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Chapter 5 Biotechnology If any industry epitomizes the new economy it is the biotechnology industry . Biotechnology involves the manipulation of cellular and genetic structures for applications in medicine, animal health, agriculture, marine life management, and environmental management.1 In 2003 the biotechnology industry employed only 191,000 people in 1,457 companies nationally. But it is expanding, and it is important. Indeed, biotechnology is expected eventually to have as great an impact on society as the advent of electric power or computers. No wonder virtually every state in the union includes this industry among those it wants to encourage. And another attraction is that the manufacturing side of the industry is likely to take off over the next decade, as more and more research and development operations reach the stage of winning product approval from the U.S. Food and Drug Administration (FDA).2 With manufacturing should come a wave of new, high-paying jobs with good advancement potential not only for highly educated research workers but also for workers without a college degree. In North Carolina, one of the few places that keeps statistics on this issue, about 75 percent of the production-floor workforce in biomanufacturing has only a high school diploma.3 Biotechnology is also part of a broad industrial cluster that includes manufacturers of pharmaceuticals and medical devices,4 and medical device manufacturers, in turn, are linked to manufacturers of electronic goods, precision metal components, and plastics:5 Firms in these businesses seekand create markets for-many of the same support services and amenities, so they benefit from being near one another. A region with a strong biotechnology industry is thus likely to attract and keep a range ofwell-paying jobs. But if this is the jackpot, only a few regions are likely to win it, for very few regions have significant concentrations of biotech R&D activity, and BIOTECHNOLOGY ll5 logic suggests that these are also best positioned to capture the manufacturing end of the business since proximity to R&D is essential for refining the production process, especially in its early years. Moreover, even if most companies would prefer to diversifY their locations, those states that win the first biomanufacturing plants will have a real advantage in keeping them and winning the next. That is because permitting by the FDA is sitespecific , so firms are unlikely to close or relocate a plant once it has passed the lengthy FDA-approval process. And once regulators grant such a permit, they are more likely to grant a second in the same place.6 There are other factors, too, that ought to temper many states' enthusiasm for biotechnology. My interviews with employers and workers suggest that biomanufacturing companies are more open than most to hire nontraditional job candidates, such as displaced workers from other industries. (Particularly prized are displaced workers from other governmentregulated manufacturing businesses.) This could present unusual opportunities in whatever states are lucky enough to snag these companies. But there is also a floor here. Even entry-level workers in biomanufacturing need to understand basic science and mathematics related to the industry, and even the bottom rungs of biomanufacturing work are likely to require specialized skills, often ones that are company-specific. As a result, any state trying to train workers for this new industry will find that the undertaking is very costly. Specialized training facilities are required, and they are expensive to build, to operate, and to staff. Meanwhile, although the payoff may be grand when a biotech company succeeds, not all of them will. According to one expert in the field, it takes about fifteen years, on average, to bring a drug to market, at a typical cost of about $304 million (in 1996 dollars).7 About 8o percent of drugs in early trials never get that far,8 and only about 30 percent of drugs that do make it to market produce profits higher than their R&D costs.9 The state of the economy will further aggravate this already volatile situation, as we saw in the 1999 recession, when the biotech industry was hit hard and its projected job growth was stalled by at least several years. In brief, states that court the biotech industry with the usual enticements -job-training programs, tax abatements, venture capital, and other incentives to reduce a new company's start-up costs-are taking a big risk. And, in most cases, it probably is not a smart one. Three-fourths of the largest biotechnology firms are concentrated in just nine metropolitan areas...


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