Breakingviews - China’s pharma scandals sully healthcare cleanup

HONG KONG (Reuters Breakingviews) - China’s pharmaceutical scandals are sullying its healthcare cleanup. Quality control problems at two drug makers have angered politicians and frightened consumers. They come despite an earnest campaign to toughen standards. Big heads will probably roll, but better medicine may result.

Changsheng Biotechnology, a $3.5 billion drugs firm before the news broke, said last week that regulators had ordered it to halt production of a rabies vaccine due to substandard production, adding that it had been fined for similar issues with its diphtheria, pertussis and tetanus vaccines. The news came on top of a separate scandal at Zhejiang Huahai Pharmaceutical, which said on July 19 that it had decided to recall a blood and heart drug in the United States, after a cancer-causing impurity had been found.

Investors have wiped more than $2 billion off the combined share price of the two firms since. Chinese social media erupted in anger at companies and regulators; even the official People’s Daily echoed the sentiment. Premier Li Keqiang on Sunday vowed to bring wrongdoers to justice. The case of Changsheng is particularly sensitive, given its vaccines were used immunising Chinese children.

Such scandals threaten to the credibility of both the domestic industry and the government. Chinese parents remember 2008, when melamine-tainted milk formula hospitalised more than 50,000 infants, causing some deaths. Local milk makers like Mengniu remember it too, because consumers fled domestic brands. Formula sales per resident birth in Hong Kong started to surge in 2008 and are now more than 25 times higher than before the crisis, suggesting mainland shoppers are still snapping up foreign formula.

These two cases, landing on front pages at the same time, are a major setback for those trying to refurbish the image of China’s biotechnology and pharmaceutical sectors. But scandal does tend to drive positive change. The SARS epidemic that began in 2002 convinced Beijing to stop covering up new cases of rare contagious diseases, and it is now one of the World Health Organization’s most earnest reporters. The last major breakthrough in vaccine regulation came in 2016, when a mini-scandal over improperly stored drugs led to fresh inspections and sweeping new safety rules. If these latest screw-ups leads to better enforcement, some good will have come from it.