China Drugs: A Cautionary Tale

Contamination Case
Underlines Risks
Of Outsourcing

By NICHOLAS ZAMISKA and AVERY JOHNSON
January 31, 2008; Page A11

HONG KONG — A contaminated anticancer drug made by one of China’s largest pharmaceutical companies underscores how quality-control problems continue to plague the Chinese drug industry. There is no sign the tainted leukemia drug was exported. But the case provides a cautionary tale as Western pharmaceutical companies start outsourcing some manufacturing to China.

Last June, Yan Zhenni, a 5-year-old with leukemia from Shanghai, received a shot of the anticancer medication methotrexate. But the drug meant to treat her left her incontinent and unable to walk on her own, her mother says.

• The News: A leukemia medicine made by a unit of one of China’s largest drug companies was found to be contaminated.

• The Big Picture: Although no tainted products were exported, the case highlights quality-control problems in China’s drug industry as Western companies look to produce more medicines there.

Possibly dozens of patients across China who took the drug from the same Chinese factory had similar problems. The drug’s manufacturer initially said the reactions might be a side effect of the medication. Later, government officials investigating reports of problems with the drug discovered the medicine had been contaminated, blamed its maker for a coverup and revoked the factory’s license to make the drug.

“We were so hopeful that she would recover from leukemia eventually. The chances were very good. But now even walking has become a problem,” says 28-year-old Ms. Yan, who took a leave from her job at an auto-parts factory to care for her daughter.

Over the past year, a spate of safety problems involving Chinese-made products has surfaced, mostly involving small-scale factories operating with little scrutiny. But the tainted leukemia drug given to Yan Zhenni was made by a subsidiary of one of China’s largest and more prominent drug companies, Shanghai Pharmaceutical (Group) Co. Other units of the company make medicines in collaboration with a number of multinational drug companies, although there is no sign that the quality-control problems affected other divisions.

Major drug companies are quickly moving to conduct research and some manufacturing in China, as costs in the U.S. rise and they face hurdles in bringing new drugs to market and defending existing blockbusters against generic competition. AstraZeneca PLC, GlaxoSmithKline PLC, Pfizer Inc. and Bristol-Myers Squibb Co. have all recently announced plans to outsource some of their manufacturing capacity.

China is still a relatively small player when it comes to exporting finished pills, a market that India’s generic-drug makers dominate. But China is the world’s largest producer of active pharmaceutical ingredients, the chemicals needed to produce drugs. In 2005, China had $4.4 billion, or 14%, of the world’s $31 billion market for APIs, ahead of Italy and India, the world’s second- and third-largest players respectively, according to a report last year from Credit Suisse.

Read The Full Story…