Public and Industrial Leadership in the Promotion of Science and Technology

1. Public and Industrial Leadership in the Promotion of Science and Technology Philipp Aerni

2. American Universities as Endogenous InstitutionsNathan Rosenberg UK Campus University German Research University US System of Higher Education Highly competitive/complementary/high turnover Agriculture/Rural Dev. Land Grant College Social movements (cultural studies, et al.) Public Sector (NIH, Biotechnology) Industry (electrical/aeronautical engineering) Military (Computer Science, Statistics, Pharma)

3. Overall Advantages - American Universities produce Prototypes - American Universities quickly respond to military, social, economic, health and environmental challenges - American professors and students must be entrepreneurs - Focus on upward mobility - Private and State universities are complementary - Combining research and teaching encouraging diffusion of new knowledge and critical feedback (from students that are expected to be critical and work in research projects) - Science Advice to Government (National Academies) Is the picture too rosy? Bush administration has undermined the system - indirectly promoting creationism and intelligent design - ignoring science advice - cutting funding for research - scaring off foreign students and researchers - undermining stem cell research

4. What about Europe? Lots of Public Funding (EU, National Governments) Low diffusion of new knowledge (most research still done in specialized research centers) Disassociated from industry, civil society, politics Not industry but governments may corrupt science Europe should not ask when it will catch up with the USA but when it will be overtaken by Asia (Survey on Higher Education, 8 Sept, 2005, The Economist)

5. The Pharmaceutical Industry and the Revolution in Molecular Biology Rebecca Henderson, Luigi Orsenigo, and Gary P. Pisano • A shift in the scientific knowledge base of an industry • Incument pharmaceutical have not been swept away • Establishment of complex interactions between firms • The creation of two quite distinct trajectories of development: • As a tool for the production of known proteins • As a tool in the search for entirely new therapies • Different Institutional Responses in the USA, Europe and Japan

6. Historical Background Before 1850 Pharmacies in France and Germany produced therapeutic ingredients of known identity and purity on small scale, designed for the customer and the respective ailing 1850-1945 Synthetic dye industry/ medicinal effects of dyestuffs/ knowledge in organic chemistry/little formal research/ little formal testing World War II US government: massive research and production effort with companies and universities Pfizer: deep-tank fermentation process for producing large quantities of penicilin. > mass-scale commercialization > technical experience, organizational capabilities 1950- 1990 Golden Age for the pharmaceutical industry ‚target-rich‘ environment, huge public funding from random-screening (animal testing) to guided drug discovery (mechanisms of action) to drug discovery by design (enzyme systems as screens)

7. Reasons for the success of US big pharma • The ability to take advantage of publicly generated knowledge • Economies of scope/scale within a firm (in-house know-how/capacity) • Isolating mechanisms that inhibit imitators and new entrants • strength of intellectual property protection • nature of the regulatory regime (after Thalidomid scandal) • organizational capabilities, tacit skills • small knowledge spill overs between firms Reasons for the failure of German, French and Japanese firms to catch up • Public support for health related research (science less relevant in • medical practice (research in nat‘l labs rather than indep‘t medical schools • Intellectual Property Protection (intrinsic solid protection against imitation) • Japan and Italy: protection only for processes • Procedures for Product Approval (1962 US proof-of-efficacy requirement) • FDA as an active participant, Japan: discrimination against foreign companies • The Structure of the Health Care System and Reimbursements (unregulated • drug prices in the US

8. The Revolution in the Biological Sciences and Changing Competence in Pharmaceutical Research and Development Two trajectories with different organizational competencies/implications Scientific Advances in Genetics, Molecular Biology, etc. Biotechnology as a Production Technique: Insulin Biotechnology as a search Technique: cloned receptors used as screens (small molecule Discovery) Discovery of biotechnology-based drugs: e.g. Protease Inhibitors/gene therapy/tailor-made pharmaceuticals (targeting of selected cellular genes for inactivation) Cohen and Boyen‘s discovery of the techniques of genetic engineering > From university to business thanks by applying it as process technology

9. Collaboration and Competition between New Entrants and Incumbents 1970s US Biotechnology Revolution Golden Age of the pharmaceutical industry 1950-1990 Organizational capabilities, economies of scale/scope ► Formalized in-house R&D programs ►new drugs Search tool for new thearpies Acquisition Marketing, Know-how, Capital New Know-how Tool for the production of Proteins (large molecules) University Start-up Companies Competition and cooperation between New entrants and incumbents • How does that contrast to the actual situation? • Almost no genuinely new drugs after 2000 • Cost growing exponentially for lawsuits, lobbying and marketing • Loss of trust in the Federal Food and Drug Administration (FDA) • ► How good is the US national innovation system today? (Patent law, • Safety regulation, health care system, university-industry linkage