A report released Monday suggests job growth in biotech and medical technology, a top focus of the Patrick Administration, has been modest at best over the past five years and has come at the expense of other research and development industries.
The study, prepared by the Pioneer Institute, a nonpartisan but fiscally conservative research group, challenges findings by other researchers and claims by the Patrick administration’s that its 10-year, $1 billion life sciences initiative has fueled a key sector of the state’s economy. Instead, the Pioneer report says, the state created just 571 direct jobs in life sciences industries from its launch in 2009 through the third quarter of last year, the most recent period for which data is available.
“What we’re saying is this approach of targeted incentives to companies, of a state agency picking winners and losers, has not worked. It has not created many jobs,” said Gregory W. Sullivan, research director at the Pioneer Institute and the former Massachusetts inspector general.
He said other states have used similar incentives more effectively, especially California, where the public subsidies have been more aggressive and broader based.
The report’s conclusion appears at odds with the findings of several other state and industry studies, including one released just last week by economists at Northeastern University who used a more expansive definition of the life sciences sector. They reported that between 2006 and 2012, Massachusetts gained 11,377 direct jobs in the life sciences research, pharmaceuticals, and medical equipment sectors, and another 6,617 indirect jobs related to those fields.
The Northeastern report, and others published in recent years by organizations ranging from the Boston Foundation to the Massachusetts Biotechnology Council, have described the Patrick Administrative’s initiative as a success. But they have measured job creation over longer periods and included more sectors of the life sciences industry than the Pioneer Institute did.
By contrast, the Pioneer Institute had a narrower focus: job growth in the core biopharma and medical technology industries targeted by the Patrick Administration, not related sectors or temporary construction jobs. Sullivan said Pioneer used the same industry definition employed by the Massachusetts Life Sciences Center in a 2006 report advocating for the initiative.
Patrick often cites the life sciences initiative as one of his proudest achievements. Just last week, in remarks at a ceremony to mark the opening of a Cambridge research center for Pfizer Inc., he told hundreds of scientists and entrepreneurs, “You are all part of what has become the most important life sciences cluster on the planet.”
Enacted by the state Legislature in 2008, the life sciences initiative provides tax credits, grants for facilities and equipment, and business loans to companies locating or expanding in Massachusetts. Industry watchers have debated whether the state incentives helped sway biotech and medical device businesses to set up shop here or whether they would have done so anyway.
Soon after the measure passed, the biotech industry suffered some job losses because of the national recession and cuts to the National Institutes of Health budget.
Glen Giovannetti, the global life sciences sector leader at consulting firm Ernst & Young, said leading biosciences clusters in the Boston area and northern California grew organically out of research universities and hospitals, but have been aided by government incentives.
“Incentives themselves will not recreate what’s happened in Cambridge,” said Giovannetti. But, “they’re a very important catalyst, especially to early-stage companies… Once you have a critical mass in an area like Boston/Cambridge has, it becomes a magnet effect.”
Pioneer Institute’s report called for Massachusetts to offer more generous tax incentives, and to a broader set of research and development businesses, from aerospace to information technology as well as life sciences. It proposed two possible models, both of which would reward businesses only after they have made investments in research.
The state legislature has so far appropriated $525 million of the $1 billion committed under the life sciences initiative. Sullivan said the remaining amount of tax breaks, grants, and loans should be open to all businesses involved in research, not just biotechs and medical device makers.
“Non-life sciences research makes up more than 70 percent of the research and development in Massachusetts,” said Sullivan. “And they were left behind by the initiative.”
Patrick Administration officials said they could not address the findings of the Pioneer Institute report because they had not seen it. But they said the life sciences initiative is an engine of economic growth that has created thousands of jobs across Massachusetts. They cited last week’s Northeastern study showing significant growth in related life sciences sectors.
“The life sciences have become our state’s fastest-growing industry sectors…” said Susan Windham-Bannister, president of the Massachusetts Life Sciences Center. “We must continue to invest if we want to maintain and strengthen our position as the global leader in life sciences.”
Barry Bluestone, director of Northeastern’s Dukakis Center for Urban and Regional Policy and a coauthor of last week’s report, defended the Northeastern study. He said he used business categories that were consistent with those typically used in national studies of the industry.
Bluestone said he was initially skeptical of the Life Sciences Initiative but ultimately concluded it was smartly conceived and executed. He said incentives provided to smaller biotechs helped lure pharmaceutical and medical technology giants to Massachusetts.
“Instead of just throwing money at companies, they created an ecosystem,” Bluestone said. “It has not just been throwing money at darts. It was very carefully calculated to build the ecosystem of all these smaller firms… and that’s what attracted the big guys here. The small fish attracted the big fish.”
Peter Abair, director of economic development for the Massachusetts Biotechnology Council, acknowledged that some previous reports on the initiative were “too laudatory.” But he said the expansion of companies such as Shire plc, the Irish maker of drugs to treat rare diseases, in Lexington, can be traced directly to state tax incentives.
“I don’t know how you can take away from the life sciences initiative,” Abair said. “The results are very transparent, especially in regard to the tax incentive program. The job creation is pretty clearly there. Shire alone has created more than 500 jobs… This is an industry that has a big upside.”
While the Pioneer Institute is known as a right of center research organization, Sullivan described himself as a socially liberal but fiscally conservative former state official who, during his years as inspector general, worked with Patrick and admires him.
But he said the Pioneer Institute analysis does not support the administration’s claim that its life science initiative has been a big job creator. California’s broader-based research tax credit has been more effective in generating jobs, he said.
“What we’re pointing out is the job growth (in Massachusetts) has been relatively anemic compared to other states,” Sullivan said.