Biotech firm fights federal bureaucracy by turning government into a partner and ally
John Henry's challenge was to assemble a team that could turn an intimidating government bureaucracy into a partner and ally
Nothing elicits more fear and loathing from a business owner than dealing with the federal bureaucracy. Biotech executive John Henry felt that hostile relationships with government officials -- a nuisance for some companies -- could kill his. Henry devised an unusual strategy: he'd regard certain agencies as partners, not adversaries, and treat government relations as just another business discipline, like marketing or research. His approach reveals a lot about the federal regulatory system. -- J.F.
John Henry is usually an optimist, but on the afternoon of March 4, 1986, his mood was as bleak as the late-winter Washington weather. He had just left a boisterous hearing on Capitol Hill, and the realization was sinking in that his company, then only five years old, might die long before it could ever bring a product to market.
Henry had known from the start that biotechnology was a tough business. The science was exotic. Technological dead ends would appear frequently. The burn rate of his venture capital would be high. At best, profits were a decade away. Still, by 1986 Crop Genetics International was looking at a promising future. Henry's "gene jockeys" were developing a plant vaccine that could, if it worked as planned, eventually replace many chemical pesticides.
Henry was pursuing the same kind of radical change in farming as had his distant ancestor Cyrus McCormick, who invented the reaping machine in 1831 and commercialized it by founding International Harvester Corp. McCormick had carried the industrial revolution to the farm; now, Henry was helping to usher in the next great wave of change through biotechnology.
The newer technology, though, was charged with the kind of danger and controversy that had never touched McCormick's invention. The reaper was a mechanical device that greatly increased the productivity of human labor; Henry's product is a biological agent that carries the seeds of both growth and destruction. And it is that very real threat of destruction -- what unintended perils might arise from the release of new biological agents into the environment? -- that has raised public concern to such a pitch that it could bring down Henry's company.
It didn't help that the biotech industry was shooting itself in the foot. The hearing that day had been called by the oversight subcommittee of the House Science, Space and Technology Committee to investigate a company named Advanced Genetic Sciences Inc. (AGS). In November 1985 AGS had been granted the first permit from the Environmental Protection Agency for a test "release" of a genetically engineered organism contained in a product called Frostban, which gave strawberries greater resistance to frost damage.
But The Washington Post had reported that, long before acquiring its EPA approval, AGS had injected the test bacterium into more than 45 fruit trees on the rooftop of its Oakland, Calif., headquarters. When the news broke, the EPA suspended AGS's license and levied a $20,000 fine. (The Frostban tests were later conducted by scientists in protective suits and masks.) The incident crystallized public suspicion that biotech companies were dangerously out of control, ethically dubious, and poorly regulated. Could they, as some critics warned, unleash some deadly new organism, an Andromeda strain?
John Henry was hardly an innocent in the Byzantine drama of Washington politics. He had spent three years on the staff of the Senate Foreign Relations Committee after graduating from Harvard College in 1971. But he wasn't prepared for the spectacle that unfolded before him in the hearing room that March day. The place was jammed with environmental activists, EPA officials, and journalists, and the atmosphere was chaotic.
Medical biotech is regulated by the Food and Drug Administration. But the EPA was trying to cope with the agricultural side of the industry with regulations aimed at chemicals; it had not devised any long-term policy for the release of new life forms into the environment.
By the time the hearing ended, some members of Congress were talking about creating a brand-new regulatory system for agricultural biotech. Crop Genetics might not survive several years in regulatory limbo. With a dwindling supply of venture capital and a business plan that allowed no time to spare, Henry reckoned he could be bankrupt before his technology ever got out of the gate. "My overwhelming feeling as I left that hearing was fear," he recalls. "Everything we had worked for since 1981 could go down the tubes."
It was then that Henry decided on an unusual strategy. By and large, U.S. industry and the regulatory system regard each other with mutual hostility. But Henry decided to consider the EPA not an adversary but a partner; environmental activists were to be regarded as "a fourth branch of government." Government relations would become just another business discipline, like marketing or research. And the dominant discipline at that: for the foreseeable future, government relations would be the business of Crop Genetics.
Three weeks after the hearing, Henry walked into the Washington office of a Seattle-based law firm called Perkins Coie to see William D. Ruckelshaus.
Ruckelshaus is a veteran on the Washington scene. He has been EPA administrator twice, first in 1970, when the agency was new, and again in 1983, when it was struggling to regain credibility in the wake of the Rita Lavelle perjury trials. In between, he was deputy U.S. attorney general. In March 1986 he was back in private life. Henry figured if anyone understood the regulatory zeitgeist, had stature and credibility, and knew how to deal with the government, that person was Bill Ruckelshaus.
