Biotech may be 'good bet' for state, economists say

January 15, 1995|By John E. Woodruff | John E. Woodruff,Sun Staff Writer

Maryland's controversial biotechnology strategy "already appears to be taking hold as a potential winner for the state," two University of Baltimore economists conclude in an article published this month.

"It appears that this sector may be a good bet for the future, especially in light of the relatively disappointing performance of Maryland's other basic industries," professors Michael A. Conte and Robert Riva wrote in the current issue of the Regional Economic Review, published by the Jacob France Center of the university's Merrick School of Business.

The state has marshaled hundreds of millions of dollars in private investments and state, federal and local government funds to build biotechnology infrastructure, ranging from laboratories and exhibition space to subsidized facilities where small companies can produce batches of new drugs to submit to the Food and Drug Administration for testing.

The strategy is aimed at ending Maryland's status as a place where many drugs and other medical items have been invented but few are manufactured once they move out of the laboratory and into commercial production.

The aim is to capitalize on the wealth of talent working in Maryland's medical and other biological research facilities, including the Johns Hopkins Medical Institutions, the National Institutes of Health and the University of Maryland.

Critics of that strategy have argued that any payoff in manufacturing jobs is far down the road, for the FDA drug testing process takes years and makes the time from invention to production longer for biomedical products than for almost any others.

Mr. Conte and Mr. Riva acknowledge that problem in the biotech strategy.

"While it is hoped that research employment in Maryland will expand as biotechnology comes of age, the preponderance of jobs in the field arise when a research product goes into actual production," their article says.

But the early evidence is that in production, as well as in research, the biotech strategy is already showing signs of paying off, the two economists wrote.

That conclusion is based on an analysis of an index they call the "location quotient," which compares the relative concentration of industry in a state with the concentration of that same industry in the nation at large.

A "location quotient" of 1.25 or more makes a business one of the state's "basic industries," the ones it relies on to earn money in trade with foreign countries and other states, they say.

From 1988, when Maryland launched its biotechnology strategy, research and testing services shot up from a 2.33 "location quotient" to 2.51 in 1993. For pharmaceutical manufacturing, Maryland's "location quotient" has grown from 0.47 to 0.67 in the same time.

The growth in pharmaceutical manufacturing boosted employment in that industry from 2,072 in 1988 to 3,346 in 1993, the article reported.

"Maryland appears to have a distinct growth opportunity in this sector, and has already capitalized on this opportunity in percentage terms, although the base from which the state has expanded was small," the two economists said.

The rapid erosion of Maryland's traditional industrial base over recent decades makes it all the more important to pursue new industries to replace the older ones that are being lost, the article adds.

"Maryland cannot rely on its traditional basic industries for its future prosperity," the two economists argue. "This may be the single greatest rationale for Maryland's biotechnology strategy."

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