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Regulatory Impact Analysis for the Regulation of Microbial Products of Biotechnology: International Considerations


A. Introduction

This chapter examines the potential impact of the rule on U.S. competitiveness in biotechnology. A description of international regulationsis provided to place the TSCA biotechnology rule in the context of additional proposed and enacted legislation that may affect the industry. The remainder of this chapter addresses similarities and differences between the rule and guidelines, regulations, and legislative initiatives in other countries.

B. Effects of the Final Rule on International Competitiveness

A limited examination of selected foreign regulations suggests that noclose competitor to U.S. industry would enjoy a significantly less stringentregulatory environment compared to the requirements included in the rule. Furthermore, several countries important in the world biotechnology marketcurrently appear to have more stringent regulatory approaches than the onedescribed in this rulemaking.

The remainder of this chapter provides a brief overview of internationalmarkets, describes several foreign biotechnology regulatory approaches, andmentions some theoretical considerations in analyzing effects of the rule oninternational competitiveness.

1. Overview of International TSCA Biotechnology Markets

Biotechnology is an international industry, and TSCA-typebiotechnology applications are no exception. Countries with large numbers ofbiotechnology companies include the United Kingdom, Japan, Canada, France, andGermany.(Footnote 1) Even though it lacks large numbers of biotechnology firms,Switzerland is considered a major biotechnology player through its industrial,

chemical and pharmaceutical industries, such as Ciba-Geigy, Hoffman-LaRoche,and Sandoz. Similarly, Novo-Nordisk and Gist Brocades, leading enzymemanufacturers in Denmark and the Netherlands, make these countries importantto TSCA biotechnology markets.

The trans-national nature of one major TSCA biotechnology market, thedetergent enzyme industry, is illustrated by a recombinant microorganismdeveloped by Novo-Nordisk. The microorganism produces a fat-degrading enzymeused in laundry detergents, first isolated by Novo's Japanese subsidiary. Themicroorganism was sent to Denmark for further development, then back to Japanfor production at a Novo plant. The enzyme product itself was shipped toDenmark for granulation, then back to Japan for sale to a Japanese detergentmaker. The Japanese plant also produced enzyme products for export to otherAsian markets.

Other microorganisms or products of microorganisms in TSCA applicationsare also traded globally. These include the commodity chemicals citric acid,xanthan gum, fuel ethanol, and lactic acid; and microorganisms forenvironmental applications such as waste treatment (Krupka 1989) and nitrogenfixation (Smith 1990).

2. International Regulation of TSCA Biotechnology Markets

It was not feasible to comprehensively examine the regulatorysituation for biotechnology in each country. However, this section provideshighlights for several countries and international organizations.

All major countries involved in the development of industrialbiotechnology appear to have some form of government oversight of geneticallymodified microorganisms for both research and development (R&D) and generalcommercial use, as the following examples illustrate:

Denmark's relatively restrictive "Environment and Gene TechnologyAct" prohibits releases except with special government approval. While a genetically modified plant was recently approved forrelease, there have been no officially sanctioned releases ofgenetically modified microorganisms. Denmark agreed to adoptEuropean Community (EC) directives on genetically modifiedorganisms. (Denmark 1986, Dixon 1989c).

Germany has also prohibited releases except under specialcircumstances (Gibbs 1987). At least one field test of agenetically modified plant (petunia) has been conducted. Contained as well as released uses of engineered microorganismshave been held up by lack of a law permitting use of genetictechnology (Hodgson 1990a, Biotechnology 1989) However, a newGermany "Gene Law" has been in place since July 1990 (USDA 1990).

In the Netherlands, the 1985 Chemical Substance Act was revised tocover genetically modified organisms (Hodgson 1990b).

UK regulations which came into force in 1989 introduced mandatorynotification of the use of genetically manipulated organisms andof their intentional introduction into the environment (Ashford1990).

In France, a biosafety review committee under the Ministry ofAgriculture reviews and approves all field tests (USDA 1990,France 1987).

The Organization for Economic Cooperation and Development (OECD)has developed scientific principles for safety assessment forlarge scale contained applications (OECD 1986), and for fieldexperiments (OECD 1990). While OECD has no regulatory authority,its work influences the practices of the major industrializedcountries (Royal Commission 1989).

The following sections discuss comparable biotechnology regulationsaffecting TSCA-type applications in the European Community, Japan, and Canada.

a. European Community (EC)

At the time of this report, the European Community (EC) wascomprised of twelve nations(Footnote 2) that sought to establish a single internal marketby 1992 (IBA 1989). The European leaders in biotechnology are EC members,including the UK, France, Germany, Denmark, and the Netherlands.

The EC has proposed several Directives affecting genetically modifiedmicroorganisms, including two that have been adopted on contained uses andanother on deliberate releases (CEC 1989a, 1989b, Ashford 1990, Hodgson 1992). These EC directives are binding only as to the result to be achieved; theexact method of implementation is provided in member nation legislation (IBC1990). Because of this flexibility, a discussion of EC directives providesgeneral insight into regulatory trends, but may not capture differences instringency among member nations.

i. Microorganisms Subject to Regulation

The Directives cover microorganisms whose geneticmaterial has been altered in a way that does not occur naturally by matingand/or natural recombination. Genetically modified organisms would includemicroorganisms modified using techniques such as recombinant DNA,microinjection, microencapsulation, and cell fusion by methods that do notoccur naturally, but would exempt microbial products developed using methodssuch as conjugation, transformation, transduction, and mutagenesis (CEC 1989a,1989b).

ii. Contained Applications

The Directive on contained uses addresses both smalland large scale applications of Genetically Modified Microorganisms (GMMOs). Notifications can be triggered by the use of facilities for the first time foroperations involving contained fermentation and/or new microorganisms subjectto the Directive. Notification requirements vary depending on the risk of themicroorganism and the type of operation. The requirements are summarized inTable VII-1.

As shown in the table, the requirements depend on the type of operation(e.g., teaching, research, non-commercial, commercial), scale (e.g. less than

ten liters, more than ten liters), and the risk category of the subjectmicroorganism.

One difference between U.S. and EC approaches is that the EC approachrequires advanced notification for some contained R&D applications. Anotherpotential difference is that, unlike the U.S. rule under TSCA, risk categoriesin EC member state rules may not be defined by species or strain of recipientorganism, so that the number of organisms qualifying as low risk under the ECapproach could be more or less than under U.S. regulation. The criteria usedto determine notification requirements under the Directive, however, aresimilar to those under the rule.

iii. Environmental Applications

Regulation would be more stringent for releasedgenetically modified organisms than for contained uses. An R&D release wouldrequire case-by-case approval by the national government, with an expected

review period of up to 90 days and provision for comments by other membercountries (CEC 1989b). A commercial application also would require priorapproval by the government of the country where the product is to be marketed. Following this approval, other member nations would have up to 60 days toobject to a commercial-level environmental application (CEC 1989b). As underTSCA, requests for more information could lead to longer review periods.

It is difficult to project actual differences between U.S. and ECreviews at the R&D level, since there is flexibility in review periods andinformation requirements under both systems, and since similar scientificconcerns are likely to drive these reviews. The U.S. review could be somewhatless burdensome, however, because submissions would be reviewed by only onenational government, because oversight of contained R&D would be reduced, andbecause review periods would be shorter. In addition, the U.S. Department of

Table VII-1. EC Proposed Reporting

Proposed Reporting for Contained Applications

First use of particular - prior notification

installation for Group I - use after 90 days if not

GMMOs prohibited

First use of particular - prior notification

installation for Group II - explicit consent required

GMMOs - CA decides within 90 days

Type A use of Group I GMMOs - no notification required

under 10 liters in previously - records must be kept

approved installation

Type A use of Group I GMMOs - prior notification

over 10 liters or Group II GMMOs - use after 60 days if not

under 10 liters in previ- prohibited

ously approved installation

Type B use of Group II GMMOs - prior notification

over 10 liters in previously - explicit consent required

approved installation - CA decides within 90 days

Proposed Reporting for Deliberate Release

Releases for - prior notification R&D Purposes - explicit consent required of

CA in relevant member state

- CA decides within 90 days

Marketing of GMMOs - prior notification

- notified CA decides within

90 days, than sends dossier

to other CAs for 60 day


- explicit consent required of

CA to whom notified; any CA

may raise objections; if the

CAs cannot reach agreement, the Commission decides

Note: GMMO = Genetically Modified Microorganism.

CA = Competent [regulatory or review] Authority of Member State.

Type A = Small scale research.

Type B = Other activities.

Group I = Lower Risk

Group II = Higher Risk

Source: Ashford 1990.

State suggests that delays may occur in the event of a conflict between amember state and a competent authority (CA). Member states have the abilityto put a hold on product use in another state, and even relatively shortdelays of weeks or months may cause the growing season to be missed, causingdelays in product testing or commercialization by more than a year. Inaddition, the Commission's review, which is responsible for resolving thesedisputes, is not subject to a time constraint, implying that their reviewcould continue indefinitely. Nevertheless, to date, at least 143 field testsof genetically modified plants have taken place in 9 EC countries (EC 1993,Hodgson 1992).

b. Japan

Japan is considered a strong competitor in worldbiotechnology markets (Dibner 1987). Detergent enzyme production in Japanusing a recombinant microorganism was described earlier. Other areas ofJapanese activity involving TSCA jurisdiction applications include researchinto recombinant microorganisms for toxic waste treatment and mining(Biotechnology 1989).

Japan controls rDNA activities through government guidelines. Theseguidelines do not have the force of law. However, they are accepted asbinding by Japanese industry, and there is an informal system of financial andsocial constraints to which industry and laboratories are sensitive (Ashford1990).

Five Japanese governmental bodies have promulgated biotechnologyguidelines for contained uses relevant to TSCA-type applications: the Ministryof Education; the Science and Technology Agency; the Ministry of InternationalTrade and Industry (MITI), which promotes biotechnology in the chemical

industry; the Ministry of Health and Welfare; and the Ministry of Agriculture,Forestry and Fisheries (MAFF) (Ashford 1990, OECD 1989).

i. Microorganisms Subject to Regulation

The guidelines cover only organisms modified byrecombinant DNA as defined by the NIH guidelines. They do not covermanipulations such as cell fusion, microinjection, protoplast fusion, genedeletion, transformation, transduction, random mutagenesis, nor do they covernaturally-occurring microorganisms (OECD 1989).

ii. Laboratory Research

Guidelines for recombinant DNA research generallyfollow OECD guidelines, but have added requirements for minimization ofreleases in exhaust gases, and inactivation of liquid wastes by validatedmeans (OECD 1990). As with U.S. NIH guidelines, there is no generalnotification requirement. However, certain types of experiments -- includingthose involving deliberate release -- are to be conducted "under the directionof the government."

iii. Large Scale Contained Applications

The two agencies concerned with TSCA-type industrialapplications, MITI and MAFF, have issued guidelines for commercial-scalecontained use of recombinant DNA microorganisms. The guidelines follow OECDrecommendations (MITI 1986, MAFF 1986, OECD 1986).(Footnote 3) Compliance is voluntary,but a company can request government review of its production facilities andprocedures (Ashford 1990, MAFF 1986). MITI has approved at least 88

applications for "large scale"(Footnote 4) work -- 87 at GILSP (Good Industrial LargeScale Practice -- the minimum OECD containment level), and one at the higherCategory 1 level. The following microorganisms were involved (OECD 1989):

E. coli strain K 12 83

Bacillus amyloliquefaciens 3

Providencia stuartii 1 (containment Category 1)

Bacillus stearothermophilus 1

Aspergillus oryzae 1

Approval for production of detergent enzymes using the Novo-Nordiskmicroorganism required three or four months (Novo 1989, Chemical Week 1988),suggesting that the approval process may be comparable in length to the U.S.PMN review period.

iv. Released Applications

As of May 1989, no recombinant DNA microorganisms hadbeen introduced into the environment in connection with either research orcommercial-scale use in Japan (OECD 1989). Three sets of current or expectedguidelines are relevant to environmental applications in TSCA-type applicationareas.

First, the laboratory research guidelines mentioned above call forexperiments to be conducted "under the direction of the government" (Ashford1990).

Second, the 1986 MAFF guidelines for agricultural industries addressdeliberate release as well as contained use. Before release to the openenvironment, the organism would have to be evaluated in a "simulated modelenvironment" that apparently could include outdoor sites with appropriateconfinement measures (MAFF 1986). The evaluation would be conducted by thecompany itself. The version of the guidelines available for this analysis did

not state whether such a release would also involve government review. TheMAFF guidelines for field testing of genetically engineered plants werefinalized in 1989 (Martin 1989).

c. Canada

Canada is active in biotechnology(Footnote 5) and the government ispromoting TSCA-type applications such as nitrogen fixation, celluloseutilization and waste treatment, mineral leaching, and metals recovery (OECD1989). There have not yet been any environmental introductions of livingrecombinant microorganisms, but plasmid-cured and transconjugant Bacillusthuringiensis strains have been field tested (Ashford 1990). Information wasnot obtained concerning uses of genetically engineered microorganisms incontained structures.

In 1988, Canada passed the TSCA-like Canadian Environmental ProtectionAct (CEPA) (Environment Canada 1988a, 1988b). As with TSCA, the new Actregulates chemicals not covered by food, drug, or pesticides legislation. TheAct is applicable to microorganisms, and draft regulations included allmicroorganisms. Provisions for exemption from review (waivers) are also inthe draft regulations.

3. Impacts of TSCA Regulations on International Competitiveness

A considerable amount of further research would be required todetermine fully the impacts of the rule on the international competitivenessof U.S. biotechnology firms. However, several preliminary observations can bemade.

First, any moderate effects of the rule on industry cost -- positive ornegative -- could be overwhelmed by other technical, economic and legal

forces affecting international competitiveness. For example, the followingfactors are thought to be important to biotechnology competitiveness (Simpson1990, Fairtlough 1990):

the level of basic molecular biology and related sciencesand engineering disciplines; this is affected by the qualityof universities and their interactions with businesses amongother things;

national policies that affect the promotion and funding ofbiotechnology research;

the availability of venture capital or other financing forhigh-technology start-ups;

the nature of patent protection.

Second, while it was not possible to project impacts of the rule on U.S.research and innovation (see Chapter VI), in theory, any negative impacts oninnovation at home could also affect the U.S. international position. Thiscould occur even if the U.S. regulations were less stringent than foreignregulations -- perhaps appearing as a reduction in a U.S. advantage ratherthan as a disadvantage. However, any such negative impacts might be partlymitigated by gains in other biotechnology fields (e.g., medical, animalhealth, or plant biotechnology) if company or university resources werediverted away from TSCA applications and into other areas of biotechnologyresearch. Conversely, any encouragement of innovation due to the rule wouldtend to help the U.S. competitive position.

Third, it is difficult to draw precise conclusions concerning therelative stringency of various national regulations, because the regulatoryframeworks in leading biotechnology countries are in a state of transition,because few microorganisms have been reviewed, and because the current andproposed regulatory language of the foreign oversight programs does not fullycapture the actual stringency of requirements when put into practice. Actualrequirements may depend, to some extent, on local social, economic, and

political factors as well as the actual regulatory language and scientificconsiderations. Overall, the similarities among stated national regulatoryapproaches examined for this RIA were more striking than the differences, andtruly significant differences may not become apparent until there have beenseveral years of experience with the various regulatory schemes.

To a great extent, the scientific knowledge base concerning microbialecology is international, and public concerns about risks of geneticallymodified organisms are shared worldwide. These shared concerns have prompteda global rethinking of biotechnology regulation, with considerable exchange ofinformation and viewpoints among countries. For example, the U.S. and EC haveheld talks as part of their Bilateral Consultation on Environment which haveaddressed technical issues in biotechnology regulation. A principle aim of these discussions is the development of mutually acceptable data andinformation in the area of biotechnology risk assessment. In addition,efforts have been ongoing in OECD since the mid-1980s to develop harmonizedapproaches on safety in biotechnology.

These efforts internationally have resulted in increased harmonizationof the approach that various countries take toward the risk presented bybiotechnology products. Future work could involve the development ofguidelines for test data and protocols and further exchange of information. This activity could lead to a convergence of regulatory positions among thecountries most active in TSCA biotechnology markets.

1. * These five countries, along with U.S., are the leading contributors tobiotechnology worldwide (Bioscan 1989).

2. * At the time of the report, the EC consisted of the following countries: United Kingdom, France, Germany, Denmark, the Netherlands, Belgium, Greece,Ireland, Italy, Luxembourg, Portugal, and Spain.

3. * The MAFF guidelines became effective in early 1989, and a third set ofguidelines from the Ministry of Health and Welfare covers food and drugproduction.

4. * The cutoff for large scale was not given, and it was not determined forthis analysis whether the 88 applications include R&D uses. In the Science andTechnology Agency guidelines, "large scale" means over 20 liters (Ashford 1990).

5. * The 1989 BioScan directory listed Canada as having 46 biotechnologycompanies (compared with roughly 60 each for Japan and the UK) (BioScan 1989).

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