Economic Implications of Plant-made Pharmaceutical Production in North Carolina

Economic Implications of Plant-made
Pharmaceutical Production in North Carolina
Christopher F. Dumas
Associate Professor, University of North Carolina Wilmington
Troy G. Schmitz
Associate Professor, Arizona State University
Christopher R. Giese
Graduate Research Assistant, Arizona State University
Michael Sligh
Rural Advancement Foundation International – USA

The Rural Advancement Foundation International - USA cultivates markets,
policies and communities that support thriving, socially just and
environmentally sound family farms.
While focusing on North Carolina and the southeastern United States, we also
work nationally and internationally. RAFI is creating a movement among farm,
environmental and consumer groups to ensure that:
• family farmers have the power to earn a fair and dependable income;
• everyone who labors in agriculture is respected, protected, and valued by
society;
• air, water and soil are preserved for future generations;
• the land yields healthy and abundant food and fiber that is accessible to
all members of society;
• the full diversity of seeds and breeds, the building blocks of agriculture,
are reinvigorated and publicly protected.
2008 RAFI-USA. All rights reserved.
Rural Advancement Foundation International - USA
PO Box 640
Pittsboro, NC 27312
www.rafiusa.org
919-542-1396

i
Preface
For more than 10,000 years, farmers have worked with the environment to
create new plants, fiber, and food to sustain life all over the earth. As we lose
farmers, we lose diversity. As we lose diversity, we lose farmers. The social,
economic, and technological changes converging on our rural communities are
rapidly changing how food is produced and what comes to our tables.
RAFI-USA believes that farmers and consumers must be informed, involved
with each other, and active in protecting and directing the use of natural and
human agricultural resources.
RAFI-USA approaches all agricultural policy, practice and technology options
with the same basic questions:
o Who will benefit?
o Who will be harmed?
o Who will pay, if something goes wrong?
o Who will decide?
These are fundamental questions and deserve our attention. In the best cases,
these questions should be answered prior to adoption of new agricultural
initiatives, and should be addressed in a fully open and transparent process –
especially those initiatives which can have profound and/or long-term impacts.
RAFI-USA also uses the “triple-bottom-line” assessment when evaluating new
agricultural initiatives:
o Is it economically viable for the farmers? Will they receive a fair
price and reasonable return on their investment?
o Is it environmentally sound? What are the risks to the
environment, local communities, biodiversity and the ecosystem?
o Is it socially just? Do farmers, workers and others participating in
this initiative have full rights and ownership of the technology?
Are the contracts fair? Are the farmers in control of the
management decisions of this initiative?
These two sets of tools, benefit assessment and the “triple-bottom line” analysis,
guide our evaluations of any potential new agricultural initiatives.
It is in this spirit that we have commissioned this report. We hope our
recommendations can help shape a full and meaningful dialogue regarding the
future of pharmaceutical crops in North Carolina agriculture, and the real
opportunities to achieve the “triple-bottom” line.
Michael Sligh
January 2008

ii
Executive Summary
Over the last twenty years, agriculture has seen the introduction and
rapid deployment of genetically modified (GM), or “transgenic,” crops for food
(i.e., corn and soybeans) and fiber (i.e., cotton). Plant-made
pharmaceuticals (PMPs) are a class of GM crop not intended for use as food
or feed. Rather, PMPs are intended for use as therapeutic drugs for humans
or livestock, or as materials for research and industry (e.g., cell culture
media). PMP plants are used as factories to produce the PMP product, the
product is extracted from the plant, and the plant remains are discarded.
Scientists and industry groups typically cite two reasons for pursuing PMP
production methods. First, lower cost: production of high-quality
pharmaceutical components (proteins and antibodies) is presently done
using cell cultures inside bioreactors, which is very costly (US$105-175 per
gram) and limits the size of the consumer market. Second, growing
demand: by the end of the decade, there could be more than 80 antibody-
dependent products with an estimated value of US$20-90 billion, provided
adequate production capacity can be developed. Proponents of PMP crops
claim that PMP production will increase the range of available drug
products, reduce the time required to bring new drugs to market, lower the
cost of drug production, and provide additional markets for farmers.
Opponents of GM and PMP crops cite potential food safety risks from cross-
contamination of food crops, consumer skepticism of genetically engineered
products, potential environmental hazards, and past regulatory mistakes as
reasons for their opposition.
The regulatory history of PMPs grown outdoors as field crops is not
encouraging. Although PMPs have been grown by several companies in
experimental field trials regulated by the U.S. Department of Agriculture
(USDA) since the early 1990s, none has been grown in commercial
quantities (although one just received a permit to grow at commercial scale
in 2007), and no PMP drug products have as yet been approved by the U.S.
Food and Drug Administration (FDA). (Some PMPs are being sold in small
quantities for use as research materials.) Escape of PMP plants from USDA-
regulated field trials has been followed by regulatory reform at USDA, but
PMP plants have continued to escape from field trials following the reform
effort. If PMP plants escape from their designated areas and become mixed
with plants that are intended for use as food, and the mixture enters the
food supply, large disruptions of the food industry can occur.
This report will review information on the potential economic benefits,
environmental impacts, and externalized costs of GM crops in general, and
PMP crops in particular, for North Carolina. Special attention will be
devoted to PMP rice developed by Ventria Bioscience. Ventria’s PMP rice is
currently undergoing field trials in North Carolina. At present, Ventria’s
PMP rice is the only field-grown PMP crop in the state. As of 2007, Ventria’s

iii
three PMP rice products, the pharmaceuticals lactoferrin, lysozyme, and
serum albumin have not been approved by the FDA for drug, food, or animal
feed uses. The products have been marketed as research and bioprocessing
materials, but it is not clear that Ventria has received substantial revenues
from these uses. Ventria plans to market the products as anti-diarrheal
additives for infant oral rehydration solutions and as nutritional
supplements in yogurt, granola bars, performance drinks and other
products. Ventria has also mentioned adding lysozyme to animal feed as a
substitute for antibiotics. Ventria claims a potential market for these
products of more than $2 billion annually. The company’s estimates of
potential profitability and economic impacts should be considered with
caution. Even if eventually approved by FDA, Ventria’s products may not be
profitable as anti-diarrheal additives for infant formulas marketed in
developing countries without subsidies, and the profitability of these
products in sports drinks, granola bars, etc., is speculative.
Although Ventria is conducting field trials in North Carolina, it currently
plans to grow and process PMP rice at commercial scale in Kansas. Ventria
projects 30,000 acres of PMP rice production per year in Kansas upon full
scale commercialization. Assuming this speculative acreage forecast is
correct, with an average farm size of approximately 700 acres in Kansas,
perhaps 43 farmers would benefit from PMP rice production. At Ventria’s
estimate of $150 to $600 in additional returns per acre relative to corn, PMP
rice may bring Kansas farmers an additional $4.5 to $18 million per year.
Perhaps 50 more people would be employed in Ventria’s proposed PMP rice
processing facility in Kansas. Using typical economic multiplier numbers,
perhaps 150 additional jobs would be supported in Kansas due to economic
multiplier effects. Including economic multiplier effects, Ventria estimates
that $45 million annually in economic impact would be generated by PMP
rice production activities in Kansas. For comparison, in 2006, Kansas
agriculture produced over $11 billion in crop, animal, and related
agricultural output, with a total economic impact of $28 billion. Ventria’s
estimated economic impact of $45 million per year is small relative to the
scale of Kansas agriculture.
For those farmers considering PMP crop production, several factors
should be considered in addition to potentially higher revenues per acre.
Ventria is implementing the field trials using independent grower contracts.
At this early stage, Ventria covers all costs for the North Carolina farmers
growing PMPs on subcontract. In the future, independent growers will be
expected to provide a seed-to-harvest package deal for the firm’s PMP
production. This will involve significant investment in PMP-specific training
and dedicated farm equipment. The USDA requires each PMP grower to
have dedicated land area, dedicated equipment for planting and harvesting,
and separate areas for cleaning PMP equipment and processing PMP crops.
Employee training is also required as part of compliance with new FDA and
USDA regulatory statues for molecular farming. This raises the possibility
that molecular farming contracting for field-grown PMP crops will require

iv
such costly investments in infrastructure and compliance that only the
largest, wealthiest growers would be able to participate and profit.
Furthermore, use of PMP crops by some farmers may impose “spillover”
costs on other farmers who do not grow PMP crops. Farmers who do not
grow PMP crops may have to spend money to certify that their crops are
“PMP-free” if grown in the same region as PMP crops. This is an especially
important issue for organic farmers.
In addition to the potential costs of PMP production to the farm sector,
there may also be environmental costs if field-grown PMP products have a
detrimental effect on fish, wildlife, insects (e.g., bees), or wild plants. While
much work has been done on the environmental impacts of GM plants used
for food, relatively little work has been done on the potential environmental
impacts of PMP plants. At this point, the most that can be said is that the
potential environmental impacts of PMP field crop production are unknown.
For PMP products grown using familiar field crops, the environmental
impacts may be small, assuming that the PMP product itself within the
plant is not harmful, but again, information is very incomplete and no firm
conclusions can be drawn. Ongoing work in bioconfinement methods may
reduce the environmental risk of PMP plants.
Detrimental human health effects are another potential cost of PMP
production. While detrimental human health effects of products intended
for pharmaceutical use are certainly possible, these products would need
approval by FDA for use as drugs or food, and any non-accidental effects
would likely be small, assuming conscientious review by FDA. In contrast,
the issue of accidental, detrimental human health effects looms large in the
PMP debate. If PMP products not intended for use as food somehow enter
the food supply and become ingested by humans, the effects could be
significant, as these products may not have undergone food safety testing by
FDA. Again, the brief history of PMP crop field trials indicates that it is very
difficult to prevent co-mingling of PMP and non-PMP crops, implying that
the potential for accidental contamination of the food supply is an important
issue.
Neither food plants nor farmers’ fields are necessary for the production of
PMPs. PMPs can be grown using non-food plants in contained systems
instead of agricultural fields. Some alternative PMP containment systems
utilizing non-food plants include duckweed (Lemna spp.), tobacco (Nicotiana
spp.), algae (Chlamydomonas reinhardtii) and moss (Physcomitrella patens),
and fungi (Aspergillus niger). Yet another option is to produce PMPs using
food crops grown inside greenhouses, such as potatoes grown
hydroponically. Advantages of growing PMPs in containment systems
include better uniformity of product, lack of residues from herbicides,
pesticides and fungicides, and greatly reduced risk of contaminating the
food supply. Two disadvantages of producing proteins in containment
systems are that it is thought to cost more, and it is thought to take longer
to bring the product to market. However, recent advances in closed-system

v
technology have eliminated some of the cost difference between field grown
PMPs and contained systems. In North Carolina, the availability of highly-
skilled biotech labor and innovations in the use of contained production
systems that attain high product purity are catalyzing market expansion of
contained PMP production. Contained PMP production currently co-exists
with profitable organic and local food suppliers in the state.
At the present time, PMP production via food crops in the field should not
be considered a cornerstone of future agricultural policy or rural economic
development policy in North Carolina or elsewhere in the United States.
Given past difficulties in securing FDA approval for PMP products, the
benefits of PMP production are too speculative. Furthermore, given past
difficulties in preventing the escape of PMP products in the field, the risks
and potential costs of future containment loss events are too great.

Contents
1 Introduction................................................................................. 1
2 GM and PMP Regulation............................................................... 2
2.1 Regulatory Framework and Experience .................................. 2
2.2 Ventria Bioscience -- Regulatory History .............................. 14
3 Potential Benefits of PMPs .......................................................... 20
3.1 Overview .............................................................................. 20
3.2 The Case of Ventria Bioscience............................................. 22
4 Potential Costs of PMPs.............................................................. 29
4.1 Farm Costs and Potential Grower Profitability ...................... 29
4.2 Government Subsidies to Biotech and PMP .......................... 38
4.3 PMP Health Risks in Intended Uses...................................... 42
4.4 Containment Loss and Potential PMP Liability Costs ............ 44
4.4.1 Consumer Reaction to GM and PMP Products in
Food ...........................................................................................................45
4.4.2 Food Market Reaction to GM/PMP Containment Loss
48
4.4.3 NRC Recommendations to Reduce GM/PMP Liability
Costs ...........................................................................................................54
4.5 Externality “Spillover” Costs Affecting Non-GM and
Organic Farmers............................................................................... 56
4.6 Externality “Spillover” Costs of Environmental Hazards........ 58
5 Alternatives to Food Crop PMPs.................................................. 66
6 Conclusions ............................................................................... 67
7 RAFI Recommendations ............................................................. 74
8 References.................................................................................. 77
9 Tables ........................................................................................ 89

1
1 Introduction
Over the last twenty years, agriculture has seen the introduction
and rapid deployment of genetically modified (GM), or “transgenic,”
crops. While crop changes produced by traditional breeding
technologies such as hybrid corn and Green Revolution rice and
wheat have had critics, opposition to the production of GM crops
has developed more quickly and publicly. A new type of GM crop,
plant-made pharmaceuticals (PMPs), has been undergoing field
trials and is on the verge of commercial-scale production. PMPs
are therapeutic drugs or medical products produced inside
genetically modified plants. The debate concerning GM and PMP
crops involves three primary issues: the benefits and costs of the
technology and its products, regulatory measures to preserve
human and environmental safety, and the appropriate legal
framework to encourage innovation, promote competition, and
preserve intellectual property (Nelson 2001). The potential benefits
of GM crops include higher crop yields, enhanced nutritional
characteristics, and reduced production costs through lower
pesticide or fertilizer requirements. Proponents of PMP crops also
claim that PMP production will increase the range of available drug
products, reduce the time required to bring new drugs to market,
lower the cost of drug production, and provide additional markets
for farmers (BIO 2002a, 2002b, 2006). Critics of GM and PMP
crops cite potential food safety risks from cross-contamination of
food crops, consumer skepticism of genetically engineered
products, potential environmental hazards, past regulatory
mistakes, and increasing corporate control of agriculture as
reasons for their opposition (e.g., Freese 2007, 2002).
The U.S. Department of Agriculture (USDA) began regulating GM
crops in 1986 (USDA 2005a). Since that time, USDA has approved
over 10,600 applications for field-testing GM crops at more than
49,300 sites. Although GM crops have been in use commercially
since China introduced virus-resistant tobacco and soybeans in
the early 1990s, the first commercial use of GM crops in Western
countries was the Flavr Savr tomato, a delayed-ripening tomato
introduced by Calgene in the US in 1994 (Nelson 2001). The global
volume of GM crop production expanded rapidly over the next ten
years. While most GM crops are grown in North America, large
quantities are also produced in Argentina, Mexico, and South
Africa. GM crops in widespread use include corn, soybeans,
cotton, potatoes and canola. From the beginning of
commercialization in 1994, the global area planted in GM crops
grew at an annual rate of 13%, reaching 102 million hectares (252

2
million acres) by 2006 (ISAAA 2006). Soybeans, corn (maize), and
cotton are the leading GM crops in terms of acreage. In 2006, an
estimated 10.3 million farmers worldwide grew GM crops in 22
countries (Table 1). The United States is the world leader in GM
crop area, with 54.6 million hectares under cultivation, while
Spain is the leading European producer with 60 thousand
hectares. The eleven developing countries planting GM crops
account for forty percent of GM crop acreage, a percentage that
has been increasing steadily.
Considerable controversy surrounds the use and adoption of GM
crops. Some consumer advocacy groups believe that genetically
engineered foods hold health and environmental dangers. Anti-
biotech activists have labeled GM products as “Franken Foods”
and have raised long-term health concerns regarding the
consumption of GM products. Several of these groups have been
successful in launching anti-GM campaigns that have influenced
the rate of GM adoption. Some examples include: (1) the decisions
of the United States and Canada to forego the adoption of GM
wheat varieties; (2) the decision of Aventis to terminate the
production of Starlink corn (see p. 38 below); and (3) the decisions
of California and Missouri to ban the production of certain
pharmaceutical rice varieties. In the United States, the rate of
adoption of GM crop varieties slowed considerably during the early
2000s. The United States Food and Drug Administration (FDA)
approved on average 9.4 GM-food varieties a year between 1995
and 1999. This approval rate fell to 3.0 GM-food varieties a year
between 2000 and 2004 (Weise, 2005). Similarly, the United States
Department of Agriculture (USDA) approved on average 8.2 GM-
crop varieties per year from 1994 to 1999, but only 2.6 GM-crop
varieties per year from 2000 to 2004.
The regulatory situation affecting GM crop production has
changed over time, with some observers complaining that
regulations have become too burdensome, stifling innovation and
application of new technologies, while others claim that regulators
are too lenient and allow too much risk. All agree that the
regulatory process is complex and varies greatly from country to
country, complicating trade. The approval procedures and labeling
regulations covering GM foods differ among countries. In general,
biotech regulations are less stringent in the United States (US)
than in the European Union (EU), which in part explains why GM
products are more widespread in the US. In fact, several
international biotech and pharmaceutical companies based in the
EU conduct field trials in the United States, because their products
have not been approved for production in the EU (Moss et al.

3
2006). Finally, the legal framework that protects intellectual
property embodied in GM crops affects the ownership and control
of new GM projects and the distribution of associated profits.
It is within this industry and policy setting that we consider the
economic and environmental implications of a specific type of GM
crop, plant-made pharmaceuticals, or PMPs, for North Carolina
farmers (Table 2). PMPs are pharmaceutical products produced
and extracted from genetically modified plants; the plant is used as
a factory to produce the PMP product, the product is extracted,
and the plant remains are discarded. PMP plants can be grown
inside laboratories or greenhouses, or they can be grown outside in
fields like agricultural crops. The goal of both traditional plant
breeding and new GM technologies like PMPs is to identify
desirable genetic traits and combine them in a crop variety that
can be grown profitably. Desirable traits are divided into two
classes—agronomic characteristics that reduce the costs of
cultivation, and product characteristics that increase value to
consumers and the price consumers are willing to pay. PMPs are a
type of GM crop that offers a new product characteristic—the
ability to produce pharmaceutical products. PMPs are referred to
as “Generation 3” GM plants. Generation 1 GM plants featured
genetic modifications that reduced the costs of crop production by
reducing the need for pesticides, making the plant more drought-
tolerant, etc. RoundUp Ready™ soybeans are an example of a
Generation 1 GM plant. Generation 2 GM plants improved the
nutritional qualities of food plants. For example, “Golden Rice” has
enhanced levels of vitamin A. Generation 3 GM plants, PMP
plants, differ from Generation 1 and 2 crops in that PMPs are not
intended for use as food or animal feed. Instead, the
pharmaceutical product is extracted from the PMP plant, and the
plant is discarded. However, either food plants (e.g., corn or rice)
or non-food plants (e.g., tobacco or algae) can be used to produce
PMP products. When food plants are used, the plants are
discarded after the PMP product is extracted. However, when food
plants are used, there is a risk that PMP plants may become mixed
with non-PMP plants grown for food or feed during the planting,
pollination, harvesting, transportation, storage, or processing
phases of production.
PMP field trials began in the US (using corn/maize) in 1992,
peaked in 1998, and declined beginning in 2001 (Smyth et al.
2004). While corn accounts for 47 percent of all PMP field trial
permits, since 2001 there has been increasing interest in PMP
safflower, rice and especially tobacco (Freese and Caplan 2006).
Field trials in Canada (using canola) also peaked in 1996-1998 and

4
declined following 2000 but are climbing again based on safflower.
Other countries report a small number of PMP field trials between
1995 and 2002. To date, PMP crops have not been grown in the
field on a commercial scale in the United States, and no PMP
products have been approved by the U.S. Food and Drug
Administration (Freese 2007). However, firms currently engaged in
field trials will presumably wish to grow successful products at
commercial scale in the future.
PMP crops and products present new opportunities and risks for
North Carolina farmers. Because PMP agriculture is in its infancy,
relatively little information is available on PMP crops and products.
This report will review information on the potential economic
benefits, environmental impacts, and externalized costs of GM
crops in general, and PMP crops in particular, for North Carolina.
Special attention will be devoted to PMP rice developed by Ventria
Bioscience. Ventria’s PMP rice is currently undergoing field trials
in North Carolina. At present, Ventria’s PMP rice is the only field-
grown PMP crop in the state. Ventria has PMP rice field trials in
Missouri as well and grows PMP rice experimentally in
greenhouses in California (Sacramento Bee 2006). In May 2007,
Ventria received approval from the USDA to plant up to 3,200
acres of PMP rice in Kansas and has begun work on a PMP rice
processing facility in Junction City, Kansas (Ventria Bioscience
2006). It appears that any PMP rice grown in North Carolina will
be transported to Kansas for processing. Because Ventria’s PMP
rice is the first PMP crop to be grown in the field uncontained at
commercial scale in the North Carolina, decisions concerning its
production, processing, transportation, marketing and regulation
are potentially precedent-setting.

2
2 GM and PMP Regulation
2.1 Regulatory Framework and Experience
A fundamental lesson of economic theory and practical
experience is that the “invisible hand” of private markets cannot be
relied upon to correct externality “spillover” costs precisely because
the financial incentives that drive the invisible hand are distorted.
In such situations, society often turns to government action to
coordinate and regulate private market actions for the public good.
Given the potential externality “spillover” costs associated with GM
and PMP crops (see sections 3.5 and 3.6), society has chosen to
regulate them. Industries often request government regulation to
prevent “bad apple” firms from ruining industry reputations and
alienating consumers. For example, the Biotechnology Industry
Organization, the leading GM and PMP industry trade association,
supports “strong regulatory oversight for all products of crop
biotechnology” (BIO 2007).
The basic institutional structure for regulating all biotechnology
products in the United States is the “Coordinated Framework for
Regulation of Biotechnology” established in 1986 (see, e.g., Pew
Initiative 2004). In general, this framework involves three federal
agencies: the USDA’s Animal and Plant Health Inspection Service
(APHIS), which regulates the importation, interstate movement,
and field testing of GM plants; the FDA, which regulates food and
feed additives, human drugs, and medical devices; and the
Environmental Protection Agency, which regulates the use of all
pesticides, including those expressed in GM plants.
Because USDA/APHIS is authorized to regulate potential plant
pests under the Federal Plant Protection Act, and since all GM
plants have the potential to be plant pests, all GM plants are
considered “regulated articles” by USDA/APHIS. Use of such
articles outside a contained facility (e.g., in a field test) requires
authorization from USDA/APHIS through either a “notification”
procedure or a permit procedure. In 1993, the USDA promulgated
new regulations governing field tests of genetically engineered
plants, removing permit requirements for most GM plants but
retaining them for PMPs. GM plants that do not require a permit
are authorized through the notification process.

3
Under the notification process, GM plants (but not PMP plants
or PMIP, plant-made industrial proteins, plants) can be grown in
field trials with simple notification of the USDA. For GM plants
intended for use as food or feed, the GM plant developer also
initiates a “consultation” with the FDA, during which the plant
typically undergoes a voluntary food safety review. For GM plants
modified to have pesticidal properties, the EPA requires an
additional experimental use permit under the Federal Insecticide,
Fungicide and Rodenticide Act (FIFRA). Upon successful
completion of the field trials, GM plant developers can apply for
deregulated status from USDA/APHIS. If deregulated status is
granted, a GM crop can then be freely commercialized with no
further oversight by USDA/APHIS, and this is in fact the route that
has been used for all the major commercial GM crops currently on
the market. If the plant has pesticidal properties, it must still
register with EPA prior to marketing.
Since 1993, PMP field trials have been regulated under the
USDA’s permit procedure rather than the notification procedure.
In theory, the permit procedure was supposed to be stricter than
the notification procedure. However, A National Research Council
report (2002) on the environmental effects of transgenic (GM)
plants found that “the only practical trigger used by APHIS [was]
the presence of a previously identified plant pest or genes from a
plant pest in the transformed plant. Other operational triggers are
needed for transgenic plants that may have associated risks but
lack the above characteristics.” The NRC report also found that
APHIS assessments of potential environmental effects of transgenic
plants are largely based on environmental effects considered at
small spatial scales. Potential effects from “scale-up” associated
with commercialization are rarely considered. The report
recommended that post-commercialization validation testing be
used to assess the adequacy of pre-commercialization
environmental testing and that this testing should be conducted at
spatial scales appropriate for evaluating environmental changes in
both agricultural and adjacent, unmanaged ecosystems. The NRC
report also found that the APHIS process should be made
significantly more transparent and rigorous by enhanced scientific
peer review, solicitation of public input, and development of
determination documents with more explicit presentation of data,
methods, analyses, and interpretations. In the committee’s review
of public participation in the review process it was apparent that
the number of comments on Federal Register notices had declined
almost to zero. Committee discussions with representatives of
public interest groups indicated that this decline in responses to

4
APHIS Federal Register notices was at least in part due to a
perception that APHIS was only superficially responsive to
comments. The committee found that there was a need for APHIS
to actively involve more groups of interested and affected parties in
the risk analysis process while maintaining a scientific basis for
decisions. Furthermore, the NRC committee found that the extent
of “confidential business information” in registrant documents sent
to APHIS hampered external review and transparency of the
decision-making process.
In addition to the 2002 NRC report, several incidents in 2002
involving PMP crop contamination of food products caused USDA
to reevaluate its PMP permitting process. In September 2002,
ProdiGene, Inc. was ordered by USDA to burn 155 acres of food
crop corn in Iowa to ensure that it was not pollinated by a nearby
field of ProdiGene’s PMP corn (New York Times 2002). In
November 2002, ProdiGene was fined US$250,000 in a second
incident for allowing experimental PMP corn grown in Aurora,
Nebraska, in the preceding year to contaminate a soybean crop
grown in the same field in 2002. The contamination was
discovered by USDA APHIS inspectors, but only after the soybeans
had been harvested and stored with other soybeans in a
commercial grain silo, contaminating 500,000 bushels of
soybeans. ProdiGene bought the contaminated soybeans and had
them destroyed at a cost of US$3.5 million. ProdiGene was also
forced to post a $1 million bond to cover potential damages from
any future contamination episode. The US government made an
interest-free loan to ProdiGene, because the small biotech
company had insufficient funds to pay (Washington Post 2003).
This can create an incentive problem for the bio-pharma industry
as a whole, as the small firms typical of the industry would not
have the funds to pay such fines. The problem is that if firms
know that the government will provide loans or loan guarantees to
pay fines resulting from regulatory violations, then firms do not
have the financial incentive to maintain containment of
pharmaceutical crops (Smyth et al. 2004).
In mid-December 2002, Dow AgroSciences was fined for failing
to meet permit conditions to prevent gene transfer from an
experimental transgenic maize variety undergoing field trials at
Molokai, Hawaii (Smyth et al. 2004). That same month, Pioneer
Hi-Bred was fined for planting experimental transgenic maize in an
unapproved location that was too close to other experimental
maize plantings in Kauai, Hawaii. In April 2003, Dow was again
fined for violating an EPA permit, this time in Kauai. The fine
resulted from the detection of 12 transgenic maize plants that

5
contained an unapproved gene that is suspected of coming from
the pollen of another experimental plot located nearby. Although
Dow officials discovered the plants, Dow failed to notify EPA
promptly, and EPA officials expressed disappointment over the
delay.
In 2003, on the heels of the regulatory violations occurring
between 2001 and 2003, including the high-profile 2002 Prodigene
incidents, USDA permit regulation of PMP field trials was
strengthened (USDA 2006A). Crop-specific measures were
stipulated to ensure containment, including isolation distance of
test plots (for maize, for example, the distance is one mile, eight
times the distance required for the production of foundation
seeds), planting of buffer borders of non-GM crops was mandated,
and perimeter fallow zones were required. In addition, the use of
dedicated equipment was mandated, there were post-harvest
restrictions on land use, and APHIS was to perform a specified
number of inspections during the field test growing season.
Also in 2003, the USDA introduced a new category of regulated
products, “value added protein for human consumption.” As of
October 2006 (UCS 2006b), the only two compounds classified as
value added proteins are lactoferrin and lysozyme, two of the
products grown by Ventria Biosciences in North Carolina.
Significantly, the USDA allows value added proteins to be regulated
under the notification process rather than requiring permits.
However, Ventria voluntarily submitted requests for permits to
grow its PMP crops.
USDA oversight of PMP crop field trials under the notification /
voluntary permit process depends to a great extent on company
reports filed with the USDA at the end of the field trial, or annually
for multi-year permits. Such reports are required to include any
adverse impacts of the experimental crop. Batie and Ervin (2001)
point out that because firms receive no financial benefit from
discovering adverse impacts, they have little incentive to
investigate them. Freese et al. (2004) goes further and suggests
that a clear conflict of interest exists. Because self-reporting of
adverse impacts to the USDA could entail revocation or non-
renewal of the permit, and thus loss of profits, the company’s duty
to report such adverse effects is clearly in conflict with its financial
interest. Dalton (2002) reports that Pioneer Hi-Bred and Dow
AgroEvo denied access to proprietary materials required by
independent scientists to conduct biosafety analysis of Bt
sunflower after the firms initially cooperated with scientists and

6
the scientists’ preliminary findings indicated potential biosafety
risks.
In 2005, the USDA APHIS regulatory program was criticized by
its own Inspector General audit for failing to properly regulate and
track GM and PMP crop field tests, even after the USDA
strengthened regulations in 2003 (USDA 2005a). The audit found:
“To evaluate the Animal and Plant Health Inspection Service’s
(APHIS) controls over releases and movements of regulated
genetically engineered plants, we visited 91 field test sites in 22
States that were either planted or harvested. We inspected the
sites for compliance with APHIS’ requirements for the growing or
post-harvest season. We found that APHIS, the USDA agency that
oversees biotechnology regulatory functions for the Department,
needs to strengthen its accountability for field tests of genetically
engineered crops. In fact, at various stages of the field test
process—from approval of applications to inspection of fields—
weaknesses in APHIS regulations and internal management
controls increase the risk that regulated genetically engineered
organisms will inadvertently persist in the environment before they
are deemed safe to grow without regulation.”
In particular, the 2005 USDA audit of APHIS found:
(1) The precise locations of all genetically engineered field test
sites planted in the United States are not always known. After
authorizing field tests, APHIS does not follow up with all permit
and notification holders to find out exactly where the fields have
been planted or if they have been planted at all.
(2) Before approving field tests, APHIS does not review
notification applicants’ containment protocols, which describe
how the applicant plans to contain the genetically engineered
crop within the field test site and prevent it from persisting in
the environment.
(3) At the conclusion of the field test, APHIS does not require
permit holders to report on the final disposition of genetically
engineered pharmaceutical and industrial harvests, which are
modified for nonfood purposes and may pose a threat to the food
supply if unintentionally released. As a result, we found that two
large harvests of genetically engineered pharmaceutical crops
remained in storage at the field test sites for over a year without
APHIS’ knowledge or approval of the storage facility.
(4) APHIS does not specify when genetically engineered crops
must be destroyed, or “devitalized,” following the field test.
Approved applicants sometimes allow harvested crops to lie in

7
the field test site for months at a time, their seeds exposed to
animals and the elements. Also, because APHIS has not
specifically addressed the need to physically restrict edible
genetically engineered crops from public access, we found a
regulated edible genetically engineered crop, which had not gone
through the Food and Drug Administration’s regulatory process
for approval for human consumption, growing where they could
easily be taken and eaten by passersby.
(5) Field inspectors “did not inspect all pharmaceutical and
industrial field test sites five times during the 2003 growing
season, as APHIS has announced to the public. APHIS has also
stated publicly that pharmaceutical and industrial field test
sites would be inspected twice during the postharvest period, or
the year following the end of the field test, during which the field
must be monitored for regrowth of the genetically engineered
crop. In one case, a violation at a pharmaceutical field test site
in our sample went undetected because PPQ [APHIS Plant
Protection and Quarantine] did not perform the required
inspections at that site during the 2003 postharvest monitoring
period” (USDA 2005a).
Despite USDA’s assurances that it would address the issues
raised in the 2005 audit, new containment breach incidents in
2006 raised questions about the ability of even USDA’s new,
strengthened regulations to contain GM crops. Twice in 2006,
current regulations did not prevent GM rice from contaminating
non-GM commercial rice supplies, halting exports of US rice to
some countries and causing substantial economic losses for US
rice farmers (Washington Post 2006, Bennett 2007). In January
2006, GM Liberty Link (LL601) rice (not approved for human
consumption) was found in rice processed by Riceland Foods in
Stuttgart, Arkansas (Fortune 2007). Arkansas produces about 45
percent of U.S. rice, and Stuttgart is home to America’s two largest
rice mills. The rice was then found in commercial rice supplies in
Texas, Louisiana, Mississippi and Missouri, as well. The Liberty
Link rice may have come from a rice research station in Crowley,
LA, operated by Louisiana State University. Although Bayer
CropScience had dropped plans to produce LL601 in 2001 and did
not pursue USDA approval for commercial production, the rice had
been grown in several test locations, including Louisiana State
University’s rice research station near Crowley, LA, from 1999 to
2001 (Washington Post 2006). It was later determined that at least
one variety of rice (Cheniere) grown at the research station was

8
contaminated with LL601 since at least 2003, even though the
closest Cheniere plot was 160 feet from the LL601 plot (16 times
the then current USDA standard). It is unknown whether the
grains from the two plots were mixed before or after cultivation, or
whether the LL601 plants fertilized some of the Cheniere plants.
However, it was not until July 31, 2006, that Bayer CropScience
notified USDA and the U.S. Food and Drug Administration that the
company had detected trace amounts of regulated LL601 in
commercial long-grain rice (USDA 2007b). On August 18, 2006,
Bayer CropScience applied to USDA for deregulation of LL601, the
same day that USDA announced the LL601 contamination
(Washington Post 2006). The Center for Food Safety claimed that
this was merely an effort by Bayer CropScience to avoid legal
liability, as Bayer CropScience had no intention of bringing the
LL601 rice to market. In November 2006, APHIS announced that
2003 Cheniere variety was the only foundation seed that tested
positive for regulated genetically engineered LL601, and farmers
were advised not to plant it. APHIS also announced that a sample
of the 2003 Cheniere variety indicated the presence of trace levels
of unregulated LL62. LL62, LL06 and LL601 are rice varieties
engineered by Bayer CropScience to be tolerant to herbicides
marketed under the brand name LibertyLink. APHIS had
deregulated LL62 and LL06 in 1999. On November 24, 2006,
USDA-APHIS retroactively deregulated Liberty Link LL601 rice,
declaring it safe for human consumption. Later tests found
contamination by two additional strains of unapproved Liberty
Link rice in another type of foundation seed rice, Clearfield 131,
which farmers were also advised not to plant. Table 3 provides the
USA Rice Federation’s estimates of the impacts of the LL601 rice
incident on U.S. rice export markets. Many importing nations
increased testing, labeling and certification requirements, and
some stopped U.S. rice imports altogether. It is estimated that 63
percent of U.S. rice exports were affected.
In 2006, the USDA consolidated its regulations and policies into
a single document: “Draft Guidance for APHIS Permits for Field
Testing or Movement of Organisms with Pharmaceutical or
Industrial Intent” (USDA 2006b). Under the 2006 consolidated
regulations, PMP crops are defined as those genetically engineered
crops produced with pharmaceutical intent. Under the PMP
permit process, PMP developers must submit detailed explanations
of the genetic engineering process, the purpose and design of the
proposed production, and the methods to be used to ensure
confinement. Upon approval, the USDA issues a permit specifying
conditions that must be met before, during and after production.

9
The conditions include: separating of PMP crops from crops
intended for food or feed, cleaning production equipment, allowing
government inspection of the site, and post-harvest monitoring and
land use restrictions. In contrast to GM products intended for use
as food or feed, under the permit process PMP crops are not
deregulated at the end of field trials; instead, PMP crops remain
regulated under permit.
The FDA has authority to regulate the manufacture of
pharmaceuticals under the Federal Food, Drug, and Cosmetic Act
(FFDCA) but has decided to rely on the USDA to oversee PMP crop
production (FDA 2002). An exception is the category of “indirect
food additives,” which includes substances that become
components of food indirectly. The PMPs in PMP crops would be
considered indirect food additives unless classified by FDA as
“Generally Regarded as Safe,” or “GRAS.” Substances can be
classified as GRAS if (1) they were in food prior to 1958 and were
safe, or (2) they are generally recognized, among qualified experts,
as having been shown to be safe food additives through scientific
procedures. Since most PMPs are not intended for use as food,
most do not have scientific evidence for their safety, and hence,
would not be considered GRAS, and, therefore, would be regulated
by FDA as indirect food additives. As food additives, the
developers would have to submit documentation to the FDA
demonstrating that the products are safe in food. Without FDA
approval, such non-GRAS food additive products would be
considered “adulterated,” could not legally participate in interstate
commerce, and would typically trigger recall actions. As of October
2006, the FDA had not indicated whether it planned to classify
PMPs as indirect food additives (UCS 2006b). However, the FDA
(2002) has said that the presence of PMP materials in food could
render it adulterated under the FFDCA. This effectively establishes
a “zero tolerance” level for PMPs and PMIPs in food or feed
products. Meeting a zero-tolerance level is difficult and essentially
impossible to achieve with absolute certainty. This is a
conundrum, but one that exists under current regulations in the
United States as well as abroad. Because it is widely accepted that
100% purity is not attainable, a zero-tolerance standard raises the
question of what should happen in those (inevitable) events when it
is violated. Costly recalls of adulterated food may be necessary,
firms may be exposed to consumer and public backlash, and
liability issues would inevitably arise (Moschini 2006). While some
have called for relaxing the zero-tolerance policy for PMP
contaminants in the food supply and would instead allow some
small, positive tolerance levels, presumably to minimize the

10
financial liability of small loss of containment events, the USDA
and FDA have maintained the zero-tolerance standard (Freese and
Caplan 2006). The food industry has opposed relaxing the zero-
tolerance standard, fearful of consumer and export market
rejection of food if even low levels of PMPs appear in the food
supply (National Food Products Association 2003). Perhaps it is
not surprising that the Grocery Manufactures of America and the
National Food Processors Association have taken positions against
the use of food/feed crops for pharmaceuticals (USA Today 2006,
Freese and Caplan 2006). In 2003, the former CEO of Kraft Foods
singled out the issue of PMP contamination of foods as a threat to
her company and the food industry as a whole (Chicago Sun Times
2003).
As of late 2006, the USDA-APHIS had never denied a petition for
a new GM crop, although about a third of all petitions are
withdrawn when APHIS challenges company claims on petition
supporting documentation (National Public Radio 2006).
On February 28, 2007, the USDA announced yet another
incident involving loss of containment--rice seed in Arkansas were
contaminated with GM rice variety LL62. In March 2007, the USA
Rice Federation (2007a) expressed doubt that current USDA
regulations can prevent GM contamination of the U.S. non-GM
commercial rice supply: “The USA Rice Federation supports the
USDA action in March 2007 to prevent the planting and
distribution of Clearfield 131 (CL131) rice seed that could contain
trace levels of genetic material unapproved for commercialization. .
. . By the same token, we are increasingly frustrated with the
apparent lack of ability on the part of private companies and
federal regulators to control research and maintain accountability
of the resulting products. The current approach to research,
development and management in the biotechnology industry must
be replaced with more conservative methodologies. . . . The USA
Rice Federation has a long established policy that there must be
market acceptance and regulatory approval prior to the production
of genetically engineered rice in the United States.”
The North American Millers’ Association’s Statement on the Use
of Food and Feed Crops for the Production of Plant-made
Pharmaceuticals and Industrial Products (NAMA 2007) states:
“NAMA has significant concern that current confinement systems
for controlling the seed, pollen and output of plant-made
pharmaceuticals and industrial products cannot control 100
percent of the genetic material of the newly developed organism or
prevent deliberate evasion of the security protocol. . . . NAMA

11
believes the risk of adulteration from genetic material not approved
for food and feed entering the food chain is unacceptable. NAMA
believes that preventing such adulteration is the responsibility of
the technology developer and the U.S. government because the
prevention of such adulteration is totally within their control.”
On May 4, 2007, a federal judge in San Francisco ordered
farmers to stop planting Monsanto’s GM Roundup Ready alfalfa
seed because of the risk that it could contaminate nearby non-GM,
organic alfalfa fields (Sacramento Bee 2007). This ruling is
significant in that it was the first time that GM crop planting was
stopped due to the potential for, rather than actual, containment
loss. Nationwide, about 200,000 acres of Roundup Ready alfalfa
have been planted since the seed was approved for commercial use
in June 2005. The judge criticized USDA for failing to adequately
assess potential problems with cross-pollination before approving
the alfalfa seed for commercial planting. The judge ruled that
contamination of an organic alfalfa field with the Roundup Ready
gene could effectively destroy the organic farmer’s crop.
In 2007, the USDA (2007c) conducted an investigation of the
LibertyLink rice incidents and released findings in October 2007.
On August 1, 2006, USDA’s Animal and Plant Health Inspection
Service (APHIS) initiated an investigation after Bayer CropScience
reported that regulated genetically modified LLRICE601 (Cocodrie
variety rice) had been detected in the long-grain rice variety
Cheniere. Investigators determined that genetically modified
LLRICE601 and Cheniere variety rice were grown at the same
location and at the same time at the Rice Research Center North
Farm in Crowley, Louisiana, in 1999, 2000, and 2001 under a
Bayer CropScience contract. The varieties were separated during
those three years by distances of 210 feet, 3,000 feet, and 165 feet
respectively. Cheniere was never planted on a location that had
been previously occupied by LLRICE601, according to the records
provided. Affidavits stated that equipment cleaning had been
accomplished by the parties involved at the Rice Research Center
North Farm in Crowley, Louisiana, for all planting, harvesting, and
cleaning operations during this period. Because rice seed for the
period 1999-2002 was no longer available, the exact mechanism
for incursion of the LLRICE601 gene into the Cheniere variety,
such as gene flow or mechanical mixture, was not determined.
On February 16, 2007, USDA (2007c) expanded the LibertyLink
rice investigation to include the discovery of regulated genetic
material, later identified as LLRICE604, in the long-grain rice
variety Clearfield 131 (CL131). The Arkansas State Plant Board

12
reported that up to 30 percent of the samples of CL131—a long-
grain variety of rice developed by LSU that was to be sold as
certified rice seed in the spring of 2006—had tested positive for the
35SBar gene i n LLRICE604. The variety Cocodrie containing
LLRICE604 was developed by Bayer CropScience (formerly Dow
AgroEvo) and was tested at various locations, including the LSU
Rice Research Station North Farm in Crowley, Louisiana, between
1998 and 2000. Because the development of these two varieties
did not overlap in location and time, the most likely entry point for
LLRICE604 into CL131 was through a means other than direct
crosspollination. Because LLRICE604 was not detected in
representative samples of breeding lines at LSU, the exact time
period and means of incursion of the LLRICE604 gene into the
CL131 variety was not determined.
USDA is currently exploring revisions to its biotechnology
regulations in Title 7, Part 340 of the Code of Federal Regulations
(CFR). In July 2007, APHIS published a draft environmental
impact statement (http://www.aphis.usda.gov/newsroom/
content/2007/07/content/printable/complete_eis.pdf) that
evaluates potential options for revising the biotechnology
regulatory program. As a result of this review, APHIS has compiled
a list of lessons learned (USDA 2007d) and considerations to
enhance its regulatory framework. The lessons learned were:
1. Records are sometimes not easily obtainable because they
are not retained by the permit and notification holders.
USDA is exploring whether to require the creation and
retention of additional records to inform potential
investigations.
2. Efforts to test seed samples during the investigation were
hampered by the unavailability of seed samples. USDA is
considering (a) revisions to the Plant Protection Act that
would provide the agency with authority to subpoena seed
samples and (b) revising regulations to require sample
retention by permit and notification holders for a specified
period of time.
3. In some instances, researchers and developers were
unclear about their responsibilities in the event of an
unauthorized release of genetically-modified material.
USDA is considering revising regulations to require that
permit applicants submit contingency plans that address
unauthorized releases., have testing procedures to identify
released genes, and retain samples of genetically modified
materials for test purposes.

13
4. Efforts by USDA offices to work together to collect, test,
and track samples were complicated by lack of prior
interoffice links and agreements. The USDA is examining
options for interoffice memoranda of understanding and
agreements to improve collaboration.
5. In some cases, formal, contractual relationships between
researchers, developers and other parties did not exist or
had expired. This hampered the investigation. USDA is
exploring revisions to regulations that would require
certain business agreements among technology
researchers, developers and other parties.
6. The sufficiency of isolation distances between
experimental crops and nearby field crops to ensure
confinement was unclear due to advances in scientific
understanding. USDA is exploring revising policy to
ensure that the latest science is incorporated into isolation
distance recommendations.
7. Appropriate quality management systems were not
consistently found throughout the biotechnology industry,
increasing the likelihood of compliance problems. The
USDA is launching a new outreach program to improve
quality management systems in the industry.
8. Difficulties in retrieving information delayed inspections
and investigations. USDA plans to use its “ePermits”
electronic permit system to improve information access
and retrieval.
In terms of the potential effects of international biotech
regulations on U.S. farmers, in 2004, the European Union adopted
a new Directive on Environmental Liability (2004/36/CE) that
established the “polluter pays” principle with respect to adverse
effects of new organisms, such that producers and biotechnology
companies may be accountable for any uncontrolled release of GM
materials (Belcher et al. 2005). The European food market is for
the most part closed to trade in North American corn, soybeans
and canola (Brassica sp.) at least partly because of the extensive
adoption of GM varieties in the US and Canada, combined with the
lack of effective identity preservation mechanisms to deliver quality
assured non-GM produce for the EU market. However, in 2006 the
World Trade Organization ruled in favor of the United States and
GM food producers when it decided that the European Union had
breached international rules by restricting imports of GM crops
and foods made from them (New York Times 2006a). In fact, the
WTO ruling simply claimed that Europe had failed to follow its own
procedures, resulting in undue delays, rather than faulting the

14
European regulatory process for GM crops. If a PMP product
produced by a U.S. farmer somehow contaminated a shipment of
food to the EU (perhaps organic food), it is uncertain at this time
whether the farmer or the biotech company would be liable.
2.2 Ventria Bioscience -- Regulatory History
Currently, Ventria Bioscience is the only firm with PMP field
trials in North Carolina, and no PMP products are grown in the
field uncontained at commercial scale in the state. Ventria has
conducted field trials of rice genetically engineered to produce
human milk proteins in North Carolina since 2005. Table 4
provides an overview of Ventria’s regulatory history as described in
this section of the report. Ventria Bioscience was founded in 1993
by Dr. Ray Rodrequez, currently a professor of molecular and
cellular biology at the University of California, Davis (Ventria
Biosciences web site, http://www.ventria.com/, accessed July 20,
2007). In 1997, Ventria developed a proprietary production
technology, ExpressTec, that uses rice and barley plants to
produce proteins. As of 2007, Ventria had produced three
potential protein products, the pharmaceuticals lactoferrin,
lysozyme, and serum albumin. These products have not been
approved by the FDA for drug, food, or animal feed uses. The
products have been marketed as limited research and industrial
bioprocessing materials (for cell culture and cell lysis applications)
under the brand names Lacromin (lactoferrin, since 2005), Lysobac
(lysozyme, since 2006) and Cellastim (serum albumin, since 2006).
Ventria plans to market the extracted milk proteins as an anti-
diarrheal additive for infant oral rehydration solutions (Bethell
2006) and as nutritional supplements in yogurt, granola bars,
performance drinks and other products. Ventria has also
mentioned adding rice-based lysozyme to animal feed as a
substitute for the antibiotics added to feed (San Francisco
Chronicle 2002).
Lactoferrin and lysozyme possess antimicrobial properties and
several of Ventria’s proposed uses for its recombinant proteins are
explicitly medical in nature. Therefore, the permits initially
provided by the USDA for Ventria’s rice production were
specifically for rice engineered to produce pharmaceuticals and
industrial chemicals. Ventria has made several attempts to change
the USDA designation for its rice. In 2003, USDA changed the
designation of Ventria’s products from “pharmaceutical proteins
produced” to “value added protein for human consumption.” This

15
reclassification of Ventria’s recombinant proteins could potentially
pose a number of potential health risks that have not been
adequately investigated. In addition, Ventria initiated a voluntary
consultation with the FDA so that its rice could be considered as a
genetically engineered crop intended for general food use. Finally,
Ventria is seeking Generally Recognized as Safe (GRAS) status
from the FDA, which would exempt it from the food additive review
process.
The FDA considers PMPs to be indirect food additives unless
classified as GRAS. Ventria’s products do not have GRAS status.
Therefore, Ventria’s products would be regulated by FDA as
indirect food additives. As food additives, Ventria must submit
documentation to the FDA demonstrating that the products are
safe in food. Without FDA approval, food containing non-GRAS
food additives would be considered “adulterated,” could not legally
participate in interstate commerce, and would typically trigger
recall actions. This effectively establishes a “zero tolerance” level
for Ventria’s PMPs in food or feed products. The potential for
contamination of food-grade rice with Ventria’s PMPs raises the
question of unintended exposure. However, the FDA plays virtually
no role in pharma crop regulation unless a company reaches the
clinical trial stage, typically after 5 to 10 years of outdoor field
trials. The FDA does not regulate Ventria’s pharma rice at the field
trial stage, and will not regulate it at any stage if the intended use
of the rice is production of a research chemical, a “medical food”
(which is different from the regulatory category “food”), or for
export. Although FDA may ultimately review lactoferrin and/or
lysozyme produced from Ventria’s pharma rice if Ventria attempts
to market them as food or feed, it will not consider the potential
human health impacts of these pharmaceuticals as accidental
contaminants in the food supply if Ventria markets the products for
research use, as “medical foods,” or produces them for export.
The EPA has authority to regulate products intended for use as
pesticides. The EPA has not reviewed Ventria’s PMP rice despite
evidence that its pharmaceutical proteins possess pesticidal
properties and could harm beneficial organisms, create more
aggressive weeds, or disrupt soil ecology, because the PMP rice
products are not intended for use as pesticides. Although a
scientific advisory panel to the EPA has recommended full length
amino acid sequencing of plant-produced recombinant proteins,
Ventria has only tested a subset of its amino acid sequences.
In 2004, the USDA granted Ventria Bioscience field trial release
permits to grow PMP rice on 120 acres in California (USDA APHIS

16
Permit No. 03-365-01r); however, Ventria was blocked from
growing its rice in California (Silber 2004) by opposition from
California rice growers.
On June 28, 2005, the USDA announced a “Finding of No
Significant Impact” (FONSI) and the availability of an
Environmental Assessment (EA) for the proposed field release of
Ventria’s PMP rice in Missouri and North Carolina (Federal Register
2005a, 2005b). Based on the EA, USDA/APHIS concluded that the
Missouri and North Carolina field releases will not present a risk of
introducing or disseminating a plant pest and will not have a
significant impact on the quality of the human environment. The
USDA granted Ventria field trial release permits to grow PMP rice
in 2005 on 200 acres in Scott County, Missouri, (USDA APHIS
Permit No’s. 04-302-01r, 04-309-01r, 05-004-01r) and on 70 acres
in Washington County, North Carolina, (USDA APHIS Permit No’s.
05-073-01r, 05-117-01r, 05-117-02r) (USDA 2007a).
In 2005, Ventria was blocked from growing its rice in Missouri
(Bennett 2005) by farmers and food companies concerned about
contamination of their food crops with Ventria’s PMP crops
containing proteins that have not been approved by FDA.
In comments filed on June 2, 2005 with the USDA, the Food
Products Association (2005) expressed its “concerns with the
Ventria lysozyme and lactoferrin applications, as well as other non-
food proteins expressed in food crops, center on the clear
possibility and consequences of adulteration of food/feed supplies
due to contamination by food crops that have been genetically
engineered to produce pharmaceuticals or industrial compounds
unapproved for food/feed use.”
In June 2005, Ventria planted approximately 60 acres of PMP
rice in North Carolina (New York Times 2005c). Planting went
forward in North Carolina in 2005 despite objections from
researchers at the North Carolina Department of Agriculture and
Consumer Services’ Tidewater Research Station
(http://www.ncagr.com/Research/trs.htm ), located in Plymouth,
NC, where rice varieties from around the world are tested before
introduction into U.S. rice breeding programs. Ventria’s field trial
location is about a half-mile from the research station (UCS
2006a). According to USDA scientist Dr. David Marshall, who is
based at North Carolina State University: “The potential exists for
stray rice pollen to be carried via air currents from the Ventria
Biosciences fields to the Nursery and pollinating the introduced
germplasm. If this were to occur, genes from the rice expressing
human lactoferrin could be introduced into the rice germplasm of

17
the National Plant Germplasm System, and thus be disseminated
throughout the U.S.” (Center for Food Safety 2005). In comments
on Ventria’s North Carolina field test proposal, Dr. Karen
Moldenhauer, the Chair of the Rice Crop Germplasm Committee
(CGC) and Professor at the University of Arkansas, said: “CGC is
concerned about the perception of a grow out this close to the
quarantine nursery and hope that they consider moving this grow
out to a location farther away (at least 15 miles) from the Tidewater
Research Station of NCDA & CS at Plymouth, NC” (Center for Food
Safety 2005). The USDA subsequently moved the station to
Beltsville, MD (USA Today 2006).
In January 2006, the Union of Concerned Scientists (UCS) filed
a Freedom of Information Act request for information on USDA-
APHIS inspections and company compliance with federal permit
requirements at the Ventria field test site in North Carolina for the
2005 growing season. The USDA provided information detailing
how often the USDA inspected the site, what the USDA found, and
how well Ventria followed permit requirements. The USDA records
showed that (1) the USDA failed to inspect the Ventria site during
planting and harvest, two of the most critical times with respect to
ensuring containment, (2) Ventria submitted only one of nine
required notification/planting reports to USDA, (3) the USDA
completed only three of five required inspections at the Ventria
site, and (4) the USDA did not communicate with Ventria about the
effects of Hurricane Ophelia, which passed close by the site in
September 2005 (UCS 2006a). A UCS report concluded that the
USDA was apparently failing to adequately monitor and inspect the
Ventria test site.
Ventria withdrew USDA permits for PMP rice field trials in MO in
February 2006 (USDA APHIS Permit No’s. 05-336-01r, 05-336-
02r).
North Carolina field trials were subsequently approved by USDA
in November 2005 and went forward in 2006 (USDA APHIS Permit
No’s. 05-293-01r, 05-332-01r, 05-332-02r). In March 2006,
Ventria received approval from USDA to expand its field trials in
Washington County, NC, from 70 to 335 acres.
North Carolina field trials for 2007 were also approved by USDA
in November and December 2006 (USDA APHIS Permit No’s. 06-
305-04r, 06-285-01r).
On February 28, 2007, the USDA released a draft environmental
impact statement concluding that Ventria’s PMP rice could be
grown in Kansas with no undue risks (Ironically, on the same day

18
the USDA announced that rice seed in Arkansas were
contaminated with GM rice LL62.) (Washington Post 2007).
Despite the containment breaches involving Liberty Link rice in
2006 and 2007, in May 2007 the USDA granted Ventria release
permits to grow 3,200 acres of commercial PMP rice in Geary
County, Kansas (USDA APHIS Permit No’s. 06-285-02r, 06-278-
01r, 06-278-02r, Fortune 2007), which would be the world’s
largest PMP planting to date (Weiss 2007, Freese 2007). On May
16, 2007, the USDA announced a “Finding of No Significant
Impact” (FONSI) and the availability of an Environmental
Assessment (EA) for the proposed field release of Ventria’s PMP rice
in Kansas (Federal Register 2007). Based on the EA, USDA/APHIS
concluded that the Kansas field releases will not present a risk of
introducing or disseminating a plant pest and will not have a
significant impact on the quality of the human environment.
APHIS stated in the ruling that “The combination of isolation
distance, production practices, and rice biology make it extremely
unlikely that this rice would impact the U.S. commercial rice
supply.” However, these are the same factors that have failed to
prevent containment breaches in the past.
The Union of Concerned Scientists (UCS 2007) criticized the
USDA’s decision on Ventria’s Kansas application based on the
following grounds:
(1) Ventria did not supply enough information on the acres to be
planted (3,200 acres are implied in other USDA documents)
(2) the procedures and safeguards to be used by Ventria to
ensure that none of the PMP rice escapes containment or persists
in the environment after harvest, as described in the permit
application and the Ventria’s standard operating procedures
(SOPs), were not made public in USDA’s environmental assessment
documents, the documents on which USDA made its permit
approval decision
(3) the analysis made public by USDA does not consider three
potential routes of containment loss: production, shipment and
storage of PMP seed prior to planting, post-harvest transport of
PMP rice to processing facilities, unintentional dissemination of
PMP rice in the field by extreme weather events, such as floods and
tornados (the proposed Kansas sites are within 4 miles of the
Kansas River and one mile of the Smoky Hill River tributary, both
of which flooded in 1993 according to the National Oceanic and
Atmospheric Administration; Kansas ranks third among states in
tornado frequency, with an average of 47 tornados per year), and

19
(4) the containment breaches involving GM Liberty Link rice that
have occurred under current USDA regulations.
It should be noted that the USA Rice Federation (2007b) filed
comments with USDA on March 29, 2007, strongly recommending
that APHIS deny Ventria permission to grow [PMP] rice:
“The USA Rice Federation today expressed its
disappointment with USDA APHIS’ approval of the Ventria
Bioscience request to grow rice containing human proteins
in Geary County, Kansas. . . . The USA Rice Federation is
disappointed with the APHIS decision and hopes Ventria and
regulators will carefully ensure that sound and enforced
protocols will prevent contamination of the commercial rice
supply—an event that would be devastating to the rice
industry. . . . The U.S. rice industry is still reeling from the
release of BayerCropScience’s genetically engineered Liberty
Link rice into the U.S. Delta-region rice fields. We are living
with the effect of unintended events and consequences. This
decision will not generate any comfort among U.S.
commercial rice growers.”
Ventria received permits to produce value-added proteins using
PMP rice field trials in KS in May 2007 (USDA APHIS Permit No’s.
06-278-01r, 06-278-02r, 06-285-02r). Ventria received permits to
produce pharmaceutical products using PMP rice in KS in
February 2008 (USDA APHIS Permit No. 07-342-102r).
Ventria received permits to produce pharmaceutical proteins
using PMP rice field trials in NC in March 2008 and permits to
produce pharmaceutical products using PMP rice field trials in NC
in April 2008 (USDA APHIS Permit No’s. 07-341-103r, 08-093-
108r).
Again, it should be emphasized that because Ventria’s PMP rice
will be the first PMP crop to be grown in the field uncontained at
commercial scale in the United States, decisions concerning its
regulation are potentially precedent-setting.

20
3 Potential Benefits of PMPs
3.1 Overview
For millennia, farmers have used selective breeding to produce
crops with desirable characteristics. The novel aspect of GM
technology is the ability to move genes and associated
characteristics between organisms that are not sexually
compatible, creating organisms with previously unavailable
bundles of characteristics. GM technology has been used to
increase crop yield, drought tolerance, herbicide tolerance,
disease/insect resistance, and product quality. Most recently, GM
technology has been used to produce PMP substances within crop
plants. Many of the PMP products under development are
proteins--antibodies, enzymes, vaccines and other therapeutic
agents--due to an increasing number of protein-based drug
discoveries by pharmaceutical companies. In 2005 alone, 38 new
protein-based drugs were approved and more are in the FDA
pipeline (Williams 2006, 2007). The pharmaceutical industry
seeks low-cost production methods for these new drug products.
Producing drugs inside green plants, PMPs, is one of several
alternatives.
Scientists and industry typically cite two reasons for pursuing
plant made pharmaceuticals (PMPs) (Smyth et al. 2004). First,
production of high-quality pharmaceutical components (proteins
and antibodies) is presently done using cell cultures inside
bioreactors, which is very costly (US$105-175 per gram) and limits
consumer affordability. Cell culture bioreactors take an average of
three to seven years to build and cost on average US$450-$600
million to complete. Second, there is insufficient bioreactor
capacity to meet current production needs, let alone expected
future needs over the next decade (BIO 2002b). Antibodies
produced in bioreactors using mammalian cell cultures are
expensive, difficult to scale up, and pose safety concerns due to
potential contamination with pathogenic organisms or oncogenic
DNA sequences (BIO 2002b). As of 2002, production of just four
pharmaceutical products required 75% of global bioreactor
capacity (BIO 2002a). By the end of the decade, there could be
more than 80 antibody-dependent products with an estimated
value of US$20 billion, provided adequate production capacity can
be developed (Smyth et al. 2004). The Biotechnology Industry

21
Organization, an industry trade group, reports that a January
2005 study by Frost & Sullivan, a market research firm, found that
the PMP market could realize total cumulative revenues of
US$98.2 billion by 2011 (BIO 2006). The potential size of the
market drives investigation of alternative production methods,
including PMP production. Compared with other production
methods, the costs of producing and storing plant-produced
pharmaceuticals are relatively low, plants may be able to produce
the product for extended periods of time, product quality is
relatively high, and risk of contamination by pathogens is low
(Table 5). The leading PMP plants have been corn/maize,
canola/rapeseed, safflower, tobacco and rice.
In July 2006, Calgary-based SemBioSys announced that it can
produce over one kilogram of insulin per acre of PMP safflower
(BIO 2006). This is enough to supply 2,500 patients for one year of
treatment each. With insulin demand projected to be 16,000
kilograms per year by 2012, SemBioSys’ GM safflower provides a
way to supply insulin to a growing diabetic patient population. It
is claimed that producing insulin in PMP safflower can reduce
capital costs by 70 percent and product costs by 40 percent,
compared to existing insulin manufacturing. In February 2007,
the USDA announced a preliminary decision to allow SemBioSys to
plant 1000 acres of PMP safflower in Washington state, although
this initial planting would produce a drug to treat diseases in
farmed shrimp and promote fish growth rather than insulin. (The
USDA’s decision to allow SemBioSys to plant PMP safflower on a
commercial scale has been criticized (UCS/CU 2007) based on the
fact that the USDA review did not assess the potential risks of
escaped PMP safflower in the environment, including the risk of
becoming an agricultural plant pest, but rather assumed that
SemBioSys’ proposed containment measures would be 100 percent
effective.) Other PMP products under development in 2006
included: cystic fibrosis treatment from GM corn (Meristem);
treatment for ovarian cancer from GM tobacco (Chlorogen); GM
tobacco to address dental caries, as well as the common cold, and
hair loss (Planet Biotechnology); monoclonal antibodies from GM
duckweed (Biolex), and human milk proteins from rice (Ventria
Bioscience) (BIO 2006).
Although Ventria’s recently proposed PMP rice processing facility
in Kansas may promote economic development in the region
(assuming project financing and construction proceed as projected,
and Ventria is able to secure necessary approvals to market its
products), the history of PMP product development to date
indicates that caution is warranted when projecting the economic

22
development benefits of PMP production. Many PMP companies
have either gone bankrupt or have ceased pursuit of PMP
production, or switched to non-food crop PMP production (Freese
and Caplan 2006). ProdiGene was saved from bankruptcy after its
PMP corn contaminated non-GM soybeans in 2001 and it was
forced to pay for the cleanup by a USDA no-interest loan;
ProdiGene was subsequently taken over by Stine Seed. CropTech
went bankrupt in 2003 after pursuing PMP production in tobacco.
Meristem Therapeutics stopped PMP corn trials in Colorado in
2003 due to farmer-led opposition. Monsanto ceased development
of PMP corn and soybeans in 2003 even though it had received 44
field trial permits from USDA. Epicyte Pharmaceutical, once a
leader in PMP corn development, went bankrupt and was taken
over by Biolex in April 2004; Biolex now produces PMPs using the
non-food plant duckweed inside controlled bioprocessing facilities.
LargeScale Biology went bankrupt in 2005 after pursing PMP
production in viral-vectored tobacco. Ventria Bioscience dropped
field trial plans in California in 2004 and Missouri in 2005 due to
farmer opposition.
3.2 The Case of Ventria Bioscience
In this section, we consider in detail the potential benefits
associated with Ventria Bioscience’s PMP rice development and
production, as Ventria’s PMP rice may be the first PMP crop to be
produced in the field uncontained at commercial scale in the U.S.
Given that Ventria is a private company developing a new product
in the very competitive biotech industry, the firm does not provide
estimates of the potential benefits to the firm itself associated with
the eventual production and marketing of its PMP products. In
terms of current employment supported by the firm’s activities, the
Sacramento Bee (2006) reports that Ventria had 18 employees in
its Sacramento headquarters in 2006.
In 1997, Ventria developed a proprietary production technology,
ExpressTec, that uses rice and barley plants to produce proteins.
As of fall 2007, Ventria has only three potential products, the
pharmaceuticals lactoferrin, lysozyme, and serum albumin that
have not been approved by the FDA for drug, food, or animal feed
uses. These products have been marketed as research and
bioprocessing materials (for cell culture and cell lysis applications)
under the brand names Lacromin (lactoferrin, since 2005), Lysobac
(lysozyme, since 2006) and Cellastim (serum albumin, since 2006)
by Ventria directly, and by firms InVitria
(http://www.invitria.com/index.html) and Sigma-Aldrich

23
(http://www.sigmaaldrich.com/catalog/search/TablePage/155521
87), but it is not clear that Ventria has received substantial
revenues from these uses. As of fall 2007, Ventria appears to be
supported financially primarily by venture capital and with some
indirect subsidies from state (Kansas) economic development
agencies. For example, the Kansas Bioscience Authority gave $1
million to Junction City, KS, to support the attraction of Ventria
Bioscience (http://www.kansasbioauthority.org/projects_funded/).
(There appear to be no subsidies to date from North Carolina state
government.) Ventria plans to market the extracted milk proteins
as an anti-diarrheal additive for infant oral rehydration solutions
(Bethell 2006) and as nutritional supplements in yogurt, granola
bars, performance drinks, and other products. Ventria has also
mentioned adding rice-based lysozyme to animal feed as a
substitute for the antibiotics added to feed (San Francisco
Chronicle 2002). Ventria claims a potential market for these
products of more than $2 billion annually. Ventria claims the
following economic and societal benefits associated with its PMP
products (Ventria Bioscience 2007):
• Potentially save hundreds of thousands of lives globally
by reducing childhood diarrhea in developing countries;
• Reduce duration of childhood diarrhea by 4 million days
annually in the US and help these children get back to
school sooner; Help parents return to work sooner with an
economic impact of $1.6 billion over five years in the US
alone;
• A $50 million positive economic impact over five years
from direct employment in Ventria’s bioprocessing
operations in Junction City, Kansas;
• A $228 million positive economic impact over five years to
farmers and rural communities from Ventria’s field
production activities in Kansas;
• $37.5 million in savings to the US Government and
American taxpayers when compared to government
subsidized rice production;
• Successful introduction of these first products may lead
to additional products being developed using plants as a
biological factory. This multiplies the benefits to society
and the US economy.

24
In support of the first claim, Ventria sponsored a study in Peru
to assess the efficacy of rice-based oral rehydration solution
containing recombinant human lactoferrin and lysozyme in
Peruvian children with acute diarrhea (Zavaleta 2007, Bethell
2006). Ventria’s interpretation of the study results is that
Ventria’s products helped to reduce the duration of acute diarrhea
by 30%, or a day and a half. (Average duration: 5.21 days for
control vs. 3.67 days for Ventria’s products). In addition, Ventria
claims that the study shows that children receiving Ventria’s
product more likely to recover from their diarrhea and were less
likely to relapse into another episode of diarrhea. Freeze (2007)
disputes the study findings on several grounds related to alleged
problems with the study methodology.
Even if the Zavaleta (2007) study results are scientifically sound,
the potential profitability of Ventria’s oral rehydration supplement
products to the firm itself may be limited by the inability of
consumers in the target market, low income households in
developing countries, to pay. Ventria’s CEO Scott Deeter has said
that financial support from foundations might be necessary to
make oral rehydration solutions containing his company’s proteins
widely available (USDA 2003, Freese 2007).
With respect to Ventria’s claim of potential benefits to
consumers in the United States, where consumers have a greater
ability to pay for the product, Ventria applies it’s interpretation of
the results from the Peruvian study to the number of childhood
diarrhea cases in the United States and the number of working
parents and the average daily wage in the U.S (Ventria 2007). The
application of the Peruvian study results to the United States may
overstate potential benefits in the U.S. if children in the U.S. have
better overall nutrition, sanitary conditions, and hygiene, relative
to Peruvian children, reducing the relative benefit of Ventria’s
products. A controlled study of Ventria’s products on children in
the U.S. would appear to be necessary to verify this benefit claim.
Another potential hurdle to realizing consumer benefits in the
United States is that, despite the results from the Peru study,
Ventria has failed to gain “Generally Recognized as Safe” (GRAS)
status from the U.S. Food and Drug Administration for its rice-
derived pharmaceutical proteins in four petitions since 2003 (Table
4). Ventria has applied to the FDA to approve its PMP proteins as
a “medical food” rather than a drug (USA Today 2006). As a
medical food, Ventria would not need to conduct long and costly
human tests. Instead, Ventria submitted data from scientists in
support of “generally regarded as safe,” or GRAS, status. If Ventria

25
wins approval to add its PMP proteins to infant formulas, there is
no requirement to label any food products in the U.S. as
containing genetically engineered ingredients.
Part of the reason why Ventria has yet to be granted GRAS
status for its PMP rice may be that a 2004 National Academy of
Sciences report (NAS 2004) recommended more stringent testing
for new ingredients in infant formulas. To date, Ventria has
chosen not to submit its proteins for review by FDA as new drugs,
a more rigorous review process. Concurrently, however, another
company (Agennix, based in Houston, TX) has been developing
recombinant human lactoferrin under FDA’s new drug review
process for use as an anti-cancer drug since 1996 (Freese 2007).
The material is being produced in genetically modified fungus in a
contained manufacturing facility, not in field crops. That
lactoferrin is being considered as a potent anti-cancer drug raises
concern about Ventria’s attempt to gain approval for the material
under the less stringent food additive regulations. Production of
lactoferrin in fungus also presents a potential competitor for PMP
rice lactoferrin, depending on regulatory approvals and relative
production costs.
If Ventria’s products are eventually certified as safe, the net
benefits of Ventria’s products to potential consumers, economically
speaking, are defined as the incremental benefits beyond those
provided by the next-best substitute product. Even if Ventria’s
products are completely safe and effective, the benefits to the
ultimate consumers, infants at risk for diarrhea, should be
measured relative to the benefits provided by the next-best
substitute product. Freese (2007) makes the case that improved
sanitation facilities, clean drinking water supplies, improved
hygienic practices, use of disinfectants, and better breastfeeding
practices, in combination with existing oral rehydration therapy,
provide a good substitute for rice-derived proteins in terms of
reducing the incidence of diarrhea, perhaps at lower cost, in
developing countries. In the U.S., the benefits of the next-best
substitute treatment for childhood diarrhea would need to be
compared with the benefits of Ventria’s products to determine the
potential net benefits of Ventria’s products to U.S. consumers.
Potential consumer benefits in the U.S. may be reduced if the
patent holder, Ventria, can exert monopoly power and raise
consumer prices. Although there are no estimates of Ventria’s
ability to exert monopoly power in the market for transgenic rice
products, Kostandini et al. (2006) estimated the potential size and
distribution of economic gains from biopharming transgenic

26
tobacco as a source of human serum albumin using an economic
surplus model under imperfect competition. Kostandini et al.
determined that the development of transgenic tobacco would
generate annual profit flows of between $25 million and $49
million for the patent holder. Because the patent holder can exert
monopoly power in the output market, consumer prices are higher,
and consumer benefits lower, than would be the case in a
competitive market. However, should both rice and tobacco prove
successful as sources of serum albumin, some degree of
competition between the two would presumably lower prices,
reduce profits, and benefit consumers.
In addition to consumers, Ventria’s products may provide
economic benefits to farmers, crop transportation, processing and
distribution workers, and others who receive benefits due to
economic multiplier effects. With respect to benefits claimed by
Ventria for farmers, PMP processing workers, and the local rural
community near Junction City, Kansas, the site of Ventria’s
planned PMP processing facility, see Section 4.1 of this report
below.
With respect to the estimated benefits that may accrue to the
Junction City, Kansas, community due to the economic multiplier
effects of Ventria-related farmer and processor activity, Ventria
estimates that “with a projected 30,000 acres of production per
year upon full scale commercialization of Ventria’s products, we
estimate the resulting economic benefit to be $18 million per year
in direct economic benefit for farmers and the rural community of
Junction City, Kansas.” Ventria’s proposed PMP rice processing
facility in Junction City “is a $6 million capital improvement
project and is expected to employ 10 people within the first year of
operation. Employment will expand as the demand for Ventria’s
products grows. It is estimated that an employment of 50 people in
Junction City, Kansas will be required for full-scale production.”
Ventria assumes an economic multiplier of 2.54 [based on the
economic multiplier used by Junction City/Geary County
Economic Development Commission], to develop an estimate of the
total economic benefit (direct benefits plus economic multiplier
effects) for farmers and rural communities from Ventria’s products
of $45 million per year over the first five years of full-scale
production. For comparison, in 2006, Kansas agriculture
produced over $11 billion in crop, animal, and related agricultural
output, with over $3 billion in wage, rent, interest, and profit
income (USDA 2007e). Using a 2.54 economic multiplier, the total
economic impacts of the $11 billion in direct impact would be on
the order of $28 billion. Ventria’s estimated economic impact of

27
$45 million per year is small relative to the$28 billion impact of
Kansas agriculture.
Ventria’s claim of “$37.5 million in savings to the US
Government and American taxpayers when compared to
government subsidized rice production” is not valid, as PMP-rice is
not grown for food and so will not substitute for the rice grown for
food that receives the rice subsidy. However, if Ventria’s PMP-rice
replaces subsidized corn, then Ventria would potentially be able to
claim a reduction in corn subsidies as savings to U.S. taxpayers.
Forty-four percent of farms in the Kansas region received
government payments in 2005, with an average payment of
$17,000 per farm (USDA 2007e), or $18,000-$20,000 per farm in
Geary county, Kansas (KFMA 2006). In 2007, Ventria estimated “.
. . a projected 30,000 acres of production per year upon full scale
commercialization of Ventria’s products” (Ventria Biosciences
2007). With an average farm size of approximately 700 acres in
Kansas (http://www.ers.usda.gov/StateFacts/KS.HTM), perhaps
43 farmers would participate in Ventria’s PMP rice production in
Kansas. If we assume that 43 farms growing Ventria’s rice would
have otherwise participated in farm programs in which they would
have received $17,000 each in government payments, then
substituting Ventria rice for corn in Kansas could save taxpayers
on the order of $731,000. This number is very small relative to the
almost $286 million in net government payments made to Kansas
agriculture in 2006 (USDA 2007e).
The economic benefits of Ventria’s PMP rice field test activity in
North Carolina are difficult to determine, as Ventria will not reveal
information on the numbers of farmers or researchers actively at
work in the state (Sargent 2007). However, given the low acreage
involved, it is likely that only a very few farmers are participating in
the field tests. It is known that Ventria project researchers,
including professors from North Carolina State University, are
based at the Tidewater Research Station in Plymouth, NC
(Washington Daily News 2006a). NCSU professor John Van Duyn,
is reportedly doing research for the Ventria project in Washington
County.
Although Ventria looked for a place to process its rice that would
be “within 50 miles” of its PMP rice field test site in Washington
county, NC, and Dr. Scott Deeter of Ventria said that the company
was considering placing a processing facility in Washington
County, Greenville or Wilson, NC, Ventria said in December 2006
that it planned to maintain operation of 200 acres of PMP rice in
Washington County, NC, but that it would expand rice production

28
and establish a rice processing plant in Kansas instead of North
Carolina (Washington Daily News 2006b).

29
4 Potential Costs of PMPs
The potential benefits of PMPs must be weighed against the
potential costs, including: (1) the costs to the farmer of specialized,
dedicated equipment, training, administration and liability to the
GM/PMP-producing farmers, (2) any government subsidies to
Ventria or farmers, (3) the costs of any harm to human health in
intended uses (e.g., allergies), (4) liability costs associated with the
potential loss of containment of PMP products and subsequent
contamination of the food supply, (5) externality “spillover” costs
affecting non-GM producing farmers, including organic farmers,
and (6) externality “spillover” costs affecting the environment. The
first four cost categories are considered in this section of the
report, while the two types of externality costs are covered in
following sections.
4.1 Farm Costs and Potential Grower Profitability
Some GM crop technologies and products are developed by
public institutions (such as public universities and federal
research laboratories) financed by tax dollars, while others are
developed by private, profit-seeking firms. The intellectual property
developed by public institutions is typically financed by tax dollars
and distributed to users without charge, for example, though
publication in publically-available academic journals, whereas the
intellectual property developed by private firms is typically owned
by the inventor, who tries to recoup his development costs and
make a profit by, for example, increasing the price of GM crop
seed, charging a technology fee, or requiring that the crop be sold
back to the firm.
Regardless of the source of innovation, farmers must somehow
gain from a new technology in order to adopt it. Typically, new
technology must provide increased financial returns to the farmer
by some combination of raising crop yields, lowering input costs,
enhancing crop quality (thereby increasing the price consumers
are willing to pay), or reducing farm management effort. A rough
estimate of gains to farmers from PMP crop production could be
made by estimating increases in net returns (benefits minus costs)
per acre and multiplying the per acre gains by the number of
affected acres. When Ventria was considering locating its PMP rice

30
processing facility in northwestern Missouri, the firm reportedly
agreed to pay PMP-growing farmers in the region about twice what
they would typically earn growing their next-most profitable crop
(New York Times 2006b). Ventria (Ventria Biosciences 2007)
estimated that farmers located near the site of its planned PMP rice
processing facility in Junction City, Kansas, will “earn
approximately $150 in additional profit per acre plus additional
economic impact from more intensive management required of
Ventria’s production, requiring an additional $300 per acre. For
example, a corn farmer that is currently generating $587 per acre
from corn production would generate an economic impact of
$1,037 per acre, or an increase of $450 per acre if they switch to
Ventria’s production.” These estimates are based on analysis by
Daniel O’Brien, Associate Professor and Extension Agricultural
Economist, Kansas State University. In addition, Ventria makes
the claim that:
“. . . [farmers] are able to receive a more consistent revenue
stream versus their alternatives because they do not
shoulder losses caused by poor yields, weather damage,
disease or insect damage, or other negative impacts typically
faced by farmers today. Third, the farmers are trained in new
value-added farming practices, quality control, and
regulatory requirements. Finally, farmers are able to enter
multi-year agreements which provide more certainty about
future cash flow, thereby improving their financial outlook.
Based on the above, we estimate an economic benefit to
farmers of $600 per acre in positive economic impact
compared to their alternative with corn” (Ventria Biosciences
2007).
Per acre impacts in North Carolina would likely be different from
those in Kansas, due to differences in crops grown, their
production costs, and market prices. As discussed by Wisner
(2005), PMP firms such as Ventria will be the sole suppliers of their
PMP products and may choose to let farmers compete with one
another for PMP production contracts, inevitably lowering the
contract prices paid to farmers, and reducing farmer benefits from
PMP production.
Turning to estimates of the eventual number of acres that may
be devoted to Ventria’s PMP rice production, in a presentation to a
USDA Biotechnology Advisory Committee meeting in 2003 (USDA
2003), Dr. Scott Deeter, president and CEO of Ventria Bioscience,
described the likely acreage involved as approximately 10,000

31
acres and the number of farmers involved as “not very many
people;” furthermore, it is not clear that all of this acreage would
be rice grown in North Carolina:
“In 2008, well I'm making the prediction that the second
decade here is where we're going to hit the mainstream or
going to really begin producing products with these -- with
these platforms. I'm saying 10,000 acres. Depending on
your efficiency and your yield, that would be an enormous
amount of pharmaceutical product. An enormous amount,
okay? So this is success for us, okay? Ten thousand acres.
I look at that and I put my pharmaceutical hat on, and I say,
holy mackerel, is that really that much volume in the
pharmaceutical business? Okay? And the answer is yes,
because many of the new products that are being developed
in the pharmaceutical industry require chronic dosage at
high levels. And we haven't been able to go after those
products in the past because we didn't have a system to do
it. I look at that from my agricultural hat, and I say, that's
nothing. How many farmers is that? Maybe, you know, [a
few] good-sized farmers, that's not very many people. So
that's just two perspectives here that I think are kind of
interesting as you think about this.”
When a member of the Advisory Committee said: “I have to tell
you that my constituents, or who I'm representing here today, are
wheat producers. And to a larger extent, I would suppose just
production agriculture. And when you put the numbers on the
table of 10,000 to 100,000 acres, frankly, that's very, very small in
the scope of U. S. agriculture,” Dr. Deeter’s response implied
agreement, and that Ventria’s efforts would not significantly affect
the rural agricultural economy in the U.S.:
“But the big benefit here, in my mind, is human health.
That's the problem [Ventria is] working on. We're not --
we're not working on rural development.”
In 2007, Ventria estimated “. . . a projected 30,000 acres of
production per year upon full scale commercialization of Ventria’s
products” (Ventria Biosciences 2007). With an average farm size of
approximately 700 acres in Kansas
(http://www.ers.usda.gov/StateFacts/KS.HTM), perhaps 43
farmers would benefit from PMP rice production in Kansas, but the
number would probably be lower, as a smaller number of larger

Economic Implications of Plant-made Pharmaceutical Production in North Carolina

Economic Implications of Plant-made Pharmaceutical Production in North Carolina

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (20)

Destacado

Destacado (20)

Similar a Economic Implications of Plant-made Pharmaceutical Production in North Carolina

Similar a Economic Implications of Plant-made Pharmaceutical Production in North Carolina (20)

Más de RAFI-USA

Más de RAFI-USA (20)

Último

Último (20)

Economic Implications of Plant-made Pharmaceutical Production in North Carolina