Will We Lose in the Stem Cell Race?

Americans take it for granted that they are the world's leaders in the life sciences. And it's true that, today, American companies account for 60 percent of global pharmaceutical sales and 75 percent of biotech sales, and that they dominate the market for medical devices. But complacency is a powerful enemy; our leadership position is not a national birthright. We could fumble it just as we fumbled leadership in the consumer electronics and automotive sectors.

In science and technology-intensive fields, fumbling is particularly easy. Less than 30 years ago, five of the world's top 10 pharmaceutical companies, including the two largest, were European. Between 1980 and 1984, Europe invented more than half of the world's new drugs. Observers assumed that Europe would lead the anticipated revolution in biotechnology.

Today, however, American companies account for more than three-quarters of worldwide biotech revenue and have almost 4,500 products in development -- 2 1/2 times as many as European companies.

How did we turn the tables?

· Government actions and court decisions allowed the patenting of living organisms and made it possible for private researchers to commercialize discoveries funded by federal grants. Further, Stanford University, which controlled key patents, ensured their widespread and rapid adoption.

· In Europe, the countries of the European Union had independent regulators until the 1990s. The patentability of living organisms remained uncertain until 1998. And state-funded academic institutions had little incentive to encourage academics to pursue commercially oriented research.

· Between 1985 and 1995 the U.S. government invested more than $50 billion in the biological sciences. Federal spending during that period dwarfed the amount spent in Europe and encouraged private-sector investment.

· With the availability of affordable, fundamental patents and a supportive public policy environment, between 1987 and 1997 investors bet some $6 billion of risk capital on the fledging sector in the United States, roughly five times as much as their European counterparts.