The Economist: Game changer
By By Ray Perryman
June 30, 2012 at 1:30 a.m.
I have been involved in economic development efforts in Texas for about 30 years and have been privileged to be part of numerous successes that have shaped the future of business activity in the state.
Throughout this period, the major gaping hole in our efforts has been the absence of "Big Pharma." Recent technological advances have given the state the potential to become a key player in the next generation of such products, and, this past week, a catalytic event occurred which should make this long-held vision a reality. It is truly a game changer of gargantuan proportions.
The U.S. Department of Health and Human Services recently announced that the Texas A&M University System won a contract to be one of three national biodefense centers. The Texas A&M National Center of Innovation in Advanced Development and Manufacturing will be located within the Research Valley area (which includes College Station and Bryan).
The center is a partnership among large biopharmaceutical companies, academic institutions, bioprocess technology providers, non-profit research institutes, commercial partners and the Texas A&M University System.
Once in operation, the Center is expected to support the goals of the U.S. Department of Health and Human Services and Biomedical Advanced Research and Development Authority by developing domestic sources and response capability for vaccines for the U.S. population. Locating such facilities in the United States increases the ability to respond to pandemics and biothreats.
In addition, it involves substantial economic benefits through its direct operations as well as the subsequent location of other firms and activity. We recently evaluated these potential economic effects as well as tax receipts for entities in the Research Valley Area (College Station-Bryan) and other Texas areas.
Any investment or corporate activity generates multiplier effects throughout the economy. As part of its ongoing operations, for example, the CIADM facility will purchase other input goods and services it requires. These could include items ranging from laboratory supplies to landscaping services.
They also lead to spillover benefits for a wide range of businesses throughout the area and the state. In addition, the presence of such a facility leads to the location of additional commercial enterprises in related industries.
We developed a model some 30 years ago (with continual updates and refinements since that time) to describe these interactions. This dynamic input-output assessment model uses a variety of data (from surveys, industry information, and other sources) to describe the various goods and services (known as resources or inputs) required to produce another good/service.
The submodels we used in this instance reflect the specific industrial composition and characteristics of the Research Valley area and the state of Texas.
We found that over the first 25 years, direct initiatives of the National Center of Innovation in Advanced Development and Manufacturing lead to cumulative total economic benefits in the Research Valley area of $10.9 billion in total spending, $5.3 billion in output (gross product) and 54,681 person-years of employment, with even higher gains for Texas.
The center is also likely to lead to additional commercial vaccine production activity, and The Perryman Group estimates a total cumulative increase in business activity of an estimated $44.1 billion in total spending, $21.0 billion in output (gross product) and 195,844 person-years of employment in the Research Valley area. Again, the state as a whole would see even larger gains.
As an outgrowth of this economic activity, tax receipts to local governments could be expected to increase by $465.9 million ($1.1 billion to the state) as a result of the CIADM's direct initiatives and collateral commercial development over the first 25 years.
Even beyond these substantial benefits is the role the Center can serve as a catalyst for economic development. Depending on the level of success Texas is able to achieve in capturing additional activity in related industries, hundreds of thousands of additional jobs could be gained.
The National Center of Innovation in Advanced Development and Manufacturing represents an important advance toward achieving goals of the U.S. Department of Health and Human Services for enhancing domestic vaccine response capabilities. In addition, the center would lead to a substantial economic and fiscal stimulus for the state and local governments.
The location of the CIADM within Research Valley offers the state of Texas an opportunity to enhance its position as a center for biosciences development.
It also represents a unique opportunity to secure major pharmaceutical facilities within the state, thus creating a long-desired element of economic growth and diversification. We were honored to be a part of the process.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.