Heparin's Deadly Side Effects

(2 of 4)

As China rapidly becomes the world's workshop, supplying everything from Thomas the Tank Engine toys to computer chips to blood thinners, the world is coming to understand what Chinese citizens have known for quite a while. The country's growth--and intense competition among manufacturers in industry after industry--has gone far beyond the government's ability to regulate the economy effectively. In an ostensibly communist country, unfettered competition combined with nonexistent or, in many cases, corrupt government oversight has often produced a race to the bottom among businesses. Competition based on cost, in which manufacturers eke out slim profits by underpricing rivals, is by far the dominant industrial strategy. China, in short, is where the U.S. was in the early 20th century when Upton Sinclair wrote The Jungle, his seminal work about the horrifying conditions in the meatpacking industry.

The milk scandal is simply the latest and not by any means the most lethal example of the dark side of Chinese capitalism. The heparin case, in fact, has been far deadlier. Last summer the Food and Drug Administration updated the estimated death toll worldwide associated with tainted heparin to 149. As more and more pharmaceuticals are sourced in developing countries--an estimated $1.5 billion from China and India alone in 2007, according to a study by Credit Suisse--the heparin case has raised a fundamental question in the U.S. and the rest of the developed world: How safe are our drugs?

The answer is, Not nearly safe enough. What happened from September 2007, when the Baxter safety inspectors arrived and left, to the end of the year, when deaths and illnesses apparently related to use of the drug began to occur, is a tale of the risks global companies take in engaging the cutthroat ethos that is the underside of China's economy.

It is jarring to see where a drug like heparin begins. Liu Jing, a cheerful 36-year-old, is stomping around in pig poop and mud in knee-high boots. He is a farmer in Jiangsu province, north of Shanghai, where providing the raw ingredients for heparin is a big business. Liu's farm produces a key source of heparin: pig intestines. (Heparin is derived from the mucous membranes in the intestines.) Nearly half the world's pigs are in China, so companies like SPL have set up shop. In SPL's case, it first began buying raw heparin in 1996, established its own production facility to make the API in 2000 and began selling to Baxter, among others, in 2004. More than half the heparin sold--for Baxter alone it was a $30 million business last year--is made from pig guts bought in China.

Farmers like Liu sell to small-scale companies--often family-run businesses--that process the intestines into crude heparin, which in turn becomes the key ingredient for the heparin that Baxter and other major drug firms sell worldwide. SPL's CEO, David Strunce, told Congress last spring that the raw material comes from "government-regulated slaughterhouses." But that regulation, farmers in Jiangsu told TIME, is haphazard at best. And if the slaughterhouses are haphazardly regulated, the small heparin-processing businesses--hundreds of them across the country--are virtually unregulated. "We haven't ever had the government come and inspect our operation," said a processor in Jiangsu whose given name is Chang and who didn't offer his family name.