How Food Became a Casualty of Biotechnology's Promise
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S U M M E R 2 0 0 7 VOLUME 1 / NUMBER 4 P O L I C Y B R I E F how food became a casualty of biotechnology’s promise By Michael Heimbinder Fellow, Oakland Institute There was something deeply mystifying about the GE crops have little to do with growing food rush of big biotech and chemical companies into the and feeding people. The developers of GE crops are seed business, Monsanto’s headfirst dive in particular not concerned with nourishing human life, but with . .. It is not, in the lingo of Wall Street, a high margin commodifying human life. The pharmaceutical industry business. is investing in agriculture because plants and animals -Daniel Charles, Lords of the Harvest: Biotech, Big can be genetically engineered to produce human proteins Money, and the Future of Food 1 and human organs – “products” that promise profits The first genetically engineered (GE) crops were approved far exceeding any imaginable from high yielding crops for human consumption in the mid-1990’s. Now, millions bearing vitamin-fortified food. of genetically modified meals later, the clamor over GE foods has become a fixture of food policy debate. The The Financial Failures parties to the argument generally fall into one of two of Biotechnology camps: those who support agricultural biotechnology as a solution to world hunger and the scarcity of Monsanto, having launched their agricultural environmental resources and those who warn that GE biotechnology program in the early 1980’s, finally crops are jeopardizing food security and threatening the managed to release their first GE product in 1996. environment.2 This paper aims to establish new ground That is, the company spent approximately 15 years in the controversy and contribute to the groundswell of and billions of dollars before they saw any return on opposition against claims that “GE crops will allow us to their investment in genetic science. This is a pattern grow more food and feed more people.” that continues to this day: in 2006 Monsanto spent $725 million on research and development 2005 alone, the global biotechnology industry while earning a net profit of $689 million.3 racked up a collective loss of $4.3 billion.12 This is the product development Agricultural biotechnology is hemorrhaging model that has become institutionalized in the money because they have invested enormous pharmaceutical industry. Companies spend big sums in cheap commodities – seeds – whose for several years in the hopes of coming up genetically engineered, value-added components with a single blockbuster drug that will generate offer negligible advantages over conventional enough revenue to cover all their sunk costs while varieties. Agriculture is an industry marked by delivering a handsome profit.4 This may be a low-margin products, high development costs, sustainable business model for the pharmaceutical and long lead times.13 It is not a blockbuster industry considering the huge size of the market business and never will be because investing in – the world spent $550 billion on drugs in 20045 products that augment farm production results in – but it hardly makes sense when addressing the an inescapable contradiction: the demand for food traditionally low margin seed business. “Compare is inelastic; fluctuations in price are unlikely to be agriculture to pharmaceuticals; any new drug that met by changes in the frequency of consumption. improves a patient’s health, This phenomenon, often no matter how slight Agricultural biotechnology has simply referred to as the effect, can be worth been financed by the promise the “fixed stomach,” billions. In agriculture, a means that when supplies new gene has to have the of future profits from products increase and food prices effect of a sledgehammer or unrelated to food. fall, consumers do not no one will notice.”6 Pfizer, necessarily buy more Monsanto’s parent company, made $12.9 billion in groceries and eat more food.14 2006 from a single drug, Lipitor,7 an amount double Decades of agricultural innovation the revenue of the entire market for GE seeds.8 have resulted in a long decline in international Agricultural biotechnology has been food prices as production has grown faster than financed by the promise of future profits from demand.15 In the United States, between 1913 products unrelated to food. As Daniel Charles and 1996 the real cost of food at retail level notes in Lords of the Harvest, “Few, if any, declined 35 percent.16 The food processing companies that heavily invested in biotechnology industry is enormously profitable but they are for agriculture have recovered that investment not directly engaged in agriculture. The industry through sales of genetically engineered simply exploits their market position as the product.”9 And this observation extends to middle man between farmers and consumers, the biotechnology industry as a whole. In its buying cheap and selling dear.17 But the value almost 30 year history, the industry has never of seeds is capped by the value of the foods they been profitable.10 During this time, the biotech will become. Farmers will not spend more on industry has sustained cumulative net losses seeds than they expect to recoup from the sale of of more than $40 billion while investors their crops. bought close to $100 billion in stock.11 In 2 w w w . O A K L A N D I N S T I T U T E . o r g 3 Seed R&D as a Means to as the major players jockey for position. To take Monopolizing Genetic Science but one example, in the early 90’s Agracetus was granted a patent covering all transgenic cotton. The meager returns from seed sales hardly matter Since then, anyone making any kind of genetic to the giant pharmaceutical conglomerates. Food modifications to cotton must seek permission from is merely a conduit through which they hope to and pay royalties to Agracetus.24 develop and monopolize the basic technologies The pharmaceutical conglomerates that will then be used to create more valuable are investing disproportionately large sums in products. As David Goodman et al. note in agricultural biotechnology because recent findings their groundbreaking work From Farming to indicate that different species share similar gene Biotechnology, “The ultimate prize is domination constructs. For example, we share 99 percent of and proprietary ownership of the scientific our genome with chimpanzees and 31 percent of knowledge and process engineering technology our genes are interchangeable with those of yeast.25 required to control the complex biological reactions This discovery has given birth to projects such 18 and microbial activities.” These “proprietary as the National Plant Genome Initiative which technology platforms . have become the end introduced the term “reference species” to suggest 19 products themselves” because controlling the that the genomic map of a single plant species enabling technology is more important than might serve as a “reference” for decoding the 20 owning the genetic material itself. In the words genomes of other plant species and maybe even of the former CEO of Monsanto, Robert Shapiro, humans.26 As William Boyd explains in his book “We are learning about biology at a level and at chapter “Wonderful Potencies: Deep Structure a rate that is absolutely unprecedented in human and the Problem of Monopoly in Agricultural history. There is an enormous space to be filled, Biotechnology,” and the stakes are very high. We want to be able to occupy and hold the most valuable territory.”21 The sequences of model organisms . are Leading firms such as Monsanto, Novartis, intended to provide the Rosetta stone of sorts and DuPont have sought to “develop and amass for interpreting the genomes of more complex patent portfolios that are broad enough to bar organisms. Genomics thus holds out the promise of a grand unification in biology, providing the entry by new players and deep enough in terms of key to the basic processes of gene function and their control over basic technologies to give them protein synthesis common to all organisms.27 substantial economic power in key markets.”22 In a study entitled Impact of Industry Concentration Biotechnology’s Promise on Innovation in the U.S. Plant Biotech Industry published in 2000, the authors found that the Biotechnology’s promise began to pay out in largest firms have been enormously successful 1978, a landmark year for the industry. Genentech in pursuit of these goals. Analysis shows that announced that it had, for the first time in history, new firm entry in the “innovation market” is manufactured a human protein outside of the declining, and research and investment is falling human body. The company had successfully 23 in all but the top four firms. Entry into the field of managed to coax insulin from an E. coli bacterium biotechnology is becoming increasingly difficult, 2 w w w . O A K L A N D I N S T I T U T E . o r g 3 by splicing human genetic instructions into its unknown number of animals, estimated to be in intracellular workings. the thousands, were pharmed. The pharmaceutical Today there are over 30 protein-based conglomerates are investing in pharming because medicines on the market and an additional 371 they anticipate that products that they cannot in the research and development phase. 28 Every physically or affordably engineer mechanically one of these new drugs has been made possible may become feasible when the task is delegated by advances in recombinant DNA processes and to genetically engineered plants and animals.31 techniques. The only problem for the industry is For example, Mich Hein, the president of Epicyte, that using single cells to produce biotech drugs, claims that his company’s plant-based production also known as biologics, is a complicated and technology can make the same annual quantity of time-consuming process.29 These hybrid cells drugs with 200 acres of corn and a few million must be fermented or cultured in enormous dollars in expenses that a $400 million factory can 10,000 liter “bioreactor” stainless steel tanks.