Scandal dogs China’s ‘king of vaccines’

Source: NYT (12/7/20)
Scandal Dogs China’s ‘King of Vaccines,’ Partner to AstraZeneca
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The British-Swedish drugmaker has joined with a huge Asian company to produce a Covid-19 vaccine in China, where shady reputations are common in the pharmaceutical industry.
By Sui-Lee Wee and Javier C. Hernández

As a government regulator sidled into a car, the Chinese pharmaceutical executive handed over a paper bag stuffed with $44,000 in cash.

The executive, Du Weimin, was eager to get his company’s vaccines approved, and he needed help. The official took the money and vowed to try his best, according to court documents from 2016.

Several months later, Mr. Du got the greenlight to begin clinical trials for two vaccines. They were ultimately approved, generating tens of millions of dollars in revenue.

The government official was jailed for taking bribes from Mr. Du and several other vaccine makers. Mr. Du was never charged. Instead, he built an empire. His company, Shenzhen Kangtai Biological Products, is one of China’s largest vaccine makers. And Mr. Du, dubbed the “king of vaccines,” is one of the richest men in China.

Capitalizing on that success, Mr. Du and his company are now at the forefront of the global race to produce a coronavirus vaccine, a national priority for China’s ruling Communist Party. Kangtai will be the exclusive manufacturer in mainland China for the vaccine made by the British-Swedish pharmaceutical giant AstraZeneca, and the companies could work together on deals for other countries. The Chinese company is also in early trials for its own candidate.

Mr. Du’s success, against the backdrop of scandal, is not an outlier in China. It is the norm.

As the Chinese government has pushed to develop vaccine companies of global renown, the state has fostered and protected an industry plagued by corruption and controversy.

Drug companies, eager to get their products into the hands of consumers, have used financial incentives to sway poorly compensated government workers for regulatory approvals. Hundreds of Chinese officials have been accused in recent years of taking bribes in cases involving vaccine companies, according to a review of court records. The companies and executives implicated rarely face punishment.

Oversight has been weak, contributing to a spate of scandals over substandard vaccines. While the government after each incident has vowed to do more to clean up the industry, regulators have rarely provided much information about what went wrong. Companies have often emerged unscathed after making an apology or paying a fine, and in nearly all instances, they have been allowed to continue operating.

Dr. Ray Yip, a former head of the Bill and Melinda Gates Foundation in China, said he considers Kangtai to be among the top tiers of the country’s vaccine companies, adding that he “has no problem” with the manufacturing and technology standards of most players.

“The problem for many of them is their business practice,” said Dr. Yip, who also led the China office of the U.S. Centers for Disease Control and Prevention. “They all want to sell to the local governments, so they have to do kickbacks, they have to bribe. That’s the Achilles’ heel of China’s vaccine business.”

Kangtai did not respond to multiple requests for comment.

In a statement, AstraZeneca said it “conducts appropriate and thorough due diligence prior to entering an agreement with any entity.”

“Safety, efficacy and quality of the vaccine is of utmost importance, and AstraZeneca has partnered with capable, established organizations to help ensure broad and equitable global access, at no profit during the pandemic,” the company said.

The lack of transparency, compounded by dubious business practices, has rattled public confidence in Chinese-made vaccines, even though they have been proved safe. Many well-off parents shun them, preferring their Western counterparts.

In 2013, 17 infants died after injections with Kangtai’s hepatitis B vaccine. Regulators cleared Kangtai of wrongdoing, and the vaccine continues to be used safely. But the government didn’t provide substantial details about its investigation into the deaths or Kangtai’s safety practices; the company had negative articles retracted.

Distraught parents around the world blame vaccine makers for their children’s illnesses or their untimely deaths, often without scientific evidence. But in China, the government muzzles many families, further feeding suspicions about Chinese-made vaccines.

Activists who have called for greater scrutiny of pharmaceutical companies, including Kangtai, have been harassed, intimidated and detained. Worried about the threat to social stability, Chinese officials have tried to stop them from organizing, by shuttering social media groups and monitoring their communications.

Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations, said the 2013 scandal “raises legitimate concerns” about Kangtai.

“The stakes are very high,” Dr. Huang said. “Imagine if a similar scandal is reported again in China. It’s not just going to undermine the confidence of the company manufacturing the vaccine, it’s also going to hurt the reputation of AstraZeneca itself and their vaccine, too.”

As the chief executive of a small vaccine maker in the early 2000s, Mr. Du was looking to grow. He set his sights abroad, visiting pharmaceutical companies and biotechnology research institutes in Western countries, including the United States, Britain and France.

Mr. Du, then in his mid-30s, came away from his meetings with an urgent conclusion, he recalled in interviews with Chinese news outlets. It was a mistake for China to continue relying on foreign vaccines, Mr. Du had determined. They were expensive. And he worried that China’s dependence on other countries posed “hidden dangers to national security.”

“Vaccines for the Chinese people must firmly be in the hands of the Chinese,” Mr. Du told a state-owned newspaper, the Jiangxi Daily, in 2014.

His timing was good. After years of relying on multinational companies for crucial medicine, the Chinese government wanted to cultivate a homegrown vaccine industry, for many of the same reasons.

State-run companies had long dominated the business in China, going back to the Mao era. As demand increased, entrepreneurs like Mr. Du saw an opportunity to build companies that could compete on the global stage.

Many embraced partnerships with overseas vaccine makers, a strategy that China followed in other areas like technology and auto manufacturing. The international companies gained access to the Chinese market, while the Chinese companies secured valuable knowledge about production techniques and technology.

Such deals would help catapult Mr. Du, the son of farmers from a poor mountainous area of Jiangxi Province, into the big leagues.

After helping found Beijing Minhai Biotechnology in 2004, he teamed up with the French pharmaceutical giant Sanofi Pasteur on a rabies vaccine. At the time, the Chinese government was leading a concerted effort to limit the spread of the disease, which killed more than 2,600 people in China that year.

In 2008, Mr. Du moved to expand his business by investing in Kangtai. The company was founded in 1992 with help from the American drugmaker Merck. Together, they produced a hepatitis B vaccine, as part of a joint venture aimed at improving health standards in China.

His dealmaking would create an industry giant. Local media called him “the warrior of the vaccine kingdom.”

His net worth was an estimated $7.4 billion until May, when Mr. Du transferred $3.5 billion worth of shares in his company to his ex-wife, Yuan Liping, in what Chinese news outlets described as China’s most expensive divorce ever. Ms. Yuan, a Canadian citizen, is now one of Canada’s richest women.

“From starting his company to getting rich to getting divorced,” China Times, a mainland news site, wrote about the tycoon, “the mysteries that he holds can only be solved with time.”

Corporate Hardball

The timing seemed suspicious.

In 2010, the state-run China Youth Daily newspaper reported that regulators had delayed telling the public that about 180,000 doses of a rabies vaccine were ineffective. The vaccine was made by Jiangsu Yanshen, then owned by Mr. Du of Kangtai.

During the delay, which lasted nine months, Mr. Du sold a roughly 51 percent stake in the company to the Simcere Pharmaceutical Group, another drug manufacturer, according to the Economic Observer website, a financial news outlet.

An investigative journalist, Du Taoxin, started digging. Industry insiders, he said, confirmed the reports, telling him that regulators held off on the announcement so that Du Weimin could sell the shares and not be held liable for the scandal.

It lined up with a report in the state-backed China National Radio. The article similarly named Mr. Du and found that the authorities had withheld the information so that Simcere would have to bear the reputational costs of the scandal.

After reports of the faulty vaccines, Simcere issued a statement saying that the quality issues occurred before it invested in Jiangsu Yanshen, emphasizing that it bore “no responsibility for the incident.” Mr. Du, the pharmaceutical executive, would not comment.

In August 2014, the journalist published his article under the headline “China’s Drug Regulators Caught Up in ‘Whistleblowing Scandals,’ Unveiling the Truth Behind Vaccine Cases.”

Many of the industry’s problems are born out of a symbiotic relationship with the government. China’s vaccines are administered through local communicable disease control centers. Those centers take a cut of the profit for certain types of vaccines, creating an incentive for corruption.

From 2018 to 2020, there were 59 corruption lawsuits involving vaccine companies, according to an analysis by The New York Times. Fifty-four of them involved bribing local officials.

Kangtai sued the journalist, Du Taoxin, and his newspaper, Democracy and the Rule of Law, claiming defamation.

The journalist and his newspaper tried to defend the work, submitting what they viewed as other evidence of media pressure.

Guangdong Satellite, a state-backed television station, had apologized in September 2014 for “hurting the feelings” of Mr. Du Weimin after a prominent Chinese economist criticized the tycoon’s company in a program. The station retracted its story.

The 21st Century Business Herald, an influential business newspaper, had deleted seven articles that it published relating to Mr. Du’s company and the deaths of newborns who were given Kangtai’s hepatitis B vaccines in 2013, according to court documents. They had closely covered several of the deaths and reported that Mr. Du’s family had previously immigrated to Canada.

As part of his defense, the journalist noted the article by China National Radio on the same topic. It’s unclear why those media outlets didn’t face legal action.

The vaccine tycoon was represented by Zhang He. Mr. Zhang had also served as the lawyer for Yin Hongzhang, the drug regulator who was convicted of accepting bribes from Mr. Du.

The journalist pointed to the bribery case as proof he had not defamed the executive in his article. Du Weimin acknowledged, in court documents, that he was the Mr. Du who had bribed Mr. Yin.

But the judge said that information was not pertinent to the case. The judge, in forming his ruling, also cited the journalist’s refusal to disclose the identities of his anonymous sources.

On November 2016, Du Taoxin was convicted of “hurting the reputation” of Du Weimin. The court said Mr. Du’s articles had “led to a decline in the society’s evaluation of Du Weimin and infringed on his reputation.”

He had to pay Mr. Du $300, and his newspaper had to delete the article.

The sentence was meted out on Chinese Journalists’ Day. Mr. Du quit journalism a year later.

“Vaccines seem to be an untouchable issue,” said Mr. Du. “No matter how I persisted in chasing the truth, it always seemed elusive. I had all the evidence, but I knew that this was a lawsuit that could never be won.”

Preferential Treatment

A group of Chinese families have led a small but spirited effort in recent years to regulate the nation’s vaccine industry more strictly. The government, which views political organizing as a threat to the Communist Party, has sought to silence their campaign.

Officials have harassed and detained mothers, fathers and grandmothers, charging them with “disrupting public order” or “picking quarrels and provoking trouble.” In October, the authorities in the central province of Henan detained He Fangmei, one of the most outspoken critics of Chinese vaccine companies in China, according to her friends, who spoke on the condition of anonymity given the legal sensitivity.

Lawyers representing vaccine activists have faced severe punishments. Many of the online groups families use to share grievances and coordinate protests on the Chinese social messaging app WeChat have been shut down.

Liao Fangsheng tried to petition the central government after his son, Pengyong, was found to have viral encephalitis. Mr. Liao said his son was a happy and healthy 18-month-old before he took a vaccine made by Kangtai.

Two or three days after the inoculation, Pengyong developed a low-grade fever and then fell into a coma for 17 days. In December 2019, the local health commission said it was a “coincidence” that the boy had become ill after taking the vaccine.

Mr. Liao didn’t have any scientific evidence, but he remained convinced that the vaccine was connected. He traveled to Beijing to the National Health Commission and the petition bureau, where people go to seek help for their grievances. They directed him to other government departments, what he described as “buck-passing.”

After he tried to seek help outside the Chinese Communist Party’s leadership compound, he was detained for a week in his hometown in southeastern Jiangxi Province. The authorities said he was “disrupting the order of a workplace,” according to a copy of the detention notice.

“They all wear one pair of trousers, their superiors protect their subordinates,” said Mr. Liao. “No one looks at any of the materials I hand over. There is no space for me to talk. Where do you think the law is? Where is the government?”

The Chinese government may have reason to shield the industry from criticism. In a country of 1.4 billion people, rumors can quickly spread, undermining China’s effort to protect the health of the nation. But the dearth of information and lack of legal recourse can also breed a deep distrust.

In 2010, dozens of elementary school students from southern Guangdong Province experienced headaches, vomiting and limb weakness after they were injected with Kangtai’s hepatitis B vaccine.

A provincial health official attributed the problems to a “mass-based psychogenic reaction,” according to the state-run China News Service.

The official, Peng Guowen, director of the institute of immunization of the Guangdong Provincial Center for Disease Control and Prevention, said that most of the symptoms such as dizziness or abdominal pain were “subjective” and that none of the students developed fever. He blamed rumors that had spread among the news media and society about the safety of vaccines, saying they had “aggravated” the students’ anxiety and caused the vomiting.

In a separate news conference, a reporter asked how the government could conclude that the students’ adverse reactions had nothing to do with the vaccine before the test results were out. Officials did not answer, according to The Southern Metropolis Daily.

In 2013, after reports emerged that 17 infants had died after they took the same vaccine, the Chinese media and the public called Mr. Du a “baby-killer.” The government stopped the sale of the vaccines in December for over a month.

It lifted the suspension after it concluded that the company was not to blame. The release about the official investigation provided little detail. It mainly took note of the deaths and listed their causes, which included pneumonia, heart disease and diarrhea, according to a government statement.

China has been less forthcoming about questions of vaccine safety than other countries. In the United States, the federal government often commissions in-depth assessments after manufacturers report problems with vaccines. In South Korea, where a string of deaths recently undermined confidence in a flu vaccine, the government released detailed data on the deaths as it worked to restore public trust.

As China now tries to burnish its global standing as a scientific and medical power, the reputation of its vaccine makers is all the more important.

For decades, the industry has focused on selling products in China, believing that the domestic market was big enough to sustain the business. Few companies have discovered products with worldwide impact.

Only five Chinese vaccines have been preapproved for export by the World Health Organization. By contrast, India has 47 vaccines that have passed those requirements.

To China, the pandemic offers a chance to transform the industry into a global player — and it’s investing heavily in champions like Kangtai.

The local government in the southern city of Shenzhen gave the company a 20,000-square-meter piece of land, which is now the base for Kangtai’s coronavirus vaccine plant. Kangtai has also received government funding as part of the country’s effort to fight the pandemic.

AstraZeneca and the University of Oxford announced late last month that their vaccine appeared effective, although the level of effectiveness is disputed. Under the deal with AstraZeneca, Kangtai will produce 200 million doses for mainland China.

In late September, Kangtai announced that it would start testing its own coronavirus vaccine on people in China after results showed that it protected mice and monkeys.

In an interview with China Central Television, the state broadcaster, Zheng Haifa, a top scientist at Kangtai, said the company was working to achieve a breakthrough in developing a vaccine “as soon as possible” to meet the demands of China’s top leader, Xi Jinping, who has called on the nation’s pharmaceutical companies to lead an all-out effort to produce a vaccine.

Mr. Zheng said the company’s mission was simple: “to provide safe and effective protection for the lives and health of people.”

Katie Thomas contributed reporting. Elsie Chen, Amber Wang, Liu Yi and Albee Zhang contributed research.