Protecting Trade Secrets
The pharmaceutical industry worries that sampling and analysis used during on-site inspections could jeopardize industrial trade secrets. The chemical industry initially had similar reservations about the intrusive inspections allowed by the Chemical Weapons Convention. For example, inspection of a chemical plant might reveal a proprietary manufacturing process that provides a small but significant competitive edge, such as lowering production costs of a commodity chemical by a few cents per ton. In the pharmaceutical and biotech fields, however, the financial stakes are much higher. Because drug development is so research-intensive, it costs a large pharmaceutical house between $350 million and $500 million to bring a new product to market. According to the Pharmaceutical Research and Manufacturers of America, an industry trade association based in Washington, U.S. pharmaceutical manufacturers spend 19.4 percent of sales on R&D, compared to an average across all industries of 3.8 percent. U.S. drug companies also lead the world in innovation, accounting for 36 percent of global pharmaceutical research and development.
Biotechnology-based medicines represent a major growth sector for the U.S. pharmaceutical industry. In 1995, U.S. firms and organizations were responsible for about 80 percent of patents for genetically engineered health-care and pharmaceutical products issued by the U.S. Patent Office. From 1989 to 1996, the number of biopharmaceuticals being developed by U.S. companies to treat diseases ranging from the common cold to cancer soared from 80 to 284. Over the same period, the number of U.S. companies developing new-generation biotechnology drugs more than doubled, from 45 to 113.
Biotech companies fear that foreign inspectors visiting their plants could gain insight into their production techniques or even obtain a covert sample of a genetically engineered microorganism, whose proprietary DNA sequences could then be determined. Such information can be worth vast sums. For example, the genetically engineered bacterium that produces human insulin is valued at more than $1 billion, according to Lilly’s Muth. With such huge investments at stake, the U.S. pharmaceutical industry is determined to protect its confidential proprietary information.
Most pharmaceutical industry representatives endorse the concept of “managed access,” an approach developed for on-site inspections under the Chemical Weapons Convention. In this procedure, the inspection team and the host country negotiate the amount of access to be provided to sensitive areas of the inspected site. For example, facility managers might turn off computers, lock up documents, place cloth shrouds over items of production equipment considered proprietary, and specify where and when samples may be taken. In return for such limits on access, the inspected party must make “every reasonable effort” to provide alternative means of addressing the inspectors’ compliance concerns. For example, the inspectors might ask the facility representative to lift the shroud covering a piece of equipment high enough to confirm that illegal materials are not hidden underneath, or to review the plant’s production records. Failure to cooperate with such requests might lead the inspectors to suspect the facility of concealing illicit activities.
Some arms-control analysts doubt that managed access will be effective in catching BWC violators because it assumes a large degree of good faith and cooperation on the part of the inspected party. “Managed-access negotiations could create delays that, unless overcome by technology or diplomacy, might allow proliferators to dispose of incriminating evidence,” contends Michael Moodie, president of the Chemical and Biological Arms Control Institute in Alexandria, Va. For example, a violator might use the managed-access negotiation as a pretext to stall the inspection long enough to eliminate most if not all traces of illicit biological agent production. Auditing of production records, critics say, would not resolve compliance concerns because such records can be falsified.
Critics of managed access have suggested alternatives that would protect corporate proprietary information while also increasing the likelihood of detecting illicit production. The inspected facility might, for example, provide escorts for the inspectors to keep them from touching equipment and taking covert samples. In addition, inspectors could be required to remove their street clothes and don disposable coveralls, booties, head coverings, and surgical masks, all of which would be destroyed after use. The inspectors would also shower after each inspection to make sure they do not remove proprietary microorganisms on their skin. Finally, the inspected facility would have the right to demand the removal of any inspector caught taking unauthorized samples.
As a further means of safeguarding proprietary production microorganisms, the Federation of American Scientists Working Group on Biological and Toxin Weapons Verification has proposed that personnel at an inspected facility could inactivate sampled microbes by heating them, and then partially digest the microbial genes with a special “restriction enzyme” to disrupt any confidential DNA sequences. Only then would the inspectors be allowed to verify the identity of the microbe or to screen for a list of biological-warfare agents with gene probes and immunoassays. In principle, the restriction enzyme would destroy proprietary information but leave enough characteristic DNA sequences to verify the identity of an illicit agent. This approach will need to be validated, however, both in the laboratory and in the field.
A number of government and commercial organizations are developing chip-based sensors containing an array of gene probes for detecting microbial pathogens and toxins of biological-warfare concern. Such devices might eventually be cheap enough to discard after use, like a disposable pregnancy-test kit. This approach would reassure the pharmaceutical industry, which fears that reusable analytical instruments accompanying an inspection team could, deliberately or inadvertently, remove samples containing proprietary microorganisms.
In crafting a set of on-site measures for monitoring BWC compliance, the Ad Hoc Group will need to balance costs and benefits. While technical and political constraints may circumscribe the use of sampling and analysis during on-site inspections, the mere possibility of sampling could deter potential violators by making illicit production more risky and expensive and by necessitating aggressive cleanup measures that would themselves arouse suspicion. At the same time, devising approaches to sampling and analysis that can safeguard legitimate industrial or national-security secrets remains a major challenge. Over the next few years, however, the development of accurate but inexpensive biosensors for the identification of microbial and toxin agents may make it easier for the Ad Hoc Group to find an acceptable tradeoff between these competing objectives.
The biotech and pharmaceutical industries have a huge stake in the outcome. So far, companies have mainly played the spoiler, complaining that proposed verification methods would intrude on their proprietary rights. They need to become more constructively involved. The biological weapons threat to international security has made it imperative to institute verification measures that will fortify the BWC, converting it from a gentleman’s agreement into enforceable international law. Companies that have the most to gain from biotech innovation-and the most to lose from unwanted disclosure of their trade secrets-need to help find suitable ways to allow international inspections of their production facilities without compromising the economic health of a leading U.S. industry.