I recently attended the 3rd Annual Massachusetts Life Sciences Innovation Day Conference here in Boston. I was struck by the cognitive dissonance coursing through the crowd. Speakers and attendees alike were conflating activity, progress, discovery, invention and innovation - all different things where I come from. The meeting left me pondering the future of a field where private investors are increasingly getting displaced by tax dollars dispensed via politically driven industrial policy.
Kicking off the conference was Massachusetts Lt. Governor Tim Murray touting the state's Billion Dollar Life Science Initiative. Somehow squeezing money from state coffers long emptied by profligate spending, this initiative is on course to "create" four construction jobs for every life science job. No word on how many jobs will be sacrificed by sucking a billion dollars out of the State's depressed private sector. Such calculations aren't offered by political economists, whose balance sheets never recognize liabilities.
Magically prescient about which of the many worthy but uncertain areas of scientific research might one day turn into actual products, Murray hailed the state's effort to create a Stem Cell Workforce. When Grecian riots arrive on our shores I suppose these subsidy-empowered workers can march alongside the Massachusetts Green Jobs Workforce to protest budget cuts.
Few seem to care that "activity" is the only outcome industrial policy can deliver. "Progress" on the other hand occurs only after activity overcomes the obstacles erected by reality. Heaven forbid policymakers should examine job creation programs in Spain and Germany where politicians tried to bootstrap a Solar Power Workforce or the efforts of our brethren in the Midwest building a Biofuels Workforce. These well intentioned but misguided efforts are imploding as economic realities turn billion dollar subsidies into dead loss. Keep your eyes on the Electric Car Workforce in California, their turn comes next.
But you'll make no friends raining on the parade of the tenured professors and stimulus bill bureaucrats crowding this audience, who favored the Lt. Governor with hearty applause. They know they are headed for a golden era. Truth be told, "discovery" will flourish in a world where larger and larger swaths of the scientific establishment are put on the dole while massive layoffs spread through the pharmaceutical industry. Papers will be published in Nature and Science, reputations will be made, and labs will be staffed with armies of foreign graduate students. (Someone has to occupy all those new buildings going up out in Worcester.) Breathless New York Times articles will be written about the promising discoveries made by Big Science.
But discoveries don't cure cancer, products do. And products have to be "invented", first by choosing which among the plethora of scientific discoveries to pursue and which to let ripen for a future day. This has traditionally been the job of venture capitalists driven by the quest for wealth creation, not job creation. In fact, the fewer jobs it takes to resolve the risks inherent with early-stage investing, the better. How does Congress propose helping this process along? By preparing legislation to double the taxes VCs pay.
After a product shows promise, be it a new drug or a medical device, innovators have to take on the expensive, risky, and arduous task of getting these products to market. Much of this is done via collaborations between start-ups and established companies, often turbo-charged with money raised from the public through IPOs.
This is where the Life Science industry is unraveling. The reasons aren't hard to ascertain.
We've erected FDA regulatory hurdles that cost $800 million dollars to clear designed to eliminate the least scintilla of risk. Those few products that get through are still left to contend with an army of tort lawyers ready to leech billions in the name of class action plaintiffs that may or may not have been impacted. Nevermind that we insist on this absolute level of safety within a healthcare system that routinely kills 100,000 patients a year through avoidable medical errors. Nevermind that many new drugs are for otherwise incurable patients that would happily face the most daunting side effects for a shot at survival. Forget about using informed consent to allocate risk, this is outlawed by the nanny state.
What do we get for insisting on this extraordinary degree of safety? We get pharmaceutical companies shifting into toiletries and cosmetics. We get venture capital investors calling it quits, tired of pumping hundreds of millions of dollars into companies so they can open the envelope at the end of the clinical trial to see if they lost all their money. We get entrepreneurs packing up to seek their fortunes in China. Yet Congress inexorably moves us toward a healthcare marketplace where medical therapies will be sold not to doctors and patients but to Uncle Sam, whose unelected Czars can set prices and comparative effectiveness committees can decide what constitutes standard of care.
What rational investors and entrepreneurs would pursue a market like this? Rest assured, though, that after innovation dries up and scientific discoveries amass unused pundits will blame it on a "failure of capitalism."
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