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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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« Burzynski Revisited | Main | More on Chinese Pharma Espionage »

December 15, 2011

Chinese Pharma Espionage?

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Posted by Derek

That's a pretty blunt headline, but this is a pretty blunt article in Businessweek. It will do nothing to allay the concerns people have about all the pharma collaborations being done in China. The article claims that hundreds of US corporations have had data stolen in what appears to be a deliberate program:

China has made industrial espionage an integral part of its economic policy, stealing company secrets to help it leapfrog over U.S. and other foreign competitors to further its goal of becoming the world's largest economy, U.S. intelligence officials have concluded in a report released last month. . .Intelligence documents obtained by Bloomberg News show that China-based hackers have hunted technology and information across dozens of economic sectors and in some of the most obscure corners of the economy, beginning in 2001 and accelerating over the last three years.

Here's a report (PDF) from McAfee on cyber-intrusions. It doesn't mention China by name, but the author confirmed to the Bloomberg people that that's who he's talking about (not that it took any great powers of deduction). And this is not just about defense and electronics:

In the biotechnology sector, their victims include Boston Scientific, the medical device maker, as well as Abbott Laboratories and Wyeth, the drug maker that is now part of Pfizer Inc.

The hackers also rifled networks of the Parkland Computer Center in Rockville, Maryland, according to documents provided to Bloomberg News by a person involved in government tracking of the cyberspies, who declined to be identified because the matter isn't public. Parkland is the computing center for the Food and Drug Administration, which has access to drug trial information, chemical formulas and other data for almost every important drug sold in the U.S.

Now that's worth thinking about. By the time a drug gets to the FDA, everyone knows what its structure is, and can figure out how to make it. But there's a lot of clinical information in the system that doesn't necessarily get disclosed in detail, and that certainly has value. It should go without saying, though, that the files from inside a drug company could be quite valuable indeed.

And this does put the recent pharma emphasis on the Chinese market in an interesting light, doesn't it? As I say, I hate to be so direct about it, but you can't get much more direct than hacking into someone's files and ransacking them, either. Right?

Comments (54) + TrackBacks (0) | Category: Business and Markets | The Dark Side


COMMENTS

1. ChrisL on December 15, 2011 9:37 AM writes...

"By the time a drug gets to the FDA, everyone knows what its structure is, and can figure out how to make it." This is definitely not true. In fact my guess is that the vast majority of phase I and a lot of phase II compounds are only identified by an identifier number in a biotech company press release and they show up with the same uninformative company identifier number on clinical trials.gov. It staggers me how anyone would agree to be a subject in a clinical trial without knowing the structure of the compound they were getting. This full disclosure idea just does not cut it if you are a person who thinks chemistry structures.

Permalink to Comment

2. anchor on December 15, 2011 9:52 AM writes...

So, what else is new? This is on top of what our able CEO are giving it to them on a platter. As an ex-pharmaceutical scientist, I can tell you that some Chinese were fired in our company for doing just that.

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3. You're Pfizered on December 15, 2011 9:53 AM writes...

It staggers me how anyone would agree to be a subject in a clinical trial without knowing the structure of the compound they were getting.

Do you really think most people who take marketed drugs know what the structure of those drugs are? Even if they did, unless they had a degree related to chemistry or pharmacy, would it even matter?

As for the article, does this really surprise anyone? Are there any medicinal chemists out there who don't believe that our CRO 'partners' aren't gathering data, compounds and the like for their own uses? I've heard of two instances where proprietary compounds being made for different companies ended up in a foreign monomer catalog.

By all means, though, let's continue to work with them and expedite the transfer of information.

Permalink to Comment

4. anchor on December 15, 2011 9:54 AM writes...

So, what else is new? This is on top of what our able CEO are giving it to them on a platter. As an ex-pharmaceutical scientist, I can tell you that some Chinese were fired in our company for doing just that.

Permalink to Comment

5. Quintus on December 15, 2011 10:00 AM writes...

So what's new? This was always going to be. We are making it easy for them by outsourcing everything to that country. At least in Pharma they don't need to hack into the systems.

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6. Just sayin' on December 15, 2011 10:06 AM writes...

Some gems from the cited article:

"Based on what is known of attacks from China, Russia and other countries, a declassified estimate of the value of the blueprints, chemical formulas and other material stolen from U.S. corporate computers in the last year reached almost $500 billion, said Rogers, a former agent for the Federal Bureau of Investigation."

"Two years later, Chinese rescue workers were using satellite communications equipment made by the Danish technology firm Thrane & Thrane AS following a major earthquake in Sichuan province. China Daily, the quasi-official newspaper, had praised the Danish equipment's performance. Alperovitch said the Danish firm was hacked by the Shady Rat crew three months later."

“With fans like those, who needs enemies?” he said.

Now I understand why Big Pharma is setting up major research operations in China: to put the hackers out of business by fostering domestic creativity!

Permalink to Comment

7. hairgreen on December 15, 2011 10:21 AM writes...

It sounds like American pharma-corps has never done espionage before, LMAO, I always thought espionage is the staple of American pharma-business. I for one am tired of these countless waves of "china-threat" propaganda. They espionage us, then we espionage back, business is business.

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8. Laurent Wada on December 15, 2011 10:29 AM writes...

Why do these guys have MFN status? If this was a state-sponsored program, then it should be treated as an act of war, yet we constantly reward their bad behavior. We buy their products, we educate their students, and we get poisoned and ripped off!

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9. You're Pfizered on December 15, 2011 10:33 AM writes...

I for one am tired of these countless waves of "china-threat" propaganda. They espionage us, then we espionage back, business is business.

This game only works if the people you are spying on have something that is better than what you already have.

What exactly does China have from a technological/IP standpoint that is better than what the West has? Better T-Shirt factories?

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10. Flyoverguy on December 15, 2011 10:44 AM writes...

Although not directly related to the electronic lifting of info/IP, I am reminded of another concerning bit of hearsay that I am hoping to find info about:

I was talking to a friend who has worked in both India and China and I was left with the impression that in China, there is a program where every CMO/CRO has to submit samples of intermediates and final products they synthesize for customers into a central depot. I don't have any insight into what the final purpose of the samples are for, but it seemed as though this was done no matter what IP agreements are in place and is not necessarily disclosed to customers. It may technically be "voluntary", but supposedly in practice, it is compulsory if you want to be a successful Chinese CMO.

I do know that many of the biggest CMO/CRO's are beneficiaries of huge amounts of infrastructure and direct salary support from the Chinese government ("investments" made before they had any large customers, by the way). So it would seem that most of the large CMO's/CRO's are directly beholden to the government and any programs they may initiate.

True or conspiracy theory?

Permalink to Comment

11. hairgreen on December 15, 2011 10:45 AM writes...

@pfizered Actually the last time I checked, some Chinese high-tech companies are becoming major international competitors, given the CHinese government actually INCREASED their funding for research. Also, the last time I checked, you Americans seem to owe the Chinese several trillion dollars. Maybe before you accuse them of espionage, you'd better pay off your loans.

Permalink to Comment

12. hairgreen on December 15, 2011 10:47 AM writes...

Look, I'm not being pro-China or anti-America here. Both governments are assholes. Live with it.

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13. Peter Medawar on December 15, 2011 10:57 AM writes...

What proportion of pharma statisticians are Chinese or Indian natives?

Just asking!

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14. KissTheChemist on December 15, 2011 11:00 AM writes...

@hairgreen This is clearly an easy target for the xenophobic, that much is true. But clearly the point here (which a few people here seem to be missing) is that competition is not truly competition unless all sides respects the law. For me, at least, the more worrying part is not hacking or even outsourcing but the fact that the illegal procuration of IP may be state sponsored.

Permalink to Comment

15. hair on December 15, 2011 11:09 AM writes...

@kisschemist I agree with everything you say, but that's the reality. The Chinese is always going to be that way as long as the commie is in power, whereas the American government is basically a wall-street puppet.

Permalink to Comment

16. Anonymous on December 15, 2011 11:10 AM writes...

It always makes me laugh that these complex, long-winded confidentiality agreements are painstakingly put in place for outsourced projects to China / India when everybody knows what happens in 90% of cases. Frankly, I don't even blame the Chindians. You reap what you sow. At least it keeps the lawyers busy...

Permalink to Comment

17. AMRI'zed on December 15, 2011 11:27 AM writes...

See...... None of this ever going to stop the corporate out souring/off shoring their commoditized cog Job. We can run around, Whine, Beat ourself to death. But, once the domino trend to move to East started, its very unlikely that its going to revert back to west.

Corporations would just have to start to invest more in technologically driven solutions to address these Espionage issues. (which I am sure they would be more than happy to do)

It's like investing Billions of dollars in Carbon Capture Technology, When we all know the easy answer is to plant more trees.

Its called the "Endless loop of Technology/Science myth"

Permalink to Comment

18. Anonymous on December 15, 2011 11:30 AM writes...

Given how badly Big Pharma is run -well, I can speak for GSK anyway after working there for a number of years-, the Chinese, or anyone else for that matter, are not going to learn much. In fact, maybe it's all a western plot to ruin their nascent pharma industry by exporting the "empty suit" business model to them!

Permalink to Comment

19. pete on December 15, 2011 11:34 AM writes...

Bright side: 10 years down the line there'll be a lot of CRO work for you & me as Chinese pharma execs get impatient with their own domestic attempts to capitalize on this wealth of pharma intelligence. But first, you'll have to sign an NDA.

Permalink to Comment

20. dearieme on December 15, 2011 11:47 AM writes...

Thank heavens no Americans ever behaved like this when the USA was trying to catch up with Britain or Germany.

Permalink to Comment

21. johnnyboy on December 15, 2011 12:25 PM writes...

re #18: "Given how badly Big Pharma is run (...), the Chinese, or anyone else for that matter, are not going to learn much."

That's what I wanted to say - if pharma companies can't seem to develop drugs with all the research they're doing, the chinese can hack into whatever company files they want, it's not going to lead to much...
Maybe this espionage might help to push their own drug programs further along, but whatever drug they might get out of it would be limited to their own internal use, rather than competing with western pharma on western markets.

Permalink to Comment

22. johnnyboy on December 15, 2011 12:47 PM writes...

Also, for a quick introduction to US-government backed industrial espionage (against europe, not china), you could start here:
http://news.bbc.co.uk/2/hi/820758.stm

Permalink to Comment

23. CR on December 15, 2011 12:58 PM writes...

@#11, hairgreen:
"Also, the last time I checked, you Americans seem to owe the Chinese several trillion dollars. Maybe before you accuse them of espionage, you'd better pay off your loans."

This might be the most absurd statement yet. How does owing money to a country not allow one to accuse it of wrongdoing? Can we not state the truth because we owe them money? Can we not talk about abuses and espionage? China is guilty of all of these, money not withstanding.

Permalink to Comment

24. Roger on December 15, 2011 1:25 PM writes...

Every Chinese graduate student in the USA is a potential spy. Based on the harsh criticism of the USA from the Chinese students I've heard, I have no doubt at least some of them are e-mailing their notebooks back to China.

Why does the USA allow the rape of US taxpayers money? Because corrupt faculty want to fill their labs with cheap labor that works for peanuts.

Why shouldn't grad students make 60K if they're the ones coming up with the ideas and doing the work? The chemistry degrees are now mostly useless.

But hey, there's an infinite pool of labor in China. Let's use those guys to justify our bloated faculty benefits.

Permalink to Comment

25. Sundowner on December 15, 2011 1:31 PM writes...

So, what else is new?

They have been doing it for years without hacking. Do you really need an official report or a journalist to say you what everybody knows? I know two real cases, told by the victims themselves.

Permalink to Comment

26. Aspirin on December 15, 2011 2:08 PM writes...

The real question is, are these isolated groups or are they explicitly or implicitly backed by the state? The real zinger would be knowing the amount of government involvement.

Permalink to Comment

27. RB Woodweird on December 15, 2011 2:18 PM writes...

Two reports, each from companies with internet security products to sell, each one warning that there is disaster ahead with the implication that their products and services are needed immediately and in great quantity.

Permalink to Comment

28. Tim on December 15, 2011 2:28 PM writes...

"They have been doing it for years without hacking."

Everyone in the pharmaceutical business should know from experience that this is true.

When a former colleague left our company to return to China to work for a small CRO, it did not surprise me one bit when that company sent us (and surely many others) advertising material containing text quoted word-for-word from our confidential non-public internal presentations and revealing our previously-undisclosed chemical structures. When confronted about it, our former colleague did not see anything wrong with what he did, replying bluntly that this is how business is done in China and it is not considered unethical.

From a business point of view, one must assume that any information shared with a Chinese partner company, or had access to by an individual who is now employed by such, is no longer confidential or private.

Cultures around the world are different, and the concept of "intellectual property" is not universal. Western companies who conduct business with Asian companies must always keep this in mind.

Permalink to Comment

29. RealityCHK on December 15, 2011 3:01 PM writes...

Roger #24 and others:
"Every Chinese graduate student in the USA is a potential spy" We should not put blame like this. This is not right or ethical.
However, I sometimes wonder we Americans are very innovative people, how come we do not understand simple things. Several times it came about 'confidentiality breach and stealing info'. Remember Hainan Island incident! or you just google, you will come across several news like http://www.bbc.co.uk/news/business-15362815.

When are we going to learn? We want to trade our valuable innovative ideas for cheap labor! Answer so far looks 'yes' to me. Than we should not worry about anything.

Solution is simple, bring back our R&D stuff to US, and outsource only simple precursors? However, who is going to implement this? Obama!!

Permalink to Comment

30. MoMo on December 15, 2011 4:32 PM writes...

Americans need to grow a spine on this topic. They are communists looking to spread their doctrine and Pharma is just one industry that is being bled Red.

For all you purists out there, the civility of any culture rests on how they treat their children.

But then the slave labor using 8 year olds to manufacture American goods is hardly talked about in this blog- Is it? And what happens to these children if they don't perform?

Take a guess America.

All correspondence is scrubbed going in and out of China, as it is internally.

Permalink to Comment

31. Mike on December 15, 2011 5:15 PM writes...

"RealityCHK"

Like anyone cares what you think? Your pidgin English underscores the vapid nature of your anti-American, pro-Chinese rhetoric.

America for Americans. Love it or leave it.

Permalink to Comment

32. Meltdown on December 15, 2011 6:30 PM writes...

#31 Mike : Define Americans?

Permalink to Comment

33. Susurrus on December 15, 2011 6:51 PM writes...

You get what you pay for. I learned that from the Chinese made HO train set that I bought for my son (it's going back - shipped broken). When western-hemisphere pharma is gone, a few (hundred?) thousand people will have to learn the hard way what Chinese pharma can provide (growing a third arm in the middle of your back). Sorry for the parenthetical remarks (I can't help it).

Permalink to Comment

34. Anonymous on December 15, 2011 7:14 PM writes...

# 27 RB woodweird. THIS! Question where the information comes from.

But food for thought. You think the bench chemists over at WuXi give a damn about your IP?

Boeing is a great example. As a result of outsourcing manufacturing, China is now building air planes.

Nothing wrong with it. It's just funny how companies choose to outsource their core competencies for a quick buck. I thought they taught that in business school.

Permalink to Comment

35. RD on December 15, 2011 8:12 PM writes...

The funny thing is that it's often harder for the internal researchers to access the data than a chinese hacker. The IT department gets paid the big bucks to keep IE6 up and running and to crackdown on users with insuffient privileges to configure their desktop backgrounds.

Permalink to Comment

36. ReneeL on December 15, 2011 8:14 PM writes...

I know an epidemiologist who used to work in the Dept. of Health and Human Services in DC, in a section that studied the spread of infectious diseases. One day about 2 years ago, the CIA showed up to inform her and her collegues that their computers had been hacked by the Chinese government, who apparently thought such information would be useful. The CIA took the computers away (I guess they got new ones).

I have, to be fair, never heard of the Chinese government hacking into the computers at the Environmental Protection Agency. They'd probably consider any info there worthless.

Permalink to Comment

37. Aspirin on December 15, 2011 9:01 PM writes...

I heard that China has even copied Apple stores in all their gory details. A store manager who visited told me he could not make out the difference between the layouts.

Permalink to Comment

38. Chuck Fina on December 15, 2011 9:36 PM writes...

My name says it all.

Permalink to Comment

39. Anonymous on December 15, 2011 9:41 PM writes...

@11-Regarding the loans to China.

America would NOT owe such large amounts to China if China had not used a 'beggar-thy-neighbor' economic policy to increase their exports unfairly. They bought US securities as quickly as they could and then increased Chinese reserve ratios to ensure the yuan would not increase against the dollar. They offered those home loans to those who were not qualified in the US which created the largest housing market bubble in history. If China had not MANIPULATED currency for years, they would not have gotten all those outsourcing contracts and the KNOWLEDGE that they stole with them. The only reason China is upset now is because the World Trade Organization is telling them that they have to stop their currency manipulation because they are now a developing market and a member of the WTO. China created the economic problems in the US and in Europe through currency manipulation. Not through innnovation or competitiveness. Through their government's need to prove that their country will dominate all no matter what it does to the Chinese people or the world for that matter.

If you want proof of esponiage you need look no further than reading Wuxi's English website (describing them as a service provider) and comparing that with Wuxi's Chinese website (describing them as a leading pharmaceutical company).

Permalink to Comment

40. Chuck Fina on December 15, 2011 9:48 PM writes...

@39

Amen!

Permalink to Comment

41. Anonymous on December 15, 2011 10:06 PM writes...

China games the system for the same reason that anyone games the system. They do not share the values that make great nations great. The Chinese government is communist, and communism is about power and authority at the expense of the individual.

Permalink to Comment

42. hair on December 15, 2011 10:30 PM writes...

@39 You talk like you are the only one in the world that knows this. The US government is not stupid. They know about the currency manipulation all along. But big pharma needs cheaper labour and bigger markent, so I guess the folks at the white house decided it's ok for the Chinese to rape the American working class as long as the Chinese market can sustain the billionare life style of a few CEOs. O BTW, you really sound like those rednecks who hate the Mexicans because "they took our jobs". Listen up, if your government is ballz enough to punish companies that pay foreinger with lower-than-minimum wage, your country would not be in the shithole that you are in right now. Same as this Chinese problem. If your government can grow some ballz and put the interest of the American working class before that of the CEOs, for just once, then we wouldn't even have to discuss this today. Blame your government first before blaming the Chinese spies.

You can talk about shitty products, lousy human rights, and dirty plays. But let me tell you this, in the end of the day, the rich rapes the poor. That's life everywhere on this planet. If you Americans don't like it, then become more intelligent and outsmart the Chinese and take back your money. And quit bitching about how the Chinese screwed your country over. It's your own fault that you voted a government that is stupid enough to get screwed over by the Chinese government.

Permalink to Comment

43. hair on December 15, 2011 10:34 PM writes...

uncle sam: hey china stop spying on our business. I mean it this time.

chairman mao: o then get your american sweatshops out of my country.

uncle same: o sorry, those sweatshopts are owned by my bosses. they hit me if you upset them.

Permalink to Comment

44. Anonymous on December 15, 2011 11:04 PM writes...

@42
Yes, everyone knew China was manipulating currency. In order to compete costs need to be the most efficient as possible. The only reason why China got away with it before is because they were poor and the rest of the world thought it was OK to help out a developing country. Blame yourself, not your government or corporate America. Americans buying the cheapest crap they can find lead to a lot of these problems. (But then again there was a lot of LYING by China about the safety of these products. I don't believe Americans would by LEAD paint toys if they were not lied to). I boycott Walmart - do you?

But now China's economy has grown enough that it is part of the WTO. Want to be a big boy? Gotta play by the big boy rules.

Funny thing is that the country that is going to get burned the most by China's unfair practices is indeed CHINA! Their economic policies are not sound. They copied pieces of how the US and Germany grew into economic powers, but China left out everything from those plans to do with ethics and sustainable economic strategy. If China was so smart, you think they could have at least copied other people's economic policy correctly? Guess they were too busy making up false economic data to publish to show how they are so 'superior' and 'innovative'. Such a joke to the world too, because for every international transaction there are two sides. Everyone knows China is faking their numbers!

Permalink to Comment

45. hair on December 15, 2011 11:14 PM writes...

@44 It's the political apathy of the American voters and the short-sightedness of the American government that led to this dillema.

I wouldn't go as far as calling China "faking numbers" but essentially they are, or will be, in the same shithole as the US is in right now. The difference? The Americans are raped by the big corps, whereas the Chinese are raped by the communist elites.

Permalink to Comment

46. a Chinese CRO on December 16, 2011 12:22 AM writes...

Every nation, every country has flaws and despicable persons, including the country you are from. Please don't wear colored glasses to judge a nation like that. Once you do that, you lose my respect.

China is a developing country and we do have issues. But we work so hard to improve ourselves. I work for a biology CRO. We treat every project so seriously and do our best to deliver the best service at low cost to our client. We sign confidentiality agreement with each partner before start collaboration. It's illegal to leak client's data, let alone stealing.

If you don’t trust Chinese CRO, the easiest way is don’t come to China. But before you make any judgment and conclusion, please make sure you are based on facts, not on illusions or hearsays.

Permalink to Comment

47. Herman Cain The Chemist on December 16, 2011 12:48 AM writes...

If your computer network gets hacked, blame yourself. If your company's IP gets stolen, blame yourself. What happened to the novel idea of taking the responsibility for your own action? Stop being a whiny baby and pointing fingers at every one else but yourself when something goes wrong. Whining gets you nowhere. Build a better firewall so your network CAN'T be hacked. Design a better system so your IP CAN'T get stolen. If your enemy is better than you, admit it. If you are better than your enemy, prove it. This is true for a country, corporate, and individual.

Permalink to Comment

48. A Chinese Chemist on December 16, 2011 3:04 AM writes...

This blog now become a site of losers. Dr. Lowe' is a respected medicinal scientist, but there are more and more negative subjects about China because the US pharmaceutical industry is losing its glories. These ignorant comments let me know why US is going down. You can not get the information only from publisher. There is a kind of news called propaganda. The news recommended is obviously for security softwares. By the way, Every country including China and USA are collecting information. CIA is the biggest organization doing this work in the world. Business is business, not politics. Blaming the competitor is not a confident behavior.

Permalink to Comment

49. processchemist on December 16, 2011 7:03 AM writes...

@49

In a "mors tua, vita mea" context you can't complain about the content of many posts. The collective technical value of an industrial sector must be calculated from an history of achievements, not only by a couple of annual turnovers.
There's an ongoing economic war, and wars are not fair: complaints from the side of the apparent winner are out of place...

Permalink to Comment

50. Anonymous on December 16, 2011 8:25 AM writes...

@50
The problem with your argument is that the rest of the world plays by certain rules. This is part of being a civilized, lawful society which cares about the good of all participants in the economy. The US and Europe work toward free trade for the good of the world.

China does not play by the rest of the world's rules. They ignore IP, steal IP, spy, and currency manipulate. China perverses free trade through actions considered illegal and unethical to the developed world.

Permalink to Comment

51. CR on December 16, 2011 9:11 AM writes...

@26, Aspirin:
"The real question is, are these isolated groups or are they explicitly or implicitly backed by the state? The real zinger would be knowing the amount of government involvement."

All of them are explicitly backed by the state.

Permalink to Comment

52. Herman Cain The Chemist on December 16, 2011 9:30 AM writes...

Imitation is the sincerest form of flattery. This proves that we are still most advanced country in the world. The strongest kid gets sucker-punched by a new kid on the block from time to time.
Instead of whining, the strongest kid should fight back like a gentleman - fair and square. Whining only confirms that we are getting fat, lazy, and sloppy. Stop whining and go build a better mouse-trap. For those sore losers, call 1-999-free-diapers for home delivery of your custom-made adult diapers (proudly made in China for Big Evil Corp of America, Inc.). This is Herman Cain and I approve this message.

Permalink to Comment

53. MoMo on December 16, 2011 10:21 AM writes...

Nobody's whining about the Chinese in my world, I've had many Chinese scientists in my labs and I pick the fakes and charlatans out and send them packing. The real ones that know they are oppressed are thankful to interact with honest and loyal Americans and I've had several convert to US citizen status.

So listen up China. Some of us do more than whine and your days of free reign in America are numbered.

We see what you do and we know who you are.

Permalink to Comment

54. III on December 28, 2011 11:46 AM writes...

This can't be happening!

Permalink to Comment

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