Congress grills pharmaceutical firm Baxter International and the Food and Drug Administration about tainted drugs that killed 81.

For those scared or curious enough to pay attention, this week's hearings offered a jarring look at how globalization is affecting the medicines we take. True, some testimony was predictable: the FDA denied that it could have averted the tragedy with an earlier (and required) inspection of the suspect Chinese factory; Baxter's CEO played the victim card, claiming that his firm's heparin, an anticoagulant, was the target of a deliberate adulteration scheme. (The Chinese government, meanwhile, argued that the faulty ingredients weren't to blame for the deaths.) But the statement of David Nelson, the senior investigator of the committee holding the hearings, sandblasts the varnish off such evasions, especially Baxter's dubious behavior, and is worth a read.

For starters, his report gives the lie to happy talk about the magic of the marketplace, with its third-party and self-inspections: In 2004, Baxter moved its source of heparin from Wisconsin to Changzhou, to a factory that had never been inspected by the FDA and wasn't even registered with China's state and food drug administration; its own inspection of the site failed to unearth the huge shortcomings found by the FDA a few months later. Maybe Baxter didn't care: As its chief financial officer said in a conference call with analysts the day before the FDA issued a recall notice on the heparin, "Sales of this low margin product totaled approximately $10 million in 2007, and we do not expect it to materially impact our business in 2008." Hmmm. I'm sure there are at least 81 families and a few hundred lawyers who hope he's wrong about that last part. Certainly, though, the stock market hasn't punished Baxter: As of yesterday, its shares were trading for more than before the scandal.

Better regulation would help, beginning with more money for the struggling FDA: As the Government Accountability Office has pointed out, the FDA inspects only about 8 percent of the foreign establishments that provide drugs to the United States. More damningly, out of the 10 countries most frequently inspected by the FDA from 2002 to 2007, China had the lowest rate of inspections. But it would be a tall order for the FDA to keep up with the growth of legitimate foreign suppliers, which has been astronomical, even if the sovereignty issues could be solved. And that's not even touching the problem of counterfeit drugs, which my former boss Moises Naim has documented in chilling detail.

So governments, companies, and consumers are going to have to find creative ways of working together. One suggestion: the FDA should require drug manufacturers to label the primary countries of origin of the active pharmaceutical ingredients (API) in any given drug. American consumers could then decide if they want to roll the dice on their domestic regulatory system (and probably pay a premium) or bet on, say, that of China or India. Yes, I know that U.S. manufacturers already import 40 percent of their API from those two countries. But maybe a little consumer paranoia might prompt U.S. companies and their suppliers (as well as their respective governments) to clean up their acts.

— James Gibney

Filed Under: Baxter International, China, consumer safety, drugs, economics, economy, FDA, globalization, medicine, trade

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