Skip to Content

Business and Markets

The Economic Impact of the Genomic Revolution’s Failure

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.

26 comments on “The Economic Impact of the Genomic Revolution’s Failure”

  1. Tok says:

    “most significant economic event of the past decade” is a tall order in the shadow of the worst economic bubble collapse since the Great Depression. Trying to prove that for a non-event is even more difficult.

  2. CMCguy says:

    Similar to a point made in previous post were observed many companies jumped heavy on the “genomics bandwagon” (like many other fads) at the expense of more established discovery efforts because of the hyped immediate and less expense capability of the new (unproven) technology for drug discovery. Rather than augmentation or parallel research it was sold as dramatic paradigm shift so resource reallocated without balance. I neither argue that such new science should be ignored or that more traditional methods do not need to be improved as in the end typically success will come from a blend of new and old but will rarely be instantaneous in achievements.
    You or correct that off-shoring of manufacturing would have occurred regardless as that started long before 1994 however I speculate potentially there could have been more small-molecule drugs from canceled programs that would have at least had development and initial manufacture done domestically. At the very least that could have helped train more people in the overall process so that the outsourcing could be better managed.

  3. qetzal says:

    Of course, the whole opportunity cost argument implies that we could have (and would have) gotten a better result by investing that time and effort somewhere other than genomics. It’s probably true that we could have, in some theoretically perfect world, but whether we would have in the real world is highly debatable.
    Not that I agree with all the hype about genomics & the HGP. I thought it was obvious that most benefits would be decades in coming, especially as regards new drugs.
    But I guess that raises another issue. Why should we judge opportunity costs based on today’s situation? Even if the genomics efforts put us worse off today than we could have been, who’s to say we won’t be vastly better off in another 10 or 20 years?

  4. JasonP says:

    For one thing, we have only had decent genomics for about ten years. Biology and its understanding take time, you don’t just sequence the genome and expect results to fall into your lap.
    Secondly 2000-2010 has been a real shit fest for America. Once we get over wars and discord, we can focus more on science….IF we get over these things.

  5. Hap says:

    It probably might help to think of what drug development is missing, and whether there was an opportunity to obtain those missing components. With the biology, the knowledge of what’s going seems to be lacking, and even if HGP/etc. didn’t get it, it might still be gotten, and without that work, it might be harder to get. Pharmacology knowledge would be helpful, but since that both takes lots of time to develop and involves people who don’t have many other places to go if you lay them off, then it seems like a capacity that would be hard to get and hard to sell to a business (it costs a lot, makes long-term liabilities, and may not pay off). We might have lost drug candidates in the forests we’ve destroyed, but we don’t know exactly what those would have been or if they would have paid better financially.
    I don’t know enough, but I don’t see the areas where the money could have been spent and have gotten a better return. Also, there’s been a lot of other financial shenanigans that seem far more deserving of emphasis (though they’ve happened before, and will happen again – hi, Enron!)

  6. GM says:

    The most outrageous thing about the whole debate that has been sparked lately is the fact that the success of science is measured by the growth of GDP it has or has not delivered or it’s potential to deliver it in the future.
    Since when is the primary goal of science to drive economic growth and create jobs? We do science to understand the world around us. It is not only wrong, but also very dangerous to subjugate science to the imperative of economic growth. It should be the other way round. If the science tells us that we should basically kill the economy in order to prevent runaway climate change, then this is precisely what we should be doing. Instead we are arguing whether we should be doing science that is not growing the economy…
    So far, genomics has brought plenty of insight into basic biology, although we are from being where we would like to be. Which is due to the fact that the problem turned our to be a lot more complicated than we imagined. This is success – we wouldn’t know how complicated it is without having done the work. Now it’s time for more work, simple as that

  7. retread says:

    Well, this article is like what us Docs call (when threatened with a malpractice suit) 20/20 hindsight. All concerned at the time thought the human genome project was a very good idea, some for drug discovery (which didn’t pan out) others for its contribution to basic knowledge (which it did in spades).
    For an example of another megaBiologic project (1.5 gigaDollars at inception in ’06), the Cancer Genome Project, and why it is seeing only the tip of the iceberg, have a look at the current post.

  8. lynn says:

    Being parochial, as is my wont, I’d say the genomics revolution (with some help from combinatorial chemistry) killed off most of antibacterial drug discovery. When “novel targets” sought through genomics did not materialize and hence solve the problem of discovering or designing new antibacterials, the pursuit effectively crowded out other avenues of novel drug discovery, and Big Pharma, with little to show for all the effort, largely left the area. The genome sequences, of course, will be useful and eventually, along with bioinformatic analysis, may help with future efforts – but antibacterial discovery needs more genetics (and geneticists) than genomics.

  9. John says:

    I think the problem with the genomics hype was the underlying assumption that if you understand something you can control it.
    As an extreme example of this, I saw a series of posts on Seeking Alpha the other day about how once gene therapy was perfected, one would be able to change the color of their hair or augment the size of their breasts for an evening out at a party. Going back to the old “nature vs nurture” debate, clearly both (irreversible) developmental history and genetics play their roles.
    We have progressed tremendously in our understanding of cancer in recent years, largely through genomics. But most of what we have learned does not lend itself to the development of a cure, or even a belief that a cure is possible. Understanding does not equal control.

  10. Tc King says:

    Technical Chemistry Difficulty (TCD) killed off antibacterial programs. Instead of investing in chemistry the emphasis shifted to targets, which put chemists out of work while the biologists found the same targets.
    Antibacterial science needs less biologists and more chemists.
    Penicillin wouldnt have made in time for WWII if it werent for chemists.
    We are doomed as a species.

  11. milkshake says:

    I think the biggest disaster that hit the industry was the fantastic stock price-tied reward schemes for upper management that encouraged short-term expectation-boosting moves and herd mentality. This drew in charlatans and bullshit masters into big pharma upper management and and pushed out technical expertise. When you reward bright self-assured management masters of universe for their hype and wishful thinking, you get corporate irresponsibility and demoralized red-tape ridden research – and thats even before the layoffs. Expensive fads that did not pay out are only a symptom of the disease.
    In a normal functioning business environment few companies would have made the mistake (of investing into an expensive fad) and get burned and sold – and their more skeptic competitors would pick up the pieces at a bargain price, take over the market share and provide sound management and better return to the shareholders. What has happened instead was that most pharma companies stumbled off the genomics cliff together (aping and outdoing each other) and the resulting undead companies somehow still manage to catch and gut their healthier competitors to deliver worse management and less shareholder value and astronomical prices for the patients.

  12. lynn says:

    @ Tc King
    Yes – more chemists are needed and part of the problem is certainly TCD. The whole fiasco put lots of microbiologists (sadly non-fungible)out of work, too. But more communication and mutual understanding between chemists and biologists would be most helpful.

  13. Anonymous says:

    “once gene therapy was perfected, one would be able to change the color of their hair or augment the size of their breasts for an evening out at a party.”
    People used to use Xrays to fit shoes– before rad hazards were understood, and DDT-soaks for garments in the military. I like the idea of messing with nature, in general, but let’s be sure we get it REALLY perfected.
    “The whole fiasco put lots of microbiologists (sadly non-fungible)out of work, too.”
    Beer. If you’re good with yeast, beer is most beneficial to humanity.

  14. anon says:

    “once gene therapy was perfected, one would be able to change the color of their hair or augment the size of their breasts for an evening out at a party.”
    People used to use Xrays to fit shoes– before rad hazards were understood, and DDT-soaks for garments in the military. I like the idea of messing with nature, in general, but let’s be sure we get it REALLY perfected.
    “The whole fiasco put lots of microbiologists (sadly non-fungible)out of work, too.”
    Beer. If you’re good with yeast, beer is most beneficial to humanity.

  15. JasonP says:

    About double posting: the key is to realize that if you hit the post button, the web site always gets your post, even if you get an error message back. 🙂

  16. Sam Weller says:

    GM – I believe it is us, the scientists, who got ourselves caught in our self-created hype, this combination of sound scientific assessment, wishful thinking and deliberate exaggeration. This is what gets us publications, publicity, and funding. Science is expected to generate economic growth, or other benefits in the long run, because understanding of nature is bound to bring about capabilities of harnessing nature. There is nothing wrong about this expectation, and it is also naive to think that the world would have been a better place had scientists run it.
    Regarding the discussion in general. I believe, scale, i.e. statistics, is a major component in this genome business. A single, or a few dozens genomes are not sufficient to crack the mechanisms or contributors to diseases. If, on the other hand, you have thousands of genomes of different people, or different cells of one person, you can start investigating things more rigorously. As a result of past decades investments, we see how sequencing costs drop dramatically every year. A revolution may be an exaggerated term, but certainly a leap in therapeutic, diagnostic, forensic, and other technological capabilities will take place in a few years. Not quite “on schedule”, not quite “as promised”, but still the return on investment, at least in the global sense, will come.

  17. ronathan richardson says:

    The “failure of the genomic revolution” to give us great new drugs is one and the same as the failure of target-based drug design to give us the flood of new drugs. And again, I think it might come down to listening too much to the disease genetics crowd.
    @The antibacterial comments–most people I’ve heard talk about the bacterial genomics revolution say that it has given us hundreds of potential targets (in the form of bacterial essential genes with

  18. Rich Apodaca says:

    To paraphrase Bob Cringely, people tend to overestimate the importance of technological change in the short term and underestimate it in the long term.
    After the initial hype wears off and the opportunists have moved on, those who are left start to understand new technology on its own terms, not our preconceptions. Only then can it be put to work.
    The same will happen with the human genome and medicine.

  19. anonymi says:

    @11,
    Amen, brother.

  20. Dirty Harry says:

    The real tragedy of mis-investment is biomedical research itself. We spend a significant portion of the US GDP on healthcare. Yes, only a fraction of this is on biomedical research, but the numbers are still huge. And what do we get for this? A society that is less healthy than many which spend a fraction of what we spend. Why, for example, would we rationally invest a single cent in research on type II diabetes when a proven method of prevention—exercise combined with maintenance of a healthy weight–is staring us in the face? We could stop all pharmaceutical research today (with the exception of anti-infective research) and still have the same public health benefit of drugs that we enjoy today. There is a large number of very smart, highly-trained people wasted in the employ (or not) of the biomedical research industry. We should take most of the NIH budget and put it toward retraining these intelligent, capable people in the pursuit of solving the single most important problem that faces our society: transitioning away from a way of life based on fossil fuels, to one that can be sustained without digging anything out of the ground.

  21. McChemist says:

    Interesting how you post this, just as The Economist came out with their special report on the human genome, arguing that we’re now just poised to start taking advantage of everything we’ve gained from the genomic revolution.
    http://www.economist.com/node/16349358?story_id=16349358

  22. FrmrMrk says:

    Why is the human factor not recognized as a caue of the failure?
    I have met or heard about numerous sleazebags, incompetents and frauds in bioinformatics, and I sometimes wondered how anything at all in the field could be accomplished.

  23. Cialisize Me says:

    I agree with Rich Apodaca, post #18. Remember back in the late 80s and early 90s when analysts (financial and others) were moaning about the lack of success of antibody-based drugs and how biotechnology did not live up to expectations of giving magic bullet products that were initially envisioned.
    Fifteen to twenty years later the successes are obvious. Time was needed to digest and experiment. Rarely is the initially proposed path the final route to success.

  24. trained observer says:

    This is a VERY IMPORTANT topic that gets very little press attention.
    I doubt #20 (Dirty Harry) has seen a family member die of an untreatable disease. He/she also doesn’t realize the enormous comparative economic benefit of better treatments over time, or the benefits of international collaboration on universal values like health and science, or the benefits of international economic integration, amoung many other benefits…
    However, I do agree with #11 (Milkshake), that marketing and MBA types were given too much control in order to meet financial targets for each quarter. Corporate governance abuses need to be corrected.

  25. Biochemist says:

    genome

  26. Anonymous says:

    Well with everyone now betting their shirts on biological agents the genomic revolution MUST be about to deliver. Let’s hear it for tanezumab, the new arthritis wonder drug from the mighty R&D engine at Pfizer.
    OOPS !

Comments are closed.