Changsheng Bio-tech, the vaccine maker behind China’s latest public health scare

Pharmaceutical firm pursued big profits through aggressive marketing and, according to court documents, even bribery

PUBLISHED : Monday, 23 July, 2018, 10:11pm
UPDATED : Wednesday, 25 July, 2018, 2:45pm

Propelled by government subsidies, aggressive marketing and – according to court documents – even bribery, drug maker Changchun Changsheng Bio-technology has seen years of robust growth and big profits.

But after it was exposed supplying ineffective DPT (diphtheria, whooping cough and tetanus) vaccines to be used on babies as young as three months old, and forging data for its rabies vaccines, the company now faces the wrath of China’s leadership and millions of parents.

Premier Li Keqiang on Monday called for an immediate investigation into the substandard vaccines, saying the drug maker had crossed a “moral bottom line”.

The Shenzhen-listed firm was then slammed in an editorial by official news agency Xinhua, headlined “Let the vaccine safety lawbreakers lose all their fortunes”.

In Africa on a trip, President Xi Jinping also issued a public condemnation of the company and the “appalling” scandal it had caused.

Meanwhile, the firm’s chairwoman, Gao Junfang, and four senior executives, were taken away by police in Changchun for questioning.

Once a darling of Chinese fund managers, Changsheng Bio-tech has lost nearly half of its share value since the State Drug Administration uncovered its data forgery in an unannounced inspection a week ago and it is now in danger of being delisted.

“This is a lesson for China’s whole health care industry,” said Liao Qun, chief economist with Citic Bank International in Hong Kong.

The revelations about Changsheng Bio-tech, which means long life in Chinese, have shattered confidence in the public health system and indicate corruption in the vaccine market, from production to distribution.

According to court papers available online, company employees have been involved in a number of bribery cases in the last couple of years. In the most recent one, last week, Changsheng Bio-tech sales representative Wu Yuhai was found to have paid 164,000 yuan (US$24,200) in bribes to the head of the Changling disease control centre, Wang Feng, between 2010 and 2015, according to a court ruling in Shangqiu, Henan province. Wang was jailed for eight years for taking bribes and other offences, but the document did not give a verdict on Wu.

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The company, based in Changchun, Jilin, was China’s second biggest supplier of rabies and chickenpox vaccines last year, according to its latest annual report.

It spent 583 million yuan on sales and marketing last year – more than double the amount in 2016 – as it stepped up efforts to sell its products to government procurement centres, which source vaccines to be given to the public.

In China, compulsory vaccines such as DPT are given to children under a state-sponsored health programme at hospitals and disease control centres. Optional vaccines such as hepatitis B, rabies and influenza are provided mainly on a commercial basis. Beijing tightened control over production of rabies vaccines in 2009 and 2010, including kicking out foreign drug makers such as Sanofi Pasteur from the market.

Changsheng Bio-tech has so far been fined 3.4 million yuan over the DPT vaccines – a small sum for the company, which reported 566 million yuan in net profits in 2017, according to its annual report. It also received 48.3 million yuan in new government subsidies last year.

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Formerly a state-owned enterprise, it became a family-owned private company in 2003 after a controversial management buyout, and has since thrived under chairwoman Gao.

A financial division cadre at the former state-owned parent of the company’s listed vehicle, Gao took a place on the Forbes China Rich List last year, with estimated wealth of US$1 billion. She was ranked at 371 out of the 400 richest Chinese.

Changsheng Bio-tech did not respond to queries from the South China Morning Post.

Additional reporting by Sidney Leng