National Academies Press: OpenBook

Biotechnology: An Industry Comes of Age (1986)

Chapter: Genetic Engineering and Biotechnology: An Overview

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Suggested Citation:"Genetic Engineering and Biotechnology: An Overview." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 1986. Biotechnology: An Industry Comes of Age. Washington, DC: The National Academies Press. doi: 10.17226/18677.
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Suggested Citation:"Genetic Engineering and Biotechnology: An Overview." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 1986. Biotechnology: An Industry Comes of Age. Washington, DC: The National Academies Press. doi: 10.17226/18677.
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Page 2
Suggested Citation:"Genetic Engineering and Biotechnology: An Overview." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 1986. Biotechnology: An Industry Comes of Age. Washington, DC: The National Academies Press. doi: 10.17226/18677.
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Page 3
Suggested Citation:"Genetic Engineering and Biotechnology: An Overview." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 1986. Biotechnology: An Industry Comes of Age. Washington, DC: The National Academies Press. doi: 10.17226/18677.
×
Page 4
Suggested Citation:"Genetic Engineering and Biotechnology: An Overview." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 1986. Biotechnology: An Industry Comes of Age. Washington, DC: The National Academies Press. doi: 10.17226/18677.
×
Page 5
Suggested Citation:"Genetic Engineering and Biotechnology: An Overview." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 1986. Biotechnology: An Industry Comes of Age. Washington, DC: The National Academies Press. doi: 10.17226/18677.
×
Page 6
Suggested Citation:"Genetic Engineering and Biotechnology: An Overview." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 1986. Biotechnology: An Industry Comes of Age. Washington, DC: The National Academies Press. doi: 10.17226/18677.
×
Page 7
Suggested Citation:"Genetic Engineering and Biotechnology: An Overview." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 1986. Biotechnology: An Industry Comes of Age. Washington, DC: The National Academies Press. doi: 10.17226/18677.
×
Page 8
Suggested Citation:"Genetic Engineering and Biotechnology: An Overview." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 1986. Biotechnology: An Industry Comes of Age. Washington, DC: The National Academies Press. doi: 10.17226/18677.
×
Page 9
Suggested Citation:"Genetic Engineering and Biotechnology: An Overview." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 1986. Biotechnology: An Industry Comes of Age. Washington, DC: The National Academies Press. doi: 10.17226/18677.
×
Page 10
Suggested Citation:"Genetic Engineering and Biotechnology: An Overview." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 1986. Biotechnology: An Industry Comes of Age. Washington, DC: The National Academies Press. doi: 10.17226/18677.
×
Page 11
Suggested Citation:"Genetic Engineering and Biotechnology: An Overview." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 1986. Biotechnology: An Industry Comes of Age. Washington, DC: The National Academies Press. doi: 10.17226/18677.
×
Page 12
Suggested Citation:"Genetic Engineering and Biotechnology: An Overview." National Academy of Sciences, National Academy of Engineering, and Institute of Medicine. 1986. Biotechnology: An Industry Comes of Age. Washington, DC: The National Academies Press. doi: 10.17226/18677.
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Page 13

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1 Genetic Engineering and Biotechnology: An Overview HUMAN BEINGS RELY ON THE EARTH'S bountiful Supply of life for a wide variety of essential substances. We survive by consum- ing the edible portions of plants and animals, and our clothes and homes are composed at least in part of biologically derived materials. Microorganisms are used to make bread, to convert milk into cheese, and to brew alcoholic beverages. Common substances like vinegar, vitamins, and monosodium glutamate are manufactured us- ing microbial "factories." Antibiotics are extracted from various strains of molds and bacteria. Over the course of time, human ingenuity has gradually worked to improve these organisms. People have selected plants, animals, and microorganisms with the most useful characteristics from among those found wild in the environment. They have bred individuals from the same or closely related species to produce offspring with new, more desirable combinations of traits. Among the results of this genetic husbandry have been improved varieties of crops and livestock, industrial microbes that are hardier and more efficient, and novel antibiotics. During the past 15 years, researchers have begun to acquire a new and unprecedented degree of control over the genetic constitution of living things. The techniques of genetic engineering, and in particular recombinant DNA, have made it possible to manipulate genetic mate- rial on the smallest possible scale—individual genes. The effect on 1

BIOTECHNOLOGY The most important influence of genetic engineering has been on basic scientific research. Genetic engineering has made it possible, using tools such as the DNA map displayed here, to read the genetic code of specific organisms—something that was unthought of before the advent of recombinant DNA. molecular biology, immunology, and other scientific disciplines has been little short of revolutionary. Says Douglas Costle, former admin- istrator of the Environmental Protection Agency, "While it is probably true that physics was the science of the first half of the century, it is almost certain to be molecular biology in what remains of this century and well into the next." The development of genetic engineering has been a direct result of generous governmental funding for basic biomedical research since World War II, and it is this research that has benefited most immedi- ately from the new techniques. "The impact of this technology has been enormous at the scientific level," says Philip Leder of Harvard Medical School. "Prior to 1973-74, when these experiments began, all that geneticists knew about the existence of genes they inferred from their properties. . . . Recombinant DNA technology changed that in a stroke. In so doing, it altered genetics from a purely inferential science to, at least in part, an analytical, observational science." In just a decade of work with recombinant DNA, researchers have

GENETIC ENGINEERING AND BIOTECHNOLOGY: AN OVERVIEW 3 uncovered a wealth of new information about how DNA is organized in cells and how it functions. They have found that single genes in higher organisms are usually split into separate and distinct segments of DNA. They have learned a great deal about oncogenes—a class of genes involved in the development of cancer. The exact sequences of the genetic material in a number of viruses, bacteria, and human genes have been determined. "We now know an enormous amount about the genome of many different organisms," says Alexander Rich of the Massachusetts Institute of Technology. "A body of data has accumu- lated that makes it possible, for example, to consider waging an effective war against a new disease, like acquired immune deficiency syndrome, precisely because of this new technology." But genetic engineering has done more than give researchers the ability to understand the genetic structure of living things; it has also given them the ability to change that structure. It is now possible to move genetic material in a functional form from one organism to another, creating genetic constructs that have never before existed in nature. For instance, the gene that produces a protein in a human cell can be isolated and inserted into a bacterium. That bacterium can then be reproduced or cloned, creating many identical copies of the gene. If the gene can be coaxed to manufacture the same protein in bacteria that it does in humans, large quantities of the protein can be produced for pharmaceutical applications. And bacteria are not the only possible recipients of new genetic material. Functional genes can be inserted into the cells of plants, animals, and even humans. This capacity of genetic engineering to introduce completely new traits into existing organisms has given rise to a development that few of the technology's founders could have foreseen. "The thing that we most underestimated ten years ago was the enormous potential that this new technology has for developing an entirely new industry, that of biotechnology," says Rich. "It has given rise to an enormous proliferation of biotechnology companies—over 200 of them in this country alone, and the number is growing." These companies are using genetic engineering to create new kinds of drugs, new vaccines, and diagnostic tools that promise the early detection of disease. They are searching for ways to produce food additives and industrial chemicals more economically through biological means. They are creating genet- ically altered microbes, plants, and animals to be used in agriculture or in the treatment of wastes. Biotechnology will have its most immediate impact in certain com- mercial sectors—such as pharmaceuticals and agriculture—in the

4 BIOTECHNOLOGY industrialized nations. But because it directly affects such basic human concerns as food production, health care, and energy availability, it is likely to eventually have worldwide implications. As Leder says, "It is impossible for us to say with confidence that something reasonable cannot be done using this technology." Any technology that deals so directly with the basic processes of life inevitably raises compelling questions. The early debates about the safety of recombinant DNA research have quieted, but new issues have taken their place. Will the release of genetically engineered organisms into the environment pose threats to human health or to natural ecosystems? How should the ability to alter the genetic makeup of human beings be managed? Is new legislation necessary to regulate the products that are likely to be manufactured with genetic engineer- ing? Should the U.S. government be encouraging the development of the American biotechnology industry in light of the considerable competition expected from biotechnology companies abroad? These and other difficult questions are being asked with a special urgency. Biotechnology is growing so quickly, and its ultimate influ- ence is so wide-ranging, that it is straining the capacity of public and private institutions to deal with it. "We are running out of time," explains Senator Albert Gore, Jr., "in the sense that the technology is developing so rapidly that we are going to have to make some tentative decisions without the base of understanding that a democracy requires for subtle and difficult decisions. Requests for field tests of genetically engineered organisms are already beginning to be made, as companies proceed with their research programs. The first authorized human gene therapy experiments are expected to be conducted later this year. Both of these facts underscore how important it is to develop a coherent set of scientific and ethical guidelines to help us evaluate the implications of this technology." The Molecular and Microbial Products of Biotechnology Most of the products being developed in biotechnology fall into one of two very broad categories: chemical substances that can be made using genetically engineered organisms, and genetically engineered orga- nisms themselves. Included in the first category are the wide variety of compounds that have drawn the attention of pharmaceutical manufacturers. Geneti- cally engineered microorganisms can be used to produce hormones like insulin and growth hormone, other biological response modifiers such

GENETIC ENGINEERING AND BIOTECHNOLOGY: AN OVERVIEW 5 as interferons and neuropeptides, blood products like clotting and antishock factors, vaccines against previously unpreventable diseases, new antibiotics, and many other kinds of biologically active molecules. In addition, the availability of large quantities of these previously scarce molecules enables researchers to learn more about their func- tion in the body, which will result in new therapeutic agents. The ability of genetically engineered microorganisms to produce valuable chemical compounds will also lead to applications in many other industries, including the food processing, chemicals, and energy industries. Among the numerous substances whose production could be affected by biotechnology are alcohol, enzymes, amino acids, vitamins, high-grade oils, adhesives, and dyes. Biotechnology will also make possible the synthesis of novel chemical compounds in these commer- cial sectors. The use of biological processes in industry places special demands on manufacturing. Generally, biological conversions entail a fermenta- tion process. Nutrients and raw materials are supplied to living cells in a reactor vessel; the cells convert the raw materials into products; and the products are withdrawn, separated, and purified. These bioconver- sions must be carefully monitored and controlled. Indeed, the develop- ment of economical fermentation equipment and methods is one of the greatest challenges facing biotechnology today. But not all genetically engineered microorganisms will be used in fermentation processes. Some are being designed for use in the envi- ronment. Many of these will have agricultural applications, but others might be used to degrade wastes or toxic substances, to leach or concentrate minerals from ores, or to increase the extraction of oil from wells. An important subset of the molecular products of biotechnology are the proteins known as monoclonal antibodies. These are produced not through recombinant DNA techniques but through the fusion of a tumor cell with an antibody-producing white blood cell. The result is a virtually immortal clone of cells producing antibodies that are chemi- cally identical. Monoclonal antibodies have already found a wide range of uses in research, because of their remarkable ability to attach to specific molecular configurations. They are also being used in a number of in vitro diagnostic tests to detect the presence of disease or other conditions. At the same time, investigators are examining their possi- ble uses within the body to expose diseased areas to scanning instru- ments, to confer passive immunity against disease, or to carry biolog- ically active agents to diseased tissues.

6 BIOTECHNOLOGY Biotechnology in Agriculture Many of the products being developed for use in human health care have agricultural analogs. New or cheaper drugs, vaccines, and diag- nostics will all cut the toll of disease and lost productivity that continues to be a major concern in agriculture. Furthermore, geneti- cally engineered microorganisms will be used to produce feed additives, growth enhancers, and other compounds that will boost agricultural yields. But biotechnology has a fundamentally different capability in agri- culture. It can potentially be used to change the genetic constitution of microorganisms, plants, and animals to make them more productive, more resistant to disease or environmental stress, or more nutritious. In doing so, biotechnology, like the green revolution before it, could have a dramatic effect on the problems of food production and hunger around the world. Probably the first application of this type will involve the genetic engineering of microorganisms. Researchers are working to produce microorganisms that will supply plants or animals with essential nutrients, protect them from insects or disease, or provide them with compounds that influence their growth. A central concern of this work is the competitiveness of the genetically engineered microorganisms in agricultural environments, since the microorganisms will generally have to survive and multiply to perform their functions. The genetic engineering of plants and animals is a far more daunting technical task than the genetic engineering of microorganisms, but this is where the greatest potential benefits lie. Researchers have already succeeded in inserting functional genes into plant cells, in regenerating whole plants that express the gene, and in having the gene passed on to offspring. In this way, they hope to eventually be able to transfer into plants such traits as resistance to pesticides, tolerance to environmental conditions such as salinity or toxic metals, greater nutritive value or productivity, or perhaps even the ability to fix nitrogen from the atmosphere. However, major technical barriers still prohibit the genetic engineering of most of the agriculturally impor- tant food crops. For instance, the majority of desirable agricultural traits are likely to arise from the interaction of many different genes, making it difficult to transfer these traits between plants. A major current limitation on research in this area is the paucity of basic biochemical knowledge about plants. To take one example, the genetic origins of almost all agriculturally useful traits are not yet known. Genes have also been inserted into the sex cells of animals in such a

GENETIC ENGINEERING AND BIOTECHNOLOGY: AN OVERVIEW 7 way that they are reproduced in the cells of the mature animal, function in those cells, and are passed on to offspring. For instance, researchers have introduced growth hormone genes into several kinds of agriculturally important animals in an attempt to make the animals grow faster, larger, or leaner. It remains to be seen whether this genetic modification will upset the animals' metabolic balance, causing harmful long-term effects on their health. Human Gene Therapy Just as genes can be inserted in a functional form into the cells of animals, so they can be inserted into human cells. There is an important distinction between the genetic engineering of animals and humans, however. For the foreseeable future, genes will be introduced only into limited subsets of a patient's somatic cells. Because the new genes will be reproduced only in that population of cells, they will not be passed on to offspring. Technical difficulties and ethical constraints will rule out the genetic engineering of human sex or germline cells for many years to come. The first attempts at human gene therapy will involve the insertion of genes into bone marrow cells extracted from patients with severe genetic disorders. The transformed bone marrow cells will be rein- serted into the patient's body, where, if the procedure is successful, they will multiply and alleviate the patient's disease. This type of treatment is essentially similar to other kinds of medical procedures, such as transplants, and it raises no new ethical problems. The technical and ethical problems associated with germline gene therapy are far more formidable. First, the procedures used with animals so damage most of the treated cells that they never develop into live animals. Second, only a fraction of the treated cells that do grow contain the foreign gene. Third, the insertion of a gene can cause severe and often lethal mutations in the cell. Finally, germline gene therapy would alter the genetic pool of the human species, rais- ing fundamental questions about tampering with humanity's genetic heritage. Ethical considerations are also associated with the use of genetic engineering to enhance a human characteristic, as opposed to replacing a defective gene. In certain cases the issues are clear-cut, as in the condemnation of any attempt to insert a growth hormone gene into an otherwise normal person. But other cases are less well resolved. For instance, it may eventually be possible through human gene therapy to reduce a person's susceptibility to various diseases.

8 BIOTECHNOLOGY The public's greatest fear about human gene therapy is that it might someday be used to alter such fundamental human attributes as intelligence, character, or physical appearance. However, such traits are undoubtedly shaped by the interplay of many interacting genes with innumerable environmental influences, making it extremely unlikely that they could ever be altered through genetic means. Nevertheless, this fear has helped generate a valuable public dialogue about the capabilities of human gene therapy—a dialogue that should continue as the science evolves. The Release of Genetically Engineered Organisms into the Environment Another issue that has generated considerable public discussion in recent years has been the approach of the first field tests of genetically engineered organisms in the environment. It is very difficult to predict exactly what influence a novel organism will exert on an ecosystem, and history is replete with examples of organisms introduced into an environment from elsewhere in the world that had unanticipated, and occasionally devastating, effects. By the same token, conventional breeding techniques have been used throughout history to create new varieties of plants and animals without undue consequences. To calculate the environmental risk of genetically engineered orga- nisms, five questions must be answered. Will the organism be released into the environment? Will it survive once it is released? Will the organism multiply? Will it move from the place where it is released to a place where it has an effect? And what will that effect be? Further- more, a genetically engineered organism can sexually or asexually transfer part of its DNA to another organism, which generates a similar string of questions for the organism receiving the DNA. The chance that a genetically engineered organism will have a detrimental effect on the environment is the product of the five factors listed above. In any given case, the probability that the answer to one or more of these questions will be "yes" is likely to be low, which makes the overall probability of a harmful effect even lower. But it is not zero, and the harmful consequences of a low-probability event could be substantial. Reducing the uncertainties that surround the effects of genetically engineered organisms on the environment requires additional research focusing on each of the factors that contribute to environmental risk, with the goal of ensuring that the initial field tests are as safe as possible. As with the basic techniques of genetic engineering, it will

GENETIC ENGINEERING AND BIOTECHNOLOGY: AN OVERVIEW 9 then be possible to build on a base of experience in expanding the range of environmental uses for genetically engineered organisms. Governmental Regulation of Biotechnology The federal government regulates biotechnology from two distinct perspectives. In the area of research, the National Institutes of Health, through its Recombinant DNA Advisory Committee (RAG), has estab- lished guidelines that prohibit certain kinds of experiments and set various levels of containment for others. The guidelines apply only to federally funded research, but nongovernmental research institutes and private companies have also adopted them. An increasingly larger portion of the research has become exempt from the guidelines as the level of concern over the risks of recombinant DNA research has fallen during the past decade. The federal government also regulates biotechnology through the actions of various agencies with authority over emerging products. The Food and Drug Administration (FDA) approves new human drugs and biologics, food additives, medical devices, and some agricultural prod- ucts and veterinary medicines. The Environmental Protection Agency (EPA) regulates pesticides, hazardous chemicals, and pollutants and plans to oversee the release of certain genetically engineered orga- nisms into the environment. The U.S. Department of Agriculture regulates animal biologics and broad categories of organisms impor- tant to agriculture, a jurisdiction that partially overlaps the jurisdic- tions of the FDA and the EPA. Each of these agencies, in regulating the products of biotechnology, also becomes involved to some extent in overseeing the research and development leading to those products. In response to apprehensions about such issues as overlapping jurisdictions, the division of responsibility between the RAG and other federal agencies, and the adequacy of existing legislation to ensure the safety of forthcoming applications of biotechnology, the Cabinet Coun- cil on Natural Resources and the Environment created the Cabinet Council Working Group on Biotechnology in 1984 under the leadership of the White House Office of Science and Technology Policy. The working group concluded that no new legislation was needed to give federal agencies adequate regulatory authority over the products of biotechnology expected in the immediate future. However, the group did propose that committees similar to the RAC be set up at each of the federal agencies with significant jurisdiction over biotechnology. It also proposed the formation of an interagency coordinating committee on biotechnology, which would lend direction to the science underlying

10 BIOTECHNOLOGY biotechnology's regulation. These proposals have been criticized for setting up additional layers of bureaucracy in the regulatory process and for ignoring the RAC's capacity to handle anticipated regulatory problems. Industry leaders and government regulators agree that a stable and sound regulatory regime is essential for the continued development of biotechnology. If the public perceives that regulatory agencies are not acting to ensure health and safety, it can move to slow down or halt a technology's development. Public trust could also be fostered through a comprehensive and trustworthy program of public education that clearly lays out both the benefits and the risks of biotechnology. The New Biotechnology Firms Two types of firms are pursuing the commercialization of genetic engineering in the United States: small entrepreneurial firms founded almost exclusively since 1976 specifically to capitalize on research developments in genetics, and established multiproduct firms in tradi- tional industrial sectors such as pharmaceuticals, chemicals, energy, agriculture, and food processing. The interactions and complementary attributes of these two types of firms have contributed greatly to the lead in biotechnology that the United States currently enjoys. The start-up biotechnology firms, of which there are now more than 200, have acquired financing from a variety of sources. Early in their histories they relied heavily on equity investments, research agree- ments, and licensing"contracts with larger firms that wanted a window on the new technology. More recently, these firms have been turning toward other funding mechanisms, such as public stock offerings and R&D limited partnerships, to achieve greater managerial indepen- dence and the possibility of larger returns on their investments. As biotechnology moves beyond research and early product develop- ment, the start-up firms will face new challenges. Large established firms are setting up major in-house programs in biotechnology, height- ening the already acute competition in the field. To survive, the new firms will eventually have to become profitable through the sale of products. Some firms have pursued this requirement by licensing some or all of their initial products to established companies in exchange for royalties. Others are setting up large-scale production facilities and marketing systems. The success of this latter group, given a product with a market advantage, will depend largely on the availability of further capital to finance scale-up, clinical tests, production, and distribution.

GENETIC ENGINEERING AND BIOTECHNOLOGY: AN OVERVIEW 11 Patents and Trade Secrets in Biotechnology A prominent concern of all companies involved in biotechnology is the degree of protection they can obtain over the products and processes they develop. In the United States this protection takes two main forms: patents and trade secrecy. In 1980 the Supreme Court ruled that a genetically engineered microorganism could be patented. Although it remains unclear if higher organisms can be patented under similar provisions, this ruling has cleared the way for a wide variety of patent applications and approvals in biotechnology. One problem with patents in biotechnology involves the requirement that patented inventions be described in enough detail that they can be reproduced without undue experimentation. Because microorganisms generally cannot be described in such detail, courts have stipulated that this requirement must usually be met by depositing a sample of the microorganism in a culture depository. This gives competitors direct access to the microorganism, increasing the possibility of patent infringement. Ways to restrict access to these deposits without violat- ing the requirements of the patent law are being considered. If the acquisition or enforcement of a patent appears difficult, a company may rely instead on trade secrecy laws to protect a product or process. In the United States the holder of a trade secret can obtain an injunction or monetary damages in state courts against a party who acquires the secret through improper means. However, there are several drawbacks to trade secrecy laws. For one, they offer no protection against someone who independently discovers the secret, who may then patent it and prohibit the original party from using it. Also, some states are less protective than others of the results of research. Trade secrecy bars scientists from publishing the results of their research in the scientific literature. And the theft of a trade secret is often difficult to prove in court. Finally, it may be necessary to release trade secrets in public forums to demonstrate the safety of a proposed experiment. University-Industry Relations Most of the basic techniques that gave rise to biotechnology were originally developed in university laboratories and other research institutes, and biotechnology today remains perched on the leading edge of research. For that reason, industry has a vital interest in establishing and maintaining ties with academic research institutes.

12 BIOTECHNOLOGY Less well recognized than the benefits to industry are the benefits to universities from university-industry alliances, in addition to the obvious attraction of additional sources of revenue. Such alliances create new challenges for academic science and engineering, place undergraduate and graduate education in new perspectives, increase scientific communication and cooperation, and tie university programs more closely to national and regional needs. Universities and industry have established a wide variety of cooper- ative agreements related to biotechnology, including consulting ar- rangements, industrial associates programs, research contracts, inde- pendent research institutes, and private companies affiliated with universities. But at least some of these arrangements involve the possibility of serious conflicts of interest for the researchers and institutions involved. For instance, conflicts may arise over the need for industrial secrecy, the retention of patent rights, or the commercial orientation of research. Many of these issues were extensively discussed in national forums during the early 1980s, when a number of alliances were being formed in biotechnology. Since then, the debate has become more specific and has moved to the local level as universities and industry gain experi- ence with the first wave of agreements. Biotechnology in Japan: A Challenge to U.S. Leadership? The United States currently enjoys a sizable lead in transforming the results of basic biomedical research into commercial products. Other industrialized countries, however, recognizing the economic potential of biotechnology, have adopted national policies to encourage its development. The Japanese government, in particular, has organized research consortia among companies, has sponsored research into biotechnology by industry, and has greatly stepped up its overall funding of biotechnology research. The U.S. government still spends much more money on biotechnology research than does the Japanese government. But the Japanese support for biotechnology is focused largely on applied research, such as the development of fermentation technologies, whereas the U.S. government's support for biotechnology is now overwhelmingly directed at basic research. The industrial policies of Japan and the United States strongly influence biotechnology in the two countries. If the U.S. government wished to boost the competitiveness of domestic biotechnology firms, it could do so indirectly through changes in these policies. For instance, the tax and investment laws of the United States have been very

GENETIC ENGINEERING AND BIOTECHNOLOGY: AN OVERVIEW 13 conducive to the formation of start-up biotechnology firms because of the venture capital they make available to entrepreneurs. There are very few start-up biotechnology companies in the rest of the world— and none in Japan—largely because of the more conservative financial climates abroad. Japan's regulation of biotechnology is similar to that of the United States, although its regulation of genetic engineering research and of new drugs, biologics, and medical devices is in some ways more restrictive than is U.S. regulation. In the past, Japan has used its strict regulations as nontariff barriers to the import of pharmaceuticals and other products. Japanese laws have been changed to give equal treatment in principle to foreign products, but significant administra- tive and social barriers to such imports still exist. The range of patentable subject matter is not quite as broad in Japan as in the United States, and Japan's grace period for filing a patent application after the public release of the patented information is just 6 months, compared with 12 months in the United States. Moreover, patent applications are made public in Japan about 18 months after the filing date, precluding the option of trade secrecy once a decision is made to pursue a patent. Japan has sought to compensate for deficits in disciplines related to biotechnology by retraining Japanese scientists, engineers, and tech- nicians; by sending researchers abroad to study; and by inducing Japanese nationals working abroad to return to the country. It has also drawn upon its extensive historical experience with fermentation techniques in developing production methods in biotechnology. A number of Japanese researchers are studying biotechnology-related subjects in the United States; the corresponding number of Americans traveling abroad to study biotechnology is very low, even though there are a number of eminent foreign research institutes that could offer valuable training. Finally, the diffusion of information about developments in genetic engineering and biotechnology is much more extensive in the United States than in Japan. Japanese companies have also purchased a considerable amount of contract research from American biotechnology firms, which gives them access to the state of the art in biotechnology. Both of these factors contribute to what many observers agree is a net transfer of technology from the United States to Japan. This is one of the ways in which the Japanese have been able to mount a strong effort in biotechnology so quickly.

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