Challenges to US lead in biotech

Federal support for biotechnology research is leveling off just as the governments of Japan, West Germany, Britain, France, and the Netherlands are increasing their support for such efforts. FAR-reaching changes are coming to the environment that nurtured the frontier of biotechnology.

Federal funding for basic research in biotechnology is leveling off just as the industry is gaining momentum and several foreign governments are increasing their commitment to such work.

Meanwhile, foreign competition is challenging the United States' so-far indomitable lead in the field as the domestic regulatory environment begins to stiffen. The small entrepreneurial companies -- set up by the visionaries that once led the charge into the new technology -- are beginning to falter and pass the initiative to large, established chemical corporations.

The young industry that pioneered and mastered the process of gene splicing is now preparing to introduce its first products: human insulin and other medicinals. Researchers are pressing for the enviromental release of genetically engineered organisms. The first experiments involving human genes, scientists report, are not far away. And experts promise that this is only the beginning.

``The whole field is exploding,'' says Stanford University microbiologist Paul Berg, who won a Nobel prize for his ground-breaking work with genetic engineering. ``We are really embarking on a grand adventure.''

Many analysts had already marked 1984 as a year of transition when the first products of genetic engineering would find their way to the market shelves. With all these developments, however, it also turned out to be the year when the industry itself passed into an era of intense and sustained public scrutiny.

That, some observers argue, might not be such a bad thing. Few question that the technology could make enormous contributions to basic research, medicine, agriculture, and a host of other areas. But some observers argue that, like the taming of atomic power, the mastery of genetic engineering will bring with it a host of unknowns. ``It's a Faustian bargain,'' says Jeremy Rifkin, a social activist and vocal critic of the biotechnology industry. Last April, Mr. Rifkin went to federal court to halt field tests of a bacterium that is supposed to prevent frost damage to crops. He then went on successfully to block experiments that transferred human genes into animals.

``Once you've released genetically modified organisms into the environment, it's too late to call them back,'' Mr. Rifkin says. ``If the field is not watched very closely, we will simply be courting trouble.''

A close watch is in store. On the last day of 1984, the US government published in the Federal Register its first plan to police the fledgling industry's explosive growth by linking existing agencies to a network of scientific oversight committees. With that step, gene splicing stepped from the exalted realm of academic inquiry to the scrappy world of regulated industry. For the industry that was about to be controlled, however, it was a welcome step: Small biotech companies and large corporations alike had been pushing hard for some type of regulation, especially in the wake of the Rifkin victories.

``You might say it shows we've come of age,'' says Harvey Price, executive director of the Industrial Biotechnology Association, a trade group including three dozen of the most prominent companies using biotechnology. ``There's been too much conflict and confusion about who controls what in [biotechnology]. The government is finally having to fashion a rational approach to the industry.''

Analysts say that lack of a clear-cut regulatory policy may have been slowing the growth of the industrial effort in biotechnology -- which includes not only the technique of rearranging genes, but also the harnessing of enzymes, fusing of cells, or any other process that somehow alters living organisms. The result was a regulatory quagmire. Companies experienced delays when they sought permission to test and market products, as federal agencies haggled over their authority.

ONE company -- Genentech Inc., a San Francisco-based genetic engineering concern -- saw approval of two products developed for cattle languish for more than a year as a turf dispute raged between the Food and Drug Administration and the Agriculture Department.

Rifkin's suit blocking the test of the antifrost bacterium was successful only because he showed that the Recombinant DNA Advisory Committee (RAC) of the National Institutes of Health -- until now the sole federal organization overseeing the safety of genetic research -- failed to prepare the environmental impact statements mandated by the Environmental Protection Agency (EPA) when it approved the experiment.

``It's been a real morass for a lot of small companies where timing is important,'' says attorney Steven Heimberg with Pierson, Ball & Dowd, a Washington, D.C., law firm that serves as counsel to Genentech.

Faced with growing regulatory confusion, the Reagan administration last April took the issue to its Cabinet Council on Natural Resources and Environment. The council decided that the existing statutes were sufficient to oversee the new industry and then came up with a framework within which they could be collected. And though the new federal controls actually repackage already existing statutes, many one-time critics of the industry say they are satisfied.

Sen. Albert Gore, Jr. (D) of Tennessee, who as a congressman last year chaired House subcommittee hearings on whether to regulate biotechnology, says that the new arrangements ``are sufficient'' to oversee industry activity. ``I think the industry also has been extraordinarily aware both of the need to be careful as well as the need of being sensitive to the public perception of what they're doing,'' he says. ``Yes, a microbial Three Mile Island would be a disaster for everybody. But I don't see one coming, and needless controls would be bad, too.''

One reason is that regulatory laws overseas are not as well developed as those in the US. ``They're waiting to follow our lead,'' explains Nanette Newell, project director of a report on biotechnology for the congressional Office of Technology Assessment (OTA).

So these attempts to regulate the industry involved a high-wire act between overregulation, which might drive industry overseas, and too little control, which might result in the much-feared spread of genetically tampered microbes that meet no natural resistance in the environment. ``They have struck a balance,'' says Mr. Price of the Cabinet council's efforts. ``The industry now knows what they have to do.''

That industry hardly existed 10 years ago. From a trickle then, a Commerce Department report says that several hundred US firms, reflecting a capital investment of nearly $2 billion, now employ biotechnology. By 1990, some estimates of the annual market for drugs produced by genetically altered organisms alone go as high as $5 billion. The Commerce Department says that the worldwide market for such products could hit $100 billion in 15 years.

While the US -- with more scientists, companies, products, and government support than anyplace else -- is currently the undisputed world leader in most areas of biotechnology, other industrialized nations have targeted the field as a major growth industry.

Many foreign companies are working to close the gap with their US competitors. The OTA report observed that Japan considers biotechnology to be ``the last major technological revolution of this century.'' The Japanese Ministry of International Trade and Industry, which has comandeered that country's development efforts in automobiles, silicon chips, and computers, has designated biotechnology as a ``strategic industry.'' The US National Academy of Sciences estimates that in little more than a year Japanese companies raised research budgets by 55 percent to more than $100 million. In West Germany, $250 million in public and private funds will be invested in biotechnology research this year. And according to NAS estimates, that country's research space in biochemistry nearly doubles that of the US. Britain, France, and the Netherlands are also stepping up their efforts.

In contrast to the overseas experience, money from the National Institutes of Health, the primary federal funding agency for biomedical research, flattened out after a period of expanding budgets in the 1970s. NIH spending grew from $2.2 billion in fiscal '72 to $3.4 billion in fiscal '80. Over the next three years, however, funding declined 11 percent. Constant-dollar spending increased in '84 to once again nearly match the '80 high. NIH director James Wyngaarden says he anticipated 1985 to be a high-water mark for his agency's funding. But the Reagan administration wants to cut the NIH's budget back by 23 percent. In any event, he notes, the future does not promise the spending increases that the 1970s witnessed.

In addition to the struggle for research funding, scientists and industry people alike cite public perception as a major factor in the biotechnology equation.

``What the public thinks is important,'' says Franklin Pass, president of Molecular Genetics Inc. in Minnesota. ``If what we're doing is perceived as dangerous, then we're in trouble.''

It has been that way since the beginning. In fact, few industries have been spawned under the shadow of such public suspicion as genetic engineering was in the mid-'70s.

IN 1974 Stanley Cohen of Stanford University and Herbert Boyer of the University of California figured out how to recombine molecules of DNA, the carriers of the genetic code, and the cornerstone of an industry was laid. Having cracked the genetic code, and with the instructions of heredity laid bare before them, the importance for basic research became apparent.

``Recombinant DNA made molecular biology the most pregnant science of the decade,'' says David Baltimore, a Nobel laureate and director of the Massachusetts Institute of Technology's Whitehead Institute. But scientists also soon became aware of the novel biohazards that might be created. Some questioned whether DNA should be tampered with at all.

The concern that a dangerous organism concocted as a result of recombinant DNA techniques might contaminate the environment caught the public imagination. Cambridge, Mass., declared a moratorium on all experiments using the new techniques and other cities threatened to follow.

Realizing that they were creating life forms with unpredictable properties, the scientists and entrepreneurs at the edge of this technique hammered out restraints on experiments of genetically tampered organisms.

Back then, however, the concern was that genetically tampered organisms not escape the laboratory. Since that time, new elements have complicated the picture of public perception -- especially the imminent first environmental release of genetically modified organisms.

``That's what makes it all so alarming,'' says Rifkin. ``It was one thing to talk about experiments in test tube. But releasing genetically tampered microbes into the environment is a different situation altogether.''

It is a concern that is likely to become more common, however. Last October, the EPA claimed authority over small-scale field experiments. Advanced Genetic Sciences wasted no time in asking the EPA for permission to test their version of the frost-fighting bacterium.

The Monsanto Company joined the fray on Jan. 2 when it asked the EPA for permission to conduct outdoor tests in the spring of the world's first genetically engineered pesticide. If the aspirations of such companies are realized, others will surely follow.

``Within a decade [genetically engineered] pesticides will revolutionize pest control,'' says Robert Kaufman, director of Monsanto's plant sciences research.

Agricultural scientists predict that a new generation of biologically engineered pesticides will prove so effective and safe that conventional pesticides could be phased out in 25 more years. That will mean more field tests. Rifkin's efforts notwithstanding, says William Waugh of the EPA's Office of Toxic Substances, ``In a decade, they will be routine.'' -- 30 --