The American Spectator

SAN DIEGO — The California biotechnology industry recently gathered for its annual CALBIO conference. Participants were excited at the prospect of developing new medical miracles. But the ever-present potential of government interference hung over the proceedings like dark clouds on the horizon.

Much is at stake. Nearly $50 billion was spent last year in pharmaceutical and biotech R&D. The big drugmakers devoted $38.8 billion to finding new cures. Biotech companies, in the main smaller and more dependent on investors willing to risk their money on unproven ventures, spent another $10.5 billion.

The U.S. dominates the biopharmaceutical industry worldwide. America’s big pharma companies account for more than half of R&D internationally. The U.S. is even more dominant in the biotech field.

America’s advantage is not that its citizens are smarter, better educated, or nicer. Rather, America is freer.

Despite manifold regulations and controls by states as well as the federal government, it is still easier to conduct research, create products, and sell medicines in the U.S. than overseas. In contrast, Europe faces a full-scale scientific brain drain in many industries due to its increasingly stultifying economic environment.

American dominance results in two obvious benefits. One is increased economic activity, particularly sales and employment.

Biopharmaceutical leaders are financial leaders. Pfizer ranks number 24 on the list of the Fortune 500. Johnson & Johnson comes in at 30, and Merck at 84. There are a half dozen more in the top 500 companies and another 11 in the next 500.

Biotech concerns typically don’t rate a Fortune 500 mention. Nevertheless, the nearly 1,500 firms are enormously important, offering the sort of diversity and entrepreneurial possibilities commonly associated with start-ups and small businesses.

Revenues for the top three drugmakers alone run $123 billion. Their total employment is 288,000. Indeed, Pfizer and Johnson & Johnson have larger work forces than some of the companies ahead of them in revenues, such as Exxon Mobil, number two on the Fortune 500 list.

A new study for the Milken Institute calculates that the biopharmaceutical industry collectively employed 406,700 people in 2003 and, “when the full multiplicative impact is captured, is responsible for 2,724,800 jobs and 2.1 percent of total employment in the nation. Each job in the industry creates another 5.7 jobs elsewhere in the economy, substantially above the average for all industries.”

Particularly notable is the kind of employment offered by the drugmakers and biotech firms. Notes the Institute, “The pharmaceutical industry is one of the most enduring and most critical knowledge-intensive sectors in the U.S. economy.” The results are higher-than-average wages and higher-than-average real output per worker, $72,600 and $157,300, respectively, in 2003.

Drugs once were but a subset of the chemical industry. Advances in chemical applications led to development of a separate complex of firms now driving medical innovation. Then came biotechnology.

Notes the Milken Institute, “Biotechnology is an outgrowth of interdisciplinary research in molecular biology, immunology and biochemistry, aided by new techniques such as X-ray structural analysis and computer-assisted drug synthesis.” It comes as no surprise that the innovative possibilities of such a combination are immense.

BIOTECHNOLOGY IS CREATING ITS own unique medicines. It also offers the possibility of reviving traditional drugs that failed in testing by adjusting their use or tailoring their patient base. For instance, find the genetic feature that leads to an adverse side effect and direct the medicine to other patients.

Some biotech firms go it alone. Many traditional drug companies have developed their own biotech research programs. Others have joined with biotech concerns, matching established resources to emerging possibilities. The overall result is a vigorous national effort.