Biotechnology: Strengthening California's strained economyby Jack Stewart
Aug. 23, 2004
In a matter of just a few years, the state of California's fiscal health has plunged dramatically. Time and again, rather than suggesting legislation that would stimulate our stagnant economy, elected officials introduce and pass policy proposals that would stifle future economic growth. This legislative session is no different. Four bills under consideration, AB 1957, SB 1149, SB 1144 and SB 1333 would destroy the one industry fueling the state's struggling economy - biotechnology.
California is the birthplace of biotechnology and the world headquarters of advanced medical technology. Our life sciences and academic institutions employ more than 230,000 Californians, with an estimated average annual salary of $67,000, and total estimated wages and salaries paid of $14 billion. The industry, according to a June 2004 report by the California Healthcare Institute, generates $32.3 billion in worldwide revenue and more than $7 billion for the state in exports. It is single-handedly responsible for the Silicon Valley's growing turnaround.
Robust as it is now though, California's biomedical industry is at a pivotal crossroads. Countries and other states staking their 21st century economic development on biomedical innovation are increasingly inviting California's biomedical companies to establish or expand their manufacturing and research and development facilities outside of the state. For months, Massachusetts Governor Mitt Romney has been heavily courting the heart of California's life sciences industry. While legislators were tied up in budget negotiations earlier this summer, Governor Romney traveled to San Francisco and attended the International BIO 2004 conference and touted Massachusetts' new rebates and incentives, funding for emerging technologies, large number of Nobel-laureates, top-flight universities and success obtaining National Institutes of Health grants.
With broad and attractive incentives being offered elsewhere, an outward migration of jobs, revenues and export dollars is anticipated. To turn the tide, policymakers must work quickly and diligently to reverse the negative trend in the state's business climate. Sustaining and expanding California's R&D tax credits, renewing the Manufacturers' Investment Tax Credit, and maintaining significant scientific research funding for higher education are among crucial steps that should be taken to help ensure that the biomedical industry continues to be a powerful, job-creating force in our state, improving the lives of our citizens and the people around the world.
Continued innovation and growth of the biomedical industry in California also hinges on a complex controversy spurred by the moves of some federal and state lawmakers to adopt a program that would illegally import prescription drugs from countries - namely Canada - that have price controls on medicines with the intent of providing lower-cost medicines here. Without question, the availability of the newest, safest, most effective and reasonably priced medications should be an important part of our health care debate but the march towards price controls would stifle investment in biomedical research and negatively impact the development of new treatments for patients as well as job creation in California.
While the value of the biotech sector lies in the higher purpose of saving lives, it cannot afford to ignore the bottom line. The industry is defined by the working partnership between world-class scientists and world-class entrepreneurs. It is no secret that high-end research depends on high-risk venture capital; in fact, many of the drugs being developed would not exist were it not for access to capital markets. Importing Canadian price controls however would slam the door shut on future investment, future innovation and future jobs. It just does not make financial sense for an investor to risk money on a new drug therapy if there is no chance for profit in return.
When price controls were discussed in the early 1990s, stock prices for new companies plummeted, financing dried up and plans for new hiring, construction and expansion projects stalled. Price controls in Europe, which was once the leader in biotech innovation, halved the number of new products and eliminated many research and development jobs.
Though the biomedical industry holds the promise of improving, even transforming, lives, while boosting economic vitality, it must be protected and nurtured by lawmakers. A hearty economy will only be achieved when California's leaders get serious about reducing the burdens on employers and encouraging growth and innovation. Now is the time for our elected representatives to put California jobs first - a no vote on AB 1957, SB 1144, SB 1149 and SB 1333 will send a strong message to biomedical companies and the rest of the world that California is indeed open for business and demonstrate support of an industry Governor Schwarzenneger has said "represents a vital part of our economic recovery effort in the Golden State. It is an industry built not only on discovery and innovation, but on hope and aspiration - the very qualities for which our great state is best known."