People have used biotechnology processes such as selectively breeding animals and fermentation for thousands of years. Late 19th and early 20th century discoveries of how microorganisms carry out commercially useful processes and how they cause disease led to the commercial production of vaccines and antibiotics. Improved methods for animal breeding have also resulted from these efforts. California scientists in the San Francisco Bay Area took a giant step forward with the discovery and development of recombinant DNA techniques in the 1970s. The field of biotechnology continues to accelerate with new discoveries leading to new applications expected to benefit California's economy throughout the 21st Century.
In its broadest definition, biotechnology is the application of biological techniques and engineered organisms to make products or modify plants and animals to carry desired traits. For the purposes of this study, this definition also extends to the use of various human cells and other body parts to produce desirable products. In this paper, the term "bioindustry" refers to the cluster of companies that produce engineered biological products and their supporting businesses. "Biotechnology" refers to the use of the biological sciences (such as gene manipulation), often in combination with other sciences (such as materials sciences, nanotechnology, and computer software), to discover, evaluate and develop products for bioindustry.4
The literature of biotechnology is enormous and quickly growing. A recent five-minute exploration of biotechnology resources on the Internet resulted in an 82-page listing of publications, agencies, associations, and companies. A quick search for documents under the specific subject "biotechnology" in the Melvyl catalog of University of California resources found 1,540 items. Both searches included documents published only within the last ten years! A full search, finding documents listed under related headings and spanning the entire database, would have been far larger. A search of periodical articles would have multiplied the resources yet again. Our intent in this report has been to bring together useful information from this vast literature on the subject.
The following chapters sketch out how several factors interact to shape the industry's development. These factors include:
The pattern that emerges is used to identify government policy options.
Analysts commonly classify bioindustry firms under the following five headings based on their end markets: 5
For ease of discussion, current developments in each of these categories will be regrouped by the field they affect: human health related products; animal and plant products; food processing; environmental cleanup and energy; and links with microelectronics and nanotechnology.
Biotechnology is researching a broad range of human-health-related products. This discussion will focus only on pharmaceuticals and genetic engineering. (These technological advances raise serious ethical issues, discussed in Chapter IV.)
Diagnostic products. Biotechnology products have made it easier to detect and diagnose illnesses. Many of these new techniques are easier to use and some, such as pregnancy testing, can even be used at home. More than 400 clinical diagnostic devices using biotechnology products are in use today. The most important are screening techniques to protect the blood supply against contamination by AIDS and the hepatitis B and C viruses. 6
Pharmaceuticals. Biotechnology regularly produces remarkable new medical treatments and applications for improving human health. The Food and Drug Administration has approved preventive agents or treatments for:
Acute Growth Deficiency Cystic Fibrosis Hepatitis B (vaccine and therapeutic) AIDS-related Kaposi's sarcoma Anemia Hairy cell leukemia Diabetes mellitus Venereal warts Acute myocardial infarction (heart attack) Kidney transplant rejection 7
Well over 1,000 clinical trials of new drugs and biological agents are currently under way. A majority of these are for cancer or cancer-related conditions. About one out of seven of the trials are for drugs to treat AIDS or HIV-related conditions. 8
Gene Therapy. "Gene therapy," according to a Scientific American review of the field, may "constitute a fourth health care revolution," following those of teaching public health practices, surgery with anesthesia, and antibiotics. " [Introduction] of selected genes into a patient's cells can potentially cure or ease the vast majority of disorders. . . . More than 4,000 conditions [such as cystic fibrosis, cancer, heart disease, AIDS, arthritis and senility] result to an extent from impairment of one or more genes . . . ." 9
Altering Genes in Sperm. A method has been discovered for altering genes in sperm. 10 The process will be patented. So far the method has only been applied to animals.
Insertion of Genes from other Species into Human Sex Cells. This transgenic (cross-species) procedure could improve the quality of life and health of future humans, particularly if it means that they will not experience a genetically transmitted disease or defect.
Somatic Gene Therapy. Somatic Gene Therapy involves insertion of genes from another species or a human into a sick person. For example, in 1988 a team of scientists wanted to place a bacterial gene into the bodies of terminally ill melanoma patients using a rodent retroviral vector. 11 The purpose was to develop a better understanding of how the immune system fights cancer and whether genes from other organisms could be used for this purpose. National Institutes of Health guidelines required that the research team receive approval from the Recombinant DNA Advisory Committee. The Advisory Committee voted to approve the project and it was carried out. 12 A recent review of National Institutes of Health investments in gene therapy research found that progress is being made but that more attention needs to be paid to basic research. 13
Insertion of a healthy gene from one person to another to treat a health problem is also possible. In 1989, the first human gene transplant was authorized by a United States District Court in Washington, D.C. 14 Since then, scientists have demonstrated that it is possible to insert a healthy human gene into the cells in a cystic fibrosis patient's lungs. The implanted gene produces an essential protein to replace one that is defective in cystic fibrosis patients. A second approach is to use genetically-altered common cold virus to act as a carrier of the healthy gene into the body. This approach has been successfully tested in the laboratory. 15 In October of 1995 the first clear gene therapy success was claimed by scientists. Two children suffering from an inherited gene that left them without an immune system received normal genes. One patient's response showed clear improvement. 16
Artificial Organs: Biotechnology is moving beyond transplantation to direct fabrication of body parts and organs. This technology depends on the manipulation, using computer-aided design, of ultrapure, biodegradable plastics and polymers. It has already been demonstrated in animals with an engineered artificial heart valve for lambs. Innovative electronics may be used. For example, "An ultrathin chip, placed surgically at the back of the eye, could work in conjunction with a miniature camera to stimulate the nerves that transmit images." 17
Vaccines. The cost and availability of potential future vaccines may depend on biotechnology research. For example, efforts are underway to sequence the genome of human pathogens and parasites. The goal is to identify genes in these organisms that influence metabolism and could be drug targets or that encode antigens that could be built into vaccines. 18 Examples include the agents that cause leprosy and African sleeping sickness.
The projected benefits from bioindustry animal and plant research and products are considerable. The Office of Technology Assessment estimates that agricultural biotechnology will continue to help agricultural productivity to increase at about the same rapid historical rate of the last two decades. 19 Table 1 shows what the estimated impact of biotechnology might be on animal- and plant-related products. For example, the bushel per acre yield of corn is predicted to increase by as much as 21 percent if more new biotechnology is developed, compared to projected loss of 2 percent if less new technology is used. The application of more new biotechnology could increase the number of calves born per 100 cows by 12 per year. These are significant increases which could have a substantial impact on commodities and the cost of food. Requirements for field testing and regulatory approval, the acceptance of the new methods by farmers, and public acceptance of the new products could significantly influence these projections.
Genetic engineering may improve an animal's economic value. Genetically engineered hormones, transfer of genes from other species, and introduction of human genes to produce specified substances are all being used today for this purpose. Experiments with transplantation of animal organs to humans are under way.
Genetically engineered hormones and other biologically active substances may improve animal qualities. For example, pigs that were administered a new bioengineered growth hormone (porcine somatotropin) "show increased average daily weight gains of about 10 to 20 percent, improved feed efficiency of 15 to 35 percent, decreased adipose (fat) tissue mass . . . of 50 to 80 percent, and concurrently increased protein deposition of as much as 50 percent without adversely affecting the quality of the meat. [This hormone] is currently being reviewed by the federal Food and Drug Administration (FDA) for commercial use." 20
In 1993, the U.S. Food and Drug Administration approved the use of Posilac, a Monsanto company product containing recombinant bovine somatotropin (rBST) to improve the milk production of dairy cows. 21 On average, depending on the management skill of the producer, rBST can increase milk production by about 12 percent. 22 Concern has been expressed about possible antibiotic residue levels in milk; however, the California Department of Food and Agriculture's position is that public health is safeguarded:
Should the use of rBST result in additional antibiotic use in treating mastitis, dairy herd managers have the same obligatory responsibilities for excluding the milk from antibiotic treated cows from human consumption that they presently have. Every tanker truck of milk produced in California is presently tested for antibiotic residues. 23
Several states have seriously considered laws that would require milk and dairy products produced with rBST to be so labeled. 24 Vermont, having adopted labeling regulations, is facing a lawsuit charging that the state is discriminating against out-of-state producers that do not label their products. 25
The potential economic impact of genetically engineered animal products may be to encourage consolidation of the industry around fewer and larger dairies. For example, a large dairy with sufficient capital may be able to afford to treat its cows with rBST and to provide the necessary management and veterinary support. The increased milk production and possible lowering of milk prices could drive out of business small dairies that cannot afford the increased expenses associated with using the hormone.
A transgenic animal contains genes which have been inserted from another species into the egg to generate a particular scientifically useful or marketable characteristic. Offspring include the desired trait.
The vast majority of transgenic animals being produced today are laboratory mice with genes inserted from many different species (including humans). Typical is the Oncomouse, which is genetically modified to develop malignant tumors useful for human cancer research. Recently developed transgenic farm animals include cattle, chickens, pigs, rabbits, sheep, fish, and goats. 26 Transgenic cattle and swine have recently been developed to produce human growth hormone. Transgenic animal blood would produce products that are free of HIV and other transmittable human disease organisms. 27
The term "gene pharming," playing on the words farming plus pharmaceutical, refers to the production of biologically active drugs using genetically altered animals. For example, Genzyme Transgenics has purchased a farm in western Massachusetts to breed genetically altered goats which produce human therapeutic and diagnostic proteins in their milk. Gene pharming is expected to be a less costly production method than traditional cell culture methods. In August of 1995, the FDA issued guidelines for medicines derived from the milk of genetically altered animals. 28
There are not enough donors of human organs to meet the need. Researchers hope that genetic engineering will soon make it possible to alter the pig so that it can become a routine source of organs for transplant into humans. Research to reduce the chances for rejection of transplanted animal organs is close to human clinical trials. The pharmaceutical industry is interested in developing the technology and is investing in the research.
Mass Producing Identical Animals
Recent laboratory success in producing identical sheep by cloning "...could open the door to gene-altered animals with desirable traits, such as sheep with better wool or pigs with `humanized' organs suitable for transplantation into people." 29 Each of the biotechnology animal related developments discussed above might be able to use this new technique to maximize benefits by reducing variation between animals.
The current work in plant biotechnology emphasizes modification of plant-specific characteristics such as resistance to weeds, pests, herbicides, and pesticides, tolerance to stress, and improved nutritional content. Other work focuses on improving traits important to agriculture such as frost resistance and nitrogen fixation. 30 According to the Biotechnology Industry Organization, all of these activities are directed at improving the yield and reliability of plants in the face of pests, reducing the cost of farming by reducing the need for costly herbicides, improving crop quality, and increasing crop diversity by developing entirely new crops. 31
A little less than half of agbioindustry's resources are spent on genetic engineering aimed at producing herbicide resistant crops, rather than disease-resistant crops. Herbicide-resistance research seeks to develop plants that can resist intensive applications of herbicides. 32 In contrast, disease-resistance research seeks to engineer plants that are resistant to diseases and insects. 33 At least 27 herbicide-producing corporations, including the world's eight largest pesticide producers, are working in this area. Market value of these products is expected to exceed $6 billion by the turn of the century. 34 In 1995 the Environmental Protection Agency, for the first time, granted "limited premarket approval for pesticidal transgenic plants. The...approval allows these companies to plant experimental crops of pesticide-resistant potatoes, corn, and cotton with the goal of gathering data that could lead to commercialization as early as 1996." 35
Plant viruses can devastate entire food crops, including corn, wheat, rice, soybeans, and potatoes. Virus-resistant plants have been developed by introducing the genes that encode a key part of the virus into the plant. The new plant retards viral infection and viral replication. Enhanced viral resistance should improve crop quality and yield; it also should decrease the need for insecticides directed against insects that spread the virus. The level of viral material in any plant is "not expected to present a health risk for humans and livestock," according to the American Medical Association's Council on Scientific Affairs. 36
Food-processing research currently focuses on growth and fermentation by yeast and bacteria. These methods are well known technologies used in cheese- and bread- making. Biotechnology applications include producing fermentation starter cultures with specific taste, texture or other characteristics; creating plant tissue for the production of plant-derived ingredients (starches for example); and improving waste management (such as oil or other waste digesting bacteria). "In principle," one report asserts, "any commodity that is consumed in an undifferentiated or highly processed form could be produced in this manner, and product substitution could be easily introduced. . . . In short, agricultural production in the field could be supplanted by cell- and tissue-culture factories." 37
Renewable sources of energy have been a national priority since the mid-1970s. Environmental cleanup of large toxic spills and of military bases remains a challenge. Biotechnologists are researching ways of addressing these needs.
Biotechnology may offer efficient ways to produce renewable energy by using microorganisms, modified plants, plant material, municipal and animal wastes, and other sources to produce different types of fuels and gases. Research is underway exploring the use of organisms to enhance the recovery of fossil fuels, to improve coal desulfurization, and to convert coal to gasoline. 38
Commercialization of this technology will depend on energy companies and others investing in the necessary machinery to use the products. Relatively little research and development has been done in the U.S. on the environmental impacts of these crops. 39
"Bioremediation" involves the use of microorganisms to degrade various types of environmental pollution, such as waste oil and heavy metals, to produce environmentally safe byproducts. 40 This method was used to clean oil spills in the Gulf of Mexico and Prince William Sound, and might be used to decontaminate military bases or to remove heavy metals from soil. It might also be used to clean up nuclear waste. Approval was recently given to release genetically engineered bacteria to "feast on pollutants in Oak Ridge National Laboratory soil." 41
Government environmental regulatory efforts to clean up polluting industries and hazardous materials disposal sites are encouraging research and development of bioremediation. 42 Germany recently passed a law requiring manufacturing companies to assume responsibility for their products from cradle to grave. As a consequence, German companies have become quite interested in biotechnological solutions in order to avoid the high costs of traditional cleanup methods.
Currently, little U.S. federal research funding is available for bioremediation research. Unresolved questions include possible risks of releasing the organisms into the environment and standards that may be too stringent for certain types of bioremediation.
The bioremediation industry was expected to gross $300 million worldwide by the end of 1995. 43
Research at the frontiers of microelectronics, nanotechnology, 44 and biotechnology may lead to fruitful collaboration among and advancement of these fields. Advanced microelectronics will play an important role in the future development of biotechnology. For example, computer-assisted gene sequencing may be used to control biotechnology manufacturing processes. 45 Computer-based "artificial life" experiments are believed by some to increase scientific understanding of how organisms evolve, and may make it easier to search for, design, and "evolve" new organisms. 46
Conversely, biotechnology has implications for microelectronics. For example, genetically-engineered synthetic genes could be incorporated into bioengineered materials and molecular electronic devices. According to the RAND Corporation, "Possible applications include optoelectronic memories with large storage capacities, biocomputation (the use of biomolecules as computational building blocks), artificial sensors (e.g., a protein-based artificial retina for image sensing), and biosensors, which could, for example, detect bacterial agents [on the battlefield] )." 47
Nanotechnology involves tools and machines that operate at macromolecular level dimensions, almost eliminating the distinction between biochemistry and physics. 48 Miniature machines which disperse a combination of biologically engineered drugs could be injected into the blood stream to correct serious blood vessel or other problems. 49 Although scientists have been unable to manipulate individual biological molecules, nanotechnology might make it possible to do so. Such manipulations could be used to self-organize the creation of nanomachines. It may also be possible to develop a nanomachine engine that uses the same fuel that the body uses (ATP) to molecularly manufacture biologically active substances within the body. 50
Research funding, cost containment, and product marketing opportunities have a strong effect on research agendas. The final institutional customer for a potential product, profit to be made in a particular market, or cost containment strategies can determine which basic research projects are pursued or move into the product development stage.
The decision to pursue a particular research agenda and to develop a particular product involves the allocation of a considerable amount of financial resources over an extended time--up to 12 years for some pharmaceutical products. There must be some certainty that such an investment will lead to a marketable product. According to the biotechnology industry, cost control initiatives within health care have created a number of public policy issues that affect research and product development choices:
Historically, the role of biomedical research in reducing health care costs has been undervalued for four reasons:
The Federal Coordinating Council for Science, Engineering and Technology contends that advances in health-related biotechnology could be of great value in containing health care costs through new diagnostic, prevention, and treatment techniques. New drugs may keep the patient productive and out of the hospital, and they might improve quality of life. 52
On the other hand, some new biotechnology-developed drugs and associated laboratory services could be prohibitively expensive. For example, the drug Centoxin deals with certain types of septic infections, a potentially fatal complication most commonly associated with post-surgical and elderly patients. Such infections claim 100,000 lives each year. The drug can cost $4,000 per treatment. Also, the hospital laboratory must be immediately available to determine whether the septic infection can be treated with the drug, which also increases costs. Hospitals may have to tighten guidelines on the use of such drugs, improve inventory procedures, and develop a clear estimate of long-term costs and benefits.
The lack of an accepted method for determining the costs compared to benefits of a new drug, combined with potential additional costs in laboratory and other services, creates long term market uncertainty. High levels of uncertainty about a promising basic research avenue or product development effort could result in its receiving a lower priority and reduced access to venture capital than if these issues had been resolved. 53
Agriculture continues to be at the center of a succession of technological and organizational changes that are slowly altering the traditional relationships between final production, its location, and the land and other natural resource inputs. 54 Agribusiness is "arguably the most capital-intensive, most technology-intensive, and most information-intensive industry around." 55Government-subsidized technological improvements in machines, seeds, and fertilizers have led to vastly increased crop yields. There has been a corresponding decrease in the number of farms and farm workers and an increase in the size of farms.
The development and introduction of new agricultural technologies has very different consequences depending on whether the technology is "yield enhancing," "labor saving," or "value adding." "Labor saving" technologies enable individual producers to greatly increase the size of their operation or to reduce the cost of labor. The tomato-picking machine is a good example. "Yield-enhancing" technologies increase yields through an improved crop strain, improved fertilizers, or pest control. "Value adding" means that the technology increases nutritional or other food qualities relative to an existing plant species or extends its shelf life without reducing its other favorable qualities. In general, biotechnologies tend to be yield-enhancing but some have been labor saving. Both technologies can result in fewer farms and greater industry concentration.
Biotechnology could continue to influence the restructuring of the U.S. agricultural industry and also catalyze major changes in the structure of worldwide agribusiness. The industry has been undergoing both vertical and horizontal concentration over the past decade:
Mergers, acquisitions, and concentration in the agricultural-input and food-processing industries have occurred, as traditionally nonfood industries such as chemical, petroleum, pharmaceuticals, and tobacco expand their investments. Most analysts predict biotechnology will continue and accelerate this trend toward increasing concentration of control by a small number of large multinational corporations. 56
For example, seed producers with proprietary value-added products could form partnerships or integrate in some other way with food processors to capture a greater portion of the full market value. Similarly, food processors could increasingly develop and control the production of proprietary crops engineered for specific production or marketing purposes. Growers could produce specific products, as "contract growers," for a food processor through formal business agreements such as joint ventures and alliances. Alternatively, vertical mergers may consolidate control of the entire production, distribution, and marketing chain. Such technology-driven vertical integration could create significant changes: 57
In 1991, the President's Council on Competitiveness wrote, "Modifications of plants, animals and microorganisms may be made to improve important beneficial characteristics, and should not be used to create or enhance dangerous, harmful characteristics." 61 Yet serious questions remain. For example, a recent news account described development of a possibly harmful characteristic, increased nicotine, in tobacco plants. The development reportedly took place in the U.S. laboratories and Brazilian fields of a biotechnology firm working for the Brown and Williamson Tobacco Corporation. Until December 13, 1991, federal law prohibited exporting tobacco seeds or plants from the U.S. without a permit. However, the new plant was supposedly seen growing in fields in Brazil in the early 1980s. These reports raise questions both about the use of biotechnology to create substances that may be bad for the public's health and about ignoring regulations concerning export and release of experimental plants in the wild. 62
Next Chapter: Bioindustry in the U.S., California, and the World
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