ANALYSIS OF LABORATO RY CAPACITY TO SUPPORT U.S. EPA

CHEMICAL TESTING PROGRAM INIT IATIVES

October 28 , 2010

Final

Economic and Policy Analysis Branch Economics, Exposure, and Technology Division

Office of Chemical Safety and Pollutio n Prevention

U.S. Environmental Protection Agency Washington, D.C. 20460CONTRIBUTORS

The analyst responsible for completion of this report was Lynne Blake

- Hedges. Analytical and draft preparation support was provided by Eastern Research Gro up, Inc. of Lexington,

Massachusetts under EPA Contract No. EP

- W

- 05

- 014

.

## Table of Contents

Table of Contents

................................ ................................ ................................ .......................... 1

1.0 Introduction

................................ ................................ ................................ ....................... 1

2.0 Demand for Laboratory Testing Services

................................ ................................ ....... 3

2.1 Environmental Protection Agency Initiatives

................................ ................................ . 3
2.1.1 High Production Volume (HPV) Challenge Program

................................ ................... 3 2.1.2 Orphaned HPVs

................................ ................................ ................................ ............. 4

2.1.3 EPA’s New Chemi cals Management Program

................................ .............................. 4 2.1.4 Endocrine Disruptor Screening Program

................................ ................................ ....... 5 2.1.5 Perfluorinated Chemical Testing

................................ ................................ ................... 6

2.2 European Chemicals Agency Requirements

................................ ................................ ... 8

2.3 Food and Drug Administration Requirements

................................ .............................. 11

3.0 Supply of Testing Services

................................ ................................ .............................. 14

3.1 Lab oratory Capabilities for SIDS

................................ ................................ ................. 14

3.2 Laboratory Capacity to Meet Deman d

................................ ................................ .......... 17
3.2.1 Testing Areas with Capacity Limitations

................................ ................................ .... 17

4.0 Trends and Factors Impacting the Testing Industry

................................ ................... 22

4.1 Emerging Markets

................................ ................................ ................................ ......... 22

4.2 Animal Welfare Issues and Activism

................................ ................................ ........... 23

4.3 Value of t he Dollar

................................ ................................ ................................ ....... 23

4.4 Economic Uncertainty

................................ ................................ ................................ .. 24

5.0 Conclusions

................................ ................................ ................................ ...................... 25

Appe ndix A: SIDS Tests and Corresponding Guidelines

................................ ..................... A

- 1

Appendix B: Laboratories with SIDS Testing Capabilities

................................ .................. B

- 11 

## 1.0 Introduction

The Toxic Substances Control Act (TSCA) authorizes the U.S. Environmental Protection Agency (EPA) to gather and review data and assess risks associated with chemicals sold and

used in the United States. Section 4 of TSCA directs EPA to require the development of test data on existing chemicals when the manufacture, processing, distribution, us e, or disposal of the

chemical “ may present an unreasonable risk ; ” or the chemical is produced in very large volume and there is potential for a substantial quantity to be released into the envir onment or for substantial or significant human exposure. Before it can mandate testing, however, EPA must

find that existing data are insufficient to resolve the question of safety, and that testing is necessary to develop the data. In addition to mandatin g testing by regulation , EPA may also enter into consent agreements with manufacturers to conduct testing, or may employ voluntary approaches to collect ing hazard information.

Chemical testing driven by EPA actions represents one source of demand for the laboratory testing industry. Toxicological testing of chemicals is also conducted to meet commercial research and development needs of companies developing chemica ls or drugs for the marketplace

, or to satisfy requirements from other federal agencies and foreign governments for health, environmental

, and safety data . Many of these testing initiatives use the same testing facilities and may compete for available capacity and expertise

.

The purpose of this report is to provide a snapshot of the demand for, and supply of, chemi cal testing services in areas of interest to EPA’s Office of Pollution Prevention and Toxics

. It is important to note that t he report provides neither comprehensive coverage of the entire industry nor does it represent a statistical sa mple of the industry. Rather, it is intended to provide insight

in to the current demand for laboratory testing services and the ability of laboratories to meet these needs. This report is an update to Analysis of Laboratory Capacity to Support U.S. EPA

Che mical Testing Program Initiatives completed in August 2004 (hereafter referred to as the Lab Capacity Report ). Additionally, s eparate assessment s entitled Laboratory Testing of Chemicals for Endocrine Disruption Potential

–

Analysis of Market Factors 1 and La boratory Industry Capacity to Conduct Health and Environmental Testing o f Nanoscale Materials 2 assess laboratory capacity to conduct testing of chemicals for endocrine disruptor potential and nanoscale materials, respectively

.

This report was prepared us ing published information compiled for EPA about the chemical testing industry, discussions with EPA and other experts familiar with the industry, and information collected first hand from laboratories exhibiting at the Society of Toxicology’s ToxExpo in M arch of 2009. In this report, the term “chemical testing industry” applies broadly to any organization that has the capability to use standard laboratory methods to determine the effects that a particular chemical may have on human health or the environmen t. These may include contract research organizations (CROs), whose primary line of business is testing for chemical toxicity ; in

- house testing laboratories maintained by chemical companies or others

1 EPA

. La boratory Testing of Chemicals f or Endocrine Disruption Potential

–

Analysis of Market Factors , Draft.

Office of Pollution Prevention and Toxics. July 2 , 2009.

2 EPA. Laboratory Industry Capacity To Conduct Health And Environmental Testing Of Nanoscale Materi als

, Office of Pollution Prevention and Toxics. October 6 , 2010.2 (who may also do work for hire); as well as laboratories maintained and operated by academic or

other institutions . Since the primary data source for this report was exhibitors at ToxExpo, however, and these consisted almost exclusively of CROs, the data and discussion largely reflect the CRO segment of the test ing industry.

Chapter 2 provides an overview of the major existing chemical initiatives that may generate demand for testing, while Chapter 3 provides a discussion of the testing industry’s ability to meet this demand. Chapter 4 examines trends and econo mic factors that may influence the supply and demand for chemical testing. The last chapter provides a summary and draws some tentative conclusions about the testing industry’s ability to meet potential EPA

- generated demand

.3 

## 2.0 Demand for Laboratory Te sting Services

Historically, laboratories have indicated that EPA regulatory and voluntary initiatives related to

the assessment of industrial chemicals have not generated a significant volume of chemical testing demand compared to their work with pharmac eutical and biotechnology products. 3
Recent developments, particularly the enactment of Registration, Evaluation, Authori z ation

, and

Restriction of Chemical (REACH) legislation in the European Union , could cause a spike in

demand for such testing. This Cha pter reviews the major U.S. and European testing initiatives

with subsections 2.1 through 2.3 describing the specific efforts and potential for overlap of testing demands.



### 2.1 E nvironmental Protection Agency Initiatives

2.1.1 High Production Volume (HPV) Cha llenge Program

In 1998, multiple studies confirmed that significant gaps existed in the data needed to understand hazards associated with a large percentage of the high production volume (HPV) chemicals used

in the United States. 4 In that year, EPA worked with stakeholders to launch the HPV Challenge Program for chemicals produced or imported in to the U.S. in quantities of one million pounds or more per year. The Agency asked manufacturers and importers to voluntarily commit to provide

basic hazard testing data to support EPA’s mission of protecting human health and the

environment

. The hazard data endpoints being requested under the HPV Challenge are the same as those specified in the Organisation for Economic Cooperation and Development ’s (OECD ’s )

Screenin g Information Data Set (SIDS) dossiers

. The SIDS dossiers cover f ive main categories of

data : general information (e.g., use patterns, volume), physical

- chemical properties,

environmental fate and transport

, ecotoxity, and toxicity

. Appendix A provides the list of SIDS

tests.

This section reviews the scope and status of the HPV Challenge Program with a focus on estimating the potential number of chemicals that may still require testing

, and describe s any overlap with similar international programs

.

As of June 20 07 , c ompanies had committed to EPA to p rovid e test data for over 2,2 0 0 HPV

chemicals. This includes approximately 1,400 “directly” sponsored chemicals as well as 860 chemicals sponsored indirectly by the International Council of Chemical Associatio ns (ICCA)

under the OECD’s HPV Chemicals Initiative. 5

3 EPA

. Analysis of Laboratory Capacity to Support U.S. EPA Chemical Testing Program Initiatives

. Office of Pollution Prevention and Toxics. August 30, 2004. By 2009, d ata for roughly 1,00 0 of the approximately 1,400 directly sponsored chemicals had been entered into EPA’s HPV

4 EPA defines HPV chemicals as tho se produced or imported into the U.S. in quantities of 1 million pounds or more per year. OECD defines HPV chemicals as chemicals manufactured or imported into an OECD member country in quantities greater than 1,000 metric tonnes (approximately 2,200,000 l b) per year

. 5 The ICCA sponsored 1,020 chemicals under the OECD HPV Chemicals Initiative, of which 860 are considered HPV chemicals under the EPA HPV Challenge.4 Information System Web database. 6 OECD reports that assessments have been complete d for

887 of the 1,020 sponsored HPV chemicals (87 percent)

. 7 Details on how many of those completed assessments that are also on the EPA HVP list were not available.

Based on the number of chemicals that have been sponsored but for which data have not ye t been submitted, the EPA and OECD/ICCA HPV programs may lead to the need for new testing of approximately 500 chemicals. 8 The number of outstanding submissions that will require new testing, however, is unknown. In analyzing the data collected as of June 2004, for example, EPA found that only 10 percent of HPV chemicals required new testing . Instead, most of the data needed to satisfy the program needs were pre

- existing. 9



### 2.1.2 Orphaned HPVs On the other hand, the fact that no data

has been submitted to date on these 500 chem icals may indicate that less existing data is

available , and a higher percentage may require new testing

. Given this, significant uncertainty remains concerning how much additional testing will be required for these chemicals.

10

In Febr uary 2010, EPA report ed that approximately 20 7 chemicals originally identified as HPV

chemicals remain ed unspo nsored under the HPV Challenge. EPA can potentially collect b asic hazard data for these “orphaned” chemicals through regulatory actions such as TS CA Section 4 Test Rules and TSCA Section 8(a)/8(d) Rules. Section 4 rules require manufacturers to develop test data to fill any information gaps while Section 8 rules can be used to require companies to submit existing test data already in their possessio n

. Twenty

- nine of those 207 orphan chemicals have been named in a proposed rule, which will require manufacturers and processors to conduct testing necessary to complete the SIDS dossier

. 11



### 2.1.3 EPA’s New Chemicals Management Program The final report on each specific test for each subject chemical su bstance is due to EPA 13 months after the effective date of the final rule

.

O n September 29, 2009, EPA announced a new, comprehensive approach to enhance the Agency’ s chemicals management program. 12 This new approach includes the following

activities:

6 Office of Pollution Prevention and Toxics, “HPV Challenge Program,” OPPT Accomplishments Rep ort January

2007

- January 2009 , EPA. April 14, 2009. Available at www.epa.gov/oppt/ar/2007

- 2009/managing/hpv_program.htm

. 7 Hernandez, Oscar and Louis Scarano. “Proposed Approa ch for the Inorganics HPV Challenge Program (IHPV),” Office of Pollution Prevention and Toxics, EPA. December 8, 2008.

8 There are 392 remaining (i.e., 1,400

- 1,008) directly sponsored chemicals in EPA’s HPV Program and 113 (i.e.,
1,000

- 887) under the OECD initiative. Note: the OECD number is based on assessments completed rather than data submitted, so some testing may have already been completed.

9 Office of Pollution Prevention and Toxics. Status and Future Directions of the High Production Volume Challen ge Program , 743

- R

- 04

- 001, November 2004. Available at www.epa.gov/hpv/pubs/general/hpvreport.pdf

. 10 This section is based on EPA, “Testing of Certain High Production Volume Chemicals; Third Group of Chemicals,” Proposed Rules, Federal Register , February 25, 2010.

11 EPA, “Testing of Certain High Production Volume Chemicals; Third Group of Chemicals,” Proposed Rules, Federal Register , February 25, 2010.

12 Jackson, Lisa. “Enhancing EPA’s Existi ng Chemical Management Program,” September 29, 2009. Available at www.epa.gov/oppt/existingchemicals/pubs/enhanchems.html

.5 **•** Development of chemical action plans;

**•** Development of new regulatory risk management actions;

**•** Requiring information needed to understand chemical risks; and

**•** Increasing public access to information about chemicals.

EPA is developing chem ical action plans to target EPA’ s risk management efforts for certain

“ c hemicals of c oncern

. ” 13 These action plans are based on EPA ’ s review of available hazard, exposure, and use information

, and outline the risks each chemical may present. The action plans also discuss the specific steps EPA will take to address the risk concerns. An action plan may include new regulatory actions under TSCA. EPA has already developed or is developing new regulatory risk management actions on a number of che micals.

As part of the new initiative, EPA has stated plans to develop new actions under TSCA Sections 4, 5, and 8 . Specifically

, as discussed in the previous section , EPA announced plans to publish

test rules under Section 4 of TSCA t o generate data on o rphaned (unsponsored) HPV Challenge

chemicals . The Agency is planning similar action for sponsored but unfulfilled HPV Challenge chemicals. Additionally, EPA has initiated action to require notification under significant new

use rules (SNUR) issued under S ection 5 of TSCA on additional HPV chemicals. These SNURs can potentially lead to more testing as companies who want to engage in a new use of a subject chemical must submit notice (and often submit te s ting data) to the Agency for review prior to

initiatin g a new use. At this time, EPA has not announced the number of HPV chemicals that may be covered by these additional TSCA Section 4 and Section 5 rulemaking s

.

EPA is also developing a proposed rule under Section 4 of TSCA to require companies to test

nano materials for health and environmental effects. 14 The specific nanomaterials or total number

of nanomaterials to be addressed under this proposed rule is unknown at this time. As previously mentioned, EPA has separately analyz ed the availability of laborato ry capacity to conduct the type of testing expected to be requested under this proposed action

. 15

It is not yet certain how many chemicals will require testing under EPA’ s comprehensive approach to enhance its chemical management program. Additionally, it is uncertain how many chemicals have outstanding testing commitments under the HPV program. Accordingly, i t is premature to draw any conclusions about the potential impact of this new chemical management approach on the demand for new testing.



### 2.1.4 Endocr ine Disruptor Screening Program

Under the Endocrine Disruptor Screening Program (EDSP), EPA has identified chemicals and pesticides (including pesticide inert ingredients) that may have the potential to exhibit endocrine disrupting properties. EPA has comp leted issuing test orders requiring screening for the first

13 EPA Announces Actions to Address Chemicals of Concern , New s Release, December 30, 2009. Available at yosemite.epa.gov/opa/admpress.nsf/0/2852C60DC0F65C688525769C0068B219

. 14 EPA. “ Control of Nanoscale Materials under the Toxic Su bstances Control Act.” April 22, 2010. Available at: http://www.epa.gov/oppt/nano/

. 15 EPA. Laboratory Industry Capacity to Conduct Health and Environmental Testing of Nanoscale Materials

. Office

of Pollution P revention and Toxics. October 6, 2010.6 group of 67 pesticides and pesticide inert ingredients to determine their endocrine disruptor potential. 16 EPA is requir ing recipients of the se test orders to submit data for 11 screening assays

wi thin two years of the date of issuance of the order

. In addition to generating new data, test order recipients also have an option to cite or submit existing data (i.e., other scie ntifically

relevant information )

, 17 along with a rationale that explains how the cited or submitted study satisfies the Tier 1 test order in lieu of developing new data

. EPA will evaluate such proposals

and determine whether the information can be used to satisfy part or all of the Tier 1 order and/or

otherwise inform the Tier 1 de termination.

EPA expects that some test order requirements will be fulfilled by other scientifically relevant

information ; however, EDSP test orders could generate a need for testing in 20 10 to 201 2 . The testing generated under the EDSP, particularly rel ated to in vivo assays, could compete with other types of chemical testing for laboratory space, employees, and equipment. In a related effort, however, EPA found that sufficient capacity is likely to be available to conduct the testing required under this program

. More details about this can be found in Laboratory Testing of Chemicals for Endocrine Disruption Potential

–

Analysis of Market Factors

. 18



### 2.1.5 Perfluorinated Chemical Testing

Since the late 1990s, EPA has been reviewing the risks associated wit h perfluorinated chemicals, specifically perfluorooctanoic acid (PFOA) and perfluorooctyl sulfonate (PFOS), after reports were published of the substances being found in blood of the general population. S tudies have

indicate d that PFOA and PFOS are persist ent, can cause developmental and other advers e effects in laboratory animals, and are bioaccumulative.

The Agency has finalized TSCA Section 4 e nforceable c onsent a greements with industry for incineration testing to see whether PFOA breaks down when artic les containing PFOA are disposed of in municipal incinerators. The Agency has also negotiated Memoranda of Understanding to evaluate the potential presence of PFOA and PFOA precursors in air, water, soils, sediments, and biota in the vicinity of DuPont and 3M/ Dyneon manufacturing plants. 19

16 EPA. “EPA t o Begin Testing Pesticides for Endocrine Disruption ,” April 15, 2009. The agreements and memoranda of understanding studies do not include PFOS since EPA instituted a separate phase out of PFOS allowing its use only in limited quantities for exempted

uses

. In 2005, EPA and DuPont reached a settlement requiring DuPont to complete tests on its fluorotelomer products , such as polytetrafluoroethylene (PTFE), which may contain trace amounts of PFOA and other related perfluorinated chemicals as impurities

. T echnical challenges

i n developing a meth od to purify the fluorotelomer products , however, caused EPA to extend the

17 Other scientifically relevant information may either be functionally equivalent to information obtained from the Tier 1 assays (i.e

., data from assays that perform the same function as EDSP Tier 1 assays ) or may include data that provide information on a potential consequence or effect that could be due to effects on the estrogen, androgen or thyroid systems. Some other scientifically relevant information may be sufficient to satisfy part or all of the Tier 1

order and/or otherwise inform the Tier 1 determination.

18 EPA. Laboratory Testing of Chemicals f or Endocrine Disruption Potential

–

Analysis of Market Factors , Draft.

Office of Poll ution Prevention and Toxics. July 2, 2009.

19 EPA, “Frequent Questions,” Perfluorooctanoic Acid (PFOA) and Fluorinated Telomers, March 19, 2009.

Available at http://www.epa.gov/oppt/pfoa/pubs/faq.ht ml

.7 testing deadline to December 27, 2011. 20 EPA has also issued provisional health advisories for PFOA and PFOS to protect against potential risk from exposure to these chemicals throug h drinking water.

In 2002 and 2007, EPA issued SNURs under TSCA Section 5 to limit any future manufacture or importation of perfluoroalkyl sulfonates (PFAS) and related chemicals specified in the rules. These SNURs allowed the continuation of a few speci fic and limited, highly technical uses of these chemicals for which no alternatives were available, and which were characterized by low volume, low exposure, and low releases. Any other uses of these chemicals would require prior notice to and review by th e Agency. EPA al s o review s proposed substitutes for PFOA, PFOS

, and other long

- chain perfluorinated substances as part of its New Chemicals Program review

process

. If potential risks are determined not to be unreasonable, production or importation of

these substitutes is generally allowed with a c onsent o rder th at imposes testing requirements and in some cases, exposure and release controls. 21 Many other countries, including those within the European Union under the REACH program, are also reviewing test da ta for proposed

substitutes. 22

During the 2009 ToxExpo, seven CROs thought to have expertise with perfluorinated chemicals were asked about their testing work in this area. These labs were identified based on having responded positively in 2006 to a questi on regarding their ability to conduct chemical testing of PFOA. Five of the seven laboratory representatives were not aware of any work on perfluorinated chemicals conducted by their organization. Without further investigation, it is

unclear whether the ma rketing representatives at ToxExpo were simply unfamiliar with the area of perfluorinated chemical testing, whether their organization had yet to actually receive a test request in this area, or whether it had decided not to pursue or accept such testing w ork.

One laboratory confirmed it had performed some testing and indicated that perfluorinated

chemicals were “a little harder to deal with” than more conventional chemicals. A second laboratory explained that meaningful analytical data is difficult to obt ain without labeling the

chemical with c arbon

- 13. H owever, the reaction used to label many of these perfluorinated

compou nds can be quite explosive; thus, it is not common for chemical manufacturers to sell

carbon

- 13 labeled perfluorinated products. Withou t the carbon

- 13 label, the laboratory felt the chemical analyses are less reliable and can take significantly more time to conduct due to the

extra verif ication steps necessary

. Both laboratories discussing perfluorinated chemicals

indicated that the amoun t of testing they were completing on the compounds had been decreasing.

20 Eder, Andrew. “DuPont Gets More Time to Test PFOA,” DelawareOnline . February 10, 2009. Available at

www.delawareonline.com/article/20090210/NEWS/902100331

. 21 Krasnic, To ni. U.S. EPA, “New Chemical Review of Alternatives for PFOA and Related Chemicals in U.S.” Presented at Workshop on Managing Perfluorinated Chemicals and Transitioning to Safer Alternatives. February 12

, 2009.

22 United Nations Environmental Programme, “Tho ught Starter: Elements to Consider When Working Towards Stewardship of Perfluorinated Chemicals and Transitioning to Safe Alternatives,” Workshop on Managing Perfluorinated Chemicals and Transitioning to Safer Alternatives Geneva, Switzerland. February 12

- 13, 2009.8 

### 2.2 **European Chemicals Agency Requirements** 

In 2007, requirements for the European Union’s REACH legislation entered into effect. REACH requires the registration of chemicals and submissi on of test data to identify risks th at chemical s

may pose. Registration is required for chemicals manufactured or imported in quantities of one tonne or more per year. C hemicals must be registered before they can be manufactured, imported, or otherwise int roduced into the European Union market.

F or most chemicals already manufactured or imported before REACH entered into force, a phase

- in was established to allow the ir continued manufacture or import , provided the chemical had been pre

- regist e r ed prior t o December 1, 2008 . Phase

- in registration deadlines were assigned for different volume categories

. The registration of the first group of chemicals began in June

2008 and is scheduled to end in December 2010.

Table 2

- 2 summarizes the different testing re quirements that apply to each of the REACH volume categories

. In general, less test data are required for lower production volume chemicals

. For those chemicals in the higher volume tiers (greater than 100 metric tones) , registration requires data from all tests required for chemicals produced below 100 metric tons , along with submission of a test plan for additional data required for that production volume (see Table 2

- 2)

. This test plan should be based on the results of previous testing analysis (e.g., in vitro studies,

structure

- activity relationship (SAR) ).

Table 2

- 2: REACH Substances and Testing Required

Threshold

Volume

Metric Tonnes [a] Estimated

Number of
Substances [b] Testing Required [c] Submission

D eadline [d]

between 1 and 10 20,000 **•** Physical

- che mical properties

**•** Acute toxicity

**•** Environmental t oxicity and biodegradation May 31, 2018

between 10 and

100 4,600 Same as above, plus:

**•** Additional acute toxicity

**•** Repeated dose toxicity

**•** Reproductive toxicity

**•** Additional environmental toxicity May 31, 2018

between 100 and 1,000 2,900 Same as above, plus potentially:

**•** Additional physical

- chemical

**•** Further repeated dose toxicity

**•** Long

- term aquatic toxicity

**•** Degradation and e

- fate

**•** Terrestrial toxicity May 31, 2013

1,000 or greater 2,600 Same as above, plus potenti ally:

**•** Additional long term toxicity

**•** Additional long term aquatic toxicity

**•** Additional terrestrial toxicity November 30, 2010

Total 30,100

[a] Manufactured or imported into the European Union on an annual basis. [b] These values are the e stimated number of existing substances that were to be registered under REACH. These values do not account for existing substance testing data generated under other initiatives such as the U.S. HPV or

OECD/ICCA initiatives. Source: ERM Economics, 2004.9 [c] Source : Foster, Robert . “ REACH (Registration and Evaluation),” Presented at SOCMA Corporate Excellence

Conference

. May 16, 2008

. [d] Source : ECHA, Guidance on Registration

. November 9 , 2009

. Available at http://guidance.echa.europa.eu/docs/guidance_document/registration_en.pdf

.

In February 2009

, the European Chemicals Agency (ECHA) reported that 143,000 substances are on the pre

- registration list 23

— well above the 31

, 000 originally estimated. 24 ECHA believes, however, that this list contains many duplicates as well as substances that are not required to be reported under REACH.

T he pre

- registration period for phase

- in substances was from June 1 to December 1, 2008. As noted in Table 2

- 2, t he earliest registration deadline for pre

- registe red phase

- in substances is for the highest volume substances, and this deadline is November 30, 2010. Within this first group are those identified by EC HA as

“ c hemicals of concern ” including : 1) carcinogenic, mutagenic, and reprotoxic substances (CMR) ; 2) persistent, bioaccumulative, and toxic (PBT)

substances ; or 3 ) very persistent and very bioaccumulative (vPvB) substances

. 25

25 Table 2

- 3 shows the number of chemicals in each of these categories.

From a total of 1,400 chemicals of concern, it is expected that industry will phase out the production of approximately 500, resulting in approximately 900 that may require further testing.

On April 16, 2010, ECHA published a list of 4,415 substances that it expects to be registered by a deadline of November 30, 2010. 26 These substances are either classified as “chemicals of

concern
, ” or meet the highest volume threshold. Sponsors can propose to meet the minimum data requirements for each data element in several ways: 1) by providing published, scientifically adequate data; 2) by providing previously unpublished, scientifically adequate data; 3) through the application of an estimation technique such as SAR models, or “read

- across” methods within a chemical category; 4) by providing a rationale for not testing; or 5) by proposing new testing, using approved non

- animal methods where available.

A 2004 assessment completed on behalf of the United Kingdom ’s Department for Environment, Food, and Rural Affairs (DEFRA) concluded that

, for the most part, data generated under the EPA and OECD/ICCA HPV initiatives will satisfy the SIDS endpoint data required of chemicals

in the 1 to 10 and 10 to 100 metric tonne production level s (testing requirements are summarized

23 ECHA

, “ ECHA Publishes An Updated List Of Pre

- Registered Substances, ” March 27, 2009. Available at http://echa.europa.eu/doc/press/pr_09_03_list_prer eg_substances_20090327.pdf

. 24 ERM Economics. New European Chemicals Strategy: UK Partial Regulatory Impact Assessment . United Kingdom Department for the Food, Environment, and Rural Affairs. March 2004. Available at http://randd.defra.gov.uk/Document.aspx?Document=CB01038_3291_FRP.pdf

. 25 ERM Economics , 2004.

26 ECHA. “Downstream Users can check list of intended 2010 registrations,” April 16, 201 0. Available at http://echa.europa.eu/doc/press/na_10_18_dcg%20_du_20100416.pdf

. Table 2

- 3 : Estimated Number of

REACH Chemicals of Concern

Chemical Category Number of

Che micals

CMRs 700

PBTs 467

vPvBs 233

Total 1,400 Expected to be phased out 500

Total 90010 in Table 2

- 2 ). 25 This would suggest that for the estimated 24,600 chemicals in these volume categories (see Table 2

- 2), the REACH requirements would not generate competing demand for laboratory testing capacity. It must be not ed, however, that the DEFRA study was prepared several years prior to REACH coming into effect and may have been somewhat speculative

.

After the 2010 deadline, there will be additional registration deadlines in 2013 and 2018 for chemicals produced at low er volume thresholds

. As part of the registration dossier, submitters

may propos e additional animal testing to eliminate gaps in the data

. This proposed testing for

chemicals imported or produced in volumes greater than 100 metric tonnes may not be carried

out until ECHA has evaluat ed the test proposals. For these chemical s , it is not expected that

evaluation of registration documents will be fully complete until between 2013 and 2016

, meaning testing in the short

- term may be very limited. 27

The 2008 and 20 09 REACH Progress Reports provide updates on the number of registration dossiers submitted since the entry into force of REACH. 28

, 29

28 In 2008, only 10 complete registration dossiers were submitted ; h owever, none of the se included a testing proposal. From

this it can be concluded that none of these 10 registered substances would require additional testing beyond any thing already submitted in support of the registration dossier.

Table 2

- 4 summarizes the number and type of complete d registration dossiers submitted in

2009. 29 As n ote d, this report include s a category for “ transported intermediates

. ” REACH

classifies intermediates as either on

- site (limited to being used a t the same site where the chemical is manufactured or imported) or transported (i.e., shipped to a second site for use under strictly controlled conditions ). In general, transported intermediates are subject to reduced registration requirements (fewer data elements) if they are handled under strictly controlled conditions as defined by REACH

.

Table 2

- 4 : Number of Complete Registration Dossiers Submitted in 2009

Threshold Volume (Metric Tonnes) * Non

- Intermediate Registrations Transported Intermediates Regis trations

Total Non

- Phase

- In
Substances Phase

- In
Substances Non

- Phase

- In
Substances Phase

- In
Substances

1

- 10 90 12 70 7 179

10

- 100 19 10 81 18 144 100

- 1,000 8 8
1,000 or greater 7 58 7 11 83

Total 124 88 158 36 406
* Manufactured or import ed into the European Union on an annual basis.

As shown in Table 2

- 4, a total of 406 completed registration dossiers were submitted in 2009. The 2009 REACH Progress Report also states that the first eight testing proposals were

submitted to ECHA in 2009. Five of these eight proposals concerned non

- phase

- in substances . I t

27 SRU. Toxic Substance s and REACH: Selected chapters of the Environmental Report 2008 Volume 3

. German Advisory Council o n the Environment. 2008.

28 ECHA. Evaluation: Progress Report 2008 . February 27, 2009. Available at http://echa.europa.eu/doc/progress_report_2008.pdf

. 29 ECHA. Evaluation under REACH: Progr ess Report 2009 . February 25, 2010. Available at http://echa.europa.eu/doc/progress_report_2009.pdf

.11 is uncertain whether additional testing proposals are expected for the other 298 r egistration

dossiers submitted in 2009. 29

Table 2

- 5 summar izes this report ’ s estimates of the number of substances registered in 2009 that may require additional testing. 30 This table uses the data presented in Table 2

- 4 and assumes chemicals produced below the 100 metric tonne threshold will not require additiona l testing since they are subject to less extensive requirements (see Table 2

- 2). Given this, it is reasonable to assume that most of the data requirements for chemicals in these volume categories will be

met with data submitted as part of the registration dossier.

Table 2

- 5 : Estimated Number of Substances Requiring Additional Testing After Registration

Threshold Volume (Metric Tonnes) * Non

- Intermediates Transported Intermediates

Total Non

- Phase

- In
Substances Phase

- In
Substances Non

- Phase

- In
Substances P hase

- In
Substances

1

– 10 0 0 0 0 0

10

– 100 0 0 81 18 115 100

- 1,000 8 8
1,000 or greater 7 58 7 11 83

Total 15 66 88 29 198

* Manufactured or imported into the European Union on an annual basis.

Source: ECHA. Evaluation under REACH: Progress R eport 2009

.

Industry has suggested that resources will be diverted from voluntary HPV initiatives t oward REACH compliance. 31 Based on the estimates summarized in Table 2

- 5, h owever, it does not appear that there will be a significant surge in demand for te sting in the near term, (i.e., the next four years) that will challenge the existing capacity of commercial chemical testing facilities. Initial results and expectations are that a significant amount of the test data being requested already exists and will be forthcoming to satisfy these demands.



### 2.3 **F ood and**  **D rug**  **A dministration**  **Requirements**

In a 2004 EPA report

, 32 toxicology laboratories reported that testing to meet Food and Drug Administration ( FDA ) requirements represent ed the largest share of their busin ess base, and that business decisions related to physical space, equipment, and human resources were strongly linked to FDA testing program requirements. 33

30 This report conservatively assumes none of the registered intermediates are handled u nder strictly controlled conditions as defined by REACH and therefore will be required to submit standard full data packages as determined by their production volume category. This section considers the extent to which FDA

31 Chemical Watch Research & Publishing

, Chemical Watch: European Business Briefi ng , March 2009. Available at http://chemicalwatch.com/index.cfm?action=briefing.issue

. 32 EPA. Analysis of Laboratory Capacity to Support U.S. EPA Chemical Testing Program Initiatives

. Office of Pollution Prevention and Toxics. August 30, 2004.

33 EPA, Analysis of Laboratory Capacity to Support U.S. EPA Chemical Testing Program Initiatives

. Office of Pollution Prevention and Toxics. August 30, 2004.12 driven testing of pharmaceuticals overlaps with some o f the testing being required of EPA for chemicals, and provides an outlook on the demand for pharmaceutical testing in these areas.

Under the authority of the Federal Food, Drug, and Cosmetic Act , FDA requires toxicology testing of pharmaceuticals and fo od additives. Commonly required in vivo tests specified by the

FDA for human pharmaceuticals include: 34

**•** Toxicokinetics and pharmacokinetics in rodents and/or other species

**•** Single

- dose studies in rodents, and occasionally dogs and primates

**•** Subacute (14

- 28 day), subchronic (90 day) and/or chronic (90+ day) studies in rodents, dogs, and occasionally primates

**•** Reproduction segment I

–– fertility studies in rodents

**•** Reproduction segment II

–– prenatal developmental toxicity in rodents and rabbits

**•** Reproduction segm ent III

–– postnatal development in rodents

**•** Mutagenicity and genotoxicity studies of at least two varieties

**•** Carcinogenicity studies in rats and transgenic mice

**•** Immunotoxicity in rodents

**•** Triggered specialized studies (e.g., phototoxicity and pyrogenicity)

CROs called upon to pe r form SIDS testing in the areas of general acute toxicity, repeated dose toxicity, and reproductive and developmental toxicity could face competing demands for their

services since these tests require the same or very similar equipme nt, skills, and laboratory space as those required for certain types of FDA testing. During discussions with exhibitors at ToxExpo, however, CROs reported that demand from pharmaceutical and biotech companies has recently declined, in some cases significan tly. For example, o ne laboratory that has historically performed about half its work for the pharmaceutical industry and half for the chemical industry reported a major decline in demand from pharmaceutical clients, while demand from the

chemical sector ha s remained strong. As a result, this laboratory has shifted staff in the short

term to industrial chemical toxicology work.

The ability of CROs to change their service offerings in response to changes in demand is of interest because of the potential incr ease in chemical testing demand driven by EPA, EU, and

related initiatives . In the case of the laboratory cited above, the shift to chemical testing in the face of slackened pharmaceutical demand has been “minimally disruptive .” This CRO emphasizes cross

- t raining of employees and uses the same or similar equipment and skill sets in both types of testing. Somewhat ironically, this same lab made a shift in the opposite direction seven years ago, when it faced a decline in chemical testing resulting from the c onsolidation that was occurring in the chemical and agri

- chemical industries. They are now seeing a similar consolidation in the pharmaceutical and biotech markets, which has resulted in fewer test

requests.

It is important to note that this observation i s based on anecdotal evidence from a small number of CROs, but it may be indicative of at least some flexibility in the industry to adjust capabilities in response to changes in chemical testing demand. Based on discussion with laboratories, EPA

34 The Humane Society of the United St ates and Procter & Gamble , “FDA,” December 6, 2007. Available at: www.alttox.org/ttrc/us/regulatory

- research

- agencies/fda.html

.13 does not b elieve any significant testing demand will be generated to meet FDA testing requirements that will overcome the testing industry’s current underutilization of capacity.14 

## 3.0 S upply of Testing Services

This section reports on efforts to identify and char acterize those laboratories capable of meeting the chemical industry’s demand for testing services as outlined in Chapter 2. Since no comprehensive directory of laborator y capabilities exists that would allow such an identification, and a survey to determi ne these capabilities was outside the scope of this study, 35 this section

relies largely on anecdotal information, as explained below. While not comprehensive, the

i nformation compiled should still be helpful as EPA seeks to better understand the potential number of laboratories with these capabilities and their capacity for conducting the testing

.



### 3.1 Laboratory Capabilities for SIDS

To assist in assessing the number and geographic distribution of CROs capable of conducting the types of testing of intere st to EPA, E astern R esearch G roup , Inc. (ERG) attended (on EPA’s behalf) the annual meeting and exhibition of the Society of Toxicology. This meeting took place in Baltimore, Maryland from March 15

- 19, 2009. T he exhibition part of the meeting, called

ToxEx po, hosted more than 350 exhibitors from the United States and overseas including pharmaceutical companies, chemical manufacturers, and CROs, whose primary line of business is toxicity testing on either new pharmaceutical compounds or manufactured chemical s

. 36 Many

of the exhibitors were CROs who annually attend and exhibit at ToxExpo in order to market and communicate their capabilities to potential clients. Based on the successful collection of comparable information from this event in the past (e.g., to d evelop the 2004 Lab Capacity Report ), EPA judged that the 2009 ToxExpo was likely to attract a majority of CROs with chemical testing capabilities of interest for the present report.

As described in Chapter 2, one of the primary testing dat a sets requeste d by EPA and ECHA is

the SIDS suite of tests. The primary testing categories are:

**•** Physical

- Chemical Data

**•** Environmental Fate

**•** Aquatic Ecotoxicity

**•** Toxicity to Terrestrial Organisms

**•** General Acute Toxicity

**•** Repeated Dose Toxicity

**•** Genetic Toxicity

**•** Reproductive and Developmental Toxicity

Appendix A lists the specific SIDS tests and OECD test guidelines represented by each main

category of testing . Besides seeking to characterize CRO capabilities in these areas, EPA also sought to identif y laboratories with anal ytical chemistry capabilities (listed in Table 3

- 1 as

35 The Paperwork Reduction Act prohibits fe deral agencies from making the same information request of more than

nine entities without approval from the Office of Management and Budget.

36 Society of Toxicology. “SOT 48 th Annual Meeting and ToxExpo,” accessed April 24, 2009. Available at http://www.toxicology.org/AI/MEET/AM2009/index.asp#

.15 “Analytical Chemistry”) and include this type of testing as part of the SIDS discussion. 37 While analytical chemistry is not an individual component of SIDS testing , labs often need to perform analys e s a t the end of each SIDS test that requir e analytical chemistry capabilities.

Prior to the conference, ERG reviewed the catalog of exhibitors and identified those known or believed to offer chemical testing services

, based on the exhibitor descriptions. At the conference, ERG visited the booths of 90 CROs, reviewed marketing literature, and asked general questions about each laboratory’s capabilities. Sixty

- six firms were determined to have capabilities in at least one of the testing categories of interest. Table 3

- 1 provides a summary of

the results , while Appendix B provides more specific details on individual laboratories’ capabilities.

Table 3

- 1. Count of Laboratories with Capabilities for SIDS Testing*

Testing Category Number of Laboratories

U.S. Non

- U.S. Total
Physical

- Chemical Data 15 11 26

Environmental Fate 8 7 15
Aquatic Ecotoxicity 7 9 16 Toxicity to Terrestrial Organisms 9 6 15 General Acute Toxicity 32 22 54
Repeated Dose Toxicity 32 19 51 Genetic Toxicity 22 16 38
Reproductive and D evelopmental Toxicity 19 17 36 Analytical Chemistry 31 16 47 * Based on a subset of 66 laboratories exhibiting at the 2009 ToxExpo. This table does not represent total industry capabilities.

From the universe of laboratories exhibiting at ToxExpo, the n umber of laboratories able to conduct SIDS testing ranges from 15 to 54 depending on the testing category. The breadth of each laboratory’s capabilities is shown in Table 3

- 2, which shows the number of laboratories with capabilities in one, two, three, and more SIDS testing areas.

An analysis of the data for individual labs produces a number of observations. It is important to emphasize that while these observations are derived from what is probably a representative sample of the industry, it is unclear w hether these are statistically significant findings that can be extrapolated across the entire universe of laboratories. Findings based on the 66 laboratories in this sample include:

**•** T he mean number of testing areas (out of ni ne possible categories) is 4. 7.

37 Most of the SIDS tests are biological ones that require analytical chemistry to perform the analysis at the end of

the test. L aboratories with an alytical chemistry units are more likely to perform the entire test without having to

subcontract out this aspect of the test

. “Analytical Chemistry” does not refer to methods development (the ability of a laboratory to develop and validate testing methods ); rather, it refers to the ability of a laboratory to perform chemical analysis using an existing standardized method.16 Table 3

- 2. Number of Testing Capabilities by SIDS Category

Number of Capabilities by SIDS Category Number of Laboratories

U.S. Non

- U.S. Total

One 6 2 8

Two 6 2 8

Three 4 0 4

Four 5 3 8

Five 9 5 14

Six 8 3 11

Seven 2 2 4 Eight 0 1 1

Nine 2 6 8

Total 42 24 66

**•** Laboratories determined to have capabilities in four or fewer of the testing categories are unlikely to have capabilities in the areas of environmental fate, aquatic ecotoxicity, or toxicity to terrestrial organisms . Only laboratories with the broadest range of capabilities cover these areas of testing.

**•** Of the 15 labs with capabilities in the area of environmental fate , only one has four or fewer capabilities suggesting that this type of testing area tends to be offered by

laboratori es that offer a larger suite of SIDS services.

**•** Of the 28 labs performing testing in four or fewer of the testing categories, 20 of them (71 percent) performed general acute toxicity testing, and 18 of them (64 percent) performed reproductive and developme nt toxicity testing.

**•** Twenty five laboratories represented in Table 3

- 1 (38 percent) also perform endocrine disruptor potential testing. Any laboratory identified as providing this service, also performs at least one of the SIDS testing categories.

Sinc e the focus of ToxExpo is on toxicology

- related testing, the small number of exhibitors with environmental fate testing capabilities may reflect the lesser importance of this capability to the ToxExpo target market. Many exhibitors focus on pharmaceutical work, which may not require extensive capabilities in this area.

The 2004 Lab Capacity R eport identified only six laboratories, all headquartered outside the U.S., with the capability to offer the full suite of SIDS laboratory testing . I n 2009

, two U.S.

- headquartered laboratories appear to have full SIDS testing capabilities, which they have developed as a result of acquisitions. 38

38 Charles River Laboratories, International, “Charles River History,” accessed April 24, 2009. Available at

www.criver.com/en

- US/AboutUs ; Harlan Laboratories, “Corporate Brochure,” accessed April 24, 2009. Available

at www.harlan.com/about_harlan_laboratories

.17 

### 3.2 **Laboratory Capacity to Meet Demand**

Exhibitors at ToxExpo were near unanimous in characterizing the testing industry as oper ating “below capacity” at the present time, due to the economic recession . As noted earlier, many CROs rely on the pharmaceutical and biotechnology sectors for a substantial part of their business. During downturns, customers in these sectors tend to curta il research and development and move new products through the pipeline more slowly. Combined with recent consolidations in the industry, these conditions have produced a notable decrease in testing demand. CROs with a more diversified customer base, or one less reliant on pharmaceuticals and biotechnology, reported doing somewhat better or even strengthening their positions, but these were the exceptions.

U

. S

. CROs are reporting the recession has hit them harder than those in Europe. Some U

. S

. CROs used t erminology such as “taking it off the chin” or “barely afloat” to describe their situation, while for the most part

, European CROs ha ve observed a slight or no depr ession in the testing market. While it would be logical to assume the European labs are bene fiting from REACH, they actually report ed having very little REACH

- related work in house during the 2009

discussions . In fact, t esting laboratories in Europe

, as well as Asia , are generally uncertain about REACH’s impact on the market. None of the laborato ries indicated that they have ex panded their operations in anticipation of REACH; however, a couple of European laboratories are providing consulting services to chemical companies about how to approach the REACH requirements.

The expected workload to be generated by REACH varied dramatically from laboratory to
lab oratory . A few CRO s speculated that chemical companies would complete much of the testing using in

- house laboratories, form consortia to minimize duplicative efforts, or submit data already in t heir possession . At the other end of the spectrum, one laboratory expressed concern

that industry was procrastinating until the deadline and that demand would suddenly materialize as deadlines approached

. Some believe or fear that affected companies will d elay their testing to learn from the experience s of other companies on how to respond to the requirements. This particular CRO expressed concern there would be an influx of testing requests in the second half

of 2010 that would over whelm European testing c apacity, pushing overflow requests to Asia and

the United States

.



### 3.2.1 Testing Areas with Capacity Limitations

Laboratories, like all businesses, organize and manage their operations according to different

models. Some emphasize flexibility and expect and train their employees to perform multiple types of testing while others remain much more specialized and keep their staff focused on one particular area of test ing . As a result, it is possible that two given tests may compete for

resources (i.e., perfo rmed by the same personnel) in one laboratory while they would be performed by two different specialists in another lab

, since each may only be capable of performing the test they specialize in . Similarly, capacity concerns can arise through different

circ umstances across different labs. In the examples below, EPA discusses capacity limitations and competing tests that seemed to be more typical across lab oratorie s.18 In general, laboratories noted that in vivo tests would be much harder to scale

- up than in v itro

tests should there be a sudden spike in demand

. To understand why, it is helpful to discuss how laboratories organize these activities. L abs that have both in vivo and in vitro testing capabilities indicate they keep these sections physically separate from one another . The in vivo testing is done in one area so animal receiving, cage cleaning, and animal testing chambers are located close together

, to economize on moving and maintaining equipment. The in vitro testing areas typically require HEPA treat ed air systems for hood air

, along with areas dedicated to media preparation. Many in vitro tests

, which typically require media preparation, exposure and dosing, incubation, and cell counting or evaluation, include many steps that can be completed with

au tomated systems , and are usually completed in a matter of minutes to a couple of hours. To

meet an increase in demand for such testing, a lab can initially increas e the number of hours the machines are operating

. In vivo tests, on the other hand , tend to t ake up more physical space (as many of them are performed in cages or tanks) and are performed for a longer duration . M any tests last from 28 days up to several months . In addition, some tests can potentially require very specific expertise . For example, t he SIDS guidelines require the following genetic toxicity tests
be conducted:

**•** Gene mutation in prokaryotic cells (OECD guideline 471);

**•** Chromosomal aberration (OECD guideline 473); and

**•** Micronucleus test or metaphase analysis of bone marrow cells (OECD guid elines 474 and 475)

While these tests are all within the same field of toxicology, they are not considered to compete among one another for resources. One CRO mentioned that the demand for each of these three test types garners enough business to support individual groups to perform the tests separately. Another laboratory added that the skills needed and equipment used to conduct the tests has little overlap with other tests performed in the lab , resulting in very little competition for resources

with oth er tests within the lab. 39

When asked their opinion about areas where constraints could arise if SIDS testing demands

were to increase very significantly , laboratory representatives at ToxExpo mentioned some specific testing areas, discussed below

.

Inhal ation

Inhalation testing was characterized by several CROs as particularly difficult to scale up. Inhalation testing requires personnel with specialized training and unique equipment

. Two CROs noted that it is very difficult to control the airflow on the equipment to ensure proper testing

conditions

, and finding specialists with training suitable to operate the equipment is very

difficult . As a result, very few employees at these laboratories ha ve the necessary training to perform this test

. Additionally, a laboratory interested in expanding capacity in this area would

need to make significant capital investment in equipment and have adequate space to house it.

A nother CRO indicated that in addition to space, equipment, and personnel issues, it would be

ne cessary to expand the analytical chemistry unit in unison with expand ed inhalation capabilities

39 Personal co mmunication with Jian Song, Director of Research, Sitek Research Laboratories. March 15, 2009.19 in order to analyze all the results. 40 Inhalation test ing was also noted as a potential bottleneck in

the 2004 Lab Capacity Report for all the reasons listed abo ve . Additionally in 2004, an expert

mentioned that few pharmaceutical companie s request the tests, and that the test protocol s for the pharmaceutical and industrial chemicals differ

. 41

Biodegr ad ation

Biodegradation was identified as a test with potential capacity limitations

. Normally, these tests last 28 days

, although under certain circumstances they can be shorter. On e laboratory noted that long test durations can tie up laboratory space and equipment for prolonged periods of time, similar to many in vi vo toxicity tests

. Addition ally, the equipment used in biodegradation testing

is expensive ; thus, scaling up would involve significant purchas ing decisions. The CRO also mentioned that the level of expertise needed in order to perform this test is higher t han the majority of the other tests they performed. From conversations with these laboratories, EPA concludes that the hierarchy of impediments to expansion is 1) availability of adequate space, 2) equipping such space with expensive equipment, 3) the need for skilled staff , and 4) the length of study. Purchasing or leasing more space is a very large, and sometimes prohibitive, capital expenditure, and purchasing and setting up expensive equipment also represents a large capital

cost. The need for additiona l staff can be partially circumvented in the short term by longer hours (and possibly shifting sta ff when their expertise allows) , but is still a major capacity limitation.

Reproductive Studies

One laboratory suggested that higher demand for either the f irst or second generation reproductive toxicity studies could compete for resources with each other within a lab. These

tests use similar laboratory space , much of the same equipment, and compete for the same staff

.

Capacity Limitations Conclusions

As se en in the above examples, limited space and lo ng test protocols attribute to capacity limitations in toxicology l aboratories; however, they are never the sole cause

. These issues in combination with the need for specialized or expensive equipment or diffic ult protocols that require specialized staff are the primary factors contributing to capacity constraints within a laboratory

.

Potential for Market Expansion

L aboratories in general report that they rarely hire staff or otherwise “gear up” i n anticipatio n of an increase in testing demand. Rather, they wait for demand to materialize in the form of actual contracts. If they find themselves short on capacity, they may push back on deliverable dates or reschedule work that has lower priority. Some may even of fer incentives, such as discounts, to entice existing customers to delay scheduled testing. Several CROs exhibiting at ToxExpo

40 The CRO mentioned that expanding many types of testing (not just inhalation testing) could potentially lead to the need to expand an analytical testing unit.

41 EPA, Analysis of Laboratory Capacity to Support U.S. EPA Chemical Testing Program Initiatives

. Office of Pollution Prevention and Toxics. August 30, 2004.2 0 indicated they may accumulate several months’ worth of work in backlog before hiring

, to avoid layoffs at a later date if the dem and increase turns out to be short lived

.

T he depressed and volatile state of the current economy has contribut ed to a more cautious hiring environment, according to exhibitors at ToxExpo. These statements echo those heard during the stronger economic ti mes of 2004 when EPA queried laboratories about their capacity in preparation for the HPV Challenge and REACH. 42 While laboratories remarked on their ability to quickly move into new areas of testing or expand current areas , they also noted that this

shifti ng involves incremental costs and they would proceed cautiously . Many laboratories noted the importance of “long

- term contracts” or “sustained demand for tests with the likelihood for

continued demand

, ” as stable funding is needed to allow for expan sion in to new areas of testing

or to increase their capacity within a given area of testing. Laboratories uniformly stated that the “promise of demand” alone would not lead them to increase capacity or expand in to new areas.

Many ToxExpo exhibitors mentioned tha t existing data and SAR

- based approaches were being

used to meet a substantial share of the HPV Challenge requirements, and this resulted in substantially less new business for the chemical testing industry than was anticipated

. Lab oratories in general are cautious about new initiatives generating demand for their services

. For programs like HPV, m any feel that much of the chemical data already exist s and the amount

of new testing demand created will be minimal. One lasting impact of the testing industry’s experience with HPV Challenge may be a reluctance to expand laboratory capacity to accommodate similar types of initiatives (e.g., EDSP) . A few of the CROs explained that the condition of the economy combined with the past disappointment has led them to ad opt a firm “wait and see” approach to any demand increase associated with new testing initiatives.

Assessments on REACH’s Impact

Like EPA, the European Union and stakeholders have expressed interest in the availability of laboratory capacity to meet the potential demand generated by REACH. In 2003, the European Union Commissioners were reporting that they expected European testing facilities to be able to provide only 25 to 30 percent of the testing capacity required for REACH. 43 In a 2004 survey,

Manfred Fleischer of the Social Science Research Center in Germany contacted European laboratories to assess their capacity to complete REACH tests. 44 Fleischer identified 16 test categories (shown in Table 3

- 3) as having the lowest capacity. These were the tests t hat the author felt could create bottlenecks to industry efforts to comply with REACH, assuming that a large number of substances require new testing. 45

As Fleischer points out, there are many tests (Table 3

- 3) that have a total annual capacity of less

th an 30 laboratories across all European Union labs in the study. The vast majority of these tests

42 EPA, Analysis of Laboratory Capacity to Support U.S. EPA Chemical Testing Program Initiatives

. Off ice of Pollution Prevention and Toxics. August 30, 2004.

43 EPA, Analysis of Laboratory Capacity to Support U.S. EPA Chemical Testing Program Initiatives

. Office of Pollution Prevention and Toxics. August 30, 2004.

44 Fleischer, Manfred. “Testing Costs and T esting Capacity According to REACH Requirements

— Results of a Survey of Independent and Corporate GLP Laboratories in the EU and Switzerland ,” Journal of Business Chemistry , 4(3): 96

- 114. September 2007.

45 Note: This analysis is based on the REACH proposal of 2003. E PA did not determine if some of these tests were dropped from the final regulation and/or how many chemicals would require these tests.21 are only required for chemicals with annual import and production volumes of over 100 metric tonnes because they fall under the general categories of long term aquatic toxicity , long term terrestrial toxicity , and d egradation and e nvironmental fate (many repeated dose tests also fall under this category). While many of these types of tests may compete for capacity with general SIDS testing (inhalation studies, t wo

- generation reproduction toxicity studies, and repeated dose toxicity, for example), laboratories have encountered limited demand for REACH tests because so much of the test data is already available. Additionally, as discussed in Section 2, there is lit tle evidence to suggest that extensive REACH testing will be generated in the upcoming few years that will cause further capacity issues for these “bottleneck” tests that Fleischer identifies. Finally, Fleischer’s study was not comprehensive in identifying all chemical testing laboratories in the European Union, so there is likely additional capacity available above and beyond what is presented in Table 3

- 3.

Table 3

- 3 . REACH Test Categories with the Lowest Annual Average Capacity among Europe an Laboratorie s

Test Category No. of labs performing

testing Total avg. capacity /year

in EU
Long

- term toxicity testing on soil invertebrates 2 6

Long

- term or reproductive toxicity to birds 3 9
Developmental toxicity study (rabbits), oral gavage 3 12

Sediment simulat ion testing 6 12

Long

- term toxicity testing on plants 2 12

Long

- term toxicity testing on earthworms 7 16

Bioconcentration in (one) aquatic species, preferably fish 8 19

Effects on soil micro

- organisms 7 19

Short

- term repeated dose tox icity : 28 days, inhalation (rats) 8 21

Long

- term repeated dose toxicity study (longer than 12 month) 10 21

Short

- term toxicity testing on plants 6 25

In vitro cytogenicity study in mammalian cells ( micronucleus test) 3 28

Two

- generation reproduction toxicity study, o ral gavage 11 28
Carcinogenicity study (rats) 11 29
Soil simulation testing (for substances adsorbing to soil) 7 29
Long

- term toxicity testing on sediment organisms 6 30

Source: Fleischer, 2007.22 

## 4.0 Trend s and Factors Impacting the Testing Industry

This section discusses a number of additional trends or factors that are currently impacting the testing industry, or could affect the industry in the near future. Many of these issues are linked to the overall weakness in the economy, which is leading t o reduced demand for testing or the

shift ing of activity to lower cost centers.



### 4.1 Emerging Markets

In a time when pharmaceutical, biotech, and chemical testing firms are looking to tighten their spending, shifting testing to laboratories in China or other l ow

- cost centers is being described as a very attractive option. One company exhibiting at ToxExpo, which operates laboratories in both the United States and China, explained that companies requiring toxicology testing are starting to see the use of these e merging markets as a “no brainer.” Companies contracting with

CROs are exhibiting less resistance towards using Chinese laboratories

, as the professional standards and quality of the work done in these labs has improved. Many Chinese

- based testing

faciliti es, for example

, are employing Ph.D staff educated at the same U.S. schools as U.S.

- based laboratories. Because the pay scale in China is lower, Chinese labor costs can be considerably less compared to laboratories in developed countries. One laboratory fa miliar with Chinese operations estimated that

, due to these labor cost differentials, the overall cost of testing in China

is 35 to 40 percent below that in the United States. Another lab representative estimated it to be closer to 50 percent lower. Still a nother testing firm, with operations in the United States and one other international location, is exploring development of a new facility in China to “take advantage of the new trend to outsource” to developing countries. Although China was most

often me ntioned as a new and emerging source of chemical testing service, several laboratories

also identified India as a n emerging market provider of chemical testing services

.

Despite these cost advantages, concerns remain about the standards in developing coun tries. For example, China’s reputation in the testing area has been somewhat stigmatized by the country’s export of toys containing lead and tainted pet food in 2007 . Some U.S. laboratories report their customers being more comfortable dealing with a labor atory with a U.S. or European corporate headquarters. Two companies indicated they plan to or are currently maintaining their corporate headquarters in the United States, while moving some testing capabilities to China. This allows them to capitalize on U. S. marketing opportunities while accessing the less expensive Chinese

work force.

Several CROs stated that “loyalty” and “reliability” help them maintain a constant level of demand. If a company is not comfortable with the ability of a CRO to conduct a te st , that company would either be risking their reputation by relying on these results or would have to confirm those results by hiring another CRO. Strong personal and long standing business relationships build trust, and this can help discourage companies requiring testing to change

CROs. This effect partially offsets the trend of utilizing cheaper CROs in emerging markets.23 

### 4.2 Animal Welfare Issues and Activism

During the development of the European Union’s REACH legislation, concerns about animal

welfare an d the need to develop alternative testing methodologies has been a frequent topic. At ToxExpo, o ne European laboratory noted that government research and development funding for

in vitro tests in the European Union has increased in the past couple of years while funding designated for in vivo tests, which require animals, has fallen dramatically. The representative

felt that this resulted from animal rights groups putt ing pressure on the government. Th is CRO itself has not been subject to any direct pressur e , but others have

. 46

The European Union has made several amend ments to its Cosmetics Directive ( Council

Directive 76/768/EEC ) to phase out animal testing of beauty products and toiletries. T he

amendments ban animal tests for skin irritancy, sensitivity to light, corrosivity, absorption through the skin, genetic toxicity, eye irritancy, and acute toxicity. 47 Non

- animal alternatives (primarily in vitro tests) to four of these tests have been validated and approved by the European Union, w h ile the other three are in advanced stages of review

. A deadline of March 2013

establishes a ban on several additional tests including repeated

- dose toxicity, reproductive toxicity

, and toxicokinetics

. The cosmetics industry feels it is in a difficult position since existing data may not meet the requirements of REACH and alternative tests have not been approved. 48

Both REACH and EPA encourage the development of consortia to avoid dupli cation of toxicological studies. Under REACH, a ll manufacturers and importers who have pre

- registered the same substance become participants in a Substance Information Exchange Forum (SIEF), along with any downstream users or third parties who also pre

- register the same substance. The participants of the SIEF exchange information and identify da ta gaps and needs for further studies (if any) and arrange for them to be conducted. The development of consortia should minimize the amount of animal testing that needs to be performed. The move away from animal testing and toward in vitro testing should increase overall laboratory testing capacity because, as many CROs pointed out, it is typically much easier to scale up in vitro testing.



### 4.3 Value of the Dollar

Chemical testing is a global market, in which a range of international clients seek the services of a global array of testing laboratories. Companies are typically willing to test overseas if international CROs meet appropriate standards since test data is of ten acceptable across companies; however, the value of the dollar relative to other countries’ currency could potentially impact the international demand for chemical testing.

W hen the dollar devalues against the euro, the testing prices of Europe an laboratories bec o me more expensive relative to U.S. laboratories

. Historically a weaker dollar usua lly means that U.S.

46 Sidique, Haroon, “ Animal rights activists guilty of blackmailing research lab suppliers ,” The Guardian , Dece mber
23, 2008. Available at www.guardian.co.uk/uk/2008/dec/23/animal

- rights

- activists

- blackmail

- guilty

. 47 European Commission. “Cosmetics Directive,” Availab le at http://ec.europa.eu/enterprise/sectors/cosmetics/documents/directive/

. 48 Pitman, Simon. “REACH Legislation Spell Catch 22 Over Animal Testing,” Cosmetics Design

- Eu rope.com, January 20, 2009. Available at www.cosmeticsdesign

- europe.com/Formulation

- Science/REACH

- legislation

- spells

catch

- 22

- ov er

- animal

- testing

.24 CROs observe more business fr om Europe

. While the do llar has been weak against the e uro in

recent years, CROs exhibiting at ToxExpo did not report a parallel increase in demand for testing

services at U.S. CROs

. It is likely that overal l weakness of the economic situation and the related decrease in demand for testing services overall is negating any effects related to the value of the

dollar

.



### 4.4 Economic Uncertainty

With the economy being generally depressed and the future uncertain, co mpanies tend to be very conservative with their spending. A few CROs noted a recent trend for biotech and pharmaceutical companies (from which they receive most of their testing requests) to lay off in

house employees in an effort to cut costs . Simultaneou sly, they are attempt ing to offset that loss in productivity by outsourcing a larger percentage of their work to more automated and cost

efficient CROs. The net outcome of this phenomenon is unclear since pharmaceutical companies and biotech companies are produc ing fewer drugs and chemicals for testing, yet, they are asking CROs to perform more of the associated tests on the drugs and chemicals they are producing.

Testing laboratories, even ones fortunate enough to see growth in this economic recession, h ave been very cautious with their spending as well. Companies noted that they were far from their testing capacity so were not looking to hire; however, many companies noted that hypothetically, even if they were close to capacity at this time, they would be very hesitant to hire unless they experience sustained periods of h igh demand for testing requests . One company that had done quite well through the recession noted that they did hire a new employee, but they were very cautious because of the economy

, a nd only made the offer after it became clearer that this

demand would be sustained over a long period

.

While CRO s have shown a commitment to be flexible to add testing capability for their long standing clients or clients with long term contract s , it see ms that there will be a strong hesitation to expand their total capacity especially during this time of economic uncertainty

, without the

assurance of additional long

- t erm contracts

. This means that relative to periods of greater economic stability, there would potentially be longer backlog periods before companies are willing to take the risk to hire new employees in order to accommodate testing demand.25 

## 5.0 Conclusions

This report was intended to provide a snapshot of the chemical testing industry and specif ically

those laboratories likely to support any near

- term, EPA

- generated testing on existing chemicals. Although part of this task involved efforts to identify specific laboratories that conduct SIDS testing, readers are cautioned that this report is based largely on information from only a subset of laboratories (i.e., exhibitors at ToxExpo). It was beyond the scope of work for this report to conduct a comprehensive survey of all laboratories that may support EPA

- driven testing.

Nevertheless, the results of this work indicate that sufficient capacity is likely av ailable to complete expected testing needs for the next five years, given the fact that laboratories are currently working well under capacity and the expected volume of new testing may be limited

. The one possible caveat is that implementation of the European Union’s REACH legislation

could still create a spike in testing demand. T he fact that laboratories have still not seen an influx in testing as the first registra tion deadline approaches , howe ver, may indicate that manufacturers and importers have existing data ready to submit, plan to use alternative methods (e.g., SAR) to meet the data requirements , or the number of chemicals in the largest import and production volume categor ies that need to be tested is limited

. This appears to be the case for a vast majority of chemicals in question. If this holds true, it should ultimately limit the amount of actual “new” chemical testing that needs to be done. Once again, however, it should be noted that these conclusions are preliminary and are based on limited data submitted to date, su pported by

consistent but anecdotal feedback from the commercial testing industry. In addition, it remains to be seen how much of the existing data submitted will ultimate ly be accepted by regulators. If the rejection rate turns out to be non

- trivial, there is a possibility a large volume of new testing demand may still be triggered. Given the extended deadlines for submitting the data and the

additional time needed t o eval uate the submissions, any surge in testing demand is not expected in the short term (i.e., any REACH generated testing demand will likely arise later in the

decade ) . By this time, the industry may have a better sense of the level of demand for new testing, and will have the time to adjust to it.

The testing industry in general is well under capacity and feels confident that it would be able to adjust to any potential increase in demand over a reasonable time frame. Such an expansion would only be initiated , however, once a backlog of test requests has been sustained for several months and is anticipated to continue over a long period of time. Due to their historical reliance on pharmaceutical and biotechnology client testing, few U.S. laboratories would eng age in speculative expansion in anticipation of increased future testing driven by EPA or European chemical testing initiatives. Some of this reluctance may be influenced by past experience waiting for EPA

- driven testing demand that never materialized.

C hina, and to a lesser extent India, are emerging as serious potential competitors to what has historically been a largely U.S. and European controlled market. While there are still barriers to overcome, the capabilities of Chinese and Indian CROs are quick ly approaching those of established laboratories in the United States and Europe. With labor costs representing a significant proportion of testing costs, China and India can offer similar capabilities at a much reduced cost. Manufacturer’s willingness to move business to these overseas providers will depend on China and India’s ability to demonstrate credibility and quality, and for the results of work done in their facilities to be accepted by industry stakeholders, including regulatory bodies.A

- 1 

## Appendix A : SIDS Tests and Corresponding Guidelines

Table A

- 1 indicates the specific SIDS data points included in each general category.

Table A

- 1. Data Requirements and Test Guideline for SIDS

Test Name OECD Guideline Physical

- Chemical Data Melting Point 102 Boiling Point 103 Density (relative density) 109 Vapor Pressure 104 Partition Coefficient (n

- Octanol/water) 107, 117 Water Solubility 105 pH and pKa Value 112
Oxidation

- Reduction Potential Adsorption/Desorption to Soil 106

Environmental Fa te And Pathways Photodegradation 113 Stability in Water (Hydrolysis) 111 Monitoring Data (Environment) Transport/Distribution OECD Environment Monograph No.27 Biodegradation 301A

- 301F Ecotoxicity Acute/Prolonged Toxicity to Fish 203

Acut e Toxicity to Aquatic Invertebrates (Daphnia) 202

- Part 1 Toxicity to Aquatic Plants e.g. Algae 201 Chronic Toxicity to Aquatic Invertebrates (Daphnia) 202

- Part 2 Toxicity to Terrestrial Organisms 205

- 208

- Avian Dietary Toxicity Test 205

- Avian Reproduction Test 206

- Earthworms Acute Toxicity Test 207

- Terrestrial Plants, Growth Test 208

Health Effects Acute Toxicity 402

- 403, 420

- Acute Dermal Toxicity 402

- Acute Inhalation Toxicity 403

- Acute Oral Toxicity 420 Repeated Dose T oxicity Tests 407, 410, 412, 422

- Repeated Dose 28

- Day Oral Toxicity Study in Rodents 407

- Repeated Dose Dermal Toxicity 410

- Repeated Dose Inhalation Toxicity 412

- Combined Repeated Dose Toxicity Study with the Reproduction/Developmental Toxic ity Screening Test 422

Gene Mutation in Prokaryotic Cells (bacterial) 471 Chromosomal Aberration ( in vitro ) 473 Micronucleus Test or Metaphase Analysis of Bone
Marrow Cells ( in vivo ) 474, 475

Reproduction/Developmental Toxicity Screening Test 421, 422 Developmental Study 414

- 416

- Pre

- natal Developmental Toxicity Study 414

- One Generation Reproductions Toxicity Study 415

- Two Generation Reproduction Toxicity Study 416

Sources: U.S. EPA. Guidance for Meeting the SIDS Requirements , 1998

, ac cessed February 24, 2009

. Available at
http://www.epa.gov/hpv/pubs/general/sidsappb.htm

. Organisation for Economic Co

- Operation and Development. ANNEX 1: OECD Test Guidelines for Studies Inc luded in the SIDS. Accessed February 25, 2009. Available at http://www.oecd.org/document/23/0,2340,en_2649_34379_1948503_1_1_1_1,00.html

.B

- 1 

## Appendix B: Laboratories with SIDS Testing Capabilities

The information provided in this Appendix is based on material collected from exhibitors during the ToxExpo trade show, held in Baltimore, Maryland in March 2009

. The table represents neither an industry directory nor a stat istical sample of the entire chemical testing industry.

Table B

- 1 . Laboratories with Expertise with SIDS Testing Capabilities

Lab Name Corporate Headquarters

LocationPhysical-Chemical DataEnvironmental FateAquatic EcotoxicityToxicity to TerrestrialOrganismsGeneral Acute ToxicityRepeated Dose ToxicityReproductive andDevelopment ToxicityGenetic ToxicityAnalytical Chemistry

ABC Laboratories USA X X X X X
Advinus Therapeutics Pvt. Ltd. India X X X X X X X X X

American Preclinical Services U SA X X

Apredica USA X X X X X

Aurigon Life Science GmbH Germany X X X X X X X

Avogadro USA X X

BASi USA X X X X X X

Battelle USA X X X X X

Bio Test s.r.o. Czech Republic X X

BioAgri Pharma Brazil X X X X X X X X X

BioDuro USA X X X X X X

Biological Testing Center USA X X

BioReliance USA X X X X

BioTox Sciences USA X X X X

Calvert Labs USA X X X X

Cantest Canada X X X X X

Ceetox USA X X X

Charles River Labs USA X X X X X X X X X

CIT France X X X X X X

Clintox Bioservices India X X X X X

CXR Sciences Scotland X X Development Center for Biotechnology (DCB) Taiwan X X X X

Eurofins/Product Safety

Laboratories USA X X X X X X

Fraunhofer Institute of Tox icology Germany X X X X X X X X X

Frontier Bio Sciences, Inc. USA X X X X X

Hamner (CIIT Research) USA X X X X

Harlan Labs USA X X X X X X X X XB

- 2 Lab Name Corporate Headquarters

LocationPhysical-Chemical DataEnvironmental FateAquatic EcotoxicityToxicity to TerrestrialOrganismsGeneral Acute ToxicityRepeated Dose ToxicityReproductive andDevelopment ToxicityGenetic ToxicityAnalytical Chemistry

HistoTox Labs, Inc. USA X X X Huntingdon Life Sciences England X X X X X X X X X

IDEXX Lab oratories USA X

IITRI Research Institute USA X X X X X

INA Research Inc. Japan X X X X X X

Inhalation Sciences Sweden X Integrated Laboratory Systems, Inc. (ILS) USA X X X X

ITR Laboratories Canada, Inc. Canada X X X X X

JRF International UK X X X X X X X X X

Korea Environment & Merchandise Testing Institute Korea X X X X X X X

Korea Institute of Toxicology (KIT) Korea X X X X X X

LAB Research Ltd. Hungary X X X X X X X X

MB Research Labs USA X X

Micro Constants USA X

Midwest Bio Research USA X

NOTOX The

Netherlands X X X X X X X X X

Pacific BioLabs USA X X

Phoenix Bio Japan X

ReachBio LLC USA X X

Ricerca Biosciences USA X X X X X

Sequani UK X X X X X

Singulex, Inc. USA X X X

Sitek Research Laboratories USA X

Smithers Viscient USA X X X X X X

SNBL USA USA X X X X X X

Southern Research Institute USA X X X X X X

Spring Valley Laboratories, Inc. USA X X X

SRI Internation al USA X X X X X X

Stillmeadow Inc. USA X X X X X X X

Sugi Institute of Biological Science Co., LTD. Japan X X X X

Summit PLC UK X X X X

Toxikon USA X X X X XB

- 3 Lab Name Corporate Headquarters

LocationPhysical-Chemical DataEnvironmental FateAquatic EcotoxicityToxicity to TerrestrialOrganismsGeneral Acute ToxicityRepeated Dose ToxicityReproductive andDevelopment ToxicityGenetic ToxicityAnalytical Chemistry

University of Illinois at Chicago (Toxicology Research Lab) USA X X X X X X X

Veritox USA X

Vivo Bio Tech Ltd. India X X X X X

WIL Research Labs, Inc. USA X X X X X

Wildlife International Ltd. USA X X X X X

WuXi AppTech USA X X X X X X

XenoBiotic Laboratories, Inc. USA X