China cracks down after Zheng execution
Former SFDA head pays supreme penalty for corruption
Fake food ingredients and drugs from China have become a major issue in many Western markets, after the execution of the former director of the Chinese State Food & Drug Administration (SFDA) was followed by a number of product scares. However, it is still full steam ahead for many companies in this field outsourcing to China.
Zheng Xiaoyu was executed for corruption
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Fake food ingredients and drugs from China have become a major issue in many Western markets, after the execution of the former director of the Chinese State Food & Drug Administration (SFDA) was followed by a number of product scares.
However, it is still full steam ahead for many companies in this field outsourcing to China.
Zheng Xiaoyu was executed for corruption
Zheng Xiaoyu, 62, was executed by shooting on 10 July for accepting bribes and dereliction of duty.
The Supreme People’s Court of Beijing had earlier dismissed his appeal against the sentence handed down by the No. 1 Intermediate People’s Court on 29 May.
Although the death penalty is common in China, Zheng is the most senior figure to be executed in seven years and only the fourth senior official since the Cultural Revolution era. Whilst his guilt and the fact that his conduct was directly responsible for dozens of deaths were both indisputable, some regard his execution as mainly a warning to others.
“As a case study of a party member and leading official breaking the law and committing crime, the Zheng Xiaoyu case offers profound lessons that all public servants, especially leading officials at every level, should take to heart,” the People’s Daily said.
The sentence also reflects China’s increasing concern over its tarnished image in the global pharmaceuticals and food ingredients industries.
In recent years, fake and contaminated food and drugs have been implicated in many deaths and illnesses, both in China and abroad.
Despite its huge growth as a pharmaceutical outsourcing destination, China still has a bad reputation as a source of counterfeit drugs and a location with a high risk of IP leakage. Many within China see this as the country’s key weakness in competition with India and other emerging nations.
Zheng, who held his position from 1998 to 2005, accepted cash and gifts worth over €630,000 from eight companies between 2001 and 2003 for approving drugs and medical devices without the required tests. At least six have proved to be counterfeit or tainted. Prominent among the companies was the Hainan Kongliyuan Group, for whom Zheng approved 277 antibiotics and other drugs.
Zheng’s powers had increased substantially from 2002, after the government imposed a requirement for the SDFA to approve all drugs. This caused bottlenecks in the system and consequently increased both the opportunity and the impetus for graft. He was dismissed in 2005 and detained in February 2006 after an investigation into corruption at the agency.
Although Zheng freely confessed to his crimes and tried to return some of his gains, the Xinhua news agency said that the sentence was appropriate: “Zheng’s dereliction of duty has undermined the efficiency of China’s drug monitoring and supervision, endangered public life and health and has had a very negative social impact,” it quoted the court as saying.
Cao Wenzhuan, who was Zheng’s secretary and director of the Pharmaceutical Registration Department, is also under sentence of death for taking €307,000 in bribes to approve drugs between 2002 and 2006.
This sentence has been suspended, however, and will probably be commuted to life imprisonment. Some 30 more senior SFDA officials, including Zheng’s wife and son, are under investigation.
The SFDA has now admitted that these scandals “have revealed some very serious problems”, that its regulatory effort has been “unsatisfactory” and that regulation must be tightened in many areas. About 170,000 medical licences that were issued during Zheng’s reign are now being reviewed.
During 2006, at least 11 people died in China after taking an antibiotic called Xinfu that had not been properly sterilised, while at least 13 babies died of malnutrition in Anhui province in 2005 after being fed fake milk powder. There have been many more mass food poisoning scandals, with thousands falling ill.
Abroad, over 100 people died in Panama in 2006 after taking cough syrup, antihistamine tablets or calamine lotion sourced from China in which glycerine had been replaced by diethylene glycol (DEG).
In March, pet food imported from China that was contaminated with melamine caused a major product recall in the US. A number of warnings have been issued at federal and state level in the US about possible contamination of fish products from China.
In early July, Spanish and Portuguese authorities withdrew two brands of toothpaste imported from China after traces of DEG were found in them. Consequently, other EU members are obliged to take follow-up actions and report on what they do to the EC. By 12 July, Italy had ordered recalls. DEG was also found in the UK in fake versions of a GlaxoSmithKline (GSK) toothpaste.
This all followed on similar findings of contaminated toothpaste in Australia and several Latin American nations. Shipments to the US have been halted pending investigations into alleged contamination with toxic chemicals and the FDA has advised consumers not to buy toothpastes labelled as being made in China for the time being.
Last year, the European Fine Chemicals Group (EFCG) and SOCMA issued a joint position paper to highlight the dangers fake drugs pose to public health. More recently, the EFCG and the APIs Committee, another sector group within CEFIC, put forward a position paper to the European Parliament calling for more action.
A ruling from the EC is expected in early 2008.
The Chinese government is now acting to tighten up regulation and implementation in both industries.
In the past weeks, the State Council has announced that it will put new controls on the imports and exports of food and drugs, increasing inspection levels from 30% to 80%.
Since Zheng’s conviction, the SFDA has frequently carried out unannounced inspections of pharmaceutical facilities.
Some 15 GMP certificates were revoked and 13 other firms ordered to put sub-standard practices right in a blitz of activity by 90 SFDA officials during June.
After joining the TRIPS agreement in 2001 as part of its entry into the WTO, China has at least theoretically implemented international standards, including GMP and ISO.
This has been hard to achieve on the ground, however, at a time of staggering economic growth. SFDA officials admit that they face a huge task to improve safety standards across the country.
“As a developing country, China’s food and drug supervision began late and its foundations are weak,” said SFDA spokeswoman Yan Jiangying. “Therefore the food and drug situation is not something we can be optimistic about”.
Meanwhile, the Finance Ministry has recently removed or reduced tax rebates on some 3,000 export categories in a bid to remove its massive trade surplus.
The cost of exported products should rise by about 8-15%.
APIs, intermediates, bulk drugs and other chemicals are affected, with the rebate falling from 13% to 5%. Chinese exhibitors at Chemspec Europe said that this would have a major effect on their business.
Nonetheless, many Western pharmaceuticals and fine chemicals firms continue to invest heavily in China, which – alongside India – is forecast to take 35-40% of the global pharmaceutical manufacturing.
GSK, Novartis, Genentech, Eli Lilly and Lonza are among many to locate not just manufacturing but commercially sensitive R&D in China in recent years, despite the IP issues.
In July, AstraZeneca revealed plans to make China the heart of its API sourcing.
Following on from a €75 million investment on an R&D centre in China in May 2006, the firm established a sourcing centre in Shanghai earlier this year which will find APIs, intermediates, contract R&D services, chemicals and laboratory equipment for the global business.
In the long term, the centre will account for some 90% of all global purchases. Hitherto, it and another sourcing centre in Bangalore, India, were responsible for only about 10%.
AstraZeneca, which traditionally made 85% of its own APIs, will exit API manufacturing over the course of the next five to ten years. It aims to save about 10% of its €6.6 billion/year purchasing. The firm has since announced some 4,300 job cuts on top of 3,300 already planned.
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