By facilitating access to valuable biological samples, the growth of biobanks since the late 1990s has propelled advances in genetics and medical research. How can we ensure the economic viability of biobanks to encourage innovation? New research by TSE’s Catherine Bobtcheff and Carole Haritchabalet underlines the importance of a biobank’s strategic positioning in the marketplace, expertise and conditions of exchange. They identify information asymmetries between biobanks and research units, and suggest ways to resolve them.
What are the key challenges of running a biobank?
The management of biobanks, which are usually attached to a hospital where patients provide the vast majority of samples, requires considerable scientific and technical expertise. Biobanks must comply with numerous legal and regulatory requirements, particularly concerning the collection and transport of samples and the management of personal data. High-quality sample production requires a great deal of coordination between various professions. Research units then acquire samples for study that can be conducted independently or in coordination with the biobank.
How can we put a price on biobanks?
The economic valorization of biobanks is mainly a problem of valorization of innovation. Successful innovation is highly dependent on sample quality and the involvement of the various stakeholders in the sample production chain. This introduces significant problems of information asymmetry. Many economists, such as Jean Tirole (1999), have analyzed the optimal contract that provides the different parties with adequate remuneration for their effort and maintains incentives for innovation. These contracts call for distribution of innovation property rights between the different parties, and for payment of licenses and royalties.
How do information asymmetries impact the market for samples?
The biobank is faced with a problem of adverse selection because the projects are carried out by different research units with different skills, and the success of projects is difficult to evaluate. This justifies a committee for the provision of samples, helping to identify the most promising research projects. It may also be difficult for a research unit to assess a sample’s quality at the point when the contract is signed. Certification, labeling and a record of academic successes can help biobanks to mitigate this problem.
Moral hazard is often found in the operation of biobanks. Different professions can carry out sampling, annotation and conservation with varying degrees of care and coordination. Sample quality can thus be manipulated by the biobank, even after the contract is signed. This problem can generally be solved by making payment of the biobank conditional on the success of the innovation.
What market strategies are available to biobanks?
In addition to providing incentive compensation for various stakeholders, biobanks must take strategic decisions about the size and quality of their collections. This modifies both the degree of competition between biobanks and the biobanks’ expertise.
By specializing in a small number of collections a biobank can ensure it obtains high visibility and recognition, and a certain monopoly power. Its expertise and thematic coherence will be strong, reducing its operating costs. Generalist biobanks can take on a larger number of projects but managing more collections involves professionals from different specialties, incurring different operating costs.
Biobanks can also differentiate vertically from competitors by improving sample quality and data. In an economic landscape of generalist biobanks, such differentiation allows all biobanks some market power. An economy of specialized biobanks limits competition and reduces the problem of sample quality because each biobank is positioned on a different collection. When generalist and specialized biobanks coexist, competition weakens generalist biobanks, which then limit their costs by producing lower-quality samples.
How can networking contribute to successful innovation?
Pooling several biobanks in a network reduces operating costs, increases the supply of samples, limits competition and improves bargaining power. It may, however, require biobanks to surrender a degree of ownership, specificity and reputation. Additional costs are linked to information asymmetries and free riders. Networking can only be successful if all partners contribute.
The positive effects of networking are more important for generalist biobanks. Collaborations with specialists enable generalists to increase their expertise, which has a positive long-term effect on the quality of innovation.
Extract of the TSE Mag #17 Summer 2018