China launches drug industry probe

"State-owned and controlled enterprises are closely linked with the economic health of China."

Li Jinhua, Chinese auditor general

China has launched a sweeping review of its drug industry as it investigates a former regulator accused of taking bribes to approve shoddy drugs blamed in a string of deaths, state media said yesterday.

The widening scandal has led to the closure of at least one company linked to the former director of the State Food and Drug Administration, who was fired in 2005. There has been no word so far on whether foreign drug companies are implicated.

Vice Premier Wu Yi (吳儀) on Thursday ordered a review of nearly 170,000 drug production licenses, most of them granted in 1999-2002, when the regulator was in office, newspapers reported.

"Wu's action is seen as a major effort to reorganize the disorderly drug market," the China Daily newspaper said.

China has suffered a string of deaths and injuries in recent years blamed on shoddy or counterfeit drugs and food products. Drug companies are accused of bribing regulators and paying off doctors and hospitals to use substandard products, leading to deaths or injuries.

Drugs improperly approved by the SFDA included Xinfu, an antibiotic that killed at least 10 patients last year before it was taken off the market, according to earlier news reports.

Zheng Xiaoyu (鄭筱萸) was dismissed as director of the SFDA in 2005 after he was accused of taking bribes from drug producers to let them circumvent testing and approval processes. Two of Zheng's deputies also reportedly are under investigation.

Last month, a drug producer suspected of links to Zheng, Kangliyuan Group (康力元集團), was ordered to suspend operations while Communist Party anti-corruption officials investigated the company.

Also last month, Beijing announced that drug companies found to be involved in bribery would be barred from doing business with Chinese medical institutions. Such a ban could bankrupt a company in a system where hospitals, clinics and other institutions account for a large share of drug purchases.

China will also impose stricter audits on companies directly under central government control, especially monopolies, to scrutinize the use of state assets, state press said yesterday, citing the top auditor.

"State-owned and controlled enterprises are closely linked with the economic health of China," said Li Jinhua (李金華), auditor general of the National Audit Office, according to the China Daily.

He added his office will expand the scope of the audits and carry out more routine and special checks.

Yu Xiaoming, the deputy auditor-general, said auditors last year unearthed 281.4 billion yuan's (US$36.3 billion) worth of "problematic money" from the inspection of 6,997 state-owned enterprises.

He said audits of the Ministry of Railways, the nation's leading oil company PetroChina Co (中國石油天然氣) and four other key state-owned enterprises would be the main tasks of his office this year.

Losses of state assets have become an outstanding problem with the reform of state-owned enterprises in China.