By Edward S. Price, President, PCI Synthesis
and Jeffrey P. Kiplinger, President, Averica Discovery Services
The biotech sector in Massachusetts has changed – but you might not realize that based on state policies.
The Massachusetts Life Sciences Act, signed into law in 2008, provided tax incentives and investment of $1 billion. The Act capped years of investment in the Boston-centered cluster – the biggest in the world with big pharma/biotech, venture-backed startups, and world-class university research.
Then the life sciences industry changed. The primary reason: The cost of developing a new drug reached $2.6 billion. Outsourcing proved more efficient than the old fully integrated company model.
Big pharma shut down local research centers and laid off thousands of employees. New biotechs adopted a virtual model, operating with only a few investors and executives while never building expensive labs. R&D moved offshore, to entrepreneurial companies in China and India.
Nearly 10 years later after the Massachusetts Life Sciences Act, the state critically needs a plan for the next decade. That plan must recognize the shift in the industry’s business model. Thankfully, the business community in biotech has kept up with the changing R&D climate, and offers a framework for the next-generation cluster.
Massachusetts is now home to more than 225 Contract Research and Contract Manufacturing Organizations (known as CROs and CMOs) that handle every step of drug discovery through FDA approval. CROs and CMOs were built by scientists and entrepreneurs who saw the disruption coming. Together we generate combined revenues of nearly $2.5 billion and employ more than 16,000 people in the state, representing a quarter of the R&D employment1. CMOs in particular represent a bright spot for in-state manufacturing.
Bob Coughlin, president of MassBio, recognizes that "Contract manufacturing organizations, or CMOs, and the contract research companies, CROs, are becoming the backbone of the cluster as research is increasing going external from the major companies."
These companies, and others that could be attracted or created here, represent the future.
Before MassBio helped the non-profit New England CRO/CMO Council meet with Speaker Robert DeLeo last February, he had never heard of CROs and CMOs, nor did he know that we represent a significant cluster in the state. Similarly, we find little awareness in Massachusetts’ Office of Business Development or the Massachusetts Life Science Center – despite only three years remaining before the expiration of the 2008 Life Sciences Act – of just how dramatically the R&D model has shifted.
Massachusetts must decide whether it wants to continue to host the world’s most successful life sciences R&D cluster. New plans must recognize a different ecosystem. Grants, matching funds, development plans, and tax incentives must support more R&D investment in contract research and manufacturing if we expect to continue to lead in science. How this will be achieved is the next big discussion.
If we want Massachusetts to maintain its position as the world’s largest Life Sciences cluster, and if we want to grow the state’s manufacturing capabilities, we need to create an investment plan for the state very different from 2008. The future will not focus on big pharma, which invested heavily here and then shuttered its brand new facilities and fired the employees who worked there. Our future is the industry’s future: the outsourcing community.
We advocate some simple solutions, such as mandating that a portion of state grants be spent in Massachusetts, and using tax incentives to encourage local spending of R&D dollars. In the coming years, CROs and CMOs will be high value targets for forward-looking states wanting to invest in biopharma. We do not want to see Massachusetts lose its leadership, or the jobs and revenues that CROs and CMOs produce.
Edward S. Price is the co-chair of New England CRO/CMO Council and the president of PCI Synthesis in Newburyport MA. Jeffrey P. Kiplinger also co-chairs the Council, and is the founder and president of Averica Discovery Services in Marlborough MA.