor-gia. Others included $250,000 in Connecticut,$500,000 in Iowa, $300,000 in Maryland, $450,000in Connecticut, $63,000 in New York, and $50)000in North Dakota. In Massachusetts, funding forbiotechnology training must go through the BayState Skills Corporation, with a requirement for

an industry match. The State provided $165)000in fiscal year 1986 and $75)000 in fiscal year 1987.

Industrial Funding

Industry funding accounted for just under IO

percent of the funds of biotechnology training pro-grams surveyed by OTA. In a 1984 survey, 32 per-cent of 106 biotechnology firms responding indi-cated that they provided grants and fellowshipsto schools and individual trainees (12). Based onthat survey, it was estimated that biotechnologycompanies provided between $8 and $24 millionfor training grants and scholarships in 1984 (11).In addition to grants and scholarships, approxi-mately 12 percent of trainees at research-intensiveuniversities receive industrial support for theirresearch, and 10 percent receive some industrialcontribution to their salary. All together, about19 percent of trainees receive some direct finan-cial assistance from industry in the form of train-ing grants, scholarships, research support, or sal-ary (31).

Private Philanthropy

The Howard Hughes Medical Institute has re-cently become a principal sponsor of biologicaleducation. In 1988, Hughes will announce grantstotaling $30 million to bolster undergraduate sci-ences at liberal arts and historically black institu-tions. The awards are part of a new 10-year pro-gram that will provide $500 million for educationin medical and biological sciences. The instituteis also funding education projects at several lab-oratories and gave the National Research Councilalmost $600,000 to study high school biology edu-cation.

The Institute also plans to award 3-year gradu-ate fellowships (renewable for 2 additional years)to 60 students each year. This year’s fellows willreceive stipends of $12)300, plus $10,700 for tui-tion and fees.

SUMMARY AND CONCLUSIONS

For the most part, the supply of specialists inbiotechnology seems adequate to meet demandat the present time, though shortages in particu-

lar areas are evident. Shortages in cutting-edgeareas, such as protein engineering, have occurred,but are largely unavoidable. Anticipated shortages

154

of bioprocess engineers have not yet occurred,but may yet occur as more biotechnology prod-ucts reach the later stages of commercialization.Demand for expertise in plant and animal tissueculture and protein chemistry is high and maybe outstripping supply. A shortage of microbialecologists has been brought about by the needto assess the risks of releasing engineered micro-organisms into the environment. A large pool ofpostdoctoral fellows and trainees in molecular bi-ology who could shift into new areas has pre-vented the serious shortages of plant molecularbiologists predicted several years ago. Many ofthese scientists were originally trained in bacterialsystems.

Growth in employment in biotechnology hasbeen rapid and will continue, although bio-technology is not expected to generate a sub-stantial number of jobs compared with tradi-tional industrial sectors. The need forspecialized biotechnology workers, coupled withtime required to train personnel, demands plan-ning for future personnel needs. Current employ-ment trends include greater opportunities fortechnicians and an increase in demand for bio-process engineers.

University programs in biotechnology haveproliferated in recent years, addressing a varietyof educational levels. State sources have provided

a large percentage of funds for these programs,and Federal funds have provided a much smallerpercentage. Consultation with industry is the rulerather than the exception in the development ofbiotechnology programs. It is too early to assessthe effectiveness of most of these programs orindustry’s satisfaction with the training studentsin these new programs have received. Nonethe-less, the nation’s campuses have clearly movedquickly to establish new initiatives in biotechnol-ogy research and training.

Biotechnology programs usually emphasize re-combinant DNA techniques. Other aspects of bio-technology, such as plant and animal tissue cul-ture, are common though less frequently foundin biotechnology curricula. Bioprocess engineer-ing is less evident in the programs identified byOTA, but is gaining in importance. Bioprocess engi-neering will often be taught as part of a chemicalengineering department, and may be less readilyidentifiable as biotechnology. Only a few programsexplicitly cover bioprocess engineering in depth.Many of the best researchers in the field are scat-tered at various universities, so few programs arefocal points of research and training. While thesupply of bioprocess and biochemical engineershas not become a bottleneck for the industry, thisarea remains a major training need.

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Chapter 9

Investment in BiotechnologyApplied to Human Therapeutics

“Biotechnology is in a state of evolution . . .the industry is moving away from the technologi-cal phase into the clinical phase. ”

Peter Drake in Chemical Week,Sept. 30, 1987, p. 20.

“[there are] not many problems with FDA. It takes a long time to get anything approved,but the delays are not unique to biotech products.”

unidentified industry spokesman, Bio/Technology,December 1987, p. 1277.

(“The equation in biotechnology is becoming all too familiar: patent plus patent equals lawsuit .“

(editor) /In The News/ Bio/Technology,December, 1987, p. 1251.

"We seem to be at a point in the history of biology where new generalizations and higherorder biological laws are being approached but may be obscured by the simple mass of data. ”

H. Moskowitz and ‘l’. SmithReport of the Matrix of Biological Knowledge Workshop, Santa Fe, New. Mexico

July 13 to Aug. 14, 1987

CONTENTS

PageIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............161Applications of Biotechnology to Human Therapeutics . . . . . . . . . . . . . . . . . . . . ..162

Biotechnology and the Development of Human Therapeutics . ..............162Biotechnology and the Production of Human Therapeutics. . ...............166

Factors Influencing Innovation and Commercialization . . . . . . . . . . . . . . . . . . . . . .168Gaps in Basic and Applied Research . . . . . . . . ............................168Research and Development Funding . . . . . . . . . ...........................173Regulation of Pharmaceutical Biotechnology . ............................177Intellectual Property Protection. . . . . . . . . . . . . . . . . . . . . . . .................181Access to Biotechnology Information . . . . . . . . . . . . . . . . . . . . . ..............182Availability of Trained Personnel . . . . . . . . . . . . . . . . . . . . . .................184

Future Applications of Biotechnology to Human Therapeutics. . ..............185Issues adoptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........185Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................187Chapter p references. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..................188

BoxesBox Page9-A. Known or Expected Therapeutic Applications of Some Human Gene

Products Under Commercial Development . . . . . . . . . . . . . . . . . . . . ........1659-B. Protein Engineering and the Development of Human Therapeutics. . ......1669-C. Center for Advanced Research in Biotechnology (CARB):A Research Facility

for Protein Engineering and Rational Drug Design . ....................175

FiguresFigure Page9-1. Preparation of Mouse Hybridomas and Monoclinal Antibodies . ..........1639-2. DNA Cloning Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............1649-3. Mouse/Human Hybrid Gene Enables Mice to Secrete Human Therapeutic

proteins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........................1679-4. Structural Similarities Between the Domains of Different Proteins , . . . . . . .1709-5. The Financial Maturation of a Biotechnology Company . .................1769-6. Databases in Biology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................,183

TablesTable Page9-1. Biotechnology-Based Human Therapeutics With FDA Market Approval. ,...1629-2. Representative Biotechnology Small Business Innovation Research (SBIR) Program

Grants Funded by the National Institute of General Medical Sciences inFiscal Year 1987 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................174

Chapter 9

Investment in BiotechnologyApplied to Human Therapeutics

INTRODUCTION

The promise of novel pharmaceutical applica-tions has captured most of the attention given tobiotechnology in the last decade. Pharmaceuticalbiotechnology, for the purposes of this report, isdefined as the use of recombinant DNA, hybri-doma, and related new technologies in the man-ufacture of human therapeutic products; diagnos-tics and vaccines are not included under thisdefinition. Although the new biotechnologies havenot radically changed the pharmaceutical indus-try, they have contributed to progress in a num-ber of important product development areas, andhave brought about a commitment to researchand development (R&D) funding from both pub-lic and private sources that greatly exceeds thatfor any other industry.

Biotechnology has facilitated the developmentof human therapeutic proteins that are difficultto produce in large quantities by traditional meth-ods such as chemical synthesis or extraction fromblood plasma, or tissues. Recombinant DNAtechnologies to combine DNA from one organ-ism with that of another have been used to clone,or make copies of, genes that produce proteinswith therapeutic potential, and to engineer genesto make proteins that are more stable or activethan their natural forms. Monoclinal antibod-ies secreted from hybridomas (the cells result-ing from the fusion of immortal tumor cells withantibody producing cells from mouse, rat, or hu-man sources) have been developed primarily asdiagnostic reagents, but their ability to specificallyrecognize foreign substances has made their useas human therapeutics possible. Studies of thebasic molecular mechanisms governing cell phys-iology have been greatly enhanced by the toolsof biotechnology, and will likely continue to leadto new drug discoveries and increased under-standing of the origins of disease. Enthusiasm forthe design of a new pharmaceutical from knowl-edge of the structure of the molecule (e.g., a cell

surface receptor protein) upon which it acts—often called rational drug design—has also beenrenewed by advances in methods to determinethe three-dimensional structures of proteins. Suchprogress has been spurred in part by the fact thatrecombinant DNA technology has increased theavailability of previously scarce human proteins.

In 1982, the Food and Drug Administration(FDA) approved human insulin as the first recom-binant DNA product for clinical use in humans.Scientists at Genentech, Inc. (South San Francisco,CA) devised recombinant DNA methods for pro-ducing insulin in bacteria from synthetic insulingenes, and assembling the protein chains into bi-ologically active insulin. Eli Lilly and Company (In-dianapolis, IN) subsequently developed and mar-keted the recombinant DNA version of humaninsulin, under the trade name Humulin®, as a ther-apy for diabetes. Since that time, six additionalhuman therapeutic agents produced using bio-technology have been approved for marketing inthe

●

●

●

●

United States (table 9-l):

two recombinant DNA-derived versions of hu-man growth hormone for long-term treat-ment of children with growth failure due tolack of adequate endogenous growthhormone,two recombinant DNA-derived versions of hu-man alpha-2 interferon for treatment of hairy-cell leukemia,a recombinant DNA-derived human tissueplasminogen activator protein for treatmentof coronary artery blood clots that triggerheart attacks, anda mouse monoclonal antibody preparation forpreventing acute rejection in kidney trans-plantation.

These biotechnology products underwent sepa-rate testing and clinical trials to receive marketapproval from the FDA, even though several are

161

162

Table 9=1.—Biotechnoiogy-Based Human Therapeutics With FDA Market Approval

Company ReceivingTrade Name/Generic Name Use Market Approval

Humulin®/Human Insulin Treatment of diabetes Eli Lilly and Company

Protropin®/Human Growth Hormone Treatment of children with inadequate Genentech, Inc.secretion of growth hormone

Humatrope®/Human Growth Hormone Treatment of children with inadequate Eli Lilly and Companysecretion of growth hormone

Intron A®/Alpha Interferon Treatment of hairy-cell leukemia Schering-Plough Corporation

Roferon-A®/Alpha Interferon Treatment of hairy-cell leukemia Hoffman-La Roche, Inc.

Orthoclone OKT*3@/Monoclinal antibody against T-cells Treatment for reversal of acute kidney Ortho Pharmaceutical Corporationtransplant rejection

Activase®/Tissue Plasminogen Activator Treatment of cardiac arrhythmia Genentech, Inc.%irst recombinant DNA product to be developad, manufactured, and marketed by a dedicated biotechnology company.SOURCE: Office of Technology Assessment, 1988.

the same type of protein marketed by differentcompanies for the same therapeutic use.

This chapter assesses the current U.S. invest-●

ment in biotechnology as it applies to the discov-ery and development of human therapeutics. Thefollowing questions are addressed:

● How is biotechnology being used to discovernew or better therapeutic pharmaceuticals?

● What basic and applied research programs

related to pharmaceutical biotechnology arebeing invested in by the public and privatesectors?How are factors such as gaps in basic and ap-plied research, availability of funds, regula-tion, intellectual property protection, infor-mation access, and availability of trainedpersonnel affecting overall investment in thedevelopment of human therapeutics derivedfrom biotechnology?

APPLICATIONS OF BIOTECHNOLOGY TO HUMAN THERAPEUTICS

Biotechnology has become an integral com-ponent of many aspects of pharmaceutical re-search, easing the technical bottlenecks thatslow the pace of new human therapeutic dis-coveries. Biotechnology has brought about sig-nificant innovations in methods for isolating andproducing human proteins with therapeutic po-tential in human beings. The following sectionssummarize the state of the art of research in thedevelopment of human therapeutics made usingbiotechnology.

Biotechnology and the Developmentof Human Therapeutics

Scientific advances in biochemistry, cell biology,immunology, virology, structural biology, and re-lated disciplines over the last 10 to 15 years haveyielded an explosion in understanding about thestructure and function of infectious agents and

the machinery of cells at the molecular level. Thissubstantial progress has been greatly enhancedby the development of methods for DNA and pro-tein sequencing, DNA and protein synthesis, mon-oclonal antibody production from hybridomas (fig-ure 9-l), recombinant DNA construction, andprotein structure determination. Thus, comparedto traditional approaches to drug development,biotechnology potentially offers a more rationalor targeted strategy that involves an in depth un-derstanding of the complexities of human biol-ogy (18)24).

The number of potential human therapeuticsis increasing in two general categories becauseof advances in biotechnology:

. monoclinal antibodies made from mouse orhuman hybridoma cell lines; and

● human proteins produced from director engi-neered copies (clones) of genes.

163

Figure 9-1.— Preparation of Mouse Hybridomas and Monoclinal Antibodies

removed andminced torelease antibodyproducing cells(B lymphocytes)

Continuous cell cultureof mouse myeloma cells

The products of thisfusion are grown in aselective medium. Onlythose fusion productswhich are both “immor-tat” and contain genesfrom the antibody-pro-ducing cells survive.These are called“hybridomas.”

SOURCE: Office of Technology Assessment, 1988

Monoclonal Antibody Products ofHybridomas

few cells that producethe antibodies beingsought are grown inlarge quantities forproduction of mono-clonal antibodies.

tion. Whereas traditional drugs suppress theentire immune system, resulting in life-threatening

ORTHOCLONE OKT3® is a monoclinal anti- infections, the value of OKT3® lies in its specific-body that targets a subset of the body’s white blood ity for T-cells. At least three biotechnology com-cells (T-cells) responsible for acute rejection of panics (Centocor (Malvern, PA), Cetus Corpora-transplanted tissue. This therapeutic, manufac- tion (Emeryville, CA), and Xoma Corporationtured by Ortho Pharmaceutical Corporation (Rar- (Berkeley, CA)) are developing either mouse or hu-itan, NJ), is used to prevent acute kidney rejec- man monoclinal antibodies against the gram-

164

Photo credit: University of California, San Francisco

Molecular biologist preparing for DNA cloning and inv i t ro mutagenes is exper iments .

negative bacterial endotoxins that cause septicshock, a life-threatening condition characterizedby a severe drop in blood pressure. Other thera-peutic monoclinal antibodies under commercialdevelopment include those for reducing risks asso-ciated with bone marrow transplants, correctingfor drug overdoses, and treating various cancerseither directly or as targeted carriers of cytotoxicdrugs (1,48).

There is also incentive to develop human mye-loma cell lines for making human hybridomas. Af-ter repeated or long exposures to therapeutic an-tibodies from rodent sources, humans can becomesensitive to the mouse antibodies and respond bymaking their own antibodies against them (8,26,34,44). In addition, cell lines derived from miceoften release pathogenic viruses that could posedangers to humans if not removed from the mon-oclonal antibodies during their purification frommouse ascites fluid (57). An alternative methodfor producing monoclinal antibodies is to synthe-size them from cloned genes in bacteria, yeast,or myeloma cells. Monoclinal antibodies with dual

specificities, pre-determined specificities, and ad-ditional activities are all possibilities with recom-binant DNA technology (69).

products of Cloned Genes

With the exception of the one monoclinal anti-body, all of the biotechnology derived human ther-apeutics presently on the market and most of thosein clinical trials are products of genes cloned byrecombinant DNA technology (figure 9-2). Brief

Figure 9-2.—DNA Cloning Technology

Chromosomal DNAto be Cloned

Recombinant DNA Molecules

SOURCE: MedSciArtCo, Washington, DC.

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M and w h i t e b l o o d

~~ the blood and pre-+“ in cardiac treatment+.’?.

SOURCE: Office of Technology Aseaiment, 1988.

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descriptions of the major recombinant DNA-derived proteins currently under commercial de-velopment for use as human therapeutics aregiven inbox 9-A. Two other OTA reports describethe categories of proteins being developed as hu-man therapeutics (e.g., regulatory proteins includ-ing the interferon and lymphokines; blood prod-ucts; growth factors; and monoclinal antibodies)and the technologies used to make them (51,54).

Recombinant DNA methods can also be used tosubstitute, delete, or add nucleotides to the DNAthat makes up a gene. Such alterations in the DNAlead to changes in the amino acids that makeupits protein product. These biotechnologies forprotein engineering have already been used

commercially to facilitate protein purificationprocesses, and they show promise for develop-ing the second generation of human therapeuticsfrom biotechnology (see box 9-B).

Biotechnology and the Productionof Human Therapeutics

Scale-up and manufacturing technologies for theproduction of human therapeutics from cells con-taining recombinant DNA, or from hybridomas, are considered in detail in an earlier OTA report(51) and more recently in other reviews (7,28,29,70). This section focuses, therefore, on the cellsor organisms currently being used for the pro-duction of gene products and on some of the tech-

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nical limitations associated with the use of eachsource.

Once a human gene is isolated, recombinantDNA methods can be used to make it function inmany foreign hosts, ranging from bacteria andyeast cells to insects, mice, and sheep. For humantherapeutics made from recombinant DNA tech-nology, vectors (plasmid or phage chromosomesdesigned to carry extra genes) have been con-structed that maximize the expression of the geneproduct (the protein) in different cell types ororganisms. Once synthesized, the cell may needto modify the human protein for proper function-ing. These modifications can include the attach-ment of sugar molecules, by a process calledglycosylation, or the removal of some terminalamino acids (45). Therefore, it is necessary to de-termine the appropriate organism or cell typefrom which large quantities of a human gene prod-uct can be easily purified in a form sufficientlysimilar to the protein as it is found naturally inhuman beings.

The choice of host cell or organism for the pro-duction of human therapeutics is decided mostlyby logistic and economic factors (28), and in manycases, by the particular post-synthesis modifica-tion requirements of the protein [29,61). Recom-binant DNA-derived insulin, alpha interferon, andhuman growth hormone–three marketed humantherapeutics-are all produced in bacteria. Despitethese successes, bacteria are not always able tosynthesize human proteins that are similar enoughto their natural human counterparts to functionadequately. Human proteins that require specialchemical modifications, like the glycosylated hor-mone erythropoietin, are best made in mammaliancell culture where they acquire optimal levels ofglycosylation (63). On the other hand, the typeof protein glycosylation varies among species andin higher organisms, and also varies from tissueto tissue. In those instances, it may be more eco-nomical to synthesize proteins in yeast with par-tially correct chemical modifications, and then

modify the product in vitro (outside of the cell)(28). One alternative to mammalian culture forthose proteins that require special modificationsis production from the lactating mammary glandsof an animal. Isolated genes can be injected intoanimal embryos (e.g., mouse, goat, sheep, cattle)and incorporated into the germ line where theycan function just as the mouse’s own genes (fig-ure 9-3) (21). The latter technology is examinedin a forthcoming OTA special report on Patent-ing Life. The challenge for bioprocess engi-neers working with human proteins isolatedfrom nonhuman organisms has been to devisemethods for retaining protein activity whilemaximizing yields.

Figure 9-3.—Mouse/Human Hybrid Gene Enables Miceto Secrete Human Therapeutic Proteins

, .

SOURCE: Adapted from Integrated Genetics, Inc., Cambridge, MA.

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FACTORS INFLUENCING INNOVATION AND COMMERCIALIZATION

OTA identified six major factors that influencethe rate at which biotechnology research will betransformed into commercial products in the areaof human therapeutics. These factors, some ofwhich might be considered incentives and othersobstacles to product development using biotech-nology, were identified in interviews with repre-sentatives of established pharmaceutical compa-nies and dedicated biotechnology companies(DBCs), Federal agencies, and from a 1987 OTAworkshop on “Factors Affecting Commercializa-tion and Innovation in the Biotechnology Indus-

●

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●

●

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try” (52). They are:

gaps in basic and applied research;availability of R&D funds;regulation of products made using biotech-nology;protection of intellectual property;access to information generated in biomedi-cal research; andavailability of trained personnel.

The availability of funds for basic research isthe factor of central concern to those involvedin developing new human therapeutic prod-ucts. Nevertheless, each of these elements fac-tor into the R&D process, and taken together, theyinfluence the overall level of investment (includ-ing monetary, personnel, and other types of re-sources) in applications of biotechnology by thepharmaceutical business sector.

Gaps in Basic and Applied Research

Despite significant advances in recombinantDNA technology and the development of efficientprotein production systems, major bottlenecks,or gaps in knowledge, remain in research ulti-mately applicable to the development of new hu-man therapeutic agents. This section focuses pri-marily on the major research needs in theidentification, isolation, engineering or chemicalsynthesis of new drugs, including new approachesfor:

. isolating human proteins and genes;● establishing relationships between protein

structure and function;

● determining how proteins fold into activethree-dimensional structures;

● developing animal models useful for elucidat-ing the physiological roles of previously un-characterized proteins;

● understanding mechanisms of protein matu-ration and export from cells; and

. administering protein drugs.

Isolating Human Proteins and Genes

There are probably over 50)000 proteins in thehuman body (11). Only a few hundred of the hu-man genes that produce these proteins havebeen isolated, however, so many more humangenes will be needed before the full impact ofrecombinant DNA on the discovery of poten-tial human therapeutic proteins is realized.Currently, most scientists target specific genes andgene products for study, often using informationfrom small amounts of the natural human pro-tein to isolate the corresponding gene (53). A Na-tional Research Council panel urged that additionalresources be given to scientists for developing theDNA mapping technologies necessary for identify-ing and isolating the entire set of human genes (40).

Establishing Relationships BetweenProtein Structure and Function

Regardless of the method used to isolate a hu-man gene, the function of the corresponding pro-tein product is rarely obvious from the structureof the gene. Studies aimed at determining the po-tential of human proteins as therapeutic agentsdepend on knowing how the proteins functionin the human body. In the absence of experimentalevidence for the function of a particular protein,scientists often attempt to predict the protein’sfunction from its structure. From the DNA se-quence of a gene, the genetic code can be usedto predict the amino acid sequence of the cor-responding protein. The next step is to predictfrom the amino acid sequence the three-dimen-sional structure of the protein. The final step, theprediction of a protein’s function, is less straight-forward. At the molecular level, the "structure-function problem)) refers to the difficulty sci-entists have in determining the relationship

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between the presence of a particular stretchof amino acids in a protein, and the activity orfunction of those amino acids (38).

A standard approach of biologists to thestructure-function problem is to compare thestructure of a protein with unknown function toa protein or proteins with known functions (fig-ure 9-4). If structural similarities exist, then ex-perimentally testable predictions can be made onpossible functions of the uncharacterized protein.Computer methods for identifying amino acid se-quence similarities among proteins, or DNA se-quence similarities among genes, are available (16),as are methods for three-dimensional structureprediction and comparison (5). These tools needto be further developed for predictions of pro-tein structure and function from sequence datato become more practical. In addition, in vitromutagenesis techniques for engineering genes toproduce modified proteins (protein engineering–see box 9-B) have advanced, but are still in needof further development (30). These techniques areimportant for making detailed molecular modelsof how specific protein structures correlate withparticular functions.

Understanding How Proteins Fold IntoActive Three-Dimensional Structures

“protein-folding is the genetic code expressedin three dimensions” (19). How does the linear se-quence of amino acids in a protein code for itsstructure? How does the three-dimensional con-formation of a protein drive its function? Some-times the amino acid sequence of a protein withan unknown function is similar to that of a pro-tein with a known function; in many such cases,the similarity is a valid indicator of comparablejobs. In other cases, the three-dimensional struc-ture of a protein (the amino acid sequence foldedinto the actual structure of the protein) gives morereliable clues about function. At present, scien-tists cannot predict with certainty how the linearsequence of amino acids in a protein will fold intothe protein’s three-dimensional structure—thusthe protein-folding problem. As more DNA se-quences of genes are obtained, the problem willtake on even greater significance. In a recent re-port, the National Academy of Sciences stated thatprotein folding is “the most fundamental prob-

lem at the chemistry-biology interface, and its so-lution has the highest long-range priority” (38).

The protein products of cloned human genescan be produced in and purified from other organ-isms or cells, but in the process, they often be-come improperly folded, inactive molecules. Thehuman factor VIII blood clotting protein requiredby hemophiliacs (see box 9-A), for example, hasposed significant problems for protein chemiststrying to purify the recombinant DNA versionfrom non-human sources (32). Because of suchproblems, it is important to develop a better un-derstanding of how the chemical and physicalproperties of a protein guide it to become a prop-erly folded, active structure under normal phys-iological conditions.

Most predictions of three-dimensional structureare based on theories of the behavior of aminoacids in certain chemical and physical environ-ments and on information gleaned from viewingthe atomic structures of proteins through x-raydiffraction (5). X-ray diffraction of protein crys-tals is an important tool in the field of structuralbiology-the study of protein and other macro-molecular structures. It is the most importanttechnique for determining the three dimensionalstructures of large proteins at the atomic level.Advances in x-ray crystallographic (15,65) andother biophysical technologies are needed so thatmore protein structures can be determined to givea solid foundation for further development ofprotein-folding theories.

Experimental evidence suggests that certainstructural domains serve similar functions in anumber of different proteins. Thus, it is the com-bination of domains that gives a protein its uniqueoverall function (figure 9-4). Protein structurepredictions have recently been used to proposea possible structure for Interleukin-2 in an im-portant step toward understanding the interac-tion of this protein with its receptor during theimmune response in humans (13). Once theprotein-folding problem is solved, and methodsfor correlating structure with function are fur-ther developed, the road going from the DNA se-quence of a gene to the function of its proteinproduct will be considerably shortened, and insome cases, will pave the way for the developmentof promising new human therapeutic products.

770

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Photo credit: University of Texas Health Sciences Center, Dallas

Instrument for x-ray diffraction analysis of protein crystals used in three-dimensional structure determinations

Developing Animal Models for Studyingthe Function of Human Proteins

The therapeutic potential of any newly isolatedhuman protein can only be ascertained once itsfunction in the body is known. With current tech-nology, it is faster to clone a human gene thanto establish the function of its protein product.As already described, there are theory-based toolsfor extracting functional information about a pro-tein from both its amino acid sequence and itsthree-dimensional structure. The most directmethod is to experimentally determine the roleof a particular human protein under the physio-logical conditions of the human body. However,experimentation with untested protein productson humans is necessarily prohibited to protect hu-man subjects. In animals, advances in recombi-nant DNA technology have made it possible to in-

troduce human genes into germ lines shortly afterthe egg is fertilized (41). An example of such atransgenic animal is the mouse whose milk pro-duces tissue plasminogen activator protein (21)(see figure 9-3). For transgenic animals to be use-ful in the analysis of human genes whose func-tions are not known, methods must be devisedfor directing genes to specific sites in the genome,and for assaying the physiological effects of in-troducing human genes into animals (53).

Understanding Mechanisms of ProteinMaturation and Export From Cells

For many proteins, mammalian cell culture canproduce a human protein with greater similarityto proteins isolated from natural human plasmaor tissue than can bacteria or yeast cells. Thereare many problems, however, with the use of large-

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scale mammalian cell culturing for the produc-tion of human therapeutics, including: high costs;technical difficulties; infection of cultures withviruses and other agents that might be danger-ous to humans; and contamination of productswith proteins secreted from the host cells or withproteins present in the culture medium that maycause an immune response or be otherwise toxicto humans (7)9). The levels and types of contami-nants in the final preparation of a human thera-peutic is a major concern of both producers andFederal regulators, and a great deal of effort needsto be directed at finding technical solutions tothese problems. In addition, since bacteria andyeast have proven to be commercially valuablesystems for the production of human proteinsfrom recombinant DNA, it is important to con-tinue developing an understanding of the proc-ess of protein maturation (e.g., how and why cer-tain chemical modifications occur) and exportfrom these cells, so that better production meth-ods might be devised.

Methods for AdministeringProtein Drugs

One of the greatest challenges to the develop-ment of proteins for use as human therapeuticsis the requirement of special delivery mechanismsfor proteins—both those derived from recombi-nant DNA and those extracted from human tis-sue and blood. Protein drugs are often ineffec-tive if ingested, because they are rapidly brokendown by enzymes in the gastrointestinal tract.When they do survive in such harsh environ-ments, the large sizes of proteins can inhibit theirabsorption through the intestinal wall. Conse-quently, protein drugs are usually administeredby subcutaneous, intramuscular, or intravenousinjections, but even these delivery routes are asso-ciated with problems. Dosage is also a problemunique to protein therapeutics; many proteins,particularly hormones, must be released continu-ously at a controlled rate over a period of weeksor even months (25). In addition, prolonged ex-posure to incompletely processed human proteinscan induce allergic responses.

Manufacturers of biological therapeutics are be-ginning to address these problems with a varietyof innovative approaches. Protein engineering, for

example, could potentially be used as a tool formore effective drug delivery. Industrial re-searchers used recombinant DNA and computergraphics-assisted molecular modeling to engineera version of insulin that, when injected daily, isreported to behave more like the body’s own in-sulin than do earlier versions of recombinant DNA-derived human insulin (49). While intravenous andsubcutaneous delivery have been standard pro-cedures for many years, methods for administer-ing protein drugs through mucosal routes are nowbeing developed. California Biotechnology, Inc. isdeveloping Nazdel®) a nasal delivery system, asan alternative to insulin injections. Other proteintherapeutics such as human growth hormone anda hormone secreted by the heart (atrial natiureticfactor, or Auriculin®), are also under study forintranasal delivery (2).

Photo credit: University of California, San Francisco

Scientist illustrating the use of computer modeling inprotein engineering.

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Research and Development Funding

Biomedical research encompasses a large num-ber of disciplines, including biochemistry, virol-ogy, immunology, genetics, neurobiology, and cellbiology. Research in these fields serves as the foun-dation for innovation in the pharmaceutical in-dustry. The tools of biotechnology are now so in-timately woven into each of these fields that itis difficult to differentiate between funding dedi-cated to biotechnology-based research and thatgoing to more traditional technology. The Na-tional Institutes of Health (NIH), the NationalScience Foundation (NSF), the Department ofDefense (DoD), and the Department of Energy(DOE) are the government agencies funding thegreatest amount of biomedical research thatunderlies applications of biotechnology to thedevelopment of human therapeutic products.

The contributions of Federal agencies, the States,and U.S. industry to biotechnology research arecovered in detail in chapters 3, 4, and 5, respec-tively. In this section, examples of notable bio-technology projects funded by Federal agenciessupporting the greatest portion of biomedical re-search are identified. Investment by industry andphilanthropic organizations in biotechnology re-search with implications for the development ofnew drugs is also discussed.

Federal Agencies

The National Institutes of Health (NIH). Withthe exception of the National Institute of GeneralMedical Sciences (NIGMS), each institute of theNIH has as its principal mission the support ofresearch on a range of diseases. NIGMS supportsresearch and training in the basic biomedical sci-ences fundamental to understanding health anddisease. Its primary function is to support U.S.and international research projects that can serveas the basis for the more disease-specific researchundertaken by the other, categorical NIH insti-tutes. The NIH has two categories of biotechnol-ogy research: basic research directly related toor using the new techniques that comprise bio-technology; and a larger science base of free-ranging research underlying biotechnology. Themore applied areas of research fall under the firstcategory.

The NIH estimates that 38 percent of its $6 bil-lion fiscal year 1987 budget was devoted to bio-technology research. The National Cancer Insti-tute (NCI), the NIGMS, and the National Institutefor Allergy and Infectious Diseases (NIAID), werethe three lead institutes for biotechnology fund-ing, spending $645, $356, and $297 million, re-spectively (see table 3-2). NIH funds a number ofbiotechnology research grants that are pertinentto drug discovery and development. Particularlyrelevant to the discovery of human therapeuticsare relatively new programs aimed at developingtherapies for Acquired Immunodeficiency Syn-drome (AIDS), stimulating research in proteinstructure determination and other areas of struc-tural biology, and developing techniques for map-ping and sequencing genomes. These projectsoften fund multidisciplinary research teams.

Under its Small Business Innovation Research(SBIR) grants program (see ch. 3 for further dis-cussion) in fiscal year 1986, NIH funded $44.5 mil-lion worth of research at small companies, withnearly 40 percent awarded to companies usingbiotechnology in their research. Research on de-livery systems for protein drugs, production meth-ods for human therapeutic proteins, and otherapplications of biotechnology is also being fundedby NIH at dedicated biotechnology firms and phar-maceutical companies (see table 9-2).

The National Science Foundation (NSF). Thefunding of basic research grants in genetics, cellbiology, and biochemistry is the major mechanismof NSF for supporting biotechnology research withlong-term applications in human therapeutics.However, while NIH contributes the greatest shareof basic research funds to independent investiga-tors, other agencies, such as NSF, are making sig-nificant contributions to the discovery of novelpharmaceuticals by funding large multi-investi-gator projects in applied research. NSF funds anEngineering Research Center (ERC), called the Bio-technology Process Engineering Center, at theMassachusetts Institute of Technology (see box3-A). The Center has programs in genetics andmolecular biology, bioreactor design and opera-tion, product purification, and biochemical proc-ess engineering systems.

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Table 9-2.–Representative Biotechnology SmallBusiness Innovation Research (SBIR) Program GrantsFunded by the National Institute of General Medical

Sciences in Fiscal Year 1987

Biotechnology Firm Title of Research Grant

Radiation Monitoring Devices, Inc. Improved gel electrophoresis forWatertown, MA medical research

Genelabs, Inc. Rapid approaches for productionSan Carlos, CA of genomic DNA probes

Collaborative Research, Inc. Analysis of yeast glycosylation ofLexington, MA a human glycoprotein

Biosym Technologies, Inc. Computer-assisted protein designRockville, MD

Biotech Research Laboratories, Inc. Porous microcarriers for growingRockville, MD cell cultures

Litron Laboratories, Ltd. Genetic Toxicology Testing byRochester, NY high-speed flow cytometry

Applied Sciences Consultants, Inc. Computer folding of RNA usingSan Jose, CA Monte Carlo method

Biogen Research Corporation Production of recombinant pro-Cambridge, MA teins in milk

TSRL, Inc. Technology for oral delivery ofAnn Arbor, Ml first pass drugs

Genex Corporation Bacillus hosts for pharmaceuticalGaithersburg, MD protein secretion

Electrocell Electrofusion and electropermea-Buffalo, NY tion of cells

Verax Corporation An improved system for massLebanon, NH culture of human hybridomas

Stratagene Cloning Systems New chromosomal jumping vec-San Diego, CA tors for gene mappingSOURCE: The National Institute of General Medical Sciences, 1988.

The NSF, the North Carolina Biotechnology Cen-ter, and several corporations jointly fund the Mon-oclonal Lymphocyte Technology Center. The Cen-ter supports research at several North Carolinauniversities in genetic engineering, lymphocytebiology, immunochemistry, and bioengineering asthey apply to the production and use of mono-clonal antibodies. The major goal of the programssupported by the Center is to stimulate university-industry cooperative research in areas with goodpotential for commercialization.

The Department of Energy (DOE). The Officeof Health and Environmental Research (OHER) isthe component of DOE with a mission in biomedi-cal research. The primary mission of OHER is tostudy sources of radiation, pollution, and otherenvironmental toxins (particularly those relatedto the generation of energy), to trace them throughthe environment, and to determine their effects

on human health and the environment. DOE’scommitment to funding a major initiative to mapthe DNA in the human genome (the entire set ofhuman chromosomes) could be particularly rele-vant to the application of biotechnology in thepharmaceutical industry. This commitmentstemmed from the work of the DOE national lab-oratories on developing technologies to isolate hu-man chromosomes and examine their structure.An outside advisory panel to OHER recently pro-posed that DOE request $20 million in additionalfunds for fiscal year 1988, $40 million in fiscalyear 1989, and $200 million in funds by fiscal year1993 for mapping the human genome at both aca-demic and National Laboratories (55). DOE spent$4.7 million on projects related to mapping geneson human chromosomes in fiscal year 1987, andreceived an appropriation of $11 million in fiscalyear 1988 to expand their gene mapping efforts.

The Department of Defense (DoD). While bio-logical research is not the main mission of DoD,some areas of biotechnology research are sup-ported by its various components. Each militaryservice, especially the Army and the Navy, con-ducts some research related to the health needsof military personnel or to defenses against chem-ical and biological warfare. Over $2 million peryear is being spent by DoD through its DefenseAdvanced Research Projects Agency (DARPA) pro-gram on university research aimed at proteinstructure determination and solving the proteinfolding problem. Biotechnology R&D at the U.S.Army’s Medical Research and Development Com-mand Laboratories, such as the unclassified re-search at the Institute of Infectious Diseases(USAMRIID), has led to the development and test-ing of a number of internationally important vac-cines. USAMRIID spent about $20 million in fis-cal year 1987 for applied medical biotechnologyresearch.

Joint Agency R&D Funding. Besides large con-tract research such as GenBank®—a DNA sequencedatabase funded primarily by NIH and DOE–thejoint funding of multi-investigator biomedical re-search programs by NIH, NSF, and other Federalagencies is uncommon. Joint agency researchfunding might, in certain instances, bean ap-propriate mechanism for accelerating the ap-

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plication of biotechnology to neglected areasof biomedical research.

The States

The States have few programs directed solelyat pharmaceutical biotechnology applications (seech. 4). The Center for Advanced Research in Bio-technology (CARB) based in Shady Grove, MD isone State-supported biotechnology research pro-gram with emphasis on human therapeutic de-sign. Protein engineering and rational drug de-sign are the focus of CARB (see box 9-C). The NorthCarolina Biotechnology Center, funded in part bythe State of North Carolina, is contributing ap-proximately one-third of the funding for a new

Engineering Research Center at Duke Universitythat will use emerging technologies to developtreatments for cardiovascular disease.

Industry

Setting up the infrastructure and facilities fordeveloping and manufacturing biotechnology de-rived human therapeutics is expensive. Establishedcorporations can support these initial costs fromprofit on sales revenues from traditional drugs,whereas dedicated biotechnology companies (DBCs),in general, continue to rely on capital from con-tract/collaborative research agreements with largecompanies, and private and public stock offerings.

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OTA surveyed 296 DBCs in Spring 1987; of these,63 firms (21 percent) had a primary research fo-cus in human therapeutics. The mean R&D bud-get of biotechnology companies dedicated to ther-apeutics was $9 million in 1986 (compared to amean of $4 million for all DBCs), and a total R&Dinvestment of $0.6 billion.

Fifty-three large, established corporations weresurveyed in July 1987; of these, 14 corporations(26 percent) had a primary biotechnology researchfocus in human therapeutics. These pharmaceu-tical corporations had a mean biotechnology R&Dbudget of $16 million in 1986 (compared to $11million for all established corporations), and a to-tal biotechnology R&D investment of $0.2 billion,or 33 percent as much as the DBCs. The total R&Dbudget of the large corporations with a primaryfocus in human therapeutics was $3 billion in1986, making biotechnology R&D only 7 percentof their total R&D expenditures.

More than for any other business sector, appli-cations of biotechnology to the pharmaceuticalindustry are moving from the technology devel-opment phase to the clinical phase. Contributingto this transition, among other factors, is that be-tween 1983 and 1986, the top management ofmany of the DBCs changed from the early scien-tist/entrepreneurs to professional managers, oftenfrom the larger, established corporations (33).Nevertheless, over the next several years, reve-nues from biotechnology product sales will be areality for only a few firms specializing in humantherapeutics. Profit from sales of more traditionalpharmaceuticals (e.g., products of chemical syn-thesis) is still the primary source of biotechnol-ogy R&D funds for established companies, whileeven the most successful DBCs continue to relyon revenues from contract/collaborative arrange-ments and other outside sources (see ch. 5).

The long-term independence of the DBCs de-pends upon their ability to continue to raise thecapital needed to become fully integrated phar-maceutical companies. A fully integrated companyinvents, develops, and markets products independ-ently. In the view of most industry analysts, Genen-tech, Inc. is the only DBC, thus far, that hasachieved the goal of becoming a fully integratedpharmaceutical company (figure 9-5). As discussed

Figure 9-5.-The Financial Maturation ofa Dedicated Biotechnology Company

Dollars (millions)2 5 0

200

150

1 0 0

50

0

sales revenues* Net income loss of $352.2 million.

SOURCE: Genentech, Inc., 19S8.

in chapter 5, the primary source of capital forcompanies striving for independent growth mustchange from venture capital, private or public eq-uity investments, or contract research revenue,to revenues from product sales. Becoming a fullyintegrated pharmaceutical company is not the goalof each of the DBCs that specializes in human ther-apeutics, however, and it is an unlikely option forthe majority.

Philanthropic organizations

Biomedical research, including that involvingbiotechnology, enjoys the greatest level of privatefunding of all the sectors considered in this re-port. Endowments used to fund biomedical re-search are provided by numerous foundations,ranging from disease-specific foundations, suchas the National Huntington’s Disease Associationand the Cystic Fibrosis Foundation, to very largeorganizations targeting research at diseases affect-ing large numbers of Americans, such as theAmerican Cancer Society.

In the last several years, the Howard HughesMedical Institute (HHMI), a medical researchorganization with an endowment of over $5billion, has emerged as a major source of fundsfor researchers in a number of biomedicalfields that involve biotechnology research. TheInstitute has increased its biomedical researchfunding dramatically over the last decade, from

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about $15 million in 1977 to over $168 million in1987 (10).

HHMI operates three main research programs.The first and largest sponsors research in 27 lab-oratories in medical centers throughout the UnitedStates. Research funded by the Institute focuseson five main areas: genetics, neurobiology, cell bi-ology, immunology and structural biology. The sec-ond major program includes the human genomeprogram for international data collection and co-ordination of genome mapping projects, and theCloister project, a joint effort with NIH to en-courage medical students to pursue careers inmedical research by enabling them to spend a yearat NIH. The third program is the Institute’s newest,and focuses on three main areas: graduate train-ing fellowships; research resources grants; andundergraduate science education. Programs forpromoting public understanding of science andfor evaluating biomedical ethics issues are alsobeing evaluated for this program. The Institutewill dedicate at least $500 million to this third ma-jor program over the next 10 years (10).

Leaders of the HHMI professed a desire to ad-dress gaps in the NIH basic research program ata NIH Director’s Advisory Committee meeting inJune 1987 (43). The Institute’s Director also ex-pressed interest in working with NSF to ensurea strong national program of training grants fordoctoral students in biomedical research dis-ciplines (10). The influx of HHMI funds in biomedi-cal research, much of which involves biotechnol-ogy, is an important supplement to governmentfunding, but deficiencies in basic research fund-ing could arise if such private investments are con-sidered as substitutes rather than supplementsto Federal funds.

Regulation of PharmaceuticalBiotechnology

For DBCs participating in the high value-addedhuman therapeutics industry, the renewal offunds for R&D and ultimately the survival of thosecompanies depends on the incentives and barriersalong the path to market approval of their prod-ucts. The regulatory component of the humantherapeutic development process is perceived byboth entrepreneurial and established companies

as the major factor influencing the time requiredto develop a pharmaceutical product.

The debate over the rigorous and lengthy drugregulatory process has gone on for years. Argu-ments have been made that when too strict, reg-ulation becomes prohibitive to pharmaceutical de-velopment. Overly stringent regulation couldimpede international competitiveness, and com-promise human health by reducing the availabil-ity of therapeutic products. On the other hand,the private sector and the general public continueto stress the importance of protecting publichealth from unsafe or ineffective drugs. As a back-ground for analyzing regulatory issues relevantto biotechnology products, this section describesthe mechanisms currently employed in the UnitedStates for regulating human therapeutics. TheFood and Drug Administration (FDA) is the regu-latory agency with purview over the developmentof therapeutic products.

Biotechnology Regulatory Policy at FDA

An underlying policy question addressed by theWhite House Office of Science and TechnologyPolicy (OSTP) in the Coordinated Framework forRegulation of Biotechnology was whether the reg-ulatory mechanisms that pertained to productsdeveloped by traditional techniques were suffi-cient for regulating products produced using re-combinant DNA and other new biotechnologies(51 F.R. 2331 O). Congress gave FDA authority, un-der the Federal Food, Drug and Cosmetics Act(FFDCA) and the Public Health Service Act (PHSA),to regulate products regardless of how they aremanufactured. These laws authorize the FDA tomonitor the testing of a new drug for safety andefficacy before it can be marketed for human usein the United States. The FDA has determined thatthere is no need for new administrative proce-dures and regulations specific for products madeby biotechnology. In its final policy statement, theFDA indicated that it would not classify prod-ucts of recombinant DNA or hybridoma tech-nologies any differently from those producedby traditional techniques, and that such prod-ucts are already covered under existing statu-tory provisions and regulations for drugs andbiologics for human use.

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The New Drug orBiologic Approval Process

The general process for obtaining new drug ap-proval includes four main stages: preclinical (ani-mal) studies; clinical investigation; applicationapproval to market the new product; and post-marketing surveillance.

Investigators planning to conduct clinical inves-tigations on human subjects with new productsmust file a Notice of Claimed Investigational Ex-emption (IND). The IND must contain informationon drug composition, manufacturing data, dataon experimental controls, results of animal test-ing, the training of investigators, intended proce-dures for obtaining the consent of subjects andprotecting their rights, and an overall plan for hu-man clinical studies. Detailed records of clinicalinvestigations are required by the Center for DrugEvaluation and Research before a New Drug Ap-plication (NDA) for marketing approval will be con-sidered. The Center for Biologic Evaluation andResearch also requires such documentation forbiologics (e.g., blood proteins). In addition, eachbiologic product lot must be characterized, andan establishment license for the production facil-ities must be obtained before a Product LicenseApplication (PLA) for marketing approval will beconsidered (56). Proteins with therapeutic poten-tial fall under the purview of one or the otherof the two Centers.

Special “Points to Consider” bulletins have beenissued by FDA for products made using recombi-nant DNA and hybridoma processes. These in-clude information to assist manufacturers in de-veloping and submitting to FDA applications forapproval of such biotechnology products for in-vestigation or marketing, The FDA has requestedassistance from product developers in the con-tinuing development of the “Points to Consider”documents (53 F.R. 5468).

FDA Approval of Human TherapeuticsFrom New Biotechnologies

Seven human therapeutics made using recom-binant DNA or hybridoma technologies have thusfar been approved for marketing by the FDA. Todate, the mean time spent by companies tak-

ing their biotechnology products through clin-ical trials and regulatory review at FDA (i.e.,from the filing of an IND to the approval of anNDA or PLA) has been five years, significantlyless than the 10- to 16-year average estimatedfor conventional drugs (67).

For some of these therapeutics, clinical data ontheir counterparts, or on close analogues preparedfrom human plasma or tissues by non-biotechno-logical methods, were available. For example, sub-stantial information already existed on the effec-tiveness of human growth hormone for dwarfismand on porcine insulin for diabetes-each pre-pared by conventional techniques (31). A key com-ponent of clinical trials for some of the seven bio-technology products now on the market was thusto demonstrate that the biotechnology productsare as safe and effective as products prepared byconventional means.

The lack of previous preclinical or clinical studieson a potential protein drug has not, however, ap-peared to slow the regulatory approval processfor biotechnology products at the FDA. Genen-tech, Inc.'s tissue plasminogen activator protein(Activase®) was approved for marketing only fouryears after the IND was filed, even though themanufacturing method was modified in the proc-ess (47), and there were no prior clinical studieswith the protein (32). On the other hand, somebiotechnology products, such as interleukin-2,have been in clinical trials for substantially longertimes. Over the last several years, there has beenconsiderable controversy surrounding the degreeto which the effectiveness of this protein as ananti-cancer agent balances with its toxicity in hu-man beings (1,35). Biotechnology products do nothave a monopoly on the “fast-track” at FDA (3).For example, the NDA for azidothymidine (AZT),a non-protein drug that is not a product of bio-technology, was approved in March 1987 for treat-ment of AIDS symptoms, only 4 months after itwas filed, and only two years after the IND wassubmitted (27), Therefore, therapeutic productswhose effectiveness can be demonstrated eas-ily, and for which an efficient productionmethod and dosage form can be readily deter-mined, are likely to be approved in a timelymanner, while others will require more exten-sive clinical studies.

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In addition to the seven biotechnology productsalready approved for marketing by the FDA, thereare nearly 400 human therapeutics (produced ei-ther by cells that express cloned genes or by hybri-domas) in some stage of clinical trials (32). Com-pared to the total number (25,000) of active INDsfor all drugs and biologics currently on file at theFDA, the number of biotechnology products issmall—representing only about 2 percent of po-tential therapeutics in some stage of human clini-cal trials (32). Nevertheless, in 1986 alone, 20 newhuman therapeutics were approved, of which fourwere products made using either recombinantDNA or hybridoma technologies. INDs for prod-ucts made using the new biotechnologies are cur-rently being filed in the Center for Biologic Evalu-ation and Research at a rate of about 125 per year,corresponding to nearly 50 percent of the totalnew INDs for 1987 (32). Meanwhile, the numberof FDA personnel available to review the data fromthe relevant clinical studies has not increasedproportionately (32, 71). The FDA Commissionerreported that these factors, combined with therecent emphasis at the FDA on speeding the re-view of applications involving drugs and biologicsthat are potential AIDS therapies, could cut intothe Agency’s resources for processing biotechnol-ogy product applications aimed at other therapeu-tic uses. Despite these concerns, the relativelyshort time required to obtain market approvalof human therapeutic products made using thenew biotechnologies, and the high proportionof biotechnology products approved, shouldhelp sustain the current high level of publicand private R&D funding for the applicationof biotechnology to human therapeutics in thenear term.

Recent Legislative Actions

Since the 1984 OTA report on commercial bio-technology (51), Congress acted in at least twoareas involving drug regulation that influence thelevel of industrial investment in biotechnology-based human therapeutics: orphan drugs anddrug exports.

The Orphan Drug Act.—Prior to 1983, phar-maceutical companies had little incentive to in-vest research funds and personnel in developingdrugs likely to yield only limited financial profit.

Small biotechnology companies developing inno-vative new techniques were even less likely to in-vest any of their limited R&D budgets in unprof-itable human therapeutics. Drugs for such rareafflictions as Huntington’s disease and Turner’sSyndrome, that affect only a small population,were thus commonly known as “orphan drugs, ”In 1983, Congress amended the FFDCA with the“Orphan Drug Act” (Public Law 97-414) to pro-vide incentives for developing drugs for rare dis-eases that would otherwise not be developed be-cause the anticipated financial rewards wereinsufficient. A 50 percent tax credit for the costof conducting clinical trials and 7-year market ex-clusivity were the key incentives provided in theAct. The 7-year market exclusivity provisionof the Act was designed to protect companiesselling dregs that were ineligible for productor use patents, were off patent, or had littlepatent term outstanding. Such companies couldnot otherwise be protected from competition fromfirms that were already marketing the drug forother therapeutic applications, and thus wouldnot be able to recoup their costs in developingthe product for an orphan application.

The Act has been amended twice. A 1984 amend-ment (Public Law 98-551) defines a rare diseaseor condition as that which affects fewer than200,000 persons in the United States, or more than200,000 persons for which it is clear that the costof developing the drug will not be recovered bysales of the drug in the United States. A 1985amendment (Public Law 99-91) authorizesseven years of exclusive marketing approvalfor all orphan drugs regardless of their patent-ability, with the intention of encouraging pri-vate pharmaceutical companies to invest morein orphan drug development (50). In addition,the amendment reauthorizes grants and contractsfor clinical testing of orphan products, author-izes grants and contracts for preclinical testing,and establishes a National Commission on OrphanDiseases.

More than one company can receive the or-phan designation for a particular use of a prod-uct, entitling them to the tax credit incentivefor conducting clinical trials. However, in thecases where several sponsors seek marketing ap-proval at the same time, only the first sponsor

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to receive approval is awarded the 7-year marketexclusivity for that drug approved for that par-ticular use. The approval of all others is delayeduntil the end of the 7-year period. The provisionsof the Orphan Drug Act have stimulated new com-mitments to orphan drugs by both research-oriented pharmaceutical companies and DBCs(50,59). As of December 1987, a total of 179 drugsand biologics had been given an orphan designa-tions for specific therapeutic uses (50). Of these,there were eight cases in which more than onecompany had initiated development of the samedrug.

The awarding in 1985 and 1986 of 7-year mar-ket exclusivity rights to two companies for theuse of their recombinant DNA-derived humangrowth hormones as a treatment for a rare formof childhood dwarfism has spurred substantialcontroversy (14,20,37,42). The second version ofhuman growth hormone differed from the firstby one terminal amino acid, and may cause lessof an immune response in human beings. By ap-proving the second product, the FDA indicatedthat they considered it a different, and presuma-bly a more effective product, than the first. Othercompanies are also developing versions of recom-binant DNA-derived human growth hormone, andview their own products as having therapeuticadvantages as well (66). Analysts predict a poten-tial annual market of over $150 million for hu-man growth hormone, which is one likely reasonfor the competition among firms for exclusive mar-keting rights. Human growth hormone is onlyone of several biotechnology products thathave received ‘(orphan” designation from theFDA that are expected to yield substantial rev-enues. other products include erythropoietin,epidermal growth factor and superoxide dismu-tase (see box 9-A). Each of these also show poten-tial for additional, non-orphan therapeutic usesand greater long-term profitability.

Competition among U.S. companies for accessto future market shares of a few of the same “or-phan” biotechnology products is already evident,leading some observers to question whether ahighly profitable drug, or one with broad poten-tial applications outside the particular rare afflic-tion warranting its orphan designation, should beeligible for special regulatory status (17,42,50). The

market exclusivity provision in the Orphan DrugAct was not intended to be applied unless it is anecessary incentive for innovation. The Commit-tee on Energy and Commerce in the U.S. Houseof Representatives reported their concern thatthere will be a sizeable number of drugs devel-oped using the new biotechnologies that will besponsored by more than one company. The pri-mary reason, in the view of the Committee, is thatthese companies are not confident about thepatentability of their products, and believe thatthe 7-year market exclusivity provision of the Actis an excellent alternative (50).

Drug Export Amendments Act of 1986.--Until1986, the United States banned the export for saleof drugs and biologics not yet approved by theFDA. (Prior to the Act, unapproved drugs couldbe exported for investigational use only.) TheFFDCA was amended in the 99th Congress toestablish conditions for the commercial export ofnew drugs and new animal drugs and biologicsmanufactured but not yet approved for sale inthe United States. The new provisions are referredto as the “Drug Export Amendments Act of 1986”(Public Law 99-660).

Commercial biotechnology trade groups weremajor advocates of this legislation, arguing thatprevious export restrictions on drugs and biologicsnot yet approved by the FDA put them at a com-petitive disadvantage by forcing them either tobuild plants abroad or to license their valuabletechnology to potential competitors. The DrugExport Amendments Act allows, under certainconditions, U.S. pharmaceutical manufactur-ers to export for commercial purposes drugsand biologics to any of 21 developed countriesprovided that the drug or biologic has been ap-proved for sale by the importing country (2 IU.S.C. Sec. 382(b)(l)). The exporting company musthave an effective IND exemption allowing testingon human subjects, and be actively pursuing fi-nal product approval. If a listed country has notapproved the product for sale, it may still receivethe product for purposes of export to anothercountry on the list in which the drug has beenapproved.

The Drug Export Amendments create a newexport category for the sale of semi-processed)

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or biological intermediate products (e.g., astrain containing a recombinant DNA mole-cule). Under the law, a partially processed bio-logical product that will be used as a therapeuticcan be exported for sale upon FDA approval. Toobtain FDA approval, the exporter must show thatthe product is manufactured in compliance withGood Manufacturing Process regulations; theproduct is labeled appropriately; and there mustbe certification from the importing company thatthe finished product is approved or approval isbeing sought. The provision for partially processedbiological products could be particularly impor-tant to entrepreneurial companies, such as theDBCs, with budgetary constraints that precludethem from building facilities abroad.

The new drug export laws might benefitDBCs seeking new markets more than large,established corporations using biotechnology.Many established pharmaceutical companies havelicensing agreements with international affiliates,or with foreign companies to manufacture theirproducts locally. In contrast, less established bio-technology companies do not want to license outall of their technologies to foreign competitors,but they cannot generally afford to build facil-ities in several countries. The new Drug ExportAmendments lessen the likelihood that the DBCswill lose their share of a product in foreignmarkets—where the drug could be approvedfirst–by the time FDA approves the drug for mar-keting in the United States.

Opponents of the new drug export legisla-tion voiced concern that products not yetrigorously tested would be eligible for export.In their view, once an unapproved drug leavesthe United States, the FDA will have great diffi-culty monitoring problems such as mislabeling orillicit shipment to other nations, especially thosewith little or no regulatory restrictions. It is stilltoo early to establish whether these concerns havebeen substantiated by FDA actions.

Intellectual Property Protection

The legal protection of intellectual property isa necessary factor for encouraging investment.Reliable patent protection stimulates innovationand reduces the focus on developing analogs or

modifications of drugs that have already beenproven effective. When intellectual propertylaws are unclear, the companies developingimportant new products, such as human ther-apeutics, are forced to invest valuable re-sources in expensive and time-consuming liti-gation. In the case of human therapeutics madeusing recombinant DNA technology, the litigationhas involved all types of patents, including thosefor the products themselves, the processes usedto manufacture and purify them, and their vari-ous uses.

Broad Scope of Patent Claims

A widely held view of industrialists is that thescope of the patent claims for biotechnology-basedhuman therapeutics is too broad (52). An exam-ple of litigation over broad patent claims is thatinvolving the tissue plasminogen activator protein(TPA). A British court revoked a TPA patent thatGenentech, Inc. had been awarded in the UnitedKingdom. The court ruled that the claims in thepatent were too broad upon a challenge by theWellcome Foundation (England) (22). Genentech,Inc.’s U.S. patent for TPA is still pending. GeneticsInstitute (Cambridge, MA) was awarded broadprocess patent coverage for a purification methodfor erythropoietin (EPO) from any source. Thisdecision is being challenged by Amgen (ThousandOaks, CA), which has product and process patentspending for EPO (1,22).

Effects of Infringement Suits onWall Street

Infringement suits between companies produc-ing human therapeutics by recombinant DNAtechnology have, at the very least, temporary ef-fects on the investment community. On Septem-ber 12, 1986, for example, Genentech, Inc.’s stockplunged 10.5 points based on the news that Hoff-man-La Roche, Inc. (Nutley, NJ) had sued for in-fringement of their patent covering synthetic hu-man growth hormone. Likewise, the issuance ofGenetics Institute’s patent on EPO sent Amgenstock down $6.75 per share from $38.25, andGenetics Institute’s stock up $4.75 per share from$31.25 on the day of the announcement, July 1,1987, This oscillating investment activity reflects,in part, the lack of case law histories for biotech-

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nology patent infringements. There is a long caselaw history for patents on traditional pharma-ceuticals, but there is little information inves-tors can use to determine the potential out-come of litigation over patents on humantherapeutics derived from biotechnology. Thecreation 4 years ago of the Court of Appeals ofthe Federal Circuit has resulted in a strong pre-sumption of patent validity for all classes of pa-tents (46).

What Is Patentable?

The U.S. Patent and Trademark Office has fourmain criteria for patentability of an invention: itmust be novel, possess utility, be nonobvious, andthe patent must enable others in the field to usethe invention (64). Products of biotechnology arecomplex proteins that must maintain a certainthree-dimensional structure, and in many casesacquire certain chemical modifications, in orderto function at their full potential, Thus, depend-ing on the organism used to produce the protein,and the process used to purify it, two recombi-nant DNA-derived versions with identical aminoacid sequences could fold into three dimensionalstructures with different levels of activity. Thisleads to questions on whether the patent on oneprotein product excludes the rights to patent allother versions. Another question regarding bio-technology patents relates to the nonobviousnesscriteria. Once a protein is discovered, is it obviousto produce it using recombinant DNA technology?For these and other reasons, some industryanalysts believe that second and third generationrecombinant DNA-based human therapeutics willbe more easily protected under existing patentlaws (1,22). Second generation protein productsmade using biotechnology can be those modifiedby protein engineering to have enhanced activ-ity, or those made by a sufficiently different proc-ess than the first generation product. The patentprotection of these products is uncertain, but thenumber of companies developing such productsreflects high hopes (see ch. 5). There are at leastfive companies competing for second generationtissue plasminogen activator protein, for example.

Alternatives to Patent Protection

Pharmaceutical companies trying to protecttheir human therapeutic products may use pa-

tents, trade secrets, or copyrights. RecombinantDNA technology offers the pharmaceutical indus-try new methods for producing proteins that al-ready exist in nature. As long as it does not natu-rally occur in pure form, and the purificationprocess is not obvious, a therapeutic protein canbe patented by the first individual or individualsto create a purified version. Recombinant DNA-derived insulin and human growth hormone werenot patentable because purified forms had beenprepared in the past using conventional tech-niques. However, the non-recombinant DNA-derived human alpha interferon was patented (46).

Although patents are the strongest protectionand most favorable, there are certain circum-stances under which trade secret protection couldbe preferable (see ch. 6). Process patent protec-tion is not as broad and enforceable as productpatent protection can be, so it is sometimes desira-ble to make innovative processes trade secrets.The advantages of trade secrets are that they donot have to be published, nor do they have to meetthe patent requirements of novelty and nonobvi-ousness (51).

Other Intellectual Property Issues

Another issue of intellectual property protec-tion that can influence the level of investment inpharmaceutical applications of biotechnology isthe infringement of U.S. process patents by de-veloping and newly industrialized countries.Emerging biotechnologies are particularly vulner-able to weaknesses in process patent protectionbecause it is often the only protection availablefor a human gene product isolated or producedusing biotechnology. A forthcoming OTA reporton Patenting Life will examine these process pat-ent issues, as well as those surrounding the patent-ing of whole animals engineered to produce hu-man gene products with therapeutic potential.

Access to Biotechnology Information

Rapid advances in recombinant DNA and otherbiotechnologies have caused an information ex-plosion in the biological sciences, The relentlesspace of new developments in biotechnologyparallels that of information processing, storage,and retrieval. The combination of developmentsfrom these two high-technology sectors could lead

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to even greater advances. Access to informationgenerated by biotechnology is crucial to innova-tion. Organization of the data generated in bio-technology research is necessary for researchersin the participating scientific disciplines (e.g.,microbiology, biochemistry, immunology etc.) tobuild on their individual contributions. Biotech-nology information access and organization hasimplications in several areas of national policy,such as:

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regulation of commercial products of biotech-nology;support of biotechnology research and de-velopment;public perception and awareness of biotech-nology;intellectual property rights; andcoordination among Federal agencies (39).

This section focuses on how information accessand organization is vital to continued advancesin the application of biotechnology to medicine.

A National Research Council report (39) urgedthat Federal agencies supporting biotechnologyresearch continue to fund or initiate funding inactivities concerning biotechnology information.These efforts could range from developing rele-vant computer software to national centers forinformation networks. Another recommendationwas that the National Library of Medicine (NLM)at the National Institutes of Health coordinate a“database of databases” for biotechnology infor-mation and expand its role as an information re-source center. Implementation would require anexpansion of the current NLM directory of infor-mation sources (DIRLINE) and would include across-referencing system and a thesaurus for bio-technology. The users of these facilities would notonly be the researchers in the multiple scientificdisciplines involved, but regulators, patent attor-neys, and other officials needing information onbiotechnology. Congress appropriated $3.83 mil-lion in fiscal year 1988 for the NLM to initiate workon the proposed database of databases.

There are more than a hundred different data-bases—some more frequently used than others—maintained as sources of data for researchers inthe various biological sciences (12). There are data-bases containing the nucleotide sequences ofcloned genes, the amino acid sequences of pro-

Figure 9.6.—Databases in Biotechnology

Protein structures

SOURCE: The National Library of Medicine and Office of Technology Assess-ment. 1988.

teins, the structures of organic molecules, loca-tions of genes on chromosomal maps, pedigreedata from families with genetic diseases, and three-dimensional atomic coordinates of protein struc-tures (figure 9-6). Computer software has beendeveloped that allows a researcher to analyze hisor her own data relative to that stored in the data-bases. The Division of Research Resources at NIHfunds a national computer resource, called BIO-NET, that offers sophisticated analytical softwarefor use by government and academic research-ers (industry only has access to the BIONET in-formation network). Databases of structures ofnonbiologic drugs with established activity canbe used together with those containing three-dimensional structure data on proteins in rationaldrug design strategies. Research on the structureof one of the family of viruses that cause acquired

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immune deficiency syndrome was made feasibleby the BIONET resource (60).

In 1987, a group of government, academic, andindustrial scientists met in Santa Fe, NM to de-velop a strategy for making biological informa-tion accessible to all users. Their goal is to createan expert system, called the Matrix of BiologicalKnowledge, by interconnecting available data-bases in ways that will interpret the scientific ques-tions of investigators from any one of a numberof diverse fields in biology and chemistry (36). TheNLM database of databases would be only onecomponent of the system. Through the Matrix sys-tem, a pharmaceutical scientist would be able tocommunicate on-line with the data from the workof agricultural scientists, for example. Certain taskgroups have been set up to initiate small projectsthat would demonstrate the efficacy of Matrix,with the hope of gaining additional support forthe project (68).

The transfer of information from proprietarysources to the public domain is an important pub-lic policy issue. For example, scientists from boththe public and private sectors are conducting re-search aimed at elucidating the structure and func-tion of human genes and gene products. Readyaccess to information, as it evolves, is essen-tial for maintaining the current pace of inno-vation in areas of biotechnology that could im-prove human health and prevent disease. Thiswill require the timely entry of information(proprietary and otherwise) into public data-bases (53).

Availability of Trained Personnel

The availability of trained personnel has beenindispensable to the dominant position maintainedby the United States in pharmaceutical biotech-nology. There is a wide variety of scientific andadministrative personnel who perform the workinvolved in applying biotechnology to the discov-ery and commercialization of human therapeu-tics. Scientists who carry out basic research, proc-ess engineers responsible for product scale-up,pharmacologists and clinicians who performstudies in animals and humans, legal and regula-tory administrators who must apply existing lawto the products and processes of biotechnology,

and marketing personnel are all involved. Chap-ter 8 covers the general scientific training and per-sonnel needs of both academia and industry. Chap-ter 6 addresses the problems in obtaining andkeeping highly trained scientific personnel in thevarious government agencies. This section sum-marizes the research disciplines from whichhighly trained scientists must continue to emergeto fill the existing gaps in biotechnology researchalong the path to development of new human ther-apeutic products.

In a recent report, the National Academy of Sci-ences (NAS) (38) requested increased Federal at-tention to the need for interdisciplinary trainingin biology, chemistry, and physics for graduatestudents and postdoctoral personnel. The newgeneration of structural biologists, those who willbe primarily responsible for advances in proteinengineering and rational drug design, must betrained in the basics of protein chemistry, molecu-lar biology, and biophysics. An increasing num-ber of large corporations and dedicated biotech-nology companies have set up programs to studythe three-dimensional structure of large moleculessuch as proteins and DNA. These programs re-quire expertise in such biophysical methods asx-ray crystallography, nuclear magnetic resonancespectroscopy (NMR), theoretical molecular mod-eling, and computer graphics. While the fields ofmolecular and cellular biology are well populated(38), academia and industry (especially pharma-ceutical companies) are competing for scientiststrained in structural biology (23).

As the number of cloned human genes rises,and the ability to purify their protein productsincreases, there will be a growing need for scien-tists trained to determine how these proteins workin the human body, and to assess their potentialas human therapeutics. This would require re-searchers from the traditional fields of humanphysiology, pharmacology, and toxicology, butwith experience that extends beyond traditionalsynthetic drugs to include protein drugs.

In assessing personnel and training programneeds, it is important to emphasize that as bio-technology becomes fully integrated into biomedi-cal research, and new research tools continue tobe developed, the types of scientific expertise re-

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quired will also evolve. Therefore, scientists likely be the best prepared to meet the chang-with solid training in the general areas of bi- ing needs of biomedical R&D in both acade-ology, chemistry, and computer science will mia and industry.

FUTURE APPLICATIONS OF BIOTECHNOLOGY TOHUMAN THERAPEUTICS

Some scientists believe that the use of biotech-nology will actually contribute more to studiesaimed at understanding the basic processes under-lying cellular physiology than to the productionof novel human therapeutics. In other words, oncethe mechanisms directing normal cellular func-tions are known, conventional drugs (e.g., phar-maceuticals made by chemical synthesis) may bedesigned more intelligently (or rationally) becausethe chemical characteristics of their target sitesand their mechanism of action will be better un-derstood (6). Biotechnology has stimulated the in-terest of pharmaceutical companies in rationaldrug design, but research in this area is expen-sive, requiring multidisciplinary research teamsand costly instrumentation and computers for de-signing molecules. Despite the renewed enthu-siasm in this area, computers and molecular mod-eling have led to very few rational drug designsuccesses (43)62). Therefore, for the time being,these methods are more likely to remain in aca-demic laboratories and a few large pharmaceuti-cal companies, than in the smaller companies dedi-cated to biotechnology.

One strategic challenge posed by human thera-peutics made using biotechnology is that new

methodologies are constantly being developed thatimprove product purity, stability, and productionefficiency, and manufacturing processes must bemodified accordingly, For example, Genentech,Inc. modified its manufacturing protocol for TPAduring clinical trials, making it necessary to ascer-tain any effects unique to the product manufac-tured by the new process (47,7 I). In such circum-stances, the sponsor is faced with the obviousbenefits of rapid advances in molecular biologyand the desire to design a superior product againstthe financial and regulatory burdens incurred byaltering manufacturing processes during devel-opment (4). In contrast to the scenario for con-ventional drugs where manufacturing recordsestablish the criteria for product purity, for hu-man therapeutics made using biotechnology, theprocess also plays a role in defining the regula-tory guidelines for the products (57,58). For ther-apeutic applications in which biotechnology is notthe only option for product development, thesefactors will continue to influence the choicebetween biotechnology and more conventionalroutes.

ISSUES AND OPTIONS

ISSUE 1: Should action be taken to ensure thatthe development incentives provided in theOrphan Drug Act are being used for theirintended purposes?

The objective of the Act was to provide incen-tives for developing drugs for rare diseases thatwould not otherwise be developed because theanticipated financial rewards were insufficient.The simultaneous development of an orphan prod-uct by multiple companies implies either that the

potential commercial value of the product is highenough that it would be developed even withoutthe Orphan Drug Act incentives, or that the com-panies are unaware of each other’s developmentactivities. Therefore, if Congress takes measuresto amend the provisions of the Act to prevent im-proper use of its objectives, it should do so takingcare not to remove incentives for the majority ofsponsors who are developing drugs that are trulyorphans.

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Option 1.1: Take no action.

The Orphan Products Board reported a signifi-cant increase in orphan drug development, includ-ing a substantial number of products made usingbiotechnology (over 10 percent of the total) in thefive years since the Act. Dedicated biotechnologycompanies have limited resources to invest, andthey generally aim their R&D budgets at poten-tially profitable drugs. If the existing incentivesfor R&D investment in orphan drug applicationswere altered, the dedicated biotechnology com-panies might be less likely to participate in orphandrug development than would the large, estab-lished corporations. However, the smaller com-panies have contributed much to innovation inthe development of biotechnology products, andfor some orphan diseases, these could prove tobe the only effective products. Congress could thusdetermine that the tax credit and 7-year marketexclusivity incentives of the Act are, for the mostpart, being used as designed, and that no furtheraction is necessary.

Option 1.2: Amend the Orphan Drug Act to dis-courage sponsors from using orphan drug sta-tus as a means of achieving market exclusivityfor drugs that they would likely develop with-out the incentives of the Act.

The 7-year market exclusivity provision of theAct was intended to assure orphan drug de-velopers that they would recoup their develop-ment costs, even though there was little commer-cial value and inadequate patent protection forthe product. Concern has been raised that in theface of uncertainty over the validity and scopeof patent protection on many biotechnology prod-ucts, the developers are viewing the Act marketexclusivity provision as a patent substitute. There-fore, in keeping with the legislative intent of theAct, measures could be taken to ensure that itsincentives are not abused by sponsors who standto make substantial financial gains on orphanproducts. One or a combination of any of the fol-lowing options could be used by Congress toamend the market exclusivity provisions of theOrphan Drug Act:

● Orphan drug sponsors with pending patentapplications, or holding patents with lifetimes

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that will not expire soon after market ap-proval, could be excluded from 7-year mar-ket exclusivity rights.Any company willing to carry out all of thenecessary testing of a drug identical to or sim-ilar to one already approved for the same dis-ease could market their product during the7-year protection period afforded to the com-pany that originally developed the drug.A 7-year term of market exclusivity could begranted to all companies that had filed NDAsor PLAs for the same therapeutic use of theorphan product by the time market approvalwas granted to the first company. Congressmight find that this option balances the needto continue proven incentives for orphandrug development with both the equitabletreatment of codevelopers of a particular drugand competition in the major markets thatcan support it. If market exclusivity is sharedonly by companies that have already filed anNDA or PLA at the time the first applicationis approved, then companies only days awaycould be excluded, even though they hadmade significant investments in orphan drugdevelopment.The market exclusivity provision could be re-moved. Congress could determine that thelow profitability of drugs marketed for or-phan uses offers a natural market exclusiv-ity to the original developer in most cases,thereby superseding the need for such a pro-vision. Without the provision, however, therewould be no assurance that the sponsor ofa product that is either off patentor unpatent-able, could offset some or all of the develop-ment costs by recouping all possible revenuesfrom the sale of the drug. Moreover, exercis-ing this option would remove incentives forall orphan product developers, even thoughonly a few products, such as recombinantDNA-derived human growth hormone anderythropoietin, could yield substantialrevenues.Sponsors receiving revenues from sales of or-phan drugs for rare disease applications thatexceed a fixed ceiling could lose their mar-ket exclusivity rights. Congress could find thatthis approach is the most direct one for dis-couraging the use of the development incen-

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tives offered by the Act for drugs with antic-ipated profitability.

ISSUE 2: Should Congress act to facilitate ac-cess to information generated by biotech-nology-based research with potential appli-cations to human health?

Rapid advances in recombinant DNA, hybri-doma, and other biotechnologies have led to anexplosion of information in the biological sciences.Organization of the data generated in researchbased on biotechnology is necessary for buildingon individual contributions and furthering inno-vation. Databases exist in government and aca-demic laboratories for a wide variety of biologi-cal information; some of the databases, such asthose containing DNA and protein sequences, areheavily used, while others are used by individ-uals in more specialized fields. In some cases, data-bases are used to indicate the availability of andto describe certain types of biological materials.The users of biotechnology information are notonly academic, government, or industrial re-searchers, but regulators, patent attorneys, andother officials needing data.

Option 2.1: Take no action.

The National Institutes of Health, through theDivision of Research Resources and other cate-gorical institutes, maintain over 100 informationaldatabases, and fund research for managing andunderstanding large amounts of biological infor-mation. Congress could conclude that these NIHactivities, and those of other Federal agencies aresufficient to meet the major needs in biotechnol-ogy information management. However, many sci-entists view the existing resources for assimilating

and analyzing the rapidly accumulating biotech-nology information as insufficient to meet theneeds of the community of users.

Option 2.2: Increase funding levels for existingprograms or initiate funding in new activitiesconcerning biotechnology information man-agement.

The development of computer software to linkthe large number of different databases in a waythat will allow researchers to better analyze theirown data, and to avoid unnecessary duplicationof research, is a major goal of all researchers usingbiotechnology. Congress could authorize Federalagencies that support biotechnology research tofund more activities related to the developmentof new systems for managing biotechnology in-formation. These efforts could range from devel-oping relevant computer software to nationalcenters for information networks. The designa-tion or creation of a center or centers for biotech-nology information analysis and managementcould assist in the development of new commu-nication tools and serve as centers for the distri-bution of biological information.

The National Library of Medicine (NLM) is onepossible location for a biotechnology informationcenter. The NLM has made a catalog of humangenetic loci, called Mendelian Inheritance in Man,available on line through its Information RetrievalExperiment (IRX) program, and has linked the datain this volume to the information available inGenBank® and the Protein Information Resourcedatabank (funded primarily by NIH), to importantdatabases for researchers in molecular biology.The NLM has also begun an experimental programfor linking molecular biology databases, using re-searchers at NIH to test the system’s effectiveness.

SUMMARY

The pharmaceutical industry enjoys the high- any other Federal agency on biotechnology R&D.est level of biotechnology R&D investment from Companies developing human therapeutics basedboth public and private sources. In fiscal year on biotechnology had R&D budgets higher than1987, the National Institutes of Health, with its those financed by any other industrial sector inresearch mission inhuman health and disease pre- the 1986/1987 fiscal years. Human therapeuticsvention, provided about 20 times the amount of make up the primary R&D effort of 21 percent

76-582 0 - 88 - 7 : QL 3

.- —

188

of dedicated biotechnology companies and 26 per-cent of the larger, established corporations usingbiotechnology. Because the application of biotech-nology to the development of human therapeuticshas only recently begun to make the transitionfrom new technology development to successfulclinical applications, the availability of funds forbasic and applied research will be important insustaining the current pace of product devel-opment.

The rate of human therapeutic product devel-opment could be substantially increased if greatereffort were given to developing new methods toisolate genes and proteins for research; establishrelationships between protein structure and func-tion; determine how proteins fold into active struc-tures; study the physiological roles of human pro-teins in model systems; analyze the mechanismsof protein maturation and export from cells; anddeliver human therapeutic proteins to the appro-priate targets in the human body. Despite its suc-cesses in the area of human therapeutics, how-ever, biotechnology will likely only complement

CHAPTER 9

1. Baum, R., “Biotech Industry Moving Pharmaceuti-cal Products to Market, ” Chemical and En@”neer-ing News, July 20, 1987, pp. 11-32.

2. Baxter, J., California Biotechnology, Inc., MountainView, CA, personal communication, March 1987.

3. Beers, D. O., Arnold and Porter, Washington, DC,persona] communication, December 1987,

4. Berkowitz, K. P,, Vice President and Director,Hoffman-La Roche, Inc., Public Affairs, Nutley, NJ,personal communication, Sept. 3, 1987.

5. Blundell, T. L., Sibanda, B. L., Sternberg, M.J.E., etal., “Knowledge-Based Prediction of Proteins Struc-tures and the Design of Novel Molecules,” Nature326:347-352, 1 9 8 7 .

6. Brown, M. G., “Second Annual Biotechnology Con-ference,” Jan. 27-29, 1987.

7. Cartwright, T,, “Isolation and Purification of Prod-ucts from Animal Cells” 7’HWECH 5:25-30, 1987.

8. Casali, P., Inghirami, G., Nakamura, M., et al., “Hu-man Monoclonals From Antigen-Specific selectionof B Lymphocytes and Transformation by EBV,”Science 234:476-479, 1986.

9. Chee, Darwin O., “Biotechnologists Recognize Grow-ing Importance of Animal Cell Cultures, ” GeneticEngineering News, June 1987, p. 6.

more traditional methods of isolating or synthe-sizing pharmaceuticals.

The new biotechnologies are now an integralpart of research in the development of humantherapeutics at dedicated biotechnology compa-nies and at larger, more established pharmaceu-tical corporations. Biotechnology is now being ap-plied by the pharmaceutical industry as a tool fordeveloping therapies for many different humandiseases and afflictions. A company’s success inapplying biotechnology to the development of hu-man therapeutics will now be measured not justby its research capabilities, but also by its strengthsin meeting drug approval requirements, protect-ing intellectual property rights, and new productmarketing. There is no longer a clear advantageof the dedicated biotechnology companiesover the pharmaceutical industry giants inthe development of new products and proc-esses. On the other hand, the large, estab-lished companies can no longer claim a sub-stantial lead in the management end of productdevelopment.

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190

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Chapter 10

U.S. Investment inBiotechnology Applied to

Plant Agriculture

“Let us never forget that the cultivation of the earth is the most important labor of man.”—Daniel WebsterJanuary 13, 1840

,, . . . whoever could make two ears of corn, or two blades of grass, to grow upon a spotof ground where only one grew before, would deserve better of mankind, and do moreessential service to his country, than the whole race of politicians put together. ”

–SwiftGulliver’s Travels: Voyage to Brobdingnag

.

CONTENTS

Page

Factors Influencing U.S. Investment in Agricultural Research . ...............193The Biotechniques in Agricultural Research . . . . . . . . . . . . . . . . . . . . . ..........194

Applications of the Techniques . . . . . . . . . . . . . . . . . . . . . ...................194Impact of Biotechniques on Agricultural Research Investment . . . . . . . . . .. ...197

Property Rights and Plants . . . . . . . . . . . . . . . . . . . . . . .......................199Plant Patent Act of 1930 and Plant Variety Protection Act of 1970..........199Diamond v. Chakrabarty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...199Impact of Intellectual Property on Agricultural Research Investment . ......,199

Agricultural Biotechnology Research Funding . . . . . . . . . . . . . . . . . . . . . . .......200Public Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........201Private Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........204Collaborative Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . ................205Impact of Funding Source on Agricultural Research Investment . ..........,205

Commercialization of Agricultural Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .209Institutional Barriers to Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...210Personnel Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..211

The Future of Agricultural Research. . . . . . . . . . . . . . . . . . . . . . ...............212Issues and Options for Congressional Action . . . . . . . . . . . . . . . . . . . . . .........213Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...215Chapter IO References.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......216

BoxesBox Page10-A. Techniques Used in Plant Biotechnology . ............................19510-B. Biotechnology in Iowa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....20310-C. The Midwest Plant Biotechnology Consortium . . . . . . . . . . . . . . . . . . . . ....207

FiguresFigure Page10-1. Plant Propagation: From Single Cells to Whole Plants . .................19610-2. Onion Cell Bombarded With DNA-Microprojectiles . . . . . . . . . . . . . . . . . . . . .19710-3. Genetically Engineered Insect-Tolerant Tomato Plant. . .................197

TablesTable Page10-1. Some Recent Applications of Biotechnology to Plant Agriculture . . . . . . . . .19810-2. Examples of USDA Competitive Grants Awarded for

Plant Biotechnology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............20210-3. State-University Research Center Initiatives in

Plant Biotechnology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............20410-4. Types of Private Plant Agriculture Grants to Universities . ..............20610-5. Probable Year of Commercialization for Some Genetically Manipulated

Crop Plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......................20910-6. Some Knowledge Gaps in Plant Agriculture Needing Basic Research .. ....210

Chapter 10

U.S. Investment in BiotechnologyApplied to Plant Agriculture

Agricultura] research in the United States is notmonolithic. It uses both traditional methods, suchas plant and animal breeding, and newer biotech-niques, such as genetic engineering. It spans abroad range of applications, extending from live-stock to fisheries to crops to forests to micro-organisms. U.S. agricultural research is a long-standing institution with public and private sec-tor components. And, while it is often difficultto compartmentalize the diverse componentsof agricultural research, this chapter focuseson U.S. investment—both human and financialcapital—in biotechnological research of plantsin agriculture. Who invests in plant agricul-tural biotechnology research, and what factorsinfluence the amount invested and how thefunding is used? What actions are necessaryto enhance the development of agricultural re-search?

An analysis of plant biotechnology researchmust include a discussion of the firmly established(and necessary) traditional technology component,i.e., plant breeding. Thus, while this chapter fo-cuses on biotechnological applications, it examines,to a lesser extent, the delicate balance betweenresearch with the new techniques v. traditional

agricultural research. Because it is difficult to sep-arate research activity from commercial develop-ment in plant biotechnology, this chapter first ex-amines factors influencing investment in U.S. plantagricultural research, and then briefly examinesissues important to commercialization of such re-search.

This chapter principally examines investmentin plant agricultural biotechnology and issues thataffect the dollar flow (rather than, for example,the impact of biotechnology on farms or on theextension service). A comprehensive analysis ofbiotechnology and its impact on the infrastruc-ture of American agriculture was assessed in the1986 OTA report Technology, Public Policy, andthe Changing Structure of American Agriculture(101). While micro-organisms play a pivotal rolein plant biotechnology research and development(R&D), examining micro-organismal applicationsis beyond the scope of this chapter. Finally, al-though plant agricultural applications of biotech-nology play a central role in discussions about envi-ronmental risks of biotechnology, these issues areaddressed in a separate OTA report in this series(96).

FACTORS INFLUENCING U.S. INVESTMENT IN AGRICULTURAL RESEARCH

US. agriculture—plant and animal—is one of the U.S. agricultural products in international mar-most efficient and productive sectors in this coun- kets, increasing commodity surpluses, low prof-try’s economy. Despite declines in recent years, itability for significant numbers of farmers, andthe U.S. agricultural trade balance has added a environmental effects of agrichemicals (83,102).surplus to the U.S. trade account every year since Research alone cannot solve these problems, but1960 (91, 101). Agriculture contributes to, directly can contribute to their solution if resources, hu-or indirectly, approximately 20 percent of the man and financial, are available (83)102). Thus,gross national product, 23 percent of the nation’s although the problems facing agriculture areemployment, and 19 percent of export earnings serious, the impact of Federal R&Din this sec-(77). tor in particular can be powerful (100).

Increasingly, however, myriad problems beset The benefits of agricultural research are sub-U.S. agriculture. Complex in nature and scope, stantial. The U.S. Department of Agriculture (USDA)they include the declining competitive position of claims the annual rate of return for investment

193

in agricultural research is between 30 and 50 per-cent per year (83)104). Other estimates of rate ofreturn vary from 21 percent to 110 percent, withthe vast majority in the 33 to 66 percent range(100). In particular, biotechnology products areexpected to improve international competi-tiveness of U.S. agricultural products (101).

Over the past decade and a half, however, theU.S. agricultural research system has undergoneincreased scrutiny and criticism (66,48)81). Agri-cultural research endeavors, including biotech-nological applications, are presently in a state offlux. Several factors affect, or have affected, theinvestment forecast for agri-biotechnological re-search, including:

● the discovery of the new technologies them-selves,

intellectual property rights for plants,the funding source of plant agricultural bio-technology research,the regulatory environment,domestic political and economic conditions,andinternational markets.

With such a range of pressures, the emphasisin U.S. plant biotechnology constantly shifts to de-rive the optimum formula to achieve the maxi-mum return possible. The following sections fo-cus on how investment in plant agriculturalresearch responded or is responding to the firstthree factors: the advent of the biotechniques;plant ownership; and private v. public plant re-search funding.

THE BIOTECHNIQUES IN AGRICULTURAL RESEARCH

New biotechnologies have the potential to mod-ify plants so that they can resist insects and dis-ease, grow in harsh environments, provide theirown nitrogen fertilizer, or be more nutritious.Technical barriers, however, still exist. In particu-lar, widespread success in applications for multi-genic traits (such as salt tolerance or stress resis-tance) will for the present remain elusive (17,44),perhaps decades away (6,101). Nevertheless, thenewer technologies can potentially lower costs andaccelerate the rate, precision, reliability, and scopeof improvements beyond that possible by tradi-tional plant breeding (68,101).

Two broad classes of biotechniques--cell cul-ture and recombinant DNA—are likely to have animpact on the production of new plant varieties.Plant tissue and cell culture date from the turnof the century, but were only minimally exploiteduntil the late 1950s (6). Successful in vitro cultiva-tion of plant cells and related culturing techniquesunderlie today’s gene transfer techniques and sub-sequent regeneration of altered, whole plants.Plant tissue and cell culture are also critical toolsfor increasing fundamental knowledge throughbasic research. The history of genetic engineer-ing and a detailed description of the principlesof recombinant DNA technology are discussed in

an earlier OTA report in this series (97). In gen-eral, the fundamentals of genetic engineering aresimilar for microbial, animal, and plant applica-tions, but developing some new approaches forplant systems has been necessary.

The endpoints of crop improvement using bio-technology are those of traditional breeding: in-creased yield, improved qualitative traits, and re-duced labor and production costs. New productsnot previously associated with classical methodsalso appear possible. Box 10-A briefly describessome of the new biotechniques exploited toachieve these aims. Comprehensive descriptionsof strategies designed to transfer foreign genesto plants and plant cells have been published else-where (19,21,57,67,68,70,88).

Applications of the Techniques

The new biotechniques are useful for investi-gating diverse problems and plant types. For ex-ample, plant tissue and cell culture is an impor-tant technique for breeders. It can be used forscreening, at the cellular level, potentially usefultraits. As many as ten million cell aggregates canbe cultured in a single 250 ml flask (less than 1cup). This can be compared to a space require-

195

Box l0-A.-Techniques Used in Plant Biotechnology

Plant Tissue and cell culture. Plant cultures can be started from single cells, or pieces of plant tissue.Cultures are grown on solid or in liquid media. Several species of plants, including alfalfa, blueberry, carrot,corn, rice, soybean, sunflower, tobacco, tomato, and wheat, can be cultured in vitro (3).

Plant Regeneration. Regenerating intact, viable organisms from single ceils, protoplasts, or tissue isunique to plants and pivotal to successful genetic engineering of crop species. (To produce a protoplast,scientists use enzymes to digest away the plant cell wall.) Although genes can be transferred and examinedin laboratory cultures, ultimate success is achieved only if the culture can be regenerated and the charac-teristic expressed in the whole plant. Figure 10-1 illustrates steps involved in regenerating plants in vitro.

Protoplast Fusion. Protoplasts from different parent cells are artificially fused to form a single hybridcell with the genetic material from each parent. Protoplasm fusions are useful for transferring multigenictraits or for fusing cells from plants that cannot be crossed sexually (68), thus permitting the exchangeof genetic information beyond natural breeding barriers. Successful gene transfer via protoplasm fusiondepends on the ability to regenerate a mature plant from the fusion product.

Agrobacterium tumefaciens plasmid One of the most widely used and probably the best character-ized system for transferring foreign genes into plant cells is Ti plasmid-mediated transfer (88). The tech-nique involves a plasmid vector (Ti plasmid) isolated from Agrobacterium tumefaciens, a naturally occur-ring soil-borne bacteria that can introduce genetic information stably into certain plant cells in nature.Using recombinant DNA technology, the plasmid has been modified to increase its efficacy in the laboratory.

Transformation (Direct DNA Uptake). Certain chemical or electrical treatments allow direct uptakeand incorporation of foreign DNA into plant protoplasts--a process called transformation. Since hundredsof thousands of cells can be simultaneously treated, transformation is a relatively easy technique. Cellsexpressing the desired trait can be regenerated and tested further.

Microinjection. Using a special apparatus, fine glass micropipettes, and a microscope, DNA is directlyintroduced into individual cells or cell nuclei (in plants, protoplasts are usually used). The process is morelabor-intensive than transformation, requiring a trained worker. Although fewer cells can be injected withDNA than in mass transformation, a higher frequency of successful uptake and incorporation of the foreigngenetic material can be achieved (68)–up to 14 percent of injected cells (22).

Virus-Mediated Transfer. Virus-mediated transfer of DNA has played a critical role in nonplant appli-cations of biotechnology. But in large part due to an underdeveloped knowledge base, viral vectors forplant systems generally have not been exploited (68). Cauliflower mosaic virus has been used with somesuccess in turnips (14,68),. and Brome mosaic virus in barley (35,68). Developing generic virus-mediatedtransfer systems could accelerate progress in plant biotechnology.

DNA Shotgun. One novel approach uses gunpowder to deliver DNA into plant cells (54). The DNA tobe transferred is put onto the surface of four micrometer tungsten particles and propelled into a plantcell by a specially designed gun. Figure 10-2 is a photograph of an onion cell with such microprojectilesvisible within its confines. While an innovative approach, it is unclear whether it will prove to be a routinemethod for gene transfer in monocots (15).

SOURCE: Office of Technology Assessment, 1988.

ment of 10 to 100 acres if individual test plants (e.g., producing strawberry, apple, plum, andwere put into the field (6). peach plants). Several crop species, such as aspara-

Several species of plants can be clonally regener-gus, cabbage, citrus, sunflower, carrot, alfalfa,tomatoes, and tobacco are also routinely regener-ated to produce genetically identical copies. The

process is widely used for a range of commercial ated (94). Although monocotyledonous plants,such as the cereals, have been more difficult toapplications, including forestry and horticulture

The process of plant regeneration from single cells or plant tissue in culture.

SOURCE: Office of Technology Assessment, 1988.

regenerate, rapid progress is being made withthese as well (1,37).

Plant regeneration is a powerful tool not onlyfor increasing the numbers of propagated mate-rials, but also for reducing the time required toselect for genetically interesting traits. Further-more, under certain conditions, genetic variantsarise during the culturing process (somoclonal var-iation). Somoclonal variation can uncover new,useful variants and again reduce the time spentselecting genetically interesting traits.

Many important agricultural applications of bio-technology depend on regenerating whole plantsfrom protoplasts. Protoplasm fusion has been ap-plied successfully in several plants, including thepotato. In this instance, cells from wild and culti-vated potato plants were fused to transfer the vi-ral resistance of the wild species. The hybrid cellswere regenerated into fertile plants that expressedthe desired virus-resistant characteristic (12,68).

Virus-free potato cells can now be cultured invitro, and virus-free plants regenerated; the yieldof these plants has increased substantially (107).Culturing virus-free plant cells is particularly im-portant in certain horticulturally important spe-cies, including ornamental and certain vegeta-ble crops. As is the case with single cell or tissueregeneration, protoplasts of the monocotyledon -ous subclass of plants, such as cereals, have beenmuch more difficult to regenerate than protoplastsof the other major plant subclass, dicotyledonousplants, such as tobacco and tomato.

Ti vectors are especially useful for geneticallyengineering dicotyledonous plants, such as tobac-co, tomato, potato, and sunflower. For example,Ti-mediated transfer has been used to engineervirus-resistant tobacco plants (38)46) and insect-tolerant tomato plants (33) (figure IO-3). The tech-nique is less useful for gene transfer in monocots(which include important cereal crops). Increas-

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ingly, however, technical hurdles identified as bar-riers only a few years ago (94,101) are beingcleared (1,24,43). Recent success using the Ti vec-tor for corn (a monocot) has been reported (43),with continued progress for monocots anticipated(108). Furthermore, direct DNA transformationapparently allows gene transfer in several cereals(monocots), including rice, wheat, and maize, withan efficiency approaching comparability to the fre-quency of Ti-mediated gene transfer in dicots (19).

Figure 10-3.—Genetically Engineered Insect-TolerantTomato Plant

Larvae were allowed to feed on a transgenic tomato plant(right) and a normal plant (left). After seven days, the plantthat was genetically engineered for tolerance to the insectis still relatively intact, whereas the normal plant has beendestroyed.

Photo credit: Monsanto Corp

New applications and new techniques, such asthe “DNA plant shotgun, ” (54) are continuouslyarising. Table 10-1 describes a few recent appli-cations of biotechnology to plant agriculture.

Impact of Biotechniques onAgricultural Research Investment

In part, the advent of genetic engineering andrelated biotechniques has, itself, altered the shapeand scope of U.S. agricultural research investmentdecisions (17)56). In particular, the emerging tech-nologies presented fundamental challenges andopportunities for the public component of U.S.agricultural research (17). Basic science advocatescharged that the USDA-led system had not beenon the cutting edge of science nor had been pay-ing enough attention to basic research (66,81),stimulating an evaluation of the system that con-tinues today.

Some have argued that the biotechnologies haveled to private sector, proprietary-dominated re-search efforts. Others, however, point out thatincreased private sector research investment re-sulting from the biotechnology boom has uniquelycontributed to the fundamental knowledge base

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Table 10-1.—Some Recent Applications ofBiotechnology to Plant Agriculture

Rice: Whole rice plants can be regenerated from single-cellprotoplasts; recent advances that improve the efficiencyof the process are important to progress in applying ge-netic engineering to cereals in general (1,37).

Maize: The Ti vector was recently used to transfer the maizestreak virus into corn plants, a monocotyledonous mem-ber of the grass family. The study is a landmark becausethe Ti plasmid is probably the best characterized plantvector and an efficient gene transfer mechanism, butmonocots had been refractory to its use (43). Successfulplant regeneration of maize protoplasts also was reportedrecently (80).

Rye: Using a syringe, DNA was injected into rye floral tillers.The new genetic material was introduced into the germcells of this monocot, and some recovered seeds grew intonormal plants that expressed the foreign gene. This sim-ple strategy, which does not require plant regenerationfrom protoplasts, could be useful in other cereals (24).

Orange: Orange juice-sac cells have been removed from ma-ture fruit and maintained in tissue culture. The cells pro-duce juice chemically similar to that squeezed from tree-grown fruit. Such laboratory cultivation could advance traitselection and speed up varietal development, although lab-oratory produced juice is not on the immediate horizon (34).

Tomato: A gene that confers a type of insect tolerance wasrecently transferred via the Ti system to tomato plants. Thetolerance is also expressed in progeny plants. Since over$400 million per year is spent to control this type of pest,constructing insect transgenic plants of this sort is of greatinterest to the agricultural community (33). See also fig.10-3..

SOURCE: Office of Technology Assessment, 1988.

and resulted in a positive economic impact (47).And, through increasing alliances between com-panies and universities, industry involvement hasalso resulted in resources for new ideas, with po-tential to further enhance economic return throughaccelerated technology transfer (47).

Biotechnology has also stimulated greater inter-est in agricultural research by the nontraditionalagricultural research community. Today, agricul-tural applications command greater interest withinthe general research hierarchy (23,42,89). Whilesome believe this shift is valuable (42), others fearthat research directed to address regional and lo-cal problems could suffer and that ‘(have” and “havenot” institutions will result (27,52,53,58,101).

In addition to the effect of biotechnology on re-search investment decisions, concern has been

raised about biotechnology’s influence on invest-ment in human capital: namely, a decline in thenumber of full-time equivalents (FTEs) in tradi-tional plant breeding at the expensive of increas-ing numbers of FTEs in molecular biology (44,58).Improvements in varieties with the new biotech-niques will be hollow achievements if there is ashortage of traditional plant breeders who con-duct the complementary field research that is es-sential to develop varieties for use by farmers.Some reports indicate a 15 to 30 percent decreasein university-based plant breeders and an increaseof about one-third in molecular biologists between1982 and 1985 (59). This trend might, in part, re-flect the glamour image of plant molecular biol-ogy coupled with industrial demands for plantbreeders (36).

A continuing industry demand for trained plantbreeders might be an attractive argument forthose making career decisions and ensure an ade-quate supply of plant breeders (42). However, alarge majority of graduate students in the plantsciences still want to work in molecular biology,and siphoning university plant breeders to indus-try could leave a teaching void for those who wantto learn conventional breeding (44). At present,some argue that a balance in supply seems to havebeen (or is being) struck (36,74). Others withinindustry and academia assert a lack of plantbreeders exists (29,44). Regardless, evidence forboth sides is largely anecdotal, and accurateaccounting would be useful for forecasting andplanning the direction of plant agricultural re-search.

The impact of the biotechnologies on the direc-tion of agricultural research has not, however,occurred in a vacuum. Intellectual property is-sues and who funds projects also are importantfactors. For example, the concern about the ex-change of plant-breeding materials just mentionedhas been generated both by the research thrustusing the biotechnologies and interpretation ofpatent law (44). The biotechniques have also con-tributed to an evolution in the investment empha-sis (i.e., the types of projects funded) of privateand public sources. The impact of these two issues,property rights and funding source, on researchinvestment is examined in following sections.

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PROPERTY RIGHTS AND PLANTS

Proprietary protection of plants precedes re-combinant DNA technology by about four dec-ades. Today, two Federal statutes specifically con-fer ownership rights to new plant varieties: thePlant Patent Act of 1930 (35 U.S.C. §§161-164) andthe Plant Variety Protection Act of 1970 (7 U.S.C.§2321 et seq.). The Chakrabarty decision coupled.with Ex parte Hibberd (32) affords plant breedersthe additional option of seeking a utility patent(35 U.S.C. §101) to protect a novel variety. ’

The following sections first outline the laws rele-vant to plant property and hybrid plants, and thenanalyze the effect plant protection has had on U.S.investment in agri-biotechnology. A detailed anal-ysis of plant protection and its economic conse-quences will be explored in a forthcoming OTAreport, New Developments in Biotechnology:Patenting Life. The issue of intellectual propertyas a barrier to commercializing plant products isbriefly discussed later in this chapter.

Plant Patent Act of 1930 and PlantVariety Protection Act of 1970

In 1930, Congress passed the Plant Patent Act(PPA), allowing patent protection for new and dis-tinct asexually propagated varieties other thantuber-propagated plants. PPA, administered by theU.S. Patent and Trademark Office, gives the pat-ent holder the right to exclude others from asex-ually reproducing the plant or from using or sell-ing any plants so reproduced, for a period of 17

‘Trade secrets are also an important form of plant protection.In particular, the hybrid seed industry (such as corn) makes exten -si\’c use of trade secrets (36). Hybrid seeds hakre “internal geneticprotection, ” making them more amenable to the trade secret ap-proach (27). Inbred parental lines (trade secrets themselves) are cross-bred to produce high-yielding hybrid seed (also trade secrets) with‘hybrid \’igor. ” But, unlike seed for nonh~rbrid crops, seed from ahar\wt using hybrid seed cannot be sa~’ed and used for additionalhigh-yield planting cycles Since hybrid vigor from subsequentprogenj’ declines, the producer must return to the source for newseed to maintain the highest yields. Thus, the genetics of hybridseed cle facto force the producer back to the supplier, and the h.v -brid seed industry has preferred trade secret plant protection, ratherthan seeking monetary return through the certificate or patent proc-ess (each ~~rith disclosure requirements) (26). Academic researchersprobab]: Jicu trade secrets less fa~orabl}’, since they hinder pub-lication efforts (94).

years. At the time PPA was enacted, it was notthought possible to produce stable, uniform linesvia sexual reproduction (4). These ideas were re-vised, however, and Congress passed the Plant Va-riety Protection Act (PVPA) in 1970.

PVPA provides for patent-like protection to new,distinct, uniform, and stable varieties of plantsthat are reproduced sexually, except fungi, bac-teria, tuber-propagated plants, uncultivated plants,and first-generation hybrids. The breeder may ex-clude others from selling, offering for sale, repro-ducing (sexually or asexually), importing, or ex-porting the protected variety. In addition, otherscannot use it to produce a hybrid or a differentvariety for sale. However, saving seed for cropproduction and for the use and reproduction ofprotected varieties for research is expressly per-mitted. The period of exclusion is 18 years forwoody plants and 17 years for other varieties.PVPA is administered by the Plant Variety Pro-tection Office, USDA.

Diamond v. Chakrabarty

In the landmark case Diamond v. Chakrabarty,the U.S. Supreme Court addressed one of the ma-jor patent law questions arising from applicationsof the new biotechniques—whether living, human-made micro-organisms are patentable (25). In a5 to 4 decision, the Court made it clear that thequestion of whether or not an invention embracesliving matter is irrelevant to the issue of patenta-bility, as long as the invention results from hu-man intervention. Since 1985, when the PatentOffice ruled that utility patents could be grantedfor novel plants (32), genetically engineered plantshave been granted utility patents. There are noexemptions for a plant utility patent —in contrastto PVPA, the holder of a plant utility patent canexclude others from using the patented varietyto develop new varieties.

Impact of Intellectual Property onAgricultural Research Investment

Intellectual property and plant protection haveinfluenced and continue to influence the direc-

2 0 0

tion of U.S. plant agricultural research investment.Since the enactment of PVPA and the Chakrabartydecision, private sector interest has blossomed(101). Funding to initially capitalize dedicated bio-technology companies (DBCs) was based, in somemeasure, on the expectation that legal means ex-isted to protect discoveries resulting from the in-vestment. In particular, some view the option ofapplying for plant utility patents (afforded byChakrabarty and Hibberd) as sparking progressand increasing dollar flow in the industry by pro-viding both the scope of protection needed to en-courage new research investment and the rapiddissemination of information describing the newtechnology resulting from the research (109).

In contrast with the Chakrabarty decision, therole of PVPA in directly stimulating private in-vestment is less clear (18). Some argue that therate of private research investment in plant breed-ing following passage of PVPA equals that duringthe preceding decade (55), However, others dis-pute the notion that private investment has notrisen since passage of PVPA in 1970 (61)63). Theperception, however, that PVPA would increasethe profitability of seed companies galvanized far--reaching acquisition and merger activity involv-ing many American and international companies(18,55). These corporate entities were then poisedto take advantage as events in the biotechnologyrevolution unfolded.

Plant protection is not only important to com-mercial parties, but to public sector institutionsas well. Until 1980, only about 4 percent of some30)000 government-owned patents were licensed(73). Furthermore, the government policy of grant-ing nonexclusive licenses discouraged investment,since a company lacking an exclusive license wasreluctant to pay the cost of developing a productand building a production facility. Potentially val-uable research thus remained unexploited. Con-gressional concern about this innovation lag

prompted passage in 1980 of the Patent and Trade-mark Amendment Act (public Law 96-517), withamendments in 1984 (Public Law 98-620) to en-courage cooperative relationships between uni-versities and industry, with the goal of puttinggovernment-sponsored inventions in the market-place. Burgeoning university-industry relation-ships have been attributed, in part, to patent pol-icy (101).

On one hand, intellectual property rights stim-ulated and are critical to maintaining investment—public and private–in plant biotechnology re-search. Innovation must be protected and re-warded to realize a continuing flow of dollars toagri-biotechnology R&D (30,109). On the otherhand, many individuals are concerned that in-creased patent activity is having serious and ad-verse consequences resulting in the “privatization”of agriculture (17,26)56). Greater awareness of po-tential profits to be accrued from patenting genesand products has led to a rush to register underthe existing patent laws (30). Moreover, patent-ing in biotechnology is increasingly viewed as adefensive mechanism (42) to protect future invest-ment and projects, rather than a means that ex-pects immediate return.

To many in both the public and corporate sec-tors, increased patent activity is tying up, or hasthe potential to tie up, germplasm (28,30,44). Someargue that a noticeable slowing in the free ex-change of germplasm that existed prior to patent-ing has occurred (28,44). In effect, they argue thatthe biological domain was once public domain,but has shifted to a private property right (27).Others argue that utility patents do not stifle freeexchange (109). Rather than patents per se, rec-ognition that germplasm is commercially valuablecould be resulting in closer attention being givento free transfer (75). In any case, advances in bothplant breeding and plant biotechnology require free-moving, international exchange of germplasm.

AGRICULTURAL BIOTECHNOLOGY RESEARCH FUNDING

The U.S. agricultural research enterprise is a tional and biotechnological research in agricul-system. Lodged partly in the private sector and ture. In response to scientific, legal, economic, andpartly in the public sector, it is comprised of a political pressures, the system evolves, seeking tobroad variety of institutions funding both tradi- balance the diverse requirements and interests

201

of each stakeholder. At issue is how research willbe prioritized, what lines of research should bepursued, and what research roles are appropri-ate for the respective public and private sectors.This section examines who invests in plant biotech-nological research in the United States and to whatextent the funding source (e.g., Federal Govern-ment, public institutions, private corporation) in-fluences the direction of agricultural research.(For a detailed accounting of biotechnology fund-ing, see chs. 3,4, and 5, and for agricultural fund-ing in general [681.)

Public Investment

U.S. public investment in agricultural researchinvolves two principal partners: the Federal Gov-ernment and the States. Within the Federal sec-tor, USDA funds the majority of plant research.In addition to the USDA, other Federal agencies,including the National Science Foundation (NSF),National Institutes of Health (NIH), Departmentof Energy (DOE), Agency for International Devel-opment, Department of Defense, and National Aer-onautics and Space Administration, support basicscience research on or applicable to plant biotech-nology. NSF in particular, funds many basic re-search initiatives and training programs in theplant sciences. In the more recent past, NH-I andDOE played critical roles funding basic plant re-searchers at non-land-grant institutions.

Funding for all agricultural research by the pub-lic sector is estimated at approximately $2.0 bil-lion–$1.9 billion combined Federal and State sup-port of the traditional USDA system and $100million through grants from other agencies (68).Not all of this research, however, involves plantsor biotechnology. The following sections describeplant research initiatives within the public sectorand, where available, plant biotechnology appli-cations. Targeted investment in education andtraining is also presented.

U.S. Department of Agriculture

A long tradition and a complex institutional fund-ing structure characterize agricultural researchinvestment by USDA. Most federally sponsoredresearch in plant biology is conducted at land-grant institutions, which are part of a tripartite

USDA complex that includes 72 land-grant insti-tutions, 146 State agricultural experiment stations,and thousands of extension agents (one in virtu-ally every county in the United States).

Determining the precise amount of USDAfunding in plant biotechnology is problematic.Funding amounts for plant science or biotech-nology projects are generally distinguished,but not both as a unit. Nevertheless, it appearsthat the majority of research funding obligatedby USDA involves plant applications (103,105,106).

USDA allocates research funds through the Agri-cultural Research Service (ARS) for intramural re-search, the Cooperative State Research Service(CSRS), and the Office of Grants and Program Sys-tems for competitive grants funding. ARS spon-sors in-house research allocated among 140 in-tramural research facilities located nationwide.CSRS distributes funds based on a formula incor-porating each State’s farm and rural population.CSRS-sponsored research is carried out largelyat State agricultural experiment stations and col-leges of veterinary medicine that are part of land-grant universities. CSRS funding includes a State-matching formula. Competitive grant funding byUSDA was established nearly a century after ini-tiation of the land-grant complex, and expendi-tures are not limited to land-grant institutions.

Within ARS, approximately 38 percent of re-search dollars (fiscal year 1986 appropriation ofapproximately $185 million) are specifically des-ignated for plant science (106). The CompetitiveResearch Grants Program of CSRS does break outplant biotechnology. Plant applications were 58percent of funds for competitive grants awarded;biotechnology applications 45 percent; and plantbiotechnology applications 28.5 percent (total bud-get $40.1 million) (105). Table IO-2 describes someof the kinds of projects funded by the CSRS com-petitive grants program.

In education and training, land-grant universi-ties also support 80 percent of the Nation’s plantbiology faculty and graduate students (68). USDAfunds 200 to 300 graduate students at both land-grant and non-land-grant institutions through train-ing grants in four targeted areas, one of whichis biotechnology (68). USDA also has a modest com-

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Table 10-2.—Examples of USDA Competitive GrantsAwarded for Plant Biotechnology

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Molecular Cloning of a Rubber Gene From GuayuleCloning of Maize Regulatory GenesMolecular Biology of Rice GenesRegulation of Soybean Seed Protein Gene ExpressionOrganization and Manipulation of Wheat Storage ProteinGenesDelivery of DNA Into Cells of Onion and Tobacco UsingHigh Velocity MicroprojectilesIn Vitro Culture of Cool Season Forage GrassesMolecular and Genetic Studies in BarleyIdentification of DNA Markers for Disease and PestResistance in PotatoMolecular Biochemistry of Herbicide ResistanceRegulation of Cytochrome Synthesis in PhotosynthesisDirected Mutation Studies of the PhotosyntheticCytochrome b6Regulation of Corn Nitrate Reductase: Application ofMonoclinal AntibodiesRegulation of Nitrite Reductase

SOURCE: U.S. Demrtfnent of Agriculture, Office of Grants end Program Systems,Cooper’atlve State R&earch Service, Food and Agriculture Competi-tively Awarded Research and Education Grants, Fiscai Year 1986,Washington, DC, 1987.

petitive postdoctoral fellowship program throughARS. Of the approximately 100 fellowships awardedin fiscal year 1986, about one-half were in biotech-nology (68). CSRS funds Food and Agriculture Sci-ences National Needs Graduate Fellowship grantsthat supported 87 doctoral degree candidates(many in plant fields) in fiscal year 1986 (105).

National Science Foundation

NSF plays a pivotal role in funding basic plantbiological research, training, and education. In fis-cal year 1985, NSF awarded 50 percent of com-petitive Federal funding for plant research (71).In addition to research investment, agency ex-penditures are also devoted to developing the plantsciences human resource base. For example, NSFconducts a peer-reviewed, competitive postdoc-toral plant biology fellowship program that em-phasizes an interdisciplinary approach to expandan individual’s training into plant biology -e.g.,bacterial molecular biology to plant molecular bi-ology. The program provides funds for approxi-mately 20 fellows per year. NSF also sponsors asummer course in plant molecular biology for 16scientists each year (68).

Science and Technology Centers forPlant Science

Plant biotechnology is one of several relevantresearch areas that could be covered at proposedmultidisciplinary plant science research centersto be funded jointly by USDA, NSF, and the De-partment of Energy. The proposal initially will in-volve $10 million per year and use a competitivegrant/peer review process to establish severalcenters with average annual funding of $1 to $2million per center for 5 years. The Administra-tion’s Working Group on Plant Science believesthat $250 million during the first five years of theprogram represents a realistic recognition thatthe scant amount of competitive funding for plantsciences needs to be increased or the search toelucidate many fundamental principles of plantswill continue to lag (79). Collaborative arrange-ments (including funds, equipment, or people) be-tween State and local governments, private foun-dations, and industries would be encouraged,although the grantee must be a doctorate grant-ing institution with graduate programs related toplant sciences. Proposed centers are encouragedto form, wherever possible, research and train-ing relationships with existing facilities, such asthose of the Agricultural Research Service andNational Laboratories (72).

States

States play a significant role in funding agricul-tural research, plant biotechnology included. Oneanalysis reports that in 1985, the ratio of Stateto Federal appropriations through CSRS at Stateagricultural experiment stations was 3.5 to 1 (68);another estimates that the ratio is much less, ap-proximately 2 to 1 (62). Total expenditures by Statelegislatures for State agricultural experiment sta-tions approach $700 million annually (68). In addi-tion to State contributions through CSRS, someStates, such as Iowa, have targeted agri-biotech-nology as a strategic industry for State investment(see box 10-B).

In addition to research and facilities funding,States have also recognized the importance of in-vesting in human capital. For example, Iowa andNorth Carolina have special graduate and post-graduate fellowships in plant molecular biology.

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Box 10-B.-Biotechnology in Iowa

“All encompassing” probably best characterizes the biotechnology effort underway in Iowa. Involving the State’sexecutive and legislative branches, industries, and colleges and universities, the necessary components of a multi-facetedapproach for success are each seemingly covered. These include:

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2-year laboratory technician training,undergraduate biotechnology training,graduate biotechnology training,faculty development and recruitment,equipment acquisition,facilities improvement and new construction,tax incentives for industry R&D, andprograms for employee training.

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State universities outside the land-grant complexalso are pivotal to research and training in plantbiotechnology.

Combining matching funds and novel initiatives,the bulk of State investment in biotechnologyis probably related to plant agricultural appli-cations—at least 33 States have biotechnology ini-tiatives (ch. 4), many with plant agriculture com-ponents (table 10-3).

Private Investment

Private funding for agricultural research derivesprimarily from industry, although private foun-dations, trade associations, and commodity orga-nizations also channel money into the system.Companies also provide money to universities fordoctoral and postdoctoral education and training,

Dollar expenditures for agricultural researchby the private sector are difficult to determine,One recent survey places industry funding at ap-

proximately $2.1 billion (2), and it may approach$3 billion (101). Again, not all of this research in-volves plants or biotechnology, but, in the pastfew years, investment in plant research usinggenetic technologies has accelerated in both theprivate and public sectors (7). The following sec-tions describe plant research and education in-vestment by private sector interests, with particu-lar focus, where available, on plant biotechnology.

Industry

Commercial funding of plant biotechnology re-search derives from two sources: large (often mul-tinational) corporations and dedicated biotechnol-ogy companies (DBCs) (ch. 5). In a 1987 OTA surveyof nearly 300 DBCs, 12.5 percent indicated plantagriculture as a primary or secondary focus. Cor-porate biotechnology companies (CBCs) involvedin applications of biotechniques to plants arelargely fully integrated seed companies. Researchinvestment includes both intra- and extramuralfunding.

Table 10.3.–State-University Research Center Initiatives in Plant Biotechnology

State Description

Georgia

Indiana

Iowa

Maryland

Michigan

MissouriNew Jersey

New York

North Carolina

Ohio

Oklahoma

Pennsylvania

Washington

Wisconsin

State Legislature appropriated $7.5 million for the construction of a $32 million Center for Biotechnologyat the University of Georgia. Research emphasis will focus on cattle, hogs, and peaches.Indiana Corporation for Science and Technology specifically targets biotechnology and agricultural geneticsas 2 of 13 strategic areas. The Corporation has granted over $2.5 million for biotechnology projects at theAgrigenetics Center at Purdue University or the Molecular and Cellular Biology Center at Indiana University.State Legislature appropriated $18 million over four years to Iowa State University for agri-biotechnology re-search. See also box 10-B.Center for Advanced Research in Biotechnology established at the University of Maryland with agricultureas one of five research areas.Michigan Biotechnology Institute established at Michigan State University includes focus on plant geneticengineering and tissue culture projects related to forestry and new uses of agricultural surpluses.Food for the 21st Century Center established at the University of Missouri, Columbia.Center for Advanced Food Technology established at Cook College, and the Center for Agricultural Molecu-lar Biology established at Rutgers University.Biotechnology Institute created at Cornell University. New York State Science & Technology Foundation alsohas designated Cornell University a “Center for Advanced Technology.” The agriculture and food industriesare target areas of both programs.North Carolina Biotechnology Center established, targeting agriculture and forestry as part of its R&D pro-gram. Center also offers graduate and post-graduate fellowships in plant molecular biology.Edison Animal Biotechnology Center established at Ohio University and the Biotechnology Institute at OhioState University.21st Century Center under construction ($30 million) at Oklahoma State University, Stillwater. Focus of cen-ter will be agricultural biotechnology, water resources, and renewable energy.Cooperative Program in Recombinant DNA Technology established at Pennsylvania State University. PennState Biotechnology Institute established with agricultural biotechnology one targeted research area.Washington Technology Center established. Projects funded include livestock, crop, and forestry applica-tions of biotechnology.Biotechnology Center established at the University of Wisconsin, Madison includes a Plant Cell and TissueCulture Service Facility. A high containment growth chamber for recombinant plants also is being developed.

SOURCE: Office of Technology Assessment, 1988.

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Industry also recognizes the importance of sup-porting the manpower base for the plant sciences.For example, several companies, such as Ciba-Geigy, have established in-house postdoctoraltraining programs, Graduate and postgraduatestudents have benefited from Agrigenetics’ invest-ment at several university laboratories.

Philanthropic

Noncorporate private sources, including foun-dations, trade associations, and commodity orga-nizations, invest in some agri-biotechnology re-search. The nature of the funded projects varieswith the interest and purpose of the organization.Although the money usually supports research,funds are sometimes earmarked for training andeducation. For example, in 1982, the McKnightFoundation of Minneapolis announced plans tospend $2 million a year for the next 10 years onbasic research and graduate education in plantbiology. Most of that money is targeted for abouta half dozen universities, with interdisciplinaryresearch teams focusing on plant genetics. Grantswill consist of up to $300,000 a year for the sup-port of doctoral and postdoctoral research. Anadditional ten grants of $35,000 per year for 3-year periods will be awarded to university scien-tists conducting basic research in plant biologyrelated to agriculture. Despite such efforts, philan-thropic investment is modest compared to thefunds available from public sources.

Collaborative Arrangements

The typology and purposes of collaborativearrangements (see ch. 7) in plant agriculturalbiotechnology apparently do not differ fromother sectors. Industry interaction with land-grant institutions has a long tradition within theagricultural sector (23,78), although the numberof formal collaborations between agricultural bio-technology companies averages one to two percompany in contrast to seven or more for the hu-man therapeutics sector (8).

Today, collaborative arrangements in plant agri-cultural biotechnology include university-government, university-industry, and university-industry-government associations. For example,State-university cooperation in agri-biotechnology

has been manifest in the establishment of severalresearch centers with plant biotechnology com-ponents (table 10-3). In addition to government-university interactions, several dedicated and cor-porate agri-biotechnology companies make grantsor other arrangements with university research-ers or research groups, Table 10-4 lists some typesof projects that companies have funded, or pres-ently fund, at universities. An ambitious consor-tium involving collaboration between universities,industry, and Federal and State Governments re-cently has been inaugurated (see box 10 C). Finally,a cooperative project, the Biotechnology Researchand Development Corp., involving the USDA, sev-eral companies, the State of Illinois, and the Peo-ria Economic Development Council was recentlyformed (10).

Impact of Funding Source onAgricultural Research Investment

Historically, public investment in agricultural re-search has been through the land-grant system.Land-grant institutions were established on a pub-lic service basis different from that of other univer-sities, with a tradition of an implied social con-tract to make its discoveries freely available tothe public (101), Since 1965, however, federallyfunded agricultural research through formulafunds and USDA has remained stagnant or de-clined (in constant dollars), while State and pri-vate sector support for agricultural research hasincreased significantly in real terms. Private sec-tor investment now exceeds public funding. And,within the public sector, the funding structureis evolving. Has the changing funding mix influ-enced agricultural research investment?

Formula-based Funding v.Competitive Grant Funding

As mentioned earlier, charges have been leveledthat the USDA research enterprise has not beenat the cutting edge of science. Such criticism oftenfocuses on the tradition of formula funding. Inresponse, a competitive grants program has beenestablished by USDA (93). The peer-reviewed, com-petitive grants program allows non-land-grantuniversities to participate in research thrustsfunded by USDA. Peer review at ARS was recently

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Table 10-4.—Types of Private Plant Agriculture Grants to Universities

Funding Source University Project Description

Agrigenetics Corp.

Asgrow Seed Co.(Upjohn)

Busch AgriculturalResources, Inc.

ChocolateManufacturers Assn.

Cotton, Inc.

Crow’s Hybrid Corn Co.

Dow Chemical

Eli Lilly & Co.

Hershey Foods

Monsanto

Nestle

North AmericanPlant Breeders

Northrup King(Sandoz)

Pioneer Hi-Bred

Popcorn Inst i tu te

Quaker Oats

Rohm & Haas

Showalter Trust

Standard Oil

Upjohn

C o r n e l l

Purdue

U. Arkansas

Purdue

U. Arkansas

Cornell

Purdue

Purdue

Penn. State

Rockefeller U.

Cornell

P u r d u e

Cornell

Penn. State

Purdue

Purdue

U. Penn.

P u r d u e

U. I l l ino is

P u r d u e

Tomato hybridization through cell culture

Soybean research

Rice breeding, genetics, and evaluation

In vitro production of cocoa

Development of types of early

Tissue culture regeneration

Soybean plant regulation

Wheat genetics research

maturing cotton for Eastern Arkansas

Molecular biology of the cocoa plant

Regulation of plant genes involved in photosynthesis

Bitterness in squash

Evaluation of alfalfa and red clover varieties

Tissue culture regeneration

Regulation of grain yield in maize

Improvement of popcorn hybrids

Improvement of competitive ability of oats in Indiana and other MidwesternStates

Support for Plant Science Institute

Development of tissue culture systems to produce plant secondary products

Long-range improvement of food production, primarily in corn and soybeans

Muskmelon breeding programSOURCE: Office of Technology Assessment, 1988.

reviewed, and recommendations were made tostrengthen the process in several ways (69).

The move to a competitive agricultural researchprogram has led to concern that elite, well-staffedinstitutions will be favored. Critics charge that thepeer review system that is generally used has re-sulted in the top 20 research universities receiv-ing the bulk of Federal research dollars year af-ter year (92). Under the grant process at theNational Institutes of Health, critics point out 1to 2 percent of institutions receive as much as 20percent of the funding. With geographical con-siderations such an important part of the agricul-tural research sector, concern has been and con-tinues to be expressed that the valuable researchfunctions performed by the smaller land-grant in-stitutions would increasingly receive less attention.

While sensitive to such concerns, others main-tain that allocation of new and even redirectedresources from USDA should be based primarilyon competitive peer and merit review. They ar-gue that such a system ensures that public dol-lars are invested most wisely and efficiently with-out limiting the character and diversity of U.S.agricultural research (68)93). These individualscontend that while there appears to be a threatto the system, the long-term impact will be bene-ficial, leading to a more competitive science anda more competitive industry (74).

Because competitive grants represent, at present,less than 5 percent of the USDA agricultural re-search budget, it is difficult to assess their impact,both on concerns raised and expectations held.

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Box 10-C.--The Midwest Plant Biotechnology Consortium

Increased Commercial Involvementporate research programs are driven by the eco-nomic incentive to produce a profit-yielding prod-

Agribusiness in the United States today is chang- uct. In the case of plant biotechnology, however,ing—becoming bigger, and also more horizontally private investment in basic research was neces-and vertically integrated (101). Historically, cor- sary to enhance the paucity of knowledge avail-

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able about plant systems. This increased spend-ing by the commercial sector was coupled withreal dollar declines in Federal support (28).

Some believe that an overall weakening of thepublic sector role in agricultural research, espe-cially within the land-grant complex, and a corol-lary strengthening of the position and interestsof the private sector is occurring, and that thiscould portend problems. For example, strength-ening support by the private sector could presentproblems in intellectual property or developingtechnology of real benefit for farmers (62). Argu-ments also have been raised that an erosion ofthe public interest in agricultural research mightnot be in the best interests of the Nation if high-cost/high-yield projects are pursued, rather thanlow-input/low-cost options (28).

In addition to the increased money being spentby industry, a recent flurry of merger activity in-volving agribusiness has also raised questionsabout the direction of agricultural research in-vestment. Since the late 1960s, seed companiesincreasingly have become subsidiaries of largercorporations, especially chemical firms. Some ex-press concern that consolidation of seed andagrichemical companies will make projects suchas herbicide-resistant plants attractive, and thatsuch applications will lead to increased depen-dence on chemicals also produced by the samefirm.

Others point out that private investment in agri-biotechnology is vital to the country’s economicwell-being and will enhance the global positionof American agriculture in the world marketplacethrough low-input options. It is also argued thatthe opportunities afforded by private involvementin agri-biotechnology could produce health andenvironmental benefits through industrial effortsto develop products that decrease the present de-pendence on chemical pesticides and herbicidesand lead to more efficient nonchemical controlmethods.

Private spending on agri-biotechnology cannot,however, replace public involvement. Private sup-port for basic research, intramural and extra-mural, is expected to decline (95) as companiesincreasingly identify potential products and shiftfunding toward applied R&D. Industry can, how-

ever, act as an advocate for public funding of agri-biotechnology research (68) as it looks to publicinvestment for advances in fundamental research.Because universities are well-springs of innova-tion, commercial agriculture will benefit from col-laborative arrangements that support basic re-search. (Questions surrounding such collaborativearrangements are discussed in ch. 7.)

Resource Allocation Within USDA

Public investment in agricultural research is nec-essary because incentives for private research areoften inadequate. The social return could be con-siderable, but private profit is meager, with gainscaptured by other firms, by producers, and byconsumers (84).

Implied in public funding of agricultural re-search is responsibility to the public, which is en-titled to broad benefits. For example, historicallyBlack colleges of agriculture in the land-grant sys-tem have important programs targeted to smallerfarms. Yet today, the USDA-led enterprise is in-creasingly challenged by consumers, environmen-talists, farmworkers, and rural developmentadvocates who have a range of concerns and re-search priorities. Concern about land-grant ac-countability led to a lawsuit in California examin-ing the role and impact of federally fundedresearch. In November 1987, a verdict, which isbeing appealed, was issued ordering the Univer-sity of California to develop a process to ensurethat Federal Hatch Act appropriations are usedto enhance rural life and promote small familyfarms (13).

Over its long history, public research has dem-onstrated that it contributes to the maintenanceor enhancement of a competitive structure in theagricultural production, farm supply, and mar-keting sectors (84). Concerns recently have beenraised, however, that the U.S. public agriculturalresearch system lacks focus toward equity forfarmers and consumers, and that an examinationof priorities could be necessary (26).

USDA’s Users Advisory Board has recommendedthat public sector research should encourage strat-egies that increase profitability, reduce the needfor subsidies, protect the environment, and en-hance rural development and world competitive-

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ness (106). With or without biotechnology, public interest sectors—that U.S. agricultural researchsector agricultural research institutions could em- programs need to be revitalized and recreditedphasize biological processes and cultural manage- in the public’s mind. This issue is paramountment in the field, new crop diversification, and if the USDA system is to reap maximumhost-based disease and insect resistance for crops, benefit.Most agree—in both the commercial and public

COMMERCIALIZATION OF AGRICULTURAL RESEARCH

The United States’ ability to transfer technol-ogy-including agricultural technology-from lab-oratory to marketplace is under increasing scru-tiny. Generic issues described earlier also applyto commercialization of plant agricultural biotech-nology as well (see chs. 5 and 6). For example, col-laborative arrangements have been designed toenhance commercialization of plant biotechnol-ogy research. What is the general profile of com-mercial plant agricultural biotechnology, and whatissues are important to product development inthis sector?

As mentioned earlier, about one-eighth of DBCs(37 companies) surveyed by OTA in 1987 are in-volved in R&D of plant agricultural applications.The OTA survey also found that the profile of pat-ent activity for these companies was similar tothat for DBCs in general (see chs. 5 and 6). In-cluding corporate participants, the commer-cial sector for plant agricultural biotechnologydoes not appear to have changed appreciablysince a 1984 OTA report of industry activity(94).

Nevertheless, expectations for profitable returnson investment in agri-biotechnology are high. Esti-mated revenues from world seed sales range from$30 to $60 billion (6,7), with the U.S. share repre-senting approximately one-fourth the world mar-ket (7). Some analysts predict that, with geneti-cally modified seeds, the world market could reach$150 to $180 billion by 1990 (6), and that disease-,pesticide-, and herbicide-resistant plants couldconstitute a sizable portion of the $10 billion agri-cultural chemical market (6). Others are less op-timistic, but still see real growth, anticipating aslow to moderate growth rate (5 percent annu-ally) over the next decade (7). This represents adoubling between 1982 and 1995 (7). Yet, com-pared to human therapeutics, raising adequate

capital for research has been relatively difficultfor most agricultural biotechnology companies,including plant biotechnology firms (76). However,the world-wide nature of agriculture could resultin biotechnological agriculture processes andproducts, both plant and animal, becoming thelargest sector in the industry (64,65). Table 10-5lists one analysis of probable years of commer-cialization for several genetically manipulated cropplants.

To achieve success under either growth pat-tern, widespread commercialization of plantbiotechnology will require breakthroughs inseveral technical areas. It will also depend onother factors, including environmental regu-lation, university-industry relations, economicincentives, and consumer acceptance. A com-prehensive analysis of the commercial plant bio-technology sector is beyond the scope of this chap-ter. As a case study, however, two issues specificto commercialization in the plant biotechnologysector merit discussion: institutional barriers todevelopment and personnel needs.

Table 10.5.—Probable Year of Commercialization forSome Genetically Manipulated Crop Plants

Tomatoes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..1988Other vegetables . . . . . . . . . . . . . . . . . . . . . . . . ........1989Potatoes . . . . . . . . . . . . . . . . . . . . . ..................1989Sugar cane . . . . . . . . . . . . . . . . . . . . . ................1989Fruit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...1990Rapeseed . . . . . . . . . . . . . . . . . . . . . .................1991Rice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...1991Sunflower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........1991Alfalfa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1992Barley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1992Corn. . . . ... , . . . . . . . . . . . . . . . . . . . . . . . . . . .........1992Sorghum . . . . . . . . . . . . . . . . . . . . . ..................1992Soybeans . . . . . . . . . . . . . . . . . . . . . .................1992Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1992SOURCE: M. Ratafia and T, Purinton, “World Agricultural Markets,” EVo/Tectrrro/-

ogy 6:280-281, 1988.

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Institutional Barriers toDevelopment

Practical use (through public or commercialavailability) of plant agricultural research is in-grained in the fabric of the U.S. system. Althoughthis chapter focuses primarily on aspects that af-fect investment in U.S. agri-biotechnology re-search, it is also important to delineate parame-ters that influence the flow of plant biotechnologyproducts to the open market. The following threesections analyze three parameters identified andexamined at a 1987 OTA workshop (95), that areimpeding or could impede rapid plant biotechnol-ogy development: the existing knowledge base,regulation, and property rights.

Knowledge Base

While an enormous information base hasprovided a substructure for sweeping ad-vances in biomedical science (68), similar basicknowledge about plants and plant systems isin short supply. Experts from academia and in-dustry nearly all agree that the sparse fun-damental knowledge base underlying plantagricultural biotechnology, especially in cropspecies, is the rate-limiting barrier to commer-cial development, and that developing the baseis critical to future U.S. efforts (95).

The level of basic scientific knowledge aboutplants is rudimentary and limited to certain spe-cies (89). Basic biochemistry of plants and plantsystems is poorly understood. For example, themetabolic basis of drought resistance is not un-derstood, let alone the genetics of this trait. Thesame holds true for many plant traits. Knowledgeabout gene expression and developmental regu-lation of plants is not well defined, and while plantsare a major source of pharmaceuticals and otherspecialty chemicals (45,94,99), biotechnological ap-plications are poorly exploited; only one productis currently under production (45)87). At the plantmolecular level, only a few important plant geneshave been cloned and sequenced (67), and com-plete molecular maps to correspond to geneticmaps are available for only two or three species(36,42).

A comprehensive treatise on the knowledge gapsin plant sciences is beyond the scope of this chap-ter, however, table 10-6 lists some basic research

Table 10-6.-Some Knowledge Gaps in PlantAgriculture Needing Basic Research

● Gene, seed, embryo Iibraries and banksc Model systems to correlate with important crop species● Metabolic regulation and expression of polygenic traits● Germination: storage, differentiation, and properties of

embryonic tissue● Plant differentiation: morphology and physiology for all

stagesQ Gene structure and function● Biochemistry and mechanisms of plant regulators and

hormonesSOURCE: Office of Technology Assessment, 1988.

needs in plant biotechnology. A following sectionanalyzes the division of labor between the publicand private research sectors to meet these needs.

Regulatory Uncertainty

Government regulates commerce for a widerange of reasons, including protection of humanhealth and the environment. State initiatives andthe Federal regulatory structure for biotechno-logical products were analyzed in a previous OTAreport (96). Does the present regulatory environ-ment act as an institutional barrier to commer-cial development of plant biotechnology?

Regulatory uncertainty stands as the secondmajor barrier to commercialization of agricul-tural research (95), and could become the mostserious (28,36)42,47,78), For the agricultural sec-tor of the biotechnology industries in particular,regulatory delays have hampered the movementof products from laboratories and greenhouses,to small-scale, experimental field tests (20). Whilethe furor appears greater when the applicationinvolves micro-organisms, genetically engineeredplants with bacterial or fungal genes also havebeen tied up in the regulatory system (20,96).

Routine progress toward field and environ-mental testing of genetically engineered organ-isms has been slow, with controversy and confu-sion among Federal regulatory agencies leadingto uncertainty within the biotechnology researchcommunity and industry (68). This uncertaintyhas resulted in significant delays in field researchon potential agricultural biotechnology products(68). Dissatisfaction with Federal regulation of bio-technology (both too much and too little) has fo-cused on the two agencies that regulate agricul-tural products: USDA and EPA (20).

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From a commercial standpoint, Federal regula-tion needs to be affordable and should support,not stifle, technology development (36). Unantici-pated regulatory delay can dramatically affect theprofitability of products and the commercial agri-cultural biotechnology research agenda (47). Reg-ulatory uncertainty, for example, affects decisionsby companies on whether to spend $1 to $2 mil-lion on greenhouses only because of concern overfuture field tests v. greenhouse work, instead ofinvesting the money in research (42).

In contrast to regulatory delay for pharma-ceutical biotechnology, crop agriculture is par-ticularly sensitive to a time lapse. A one-monthdelay at a critical time can result in a lost yearof development. A one-year delay can reduceprofit by 50 percent during the product lifetimeand stem cash flow (47). Missing a seasonalplanting window for an experimental fieldtrial of a plant biotechnology product repre-sents a major risk to be factored by companiesinto the R&D process, with such factoringaffecting, and probably reducing, total invest-ment decisions Diverting funds away from R&Dcould be especially critical to the survival ofsmaller DBCs which, unlike corporate seed sup-pliers, do not have seed revenues to offset short-term losses.

In some respects, regulation could be less aninstitutional barrier itself than a consequenceof the barrier just discussed—poor knowledgebase. Only further research can alleviate thislack and reverse the regulatory uncertainty itcreates.

Property Rights

As discussed earlier, proprietary protection iscritical to maintaining investment in research,especially commercially sponsored research. Highcosts for R&D and regulatory approval of prod-ucts favor patenting because a company wantsto protect its investment. Are there intellectualproperty issues that are barriers to developingplant agricultural research?

The structure of the plant protection systemdoes not seem to be a barrier to commercial de-velopment (36)78), but rather an idiosyncrasy add-

ing complexity to management of plant intellec-tual property. Some sentiment exists that patentand related issues are overblown (36,78), espe-cially compared to regulatory issues (36). Choos-ing the type of protection to seek is character-ized as a basic business decision (36). For example,there are advantages and disadvantages of secur-ing protection of sexually and asexually repro-duced plant varieties by obtaining a utility patentthrough 35 U.S.C. §101 rather than PPA or PVPA.Utility patents for plants provide somewhat greaterprotection (49,60) and lower nominal cost (60), andthe holder of a utility patent can exclude othersfrom using the patented variety to develop newvarieties. A Certificate of Plant Variety Protection,however, affords 18 years of protection, whereasthe life of a utility patent is 17 years. In the caseof many agriculture companies, especially largefirms, formal protection is not generally a partof their corporate milieu; rather they rely on tradesecrets (ch. 6).

Although the domestic structure of plant intel-lectual property probably does not hinder com-mercialization, a lack of international harmonyfor plant protection is a potential barrier, espe-cially considering the global economy in whichthe agricultural sector operates (31,36,47,78). Ad-ditionally, calls for patent extension for agri-bio-technology products (similar to the situation forpharmaceuticals) have been made. In light of thepresent regulatory uncertainty just described,some parties believe patent extension, based onthe period a product is under regulatory review,would compensate companies and stimulate themto undertake higher risk research ventures. Anal-yses of international patent issues, how a type ofprotection is chosen by a company, and patentterm extension will be analyzed in a forthcomingreport on New Developments in Biotechnology:Patenting Life,

Personnel Needs

Adequate numbers of trained personnel in a va-riety of disciplines are necessary for successfulcommercialization of U.S. plant agricultural bio-technology, and the demand remains substantiallyunmet (5,68). A 1985 survey found that compa-nies seeking plant scientists cited shortages in plant

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molecular biologists who had solid education andtraining in plant science (as opposed to individ-uals who cross over from animal or microbial sys-tems), plant tissue culture experts, and plantgeneticists or breeders with expertise within vitrotechnologies (50). In other words, industry citedshortages in just about every area. These person-nel shortages are not limited to the private sec-tor, since industry draws its talent from universi-ties. What measures could solve this problem?

The Federal role in funding education and train-ing is crucial. Industry support—at universitiesor private institutions and in-house programs—isalso important. Equally important is adequate re-search funding. Personnel needs are self-driven;if enough money is available to support research,then individuals will be drawn to the field. Re-search funding drives the process, ensuringan adequate supply of trained personnel foruniversities, government, and industry.

THE FUTURE OF AGRICULTURAL RESEARCH

The U.S. agricultural research enterprise is anevolving system. In addition to the three impactsjust described, the changing global market for agri-cultural products affected and continues to affectagri-biotechnology research. In the late 1970s andearly 1980s, the goal of increasing agricultural pro-duction drove public policy and the agriculturalresearch agendas of both the public and privatesectors. Today, however, the goal of U.S. agricul-tural research is increasingly focused on farm-ing profitability.

In a recent survey, most Americans said thatresearch into genetic engineering should be con-tinued (98). Americans support and encourage arange of agri-biotechnology applications, such asdisease-resistant crops, frost-resistant crops, andmore effective pesticides (98). Given this popularsupport and these high expectations, what is thelong-term outlook for U.S. investment in plant bio-technology research?

Increased Federal attention to agricultural re-search seems to be the most urgent need. In 1939,approximately 80 percent of federally sponsoredresearch was for agriculture, while in 1985, agri-cultural research comprised less than 2 percentof Federal research expenditures. USDA, thelargest Federal sponsor, is allocated only 5.2 per-cent of total Federal research funds, and only 1.4percent of USDA’s budget is used for research.Given the potential return on investment in agri-cultural research, the present spending patternmight be too low for priority research areas thathave the ability to enhance and ensure the futurecompetitiveness and profitability of U.S. agricul-ture (83). In particular, more fundamental re-

search on plant applications is needed than onanimal applications, because basic knowledgeabout plants is less (68). While recognizing thepresent climate of fiscal restraint, both public andprivate interests express the conviction that fund-ing should be reallocated from other activities toagriculture, not reallocated within agriculture (95).Furthermore, increased integration between thebasic biological sciences and applied agriculturalresearch is paramount.

Agri-biotechnology research performed inthe private sector has different long-term ob-jectives from public sector research. What isthe proper division of labor between the di-verse interests? Balance needs to be foundbetween molecular biology and traditionalbreeding private and public interests, and ap-plied and basic research. While recent researchagendas and interests of each sector have over-lapped rather extensively, the public sector canno longer rely on the private sector to performsubstantial basic research. The private sector, trou-bled by public sector usurpation, must also rec-ognize the traditional responsibilities and con-straints (including the broad and specific “publicgood” mandate) of the public sector. Applied re-search is an important component of the publicagricultural research tradition—necessary to fillgaps left by industry, explore novel applications,and keep the government abreast of developmentsin the field. Accordingly, to strike and maintaina balance, agri-biotechnology research per-formed by both sectors will need careful man-agement so that its research benefits the pub-lic and enhances the competitiveness of theU.S. agricultural industry.

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At present, scientific, legal, economic, and po-litical forces have seemingly converged to accel-erate the rate of evolution and the direction ofU.S. agricultural R&D. Yet change in the systemis not novel, and adopting a siege mentality wouldbe counterproductive (90). Serious new issues

ISSUES AND OPTIONS FOR

Three policy issues related specifically to appli-cations of biotechnology to plant agriculture wereidentified during the course of this study. The firstconcerns possible congressional actions regard-ing research funding. The second involves regu-lating products of plant biotechnology, and thethird concerns the impact of intellectual propertyprotection of plants on germplasm exchange.

Associated with each policy issue are severaloptions for congressional action. The options arenot, for the most part, mutually exclusive, nor isthe order in which the options are presented in-dicative of their priority.

ISSUE 1: Is Federal funding of research in plantbiotechnology adequate?

Option 1.1: Take no action.

Congress could conclude that current Federalspending for plant agricultural research is ade-quate. Continuing the present level of funding,however, could result in a static agricultural sec-tor that is unable to respond to future economic,technological, and scientific needs—both domes-tic and international. Knowledge in the plant sci-ences would continue to remain in short supply,limiting commercialization even further.

If Federal spending remains the same, the re-duced role for public research could result in aslower rate of technological progress.

Option 1.2: Increase spending.

Congress could determine that present spend-ing for agricultural research is insufficient. If Con-gress increases agricultural research funding, U.S.preeminence in this sector would probably con-tinue, Increased expenditures for training wouldensure an adequate supply of personnel for bothuniversities and industry.

have been raised, but the embryonic nature ofthe agricultural biotechnology industry compli-cates the assessment of long-term effects. Con-tinued examination and private and public sup-port for long-range planning seem prudent.

CONGRESSIONAL ACTION

Option 1.3: Decrease spending.

The U.S. agricultural sector has added a sur-plus to the U.S. trade account every year since1960, Underlying this success has been researchsupport—with an annual rate of return for invest-ment in agricultural research in the range of 33to 66 percent.

If Congress determines that Federal investmentin plant biotechnology is excessive, it could de-crease allocations for this sector. Decreased fund-ing for agricultural research would result indiminished returns that would undermine theagricultural economy.

Option 1.4: Reallocate existing resources.

Should Congress conclude that present fund-ing levels are adequate or, because of fiscal con-straints, must remain the same, then it could di-rect that Federal resources be reallocated.

Congress could increase the Competitive GrantsProgram at USDA at the expense of formula fund-ing for land-grant institutions. Increasing dollarsfor peer-reviewed, competitive-based grants couldbean effective mechanism to ensure that Federalinvestment in basic research is being well spent.However, historically, the nature of federally spon-sored agricultural research has been applied. Thisfact, combined with a decentralized structure thatincludes local agricultural experiment stations andextension services, provides a unique national ca-pacity to identify and solve local or regional prob-lems. Reallocating resources away from formula-based funding would diminish the important rolethat even the smallest, poorest funded land-grantuniversities play.

Likewise, Congress could decrease spending forcompetitive grants within USDA or other agen-cies, such as NSF. In general, competitive researchfunding is directed toward basic research. Be-

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cause the database for plant sciences is sparse,decreasing awards that foster excellence in thisarea could hinder rapid progress in plant biotech-nology.

Option 1.5: Direct increases in State funding atState Agricultural Experiment Stations throughthe Cooperative State Research Service.

To increase total spending or offset Federal re-ductions, Congress could require States to increasetheir contributions to agricultural research throughthe Cooperative State Research Service at StateAgricultural Experiment Stations. If increasedState spending were to result in an overall increasefor agricultural research, then continued devel-opment should occur.

ISSUE 2: Agricultural applications of biotech-nology will increase significantly over thenext several yearn Is the statutory and reg-ulatory structure governing environmentalapplications of plant biotechnology adequate?

Option 2.1: Take no action.

Congress could take no action if it determinesthat the present regulatory structure provides ade-quate review to ensure environmental safety andpublic health, or that experience with the exist-ing structure has been insufficient to ascertainits adequacy.

If Congress takes no action, the CoordinatedFramework for the Regulation of Biotechnology(51 F.R. 23301) will continue to direct regulationof plant biotechnological products.

Option 2.2:Direct the Office of Science and Tech-nology Policy (OSTP) to report on the imple-mentation of the Coordinated Framework.

Congress could direct OSTP to evaluate, or spe-cifically commission an independent analysis of,the process by which plant agricultural applica-tions have been handled by regulatory author-ities. A comprehensive review of the timelinessand efficiency of regulatory review, resolution ofcompeting agency jurisdictions, scientific knowl-edge gained through field testing, actions of Stateand local regulation, community involvement, andconsequences of field testing on environmentalsafety and public health could demonstrate whether

the present regulatory framework best serves allinterested parties.

Option 2.3: Relax regulatory constraints.

If regulatory requirements are judged excessive,Congress could direct executive authorities to re-lax regulations. The existing USDA regulatory au-thority for plant biotechnology includes the Fed-eral Plant Pest Act (7 U.S.C. 150aa-150jj), the PlantQuarantine Act (7 U.S.C. 151-164, 166, 167), theFederal Noxious Weed Act (7 U.S.C. 2801 et seq.),the Federal Seed Act (7 U.S.C. 551 et seq.), andthe Plant Variety Protection Act (7 U.S.C. 2321et seq.) (51 F.R. 23339). Modifications that removerestrictions would make regulations for some ap-plications more consistent with the regulation ofnonengineered cultivars.

Less stringent regulation of environmental ap-plications of genetically engineered plants mightdecrease costs associated with experimental fieldtesting and increase investment in research. How-ever, if planned introductions in the future (in con-trast with those now contemplated or likely) definenew risks, then reevaluating relaxed regulatoryrequirements could be necessary.

Option 2.4: Preempt State and local regulation ofagricultural applications of biotechnology.

Increased State and local interest in regulatingbiotechnology exists. If Federal regulation of bio-technology is deemed adequate, Congress couldenact a statute that preempts State and local reg-ulation on this issue.

Uniform authority could remove some presentregulatory uncertainty, streamline the process,and decrease delays in field testing. If Congresspreempts such regulation, however, local concernsmight receive less attention. Federal preemptioncould also hinder cooperative regulatory effortsbetween Federal and State agencies that are pres-ently in place, e.g. the Animal Plant Health Inspec-tion Service’s regulation of genetically engineeredorganisms or products under the Plant Pest Act.

Option 2.5: Direct the Secretary of Agricultureto report how USDA is complying with NationalEnvironmental Policy Act requirements (NEPA)in its regulation of genetically engineered plants.

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The statutory mission of USDA is to assist thedevelopment of agriculture and husbandry in theUnited States. NEPA requires all Federal agenciesto consider the environmental impact of activi-ties funded with Federal dollars.

If Congress determines that a conflict betweenNEPA requirements and the statutory responsi-bilities of USDA exists, then Congress could amendthe mission of USDA to explicitly include environ-mental protection.

ISSUE 3: Does intellectual property protectionof plants in the United States ensure ade-quate germplasm exchange?

Option 3.1: Take no action.

Congress could conclude that the present intel-lectual property structure for plant protectiondoes not interfere with germplasm exchange. If

Congress takes no action, inventors would con-tinue to seek protection through the avenue theydeem most appropriate or advantageous. Germplasmexchange would continue on an ad hoc basis.

Option 3.2: Direct the Secretary of Agricultureto report on the impact that plant protectionhas on germplasm exchange.

Congress could direct the Secretary of Agricul-ture to report on the impact that proprietary in-terests in plants has on germplasm exchange. Todate, any information on the issue is anecdotal.Because all interested parties agree that free ex-change of germplasm is necessary to continueprogress in plant biotechnology, a comprehensiveanalysis examining trends in plant protection andgermplasm exchange could reveal that a problemexists, that no problem exists, or could direct at-tention to potential problems.

SUMMARY AND CONCLUSIONS

The largest industry in the United States, agri-culture is one of the most efficient and produc-tive sectors in the country’s economy. Agriculturecontributes to approximately 20 percent of thegross national product, and employs more than1 in 5 Americans. Increasingly, however, problemsbeset the U.S. agricultural economy. Researchalone cannot solve all of the problems, but cansignificantly alleviate them if resources are avail-able. Historically, the returns on Federal R&D inthis sector have been high, so efforts to providerelief through agricultural research could yieldpowerful results.

Both public and private sector agricultural re-search endeavors are in a state of flux. Severalfactors have converged to affect U.S. investmentdecisions in such research, including the discov-ery of the new biotechniques, intellectual prop-erty rights and plants, and the funding source forplant agricultural biotechnology research.

Biotechnological innovation in plants spans aspectrum of applications, New techniques and newuses continue to arise. The new technologies canpotentially accelerate the rate, precision, reliabil-ity, and scope of improvements beyond that pos-sible through traditional plant breeding, while also

reducing costs. Some have expressed concern,however, that biotechnology has led to privatesector-, proprietary-dominated research efforts.others point out that biotechnology has affordedunique contributions to agricultural research andcreated positive economic effects. Biotechnology’seffect on the balance of manpower between tradi-tional plant breeders and molecular geneticistsis seemingly reaching equilibrium.

Plant property developments have influencedagri-biotechnology research profoundly. Intellec-tual property protection of plants has stimulatedinterest and investment in plant research. How-ever, increased plant protection activities have ledto concerns about free-flowing exchange of germ-plasm. Such exchange is necessary to continuedadvances in plant breeding and biotechnology.

The U.S. agricultural research enterprise islodged partly in the public sector and partly inthe private sector. Each has different agendas andpurposes. Understandably, the perceptions ofproper roles, research priorities, and investmentdecisions clash. The issue of balance—formulafunding v. competitive grants, private v. public,basic v. applied, traditional plant breeding v.molecular biology-seems foremost. Spending pat-

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terns by the public sector should be responsibleand sensitive to broad public benefit. Industry canserve as an advocate for public agri-biotechnologyresearch and as a funding source for research toenhance US. competitiveness. Adequate researchfunding also pulls in interested and qualified man-power to the agricultural research system.

The commercial profile of the plant agriculturalsector does not appear to have changed apprecia-bly since an earlier OTA report. Achieving wide-spread success, however, will require expansionof the plant science knowledge base, Lack of fun-damental knowledge about plants and plant sys-tems is probably the rate-limiting barrier to com-plete commercialization of plant biotechnologyresearch. Regulatory uncertainty stands as the sec-ond major barrier and looms as potentially themost serious. Crop agriculture is particularly sen-sitive to regulatory delay—a one month lapse canresult in a company missing the planting seasonand, thus, an entire year of development. In somemeasure, regulation itself could be less an institu-tional barrier than one arising from a poor fun-damental knowledge base. Intellectual property

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5.

6.

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. Arthur D. Little, Inc., Business Assessment of Fu-

issues do not appear to hinder commercialization,although patent term extension to compensate forregulatory delays might stimulate companies toundertake higher risk ventures.

Increased Federal and popular attention to agri-cultural research seems to be the most urgentneed. Given the potential return for agriculturalresearch, the present level of expenditures mightbe too low to ensure the preeminent role thatguarantees U.S. agriculture vitality and profitabil-ity. While recognizing the present climate of fis-cal restraint, proposals to reallocate already scarceagricultural resources to meet unmet needs dis-turb both commercial and public interests. In par-ticular, USDA funding for fundamental researchon plants is required to a greater extent than ani-mal basic research. Furthermore, increased in-tegration between the basic biological sciences andapplied agricultural research is paramount.

As scientific, legal, economic, and political forcescontinue to direct U.S. investment in agriculturalresearch, including plant biotechnology, ongoingexamination and long-range planning seem prudent.

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4(2):33-39, Yoshisato,

Pratec-

.

Chapter 11

U.S. Investment inBiotechnology Applied To

Hazardous Waste Management

“The prospect of controlling pollution is one of the reliable rhetorical war-horses trottedout by advocates of the new biological technology every time someone asks what this newbaby might be good for.”

Douglas McCormickBio/Technology

May 1985

“If it wasn’t for the high cost of the alternative, this (bioremediation) wouldn’t be worth con-sidering at all. ”

Perry L. McCartyStanford University

July 1987

“Burning and burying are no solution. They just make less of a bigger problem.”Ananda M. Chakrabarty

University of IllinoisSeptember 1987

CONTENTS

PageIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........223The Context for Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................223

Regulatory Pressures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............224Economic Pressures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...225

Scientific Base of Biotechnology for Waste Management . ...................225persistent Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........225Remediation of Complex Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........227Modern Biological Strategies . . . . . . . . . . . . . . . . . . . . . .....................227Microbial Physiology and Ecology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....230Site Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....................231

Biotechnology Applications in Hazardous Waste Management . ..............,233Waste Stream Cleanup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...233Wood Treatment Site Cleanup . . . . . . . . . . . . . . . . . . . . . . ..................234PCB Degradation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........234Chemical Manufacturing Wastes . . . . . . . . . . . . . . . . . . . . . ..................234Groundwater Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....235

Research and Development Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......235Public Sector Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....235Private Sector Investment . . . . . . . . . . . . . . . . . . . . . . . .....................240

Research and Development Needs . . . . . . . . . . . . . . . . . . . . . . .................241Basic Research Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......241Applied Research Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .242

Barriers to Development of the Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .242Funding and Programmatic Implementation . . . . . . . . . . . . . . . . . . . . . ........242Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................244Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........................244Economic Uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................245

Issues and Options for Congressional Action . . . . . . . . . . . . . . . . . . . . . .........245Summary and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..247Chapter 11 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......247

FiguresFigure Page11-1. Laboratory Selection and Enhancement of Micro-organisms . ............22811-2. The Continuum of Environments in Xenobiotic Degradation. . ...........229

TablesTable Page11-1. State of Knowledge of Biodegradation of Common Pollutants. . ..........22611-2. Federal Expenditures for Biotechnology Applications to Waste Cleanup ...23611-3. EPA Projects in Biotechnology for Waste Management . . . . . . . ..........237

Chapter 11

U.S. Investment inBiotechnology Applied to

Hazardous Waste Management

INTRODUCTION

Destroying persistent toxic waste is frequentlytouted as a major benefit of new biotechnologies.Natural microbial populations have a wide rangeof waste management capabilities, from degrad-ing hydrocarbons to accumulating cadmium.While existing micro-organisms can degrade mostnatural chemicals, organisms frequently requiresome assistance to be effective against many man-made chemicals. Many applications of biotechnol-ogy for hazardous waste management are still ex-perimental, and the investment in developingbiotechnology for waste treatment and cleanupis small when compared with efforts in pharma-ceuticals or agriculture. Current applicationsrely on conventional techniques of geneticmanipulation and microbiology; the use of re-combinant DNA to develop microbes with spe-cial capabilities for waste degradation hasbeen limited.

Research and development in biological wastetreatment methods is growing and may equal R&Defforts in thermal technologies. Companies usingbiological cleanup techniques have attracted sub-stantial amounts of venture capital in recent years.

In this chapter, biotechnology for hazardouswaste management refers to all efforts to engi-neer systems that use biological processes todegrade, detoxify or accumulate contami-nants. These systems can use naturally occur-ring or laboratory-altered microbes or both.

THE CONTEXT

Several factors make the development of newtechnologies for waste management environ-mentally important and economically attractive.In 1985, U.S. industry generated at least 569 mil-

Genetic engineering refers specifically to the useof recombinant DNA techniques but does not in-clude more conventional, less precise techniquesof altering genes, such as random mutation andselection,

This chapter briefly describes the science under-lying biotechnology for hazardous waste manage-ment and looks at some of the private and publicsector activities in researching, developing, andapplying new knowledge in biology to treat haz-ardous waste. The state of scientific knowledgeand the barriers to further development of thefield are analyzed.

This chapter focuses on issues specific to ap-plying biotechnology to waste management, al-though some issues are generic to innovative wastetreatment technologies. OTA has addressed manyissues involved in waste management and wastereduction in its reports, Technologies and Man-agement Strategies for Hazardous Waste Control(93) Protecting the Nation’s Groundwater FromContamination (90), Superfund Strategy (92), Seri-ous Reduction of Hazardous Waste (91), OceanIncineration: Its Role in Managing HazardousWaste (89), Wastes in Marine Environments (94),and From Pollution to Prevention: A Progress Re-port on Waste Reduction (88). Two related OTAstudies are in progress: Municipal Solid WasteManagement and Superfund Implementation.

lion metric tons of hazardous waste, accordingto EPA (103). Most hazardous waste has been putin unlined surface dumps, with no barrier be-tween the waste and groundwater (54). The Fed-

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224

eral Government has spent more than $2 billionon the cleanup of closed or abandoned waste sites,and industry has spent hundreds of millions morein complying with new Federal and State regula-tions on hazardous waste management (54). TheCongress has strongly expressed its desire for haz-ardous waste generators to move away from landdisposal and to use permanent treatment meth-ods. These views are reflected in the Hazardousand Solid Waste Amendments (HSWA, public Law98-616) of 1984 and the Superfund Amendmentsand Reauthorization Act (SARA, Public Law 99-499) of 1986.

Waste cleanup is a substantial and growing in-dustry. The cost of waste disposal is expected toincrease significantly in coming years. OTA hasestimated that it will cost $300 billion over thenext 50 years to clean up waste already gener-ated (92). Gross annual costs of both solid and haz-ardous waste disposal have risen from $827 mil-lion in 1976 to $2.4 billion in 1984 (54). ArthurD. Little projected an $8 billion market for com-mercial hazardous waste treatment and disposalservices by 1990, and the market could top $13billion by 1995 (30).

Regulatory Pressures

Regulation both drives and constrains wastemanagement practices. Within the last two dec-ades the Federal Government has established reg-ulatory and research programs to control and de-velop waste disposal activities. In addition toHSWA and SARA, the laws most pertinent to wastecleanup and disposal are the Toxic SubstancesControl Act (TSCA, Public Law 94-469), the Re-sources Conservation and Recovery Act (RCRA,Public Law 94-580), and the Comprehensive Envi-ronmental Response, Compensation, and Liabil-ity Act (CERCLA, Public Law 96-510).

In 1976, Congress passed the Toxic SubstancesControl Act to address comprehensively the risksof hazardous chemicals. The Act gives EPA highlyflexible powers to control ‘(an unreasonable riskof injury to health of the environment,” includ-ing the control of disposal methods (2).

Also in 1976, Congress passed the ResourcesConservation and Recovery Act to cope with dis-

posal of hazardous waste as it was generated. Thisprogram called for “cradle to grave” control ofall hazardous waste and requires permits for treat-ment, storage, and disposal facilities.

RCRA was amended by the Hazardous and SolidWaste Amendments of 1984, which establisheddeadlines for banning land disposal of many haz-ardous and persistent wastes. HSWA also requiredthat all land disposal facilities monitor ground-water and certify financial responsibility by No-vember of 1985. Fewer than one third of the 1,650land disposal facilities certified compliance; therest closed (53).

HSWA also greatly expanded EPA’s authorityto require corrective action for releases of haz-ardous wastes at RCRA facilities, where EPA hasultimate authority over what cleanup technologiesare used. Therefore, if the agency develops thenecessary knowledge base in biotechnology, it ispossible that EPA would begin to recommendmicrobial degradation for RCRA corrective actions(109).

In 1980, Congress responded to rising publicconcern about hazardous waste sites with theComprehensive Environmental Response, Com-pensation and Liability Act (CERCLA or “Super-fund”). Superfund requires the generator, trans-porter, and disposer of waste to bear the burdenof cleaning up existing nonconforming disposalsites. The EPA has responsibility for monitoringand implementing cleanup at these sites. Super-fund was originally funded for 5 years at $1.6 bil-lion. The law was reauthorized in 1986 at $8.5billion by the Superfund Amendments and Reau-thorization Act (SARA, public Law 99-499).

Among the important provisions of the new laware deadlines for initiating cleanup actions; cleanupstandards that emphasize permanent remedies;a program to accelerate cleanup at Federally ownedhazardous waste sites; and broad new researchand development authorities (73). In authorizingSARA, Congress mandated that the President shall“utilize permanent solutions and alternative treat-ment technologies or resource recovery technol-ogies to the maximum extent practicable” (PublicLaw 99-499).

Thus, the regulatory environment is increasingpressure on waste generators to reduce waste and

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to find permanent solutions to the waste that isgenerated. over the past 2 years, regulations havebanned the land disposal of solvents and otherwastes. The Land Disposal Restrictions of HSWAstipulate that, by 1990, all RCRA hazardous wastesmust meet certain treatment standards beforethey can be land disposed. Small-quantity wastegenerators, previously exempt, must now com-ply with regulations. In addition, SARA directs EPAto choose permanent remedies when possible,rather than burying wastes.

Economic Pressures

Regulations have and will continue to increasethe cost of waste disposal, making alternative tech-nologies more economically feasible. EPA reportedthat design and construction standards for RCRA-approved landfills raised the price of land disposalfrom as little as $10 to $15 per metric ton in theearly 1970s to $240 per metric ton in 1986 (98).According to another report, prices charged bycommercial waste management firms increased30 to 400 percent in 1985 alone (99).

These price increases, moreover, predate theenactment of most provisions of the Hazardousand Solid Waste Amendments of 1984 (HSWA).HSWA requirements have already resulted in theclosure of some 1,100 noncompliant land disposalfacilities. If implemented as enacted, HSWA willforce most land disposal facilities to install linersand leachate collection systems and will prohibitland disposal of wastes for which alternative treat-ment methods exist (54).

EPA estimates that the HSWA will add at least$2.25 billion to industry’s annual cost of wastedisposal, approximately doubling 1984 disposalcosts (54), although this estimate does not reflectpotential savings from waste reduction and lower-cost on-site disposal.

Companies with new technologies and servicesfor waste management are seeing sales increaseat 20 to 30 percent per year (52). Stock prices ofsix waste companies followed by Kidder Peabody& Co. rose substantially higher than Standard andPoor’s 500-stock” index from 1984 until the October1987 stock market crash and have reboundedstrongly from the crash (46).

SCIENTIFIC BASE OF BIOTECHNOLOGY FORWASTE MANAGEMENT

The rationale for using micro-organisms to de-grade pollutants comes from experience with na-ture. Micro-organisms, particularly bacteria, havea variety of capabilities that can be exploited forwaste management and disposal and have beenintentionally used for municipal waste manage-ment for over a century.

A large proportion of organic compounds of bio-logical and chemical origin are biodegraded, pre-dominantly by micro-organisms (69). Organic com-pounds of biological origin are readily degraded.Many different micro-organisms are known to de-grade oil (19). Industrial chemicals that are simi-lar in structure to natural compounds are fre-quently also biodegraded.

Persistent Chemicals

Persistent compounds, however, have chemicalstructures not found in natural compounds and

so resist degradation by most naturally occurringmicro-organisms. Such compounds are calledxenobiotics. In addition to xenobiotics, other com-pounds may persist in the environment, becausethe compounds are present in too dispersed ortoo toxic a concentration, the organisms neces-sary for degradation are absent or occur in lowamounts, one organism cannot degrade the com-pounds completely, or the oxygen and nutrientsnecessary for degradation are lacking.

Industrial chemicals have been present in theenvironment for “only an instant in evolutionarytime” (69), a period that is often not long enoughfor the evolution of the necessary catabolic en-zymes, the molecules made by organisms to bringabout degradative reactions. Micro-organisms,however, display “a striking plasticity” to evolvethe necessary capabilities and, on occasion, to doso in a short amount of time (83) and sometimesevolve new pathways rapidly when confronted

— —

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Table 11-1.—State of Knowledge of Biodegradation of Common Pollutantsa

Organism On-sitedegrades or Pathway Enzymes Genes RecDNA biodegradation

Pollutant transforms known characterized sequenced technology underwayAcetone . . . . . . . . . . . . . . . . . . . . . . . . . . . .Aluminum and Compounds . . . . . . . . . . .Anthracene . . . . . . . . . . . . . . . . . . . . . . . . .Arsenic . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Barium . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Benzene . . . . . . . . . . . . . . . . . . . . . . . . . . . .Benzo(a)Pyrene . . . . . . . . . . . . . . . . . . . . .Bis(2-Ethylbenzyl) PhthaIate . . . . . . . . . .Cadmium (Cd)... . . . . . . . . . . . . . . . . . . . .Carbon Tetrachloride . . . . . . . . . . . . . . . . .Chlordane. . . . . . . . . . . . . . . . . . . . . . . . . . .Chlorobenzene . . . . . . . . . . . . . . . . . . . . . .Chloroform . . . . . . . . . . . . . . . . . . . . . . . . . .Chromium . . . . . . . . . . . . . . . . . . . . . . . . . .Chromium, Hexavalent. . . . . . . . . . . . . . . .Copper and Compounds (Cub ) . . . . . . . . .Cyanides (soluble salts). . . . . . . . . . . . . . .DDT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Dichloroethane . . . . . . . . . . . . . . . . . . . . . .1,1-Dichloroethane . . . . . . . . . . . . . . . . . . .1,2-Dichloroethane . . . . . . . . . . . . . . . . . . .1,1-Dichloroethene . . . . . . . . . . . . . . . . . . .Ethylbenzene . . . . . . . . . . . . . . . . . . . . . . . .iron and Compounds . . . . . . . . . . . . . . . . .Lead (Pb) . . . . . . . . . . . . . . . . . . . . . . . . . . .Lindane. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Manganese and Compounds (Mn) . . . . . .Mercury . . . . . . . . . . . . . . . . . . . . . . . . . . . .Methyl Ethyl Ketone . . . . . . . . . . . . . . . . . .Methylene Chloride . . . . . . . . . . . . . . . . . .Naphthalene . . . . . . . . . . . . . . . . . . . . . . . .Nickel and Compounds (Ni) . . . . . . . . . . .Pentachlorophenol (PAP). . . . . . . . . . . . . .Phenanthrene . . . . . . . . . . . . . . . . . . . . . . .Phenol . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Polychlorinated Biphenyls (PUBS) . . . . . .Pyrene. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Selenium . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,1,2,2-Tetrachloroethane . . . . . . . . . . . . . .1,1,2,2-Tetrachloroethene. . . . . . . . . . . . . .Toluene. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,2-Trans-Dichloroethylene . . . . . . . . . . . .1,1,1-Trichloroethane . . . . . . . . . . . . . . . . .1,1,2-Trichloroethane . . . . . . . . . . . . . . . . .Trichloroethylene (TEE) . . . . . . . . . . . . . . .Vinyl chloride . . . . . . . . . . . . . . . . . . . . . . .Waste Oils/Sludges . . . . . . . . . . . . . . . . . .Xylenes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Zinc and Compounds (Zen ) . . . . . . . . . .. .KEY:@ - K n o w n

e - Partially KnownO - Not Known

~hlstable wascompited from information provided toOTA by20researchersin the fieidof biodegradation?. Some compounds iisted include multipiecongenors, forwhich organisms may be known that degrade some congenors but not others.

SOURCE: Officeof Technology Assessment, 1988.

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with significant concentrations of xenobiotics intheir environment.

Micro-organisms have been identified that de-grade at least 42 pollutants commonly found athazardous waste sites targeted for cleanup on theNational Priority List (NPL) sites (table 11-1). Cur-rent research is aimed at exploiting the naturaldegradative capabilities of microbes to acceleratedegradation, enable the organisms to live in newenvironments, and attack new contaminants.

Simple Bioremediation

Waste management biotechnology typically in-volves mixing live organisms or their productswith the waste to degrade or transform it. Bio-logical treatment requires that an organism livein a sometimes exceedingly hostile environment.In nature, certain organisms live in extreme envi-ronments, Thus, in some cases, it has been possi-ble to isolate micro-organisms from a particularenvironment (where they have been environ-mentally selected) and introduce them into simi-larly contaminated sites. Alternatively, supplyingthe required nutrients and conditions may alloworganisms already present to degrade waste. Iso-lated organisms may also be further adapted inthe laboratory with mutagenizing agents (e.g., ra-diation) or with selective pressure (see figure 1).Many bacteria have such short generation timesthat under strong selective pressure a year is morethan enough time to evolve desired characteris-tics. Under the right laboratory conditions, manybacteria can divide about every two hours (orfaster), creating over 4)000 generations per year.Such a large number of generations provides sig-nificant opportunity for evolution (51).

In these cases, almost nothing may be knownabout the biochemistry or the genetics of theorganism that breaks down the pollutant. Lack-ing comprehensive biodegradation and physiolog-ical information, strategies to enhance degrada-tion involve reseeding the site with bacteria asthey die out (bioaugmentation) or enhancing thesite with nutrients or oxygen required by themicro-organisms for optimum growth and per-formance (bioenrichment). For simple waste sitesinvolving readily degraded contaminants, such asfuel oils, these strategies suffice.

Remediation of Complex Sites

Waste sites pose significant challenges to organ-isms. Waste sites can involve materials in any form:solid, liquid, gas, or mixed. Waste sites can involvea single material, a family of related compoundscalled congeners, or a mix of unrelated wastes.Pollutants in lagoons or landfills may leach intothe groundwater. Pollutants may occur highlydiluted, highly concentrated, or in locally concen-trated “hot spots” (13).

Different environments require different strat-egies. Immobilized enzymes in a bioreactor maybe the best method to treat a waste stream at thesource. As complexity grows, a single organismmay not be able to survive or compete in the con-taminated environment. To clean up an ecosys-tem, an ecosystem-level approach may be re-quired, incorporating a variety of organisms (49)(see figure 11-2).

Environmental conditions affect organism func-tion. Although an organism can degrade or other-wise change a toxic chemical, it might do so onlyat certain concentrations or at a relatively slowrate. Mixtures of chemicals at sites might poisonthe organism, or the degradation reaction mightsupplant other necessary reactions, such as energyproduction. Many organisms require oxygen,which might not be available in the site. Finally,many pollutants occur attached to particles or inother physical states that can make them unavail-able to the organism (76).

Finally, degradation itself may be the limitingfactor in the use of biological systems for site re-mediation. If the waste provides the sole carbonsource for the organism, then as the waste isdepleted, the food supply for the organism is alsodepleted. The organism may or may not surviveas the waste reaches lower concentrations. Thus,full remediation may not be achieved.

Modern Biological Strategies

The term degradation generally indicates thata product is changed, but not necessarily the ex-tent to which it is altered or broken down. Manydemonstrations of degradation rely on evidencethat a single compound is lost, without determin-ing whether new products are formed (76). Degra-

.

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Figure 11-1 .—Laboratory Selection and Enhancement of Micro-organisms

Ill I

C o l l e c t i o nfrom nature

( M i x e dcul ture)

Growth ands e l e c t i o n

Pure

storagevacuum–,— Isolated adapted mutants

(Pure cul tures)

I s o l a t i o n

G r o w t h a n ds e l e c t i o n

R a d i a t i o n

Shake flasks

Micro-organisms indigenous to various environmental sites can be isolated and screened for degradative capabilities. Thisfigure shows how naturally occurring organisms can be selected in the laboratory and, if desired, subjected to mutagenizingagents such as radiation. This imprecise method can sometimes produce new strains of organisms with enhanced capabilities.

SOURCE: Polybac Corp.

dation can produce new toxic products (76). Sim- Ideally, a complete biological strategy for re-ply defined, true biodegradation is the metabolism search and development to degrade a pollutantof a compound to innocuous products (35). It is would include:therefore necessary to identify the pathways ofdegradation and define the acceptable products

●

and amounts.●

With better knowledge of microbial genetics,microbial physiology, and microbial ecology, sci- ●

entists and engineers can develop more efficientstrategies for biodegradation.

finding and characterizing an appropriateorganism with degradative capabilities;defining the conditions that allow the micro-organism to exist and function;defining the pathway of metabolism for thepollutant and for any other related or criti-cal cell products;

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Figure 11-2. —The Continuum of Environments inXenobiotic Degradation

THE CONTINUUM OF ENVIRONMENTS IN XENOBIOTIC DEGRADA-TION: A wide var ie ty of envi ronments means that in order toeliminate toxic materials a variety of strategies must be employed.I n w a s t e s t r e a m s f r o m p r o c e s s p l a n t s a n i m m o b i l i z e denzyme in a bioreactor may prove sufficient. As complexity grows asingle organism may not be able to survive or compete in the con-taminated environment. In order to clean up ecosystems anecosystem level approach may have to be undertaken, incorporatinga variety of organisms and trophic levels.

SOURCE” Wayne G. Landis, Chemical Research, Development and Engineer-ing Center, Aberdeen Proving Grounds, MD.

• identifying and characterizing the enzymesof the pathways; and

● characterizing the treatment environment.

If genetic engineering is applied, these additionalsteps are necessary:

● locating the genes for the enzymes and thecontrol of the pathways; and

. manipulating the genes to improve degrada-tion rates, stability, or substrate range.

In some applications, sequencing the genes of in-terest may provide some clues for ways to altergene products to degrade persistent compounds.

Metabolic Pathway Design

Three approaches are being used in the labora-tory to design beneficial metabolic pathways (thefirst two are more commonly used):●

●

chemostats and other laboratory systems, inwhich organisms are grown under long-termselective conditions to encourage the organismsto metabolize new substrates;in vivo genetic transfers, in which the gene ofa useful enzyme from one organism is recruitedinto a pathway of another organism via natu-ral genetic processes; and

● recombinant DNA technology, in which genesare introduced by in vitro techniques into a newhost to create a new pathway.

Recombinant DNA technology enables the mostprecise manipulation of genes, but also requiresextensive background knowledge and thus re-search and development. Selective pressure andin vivo transfer can often be accomplished with-out extensive basic research. In certain cases, thewaste site itself has provided selective pressureto generate organisms capable of metabolizingnew substrates, such as the decades of exposureto creosote and pentachlorophenol (PCP) waste.

EPA and University of Illinois scientists haveused the in vivo transfer strategy to further mod-ify a strain of pseudomonas isolated from achemostat. The transformed Pseudomonas cancompletely degrade 2,4,5-T, one of the active in-gredients of Agent Orange. This strain carries aplasmid (an extrachromosomal unit of DNA) withthe genes responsible for making one or more en-zymes that degrade the compound. Modifying theplasmid so that it can be introduced and main-tained in a range of host organisms that can existin toxic sites could lead to environmental applica-tion (37).

Genetic Enhancement of Organisms

One strategy uses recombinant DNA technol-ogy to rationally design pathways that can degradexenobiotic compounds. These pathways can beconstructed in two ways: restructuring existingpathways or assembling entirely new pathwaysfrom enzymes or portions of enzymes (37). Thelatter strategy is called patchwork assembly.

Many perceive the benefits of using, whereverpossible, natural pathways in indigenous organ-isms while using recombinant DNA technologyto develop reactions for recalcitrant compounds.Work is progressing on molecular biological ap-proaches to several classes of recalcitrant com-pounds. For example, a pathway is known thatdegrades DDT, one of the most persistent pesti-cides in the environment, to DCB, an acceptableproduct (76). However, one step in the pathwayrequires oxygen. Eliminating the oxygen require-ment would be advantageous in many applica-tions. Basic research in recombinant technology

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is needed to develop organisms that will workwithout oxygen (34,58,61,81).

Other laboratories are working on genetic ap-proaches to facilitate the removal of toxic formsof metals, which pollute various waste streamsand soils. This process can reclaim valuable me-tals (12,41,84,108).

Useful Microbial Properties

In some cases, the pathways, enzymes, andgenes are known and available to degrade a pol-lutant, but the conditions in which the pollutantexists inhibit or kill the organisms. Such condi-tions include unusual concentrations of the pol-lutant, extreme temperatures, high salt concentra-tions, extreme pH, and the presence of additionalchemicals that are toxic to the organism (76).Genetic approaches to these problems include in-creasing the activity of a gene so the organismcan live in more toxic concentrations or placingthe requisite genes in organisms that can exist inthese extreme environments.

Linking genes for surfactants and emulsifierswith genes for degradation may permit organismsto work more effectively (21), since the physicalstate of the pollutant is often critical to degrada-tion. pollutants frequently occur in partially solidlagoons where the chemical adheres to soil (55,76) or is mixed with oil.

The search for degradative activity has turnedup two reactions with surprising and potentiallybroad applications. In one, the enzyme ligninasedegrades lignin, a naturally occurring compoundthat resists degradation by most microorganisms.The enzyme has been reported to partially de-grade PCBs, dioxin, lindane, PCP, and DDT (11,15,116). For practical applications, low concen-tration of the pollutant is a problem as the en-zyme may attack other materials in the site ratherthan the target pollutant.

In the other a newly discovered anaerobic re-action breaks the chlorine-carbon bond in aro-matic compounds-one of the most recalcitrantchemical bonds and a major stumbling block inthe destruction of wastes. Removing the chlorineis a key step in degrading PCBs, chlorinated ben-zenes, chlorinated phenols, and dioxins (76). This

recently discovered anaerobe, isolated from sew-age sludge, removes the chlorine from chloroben-zoate, producing benzoate. While chlorobenzo-ate is not a major pollutant, it serves as a modelfor major pollutants (29). Recently, this dechlori-nation reaction has been shown to work on hex-achlorobenzenes and some PCBs (33).

Microbial Physiology and Ecology

Research and development in microbial physi-ology and ecology are much less developed thanmicrobial biochemistry and genetics. Theseaspects have serious implications for the use oforganisms in the environment to reduce wasteand pollution.1 Only 1 to 10 percent of all soilorganisms are known or cultured (22). Even forknown microbes, little is known about the entireset of reactions that occur in any one organismor how these reactions are interrelated and con-trolled. Even less is known about the relationshipof an organism to its environment and to otherorganisms. Knowledge of physiology and ecologyis especially important in nutrient enrichment andbioaugmentation. otherwise, the efficiency andthe outcome of the biosystem cannot be known.

Microbial Communities

Micro-organisms are not isolated in the environ-ment but occur in mixed microbial communities.Microbial communities are sometimes able to de-grade pollutants that a single organism could not.If the conditions are right, a series of reactionscan be accomplished by the community of organ-isms. For example, the dechlorination reaction de-scribed previously is followed by at least two otherreactions carried out by other specialist organ-isms, one that transforms benzoate into acetate,hydrogen, and carbon dioxide, and another thatconverts hydrogen and carbon dioxide into meth-ane (29).

In another case, enrichment by an analog chem-ical, a chemical similar in structure to the pollut-ant but without the chlorine attached, causes the

1A more thorough discussion of microbial eCOloW and otheraspects of the environmental application of novel organisms canbe found in OTA’s report, Field-Testing Engineered Organisms:Genetic and Ecological Issues (87).

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requisite bacteria to grow and induces degrada-tion, Then other organisms, which have not yetbeen isolated, metabolize the products. Creatingnew genotypes that would work in concert withthe indigenous organisms could replace the ana-log chemical. At least one laboratory is exploringthis strategy (34). Providing oxygen and nutrientsincreases the cost of treatment substantially, bothin the cost of the raw material and in the costof supplying and mixing in the additives. Reduc-ing the need for additives would produce signifi-cant savings.

Exploring Other Organisms

One approach to reducing the need for addi-tives is to use anaerobes, which do not requireoxygen. Anaerobes might also be capable of novelreactions. Basic knowledge of most anaerobes islacking, and genetic engineering of anaerobes isproblematic. Researchers are, however, beginningto systematically seek reactions in anaerobes thatcan be developed to efficiently degrade aromatichydrocarbons in soil (34,47,58).

While most research in the past has focused onbacteria, other organisms also perform desiredreactions, such as fungi (15,38), algae (74,88), pro-tozoa (50), yeast (107), clams (50), and plants (7,4 I).

Site Engineering

Biotechnology waste treatment sites providesignificant and unique challenges to environ-mental engineers. The site engineer must ensurethat the organism degrades the pollutant, treat-ing the contaminant directly where it occurs (insitu), using a contained bioreactor, or using a com-bination of these two. Nonbiological technologies,such as air stripping (the removal of volatile com-pounds via a jetstream) and incineration, maybeused in conjunction with biological treatment.

Site engineers must consider at least five criteria:

● The availability of the contaminants. Gettingmicroorganisms into contact with sorbed ornonaqueous contaminants is often limiting foroils, some solvents, pesticides, dioxins, andPCBs (74).

● The ability of the degrading strains to live andfunction. The ecology of the treatment envi-

●

●

●

ronment determines whether or not desiredmicro-organisms will survive and do their job(74).The ability to degrade pollutants at very lowconcentrations. Achieving the very low con-centrations usually required for hazardouswaste cleanup requires micro-organismsadapted to function at low concentrations orreactor conditions designed to allow very lowconcentrations (74).The ability to cope with a range of conditions,particularly unexpected substances and con-centrations.The need for low costs. Cost-effective ap-proaches to waste cleanup require designsto minimize costs of equipment, energy, andmanpower. The cost of the organisms, onceidentified and developed, is relatively low.Cost-effectiveness requires reactor designsthat minimize initial capital and operationscosts (74).

Demonstration projects have shown that appro-priate bacteria will metabolize pollutants in land-fills if they are maintained with proper energysources and nutrients in thin layers of well-prepared, hydrated soil. For soil pollutants, a tech-nique called landfarming may be used (14,60,85).This involves establishing treatment domains,pretreating the soil for pH and other conditions,spraying the soil with the micro-organisms, andmaintaining the site with the proper humidity, oxy-gen, and nutrients. Providing nutrients and oxy-gen and mixing the components properly are ma-jor tasks. In current applications, treatment hasbeen confined to surface layers (1.5 to 6 feet) ofsoil (44,72,85).

Currently data concerning the optimal ratiosof microorganisms and nutrients to pollut-ants are largely derived from laboratory trials.Scale-up on site is difficult (76). Field condi-tions can vary significantly, changing expectedresults.

Most waste sites present a variety of problemsfor in situ treatment. Frequently wastes are mixedand in extremely varied concentrations, makingboth assessment and treatment difficult (8,76). Inlagoons, liquid pollutants may adhere to solids,significantly reducing reaction rates (55,56). La-

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Daily tilling of soil provides oxygen to naturally occurring microbes, enabling them to remediate hydrocarbon-contaminatedsoil in an enclosed, solid-phase soil treatment facility. Current applications of biotechnology to waste management rely

on naturally occurring microbes; the application of genetic engineering to this field remains some years away.

goons frequently leak and the pollutants may befound in the unsaturated (vadose) zone or in thewater-saturated (aquifer) zone, contaminating thegroundwater.

Among the most difficult sites to clean up isgroundwater that contains low molecular weight,semi-volatile substances, such as trichloroethene(TCE), a widely used industrial solvent. In thesecases, in situ treatment means injecting materi-als to create a reaction site in the groundwater.Thus, the resulting products and the migrationof contaminants must be well understood. In situtreatment of soil contamination, on the otherhand, can increase groundwater contamination,at least temporarily, as contaminants are releasedfrom the soil. Then the degradation reaction canoccur in the groundwater (65).

In order to better control the conditions of thereactions and circumvent some of the safety con-cerns related to in situ treatment, bioremediationcompanies often use contained bioreactors. Herethe process is more analogous to fermentation orsewage treatment technologies, where the pollut-ant is passed through a closed or controlled sys-tem. Considerable research is underway to optimizesuch bioreactor systems. Promising techniques in-clude the use of fixed films (10,67), fluidized beds(75), microbes immobilized on beads (25,36,62),and microbes immobilized by membranes (4).

Directly at the end of a waste stream, the pol-lutants may be known, consistent, relatively pure,and moderately concentrated. Because of thesefactors, there is emerging interest in the useof biotechnology to treat an undesired prod-

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uct within the waste stream or directly at the cases, biotechnology might be used for waste re-end of the pipeline where the cost of collect- duction. For example, the use of ligninase to pulping the material is less and the conditions may wood could reduce the air and water pollutionbe better controlled (18,36,91,110,1 11). In some of chemical pulping (42).

BIOTECHNOLOGY APPLICATIONS INHAZARDOUS WASTE MANAGEMENT

The application of biotechnology to hazardouswaste management is new and less developed thanapplications in the pharmaceutical or agriculturalindustries, The relative merits of conventionalversus biotechnological approaches to waste man-agement are currently being debated. Questionsregarding the effectiveness and economic at-tractiveness of biotechnological techniquesfor waste management have not been resolved.Conventional methods, e.g., airstripping, inciner-ation, and containment, have a longer history, arebetter understood, and are thus frequently pre-ferred, Company representatives have reporteddifficulty obtaining permits for biological reme-diation techniques (26,86). Such difficulties arecommon for innovative treatment technologies.

In contrast, certain industries historically haveused conventional biotechnology to use or treatwaste, have matter-of-factly adopted limited in-novations in the field, and are convinced of itseconomic advantage. In other cases, changes inthe regulatory environment (such as California’srecent ban on open airstripping of volatile), pooreconomic projections of the conventional technol-ogies, or reduced availability of dump sites haveforced some industries to explore new tech-nologies.

At least 65 companies are involved in someaspect of biotechnology for waste manage-ment (see app. D). Some of these companies arededicated biotechnology companies (DBCs, see ch.5), others are waste management companies, andsome are waste generators. A few companies havefully functioning sites relying on micro-organismsor products of micro-organisms to detoxify waste.Other organizations are engaged in demonstra-tion projects. Several independent and young com-panies dedicated to biotechnological waste treat-ment have emerged.

No waste management company is currentlyusing or even testing genetically engineeredmicro-organisms in the environment, al-though research on genetic engineering ofmodel organisms is proceeding in labora-tories. Current, on-site biotechnology strategiesin the waste industry involve the use of eitherenvironmentally selected organisms or laboratoryadapted, crossed, or mutagenized strains. Biologi-cal approaches are frequently integrated with con-ventional approaches.

Current applications of biological degradationfocus on fuel oils, common industrial solvents suchas benzene, wood preservatives such as PCP andcreosote, and other compounds that are relativelyamenable to biodegradation. One company presi-dent expressed a commonly held feeling in say-ing that there is so much crude oil, benzene, anddiesel oil spilled around the country that thereis no need to look for more exotic applications(115).

Various cost savings are attributed to biodegra-dation systems over other methods, but generali-zations are difficult to make due to the variabilityof waste sites. While various claims of cost sav-ings have been made, few if any demonstra-tions by disinterested parties, such as EPA orstate environmental agencies, clearly evaluatethe cost and effectiveness of biological cleanupcompared with other cleanup technologies.

Waste Stream Cleanup

Bethlehem Steel Company uses a conventionalbiological approach to handle the coke oven wastewater at its Sparrows Point, MD, plant. The cokeoven waste stream contains phenols, cyanides, andammonia, comprising about 4,000 to 6,000 poundsper day of phenol. Prior to 1970, the waste wasdumped directly into the Chesapeake Bay. Now

—

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the waste stream goes through the equivalent ofa sewage treatment facility. This facility is seededwith sludge from local sewage that contains nat-urally acclimated microbes. The daily output ofphenol is reduced to about 2 pounds (99.9 per-cent reduction), a level in compliance with the Na-tional Pollution Discharge Elimination System fordischarge of water.

The Sparrows Point plant was used to set EPA’s“Best Available Technology” standard. Economicevaluations from the 1970’s showed that the bio-logical treatment plant was less expensive to buildthan other methods at that time by $1.2 millionand is simple and inexpensive to run ($1.7 millionas compared with $2.6 million for the conventionaltreatment for one year in 1978). All but one othersteel plant in the United States have adopted thistreatment method, although recent changes in ef-fluent standards, requiring treatment of ammo-nia, are again forcing a change in treatment tech-nology. Bethlehem Steel had been examining theuse of biological methods to degrade the petro-leum hydrocarbons in steel rolling mill solid wasteat a site in Bethlehem, PA, until poor economicconditions forced the company to cut back at alllevels and terminate its program on biotechnol-ogy (80).

Wood Treatment Site Cleanup

Wood preservation plants have created a sig-nificant number of waste sites. Koppers Company,a diversified manufacturing company with inter-ests in wood preservation plants, has created asubsidiary environmental services company, Key-stone Environmental Resources, Inc., to deal withwaste sites resulting from wood preservationplants. Keystone received EPA funds for a dem-onstration project to clean up a wood preserva-tion site in Nashua, NH, that contained creosote,polynuclear aromatic hydrocarbons (PAHs), PCP,and dioxins in soil. The treatment system wasestablished on a prepared bed of soil and loadedwith a 1-foot layer of soil augmented with cowmanure and fertilizer. The soil was sprayed peri-odically with water and tilled once a week to im-prove mixing and aeration (44). In 5 months ofdegradation, over 75 percent of PCP and over 95percent of polynuclear aromatic hydrocarbons

(PAHs) were degraded. Neither the groundwaternor the soil beneath the system were affected bythe chemicals in the treatment system (86). Thesoil went from being visibly contaminated withoil and grease to the consistency of garden soil“which might be used for construction site fill” (44).

PCB Degradation

General Electric Corp. (GE) has extensive con-tamination problems resulting from the wide-spread use of polychlorinated biphenyls (PCBs)in electrical transformers beginning about 50years ago (13). GE began examining the use ofmicro-organisms to biodegrade PCBs and othercontaminants in 1981. In the laboratory, they iso-lated 35 to 40 mixed cultures; upon purificationof two dozen of these cultures, several strainswere found to degrade PCBs exceptionally well,and two of these showed novel pathways. Thegenes for PCB-degrading enzymes from one strainhave been cloned. The first laboratory demonstra-tion project treated soil spiked with PCBs; next,soil from a contaminated site was treated in thelaboratory. As of September 1987, a site test wasunderway at South Glens Falls, NY, where oil con-taining PCB was used for dust control on a racetrack. GE provides its strains to other companiesand academic laboratories. (85). None of thesestrains, however, degrades the more persistenthighly chlorinated PCBs (82).

Chemical Manufacturing Wastes

The Occidental Chemical Corp. is responsiblefor a number of chemical dump sites, includingLove Canal. Occidental, its subsidiary TreatTek,and BioTal (formerly BioTechnica Ltd.) have claimedfull-scale remediation assisted by microbial tech-nology at two sites.

The Hyde Park Landfill in Niagara, NY, was usedfrom 1963 to 1975 as a disposal site for an esti-mated 73,000 metric tons of chemical waste, includ-ing phenols, halogenated organics, and halogen-ated aromatic compounds (especially chlorinatedbenzoic acids), including dioxin. A compacted claycover was placed over the landfill in 1978, anda leachate collection system made of tile was in-stalled around the perimeter in 1979. The leachateis collected in a sump, pumped into a lagoon, the

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lagoon allowed to settle, and the supernatanttrucked to a nearby treatment plant. The conven-tional treatment uses activated carbon, at an esti-mated cost of $21 million over the next 10 years.The company developed batch bioreactors usingorganisms selected from contaminated sites, whichreduce the need for activated carbon by 96 per-cent, saving an estimated $20 million at this sitealone.

At an abandoned gasworks site in England, coaltars, phenols, cyanides, heavy metals, and othercontaminants were similarly treated by traditionalmethods, supplemented by microbial methods, toreduce phenols from 500 to less than 100 mg/kgin 8 weeks. Full-scale treatment will require ex-cavation to layer the soil (112,113)114).

Groundwater Treatment

At a Superfund site in California, Ecova Corp.operates a groundwater decontamination systemthat combines an air stripper with a bioreactorto remove chlorinated hydrocarbons and solubleorganics. The air stripper is a 35-foot column thatblows air at a cascade of groundwater, thus strip-ping volatile hydrocarbon molecules from thewater. After removal of volatile organics, thegroundwater is transferred to a bioreactor to de-grade the soluble organics. The bioreactor is a10,0()()-gallon tank seeded with microbes and anutrient mix developed specifically to biodegradethe remaining soluble organic contaminants. Thebioreactor contains an agitator to provide aera-tion and instrumentation to monitor contaminantlevels and rates of degradation. The treated ground-water meets standards established by the Califor-

Photo credit: Ecova Corp

An air stripper, combined with a bioreactor, detoxifieswastes at this Superfund site in San Jose, CA. The airstripper blows air at a cascade of groundwater to remove

volatile hydrocarbons. The groundwater is thentransferred to the bioreactor where soluble

organics are degraded.

nia Regional Water Quality Control Board (chlori-nated hydrocarbons of 5 ppb and soluble organicsof 1 ppm), and the effluent can be discharged tothe public sewer system (32).

RESEARCH AND DEVELOPMENT FUNDING

Research and development funding for biotech- ogy field is supported by basic research concernednological approaches to waste management is with toxic compounds, environmental sciences,modest compared with funding in other areas of physical-chemical sciences, and engineering,biotechnology and comes from a variety of pub-lic and private sources. In addition to basic re- Public Sector Investmentsearch, which has the potential for leading to in-novations in all fields of biotechnology (supported A substantial portion of basic research under-by projects in genetics, molecular biology, micro- lying biotechnology for waste management is sup-bial physiology, and ecology), the waste biotechnol- ported by the public sector through the regular

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Table n-2.-Federal Expenditures for BiotechnologyApplications to Waste Cleanup

Fiscal 1987

Agency Dollars (in thousands)

Department of Defense . . . . . . . . . . .Department of Education . . . . . . . . .Department of Energy . . . . . . . . . . . .Department of Interior. . . . . . . . . . . .Environmental Protection Agency . .National Aeronautics and Space

Administration. . . . . . . . . . . . . . . . .National Institutes of Health . . . . . .National Science Foundation . . . . . .TOTAL . . . . . . . . . . . . . . . . . . . . . . . . .

1,953486920714

3,497

350270

2,75010,942

SOURCE: Off Ice of Technology Assessment, 1988.

intramural and extramural programs of the Fed-eral agencies. Federal agency funds specific to bio-technology for waste control are listed in table11-2, for fiscal year 1987. EPA invested the mostof any Federal agency, spending about $3.5 mil-lion on R&D related to biological systems for wastemanagement. This is less than one-third of thetotal Federal investment, which OTA estimates atalmost $11 million (table 11-2).

EPA Activities

The Environmental Protection Agency is theprincipal agency for conducting research and de-velopment for biotechnology and waste disposal.However, EPA is primarily a regulatory agency,and most of its R&D is geared to support regula-tory activities. Thus, most biotechnology fundsare directed toward developing methods for riskassessment. EPA also has some funds for devel-oping products to clean up waste or products tomitigate risks of environmental damage. Fundinglevels for product development research are low,however, in accordance with EPA policy that theprivate sector should play a primary role in thedevelopment of products for commercial use (48).

Nonetheless, EPA laboratories are conductinga variety of small but significant research projects(see table 11-3). EPA also sponsors documentationand evaluation of new cleanup technologies throughthe Superfund Innovative Technology Evaluation(SITE) Program, and a coordinated Biosystems Ini-tiative is planned for fiscal year 1989, pending bud-getary approval. Many EPA projects involve inno-vative biological treatment technologies, but many

do not involve genetic engineering, and so fall out-side of EPA’s definition of biotechnology (see ch.3). Thus, funding figures reported in this chapteroverlap with EPA funds reported in chapter 3 onlyfor projects that involve genetic engineering oforganisms for waste degradation,

SITE Program. The Superfund Innovative Test-ing and Evaluation (SITE) Program is authorizedunder the Superfund Amendments and Reauthor-ization Act of 1986. The SITE Program providestesting, sampling, and evaluation of innovativetechnology for hazardous waste cleanup. Theproprietor of the technology pays for the dem-onstration itself, if private funding is available.If funding is not available, EPA can fund up to50 percent, not to exceed $3 million, for any sin-gle demonstration. EPA accepted 12 technologiesfor testing and evaluation in the first round ofselections for the SITE program in April 1987. Oneof these involves the microbial degradation ofPCBs. In September of 1987, EPA selected 3 bio-logically based technologies out of a total of 10for the second round of selections (39,45).

Funds have not yet been spent by EPA for thePCB-degradation project, but preliminary esti-mates indicate that testing and evaluation will costabout $200)000 (45), The owner of the technol-ogy says the SITE demonstration will cost him$50,000 and 1 year’s time. He says that this dem-onstration will involve the bioremediation of 10cubic yards of soil, although he has already dem-onstrated the technology on 14,000 cubic yardsunder State auspices. The SITE program, how-ever, will provide the documentation and analy-sis to assure potential clients that the system works(26).

Biosystems Initiative. Recognizing the poten-tial of biological systems for waste management,EPA proposed the Biosystems for Pollution Con-trol Initiative, which, if approved, would beginin fiscal year 1989, The proposed initiative wouldprovide about $4 million per year from 1989 to1991 to develop, demonstrate, and evaluate bio-logical technologies for waste cleanup (39). TheBiosystems Initiative includes the following ob-jectives:

. search out and characterize biodegradationprocesses in surface waters, sediments, soils,

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Table 11-3.—EPA Projects in Biotechnology for Waste Managementa

Pro jec t Dollars (fiscal 1987)

Environmental Research Laboratory,Gulf Breeze, FloridaTCE degradation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Complex waste sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Anaerobic dehalogenation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Suicide plasmids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Metabolic pathway recruitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Extramural support (2,4,5-T degradation) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Hazardous Waste Engineering LaboratoryCincinnati, Ohio2,4,5-T degradation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .White rot fungus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .P. Chrysosporium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Yeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .PCB degradation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Plants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Biofilm reactor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Leachate slurries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Guidance document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Robert S. Kerr Environmental Research LaboratoryAda, Oklahoma.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .TCE-degradationModels for spilled hydrocarbonsModels for soil cleanupStanford demonstration project

Water Engineering Research LaboratoryCincinnati, OhioGenetics of methanogens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Microbial binding proteins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Prediction of biodegradation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Environmental Research LaboratoryAthens, GeorgiaAnaerobic activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Screening of indigenous organisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Office of Exploratory Research(Extramural Grants) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SITE ProgramEvaluation of PCB degradation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .aEXclUdes Projectg whose primary purpose h risk assessment.bFigure repres e nts one half of the totalof fiVetWO-year grantS, $*5,143cAnticipated expenditures for Fy88 are approximately $200,()()().

SOURCE: Office of Technology Assessment, 1988.

and subsurface materials to identify processesthat may be used in biological treatmentsystems;

● develop new biosystems for the treatment ofpollutants, including genetically engineeredand naturally selected microorganisms, con-sortia, and bioproducts;

● determine, evaluate, and demonstrate theengineering factors necessary for the appli-cation of biological agents to detoxify or de-stroy pollutants;

unsupported120,000103,00050,000

1,413,300

14,00070,000

482,571b

Oc

3,496,871

● determine the environmental fate of and ef-fects of and the risks involved in the use orrelease of biological agents or their productsdeveloped to detoxify or destroy pollutants;

● develop means to mitigate adverse conse-quences resulting from the accidental or de-liberate release of biotechnology products de-veloped for pollution control; and

● transfer information on the technology to pro-mote its use (101).

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EPA is marginally supporting various programswith long-term potential benefits. Programmanagers believe that many programs will havelong-term payoff, but cannot be completed with-out additional funding. These programs include:

● genetically engineered anaerobic dehalogen-ators of chlorinated aromatics, which couldbe ready for commercialization and field ap-plication at Superfund sites within 3 to 4years;

. immobilized ligninases isolated from whiterot fungi, which could be used to oxidize chlo-rinated hydrocarbons within 3 to 5 years; and

● plant root fungi, which could be used to con-centrate toxic metals from contaminated soilsby 1992 (100).

EPA Research Laboratories. The Environ-mental Research Laboratory in Gulf Breeze, FL,is one of EPA’s leading laboratories for researchinvolving new biotechnologies. While their effortis focused on risk assessment for the release ofnovel organisms, several projects are focused ondeveloping biotechnology to cleanup hazardouswaste. Gulf Breeze has projects to develop or-ganisms to degrade trichloroethylene (TCE), to in-vestigate the biology of complex waste sites; toinvestigate the anaerobic dehalogenation of hydro-carbons; to develop a ‘(suicide plasmid” that wouldcause the organism to die once degradation of atarget compound was complete; and to facilitatethe transfer of metabolic pathways into neworganisms. In addition, Gulf Breeze is supportingresearch at the University of Illinois on the micro-bial degradation of 2,4,5-T, an active ingredientin Agent Orange (66). The total cost of these proj-ects was $373,000 in fiscal year 1987 (66).

The Hazardous Waste Engineering ResearchLaboratory (HWERL) in Cincinnati, OH, is the prin-cipal laboratory of the Office of Research and De-velopment responsible for developing and evalu-ating technologies for hazardous waste control.HWERL has been supporting projects in biodegra-dation for several years (28). HWERL, along withGulf Breeze, supports the 2)4,5-T work at theUniversity of Illinois (66). HWERL also has a smallbiosystems program investigating the enzymes ofthe white rot fungus, which have been shown toreduce dioxins and other pollutants (39) and sup-

ports a range of extramural research projects inbiodegradation. In addition, it is the lead labora-tory in the Biosystems Initiative, described pre-viously. The cost of these projects was about$850,000 in fiscal year 1987 (28).

The Robert S. Kerr Laboratory in Ada, OK, fo-cuses on groundwater research and has identi-fied a microbial process that may be capable ofcleaning up TCE from aquifers and groundwater.The process is different from that used for TCE-degradation at the Gulf Breeze labs. This processrelies on the ability of a group of naturally occur-ring microbes, called methanotrophs, to cooxidizetrichloroethylene and a variety of other halogen-ated organic compounds when methane, propane,or natural gas is added. Researchers at Kerr Lab-oratory have demonstrated degradation using soilcolumns and are conducting field and laboratorytests in cooperation with Stanford University, theUniversity of Oklahoma, and the Air Force (57).In the field tests, the bacteria degraded nearly 30percent of the TCE in groundwater (l). Kerr Lab-oratory is also working to develop mathematicalmodels for biosystems cleanups. The laboratoryalso has an active anaerobic biodegradation ef-fort underway, as well as studies on subsurfacemicrobiology.

EPA’s Water Engineering Research Laboratoryin Cincinnati supports several bioremediationprojects. Projects include the study of the geneticsof methanogens, with the long-term objective toimprove the rate and reliability of anaerobic diges-tion; the study of microbial binding proteins, par-ticularly the metallothionein enzyme, which isknown to bind cadmium; and a study on theprediction of the biodegradation of toxic com-pounds based on structure-activity relationships.The laboratory has also worked to develop a pro-tocol for evaluating bioaugmentation projects(106).

Microbial research at the Environmental Re-search Laboratory at Athens, GA, is concernedprimarily with the fate of environmental pollut-ants. Research on the degradation of chlorinatedcompounds in anaerobic environments is an in-tegral component of the in-house program. In addi-tion, a 3-year cooperative program with New YorkUniversity is looking at the stability of anaerobic

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consortia capable of degrading various organicpollutants (81).

EPA’s Office of Exploratory Research supportedfive extramural research projects (all at universi-ties) related to biological remediation systems fora 2-year total of $965)143 in 1986 and 1987. Theextramural projects all involve in situ treatment,thus the emphasis on biological systems, and in-clude bioenrichment with hydrogen peroxide, bio-degradation of chlorinated aliphatic solvents, andother projects (17).

From 1982 to 1987, EPA also selected biodegra-dation for 4 Superfund sites, out of a total of 41sites for which treatment technologies were used(102),

Cleanup of Federal Waste Sites

The Federal Government has been a substan-tial waste generator. The civilian Federal agencieshave at least 1,882 potentially hazardous wastesites but have studied only half of them to deter-mine whether cleanup is necessary. Of these, 1,326sites belong to the Department of Energy (DOE);1,061 of these were for the production of nuclearmaterials and weapons (5).

The Department of Defense (DoD) has also beena substantial waste generator, reporting 400 to800 sites, which need remediation at a cost of $5to $10 billion over the next 10 years. DoD sup-ports a substantial research and developmenteffort related to hazardous waste, in part as a re-sponse to the requirement to clean up its hazard-ous waste sites via their Installation RestorationProgram (IRP), which is analogous to the Super-fund. The DoD is collaborating with the EPA andDOE to develop demonstration projects at a totalcost of $5 million (DoD’s share is $1.953 million).A few of these relate to the use of biotechnology,according to the DoD program manager (27).

A significant portion of the DoD waste resultedfrom airplane engine cleaning solvents, airplanefuel spills, paint stripping, and nuclear waste. TheEnvironics Division of the Research and Develop-ment Directorate of the Air Force is the service’sprincipal laboratory for environmental researchand development and maintains the lead in theDoD for biotechnology research and coordination

with other Federal programs. The laboratory’swork focuses on hazardous waste reduction; re-covery and treatment of polluted soils; pollutedgroundwater treatment; and alternative energysources. The laboratory funds both intramuralprojects (some funded jointly by EPA) and ex-tramural programs, both in laboratories and atIRP sites. One project is funded jointly with DOEas a Small Business Innovation Research award.

The laboratory’s research includes a wide-ranging program of 24 projects encompassing airand groundwater, containment chemistry, micro-bial degradation, and waste treatment. In-houseresearch and program management staff includes38 people, 9 holding doctorates, with an annualbudget of $8 million. Six of the 24 projects usebiological treatment of contaminants and severalother projects provide background informationto support biological methodology. Laboratoriesat Tyndall Air Force Base are investigating biologi-cal degradation of TCE, dioxin, and organometal-lies. They are attempting to isolate and modifymicro-organisms capable of degrading contami-nants, with particular interest in mixed culturesystems and enhancement of conditions. Recom-binant DNA modifications are used in the labora-tory. Among other innovative technology projectsis a contract to Cornell University to examine theuse of aphrons, small (about 25 microns), stablebubbles, which serve both as a transport mecha-nism and as an oxygen source for biological agentsto clean up aquifers.

Other Federal Research Activities

The Department of Energy (DOE) supports someresearch and development related to biotechno-logical approaches to waste management. Withinthe Deep Subsurface Microbiology Research Pro-gram, DOE supports projects involving 15 in-tramural and extramural researchers investigat-ing microbial community structure and the factorsthat control microbial habitats and reactions atdepths of 30 to thousands of meters, the depthof many of the nation’s largest aquifers. Theseprojects are aimed at in situ degradation of or-ganic contaminants at DOE sites. The EcologicalResearch Division supports research on microbialfermentation of cellulose to methane and carbondioxide, the mechanisms by which plants metabo-

240

lize metals, and other plant processes. Throughthe DOE Small Business Innovation Research Pro-gram, five projects support bioenvironmental re-search and development. No studies on cost anal-yses of conventional versus biotechnologicalapproaches could be identified at DOE. DOE sup-ports some interagency research efforts with theAir Force and maintains contact with the LosAlamos and Idaho National Engineering Labora-tories (31)95,96).

DOE’s Idaho National Engineering Laboratoriesmaintains a biotechnology unit with an interdis-ciplinary program, comprising molecular genetics,bioseparations, bioprocessing, biohydrometal-lurgy, and biochemical engineering focused onbasic and applied microbiology relating to recov-ery of metal from ore and waste streams, removalof sulfur and metals from fossil fuels, solubiliza-tion and gasification of fossil fuels, degradationof toxic organic materials, and production and sep-aration of proteins and carbohydrates. The lab-oratory is supported by the Department of Interioras well as by DOE (41,97).

The National Aeronautics and Space Adminis-tration (NASA), through its Controlled EcologicalLife Support System (CELSS), supports work onwaste conversion as part of its focus on maintain-ing life processes and recycling technology inclosed systems. NASA also supports a limitedamount of research on the metabolism of exoticorganisms that live in unusual habitats, such assea vents (6).

The National Science Foundation (NSF) supportsabout 10 projects for $2.5 million that are directlyrelated to bioremediation of waste. One is a re-search center at the University of California atLos Angeles focused on engineering for hazard-ous substance control. The foundation also spon-sors workshops on bioremediation (68).

The Department of Interior conducts severalin-house projects on the bioleaching of manganeseand supports research at Morehouse College onmetallo-resistance. Interior, through the Bureauof Mines, also provides $500,000 to the Idaho Na-tional Engineering Laboratory for projects relatedto metals extraction and recovery and bio-assistedminerals processing.

The National Institute of Environmental HealthSciences has funded four research projects un-der authority granted in the Superfund Amend-ments and Reauthorization Act of 1986. Fundscome from the Superfund Trust Fund. Researchincludes developing organisms tailored to degradetoxic waste, developing combinations of appro-priate organisms, designing reactors, and defin-ing operating conditions.

The Department of Education, through its Di-vision of Higher Education Incentives, provideda grant of $488,000 in fiscal year 1987 to theUniversity of Tennessee at Knoxville to establisha Center for Environmental Biotechnology, whoseresearch focuses on environmental hazardouswaste degradation (78).

Private Sector Investment

Investment by the private sector in waste man-agement technologies is driven by regulation.Without regulation there would be little incen-tive for the major waste generators to minimizeor clean up waste, and there would be a muchsmaller market for waste management servicesand technologies. Regulations also determine whichwaste cleanup technologies can be used.

New and stricter regulations are driving up thecost of traditional waste management services.Service providers who can find cheaper or safermethods of disposing wastes will have a clearadvantage in today’s markets. However, mostwaste management companies are small and can-not afford substantial R&D expenditures. Someof the large waste generators, on the other hand,can and do support R&D efforts. Biotechnologyappears to be the subject of strong interest fromventure capitalists interested in investing in wastemanagement, although precise figures are notavailable.

An entire industry of small and not-so-smallcompanies has sprung up to respond to the regu-latory environment. These environmental compa-nies range from engineering-oriented to biotech-nically oriented, and a few are mixed. Twenty-onecompanies are listed in a recent directory as pro-viding biological treatment services for hazard-ous waste material management. While substan-

241

tially more companies are listed for chemicaltreatment and incineration (49 and 64 respectively)(40), the number of companies in biological treat-ment is significant and probably growing. A totalof 65 companies, including waste generators, havebeen identified as involved in waste managementbiotechnology (see app. D).

The level of R&D investment in biotechnologyfor waste management by each company variessignificantly. OTA has obtained figures for 1986R&D expenditures from 10 of these 65 compa-nies, which range from zero at one company toabout $3 million at another. The 10 companiesare all service providers, not waste generators.

In certain subspecialties, a substantial portionof even the most basic aspects of biotechnologyresearch is supported by private funds. For ex-ample, the most advanced work on genes to de-grade several of the chemicals listed on the Na-

tional Priority List sites is being conducted inindustrial laboratories.

Research and development costs at waste man-agement companies cannot be separated cleanlyfrom engineering costs and other costs of doingbusiness. The industry’s role is to provide scien-tific and engineering services, much of whichcould be considered R&D. Since each waste siteis unique, each requires some original researchbefore the best cleanup technology can be identi-fied. In many cases, new engineering solutionsmust be developed that will enable degradationto occur while controlling the release or migra-tion of contaminants. Some companies enter intoresearch and development limited partnerships,in which the waste management company andthe client (typically a waste generator) shareownership of whatever techniques are developed.R&D is thus based on what the client will buy.

RESEARCH AND DEVELOPMENT NEEDS

Research needs include microbial ecology,physiology, genetic expression and control,site engineering site characterization, and fea-sibility studies. Numerous microbes withdegradative capabilities have been identified andisolated. Other metabolic capabilities are stillneeded, however, and the isolation of newstrains of micro-organisms is an importantarea of research. Many of those organisms al-ready identified need refining and enhancementto be useful for field application; these activitiesrequire research investment. Site engineering andfeasibility studies require that the metabolizesproduced be understood and that the migrationof compounds in the environment be predicta-ble. Knowledge of surfactants and emulsifiers,often needed for the microbes to react with thetarget compound, is also required.

Basic Research Needs

The lack of knowledge of microbial physiol-ogy and ecology is a major scientific stumblingblock from the standpoints of efficacy, effi-ciency, economics, and environmental safety.While molecular biology has had several decades

of stable funding, microbial ecology has laggedbehind, and suddenly the need for informationabout microbial ecosystems is acute (24,71).

Identifying and selecting organisms to alterwaste continues to be an important area of en-deavor. While many of microorganisms have beenlocated with propitious characteristics, otherorganisms with even more advantages can prob-ably be found (22,63).

Interest in anaerobic degradation has increasedin recent years. Anaerobes may circumvent theneed for oxygen in some applications. Anaerobesare also likely to produce novel reactions, suchas the dechlorination reaction described previ-ously, that could provide key steps in degradingtarget chemicals. Knowledge of the biology andgenetic manipulation of anaerobes, however, lagsbehind that for aerobes (61),

For wastes that resist degradation by knownorganisms, engineering new organisms might beappropriate. To genetically engineer microbes forspecific waste problems, the genes of interest andtheir control elements need to be identified. Ascan be seen in table 11-1, many degradative organ-

242

isms have been identified, but the pathways, en-zymes, and genes involved in degradation areoften unknown. Genes for other processes, suchas production of energy, surfactants, and emulsi-fiers also need to be identified if these traits areto be genetically engineered.

Applied Research Needs

Keeping the degrading organism alive and ac-tive and providing access to target compounds arethe two most basic needs in applying biotechnol-ogy to pollution problems. Strategies include pro-viding oxygen and nutrients and exploiting mi-crobial symbiosis. The potential advantages ofcreating engineered organisms with all the requiredcapabilities versus creating mixed communitiesof specialist organisms are not known. However,researchers are reluctant to deal with engineeredorganisms when alternatives are available.

Biodegradation requires making the target com-pound available to the organisms. Pollutants fre-quently occur attached to solids, mixed as hydro-phobic and hydrophilic waste, or as low molecularweight semi-volatiles in groundwater, often mak-ing them inaccessible to microbes. Molecular andengineering strategies to make pollutants avail-able to organisms are poorly developed. Surfac-

tants and emulsifiers produced by naturally occur-ring organisms should be investigated.

Information on the characteristics and meas-urement of pollutants is only partly developed (76,104), especially with regard to chemically similarcompounds, called congeners. Extreme and var-ied concentrations of compounds, known as hotspots, complicate assessment (76). Measuringgroundwater contamination in situ, for example,is problematic (70).

Careful and thorough demonstration and evalu-ation studies of bioremediation techniques are alsorequired. Current practice frequently relies ona single line of evidence for the disappearance ofone pollutant and relies on samples from a fewspots in an uneven mixture. Lack of informationin this area leads to a lack of credibility regardingthe effectiveness of cleanup efforts. In at least onecase of putative degradation, for example, anorganism was thought to have degradative capa-bilities because a target compound disappearedfrom the medium in which the organism wasgrown. It turned out the compound had not beendegraded but absorbed by the organism, a usefulproperty but not one that actually degrades ordetoxifies the pollutant. Comparative data re-garding the relative efficacy economics, andenvironmental safety of biotechnical versusconventional methods are seriously lacking.

BARRIERS TO DEVELOPMENT OF THE TECHNOLOGY

Although the potential advantages of innova-tions in biotechnological approaches for wastemanagement are recognized, it is generally ac-cepted that the development of biotechnologyproducts for hazardous waste management is lag-ging behind product development in other sec-tors of the biotechnology industry, such as phar-maceutical and agricultural applications (104). Thebarriers to innovative applications lie in severalareas, including funding, regulations, personnel,and economics.

Funding and ProgrammaticImplementation

Technical and scientific barriers to biotechno-logical waste management are discussed in the

previous section on “Research and DevelopmentNeeds.” Knowledge gaps result from uneven fund-ing for basic research in certain fields, such asmicrobial ecology, and from the fragmented anduncoordinated nature of funding for R&D of bio-technological approaches to hazardous wastemanagement. Funding is fragmented for thesereasons:

Neither the public nor the private sector takesresponsibility for funding basic or generic ap-plied research in important areas. Microbialphysiology and ecology have not been wellsupported by any agency or other resource.Technical and scientific advancement of thewaste field is strongly linked to regulationsand to the funding programs of a single lead

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agency. The amount of funding available sup-ports only a few researchers and projects,and the available funding lacks a coherentprogram to develop the necessary technicaland scientific base in identified critical areas.In addition, EPA’s enforcement efforts andregulatory authority were in a state of fluxin the early 1980s (23), which reduced theprivate sector’s incentives for research (26).

problems With Private Investment

Waste management companies face a range ofdisincentives to investing in bioengineered ap-proaches to waste management, from regulatoryuncertainty to R&D expense. Waste managementcompanies focus development efforts on technol-ogies that have been developed by others and thatcan be purchased ready for commercialization,thus avoiding the R&D risk.

Waste companies also favor technologies inwhich the treatment times and effluent concen-trations can be predicted with reliability, evenwhen the costs are much higher, in order to re-duce potential liability. Bioengineered approachesare almost never as predictable, at least with cur-rent knowledge, as nonbiological alternatives (8,9).

Since much of the waste management andcleanup market involves the remediation of com-plex waste sites, companies may prefer to investin techniques better suited to handle complex mix-tures of waste. Complex waste sites are currentlybeyond the capabilities of biotechnological wastemanagement techniques.

Problems With Public Investment

Both researchers and industrial managers saythey believe that EPA does not provide clear man-agement with regard to developing the field scien-tifically and does not manage its programs froma broad enough perspective to give appropriateweight to biotechnological approaches. Questionsabout the best implementation of the programhave been raised many times (59)63,92)104)) buthave not been resolved. These include:

● developing clear standards,● developing assessment technologies to sup-

port implementing these standards, and

● conducting clear, comparative studies of bio-technology and conventional approaches tohazardous waste treatment to answer the ef-ficacy, economic, and safety questions thatface the field,

Regulatory programs have strongly directed thepatterns of the research conducted. As EPA’s ex-perience has been largely with land disposal andincineration, some believe that staff at the agencyare poorly equipped to deal with biotechnology.For example, access to federally designated sitesfor demonstration projects appears weighted infavor of nonbiological approaches (26,79,86,102).While many innovative nonbiological methods arealso worthy of testing and evaluation, biologicalmethods clearly will not be fully developed with-out additional testing and evaluation.

Funding by the EPA is insufficient and com-paratively unstable. The Agency is funding high-quality in-house research, but at a level too lowto develop biotechnology’s potential for hazard-ous waste detoxification. Unstable funding of ex-tramural projects, in particular, prevents initiat-ing long-term projects, For example, a leadingresearcher with demonstrated ability to produceorganisms tailored to degrade toxic substances be-lieves that he could develop a microorganism thatwould degrade dioxin (21)64). Development wouldrequire stable funding of $125)000 per year for5 to 7 years. The project would require a high-quality and experienced postdoctoral fellow, butthe researcher cannot in good faith recruit sucha person because even funded projects are sub-ject to cancellation by EPA. This project is not suit-able for students or postdoctoral fellows for ashort period, both because it requires dedicatedexpertise and because researchers at those stagesin their careers must have projects that produceresults in time for them to write a dissertationor secure a job. In addition, the toxicity of the com-pound being examined suggests the need for des-ignated research facilities with researchers spe-cially trained in necessary safety measures. Inshort, this project and others like it will not beaccomplished without a stable, long-term commit-ment (21).

Until the critical research areas are ad-dressed and performance standards areclearly established, cleanup claims offered by

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individual companies will lack credibility.Only studies conducted without conflict of in-terest will resolve efficacy, economic, and envi-ronmental safety questions.

Regulation

Regulation dictates what must be cleaned up,how clean it must be, and which cleanup meth-ods may be used. Thus, regulation determineswhat is developed for the waste field. Currently,regulation favors the use of contained cleanupmethods and the use of naturally occurring, in-digenous organisms. Although no recombinantorganism is ready for field trial, such an organ-ism eventually will be ready. However, fears ofregulatory barriers are discouraging research-ers from investigating genetic engineering asa means of developing novel, potentially ben-eficial, organisms.

Individual companies have reported great dif-ficulty in getting approval or support from EPAfor biological approaches or even access to sitesfor demonstration projects. Company research di-rectors and presidents have complained that EPAis biased toward nonbiological approaches, andthat it is extremely difficult to get regulators toconsider biological techniques (26,86).

In addition, HSWA defines land disposal to in-clude land treatment. Thus, with the onset of theLand Disposal Restrictions, RCRA-listed hazard-ous waste cannot be placed in or on the land foreventual biodegradation, even as a landfarmingexperiment, unless a petitioner can prove thewaste will not migrate for as long as it remainshazardous (109). Furthermore, obtaining theRCRA permit takes approximately 4 years. A re-search, development, and demonstration permitcan be obtained in about 8 months (109).

Regulatory resistance to bioremediationstems from a variety of factors. One prominentproblem is that bioremediation techniqueshave been oversold in the past, so the fieldlacks credibility. Many applications are newand do not have any history of effectiveness.A second problem involves time limitations:certain biological applications take longerthan incineration or excavation. Although they

may be cheaper or more thorough, bioremedia-tion techniques may be passed over due to thedesire to address the problem as quickly as possi-ble. In addition, performance standards have beenestablished only for land disposal and incinera-tion. Finally, engineers, who are often the regula-tors, may not be familiar with the biology involvedin these cleanup systems. EPA frequently does nothave adequate data for evaluating biotechnology.No regulations require companies to compile andsubmit data on alternative technologies. Also, com-panies often do not want anyone to know theyhave a hazardous waste problem and thus do notmake their information public.

Personnel

A serious impediment to greater use of bi-oremediation techniques is the lack of technicalunderstanding by regulatory enforcement person-nel (86) and by many EPA contractors involvedin waste management. In some cases, officials haverelied on bioremediation data from the 1970s (86)despite the numerous advances made in recentyears. Small businesses with waste problems havetestified to the reluctance on the part of regula-tors to accept the possibility that biodegradationworks (86).

Despite testimony from EPA scientists that bio-degradation may be applicable to many Superfundsites (86), EPA apparently does not see the needto increase its expertise in biology in the Super-fund program. Personnel with expertise in thebiological sciences constituted 25 of 1,643 full-timeequivalents in the Superfund program in fiscalyear 1986, or 2 percent of the total (105). An EPAwork force planning study concluded that Super-fund’s current and strong orientation toward engi-neering and physical/environmental sciences wasappropriate for future field operations. On thebasis of anticipated trends and changes in the pro-gram, the following occupation areas were re-ported to be underrepresented among Superfundstaff: hydrology, geology, and procurement andcontracts (105). Such a conclusion, if heeded, doesnot indicate that EPA will increase its expertisein the biological sciences and bioremediation tech-niques. An EPA administrator, however, has sug-gested that if the agency develops the necessary

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knowledge base in biotechnology, it is possible thatEPA would begin to recommend microbial degra-dation for RCRA corrective actions (109).

Since the application of biotechnology to haz-ardous waste management is relatively new, theinfrastructure for training is underdeveloped, Thefield requires bioengineers with interdisciplinarytraining in chemical and civil engineering and bi-ology as well as hydrogeologists with expertisein biology (16). Additional personnel with exper-tise in microbial ecology are also required (see ch.8) (87). Underfunding of microbial ecology in thepast has led to a shortage of expertise.

Economic Uncertainty

Whether conventional methods or biotechnol-ogies offer more economic potential to clean upwaste is under debate. Small, young biotechnol-ogy firms, in particular, cannot afford the highrisk, uncertain-payoff R&D efforts required to de-velop new technologies. Uncertainty about regu-lations and liability also discourages some firms

from pursuing innovative technologies. EPA is,however, addressing this problem with a smallconference to bring entrepreneurs, venture cap-italists, and EPA regulators together to clarify po-tential opportunities (43).

Theoreticians argue that, once the technologyis developed, biological degradation is alwayscheaper than chemical treatment or burning be-cause the organism supplies a catalyst that worksat ambient temperatures and, if designed well,generates its own energy, without additives. Othersargue that the high up-front cost of biotechnol-ogy research and development brings the eco-nomic projections for the two approaches closertogether.

The need to develop specific solutions for eachin situ cleanup adds to economic uncertainty. Eachsite has unique characteristics, ranging from thetype of contaminant to soil porosity to local poli-tics. A treatment system developed for one sitemay or may not be applicable to other sites.

ISSUE 1: Should research and development inbiotechnology for waste management bestimulated?

Option 1.1: Take no action.

Biotechnology for waste management has suf-fered in recent years from various funding andinstitutional barriers. Its development is in a rela-tive state of infancy compared with that of bio-technology in pharmaceuticals and agriculture.However, public and private interest in biotech-nology for waste management is increasing with-out specific congressional action. Nonetheless,without some initiatives, key research barriers arelikely to go unaddressed for several years or longerand adequate efficacy and efficiency demonstra-tions will not be carried out. Without specific ac-tion, the relevant agencies, in particular EPA, arenot likely to develop in-house scientific and man-agerial expertise for the assessment and regula-tion of bioremediation techniques.

Option 1.2: Increase funding for research in bio-degradation activities.

Increased funding for research and developmentin biotechnology for waste management couldbring attention to key research areas that are cur-rently bottlenecks in the application of the tech-nology, such as microbial physiology and ecology,genetic engineering of anaerobes, and the devel-opment of specific degradative pathways for keypersistent compounds, such as dioxin. Additionalfunds could also facilitate demonstration andevaluation projects, which require support fromgovernment or other disinterested parties if re-sults are to be unbiased and credible. For exam-ple, with funds to increase its expertise in biol-ogy, EPA would be better able to evaluate potentialresearch and development projects, demonstra-tion projects, and cleanup projects that use inno-vative biological methods. Without such funding,EPA will continue to fund only certain high pri-ority projects, and at relatively low levels.

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Option 1.3: Provide funds for training programsin disciplines related to waste management bio-technology, including microbial ecology, bio-hydrogeology, and environmental engineeringwith emphasis in biotechnology

The successful development of waste manage-ment biotechnology requires a wide range of ex-pertise in the waste management industry, in Stateand Federal regulatory agencies, and in researchuniversities. The predominance of personnel withexperience in land disposal and incineration inthe waste management field has left biological andother innovative technologies with an uphill bat-tle for acceptance. A training strategy should betwo-pronged, including both training current engi-neers in biology and the training of new environ-mental engineers in bioremediation.

Option 1.4: Clarify and enforce existing regula-tions regarding hazardous waste cleanup anddisposal.

The claim has been made that existing regula-tions are not being fully or uniformly enforced.Standards for cleanup are also not always clearand can change. Enforcing existing regulations willensure that more cleanup technologies are usedand will create incentives for developing morecost-effective technologies.

Option 1.5: Establish more stringent standards torequire permanently remediated and ecologi-cally sound sites.

Regulations drive the field of waste manage-ment. The current Superfund program estab-lished cleanup standards that emphasize perma-nent remedies. However, RCRA standards aregenerally less stringent. Also, performance stand-ards for bioremediation are less well developedthan those for incineration or land disposal. Suchperformance standards need to be clarified. Reg-ulations requiring permanent disposal of wastescould spur the development of technologies thatwill detoxify or destroy wastes and leave prod-ucts that can be returned to use in the envi-ronment.

ISSUE 2: Is the management and regulation ofbiological cleanup technologies adequateand appropriate?

Option 2.1: Take no action.

In the current system, both basic and appliedR&D is supported by a variety of public and pri-vate organizations, including several Federal agen-cies and private companies, However, neither thepublic nor private sector takes responsibility formany basic and strategically important researchand development areas. As a result, there is nocoherent program for overall management ofR&D and no strategy for developing the field. Keyresearch barriers are not being addressed, anddemonstration and evaluation projects are lack-ing. A limited number of innovative technologiesare being attempted through programs such asthe Superfund Innovative Technology Evaluation(SITE) program. without some management ini-tiative, the field cannot be expected to developin a timely manner. EPA’s Biosystems Initiative isa first step in this direction, but EPA’s principalfocus is regulation, not research and development.The present system may, however, protect thepublic from excessive or irresponsible applicationsof bioengineered cleanup approaches that couldexacerbate, without solving, the problem.

Option 2.2: Establish an interagency coordinat-ing body to create strategies for developing bio-logical cleanup technologies.

Currently, EPA, the National Science Founda-tion, the National Institutes of Health, the Depart-ment of Interior, the Department of Energy, andthe Department of Defense have significant pro-grams related to bioengineered waste cleanuptechnologies. An interagency coordinating groupcould identify major gaps in the research and workto prevent unnecessary duplication of efforts byFederal agencies. This option would not neces-sarily cost the government more money, norwould it ensure more money would go for re-search.

Option 2.3: Clarify regulations on the environ-mental application of genetically engineeredorganisms.

The private sector favors activities involvingnonengineered organisms due to the uncertaintysurrounding regulations for engineered organ-isms. While nonengineered organisms are fre-quently effective and appropriate, opportunities

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may be missed if genetic engineering is not ex-plored. Congress could encourage the use of ge-netically engineered organisms for waste cleanupby resolving the issues of deliberate release of

novel organisms. Adopting this option could leadto the creation of organisms with important newdegradative capabilities.

SUMMARY AND CONCLUSIONS

Biotechnology offers real possibilities for pro-viding permanent solutions to hazardous and non-hazardous environmental wastes. Most of its po-tential, however, remains unrealized due totechnical, institutional, economic, and perceptualbarriers. Progress is being made in each of theseareas.

Interest in waste management biotechnology isgrowing in the public and private sector, but thefield continues to suffer from a lack of personnelin regulatory agencies and in the waste manage-ment industry who understand biology. The fieldsuffers from a credibility problem brought aboutpartly by earlier claims that were not supportedby scientific fact and partly by the inertia in thewaste management community that favors tradi-tional methods of land disposal and incineration.In addition, much fundamental research is neededif biological techniques are to achieve high ratesof destruction on a broad range of toxic wastes.There is a strong need for demonstrating andevaluating innovative bioremediation techniques.EPA has begun to move in this direction with theSITE program and the proposed Biosystems Ini-tiative.

Many chemical waste sites are amenable to bio-degradation, and practical applications are under-way. Many other potential applications requiresubstantial amounts of research and developmentbefore field trials can be attempted. Much workwith naturally occurring or laboratory-selectedstrains can proceed, avoiding the perceptual andregulatory problems of using genetically engi-neered micro-organisms.

However, current applications of biological re-mediation techniques are generally suited to a

limited range of pollutants in accessible conditions.Expanding the range of wastes amenable to bio-remediation and degrading those wastes in theenvironments in which they occur to the very lowconcentrations needed may, ultimately, requiregenetic engineering. Engineering such microbeswill require a substantial investment in R&D, andmay face significant problems of public percep-tion. Regardless of how the organisms are derived,thorough knowledge of waste ecology, of degrada-tive intermediates and end products, and of themigration of both the organisms and the chemi-cals is needed.

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76-582 0 - 88 - 9 : QL 3

Appendixes

Appendix A

Dedicated Biotechnology Companies(DBCs) by State

Alabama

Southern Biotech AssociatesP.O. Box 26221Birmingham, AL 35226

Arizona

Bio Huma Netics201 Roosevelt Ave.Chandler, AZ 85226

Vega Biotechnologies,P.O. Box 11648Tucson, AZ 85734

Arkansas

Pel-Freeze Biological,P.O. Box 68Rogers, AR 72757

California

Inc.

Inc.

Advanced Genetic Sciences6701 San Pablo Ave.Oakland, CA 94608

Advanced Genetics ResearchInstitute

2220 Livingston St.Oakland, CA 94606

Agouron Institute505 Coast Blvd., SouthLa Jolla, CA 92037

American Biogenetic Corp.19732 Macarthur Blvd.Irvine, CA 92715

American Bionetics, Inc.4560 Horton St.Emeryville, CA 94608

American Qualex Int’l., Inc.14620 E. Firestone Blvd.La Mirada, CA 90638

Amgen1900 Oak Terrace LaneThousand Oaks, CA 91320

Antibodies, Inc.P.O. BOX 1560Davis, CA 95617

Applied Biosystems850 Lincoln Center Dr.Foster City, CA 94404

Automedix Sciences, Inc.9401 S. Vermont Ave., Suite B100Torrance, CA 90502

Behring Diagnostics10933 N. Torrey Pines Rd.La Jolla, CA 92037

Berkeley Antibody4131 Lakeside Dr., Suite BRichmond, CA 94806

Biogenex Laboratories6549 Sierra LaneDublin, CA 94568

Bio-Rad Laboratories, Inc.1414 Harbour Way SouthRichmond, CA 94804

Bio Research, Inc.11189 Sorrento ValleySan Diego, CA 92121

Bio-Response, Inc.1978 W. Winton Ave.Hayward, CA 94545

Biogrowth3065 Atlas Rd., Suite 1Richmond, CA 94806

Rd.

17

Bioprobe International, Inc.2842 Walnut Ave., Suite CTustin, CA 92680

Biosearch, Inc.2980 Kerner Blvd.San Rafael, CA 94901

BioSym Technologies10065 Barnes CanyonSan Diego, CA 92121

Rd., Suite A

Biotherapy Systems, Inc.291 N. Bernardo Ave.Mountain View, CA 94043

Biotrack430 Oakmead ParkwaySunny Vale, CA 94806

Breit Laboratories2510 Boatman Ave.W. Sacramento, CA 95691

Brunswick/Technetics4116 Sorrento Valley Rd.San Diego, CA 92121

BTX3742 Jewell St.San Diego, CA 92109

Calgene, Inc.1920 5th St.Davis, CA 95616

California Biotechnology, Inc.2450 Bayshore Frontage Rd.Mountain View, CA 94043

California Integrated Diagnostics1440 Fourth St.Berkeley, CA 94710

California Biotherapeutics10901 N. Torrey Pines Rd.La Jolla, CA 92037

Calzyme Laboratories, Inc.3443 Miguelito Ct.San Luis, CA 93401

Cetus Corp.1400 Fifty Third St.Emeryville, CA 94608

Chemicon International, Inc.100 Lomita St.El Segundo, CA 90245

Chiron Corp.4560 Horton St.Emeryville, CA 94608

255

256

Clontech Laboratories, Inc.4055 Fabian WayPalo Alto, CA 94303

Codon430 Valley Dr.Brisbane, CA 94005

Collagen Corp.2500 Faber Pl.Palo Alto, CA 94303

Cooper Development Co.3145 Porter Dr.Palo Alto, CA 94304

Cryschem, Inc.5005 LaMart Dr., Suite 204Riverside, CA 92507

Cygnus Research Corp.701 Galveston Dr.Redwood, CA 94063

Cytotech, Inc.11045 Roselle St.San Diego, CA 92121

Dako Corp.22 North Milpas St.Santa Barbara, CA 93103

Diagnostic Products Corp.5700 W. 96 St.Los Angeles, CA 90045

Dnax901 California Ave.Palo Alto, CA 94304

E-Y Laboratories, Inc.107 N. Amphlett Blvd.San Mateo, CA 94401

Engenics, Inc.3760 Haven Ave.Menlo Park, CA 94025

Enzon518 Logue Ave.Mountain View, CA 94043

Fermentec Corp.101 First St., Suite 490Los Altos, CA 94022

Gen-Probe, Inc.9880 Campus Point Dr.San Diego, CA 92121

Genenchem460 Point San Bruno Blvd.S. San Francisco, CA 94080

Genencor, Inc.180 Kimball WayS. San Francisco, CA 94080

Genentech460 Point San Bruno Blvd.S. San Francisco, CA 94080

Gensia Pharmaceuticals, Inc.11180 Roselle St., Suite ASan Diego, CA 92121-1207

Hana Biologics, Inc.8050 Marina Village ParkwayAlameda, CA 94501-1034

Hybritech, Inc.11095 Torreyana Rd.San Diego, CA 92121

Idec, Inc.11211 Sorrento Valley Rd., Suite HSan Diego, CA 92121

Idetek, Inc.1057 Sneath LaneSan Bruno, CA 94066

The Immune Response Corp.8950 Villa La Jolla Dr., Suite 1200La Jolla, CA 92037

Immunetech Pharmaceuticals11045 Roselle St.San Diego, CA 92121

Infergene Co.433 Industrial WayBenicia, CA 94510

Ingene, Inc.1545 17th St.Santa Monica, CA 90404

Intek Diagnostics, Inc.1450 Rollins Rd.Burlingame, CA 94010

Intelli-Genetics700 East El CaminoMountain View, CA 94040

International Enzymes, Inc.1667 S. Mission Rd.Fallbrook, CA 92028

International Plant ResearchInstitute

830 Bransten Rd.San Carlos, CA 94070

Kirin-AmgenAmgen, 1900 Oak Terrace LaneThousand Oaks, CA 91320

Lee Bimolecular Research Labs11211 Sorrento Valley Rd.San Diego, CA 92121

Liposome Technology1050 Hamilton Ct.Menlo Park, CA 94025

Lucky Biotech Corp.4560 Horton St.Emeryville, CA 94608

Microbio Resources6150 Lusk Blvd., Suite B105San Diego, CA 92121

Microgenics2341 Stanwell Dr.Concord, CA 94520

Molecular Biosystems, Inc.11180 Roselle St., Suite ASan Diego, CA 92121

Molecular Devices3180 Porter Dr.Palo Alto, CA 94034

Monoclinal Antibodies, Inc.2319 Charleston Rd.Mountain View, CA 94043

Moor Associates2190 Crestmoor Dr.San Bruno, CA 94066

Multiple Peptide Systems, Inc.558 Ford Ave., P.O. Box 5000Solana Beach, CA 92705

Mycogen5451 Oberlin Dr.San Diego, CA 92121

Neuroscience Inc.1520 McCandless Dr.Milpitas, CA 95035

Neushul Mariculture475 Kellogg WayGoleta, CA 93117

—

257

NMS Pharmaceuticals1533 Monrovia Ave.Newport Beach, CA 92663

Ocean Genetics140 Dubois St.Santa Cruz, CA 95060

Omni Biochem, Inc.221.5 Cleveland Ave.National City, CA 920.50

Organon Diagnostics316 Prospect St.La Jolla, CA 92037

Pacific Biotech Inc.8535 Commerce Ave.San Diego, CA 92121

Peninsula Laboratories, Inc.611 Taylor WayBelmont, CA 94002

Pharmatec, Inc.9401 S. Vermont Ave., Suite B100Torrance, CA 90502

Phytogen101 Waverly Ave.Pasadena, CA 91105

Plant Genetics, Inc.1930 Fifth St.Davis, CA 95616

Protein Design Labs3181 Porter Dr.Palo Alto, CA 94304

Quidel11077 N. Torrey Pines Rd.La Jolla, CA 92037

Research and DiagnosticAntibodies

P.O. BOX 7653Berkeley, CA 94707

Salutar, Inc.428 Oakmead ParkwaySunnyvale, CA 94806

Scripps Laboratories9950 Scripps Lake Dr.San Diego, CA 92131

Sepragen2126 Edison Ave.San Leandro, CA 94577

SibiaP.O. BOX 85200San Diego, CA 92138

Stratagene Cloning Systems3770 Tansy St.San Diego, CA 92121

Sungene Technologies3330 Hillview Ave.Palo Alto, CA 94304

Synbiotics Corp.11011 Via FronteraSan Diego, CA 92129

Synthetic Genetics

Corp.

10457 Roselle St, Suite ESan Diego, CA 92121

Syntro Corp.10655 Sorrento ValleySan Diego, CA 92121

Syva Co.900 Arastradero Rd.Palo Alto, CA 94304

Rd.

Techniclone International3301 South Harbor Blvd.Suite 101Santa Ana, CA 92704

Telios Pharmaceuticals2909 Science Park Rd.San Diego, CA 92121

Inc.

Three-M (3M) Diagnostic Systems1500 Salado Dr.Mountain View, CA 94043

Triton Biosciences, Inc.1501 Harbor Bay ParkwayAlameda, CA 94501

Vector Laboratories, Inc.30 Ingold Rd.Burlingame, CA 94010

Viagene, Inc.11180 Roselle St., Suite ASan Diego, CA 92121

Westbridge Research Group9920 Scripps Lake Dr.San Diego, CA 92131

Xoma Corp.2910 Seventh St.Berkeley, CA 94710

Xytronyx, Inc.6555 Nancy Ridge Dr.San Diego, CA 92121

Zoecon Corp.975 California Ave.Palo Alto, CA 94304

Zymed Laboratories, Inc.52 S. Linden Ave., Suite 4S. San Francisco, CA 94080

Colorado

Advanced Mineral Technologies5920 McIntyreGolden, CO 80403

Agrigenetics3375 Mitchell LaneBoulder, CO 80301

Amgen Development Corp.2045 32nd St.Boulder, CO 80301

Biostar Medical Products, Inc.5766 Central Ave.Boulder, CO 80301

Coors Biotech Products Co.(subsidiary of Coors Brewing Co. )Mail #CC150Golden, CO 80401

Genetic Engineering, Inc.136 Avenue and North

Washington St,PO-33554Denver, CO 80233

Synergen, Inc.1885 33rd St,Boulder, CO 80301

Synthetech5547 Central Ave.Boulder, CO 80301

Techometrics, Inc.1960 Sherrelwood CircleDenver, CO 80221

Connecticut

Agotek1465 Post Rd. East, PO-51 17Westport, CT 06881

American Diagnostic, Inc.111 North St.Greenwich, CT 06830

258

Biopolymers, Inc.309 Farmington Ave.Farmington, CT 06032

John Brown E&C Inc.P.O. Box 1432, 17 Amelia Pl.Stamford, CT 06904

ChimerixP.O. Box 976, 55 Nye Rd.Glastonbury, CT 06033

Deltown Chemurgic Corp.191 Mason St.Greenwich, CT 06830

Intl. Biotechnologies, Inc.275 Winchester Ave.P.O. BOX 9598New Haven, CT 06511

Microgene Systems400 Frontage Rd.West Haven, CT 06516

Molecular Diagnostics, Inc.400 Morgan LaneWest Haven, CT 06516

NOVO Labs, Inc.59 Danbury Rd.Wilton, CT 06897

Technology Management Group25 Science ParkNew Haven, CT 06511

University Genetics Co.1465 Post Road EastWestport, CT 06881

Xenogen1734 Storrs Rd.Mansfield, CT 06268

Delaware

Triad Technologies, Inc.308 W. Basin Rd.New Castle, DE 19720

District of Columbia

Alpha I Biomedical777 14th St., N. W., Suite 747Washington, DC 20005

Florida

Applied Genetics Labs.,3150 S. Babcock St.Melbourne, FL 32901

Inc.

Diamedix, Inc.2140 N. Miami Ave.Miami, FL 33127

Immunomed5910-G Breckenridge ParkwayTampa, FL 33610

Innovet3401 N. Federal HighwayBoca Raton, FL 33431

Life Sciences2900 72nd St., NorthSt. Petersburg, FL 33710

Molecular Genetic Resources6201 Johns Rd., Suite 8Tampa, FL 33634

Petroferm USA5400 First Coast Highway,

Suite 200Ferandina Beach, FL 32034

Viragen2201 W. 36th St.Hialeah, FL 33016

Georgia

Biosystems, Inc.762 U.S. Highway 78Loganville, GA 30249

Murex Corp.P.O. BOX 2003Norcross, GA 30071

Hawaii

Hawaii Biotechnology Group, Inc.99-193 Aiea Heights Dr.Aiea, HI 96701

Illinois

Ball Biotech Co.250 Town Rd.W. Chicago, IL 60185

Dekalb-Pfizer Genetics3100 Sycamore Rd.De Kalb, IL 60115

Petrogen, Inc.2452 East OaktonArlington Heights, IL 60005

United Agriseeds, Inc.P.O. Box 4011Champaign, IL 61820

Indiana

Agdia, Inc.1901 N. Cedar St.Mishawaka, IN 46545

BioProducts for Science, Inc.P.O. BOX 29176Indianapolis, IN 46229

Consolidated Biotechnology, Inc.1413 W. Indiana Ave.Elkhart, IN 46515

Iowa

Ambico, Inc.P.O. Box 522, Route 2Dallas Center, IA 50063

Kansas

Clinical Biotechnologies, Inc.11844 W. 85th St.Lenexa, KS 66214

Hazelton Research ProductsP.O. BOX 14848Lenexa, KS 66215

Monoclinal Production Int’l.Twentieth and Sydney Sts.Fort Scott, KS 66701

Syngene Products15 and Oak, P.O. Box 338Elwood, KS 66024

Louisiana

Helix Corp.635 Louisiana Ave.Baton Rouge, LA 70802

Imreg, Inc.144 Elk Pi., Suite 1400New Orleans, LA 70112

Microbe Masters11814 Corsey Blvd., Suite 285Baton Rouge, LA 70802

Maine

Agritech Systems, Inc.104 Fore St.Portland, ME 04101

Atlantic Antibodies10 Nonesuch Rd.Scarborough, ME 04704

259

Binax, Inc.95 Darling Ave.S. Portland, ME 04106

Immucell Corp.966 Riverside St.Portland, ME 04103

Ventrex Laboratories217 Read St.Portland, ME 01403

Maryland

Advanced Biotechnology, Inc.12150 Tech Rd.Silver Spring, MD 20904

American Biotechnology Co.7658 Standish P]., Suite 107Rockville, MD 20855

Andrulis Research Corp.7315 Wisconsin Ave., Suite 650NBethesda, MD 20814

BBL Microbiology Systems(Division of Becton-Dickinson &

co.)Box 243, 250 Schilling CircleCockeysville, MD 21030

Bionetics Research, Inc.1330 Piccard Dr.Rockville, MD 208.50

Biospherics4928 Wyaconda Rd.Rockville, MD 20852

Biotech Research Labs, Inc.1600 E. Gude Dr.Rockville, MD 20850

Biotronic Systems Corp.15225 Shady Grove Rd., Suite 306Rockville, MD 20850

Braton Biotech, Inc.1 Taft Ct.Rockville, MD 20850

Cellmark Diagnostics20271 Goldenrod LaneGermantown, MD 20874

ChemGen Corp.2501 Research Blvd.Rockville, MD 20850

Crop Genetics International7170 Standard Dr.Hanover, MD 21706

Design Engineering andManufacturing Co., Inc.

4906 46th Ave.Hyattsville, MD 20781

Diagnon Corp.11 Taft Ct.Rockville, MD 20850

DigeneBldg. 334University of MarylandCollege Park, MD 20742

Electro-Nucleonics, Inc.Cell Science Institute12050 Tech Rd.Silver Spring, MD 20904

Genex, Inc.16020 Industrial Dr.Gaithersburg, MD 20877

Gentronix, Inc.12150 Tech Rd.Silver Spring, MD 20904

Igen1530 E. Jefferson St.Rockville, MD 20852

Igene Biotechnology, Inc.9110 Red Branch Rd.Columbia, MD 21405

ImmuQuest Laboratories, Inc.2 Taft Ct., Suite 101Rockville, MD 20850

In Vitro International, Inc.611P Hammonds Ferry Rd.Linthicum, MD 21090

Inter-American ResearchAssociation

1160 Taft St.Rockville, MD 20850

Keystone Diagnostics, Inc.9062 Route 108Columbia, MD 21405

Life Technologies, Inc.8717 Grovemont CircleGaithersburg, MD 20877

Loftstrand Laboratories8042 Cessna Ave.Gaithersburg, MD 20879

Microbiological Associates5221 River Rd.Bethesda, MD 20816

Molecular Diagnostic Systems, Inc.3100 Wyman Park Dr.Baltimore, MD 21211

Molecular Toxicology335 Paint Branch Rd.College Park, MD 20742

Nordisk-U.S.A.3202 Monroe St., Suite 100Rockville, MD 20852

Oncor, Inc.209 Perry Parkway, Suite 7Gaithersburg, MD 20877

Pharma-Tech Research Corp.6807 York Rd.Baltimore, MD 21212

P & S Biochemical, Inc.7879 Cessna Ave.Gaithersburg, MD 20879

Survival Technology, Inc.8101 Glenbrook Rd.Bethesda, MD 20814

Synax, Inc.One Kendall Sq., Bldg. 700Cambridge, MA 02139

University Micro Reference Lab611P Hammonds Ferry Rd.Linthicum, MD 21090

Westinghouse Bioanalytic Systems2096 Gaither Rd. -

Rockville, MD 20850

Whittaker M.A. Bioproducts, Inc.Biggs Ford Rd.Walkersville) MD 21793

Massachusetts

A/G Technology Corp.34 Wexford St.Needham, MA 02194

Advanced Magnetics, Inc.45 Spenelli Pl.Cambridge, MA 02138

—

260

Amicon Corp.24 Terry Hill Dr.Danvers, MA 01923

Angenics100 Inman St.Cambridge, MA 02139

Applied Biotechnology80 Rogers St.Cambridge, MA 02142

Applied Protein Technologies, Inc.103 Brookline St.Cambridge, MA 02139

Bioassay Systems Corp.225 Wildwood Ave.Woburn, MA 01801

Biogen14 Cambridge CenterCambridge, MA 12142

Biomedical Technologies378 Page St.Stoughton, MA 02072

BioPURE136 Harrison Ave.Boston, MA 02111

Biotechnica International85 Bolton St.Cambridge, MA 02140

Biotechnology Development Corp.44 Mechanic St.Newton, MA 02164

Cambridge Bioscience Corp.35 South St.Hopkinton, MA 01748

Cambridge Medical Diagnostics575 Middlesex TurnpikeBillerica, MA 01865

Cambridge Neuroscience Research1 Kendall Square, Bldg. 700Cambridge, MA 01730

Cambridge Research Laboratory195 Albany St.Cambridge, MA 02139

Charles River BiotechnologyServices

251 Ballardvale St.Wilmington, MA 01887

Chemgenes925 Webster St.Needham, MA 02192

Ciba Corning Diagnostics Corp.One Kendall Square Bldg., Rm. 200Cambridge, MA 02139

Collaborative Research, Inc.2 Oak ParkBedford, MA 01730

Corning Biomedical Research1 Kendall Square, Bldg. 200Cambridge, MA 02139

Creative Biomolecules35 South St.Hopkinton, MA 01748

Damon Biotech, Inc.119 Fourth Ave.Needham Heights, MA 02194

E. 1. du Pont Products331 Treble Cove Rd.N. Billerica, MA 01862

Endogen451 D St., 8th FloorBoston, MA 02210

The Enzyme Center, Inc.36 Franklin St.Maiden, MA 02148

Genetics Institute, Inc.87 Cambridge Park Dr.Cambridge, MA 02140

Genetics International, Inc.50 Milk St.Boston, MA 02109

Genzyme Corp.75 Kneeland St.Boston, MA 02111

Hygeia Sciences330 Nevada St.Newton, MA 02160

Immunogene, Inc.124 Mount Auburn St., Suite 200Cambridge, MA 02138

Immunotech Corp.P.O. Box 860Boston, MA 02134

Instrumentation Laboratories113 Hartwell Ave.Lexington, MA 02164

Integrated Chemical Sensors44 Mechanic St.Newton, MA 02164

Integrated Genetics, Inc.31 New York Ave.Framingham, MA 01701

Karyon Technology, Ltd.333 Providence HighwayNorwood, MA 02062

Milligen75 Wiggins Ave.Bedford, MA 01370

Millipore Corp.80 Ashby Rd.Bedford, MA 01730

Moleculon Biotech230 Albany St.Cambridge, MA 02139

New England Biolabs, Inc.32 Tozer Rd.Beverly, MA 0915

Nova Biomedical Corp.200 Prospect St.Waltham, MA 02254

Parexel International Corp.55 Wheeler St.Cambridge, MA 02138

Penicillin Assays, Inc.36 Franklin St.Maiden, MA 02148

Repligen Corp.One Kendall Square, Bldg. 700Cambridge, MA 02139

Schering Corp.333 Providence HighwayNorwood, MA 02602

Sepracor, Inc.33 Locke Dr.Marlborough, MA 01752

Seragen, Inc.54 Clayton St.Boston, MA 02122

261

Serono Diagnostics, Inc.100 Longwater CircleNorwell, MA 02601

Serono Labs280 Pond St.Randolph, MA 02368

Swartz Associates15 Manchester Rd.Winchester, MA 01890

T-Cell Sciences840 Memorial Dr.Cambridge, MA 02139

Toxicon125 Lenox St.Norwood, MA 02062

Transformation Research, Inc.P.O. BOX 2411Framington, MA 01701

Travenol-Genetech Diagnostics600 Memorial Dr.Cambridge, MA 02139

Michigan

Covalent Technology Corp.P.O. Box 1868Ann Arbor, MI 48106

National Geno Sciences22150 W. Nine Mile Rd.Southfield, MI 48034

Neogen Corp.620 Lesher Pl.Lansing, MI 48912

Recomtex Corp.4700 S. Hagadorn, Suite 290East Lansing, MI 48823

Minnesota

Biotrol, Inc.11 Peavy Rd.Chaska, MN 55318

Endotronics, Inc.8500 Evergreen Blvd.Coon Rapids, MN 55433

Genesis Labs, Inc.5182 West 76th St.Minneapolis, MN 55435

Lifecore, Inc.315 27th St., S.E.Minneapolis, MN 55414

Molecular Genetics, Inc.10320 Bren Road EastMinnetonka, MN 55343

Protatek International, Inc.1491 Energy Park Dr.St. Paul, MN 55108

Missouri

Bioclinical Systems, Inc.5977 S.W. Ave.St. Louis, MO 63139

Invitron Corp.4649 Le Bourquet Dr.St. Louis, MO 63134

Montana

Gametrics, Ltd.Colony (Wyoming) RouteAlzada, MT 59311

RIBI Immunochem Research, Inc.P.O. Box 1409Hamilton, MT 59840

Nebraska

American Laboratories, Inc.4410 Omaha, NE 63127

Biologics Corp.2720 N. 84th St.Omaha, NE 68134

New Hampshire

Verax Corp.HC61 Box 6, Etna Rd.Lebanon, NH 03766

New Jersey

Agri-Diagnostics Associates2611 Branch PikeCinnaminson, NJ 08077

Alfacell Corp.225 Belleville Ave.Bloomfield, NJ 07003

Bio-Recovery, Inc.P.O. Box 38, 193 ParisNorthvale, NJ 07647

Bioconsep, Inc.RD 3, Homestead Rd.Bldg. 5, Unit 9Belle Mead, NJ 08502

Biomatrix, Inc.488 Hobart Rd.North Brunswick, NJ 08902

Biotest Diagnostics Corp.6 Daniel Rd., EastFairfield, NJ 07006

Chemical Dynamics Corp.P.O. Box 395South Plainfield, NJ 07080

Cistron Biotechnology, Inc.10 Bloomfield Ave., Box 2004Pine Brook, NJ 07058

Clinical Sciences, Inc.30 Troy Rd.Whippany, NJ 07981

Cytogen Corp.201 College Rd., EastPrinceton, NJ 08540

DNA Plant Technology Corp.2611 Branch PikeCinnaminson, NJ 08077

Electro-Nucleonics, Inc.350 Passaic Ave.Fairfield, NJ 07006

Emtech Research15 W. Park Dr.Mount Laurel, NJ 08054

Enzon, Inc.300-C Corporate Ct.S. Plainfield, NJ 07080

Glen Mills, Inc.203 Brookdale St.Maywood, NJ 07607

Immunomedics, Inc.5 Bruce St.Newark, NJ 07103

Inter-Cell Technologies, Inc.422 Route 206, Suite 143Somerville, NJ 08876

262

Interferon Sciences, Inc.783 Jersey Ave.New Brunswick, NJ 08901

Liposome Company, Inc.One Research WayPrinceton, NJ 08540

Marcor Development Corp.206 Park St.Hackensack, NJ 07601

Pharmacia Biotechnology Group800 Centennial Ave.Piscataway, NJ 08854

Queue Systems, Inc.P.O. BOX 5 3 6 6North Branch, NJ 08876

Seapharm, Inc.79 I Alexander Rd.Princeton, NJ 08540

Unigene Laboratories, Inc.110 Little Falls Rd.Fairfield, NJ 07006

New Mexico

Summa Medical Corp.4272 Balloon Park Rd., N.E.Albuquerque, NM 87109

New York

An-Con Genetics1 Huntington QuadrangleMelville, NY 11747

Applied MicrobiologyBrooklyn Navy Yards Bldg. 5Brooklyn, NY 11205

Bionique Labs, Inc.Bloomingdales Rd., Route 3Saranac Lake, NY 12983

Biotechnology General Corp.375 Park Ave.New York, NY 10152

Brain Research, Inc.46 E. 91 St.New York, NY 10028

Cellular Products688 Main St.Buffalo, NY 14202

Charles688 Main St.Buffalo, NY 14202

Diagnostic Technology, Inc.240 Vanderbilt Motor ParkwayHauppauge, NY 11788

Enzo Biochem, Inc.325 Hudson St.New York, NY 10013

Exovir, Inc.111 Great Neck Rd., Suite 607Great Neck, NY 11021

Genetic Diagnostics Corp.160 Community Dr.Great Neck, NY 11021

Imclone Systems, Inc.180 Varick St.New York, NY 10014

Intra Gene International, Inc.987 Elliott Dr.Lewiston, NY 14092

Lifecodes Corp.4 Westchester PlazaElmsford, NY 10523

Nuclear and Genetic172 Brook Ave.

Technology

Deer Park, NY 11729

Nygene Corp.One Odell PlazaYonkers, NY 10701

Oncogene Science, Inc.222 Station Place N., Room 301Mineola, NY 11501

Praxis Biologics30 Corporate Woods, Suite 300Rochester, NY 14623

Sulzer Biotech Systems230 Crossways Park Dr.Woodbury, NY 11797

United Biomedical, Inc.2 Nevada Dr.Lake Success, NY 11042

North Carolina

BiothermP. O. Box 1409Research Triangle Park, NC 27709

Embrex, Inc.401 Oberlin Rd.Raleigh, NC 27605

Environmental Diagnostics, Inc.P. O. Box 908, 2990 Anthony Rd.Burlington, NC 27215

Maricultura, Inc.P.O. Drawer 565Wrightsville, NC 28480

Mycosearch, Inc.P.O. Box 941Chapel Hill, NC 27514

Organon Teknika800 Capitol Dr.Durham, NC 27713

Ohio

Agrigenetics Corp.29400 Lakeland Blvd.Wickliffe, OH 44092

Enzyme Technology Corp.783 U.S. 250 E., Route 2Ashland, OH 44805

North Coast Biotechnology, Inc.19701 S. Miles Rd.Warrensville Heights, OH 44128

Ricerca, Inc.7528 Auburn Rd., Box 100Gainesville, OH 44077

United States Biochemical Corp.26111 Miles Rd.Cleveland, OH 44128

Oregon

American Bioclinical4432 S.E. 16th Ave.Portland, OR 97202

Antiviral, Inc.249 S.W. AveryCorvallis, OR 97333

Bend Research, Incorp.64550 Research Rd.Bend, OR 97701

Bentech Laboratories635 Water Ave. EastAlbany, OR 97321

263

Epitope, Inc.15425-E Southwest Koll ParkwayBeaverton, OR 97006

Pennsylvania

Biochem Technology, Inc.66 Great Valley ParkwayMalvern, PA 19355

Biological Energy Corp.P.O. Box 766, 2650 Eisenhower

Ave ,Valley Forge, PA 19482

Bioscience Management, Inc.BFTC-South Mountain Dr.Bethlehem, PA 18015

C e n t o c o r244 Great Valley Parkway

M a l v e r n , P A 1 9 3 5 5 -

Cytox Corp.954 Marcon Blvd.Allentown, PA 18103

Du Pent Biosystems368 Turner WayAston, PA 19014

Ecogen Inc.2005 Cabot Blvd. WestLanghorne, PA 19047-181O

Jackson Immunoresearch Lab872 Baltimore PikeWest Grove, PA 19390

Polybac Corp.954 Marcon Blvd.Allentown, PA 18103

Rhode Island

Scott Laboratories771 Main St.Fiskville, RI 40182

South Carolina

Fluor DanielDaniel Bldg.Greenville, SC 29602-2170

Tennessee

Biotherapeutics, Inc.3,57 Riverside Dr.Franklin, TN 37064

Texas

Bethyl Labs, Inc.P.O. BOX 8 5 0Montgomery, TX 77356

Biotics Research Corp.4850 Wright Rd., Suite 150Stafford, TX 77047

Brown and Root, Inc.P.O. Box 3Houston, TX 77001

Detox Industries12919 Dairy AshfordSugar Land, TX 77478

Gamma Biological, Inc.3700 Mangum Rd.Houston, TX 77092

Granada Genetics Corp.10900 Richmond Ave.Houston, TX 77242

Houston Biotech3606 Research Forest Dr.The Woodlands, TX 77380

Hyclone, Inc.P.O. Box 3190Conroe, TX 77305

Immuno Modulators Labs, Inc.10521 Corporate Dr.Stafford, TX 77477

Inland LaboratoriesP.O. BOX 180456Austin, TX 78718

Kallestad Laboratories1120 Capital of Texas Highway, SO.Austin, TX 78746

Monoclonetics International, Inc.18333 Egret Bay Blvd., Suite 270Houston, TX 77058

O.C.S. LabsBOX 2868Denton, TX 76202

Utah

Biomaterials International, Inc.P.O. Box 8852, 420 Chipeta WaySuite 160Salt Lake City, UT 84108

Hyclone Laboratories1725 S. State Highway 8991Logan, UT 84321

NPI417 Wakara WaySalt Lake City, UT 84108

Virginia

Flow Laboratories, Inc.7655 Old Spring House Rd.McLean, VA 22102

Glen Research Corp.P.O. Box 1047487 Carlisle Dr., Suite AHerndon, VA 22070

Hazelton Biotechnologies9200 Leesburg TurnpikeVienna, VA 22180

Interleukin-2413 N. Washington St.Alexandria, VA 22313

Meloy Laboratories, Inc.6715 Electronic Dr.Springfield, VA 22151

Washington

Bio Techniques Labs., Inc.15555 N.E. 33rd St., Biotech Rd.Redmond, WA 98052

Biocontrol Systems21414 68th Ave., SouthKent, WA 98032

Biomed Research Labs, Inc.1115 E. Pike St.Seattle, WA 98122

Cyanotech Corp.18748 142nd Ave., N.E.Woodinville, WA 98072

Ecova Corp.3820 159th Ave., N.E.Redmond, WA 98052

Genetic Systems Corp.3005 First Ave.Seattle, WA 98121

Immunex Corp.51 University St.Seattle, WA 98101

264

IMRE Corp.130 5th Ave., NorthSeattle, WA 98109

NEORX Corp.410 W. Harrison St.Seattle, WA 98119

Oncogen3005 First Ave.Seattle, WA 98121

R & A Plant/Soil, Inc.24 Pasco Kahlotus Rd.Pasco, WA 99301

Solomon Park ResearchLaboratories

12815 N. E. 124th StKirkland, WA 98034

Zymogenetics, Inc.2121 N. 35th St.Seattle, WA 98103

West Virginia

Allelic BiosystemsRt. 1, BOX 230

Suite I

Kearneysville, WV 25430

Wisconsin

Agracetus8520 University Ave.Middleton, WI 53562

AgrecoRoute 4Viroqua, WI 54665

Agrigenetics Advanced Science Co.5649 East Buckeye Rd.Madison, WI 53716

American Breeders ServiceP.O. Box 459, Route 1DeForest, WI 53532

American Genetics Inc.7685 Mineral Point Rd.Verona, WI 53593

Anaquest2005 W. Beltline HighwayMadison, WI 53718

Bio-Technical Resources, Inc.1035 S. 7th St.Manitowoc, WI 54220

Epicenter2131 Kendall Ave.Madison, WI 53705

Genetic Designs, Inc.5146 Anton Dr.Madison, WI 53719

Hazelton Biotechnologies Corp.3301 Kinsman Blvd.Madison, WI 53704

Incell Corp.1600 W. CornellMilwaukee, WI 53209

Knight Hollow Nursery,2433 University Ave.Madison, WI 53705

Inc.

Molecular Biology Resources, Inc.5520 W. Burleigh St.Milwaukee, WI 53210

Pharmacia P-L Biochemical Inc.2202 N. Bartlett Ave.Milwaukee, WI 53202

Promega Biotech2800 South Fish Hatchery Rd.Madison, WI 53711

Universal Bioventures Corp.6143 North 60th St.Milwaukee, WI 53218

Appendix B

Major CorporationsInvesting in Biotechnology

Abbott LaboratoriesAbbott ParkN. Chicago, IL 60064

Allied Chemical Corp.Columbia Rd. & Park Ave.P.O. BOX 2245RMorristown, NJ 07960

Allied-Signal, Inc.Columbia Rd. & Park Ave.P.O. 1021RMorristown, NJ 07960

American Cyanamid Co.P.O. Box 400Princeton, NJ 08540

American Home Products685 Third Ave.New York, NY 10017

American Hospital Supply Corp.one American PlazaEvanston, IL 60201”

Amoco Corp.P.0. Box 400, MS B-1Naperville, IL 60566

Ares-Serono Laboratories280 Pond St.Randolph, MA 02368

Baxter Travenol Labs, Inc.One Baxter ParkwayDeerfield, IL 6001.5

Becton Dickinson & Co.1 Becton Dr.Franklin Lake, NJ 07417

Bio-Rad Laboratories2200 Wright Ave.Richmond, CA 94804

Boehringer Ingleheim90 E. RidgeP.O. BOX 368Ridgefield, CT 06877(Overseas Only)

Corp.

Boehringer-Mannheim Corp.9115 Hague Rd.Indianapolis, IN 46250

Bristol-Meyers100 Forest Ave.Buffalo, NY 14213

Burroughs Wellcome Co.3030 Cornwallis Rd.Research Triangle Park, NC 27709

Campbell Institute for Research &Technology

Campbell Soup Co.Campbell Rd.Camden, NJ 08101

CIBA GEIGY Corp.556 Morris Ave.Summit, NJ 07901(Overseas only)

Celanese Research Co.86 Morris Ave., Box 1000Summit, NJ 07901

Corning GlassworksHoughton ParkCorning, NY 14831

Del Monte USAAgricultural] Biotechnology

ProgramP.O. BOX 36San Leandro, CA 94577

Diamond ShamrockBiotechnology ResearchSDS Biotech Corp.P.0, BOX 348Painsville, OH 44077

The DOW Chemical Co.1701 BuildingMidland, MI 48674

E. I. du Pont de Nemours Co.Barley Mill PlazaWilmington, DE 19898

Eastman Kodak Co.Bio-Products DivisionRochester, NY 14650

Ecogen Inc.2005 Cabot Blvd. WestLanghorne, PA 19047-1810

Eli Lilly & Co.Lilly Corporate CenterIndianapolis, IN 46285

Exxon180 Park Ave.Florham Pk, NJ 07932

FMC Corp.2000 Market St.Philadelphia, PA 19103

General ElectricR&D Laboratories, 1 River Rd.Schenectady, NY 12345

General Foods Corp.250 North St.White Plains, NY 10625

Gist-Brocades USA, Inc.555077 Center Rd.P.O. BOX 241068Charlotte, NC 28224(Overseas only)

Glaxo Inc.5 Moore Dr., Box 13398Research Triangle Park, NC 27709

W. R. Grace & Co.7379 Route 32Columbia, MD 21044

Hercules R&DHercules PlazaWilmington, DE 19894

Hoffman-La Rouche Inc.340 Kingsland St.Nutley, NJ 07110

265

266

Intl. Mineral & Chemical Corp.2315 Sanders Rd.Northbrook, IL 60062

Johnson & Johnson501 George St.New Brunswick, NJ 08903

Key Pharmaceuticals18425 N.W. 2nd Ave.BOX 694307Miami, FL 33269(subsidiary of Schering-Plough)

Kimberly-Clarke1400 Holcomb Bridge Rd.Roswell, GA 30076

Life Technologies Inc.8717 Grovemount CircleGaithersburg, MD 20877

Litton Bionetics, Inc.1330 A. Piccard Dr.Rockville, MD 20850

Lubrizol Enterprises29400 Lakeland Blvd.Wickliffe, OH 44092

Merck and Company, Inc.126 East Lincoln Ave.Rahway, NJ 07065

Miles Laboratories, Inc.1127 Myrtle St.P.O. Box 40Elkhart, IN 46515

Miller Brewing Co.3939 W. Highland Blvd.Milwaukee, WI 53201

Monsanto Agricultural Co.800 N. Lindbergh Blvd.St. Louis, MO 63166

Natl. Distillers & Chemical Corp.11500 Northlake Dr.P.O. BOX 429550Cincinnati, OH 45249

New England Nuclear Corp.549 Albany St.Boston, MA 02118

Norwich Eaton Pharmaceuticals,Inc.

Procter & Gamble Co.Cincinnati, OH 45201(subsidiary of Procter & Gamble

Olin Corp.275 S. Winchester Ave.New Haven, CT 06511

Ortho Pharmaceutical Corp.Rt. 202Raritan, NJ 08869(division of Johnson & Johnson)

Pennwalt Corp.P.O. Box 1710Rochester, NY 14603

Pfizer Inc.Eastern Point Rd.Groton, CT 06340

Phillips Petroleum Co.15C4 Phillips Bldg.Bartlesville, OK 74004

Pioneer Hi-Bred Intl., Inc.Plant Breeding DivisionB OX 8 5Johnston, IA 50131-0085

RJR Nabisco, Inc.1100 Reynolds Blvd.Winston-Salem, NC 27102

Rohm & Haas Co.Independence Mall WestPhiladelphia, PA 19105

Rorer Group Inc.500 Virginia Dr.Ft. Washington, PA 19034

Sandoz, Inc.59 Route 10East Hanover, NJ 07936

Schering-Plough Corp.One Giralda FarmsMadison, NJ 07940-1000

Smith Kline & French Labs.1500 Spring Garden St.P.O. BOX 7929Philadelphia, PA 19101(division of Smith Kline Beckman)

Squibb Corp.P.O. Box 4000Princeton, NJ 08543-4000

The Standard Oil Co.200 Public SquareCleveland, OH 44115-2375

Syntex Corp.3401 Hillview Ave.P.O. BOX 10850Palo Alto, CA 94304

Texaco Research CenterTexaco Inc.Research & Environmental Studies

Div.P.O. Box 509Beacon, NY 12508

3M3M Center Building220-4 NE-01St. Paul, MN 55144

Universal Foods Corp.433 East Michigan St.Milwaukee, WI 53202

The Upjohn Co.7000 Portage Rd.Kalamazoo, MI 49001

Weyerhauser Co.Tacoma, WA 98477

Wyeth LaboratoriesP.O. BOX 8299Philadelphia, PA 19101(division of AmericanHome Products)

Appendix C

Training and Education Initiativesin Biotechnology

Note: The programs and degrees listed here do not include the more traditional disciplines that contributeto biotechnology, such as genetics, molecular biology, microbiology, and chemical engineering, though most ofthe universities listed here offer those degrees as well. Listing here does not constitute any endorsement orcertification by OTA.

California

*California Polytechnic State UniversityBiochemical EngineeringSan Louis Obispo, CA 93407Degrees offered: B.S./M.S.Year of Initiation: 1986

California State University, HaywardCertificate Program in BiotechnologyDepartment of Biological SciencesHayward, CA 94542Degrees offered: M.S. with certificate in

BiotechnologyYear of Initiation: 1986

California State University, Los AngelesCertificate Program in BiotechnologyDepartment of Biology5151 State University Dr.Los Angeles, CA 90032Degrees offered: Graduate Certificate in

BiotechnologyYear of Initiation: 1987

San Diego State UniversityProgram for Biotechnology

ResearchMolecular Biology InstituteSan Diego, CA 92182

Education and

Degrees offered: Certificate in Recombinant DNA(1983); Certificate in Protein Engineering (1988);M.A. in Biotechnology and Certificate inAgricultural Biotechnology (pending approval).

Year of Initiation: 1980

San Diego State UniversityCalifornia State University System Program for

Biotechnology Education and ResearchMolecular Biology InstituteSan Diego, CA 92182-0328Degrees Offered: NoneYear of Initiation: 1987

San Francisco State UniversityGenetic Engineering CertificateDepartment of BiologySan Francisco, CA 94132Degrees Offered: CertificateYear of Initiation: 1983

University of California, DavisBiotechnology ProgramCollege of AgricultureDavis, CA 95616Degrees Offered: B. S.,

disciplinesYear of Initiation: Not

District of Columbia

Catholic University ofCenter for Advanced

Molecular Biology

and Environmental Science

M. S., Ph.D. in various

Applicable

AmericaTraining in Cell and

Room 103 McCort-Ward BuildingWashington, DC 20064Degrees Offered: NoneYear of Initiation: 1982

Florida

*University of FloridaFlorida Biotechnology R & D Institute1 Progress Blvd.P.O. BOX 26Alachua, FL 32615Degrees Offered: NoneYear of Initiation: 1987

*University of FloridaInterdisciplinary Center for Biotechnology

Research1301 Fifield HallGainesville, Florida 32611Degrees Offered: NoneYear of Initiation: 1987

“Sur\yv infwmatwn not prmicfed by p rogram to 0’[’4.

76-582 0 - 88 - 10 : QL 3 267

—.

268

*University of South FloridaBiotechnology TracksTampa, FL 33620Degrees Offered: Biotechnology Tracks in

Chemical Engineering and Biology; CombinedB.S./M.S. in Biotechnology is planned

Year of Initiation: 1985

Georgia

*University of GeorgiaBiotechnology CenterAthens, GA 30602Degrees Offered: NoneYear of Initiation: 1982

Illinois

University of Illinois—Urbana/ChampaignBiological Engineering Program and Bioprocess

Engineering Research LaboratoryBioprocess Engineering Laboratory Committee208 North RomineUrbana, IL 61801Degrees offered: M.S. and Ph.D. in Biological

Engineering (planned)Years of Initiation: Research (1986); Engineering

Program (1988)

Iowa

*Iowa State UniversityBiotechnology ProgramOffice of Biotechnology1301 AgronomyIowa State University of Science and TechnologyAmes, IA 50011Degrees offered: noneYear of Initiation: 1984

University of IowaBiocatalysis: A Graduate Program in

BiotechnologyCollege of PharmacyIowa City, IA 52242Degrees Offered: No specific biotechnology degreeYear of Initiation: 1983

University of IowaBiochemical Engineering/BiotechnologyDepartment of Chemical & Materials EngineeringIowa City, IA 52242Degrees offered: MS., Ph.D. in Chemical and

Materials Engineering with emphasis inBiochemistry/Biotechnology

Year of Initiation: 1985

“Survey information not provided by program to OTAaThe Department of Applied Biological Sciences at the Massachusetts insti-

tute of Technology is being phased out.

University of Iowa Medical SchoolIowa Biotechnology Training ProgramDepartment of MicrobiologyIowa City, IA 52242Degrees Offered: No specific biotechnology degreeYear of Initiation: 1984

Kentucky

University of KentuckyBiotechnology Undergraduate DegreeDepartment of Biochemistry800 Rose St.Lexington, KY 40536Degrees Offered: B.S. in Biosciences/BiotechnologyYear of Initiation: 1987

Maryland

University of Maryland, Baltimore CountyMaster of Science in Applied Molecular BiologyApplied Molecular BiologyDepartment of Biological SciencesCatonsville, MD 21228Degrees offered: M.S., 5-year B.S./M.S.Year of Initiation: 1981

Massachusetts

*Becker Junior CollegeBiotechnician Program3 Paxton St.Leicester, MA 01524Degrees Offered: A.A.S.Year of Initiation: 1988

Massachusetts Institute of Technologya

Biochemical EngineeringDepartment of Applied Biological SciencesMIT Room 20A-207Cambridge, MA 02139Degrees Offered: M.S. and Ph.D. in Biochemical

EngineeringYear of Initiation: 1955

Massachusetts Institute of TechnologyBiotechnology Process Engineering CenterBiotechnology Process Engineering CenterRoom 20A-207Cambridge, MA 02139Degrees Offered: NoneYear of Initiation: 1985

269

*Metropolitan CollegeBoston UniversityBiotechnology Program755 Commonwealth Ave.Boston, MA 02215Degrees offered: A.A.S.Year of Initiation: 1987

Tufts UniversityBiotechnology Engineering CenterPearson Building P-103Medford, MA 02155Degrees offered: B.S./M.S., MS., Ph.D. in

Biochemical/Chemical Engineering; Certificateprogram in biotechnology processing

Year of Initiation: 1986

Worcester polytechnic InstituteBiotechnologyDepartment of Biology and BiotechnologyWorcester, MA 01609Degrees offered: B.S. and M.S. in biotechnologyYear of Initiation: 1982

Michigan

Ferris State CollegeBiotechnology Emphasis, B. S., Applied BiologyDepartment of Biological SciencesBig Rapids, MI 49307Degrees Offered: B. S., Applied BiologyYear of Initiation: 1988

Minnesota

University of MinnesotaProgram in Microbial EngineeringB O X 1 9 6School of Medicine420 Delaware St., S.E.Minneapolis, MN 55455Degrees Offered: M.S. in Microbial EngineeringYear of Initiation: 1984

University of MinnesotaInstitute for Advanced Studies in Biological

Process Technology240 Gortner Laboratory1479 Gortner Ave.St. Paul, MN 55108Degrees Offered: Ph.D. minor in Biological Process

Engineering is under developmentYear of Initiation: 1985

Montana

Montana State UniversityInstitute for Biological and Chemical Process

AnalysisBozeman, Montana 59717Degrees Offered: NoneYear of Initiation: 1983

Nebraska

Central Community CollegeBiotechnology ProgramP.O. BOX 1024Hastings, NE 68901Degrees Offered: A.A.S.Year of Initiation: 1986

New Jersey

*Rutgers UniversityBiochemical EngineeringDepartment of Chemical and Biochemical

EngineeringP.O. Box 909Piscataway, NJ 08854Degrees Offered: B. S., M. S., and Ph.D. in

Biochemical EngineeringYear of Initiation: 1970

*Rutgers UniversityCertificate in BiotechnologyDepartment of Chemical and Biochemical

EngineeringP.O. Box 909Piscataway, NJ 08855Degrees offered: Certificate in BiotechnologyYear of Initiation: 1982

*Rutgers UniversityCenter for Advanced Biotechnology and

MedicineP.O. Box 759Piscataway, NJ 08854Degrees Offered: NoneYear of Initiation: 1986

Rutgers UniversityShort Courses in BiotechnologyCook CollegeOffice of Continuing Professional EducationP.O. BOX 231New Brunswick, NJ 08903Degrees Offered: NoneYear of Initiation: 1984

‘Sutney Information not pro\ided t)} program to OTA

270

Rutgers UniversityBiotechnologyCook CollegeDepartment of Biochemistry and MicrobiologyLipman Hal]New Brunswick, NJ 08903Degrees Offered: B.S. in Biotechnology (pending

approval)Year of Initiation: 1986

New York

Cornell UniversityCornell Biotechnology ProgramBaker LaboratoryIthaca, NY 14853Degrees offered: NoneYear of Initiation: 1983

*Monroe Community CollegeBiotechnology Program1000 E. Henrietta Rd.Rochester NY 14623Degrees Offered: A.A.S.Year of Initiation: 1983

Rochester Institute of TechnologyBiotechnologyDepartment of BiologyOne Lomb Memorial Dr.Rochester, NY 14623Degrees Offered: B.S. in BiotechnologyYear of Initiation: 1983

*State University of NewBiotechnology ProgramAlfred, NY 14802Degrees Offered: A.A.S.Year of Initiation: 1986

*State University of New

York, Alfred

York, BuffaloCenter for BiotechnologySchool of Medicine462 Grieder St.Buffalo, NY 14215Degrees offered: NoneYear of Initiation: 1984

State University of New York, FredoniaBachelor of Science Major, Recombinant Gene

TechnologyDepartment of BiologyFredonia, NY 14063Degrees Offered: B.S., Recombinant Gene

TechnologyYear of Initiation: 1983

State University of New York, Plattsburgh/MinerInstitute

In Vitro Cell Biology and BiotechnologyMiner CenterChazy, NY 12921Degrees Offered: B.S. and M.A.Year of Initiation: 1980

State University of New York, Stony BrookCenter for Biotechnology130 Life Sciences Bldg.Stony Brook, NY 11794Degrees offered: NoneYear of Initiation: 1983

North Carolina

*North Carolina State UniversityBiotechnology ProgramRaleigh, NC 27695Degrees offered: Ph.D. minor in BiotechnologyYear of Initiation: 1982

Technical College of AlamanceBiotechnologyP.O. BOX 623Haw River, NC 27258Degrees Offered: A.A.S.Year of Initiation: 1986

University of North CarolinaProgram in Molecular Biology and

BiotechnologyRoom 402 Swing Bldg.Chapel Hill NC 27514Degrees offered: NoneYear of Initiation: 1981

North Dakota

North Dakota State UniversityBiotechnology Academic ProgramBOX 5516Fargo, ND 58105Degrees Offered: B.S. in BiotechnologyYear of Initiation: 1986

● Survey information not provided by program to OTA

271

Ohio

Case Western Reserve UniversityConcentration in Biotechnology and Genetic

EngineeringDepartment of BiologyCleveland, OH 44106Degrees Offered: B.A./B.S., M.S., Ph.D.Year of Initiation: 1984

*Ohio State UniversityOhio State Biotechnology CenterRightmire Hall1060 Carjack Rd.Columbus, OH 43210Degrees Offered: Not yet formulatedYear of Initiation: 1987

Pennsylvania

Cedar Crest CollegeGenetic Engineering Technology ProgramAllentown, PA 18104Degrees Offered: B.S. major in Genetic EngineeringYear of Initiation: 1983

Lehigh UniversityApplied Biological Science (M.S.)Center for Molecular Bioscience & Biotechnology570 A Whitaker LabsBethlehem, PA 18015Degrees offered: Ph.D. & M.S. Biochemical

EngineeringYear of Initiation: 1987

Pennsylvania State UniversityPenn State Biotechnology Institute532 Biotechnology Headquarters Bldg.University Park, PA 16802Degrees Offered: None specifically in

biotechnologyYear of Initiation: 1985

*University of PittsburghCenter for Biotechnology and Bioprocess

Engineering911 William Pitt UnionPittsburgh, PA 15260Degrees Offered: NoneYear of Initiation: 1987

Tennessee

University of TennesseeBiotechnologyM303 Wakers Life Sciences Bldg.Knoxville, TN 37996Degrees Offered: M.S. in Life Sciences -

BiotechnologyYear of Initiation: 1985

Texas

Texas A &M UniversityAgricultural BiotechnologyDepartment of Biochemistry & BiophysicsCollege Station, TX 77843Degrees Offered: None specifically in

biotechnologyYear of Initiation: 1984

Utah

Utah State UniversityCenter of Excellence in BiotechnologyLogan, UT 84322-4430Degrees Offered: None specifically in

biotechnologyYear of Initiation: 1987

Virginia

Old Dominion UniversityBiotechnologyCenter for BiotechnologyNorfolk, VA 23508Degrees offered: MS. in BiotechnologyYear of Initiation: 1987

Wisconsin

Madison Area Technical CollegeBiotechnology Laboratory Technician Program3550 Anderson St.Madison, WI 53704Degrees Offered: A.A.S.Year of Initiation: 1987

“Survey information not provided by program to OTA

272

University of WisconsinUniversity of Wisconsin Biotechnology Center1710 University AveMadison, WI 53705Degrees offered: NoneYear of Initiation: 1984

*University of WisconsinUniversity of Wisconsin Bioprocess and

Metabolic Engineering ProgramDepartment of Chemical EngineeringMadison, WI 53706Degrees offered: NoneYear of Initiation: 1987

——“Survey information not proiided by program to ()”1’,4.

Appendix D

Companies Involved in Biotechnologyfor Waste Degradation

Company Materials to Be Degraded Application

Advanced Biocultures Formulations Phenols Domestic sewageOrange, CA Hydrocarbons

OilsGreasesPesticidesTars

Advanced Mineral TechnologiesGolden, CO

American CyanimidOrganic Chemicals DivisionWayne, NJ

American Genetics InternationalArvado, CO

Amicon Corp.Danvers, MA

Aquifer Remediation SystemsPrinceton, NJ

Arco Performance Chemicals, Inc.Philadelphia, PA

Atlantic Research Corp.Alexandria, VA

ATW Caldwelda

Santa Fe Springs, CA

AvascoWheatridge, CO

Battelle MemorialColumbus, OH

Bethlehem Steela

Bethlehem, PA

Institute

Heavy metals

Toxic waste

Paper and pulp

Chlorinated compounds

Phenols

Biochem Technology, Inc.Malvern, PA

Bioclean, Inc.a PCPBloomington, MN

Bio Huma Netics PCBChandler, AZ PCP

DDT

‘BiO@@l tr~’trnent methods have been tested or applied in the field

Hazardous waste

Waste treatment

Toxic waste

Hazardous waste

Waste streams

Toxic waste

273

—

274

Company Materials to Be Degraded Application

Bioscience Management Organics SoilBethlehem, PA Groundwater

Biospherics WastewaterRockville, MD

Biosystems, Inc.a Petroleum products GroundwaterChester Township, PA Organic pollutants

Biotechnica International Phenol Toxic wasteCambridge, MA Coal tars

CyanidesHeavy metals

Biotechnology Unlimited, Inc. Industrial surfactants SoilsHouston, TX Petroleum Wastewaters

Pesticides PondsHerbicides LagoonsOrganic solventsHalogenated hydrocarbonsPAH

Biotrol, Inc.a

Chaska, MN

Cambridge Analytical Associates, Inc.Cambridge, MA

Cecos International, Inc.Buffalo, NY

Chem-Clear, Inc.Wayne, PA

Chemical Waste ManagementModel City, NY

Celanese Chemical Co., Inc.Corpus Christi, TX

Cytoculture International, Inc.San Francisco, CA

Detox, Inc.Newport Beach, CA

Detox IndustriesHouston, TX

PCP Groundwater

Chlorinated hydrocarbons WastewaterChloroethenes

SpillsToxic waste

PCBPAHDDTOilChlordane

DupontWilmington, DE

Ecova a Butyl acrylateRedmond, WA Solvents

Toxic waste

AnaerobicWastewater

Wastewater

Toxic waste

SoilsToxic wasteSpills

aBio]ogica] treatment methods have been tested or applied in the field.

275

Company Materials to Be Degraded Application

EnzonS. Plainfield, NJ

Flow LaboratoriesOrange, CA

Fluor Corp.Irvine, CA

General Electrica

Schenectady, NY

General Environmental Sciencea

Beachwood, OH

Genex Corp.Gaithersburg, MD

Groundwater Decontamination SystemsWaldrick, NJ

Groundwater Technology, Inc.a

Norwood, MA

Haztech a

Decatur, GA

Homestake Mining Co.Reno, NV

Institute of Gas TechnologyChicago, IL

ITT Rayonier, Inc.Shelton, WA

InterbioNaperville, IL

International Technologies (IT)’Torrance, CA

Ionics, Inc.Watertown, MA

Johnston Associates, Inc.Princeton, NJ

Keystone Environmental Resourcesa

Pittsburgh, PA

Lab Systems, Inc.Morton Grove, IL

PCBPhenols

PhenolsHydrocarbons

Methylene chloride

Petroleum productsHydrocarbonsSolvents

Petroleum products

Copper cyanideFree cyanideThiocyanate

Sewage treatment

Toxic wasteWastewater

Toxic wasteNon-toxic waste

Waste treatment

Groundwater

Groundwater

GroundwaterHazardous wasteSpills

Wastewater

Toxic waste

Pulp and paper

Hydrocarbons

Nonhalogenatedorganics

CreosoteCoal tars

Soils

SoilSpillsGroundwater

SoilToxic waste

aBiological treatment methods have been tested or applied in the field.

276

Company Materials to Be Degraded Application

Metropolitan Environmental Hazardous waste

Celina, OH Dewatering sludgeGroundwater

Microbio ResourcesSan Diego, CA

Microbe Masters, Inc.Baton Rouge, LA

Microlife TechniquesSarasota, FL

Miles LaboratoriesElkhart, IN

MotecMount Juilet, TN

MycoSearchChapel Hill, NC

Occidental Chemicala

Grand Island, NY

Oxford EnvironmentalNew Orleans, LA

Polybac, Inc.Allentown, PA

Remediation Technologies, Inc.Kent, WA

Rollins EnvironmentalWilmington, DE

Sybron Biochemicala

Birmingham, NJ

Syntro Corp.San Diego, CA

PhenolicsHydrocarbonsStyreneTrimethylamineEthylene dichloridePCPCreosote

Petroleum productsCutting fluidsTolueneNapthaleneBenzenePhenolHexaneOctaneIsophrenols

Wood preservatives

Chlorinated compounds

Wastewater

Wastewater

Hazardous waste

Hazardous wasteSoils

Toxic waste

WastewaterGroundwaterSpills

aBiological treatment meth~s have been tested or applied in the field

.—

277

Company Materials to Be Degraded Application

Vertech Treatment Pesticides Aqueous organicsDenver, CO Herbicides Sludges

Phenols SoilsNitratesCyanidesBenzeneAromaticsNonhalogenated hydrocarbonsCoal tarsSulfides

Westinghouse Bio-Analytic Systems

Madison, PA

Zimpro, Inc.Rothschild, WI

OrganicsAcidsHydrocarbonsLeachatesHerbicidesPesticidesMetals

Hazardous wasteGroundwater

WastewaterGroundwater

aBirjlogl(:a] treat nl[,nt methods ha~e been tested or applied in the fieki.

S()(lfK’F; Jodi Bakst, of fire of Solid Wraste and Emergency Response, U S. Eknrironmental Protection Agency, tVashington, DC, 1987

Appendix E

List of working Papers

For this special report, OTA commissioned 6 reports on various topics concerning U.S. invest-ment in biotechnology. The manuscripts of the following contract reports are available in threeparts from the National Technical Information Service, 5285 Port Royal Road, Springfield, VA,22161.

Part I: The Biotechnology Industry in the United States

“Report on the Biotechnology Industry in the United States,” The Business Studies Program,North Carolina Biotechnology Center, Research Triangle Park, NC. #PB88143599/AS: $38.95 (pa-per), $6.95 (microfiche).

Part II: Collaborative Research

“Collaborative Research Relationships in Biotechnology,” Trudy S. Solomon, Solomon Associates,Washington, D.C. #PB88144209: $19.95 (paper), $6.95 (microfiche).

Part III: Public and Private Sector Roles in the Funding of Agricultural Research

“Public and Private Sector Roles in the Funding of Agricultural Biotechnology Research,” JackDoyle, Agricultural Resources Project, Environmental Policy Institute, Washington, D.C.

“Public and Private Sector Roles in the Funding of Agricultural Biotechnology Research,” RichardA. Herrett and Richard J. Patterson.

#PB88143680/AS: $19.95 (paper), $6.95 (microfiche).

278

Appendix F

List of workshops and Participants

Workshop on Public Funding ofBiotechnology Research and Training

Sept. 9, 1986

David Blumenthal, Workshop ChairBrigham and Women’s Hospital CorporationBoston, MA

Duane AckerAgency for International DevelopmentWashington, DC

Saiyed AhmedNational Oceanic and Atmospheric AdministrationRockville, MD

Pierre AusloosNational Bureau of StandardsGaithersburg, MD

Roger CrouchNational Aeronautics and Space AdministrationWashington, DC

Mary Ann DanelloFood and Drug AdministrationRockville, MD

George DudaU.S. Department of EnergyWashington, DC

Doug GetterIowa Department of Economic DevelopmentDes Moines, IA

Gary GlennCenters of Excellence CorporationBoston, MA

David KingsburyNational Science FoundationWashington, DC

Ruth L. KirschsteinNational Institutes of HealthBethesda, MD

Frederick KutzU.S. Environmental Protection AgencyWashington, DC

Dan LasterU.S. Department of AgricultureBeltsville, MD

Morris LevinU.S. Environmental Protection AgencyWashington, DC

Ted LoreiVeterans AdministrationWashington, DC

Lawrence M. McGeehanThe Thomas Edison ProgramColumbus, OH

Henry MillerFood and Drug AdministrationRockville, MD

Joseph MontemaranoNew Jersey Commission on Science and

TechnologyTrenton, NJ

Robert W. NewburghDepartment of the NavyArlington, VA

Sue TolinU.S. Department of AgricultureWashington, DC

Workshop on Collaborative ResearchArrangements in Biotechnology

April 23, 1987

David Blumenthal, Workshop ChairBrigham and Women’s Hospital CorporationBoston, MA

Wm. Hugh BollingerNPISalt Lake City, UT

Martin C. CareyHarvard Medical SchoolBoston, MA

Michael CrowIowa State UniversityAmes, IA

Harvey DruckerArgonne National LabArgonne, IL

279

280

Sarah Sheaf FrielCentocorMalvern, PA

William G. HancockEverett, Hancock and NicholsDurham, NC

John J. KelleyUniversity of Wisconsin Biotechnology CenterMadison, WI

Martin KenneyOhio State UniversityColumbus, OH

David KiszkissGenentechSouth San Francisco, CA

Walter PlosilaMontgomery County High Technology CouncilRockville, MD

Janett TrubatchUniversity of ChicagoChicago, IL

Kevin M. UlmerSEQLTDCohasset, MA

Helen WhiteleyUniversity of WashingtonSeattle, WA

Martin YarmushBiotechnology Process Engineering Center, MITCambridge, MA

Workshop on Factors AffectingCommercialization and Innovation

in the Biotechnology IndustryJune 11, 1987

Jerry D. Caulder, Workshop ChairMycogen CorporationSan Diego, CA

Kathy BehrensRobertson, Coleman & StephensSan Francisco, CA

Mary Helen BlakesleeLongwood, FL

Boyd BurtonBiotrol, Inc.Chaska, MN

Walter E. ButingGenentechSouth San Francisco, CA

Peter DrakeVector Securities InternationalNorthbrook, IL

George GagliardiAmerican Cyanamid CompanyPrinceton, NJ

David J. GlassBiotechnica International Inc.Cambridge, MA

Susan HammellOrtho Pharmaceutical CorporationRaritan, NJ

John B. HenryCrop Genetics InternationalHanover, MD

David W. KrempinMicrobio Resources, Inc.San Diego, CA

Linda MillerPaine WebberNew York, NY

Dale L. OxenderUniversity of MichiganAnn Arbor, MI

John Misha PetkevichHambrecht and QuistNew York, NY

George PosteSmith Kline & French LaboratoriesPhiladelphia, PA

Peter StapleCetus CorporationEmeryville, CA

Robert D. WeistAmgenThousand Oaks, CA

Workshop on Funding ofBiotechnology Research in Agriculture

July 23, 1987

Michael Crow, Workshop ChairIowa State UniversityAmes, IA

281

Nicholas FreyPioneer Hi-Bred International, Inc.Johnston, IA

Robert M. GoodmanCalgeneDavis, CA

Anthony E. HallUniversity of California, RiversideRiverside, CA

William B. LacyUniversity of KentuckyLexington, KY

Lawrence NoodenUniversity of MichiganAnn Arbor, MI

Sue TolinVirginia Polytechnic InstituteBlacksburg, VA

Dewayne C. TorgesonBoyce Thompson InstituteIthaca, NY

Appendix G

AcknowledgmentsOTA would like to thank the members of the advisory panel who commented on drafts of this report, the

contractors who provided material for this assessment, and the many individuals and organizations that suppliedinformation for the study. In addition, OTA acknowledges the following individuals for their review of draftsof this report:

Saiyed J. AhmedNational Oceanic & Atmospheric Administration

Mark AndelmanApplied Resources, Inc.

Fran S. AtchisonNJ Commission on Science & Technology

Ronald M. AtlasUniversity of Louisville

Pierre AusloosNational Bureau of Standards

Joseph C. BagshawWorcester Polytechnic Institute

Jodi BakstU.S. Environmental Protection Agency

Robert BarkerCornell University

John D. BaxterCalifornia Biotechnology, Inc.

Frank T. BaylissSan Francisco State University

Donald BeersArnold & Porter

Sanford I. BernsteinSan Diego State University

James W. BlackburnUniversity of Tennessee, Knoxville

Jean E. BrenchleyPenn State Biotechnology Institute

Duane F. BruleyNational Science Foundation

M.B. BurtonBiotrol, Inc.

Ronald CapeCetus Corp.

William D. CarpenterMonsanto Corp.

Linda J. CarterOhio State University

Philip CarterNorth Carolina State University

A.M. ChakrabartyUniversity of Illinois

Peter ChapmanU.S. Environmental Protection Agency

John R. ChirichielloNational Science Foundation

Ralph E. ChristoffersenThe Upjohn Co.

Marianne K. ClarkeNational Governors’ Association

Barry CohenAbbott Laboratories

Joel I. CohenU.S. Agency for International Development

Steve DahmsSan Diego State University

Mary Ann DanelloFood and Drug Administration

Ellen DanielCetus Corp.

Arnold L. DemainMassachusetts Institute of Technology

David W. DennenEli Lilly & Co.

Wanda deVlaminckCetus Corp.

Clyde J. DialU.S. Environmental Protection Agency

Donald K. DougallUniversity of Tennessee, Knoxville

Harvey DruckerArgonne National Lab

282

283

Wayne G. LandisAberdeen Proving Ground

George D. DudaDepartment of Energy

Dennis D. FochtUniversity of California, Riverside

Timothy D. LeathersU.S. Department of Agriculture

Tom FrederickRochester Institute of Technology

Morris A. LevinU.S. Environmental Protection Agency

Sarah Sheaf FrielCentocor

Rachel LevinsonNational Institutes of Health

Carol D. LitchfieldEI. du Pont de Nemours &Co.

Richard M. GersbergSan Diego State University

Dennis N. LongstreetOrtho Pharmaceutical Corp.

David T. GibsonUniversity of Texas, Austin

Gerald D. LoreHoffman La Roche, Inc.

David J. GlassBiotechnica International, Inc.

Gary GlennThe Commonwealth of Massachusetts

Perry L. McCartyStanford University

Joy A. McMillanMadison Area Technical College

Allan HabermanTufts University

James F. McNabbU.S. Environmental Protection Agency

Anthony E. HallUniversity of California, Riverside

Claudia McNairBiotechnica International, Inc.

Susanne L. HuttnerUniversity of California, Los Angeles

Robert P. MergesColumbia University

Shirley IngebritsenU.S. Department of Agriculture

Henry I. MillerFood and Drug Administration

Jenefir D. IsbisterAtlantic Research Corp.

Lamar JohnsonIdaho National Engineering Lab

Joseph MontemaranoNJ Commission on Science & Technology

John J. KelleyUniversity of Wisconsin

Jim MorrisonEcova

Martin KenneyOhio State University

Casey KiernanNational Academy of

Ruth L. KirschsteinNational Institutes of

Robert W. NewburghDepartment of the Navy

Lawrence NoodenSciences University of Michigan

Gilbert S. OmennHealth University of Washington

Michael S. OstrachH.J. KlostermanNorth Dakota State

Richard K. KoehnSUNY Stony Brook

Frederick W. KutzU.S. Environmental

University Cetus Corp.

Joseph G. PerpichHoward Hughes Medical Institute

John Misha PetkevichProtection Agency Hambrecht & Quist

284

Walter PlosilaMontgomery County High Technology Council

Fernando QuezadaMassachusetts Biotechnology Center of Excellence

Robert RabinNational Science Foundation

Lisa J. RainesIndustrial Biotechnology Association

Hollings RentonCetus Corp.

W.C. RipkaEI. du Pont de Nemours & Co.

Bruce E. RittmanUniversity of Illinois

Vernon W. RuttanUniversity of Minnesota

Debonny Barsky-ShoafUniversity of California, Davis

Allen M. SingerInstitute of Medicine

Raymond B. SnyderCornell University

Jim SpainU.S. Air Force

Robert R. SwankUS. Environmental Protection Agency

Frieda B. TaubUniversity of Washington

Janett TrubatchUniversity of Chicago

Ronald UntermanGeneral Electric Co.

Margaret Van BoldrikUniversity of Wisconsin

Albert D. VenosaU.S. Environmental Protection Agency

Mitchel B. WallersteinNational Research Council

Terry L. WeaverState University of New York, Alfred

Robert D. WeistAmgen

Thomas G. WiggansSerono Laboratories

James WildTexas A&M University

W. Lee WilliamsTechnical College of Alamance

Marcia WilliamsU.S. Environmental Protection Agency

Lloyd Wolfinbarger, Jr.Old Dominion University

Martin L. YarmushMassachusetts Institute of Technology

Randall A. YoshisatoUniversity of Iowa

Wayne YunghansState University of

John A. ZdericSyntex Research

J. Gregory Zeikus

New York, Fredonia

Michigan Biotechnology Institute

Barbara A. ZilinskasCook College, Rutgers University

Appendix H

List of Acronyms and Glossary of Terms

AASABCAIDAIDSARSBPEC

BSBSCC

CAHCARB

CCLCERCLA

CoCom

CSRS

CSUDARPA

DBCDDTDNADOCDoDDOEDRRDURIP

EAAEAAA

EOPEPAEPSCoR

ERCERTAFDAFFDCAFIFRA

FTEGAOGE

List of Acronyms

—Associate of Applied Science degree—Association of Biotechnology Companies—Agency for International Development—acquired immune deficiency syndrome—Agricultural Research Service—Biotechnology Process Engineering Cen-

ter (MIT)—Bachelor of Science degree—Biotechnology Science Coordinating Com-

mittee-chlorinated aromatic hydrocarbon-Center for Advanced Research in Biotech-

nology (MD)–Commodity Control List—Comprehensive Environmental Response,

Compensation and Liability Act—Coordinating Committee on Multilateral

Export Controls—Cooperative State Research Service

(USDA)—Colorado State University—Defense Advanced Research Projects

Agency--dedicated biotechnology company-dichloro diphenyl trichroethane-deoxyribonucleic acid—Department of Commerce—Department of Defense—Department of Energy—Division of Research Resources (NIH)—Defense University Research Initiative

Program—Export Administration Act—Export Administration Act Amendments

of 1985—Executive Office of the President—Environmental Protection Agency—Experimental Program to Stimulate Com-

petitive Research (NSF)–Engineering Research Center (NSF)–Economic Recovery Tax Act of 1981—Food and Drug Administration—Federal Food, Drug and Cosmetics Act—Federal Insecticide, Fungicide, and Roden-

ticide Act–full-time equivalent—General Accounting Office—General Electric Corporation

HERAC

HHMIHSWA

IBAINDIOMIPOIRPIRSISUITITAITCMBIMCTLMITMPBCMROMSNASNASA

NBFNBSNCINCRA

NDANEINEPANHLBI

NIANIAID

NIAMS

NICHD

NIDDK

NIDR

NIEHS

NIGMS

NIH

—Health and Environmental Research Advi-sory Committee (DOE)

—Howard Hughes Medical Institute—Hazardous and Solid Waste Amendments

of 1984—Industrial Biotechnology Association–Investigational New Drug—Institute of Medicine—initial public offering—Installation Restoration Program—Internal Revenue Service—Iowa State University—International Technologies—International Trade Administration—Investment Tax Credit—Maryland Biotechnology Institute—Militarily Critical Technologies List–Massachusetts Institute of Technology—Midwest Plant Biotechnology Consortium—medical research organization—Master of Science degree—National Academy of Sciences—National Aeronautics and Space Admin-

istration—new biotechnology firm—National Bureau of Standards–National Cancer Institute (NIH)—National Cooperative Research Act of

1984—New Drug Application–National Eye Institute (NIH)—National Environmental Policy Act—National Heart, Lung and Blood Institute

(NIH)–National Institute on Aging (NIH)—National Institute of Allergy and Infec-

tious Diseases (NIH)—National Institute of Arthritis and Mus-

culoskeletal and Skin Diseases (NIH)—National Institute of Child Health and Hu-

man Development (NIH)—National Institute of Diabetes and Diges-

tive and Kidney Diseases (NIH)—National Institute of Dental Research

(NIH)—National Institute of Environmental

Health Sciences (NIH)—National Institute of General Medical Sci-

ences (NIH)—National Institutes of Health

285

.

286

NINCDS

NLMNMRNOAA

NPLNSFNYUOBEROECD

OHER

ONROSHA

OSTP

OTA

PAHPCBPCPPHSAPLAPMAPPAPTAAPTOPVPARAC

RCRA

RDLP

RITSAESSARA

SBIRSJSUSSET

SITE

SUNYSUPTACTCDDTCETPATRA

—National Institute of Neurological andCommunicative Disorders and Stroke(NIH)

–National Library of Medicine (NIH)—nuclear magnetic resonance spectroscopy—National Oceanic and Atmospheric

Administration–National Priority List (EPA sites)—National Science Foundation—New York University-Office of Basic Energy Research (DOE)--Organization for Economic Cooperation

and Development-Office of Health and Environmental

Research (DOE)-Office of Naval Research (DOD)-Occupational Safety and Health Admin-

istration-Office of Science and Technology Policy

(EOP)-Office of Technology Assessment (U.S.

Congress)—polynuclear aromatic hydrocarbon–polychlorinated biphenyl–pentachlorophenal—Public Health Service Act–public licensing application—Pharmaceutical Manufacturers Association—Plant Patent Act—Patent and Trademark Amendment Act—Patent and Trademark Organization—Plant Variety Protection Act—Recombinant DNA Advisory Committee

(NIH)—Resources Conservation and Recovery

Act of 1976—Research and Development Limited Part-

nership–Rochester Institute of Technology—State Agricultural Experiment Stations—Superfund Amendments and Reauthori-

zation Act—Small Business Innovation Research–San Jose State University—Science, Engineering, and Technology;

NSF program–Superfund Innovative Technology

Evaluation—State University of New York—Sustaining University Program—Technical advisory committee-chlorinated dioxin—trichloroethylene—tissue-plasminogen activator–Tax Reform Act of 1986

TSCA —Toxic Substances Control Act of 1976UCSF —University of California, San FranciscoUI —University of IowaUSAMRIID—U.S, Army Medical Research Institute of

Infectious DiseasesUSDA —United States Department of AgricultureVA —Veteran’s Administration

Glossary of Terms

Amino Acid: Any of a group of 20 molecules that arelinked together in various combinations to form pro-teins. Each different protein is made up of a spe-cific sequence of these molecules with the uniquesequence coded for by DNA.

Antibody: A protein molecule, also called immuno-globulin, produced by the immune system in re-sponse to exposure to a foreign substance. An anti-body is characterized by a structure complementaryto the foreign substance, the antigen, that provokedits formation and is thus capable of binding specifi-cally to the foreign substance to neutralize it. Seeantigen and monoclonal antibodies.

Antigen: A molecule introduced into an organism andrecognized as a foreign substance, resulting in theelicitation of an immune response (antibody pro-duction, lymphokine production, or both) directedspecifically against that molecule. See antibody andmonoclinal antibodies.

B lymphocyte A specialized white blood cell involvedin the immune response of vertebrates that origi-nates in the bone marrow and produces antibodymolecules after challenge by an antigen. In hybri-doma technology, these cells contribute antibody-producing capability to a hybridoma.

Bioaugmentation: A strategy involved in bioremedi-ation that increases the activity of an organism tobreak down or metabolize a pollutant. This involvesreseeding a waste site with bacteria as they die.

Bioenrichment: A strategy involved in bioremedia-tion that enables an organism to survive and breakdown or metabolize a pollutant. This involves en-hancing the site with nutrients or oxygen requiredby the micro-organism so they survive and grow.

Biomass: The entire assemblage of living organisms,both animal and vegetable, of a particular region,considered collectively.

Bioprocess engineering: Process that uses completeliving cells or their components (e.g., enzymes, chlo-roplasts) to effect desired physical or chemicalchanges.

Bioreactor: A vessel used for bioprocessing.Biosynthesis: Production, by synthesis or degrada-

tion, of a chemical by a living organism.Biotechnology: Commercial techniques that use liv-

287

ing organisms, or substances from those organisms,to make or modify a product, and including tech-niques used for the improvement of the character-istics of economically important plants and animalsand for the development of micro-organisms to acton the environment. In this report, biotechnologyincludes the use of novel biological techniques-specifically, recombinant DNA techniques, cell fu-sion techniques, especially for the production ofmonoclinal antibodies, and new bioprocesses forcommercial production.

Cell culture: The propagation of cells removed fromorganisms in a laboratory environment that hasstrict sterility, temperature, and nutrient require-ments; also used to refer to any particular individ-ual sample.

Cell fusion: Joining of the membrane of two cells, thuscreating a hybrid cell that contains the nuclear ma-terial from parent cells. Used in making hybridomas.

Chemostats: Growth chamber that keeps a bacterialculture at a specific volume and rate of growth bycontinually adding fresh nutrient medium whileremoving spent culture.

Chromosome: The physical structure within a cell’snucleus, composed of DNA-protein complex, andcontaining the hereditary material—i.e., genes; inbacteria, the DNA molecule in a single, closed circle(no associated protein) comprising a cell’s genome.

Cloning: The process of asexually producing a groupof cells (clones), all genetically identical to the origi-nal ancestor. In recombinant DNA technology, theprocess of using a variety of DNA manipulation pro-cedures to produce multiple copies of a single geneor segment of DNA.

Cobalamins: A cobalt-containing complex common tomembers of the vitamin B12 group.

Cometabolism: Process by which a substrate ismetabolized by a cell while the cell utilizes anothersubstrate as its energy source. Also called fortui-tous degradation.

Congeners: A family of related materials.Cytoplasm: Cellular material that is within the cell

membrane and surrounds the nucleus.Dicot (dicotyledon): Plant with two first embryonic

leaves and nonparallel veined mature leaves. Exam-ples are soybean and most flowering plants.

DNA (deoxyribonucleic acid): The molecule that isthe repository of genetic information in all organ-isms (with the exception of a small number of virusesin which the hereditary material is ribonucleic acid—RNA). The information coded by DNA determinesthe structure and function of an organism.

Enzyme: A protein that acts as a catalyst, speedingthe rate at which a biochemical reaction proceeds,but not altering its direction or nature.

Eukaryote(ic): Cell or organism with membrane-bound, structurally discrete nucleus, and other well-developed subcellular compartments. Eukaryotesinclude all organisms except viruses, bacteria, andblue-green algae. See prokaryote.

Fermentation: An anaerobic process of growingmicro-organisms for the production of various chem-ical or pharmaceutical compounds. Microbes arenormally incubated under specific conditions in thepresence of nutrients in large tanks called fermenters.

Gene: The fundamental physical and functional unitof heredity; an ordered sequence of nucleotide basepairs that produce a specific product or have anassigned function.

Gene expression: The process by which the blueprintcontained in a cell’s DNA is converted into a product.

Gene therapy: Insertion of normal DNA directly intocells to correct a genetic defect.

Genome: All the genetic material in the chromosomesof a particular organism: its size is generally givenas its total number of base pairs.

Germplasm: The total genetic variability, representedby germ cells or seeds, available to a particular pop-ulation of organisms.

Hybrid: An offspring of a cross between two geneti-cally unlike individuals,

Hybridoma: A cell produced by fusing a myeloma cell(a type of tumor cell that divides continuously inculture and is “immortal”) and a lymphocyte (anantibody-producing cell). The resulting cell growsin culture and produces the specific antibody pro-duced by the parent Lymphocyte (a monoclinal an-tibody).

In vitro: Literally, “in glass. ” Refers to a process, test,or procedure in which something is measured, ob-served, or produced outside a living organism af-ter extraction from the organism. See in vivo.

In vivo: Literally, “in the living”. Refers to a processtaking place in a living cell or organism. See in vitro.

In vivo genetic transfer: The gene of a useful enzymefrom one organism is transfered into a pathway ofanother organism via natural genetic processes suchas transduction, transformation, and conjugation(facilitated by transmissible plasmids or trans-posons).

Liposomes: A structure with a lipid membrane likethat of a cell that can be filled with specific sub-stances and then used as a delivery vehicle to trans-port those substances to the interior of a target cellby fusion with the cell’s own membrane. One of sev-eral potential delivery vehicles for use in genetherapy.

Monoclinal antibodies: Identical antibodies that rec-ognize a single, specific antigen and are producedby a clone of specialized cells. Commercial quanti-

288

ties of these molecules are now produced byhybridomas.

Monocot (monocotyledon): Plant with single first em-bryonic leaves, parallel-veined leaves, and simplestems and roots. Examples are cereal grains suchas corn, wheat, rye, barley, and rice.

Mutagenesis The induction of mutation in the geneticmaterial of an organism; researchers may use phys-ical or chemical means to cause mutations that im-prove the production of capabilities of organisms.

Myeloma: A malignant tumor of an antibody-produc-ing cell. In hybridoma technology, some of these tu-mor cells have been adapted to cell culture, andthese cells contribute immortality to a hybridomacell line.

Nitrogen fixation: A biological process (usually asso-ciated with plants) whereby certain bacteria con-vert nitrogen in the air to ammonia, thus forminga nutrient essential for growth.

Nucleic acid hybridization: Matching of either DNAor RNA (depending on the organism) from an un-known organism with DNA or RNA from a knownorganism. This method is used in tropical diseaseresearch for identifying species and strains oforganisms.

Nucleotide (base): The unit of nucleic acids. Themolecules consist of one of four bases—adenine,guanine, cytosine, or thymine/uracil (DNA/RNA) at-tached to a phosphate-sugar group. The sugar groupis deoxyribose in DNA; in RNA it is ribose.

Prokaryote(ic): An organism (e.g., bacteria, virus,blue-green algae) whose DNA is not enclosed withina nuclear membrane. See eukaryote.

Protein: A polypeptide consisting of amino acids. Intheir biologically active states, proteins function ascatalysts in metabolism and as structural elementsof cells and tissues.

Protoplasm fusion: A means of achieving genetic trans-fer by joining two protoplasts or joining a protoplasmwith any of the components of another cell.

Recombinant DNA: A broad range of techniques in-volving the manipulation of the genetic material oforganisms; often used synonymously with geneticengineering; also used to describe a DNA moleculeconstructed by genetic engineering techniques andcomposed of DNA from different individuals orspecies.

Somatic ceil genetics: Genetics involving any cell inthe body except reproductive cells and theirprecursors,

Somoclonal variation: Genetic variation producedfrom the culture of plant cells from a pure breed-ing strain; the source of the variation is not known.

Tissue culturing In vitro growth in nutrient mediumof cells isolated from tissue.

Transformation: Introduction and assimilation ofDNA from one organism into another via uptakeof naked DNA.

Vadose: The unsaturated zone of the ground abovethe permanent water table.

Xenobiotics: Industrial chemicals that have a chemi-cal structure not found in natural compounds,which may resist degradation by micro-organisms.

Index

IndexLaboratories (Illinois), 89

Accreditation Board for Engineering and Technology, 140Acquired immunodeficiency syndrome (AIDS), 173, 178, 179,

183-184Agency for International Development, U.S. (AID)

research funding by, 8, 35, 47-48, 201training activities funding by, 152

Agriculture, plant, 13, 193, 215-216AID funding of biotechnology-related R&D for, 48barriers to commercialization in, 210-212biotechniques used in, 194-197biotechnology’s impact on research investment in, 197-198commercialization of biotechnical research involving,

209-212funding biotechnical research for, 200-209future research in, 212-213impact of intellectual property protection on research in-

vestment in, 199-200personnel needs for commercialization of, 211-212policy issues and options involving, 213-215USDA funding of biotechnology-related R&D for, 4, 44-

45, 201-202Agricultural Research Service (ARS)–USDA

research funding by, 4, 44-45, 201-202training activities funding by, 152, 201-202

Agrigenetics Corp. (Ohio), 205Agro Ingredients, 81Alabama, biotechnology development by, 70American Cancer Society, 176American Council of Education, 140American Cyanamid Co. (New Jersey), 89American Institute of Chemical Engineers, 140American Society for Microbiology, 119Amgen (California)

collaborative ventures by, 89intellectual property litigation by, 181

Arbor Acres Farm, 89Arkansas, biotechnology development in, 68, 69, 70Arizona, biotechnology development in, 68, 70Arizona, University of, 49

Bay State Skills Corporation (Massachusetts), 145, 153Ben Franklin Partnership Fund (Pennsylvania), 59, 66Bethlehem Steel Co. (Maryland), 233Biocatalysis Research Group (University of Iowa), 203Biological Sciences Complex (University of Georgia), 62, 121Biological Sciences Curriculum Study, 150BIONET, 38, 183-184Bioprocessing and Pharmaceutical Center (Philadelphia), 49Biosystems for Pollution Control Initiative (EPA), 226-238,246BioTal, 234Biotechnica Ltd., 234Bio-Technology General, 87Biotechnology Institute (Penn State University), 59, 116, 147Biotechnology Process Engineering Center (BPEC)–MIT, 39,

40, 147, 151, 152, 173Biotechnology Program (Cornell University), 147Biotechnology Research and Development Corporation (Il-

linois), 205

Biotechnology Task Force on Education, 142Bock, Richard, 87Branstad, Terry, 203Bureau of Labor Statistics, 133Burroughs-Wellcome (PLC), 102

Calgene, Inc. (California)collaborative ventures of, 89revenue sources of, 81

Californiabiotechnology development in, 8-9, 56, 61, 68, 69-70litigation involving impact of federally funded research in,

208California Biotechnology, Inc., 172California State University, 140, 144, 145California, University of, 116, 208California, University of (Davis), 48, 149California, University of–Los Angeles (UCLA), 240Campbell Soup Co. (New Jersey), 81, 89Case Western Reserve University (Ohio), 147Catholic University of America (Washington, DC), 147Cedar Crest College (Pennsylvania), 144Center for Advanced Biotechnology Training in Cell and

Molecular Biology (Catholic University), 147Center for Advanced Research in Biotechnology (CARB)–

Maryland, 8, 46, 57, 62, 116, 117, 175Center for Biologic Evaluation and Research (FDA), 178, 179Center for Biotechnology Research (California), 116Center for Biotechnology (SUNY Stony Brook), 116, 117, 147,

148, 149-150Center for Environmental Biotechnology (University of Ten-

nessee), 240Center for Separation Science (Arizona), 49Centocor (Pennsylvania), 163Cetus Corporation (California)

financing of 83, 85, 87monoclinal antibody research by, 163protein engineering research by, 166revenues of, 82

CIBA-GEIGY Corp., 81, 89, 205Cisneros, Henry, 56Cold Spring Harbor Laboratory (New York), 148, 149, 150, 152Collaborations

agri-biotechnical, 205among U.S. biotechnology companies, 10, 87-90between U.S./foreign companies, 10, 90-92Federal interagency research, 17-18, 174-175, 202structures of university/industry research, 115-118trade-offs involving university/industry, 6-7, 114, 118-126university/government, 6-7, 39, 40, 42, 43, 44, 46, 47-48,

49, 60, 63university/industry, 6-7, 8, 20, 55, 66, 68.70, 113-126, 174see also Research; Research and Development; individual

participants inColorado, biotechnology development in, 59, 62, 69Colorado State University (CSU), 48Columbia University (New York), 43, 57Commercialization

of agricultural biotechnical research, 209-212

291

.

areas of primary focus for biotechnological, 9-10, 79-80barriers to biotechnology, 10-11, 97-109, 242-245factors influencing, of human therapeutics, 12, 168-185history of U.S. biotechnology, 9, 78-79policy options involving Tax Reform Act’s incentives for

biotechnological, 21-22State promotion of biotechnology, 55-57, 115university/industry collaborations and, 120

Commodity Control List (CCL), 98, 99, 100Comprehensive Environmental Response, Compensation, and

Liability Act–1980 (Public Law 96-510)(CERCLA), 224,235, 239, 240

Congressional Research Service, 108Connecticut, biotechnology development in, 62, 68, 69, 153Cooperative State Research Service (CSRS)–USDA

research funding by, 4, 44, 201-202training activities funding by, 152, 201-202

Coordinating Committee on Multilateral Export Controls(CoCOM), 97

Cornell University (New York), 147, 239Corporate biotechnology companies (CBCs). See Industry; in-

dividual companiesCouncil of State Governments, 70Crops. See Agriculture, plantCystic Fibrosis Foundation, 176

Darst/Imperial Chemical Industries (Iowa), 203Databases

biotechnology information, 38, 182-184lack of agribiotechnical, 210policy options relating to biotechnology, 187

Dedicated biotechnology companies (DBCs)agricultural R&D involvement by, 204, 209biotechnology waste degradation, 273-277collaboration with major corporations by, 87-92financing, 10, 82-87, 88R&D budgets of, 80revenue sources of, 81-82State distribution of, 67-68, 255-264see also Industry

Defense Advanced Research Projects Agency (DARPA)--DoD,41

Defense University Research Initiative (DURIP)–DoD, 42Department of Agriculture, U.S. (USDA)

agricultural investment return estimate by, 193-194regulatory power of, 210research allocation and process of, research grants, 205-

206, 208-209research funding by, 4, 7, 35, 44-45, 117, 201-202, 205training activities funding by, 6, 152, 201-202

Department of Commerce, U.S. (DOC)DBC personnel estimate by, 132research consortia promotion by, 104research funding by, 45-47technology transfer oversight by, 97, 98, 99, 100

Department of Defense, U.S. (DoD)research funding by, 4, 7, 35, 41-42, 174, 201technology transfer oversight by, 97, 98-99, 100training activities funding by, 152waste generation by, 239

Department of Energy, U.S. (DOE)hazardous waste cleanup research projects, 239-240, 246research funding by, 7, 35, 42-43, 174, 201, 202

Department of the Interior, U. S., 240, 246Department of Justice, research consortia promotion by, 104Diamond v. Chakrabarty, 101, 199, 200DIRLINE, 183Drug Export Amendments Act–1986 (Public Law 99-660),

97, 98, 180-181Duke University (North Carolina), 175

Eastman Kodak Co. (New York), 89Economic Recovery Act–1981 (ERTA) (Public Law 97-34),

105, 107, 115Ecova Corp. (Washington State), 235Education. See Training; UniversitiesEli Lilly & Company (Indiana), 161Embryogen, 123Endotronics, Inc. (Minnesota), 87Engenics, Inc. (California), 116Engineering Research Center (Duke University), 175Engineering Research Centers program (NSF), 39, 40Environmental Protection Agency, U.S. (EPA)

R&D strategies report by, 100regulatory authority of, 210, 224-225research funding by, 7, 35, 48, 236-239Research Laboratories, 238-239waste management R&D activities by, 236-239,243-244, 246

Ex parte Hibberd, 199Expenditures. See FundingExperimental Program to Stimulate Competitive Research

(EPSCoR), 9, 70.71Export Administration Act (EAA)(Public Law 96-72), 97,

99-1ooExport Administration Act Amendments–1985 (EAAA)(Pub -

lic Law 99-64), 97, 99

Federal Food, Drug, and Cosmetics Act (FFDCA), 97, 177Feinstein, Dianne, 56Ferris State College (Michigan), 144Florida, biotechnology development in, 62, 65, 68Food and Drug Administration (FDA)

biotechnology regulatory policy of, 177human therapeutics approval and regulation by, 12, 161,

162, 178-179research funding by, 7, 50technology transfer approval of, 97, 98

Fundingagri-biotechnical research, 200-209Federal biotechnological hazardous waste cleanup, 235-

236, 237, 242-244, 245-246Federal biotechnology-related, 3-5, 15-18,22-23, 30-31, 35-

52, 62, 70-71, 173-175, 201-202, 205-206, 208-209impact on agricultural research investment of source of,

205-209methods for DBCs, 10, 82-87, 88private sector biotechnology research, 6,31, 113, 175-177,

204-205, 207-208, 209R&D, from Federal to State governments, 21, 57, 60-61,

70-71

293

R&D involving human therapeutics, 173-177State biotechnology-related, 4, 9, 55, 64-70, 175, 202-204

GenBank, 38, 51, 174, 187Genentech, Inc. (California), 77

Activase approval for, 178effect of patent litigation on, 101-102, 181financing of, 83, 86, 87, 176recombinant DNA insulin developed by, 161R&D expenditures of, 80revenues of, 82

General Accounting Office (GAO), 100General Agreement on Tariffs and Trade (GATT), 101General Electric Corp. (GE)–New York, 234Genetic Engineering News, 136Genetics Institute, Inc. (Massachusetts), 181Georgia, biotechnology development in, 6, 62, 153Georgia, University of, 62, 121Government, Federal

biotechnology-related funding by, 3-5,30-31,35-52,62,70-71, 173-175, 201-202

biotechnology waste management research by, 235-240cleanup of waste sites belonging to, 239funding involving human therapeutics development,

173-175funding of training activities by, 6, 151-153R&D funding to States by, 21, 57, 60-61, 70-71Superfund cleanup expenditures by, 223-224support for agricultural research by, 13, 193-194,201-202,

205-206, 208-209, 213-214see also individual agencies of

Government, local. See Government, StateGovernment, State

agricultural research funding by, 202-204biotechnology promotion by, 4, 8-9, 55-64, 115biotechnology-related funding by, 4, 55, 64-70Federal assistance to biotechnology efforts by, 2, 57, 60-

61, 70-71funding involving human therapeutics development by, 175funding of training activities by, 6, 150-151, 153fund-raising mechanisms of, 66-67incentives to biotechnology companies by, 67-70

Guidelinesbiotechnology regulatory, 46-47, 101land-grant system accountability, 208policy options regarding university/industry research, 20technology transfer, 7, 38see also Regulation

Harvard University (Massachusetts), 43, 124Hatch Act, 208Hazardous and Solid Waste Amendments–1984 (HWSA)(Pub-

lic Law 98-616), 224, 225Hazardous waste management, 13-14, 223, 224, 247

barriers to biotechnology development for, 242-245biotechnological applications for, 233-235companies involved in (list of), 273-277congressional issues and options involving, 245-247onsite, 231-233research needs for biotechnological, 48, 241-242

scientific base of biotechnology for, 225-233History of U.S. commercial biotechnology, 9, 78-79Hoechst Corp., 118Hoffman-LaRoche, Inc. (New Jersey), 102, 181Howard Hughes Medical Institute (HHMI)

biological education sponsorship by, 153research funding by, 176-177

Human Mutant Cell Repository (New Jersey), 38Human therapeutics, 12, 161-162

biotechnological applications to, 162-167, 185databases in biotechnological, 182-184intellectual property protection for, 181-182personnel availability for biotechnology applications to,

184-185policy issues and options relevant to, 185-187R&D funding for, 173-177regulation of biotechnology involving, 177

Hunt, James B., 59

Idaho, biotechnology development in, 62Illinois, biotechnology development in, 59, 65, 69, 205, 207Illinois, University of, 229Incentives

to attract trained scientific personnel to PTO, 103influencing human therapeutics development, 177-182State, to attract biotechnology companies, 67-60tax-based investment, 105-108

Indiana, biotechnology development in, 68-69, 70, 207Industrial Biotechnology Association (IBA), 105

personnel estimates by, 133, 136secondary school teacher training by, 150

Industrybenefits and problems resulting from collaborations with

universities by, 120, 123biotechnology investment by large (list of corporations),

265-266collaborative ventures in biotechnology by, 87-92hazardous waste generated by, 223human therapeutics development funding by, 175-176pressures to develop alternative waste management solu-

tions on, 223-235profile of commercial biotechnology, 9-10, 78-82research funding by, 6, 10, 31, 80-81, 113, 176-177, 204-

205, 207-208, 209, 240-241, 243training activities funding by, 6, 153waste disposal costs of, 225see also Commercialization; Dedicated biotechnology com-

panies; Private sectorInformation Retrieval Experiment (IRX) program (NLM), 187Installation Restoration Program (IRP)(DoD), 239Institute of Medicine (IOM), DBCs personnel needs survey

by, 119, 131Intellectual property. See Patents; Trade secrets.Investment, See Funding; Personnel; TrainingIn Vitro Cell Biology and Biotechnology Program (SUNY Platts-

burgh), 144Iowa

agricultural training investment by, 202, 203biotechnology development in, 59, 66, 153, 202, 203, 207

Iowa State University (ISU), 204

Iowa, University of, 140, 144, 203

Japan, collaborative biotechnology ventures with, 10, 90-91Johnson & Johnson (New Jersey), 89

Kansas, biotechnology development in, 59, 70Kemira Oy Corp., 89Kentucky, biotechnology development in, 9, 70, 71Kentucky, University of, 144Keystone Environmental Resources, Inc. (Pennsylvania), 234Kidder Peabody & Co., 225Kirin Brewery, 89Koppers Company, 234

Legislationaffecting intellectual property issues, 101, 179-181, 185-

187, 199-200effect of antitrust, on R&D technology transfer, 104see also individual statutes

Lehigh University (Pennsylvania), 146Litigation

concerning federally funded research in land-grant sys-tem, 208

involving intellectual property laws, 101-102, 181-182see also individual cases

Little, Arthur D., 224Louisiana, biotechnology development in, 62, 68

Maryland, biotechnology development in, 57,66,68,69, 153Maryland Biotechnology Institute (MBI), 62, 116Maryland, University of—Baltimore County (UMBC), 146, 147Maryland, University of-College Park, CARB project par-

ticipation by, 8, 46, 57, 62, 175Massachusetts, biotechnology development in, 8-9, 56, 59,

62, 64, 66, 68, 69, 153Massachusetts General Hospital, 118Massachusetts Institute of Technology (MIT), 39, 40, 116Matrix of Biological Knowledge, 184Mendelian Inheritance in Man, 187Michigan, biotechnology development in, 59, 65, 66, 68, 69,

207Michigan Biotechnology Institute, 148Midwest Plant Biotechnology Consortium (MPBC), 116, 207Militarily Critical Technologies List (MCTL)–DoD, 98Minnesota, biotechnology development in, 59, 207Minnesota, University of, 146, 147Missouri, biotechnology support by, 66, 207Models

developing animal, for human protein function study, 171risk assessment, 48

Monitoring. See RegulationMonoclinal Antibodies, Inc. (California), 82Monoclonal Lymphocyte Technology Center (North Carolina),

174Monsanto Agricultural Co., 6, 113, 123, 124Montana, biotechnology development in, 9, 66, 71Morehouse College, 240Merrill Act—1862, 7, 60

National Academy of Sciences (NAS)interdisciplinary training encouragement by, 184protein folding and, 169R&D personnel estimate by, 131

National Aeronautics and Space Administration (NASA)research funding by, 7, 49, 201, 240training activities funding by, 153waste conversion research by, 240

National Bureau of Standards (NBS), research funding by,8, 35, 46-47, 62, 175

National Cooperative Research Act—1984 (NCRA) (Public Law98-462), 104, 115

National Huntington’s Disease Association, 176National Institutes of Health (NIH)

research funding by, 3, 7, 35, 37-38, 135, 173, 174, 240training activities funding by, 6, 151-152, 206waste management R&D by, 240, 246

National laboratories. See Department of Energy, U.S.National Library of Medicine (NLM)(NIH), database coordi-

nation by, 183, 184, 187National Oceanic and Atmospheric Administration (NOAA)

research funding by, 8, 35, 45-46training activities funding by, 6, 153

National Research Councilbiotechnology funding report by, 43curriculum content survey by, 140DNA mapping technologies development and, 168

National Science Foundation (NSF)biotechnology R&D personnel estimate by, 132research funding by, 4, 7, 35, 39-41, 60-61, 70-71, 115, 173-

174, 201, 202training activities funding by, 6, 151, 152, 202waste bioremediation research by, 240, 246

Nebraska, biotechnology development in, 59Nevada, EPSCoR grant to, 70New Hampshire, biotechnology support by, 70New Jersey, biotechnology development in, 4,59,64,65,66,

68, 69New York State, biotechnology development in, 57, 59, 65-

66, 68, 69, 70, 153North Carolina

agricultural training investment by, 202biotechnology development in, 4, 59, 62, 64, 65, 70, 17

North Carolina Biotechnology Center, 148, 150, 174, 175North Carolina, University of-Chapel Hill, 148North Dakota, biotechnology development in, 9, 70-71, 153North Dakota State University (Fargo), 144

Occidental Chemical Corp. (New York), 234Ohio, biotechnology development in, 66, 67, 68, 207Ohio State University, 147Ohio University, 123Oklahoma, biotechnology development in, 9, 59, 70, 71Oregon, biotechnology development in, 62Oregon Health Sciences University, 62Oregon State University, 62Oregon, University of, 62Orphan Drug Act–1983 (Public Law 97-414), 179-180,

185-187

295

Ortho Pharmaceutical Corporation (New Jersey), 163

Patent and Trademark Amendments Act—1980 (Public Law96-517), 114, 200

Patent and Trademark Amendments Act—1984 amendments(Public Law 98-620), 200

Patent and Trademark Office, U.S. (PTO), 101, 103patentability criteria of, 182plant patents granted by, 199

Patentscollaborative efforts and, 118-119, 120, 121, 123, 124, 125effects of, on biotechnology development, 11, 101-103human therapeutics development and, 181-182plant protection using, 199-200, 211

Pennsylvania, biotechnology promotion in, 4, 6, 59-60, 62,65, 66-67, 68, 69, 153.

Pennsylvania State University, 59, 116, 147Perot, H. Ross, 65Personnel, 5-6, 131, 153-154

availability of trained, and U.S. pharmaceutical biotech-nology superiority, 184-185

biotechnology’s effect on types of trained agricultural, 198current levels of biotechnology, 131-133funding for training of, 6, 150-153, 202, 203needs in biotechnology industry, 133-135, 211-212potential shortages in biotechnology, 135-137, 244-245turnover and workload trends for PTO, 103university/industry collaboration and, 119-120

Pharmaceuticals. See Human therapeuticsPhilanthropic organizations. See individual organizations.Philip Morris Company, 81, 89Pioneer Hi-Bred International (Iowa), 203Pittsburgh Biomedical Research Center (University of Pitts-

burgh), 59Pittsburgh Technology Center, Biotechnology Center of, 59-60Pittsburgh, University of, 59Plant Patent Act—1930 (U.S.C. §§ 161-164) (PPA), 199, 211Plant Variety Protection Act–1970 (7 U.S.C. §2321 et seq.)

(PVPA), 199, 200, 211Plants. See Agriculture, plantPolicy

FDA biotechnology regulatory, 177issues and options for Congress, 14-23, 185-187, 213-215,

245-247trade, 10, 97-loo

Pramer, David, 138Private sector

funding of research,209

waste management

6, 31, 113, 175-177,204-205,207-208,

R&D by, 240-241, 243see also Industry; individual philanthropic organizations

Procter & Gamble Co. (Ohio), 81, 89Program in Molecular Biology and Biotechnology (Univer-

sity of North Carolina), 148Proprietary information. See Patents; Trade secretsProtein Information Resource databank, 187Public Health Service Act (PHSA), 177Puerto Rico, EPSCoR grant to, 70

Regulationeffect on public stock offerings of, 87, 101-102, 181-82

effects of governmental, on biotechnology development,100-101, 210-211

of pharmaceutical biotechnology, 177-181private sector waste management investment and, 240of university/industry collaborations, 7, 126of waste management activities, 224-225, 240, 244

Researchaccess to biotechnology data derived from, 182-184, 187agri-biotechnical, 13, 193, 215-216applications of biotechnology applied to human therapeu-

tics, 162-167, 185benefits and problems of university/industry collaborations

in, 118-123biotechniques used in agricultural, 194-197biotechnology’s impact on investment in agriculture,

197-198consortia, 104, 116factors affecting investment in agri-biotechnical, 193-194,

199-200factors influencing commercialization of human therapeu-

tics, 12, 168-185funding agri-biotechnical, 200-209, 213-214future of agri-biotechnical, 212-213gaps in basic and applied, applicable to human therapeu-

tics development, 168-172predictive risk assessment modeling, 48State promotion of biotechnology, 4, 8-9, 55-64, 115trends in university/industry collaborative, 114-115types of collaborative arrangements for, 115-117see also Collaborations; Funding; Research and develop-

ment (R&D)Research and development (R&D)

areas of focus for biotechnology companies in, 9-10, 79-80Federal funding to States for, 21, 57, 60-61, 70-71funding for waste management, 235-241funding involving human therapeutics development,

173-177investment by biotechnology firms, 10, 80-81microbial physiology and ecology, 230-231needs for biotechnological waste management, 241-242private sector financing of biotechnology, 10, 80-92private sector funding of agri-biotechnical, 204-205,207-208State support of, 68-70see also Collaborations; Research

Research and Development Limited Partnerships (RDLPs),84-85, 105, 115

Resources Conservation and Recovery Act—1976 (Public Law94-580) (RCRA), 224, 225, 246

Rhone-Poulenc Agrochimie, 81, 89Risk assessment, biotechnology-related research funding for,

48Rochester Institute of Technology (RIT), 143Roussel-Uclaf Corp., 89Ruckelshaus, William, 101Rutgers University (New Jersey), 144, 145, 147

San Diego State University, 140, 144-145, 146San Francisco State University, 144, 145San Jose State University (SJSU), 149Small Business Administration Development Act—1982 (Pub-

lic Law 97-219), 50, 51

U . S . GOVERNMENT PRINTING OFFICE O - 76-582 : QL 3

Small Business Innovation Research (SBIR) program, R&Dfunding by, 8, 35, 50-51, 70, 173, 174

SmithKline Beckman, 89South Carolina, biotechnology development in, 61-62Standards. See Guidelines; RegulationStanford University (California), 116State University of New York, 116, 117, 143-144, 147, 148,

149-150Stevenson-Wydler Technology Innovation Act–1980 (Pub-

lic Law 96-480), 114Strategic alliances. See CollaborationsSuperfund, 224, 235, 239, 240Superfund Amendments and Reauthorization Act–1986

(Public Law 99-499) (SARA), 224, 225, 240Superfund Innovative Technology Evaluation (SITE) Program,

236, 246, 247

Tax Reform Act—1986 (TRA) (Public Law 99-514), impact onbiotechnology investment of, 11,21-22,84-85,105-108

Technical Advisory Committee (TAC)--DOC, biotechnology,99

Technology transferantitrust considerations and, 104biotechnology development and, 23, 97-100trade policy and, 97-100U.S./Foreign collaborative ventures and, 90

Technology Transfer Act–1986 (Public Law 99-502), 7, 38Tennessee, biotechnology development in, 62, 69Tennessee, University of—Knoxville, 240Texaco, Inc., 89Texas, biotechnology development in, 56, 61, 65Texas, University of, 56Toxic Substances Control Act–1976 (Public Law 94-469)

(TSCA), 224Trade secrets

as alternative to patenting, 103, 182plant protection using, 199, 211university/industry collaborations and, 7, 115, 121, 122,

124, 125Training

biotechnicians at community colleges, 140-143biotechnology’s effect on agriculture personnel, 198funding of biotechnology, 6, 18-20,37,39-40,48, 150-153,

202, 203interdisciplinary, 184

secondary school biotechnology, 149-150university/industry collaboration and, 119-120university initiatives in biotechnology, 6, 138-139, 267-272

TreatTek, 234Tufts University (Massachusetts), 145, 146, 147, 149

United Kingdom, patent litigation in, 181Universal Foods Corp. (Wisconsin), 59University City Science Center (Pennsylvania), 49Universities

benefits and problems resulting from collaborations withindustry by, 118-120, 121-123

biotechnology education and training by, 6, 138-149,267-272

role of, in State biotechnology programs, 60-63see also individual universities; individual university bio-

technology initiativesUpJohn Co., 89Utah, biotechnology development in, 59, 65

Vaccines. See Human therapeuticsVermont, biotechnology development in, 9, 70Veterans Administration (VA), research funding by, 8, 49Virginia, biotechnology development in, 59, 69

Washington University (Missouri), 6, 113, 123, 124Waste treatment. See Hazardous waste treatmentWellcome Foundation (U.K.), 181West Virginia, biotechnology development in, 59W.H. Miner Agricultural Center (SUNY Plattsburgh), 144Wisconsin Biotechnology Center (University of Wisconsin),

116, 117, 147Wisconsin Biotechnology Center Biopulping Consortium, 116,

117Wisconsin, biotechnology development in, 59,62,68,70, 117,

207Wisconsin, University of, 117, 148, 150Worcester Polytechnic Institute (Massachusetts), 147Wyoming, EPSCoR grant to, 70

Xoma Corporation (California), 163

Young, Arthur, 87