TAC Remarks on Biotechnology Panels Reports
Presented by Donald Winkelmann, TAC Chairman, at MTM98, Brasilia, on 27 May 1998

I welcome this opportunity to comment on the biotech panel reports. I propose to focus on three themes: the substantial congruence between the panel reports and TAC’s commentaries, an amplification of selected points that were made in the reports, and observations on a few points which might have a role in the Group’s deliberations.

First, with respect to the report on General Biotechnology:

--The Committee applauded the Panel’s emphasis on the overarching goals of the System, on biosafety, on viewing biotechnology as a tool, and on ensuring that center responsibilities as germplasm trustees are in accord with international agreements. With respect to biosafety TAC notes the opinions of some that the centers have the strongest sense of the needs for biosafety in their regions and that they should be at the fulcrum of efforts to develop and implement consistent global norms.

--TAC agrees with the Panel on the importance of genomics and about the unique role that the centers might play in that arena. Not only do the centers have easy access to a germplasm cornucopia, they have a vast knowledge about the performance of materials in tropical and sub-tropical environments, dense webs of working relationships with most of the research programs concerned with those environments, and unparalleled access to environments in which germplasm can be tested as a part of linking ’genes’ to traits. There is much to commend in the idea of the centers playing a pivotal role in genomics with the accompanying prospect of maintaining findings in the public domain for all to use.

--TAC flagged the desirability of a policy framework that will accommodate not only germplasm improvement, but, as well, the other fields like vaccines, pest management, and natural research management in which biotechnology will help achieve the System’s goals.

--The Committee agrees with the urgency of ensuring that centers have sufficient capacity in biotechnology to be effective in the pursuit of their goals for improving germplasm, including capacity in the creation and safe deployment of transgenic plants, and with the Panel’s emphasis on the need for a balanced combination of biotechnology and other breeding technologies.

--TAC thought it important that the Panel did not suggest a massive shift towards biotechnology nor the need for a centralized operation, but rather proposed an evolutionary process. Consistent with this counsel, TAC now includes specialists in biotechnology in the external reviews of those centers engaged in work likely to include biotechnology.

The Panel recommends that the System facilitate the development of networks of practitioners in order to add breadth and depth to the resources committed to work on the CGIAR’s portfolio. TAC noted that centers are now engaged, frequently as the hub, in networks with NARS seeking to apply relevant, new tools. What role the centers might play in the larger and deeper networks recommended by the Panels will require careful consideration. The Panel outlines one approach to the implementation of such a strategy. TAC notes that other strategies might be considered and that center and NARS participation will be important to the process of establishing opportunities and modalities.

As members discuss a policy framework, various themes related to its implementation will emerge. I will comment on three such themes in an effort to facilitate discussion.

First, while it is clear that biotechnology’s basic science is broadly applicable across agro-ecologies, it is also clear that investments in applying the findings of basic science to technology development notably favor temperate environments. While a portion of that research will be relevant to the tropics and sub-tropics, not all of it will be. It follows, not surprisingly, that CGIAR investment in biotechnology should favor strategic applications of basic science to the species and problems important to the tropics and sub-tropics.

Second, portions of the genomics work being recommended will require access to large scale capital and specialized expertise. Happily, notable efficiencies are at hand through out-sourcing. Private companies are rapidly taking advantage of such services; it is estimated that the U.S. pharmaceutical industry out-sources roughly 20% of its current expenditures for research and development. Members will want to keep the considerable potential through out-sourcing in mind as they consider the Panel’s recommendation.

Finally, both Panels recommended a central unit. What would be the requirements for additional institutional infrastructure and how much would it cost? The Panels envision a small unit capable, not of directly providing, but of facilitating access to specialized counsel, especially in law and in negotiating agreements. Beyond that, a central unit could help in standardizing the framework through which individual centers’ make operating decisions and could help centers stay abreast of one another’s work; the surprising similarity among plant genomes will make such interaction ever more important to efficient operations. And what about cost? To the extent that centers use the IP of others or engage in out-sourcing--and they must do both if they are to effectively serve the poor-- access to legal, negotiating and other expertise will be required. Its cost can be reduced through a central unit. As for the costs of protection for center IP, they may not be trivial, but these should be seen as the cost of protecting access to IP, of ensuring its effective distribution, of promoting partnerships, or of responding to international agreements, and these costs, too, will be reduced through judicious use of a central unit.

Turning now to the Report of the Panel on Proprietary Science:

--Again, TAC was largely in accord with the findings of the Panel. The Committee went on to accept the Panel’s impressions that the CGIAR must be concerned with genetic resources held in trust and the IP emerging from it, the intellectual property developed by others, and the IP developed by centers.

--TAC strongly endorsed the Panel’s view that all research should be pursued only for its potential direct contribution to CGIAR goals and that only in some situations will protecting such property favor the System’s goals. The Panel identified five such situations (to protect the access of others, to facilitate distribution of a product, to promote useful partnerships, to protect “bargaining chips”, and to generate income) and reported internal agreement for protection in three cases. TAC saw the possibility of protection in all five cases, but with a particular caveat for that related to income. Let me add here that it is easy to overestimate the potential returns to IP. According to 1996 data from U.S. universities, income from license fees is only 2.0% of research expenditures and only 2.4% for the top 30 universities, even before deducting the costs of managing the property, which run about 20% of license fees.

--TAC applauds the insight that led the Panel to decide to seek information on current center practice with respect to the IP of others, leading to development of the questionnaire and to arranging for ISNAR to conduct the survey and analyze the data. TAC completely supports the Panel’s sense of urgency about an expert review aimed at normalizing center use of the IP of others. Moreover, it seems likely that the review itself will tell centers much about their likely future requirements for such expertise.

--As well TAC is in accord with the Panel’s endorsement of the Guidelines already in use, and infers that the review now underway by centers will maintain the dispositions of the earlier document, but hopes that the new version reflects a more neutral stance with respect to the potential role of protection for IP under certain circumstances.

TAC noted that new science combined with protection can reduce the portfolio of public goods and that one strategy the CGIAR might follow would keep certain goods in the public domain, even if no longer as truly public goods. TAC will have more to say about this development in the near future.

Like the Panel, and in accord with its terms of reference, TAC did not focus on ethical issues that might emerge from the protection of IP. TAC did opine that any discussion of ethics must be consistent with the System’s people centered strategy and its overarching goals.

TAC amplified two of the Panel’s recommendations. On the first, TAC shares the Panel’s concern for compliance with the international agreements dealing with genetic resources, and this led TAC to urge that, in case revenue emerges from center developed IP, it go to a free standing entity for distribution. TAC believes that this would quiet apprehensions about appropriate benefit sharing among those who contributed the initial germplasm, and obviate other concerns that might emerge were such revenues to go directly to the centers.

For a second recommendation, TAC extended the discussion by emphasizing that decisions on protecting IP should lie with the centers, that center decision-making on protection for IP should be strongly supported by a centralized service, and that, for all such decisions, the logic should be made transparent and easily accessible to all concerned.

There are a few selected themes where further discussion might be useful to members. One of those, that dealing with MTAs, is already under consideration by the centers. A second has to do with CGIAR access to the intellectual property of others in the future. Some argue that, as patent law is clarified and markets better reflect value, access will be more through royalties and fees than through bargaining chips and cross-licensing. Third, and especially for NARS in some countries, protection will not apply or will not be enforced.

Finally, I want to comment on three apparent concerns that have limited the utility of some earlier discussions about protection for IP. One rests on the extent to which the protection claimed by an innovator on improved IP might be extended backwards to the basic but unprotected product on which the improvement rests. There seems to be little likelihood that this will occur, even less likelihood that it would be enforced. A second is the extent to which innovators can, through pricing of their product, recover most of the value of the innovation while leaving little to others, whether producers or consumers. For the division between producer and innovator and based on the few studies available, it appears that the innovator’s share tends to be well under 50%, with the availability of substitutes as a major determining factor. It is said that a convention in hybrid maize markets is to set prices so that about one third of the gains go to the seed company and the rest to the producer. Beyond that, and of considerable importance, the gains to consumers through lower prices are typically a large part of the total gains from an innovation. Usually, then, the innovator's portion of the total social gain is well under 50% with producers and consumers taking the lion's share. For example, a study of Bt cotton seed in the U.S. estimated that, for 1996, farmers gained 54% of the value added, consumers (domestic and international) gained 17%, seed companies, 6%, and the innovator, 23%. (Personal communication from Greg Traxler, soon to appear in Falck-Zepeda, J.B. and G. Traxler, "Rent Creation and Distribution from Transgenic Cotton in the U.S.", Department of Agricultural Economics, Auburn University.) Third, some have expressed concern that innovators will make small changes in unprotected IP and then reap major benefits by claiming protection for the new IP. Two comments seem pertinent here. To the extent that substitutes, especially the unprotected initial IP, are available, the gains going to innovators will be limited. Second, to the extent that the small change opens new options to producers and consumers, perhaps CGIAR concerns should be limited. We are, after all, in the business of opening options to the poor!

As TAC sees it, Panel discussions and findings rest squarely on CGIAR goals and integrate the common apprehensions about biotechnology--consumer safety, implications for biodiversity, obligations under international agreements, and agreements with partners. As well, TAC noted that both Panels gave due attention to the CGIAR’s concern for the efficient use of its resources in serving the poor. The Panels’ recommendations deal with important issues and opportunities and the excellence and breadth of Panel membership provide reassurance that important considerations were not overlooked. There is, it appears, sufficient counsel to support the policy discussion that the System requires and the bulk of that counsel is congruent with the Chairman’s propositions of yesterday morning.

One thing is clear...that the science and the law and the economics of biotechnology is in a continuous state of flux. Whatever the decisions of this week, the swirl of science and the evolution in law will ensure that the CGIAR must periodically revisit its policy in this arena. It is equally clear that certain steps must be taken now. Klaus Schwab of the World Economic Forum is said to have said that, “Not too long ago, it was the large eating the small...now it’s the swift eating the slow”. The Group must be swift enough that the centers remain robust and relevant in their work for the poor.

Finally, these panels included very busy people. That they would give so freely of their time and energy to the CGIAR, that 21 of the 22 people initially contacted agreed readily to meet our challenge, is a marvelous testimony to the reputation of the centers. On behalf of the Technical Advisory Committee, I want to add our thanks to Panel members for their notable service to the CGIAR.