Corruption Charges Hit China’s Food & Drug Regulator, Again

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Today’s announcement of a series of arrests of State Food & Drug Administration (SFDA) officials on charges of corruption has everyone scrambling for information on what happened in 2007. That was the year that the head of the agency, Zheng Xiaoyu, was executed for taking millions in drug company bribes.

Zheng, head of the State Food and Drug Administration from 1998 to 2005, was sentenced on May 29 and his appeal was heard last month [June 2007].

Zheng’s execution marks the first time China has imposed a death sentence on an official of his rank since 2000. The harsh sentence reflected Beijing’s resolve to wipe out corruption and to ensure consumer safety. (China Daily)

This was a very significant event at the time for two reasons. First, Zheng’s execution was a strong signal that the central government was continuing, and perhaps ramping up, its overall anti-corruption measures. A June 6, 2007 article in Asia Times concluded that:

In delivering Zheng such harsh a punishment, Beijing wants to safeguard the relatively clean image and authority of the central government so as to sustain CCP rule.

[ . . . ]

It is vital for the CCP to maintain the clean image of the central government. If people begin to believe that even the central government is becoming corrupt, they would completely give up their confidence in Beijing’s sincerity in cracking down on official corruption. Then the party’s rule would really be in jeopardy.

In other words, Zheng was punished more severely than others because the central government was setting an example, ensuring that the central government was not seen as giving leniency to high-ranking officials. This narrative was reinforced by commentary from government and academia:

Zhao Bingzhi, director the Criminal Law Institute of the China Law Society, said, “The execution of Zheng demonstrated the resolve of the government to punish corrupt officials, and those with high positions and strong power are punished without mercy.” (Xinhua)

The People’s Daily, voice of the ruling Communist Party, said the punishment was intended to deter other wayward officials.”Corrupt elements will be thoroughly investigated no matter who they are, how high their post, or how deep they hide, and there can be no appeasement or softness,” the newspaper said. (Reuters)

Second, Zheng’s execution showed the government in action, a positive step towards effective regulation of the food and drug market.

Exposing rampant corruption at SFDA served two purposes: not only did it suggest a reason for so many of the product safety problems (i.e. corrupt officials), but it also showed the government involved in strong remediation measures.

It is difficult to exaggerate the negative opinion that people had of food and drug regulators back in 2007 and 2008, and to a large degree still have to this day.

As Time‘s Simon Elegant noted in 2007:

Zheng, who was arrested in December, may to some extent be a victim of bad timing: Beijing is being bombarded with criticism at home and abroad for its sometimes-fatal inability to regulate its food and medical industries. Chinese citizens have been inundated with news stories about fake drugs and poisoned food products in recent years. In 2006, six people died and scores of others became ill after taking a contaminated antibiotic.

Several years earlier, 300 babies fell gravely ill and more than a dozen died of malnutrition after being fed fake milk powder which had found its way onto market shelves. Indeed, the same day Zheng’s verdict was announced, China’s main quality control agency, the General Administration of Quality Supervision, Inspection and Quarantine, announced it was launching its first recall system for unsafe food products, expected to be up and running by the end of the year.

At the time Zheng’s execution was announced, and prior to that when the government was making wholesale changes at SFDA, I recall having several clients and contacts, which at the time included some drug and medical device companies, ask me about the potential fallout of the “cleanup operation.” My answer was that there was a negative short-term result and an uncertain long term effect.

In the short term, many officials at SFDA were rotated out of their positions and moved elsewhere, sometimes to local offices. At the same time, inexperienced officials were rotated in from provincial-level positions.

Those personnel movements were the source of a lot of turmoil for many months; the new officials had to learn how to do their jobs, and the rest of the industry had to reinitiate a whole new set of government contacts to facilitate transactions, such as new drug applications. Literally overnight, we had a whole new set of faces to deal with, people who sometimes had no clue how to do their job.

The long term result was unclear. At the time, I remember saying that if, several years later (i.e. now), the SFDA was relatively clean and operating efficiently with no huge corruption problems, then the dislocations of 2007 would have been justified. On the other hand, if the new set of people brought in fell into the same bad habits as the original corrupt group that was tossed out, then it would all be for nothing.

Today’s announcement regarding alleged corruption with the new drug application process  sounds like the same old story, unfortunately:

The scandal surfaced after a report from a drug company said Wei Liang, an official from the drug registry department of the SFDA, allegedly accepted bribes of 1.5 million yuan ($221,000).

The investigation is still under way, and more people are likely to be involved in the case, an industry insider who did not want to be named was quoted as saying.

Wei Liang was an investigator in the departments of drug registry and drug safety and inspection of the SFDA, which is in charge of issuing production licenses for biological products and supervising drug safety.

Biological products include vaccine, blood products, diagnosis products and culture mediums.

It’s much too early to conclude that all of the sturm und drang of 2007 was a waste of time. If nothing else, a number of corrupt officials were removed from office and punished. But the bigger picture is still unclear. Are we moving in the right direction? Is the culture of corruption at SFDA getting appreciably better or are we seeing a cyclical problem as new officials become co-opted by a powerful drug industry?

3 responses on “Corruption Charges Hit China’s Food & Drug Regulator, Again

  1. Jesse Covner

    Great article. BUT…

    “Second, Zheng’s execution showed the government in action, a positive step towards effective regulation of the food and drug market.”

    What the government did was ??????. Of course it was not effective, and I predicted it would not be. Are provincial officials less corrupt than central? Of course not. Corruption follows the person, not just the position.

    1. Stan Post author

      Yeah, it was an easy call to say nothing was going to change. And of course, nothing changes simply with having new people in the same old jobs.

      At the time, promises were made about reforms of internal policies and procedures. Some of those happened (I think), and I was willing to suspend judgment until it became clear one way or another if new rules were put into place for PR reasons, or if they were real. I was trying to give them the benefit of the doubt, contrary to my usual cynicism.

      However, I am certainly not surprised by the results. The drug industry is powerful and everyone has a price (and if you’re brought in from the sticks, that price is pretty low).