The Economic Impact of the Genomic Revolution's Failure

by: Derek Lowe

Here's something that oddly ties together the last couple of days of posting around here: the failure of the Human Genome Project to jump-start drug discovery as the "most significant economic event of the past decade". (Thanks to Jonathan Gitlin for the tip.)

I have to say, I hadn't thought of it in those terms. My first thought is that this is a negative event, something that didn't happen, so it's pointless to speculate about what might have been. But the author, Mike Mandel, is also talking about the opportunity cost of all the genomics frenzy, which is a real consideration. That time and money could have been spent somewhere else, doing something more useful. Where would we be then?

I've wondered about that myself, having seen first-hand what happened. Many companies really did cut a deep notch in their development pipelines during that era, abandoning (to one degree or another) their traditional approaches while piling resources into the genomics gold rush. (The current economic environment is cutting a similar gouge into the list of start-up companies - many of the ones that "normally" should have formed during the last couple of years just haven't happened.)

Mandel's larger point, though, is something I'm not so sure about. He's talking about all the manufacturing jobs that haven't been created by the basic research, holding that these are the ones with real economic effect. But even if the genomics era had been wildly successful, we wouldn't have seen manufacturing jobs picking up from it for some years - 2008, maybe? His charts, which tend to cover from the early 1990s to date, are reflecting other issues entirely.

Then the talk turns to balance of trade:

Now let’s turn to trade. China, India, and the rest of the developing countries sell the U.S. an increasingly diverse array of goods and services. What does the U.S. provide in return? There’s the usual list of suspects, such as commercial aircraft (which is increasingly drawing on parts made outside of the country). But they are not enough to avoid a huge trade deficit, even now.

The logical candidate for the next wave of U.S. exports should have been biotech products and knowledge. The U.S. is the acknowledged world leader; the research is expensive and lengthy; the production processes are complicated, delicate, require skilled technicians, and cannot be easily offshored. And the category–treatments to deal with major medical problems–is something that everyone wants.

But what happened? Without compelling new biotech products, the big pharma companies were “me-tooed” to death. In fact, pharma trade went from roughly balanced to a big deficit.

That's illustrated by another chart from 1994 on. But what it's showing isn't what he thinks it's showing. It illustrates the move to less costly manufacturing sites, which would have taken place whether genomics would have delivered or not. The only mitigating factor is that any big protein-based biologics would have had a better chance of being produced domestically, but production of all the small-molecule drugs that might have come out of the genomics frenzy would have migrated offshore just like everything else.

And what if the genomics revolution had delivered? We'd have a lot more drugs on the market, none of which would be selling cheaply, you can be sure - and there would be even more anxiety over the amount of our GDP going to health care. (Never mind that some of these drugs would, one hopes, be keeping people from going into even more expensive therapies later - people don't seem to pay attention to that, either.) So overall, I take the point about opportunity cost. But his broader economic implications, as least as regards the US economy alone, don't seem to me to hold up.

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