Federal regulations affect biotechnology research choices, laboratory construction and practices, testing procedures, manufacturing practices, and marketing of new products in the United States. The principles of regulatory review differ somewhat among federal agencies. The Food and Drug Administration (FDA), the U.S. Department of Agriculture (USDA), and the Environmental Protection Agency (EPA) each have adopted somewhat differing regulatory requirements. Many of these differences are being actively addressed and may soon be resolved or minimized. Some regulations that affect particular portions of bioindustry (medical devices for example) are not addressed here.
California bioindustry claims that the lengthy FDA drug approval process has negatively affected the state's economy. The amount of capital required to sustain a company during product development and the FDA regulatory review is substantial and may be excessive compared to other countries with more timely reviews. A new study by the California Health Care Institute and Ernst and Young LLP provides a very preliminary estimate of the affects of FDA regulatory delays on the state's economy. The findings are based on forty bioindustry CEOs' estimates of the portion of their initial device or product development activity currently being conducted abroad (70 percent) and the total staff necessary to support this activity. "Over the past five years, this total FDA-related drain amounted to between 13,000 and 18,500 lost jobs in California, and between $700 million and $1 billion in lost annual salaries." 112
The FDA is attempting to deal with these delays. For example, the agency follows a case-by-case approach in reviewing biotechnology-derived products. The FDA is more willing than other agencies to use data available from independent clinical trials and worldwide regulatory reviews, and to expedite approval of proven biotech treatments. A separate, priority track has also been established for innovative treatments for life-threatening illnesses. 113 In 1992 the agency adopted new regulations allowing approval of very promising new drugs before completing all tests. The agency claims that approval time for "breakthrough" medicines has been cut to six months. The FDA also permits flexible drug trial designs that reduce drug approval time for drugs that are not considered to be significant breakthrough drugs. 114 These efforts reduced drug approval time from three years in 1987 to an average of 16 months in 1995.
Critics would like to see the process streamlined even further. One group of researchers in a 1994 study acknowledged that significant improvements had been made, but point out that a number of significant issues had been raised many times without corrective changes being made: "Among them, three general areas stand out: the use of outside expertise at various points in the regulatory process; the severing from FDA's jurisdiction of certain areas of regulatory oversight; and the allocation of inadequate resources to the agency in terms of budget appropriations, staffing, and physical facilities." 115
The USDA has taken the position that: "In sum, there exists wide scientific consensus that the use of genetic manipulation techniques in general or the newest techniques such as recombinant DNA in particular do not warrant a new regulatory paradigm or special regulatory scrutiny [emphasis in original] ." 116 Previously, the USDA required that every genetically engineered plant be tested, even if it was identical to a plant created through traditional breeding practices. Once the tests were completed, all of the newly engineered test plants had to be destroyed. The USDA also required a complete environmental assessment. It took Calgene four years to complete these procedures and receive approval for its Flavr-Savr tomato. On August 21, 1995, USDA proposed that researchers could test and move most genetically engineered plants and microorganisms without permits: " [P] ublic and private researchers would no longer have to apply for permits to test most new plants. Instead, they would only have to give 30 days notice, and could go ahead if the department raised no objections." 117
The USDA and EPA are particularly concerned about new organisms that contain genetic material from pathogens 118 or that contain new traits. 119 The EPA has adopted regulations that:
[Pay] particular attention . . . to microorganisms that  are used in the environment,  are pathogenic or contain genetic material from pathogens, or  contain new combinations of traits. EPA believes these categories have sufficiently high potential for widespread exposure, adverse effects, or uncertainty concerning potential effects to deserve particular regulatory scrutiny. This approach takes a significant step towards separating products on the basis of potential risk. 120
Interagency inconsistencies create an uncertain regulatory environment. One result has been that more venture capital has been made available for FDA-regulated biomedical research, in contrast to USDA-regulated agricultural research where investment is comparatively flat. EPA regulations may have slowed the development of biotechnological approaches to environmental cleanup. 121 Regulatory delays may allow foreign competitors to expropriate a new technology, have it approved by their regulatory agencies, and get it to market faster. The trade-off is that the U.S. consumer does not have access to beneficial new drugs or other products, but may be better protected against a too hastily approved harmful product.
In 1994, The Tufts Center for the Study of Drug Development, at the request of the Pharmaceutical Research and Manufacturers of America, conducted a study to document regulatory-related delays in the introduction of new drugs (not just biotechnology-drugs) in the United States. They found that:
Existing regulatory structures for plants, animals, pharmaceuticals, chemicals and toxic substances provide an adequate framework for regulation of biotechnology in those instances where private markets fail to provide adequate incentives to avoid unreasonable risks to health and the environment. In these instances, regulation also can help shield industry from avoidable incidents that could tarnish its image and impair its development. 125
For the most part, states defer to the federal government for regulation of bioindustry. The Office of Technology Assessment surveyed state bioindustry related legislation in 1990, identifying 19 bills spread among 13 states. The areas addressed include: DNA testing, rBST (milk hormone for cows), R&D and economic development, and deliberate release. In the same year, some 48 bills were introduced but not passed. 126 Over the past several years, nine states (Florida, Hawaii, Illinois, Maine, Minnesota, New York, North Carolina, Oklahoma, and Wisconsin) have enacted legislation directly related to field testing genetically modified organisms. West Virginia amended its Plant Pest Act to include biotechnology in 1991. Many state statutes require public notification of federal field test applications. Only North Carolina and Minnesota require additional state field test permits.
California state government began to address biotechnology public policy issues in the mid-1980s. Biotechnology industry development and state regulation and permitting have remained high priorities ever since. In 1984, the California Legislature adopted Assembly Concurrent Resolution 170 "to promote the biotechnology industry, while at the same time protecting the public health and safety and the environment . . . ." 127 The resolution directed the Assembly Office of Research to study California's biotechnology regulatory structure and to make recommendations for improvement. The 1985 report, "Biotechnology: A Regulatory Review," called for creation of an Interagency Task Force on Biotechnology and made several regulatory recommendations that are discussed below.
In 1985, Governor Deukemejian appointed the Interagency Task Force on Biotechnology. 128 The Task Force drew from the Departments of Commerce, Food and Agriculture, Health Services, Fish and Game, the Environmental Affairs Agency, the Occupational Safety and Health Division of the Department of Industrial Relations, and the Water Resources Control Board. Its responsibilities included: 129
The Task Force adopted the position that:
This new industry must be encouraged to grow and prosper in California. . . . While the benefits of biotechnology are widely recognized, concerns about safety and the environment have also been raised. These concerns will need to be addressed as additional products move from contained research laboratories into full contact with the public and the environment. . . . California recognizes the need for a regulatory program that adequately considers the health, safety and environmental consequences of new products and processes as they move from the laboratory to the marketplace. A good regulatory program is one that will encourage a growing industry, is well coordinated and minimizes the uncertainties and inefficiencies that can stifle innovation. Decisions should be consistent from agency to agency and from application to application. Public risk management decisions should be based on the best available science. 130
The Task Force issued a report identifying existing state biotechnology regulatory requirements, the agencies involved, permit and regulatory functions, and the relevant statutory authority. 131 The report recommended minor changes to existing procedures and no new state regulations:
. . . the Task Force has adopted the policy of deferring to the federal government whenever possible in regulating the industry. As this time the Task Force believes that existing authority is adequate and appropriate to regulating the products and activities of the biotechnology industry. 132
The Task Force continues to address important scientific and regulatory issues, such as labeling of agricultural and meat products, within this framework.
In 1994, Governor Wilson created the Council on Biotechnology by Executive Order to advise on actions needed to encourage the growth of biotechnology in California. 133 The Interagency Task Force on Biotechnology and the new Council on Biotechnology provide a mechanism for evaluating and setting biotechnology scientific and economic development policy. The Trade and Commerce Agency coordinates both bodies.
In July 1990, an open forum of representatives of 30 states, with additional participation by federal agencies, universities, the press, and environmental groups, formulated "Guidance for State Governments on Oversight of Biotechnology." 134 Generally, the guidelines call for creation of a task force to: 135
Applications to permit construction of new or expanded biotechnology laboratories and industrial facilities are increasing. Most local governments defer to state and federal agencies for technical regulations such as emissions or biological containment requirements. Generally, biotechnology companies have voluntarily complied with National Institutes of Health laboratory safety guidelines to ensure safety of genetic experiments. Biotechnology safety is also guided by the 1986 Federal "Coordinated Framework for Regulation of Biotechnology." 136
However, local governments review facility development plans, grant use permits, and approve plans for materials storage and handling. Local reviews can take up to one year. Few communities have planning staff with sufficient expertise to understand and address the complex issues raised by bioindustry. Also, local planning agencies may lack the expertise to meet plan review time limits prescribed by local law. 137 Lengthy local laboratory and other construction permit approvals may take up to one year and strain limited business capital. 138 Certainty about the building permit and review process, its requirements, and its time frames is important to encourage venture capital investment and the construction of new labs and manufacturing facilities. 139
Recently, the City of Chula Vista identified overlapping and duplicative federal, state, and local regulations as part of the study to evaluate the feasibility of establishing a biotechnology/biomedical zone in the city. The city found conflicting standards in the following areas: 140
The Chula Vista report also made recommendations for streamlining other services and permitting processes:
Regulatory and other local government permitting issues vary in different parts of the state. Joint Venture: Silicon Valley has facilitated the development of a common set of regulations in Santa Clara and San Mateo counties. Cities have "...agreed to unify their building, plumbing, mechanical, and electrical codes". 142 San Diego has established a Biotechnology Ombudsman to expedite the city permit process with a goal to complete the plan review and permitting procedures in 30 days.
The City of San Diego is targeting biotechnology as a key industry with the following actions:
The City of Chula Vista has embarked on a similar process in its effort to develop a biotechnology business park. 144
Most bioindustry firms do not set aside a portion of their budget for regulatory expenses, according to a 1988 University of California Berkeley biotechnology industry survey:
Few California biotech firms, in spite of complaints about the State's regulatory environment, budget for compliance. Agritech and therapeutic firms, as anticipated, spend the most on compliance activities. Most interviewees suggested that the regulatory environment in California was controlled by national standards rather than state or local requirements. In essence, it appears that while regulation is a valid community and industrial concern, there is little evidence that California is any better or worse a location in this regard.145
Regulatory problems most often occur when a company is expanding into production. Biotechnology firms experience a sudden drain on scarce investment resources when they enter the manufacturing phase. This is particularly a problem for small companies which must devote between 12 and 20 percent of their total operating budgets to regulatory compliance. 146 The combination of scarce resources and confusing regulatory requirements can be very frustrating.
Patents on biotechnical products (broadly defined) date back to the earliest days of the United States. Acetic acid fermentation of foods and other food patents date from the early 1800s. Louis Pasteur received a patent on a process for fermenting beer. Therapeutic patents in biotechnology were first issued in 1895. 147 Patents are viewed by many as vital to protecting commercial interests and intellectual property rights in bioindustry. In 1987 alone, the U.S. Patent and Trademark Office issued 1,426 biotechnology patents, up from 1,232 in 1986. About 6,900 patent applications were pending in 1988.
The United States Supreme Court authorized the patenting of biological products in 1980 in Diamond v. Chakrabarty. The court held that: "a live, human-made micro-organism is patentable subject matter under Section 101 as a 'manufacture' or 'composition of matter'." 148 Generally, patents extend to any type of living being (other than humans) as patentable subject matter. This means,
one can patent as products [an] organism's parts (such as flowers, fruits, seeds, and fertilized eggs), genes and other DNA (whether natural, recombinant, or synthetic), cells and cell lines, and gene and cell products (e.g., proteins and antibodies). One can also patent specific uses of any biological agent, whether the "agents" are novel or preexisting (e.g., patenting a bacterium for use as an insecticide or human stem cells to treat disease). Additionally, biotechnical processes for manipulating these biological materials and organisms can be patented (e.g., gene-splicing techniques). All of these can be claimed with one patent application. 149
Patent protection has led to litigation between bioindustry companies due to a complex web of partially overlapping patent claims, the high potential value of the products, prior research publications, and the fact that many companies are developing the same kinds of products.
Patenting animals and plants provides several benefits to bioindustry companies:
On the other hand, patenting may have a chilling effect by restricting access to information about new seeds, products and other information. Hundreds of patent applications and patents covering genetically altered crops have been issued. Challenging such patents increases research costs and may serve as a disincentive for smaller companies to initiate new research. 151
A related issue occurs when a foreign company obtains a patent to monopolize a particular discovery in the United States, the world's largest market, without reciprocal rights for U.S. companies. For example, Japanese companies accounted for 20 percent of all U.S. patents (not just biotechnology) issued in 1991. U.S. companies do not have a comparable patent advantage in foreign jurisdictions. The World Intellectual Property Organization's draft Patient Harmonization Treaty would establish a world-wide set of uniform principles. 152
Pending federal legislation would extend the patent term from 17 to 20 years, effective from the filing date (a potential problem if product development time is long term). 153 The 20 year time limit is also being discussed in a second forum, the General Agreement on Trade and Tariffs. Proposed U.S. treaty language would "stop the clock" on a patent's 20-year life if its validity is challenged by a third party before it is issued, or if an inventor appeals a decision not to award a patent. 154
The U.S. Patent and Trademark Office recently made it easier for biotechnology companies to obtain a patent: "Patent examiners will no longer require companies to back up their applications with clinical data showing a product works in people . . . animal tests or in vitro data" demonstrating effectiveness will be sufficient . . . ." 155
Important patenting issues have emerged since the U.S. Supreme Court authorized the patenting of organisms. Probably the most serious one is the issuing of patents covering all of a genetically engineered species such as cotton. Such a patent might allow a single company to monopolize all genetic improvements. For example, critics claim that a patent might establish:
property rights in broad classes of organisms in radically different species as long as they have the same traits and functional properties. Harvard's oncomouse patent is actually an oncomammal patent. Harvard (or Du Pont) owns any mammal with any recombinant, cancer-causing gene . . . inserted into it or its ancestors at an embryonic stage. 156
A similar concern involves the awarding of a patent to the National Institutes of Health which covers "any therapy in which cells are genetically modified outside the patient's body--no matter what the disease or the change." 157 A previous patent on DNA recombination techniques, which theoretically applies to all biotechnology activities involving recombinant DNA, has not stopped the industry's development.
Patenting basic food and other crops raises another serious question. From an ethical and historical standpoint, improved crops have been resources of common heritage and could be considered unsuitable for exclusive control by a firm, including through patents. 158 Hettinger asserts,
That plant utility patents prohibit farmers from using seeds from the very crops that they have grown seems incredibly wasteful and is as absurd as if software companies insisted that a program they sell may only be used once. This is a significant restriction given that almost 50 percent of wheat and soybeans crops are grown from farmer saved seeds. 159
The implications of multinational seed company's potentially controlling segments of a nation's food supply or the raw materials for an industry are still being considered. Patenting of a species that comes to dominate a country's food supply might make the country's food supply more vulnerable to a massive attack by herbicide- or pesticide-resistant diseases or pests. Since this could be the only crop grown in volume there would be little chance of replacement by related but hardier plants. 160
Another serious issue involves the patenting of gene sequences whose utility is not known. In 1991, the National Institute of Health filed applications for patents on 6,869 genetic sequences of the human genome. The Patent and Trademark Office rejected the applications on the grounds that the required utility of the sequences had not been demonstrated. 161 The issue of requiring a show of sequence utility might affect the future development of the industry. 162
A related issue is the ownership and patenting of genetic innovations produced from life forms freely collected on U.S. public lands, or from plants in other nations. In several cases a newly engineered and patented organism may be resold to the farmers in the originating country. In others instances, profits may be made without benefiting the original source of biological materials. Both issues are being hotly debated. For example, conflict is developing over research and commercialization of bacteria in Yellowstone National Park hot springs. The bioindustry position asserts, "all value is created in the recombination of genes, and that until this takes place, genetic material is worthless and thus free for everyone to take." 163
The North American Free Trade Agreement (NAFTA) Intellectual Property Rights text protects U.S. biotechnology's discoveries. NAFTA provides a higher standard of protection for U.S. patents, copyrights, trademarks, and trade secrets than any other bilateral or international agreement. This protection allows U.S. seed producers and plant breeders to sell in these markets confident that their invention will not be stolen at least not legally. NAFTA also aids agricultural chemical companies and biotechnology companies by providing product and process protection. 164
Human Biological Material Property Rights
According to a U.S. Commerce Department forecast, the potential market for genetically engineered human biomedical products amounts to tens of billions of dollars. 165 The question arises as to whether any limits should be placed on patenting the human body, its parts or derived cell lines. Patenting of humans as such is generally agreed to be unacceptable. Current questions revolve around patenting genetic or other biological materials, the ownership of the rights to use specific families for genetic studies, 166 and which body parts may be marketed.
The California Supreme Court established an important precedent in its 1990 decision in Moore v. Regents of the University of California. 167
. . . in Moore, the court imposed a fiduciary duty of physicians to disclose any personal interest that a physician may have in a patient's genetic material unrelated to treatment. The imposition of a duty to disclose ensures a patient's specific consent to the use of his or her genetic material for both medical research and commercial products. . . . While the court was clear about informed consent, it was . . . unclear as to the nature of the "interest" that a physician must disclose to a patient to avoid liability for breach of a fiduciary duty, nor did the court determine the nature or individual rights in genetic material. 168
For informed consent, the court held that a physician must "disclose personal interests unrelated to the patient's health, whether research or economic, that may affect his judgment." 169 However, the court did not provide definitions or guidelines nor did it support the patient's claim to a property right in their cells. The court found that a patient does not retain ownership interest in cells following removal from his body. (In contrast, the researcher's cell line is considered to be both factually and legally different from cells taken from the patient's body.) In making this finding, the court relied upon federal statutes that govern the disposition of human tissue. 170
The Federal Tax Court addressed a similar issue in a case involving ownership of body products and payment of business taxes. In Margaret Cramer Green v. Commissioner of Internal Revenue Service,74 T.V. 1229 (1980), a woman who sold her rare blood for profit wished to claim business-related deductions:
First the court [in Green vs. Commissioner] ruled that blood was a commodity, and that Green was essentially both a "factory" and a "container" of her product, blood. The court held that she was not involved in a service, but rather "the usual sale of a product by a manufacturer to a distributor of raw materials, by a producer to a processor. A tangible product changed hands at a price, paid by the pint. . . . The rarity of the petitioner's blood made the processing and packaging of her blood plasma a profitable undertaking, just as it is profitable for other entrepreneurs to purchase hen's eggs, bee's honey, cow's milk or sheep's wool for processing and distribution. Although we recognize the traditional sanctity of the human body, we can find no reason to legally distinguish the sale of these raw products of nature from the sale of the petitioner's blood plasma." 171
European countries are also wrestling with patenting issues. The issue of patenting human body parts was partially responsible for the recent failure of the European Parliament to harmonize European patenting rules. One group wanted to ban patents on all human body parts. A second group wanted to ban patents on body parts "as such"--allowing patenting of cells, genes, and proteins isolated from the body. Others advocated "stronger language on policing gene therapy and animal suffering, as well as an agreement to incorporate any future laws on the rights of farmers to use patented animals for their own use without paying licensing fees into the directive." 172
Public Funding and Intellectual Property Rights
Proprietary research at publicly funded universities raises serious questions about intellectual property rights, particularly when the publicly funded basic research is privately developed into a product for sale. For example, Scripps Research Institute in La Jolla (which receives about 65 percent of its budget from federal grants), granted Sandoz Inc. first rights to develop any discoveries made at the institute over ten years in exchange for $300 million. 173 The deal was renegotiated as a result of a congressional complaint, granting Sandoz exclusive access only to the research discoveries it paid for directly. 174
The problem of intellectual property rights also arises when a university researcher who made a discovery wants to establish a private business to market and sell it.
New legal and contractual relationships have arisen in response to these concerns:
These intertwined relationships arguably improve national competitiveness, increase the flow of information between industry and the university, and serve as one method to raise funds for research. On the negative side, proprietary interests may restrict communication about forthcoming scientific discoveries, and may lead to ethical conflicts for researchers. Professional Conflicts of Interest
There is considerable disagreement over exactly what the definition of conflict of interest should be. Recently, the New England Journal of Medicine "define [d] a financial conflict of interest as a condition, not behavior; clinicians or researchers who might benefit financially by distorting their work have a conflict of interest regardless of whether they actually distort their work." 176 Publication of a major research finding in a top journal may have a positive influence on a company's stock and development; should medical or other researchers gain financially from companies whose products they are evaluating for a journal? 177 With the exception of the New England Journal of Medicine and the Journal of the American Medical Association, most academic journals are still trying to develop a conflict of interest policy for authors who review products or research developments in which they have a financial interest.
The U.S. Public Health Service announced new policies in July 1995 that define what a conflict of interest might be for government-funded researchers:
The rules require researchers to inform their institutions if they, their spouses, or their dependent children have financial interests--exceeding $10,000 or 5 % ownership--in companies that might be affected by their research. It is then up to the institution to decide whether those holdings constitute a conflict of interest, take the appropriate steps to eliminate the conflict, and tell the government that the problem has been resolved. 178
Product labeling is one of the primary means for informing the public about potential food hazards. As many such hazards cannot be immediately detected, the manufacturer of the food or additive must provide information and assurances that it is safe. However, sufficient scientific evidence may not be available to make a determination as to the probability of harm. 179
Sometimes it is very difficult to clearly identify potential food risks for a consumer. For example, researchers added a Brazil nut gene to a soybean plant in hopes of creating a high-quality animal feed. Unfortunately, some individuals who are allergic to Brazil nuts are also allergic to the new soybean. 180 An allergic person eating at a restaurant would not have access to the label of the food product used, and could have an unexpected allergic reaction. " [A] coalition of nearly 2,000 chefs [has] pledged to keep genetically-engineered foods out of their restaurants." 181 Scientists have sharply differing views on how effective existing reguations are at protecting consumers against possible allergy- producing materials in genetically engineered foods and whether existing tests are adequate. 182
Traditional plant breeding techniques also have potential risks, yet do not raise as much public concern. 183 Both traditional breeding techniques and genetic engineering can lead to the expression of undesirable traits 184 or helpful ones, such as improving Canola oil by genetically engineering it to increase unsaturated fatty acids. 185 Decades ago a pest-resistance trait was introduced from inedible tomatoes into commercial tomatoes with little concern. 186 The FDA and the International Food Biotechnology Council consider genetically-engineered plants and microorganisms to be as safe as those derived from the traditional means of genetic manipulation. Genetically modified food crops currently under field test are thought to offer low risk to human health as a food product because of the detailed knowledge of the introduced DNA, an extensive understanding of the gene product, and the assurance that the newly engineered organisms can be contained until field tests are completed. 187
The World Health Organization's Food and Agriculture Organization has reviewed a comprehensive list of many different potential hazards and concluded: "These potential hazards are not new and can be controlled adequately using sound micro-biological principles. Indeed, the techniques of molecular biotechnology greatly enhance scientists' ability to address these concerns and to ensure safety." 188
Both the Biotechnology Office of the Federal Drug Administration and the International Food Biotechnology Council recognize the need for strict regulation of genetically engineered food products, particularly those that derive from a pathogenic source (poisonous or unhealthful for humans) or that contain new genetically altered proteins to which humans have not been previously exposed. These new foods are subject to the same FDA regulatory requirements used to guard the safety of all foods in the marketplace. 189 Changes in food content are treated and regulated as "food additives." 190
FDA policy includes a comprehensive "guide to industry" that identifies scientific questions that could raise sufficient concern to warrant pre-market consultation:
Should the FDA determine that the answer to any of these questions raises a concern about the genetic safety of a new plant, the agency has the authority to withhold approval of the product or to require special labeling. The American Medical Association and the American Dietetic Association have endorsed the FDA approach. 192
On the basis of extensive field testing and permitting, the USDA streamlined the regulatory requirements for certain genetically modified plants including corn, cotton, potatoes, soybeans, tobacco, and tomatoes. To qualify for the revised notification process, a company must certify: that the modified plant is one of the approved crops; that the modified gene is stable and contains no latent substances; and that the genetic modification has produced no disease, has not increased toxins, nor created other significant risk to the plant or other organisms or the environment. 193
Next Chapter: Ethical Issues and Risk Assessment in Biotechnology
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