Chinese President Xi Jinping has launched an official investigation into Changsheng Biotech, the country’s largest vaccine producer by revenue, following accusations by the State Drug Administration that the company had forged production and inspection records for 110,000 freeze-dried rabies vaccines designated for human use.
Shortly after the President’s declaration, state media reported that Chinese police had arrested the company’s chair Gao Junfang, as well as five other senior executives from Changsheng, which has been confirmed by the company.
In his public statement, President Xi proclaimed that Changsheng had violated laws and regulations and would be subject to investigation. Additionally, he emphasised that drug safety was an ‘unshirkable responsibility’ of his administration and called for severe punishment for those involved.
The President’s statement followed one by Chinese Premier Li Keqiang, which declared that the case had crossed a moral line and the nation deserved a clear explanation.
Li was quoted by state media as saying: “We will resolutely crack down on illegal and criminal acts that endanger the safety of peoples’ lives, resolutely punish lawbreakers according to the law, and resolutely and severely criticise dereliction of duty in supervision.”
The State Drug Administration has ordered the company to stop producing the rabies vaccine and revoked its license to produce and sell the vaccine. It also announced that it had tested the company’s other products and found no other quality issues.
Changsheng has made a public apology and voluntarily recalled all vaccines available on the market, which the company estimates will cost it CNY200m ($2.49m).
The accusations have led to a public outcry against both Changsheng and the country’s healthcare regulatory system. State censors have tried to curb discussions of the scandal on social media – vaccine is now one of the most blocked terms of Weibo, the Chinese version of twitter.
As a result of the scandal, the company’s share price on the Shenzhen Stock Exchange fell by 10% on 24 July after a seven day run of maximum losses. The company’s market value has declined by 52%, which represents CNY12bn, since 13 July.
The scandal has also affected the stocks of other drug companies. The Shenzhen CSI 300 Healthcare Index, which tracks the performance of 22 pharmaceutical companies, declined by 1% following a 4% drop on 23 July.
The Stock Exchange has warned the company it will be delisted if regulators confirm any illegal act or the investigation is transferred to the public security department, which the State Drug Administration has declared will occur.
Changsheng responded by saying: “We feel very remorseful and guilty about what has happened, and we apologise to all those vaccinated and investors.”
This investigation into Changsheng’s rabies vaccines follows another one initiated in November 2017 into more than 250,000 substandard diphtheria, tetanus and pertussis vaccines sold by the company. As a result of the investigation, the company was fined CNY2.58m and CNY859,000 of assets were confiscated.
The company has also been embroiled in at least ten bribery cases in the past decade, according to China Judgement Online, a database of court rulings. Several Chinese officials have been prosecuted for their acceptance of bribes from the company.