The biotech contrarian

Joseph Cortright

If you've been to any Biotechnology Industry Organization (BIO) convention in the past several years, you'll have noticed dozens of booths staffed by economic development officials from all over the world, all working to lure biotech investment in their regions. Biotech, many seem to believe, is one of the most important drivers of growth and jobs.

Joe Cortright disagrees. The economist and vice president of Impresa Consulting in Portland, Oregon, calls biotechnology an "idea virus" that has infected public officials and economic development agencies. "There's a lot of boosterism out there," Cortright says. "The fascination with biotech says a lot about the group-think mentality in economic development." It also says a lot about the relationship between economic consultants and their clients, he says: "People don't pay consultants to tell them what they can't do."

Cortright gained notoriety after co-authoring a 2002 Brookings Institution report, "Signs of Life: The Growth of Biotechnology Centers in the US." He and Heike Mayer studied the biotechnology industry in the 51 largest metropolitan areas in the United States and found that biotech is concentrated in nine areas that dominate research, patenting, venture capital investment and commercialization. In the top nine biotech metro areas, average NIH research funding in 2000 was $812 million, nearly eight times more than the $104 million average for the remaining 42 metro areas. Venture capital investment from 1995 to 2001 in the top nine areas totaled an average of $957 million, compared to $27 million in the other areas.

What that told him is that regions can't count on biotech to save their local economies unless they already have a substantial amount of research money coming in, and several successful companies in place. Spending hundreds of millions of dollars to create research institutions - akin to the 1980s and 1990s, when metropolitan areas tried to create their own versions of Silicon Valley - or lure famous scientists may bring in research grants, but it won't necessarily lead to commercialization of the fruits of the research. "Investing in biotech is time-consuming, risky and expensive," he says.

Although it creates high-paying jobs, compared to other industries, biotechnology is not a great employment generator. Even in the nine leading biotech regions, pharmaceutical manufacturing and life science research is equal to only 3.5% of manufacturing employment in the regions. In only two regions - San Diego and Raleigh-Durham, NC - are biotech jobs equal to 10% of number of manufacturing jobs. That's because most biotechs don't grow to the size of large pharmaceutical companies.

Four and a half years later, economic development experts, biotech professionals and journalists are still talking about the report. "I don't think a week goes by that I don't get an inquiry about it," says Cortright. He says that since 2000, the nine leading regions are pulling even farther ahead, and he hopes to publish a follow-up study next year.

Other economists, such as the Milken Institute's Ross DeVol and Maryann Feldman at the University of Toronto, have come to similar conclusions about the importance of industry concentration to biotech growth. However, no other analyst seems to be quoted as often. "I don't think that anyone else has been quite as blunt," says Cortright, who spent a dozen years as chief economic development staff person for the Oregon Legislature.

Among economists, Cortright is respected but known for painting a dark picture. "He's a brilliant skeptic," says Mary Jo Waits, director of the Pew Center on the States in Washington, DC. Waits has studied similar issues and arrived at less pessimistic conclusions. Still, she says, "he's absolutely right to caution everybody."

Not everyone applauds Cortright's work. Walter H. Plosila, vice president of the Battelle Technology Partnership Practice in Columbus, Ohio, which also publishes studies on biotech and economic development, says that Cortright's definition of biotechnology is too narrow and therefore glosses over much of the agriculture- and chemical-based biotech in the Midwest and up-and-coming biotech areas such as Madison, Wis., Lincoln, Neb. and Phoenix. Plosila believes Cortright has done a disservice to regions trying to develop biotech. "It's not very useful," Plosila says of Cortright's study. "What's he suggest? Going back to producing straw mats?"

Cortright suggests that metropolitan areas look at their "clusters" of existing industries and create an economic development model based on those strengths. That's what they did in Hollywood, Silicon Valley and the Garment District in New York, he says.

In the long run, Cortright says, biotech may help fight disease, but it won't revolutionize the way business is conducted or the way people interact, as the personal computer and the Internet did in the 1990s. If successful in a region, biotechnology won't create as many jobs as other industries such as information technology. It's the nature of the industry: "There is no Moore's Law for biotechnology."