One of the biggest questions about globalization is whether it is a race to the bottom or a rising tide that lifts all boats.
China is now the world’s largest drug manufacturer and the regulatory agencies charged with inspecting pharmaceutical plants in Europe and North America perform few inspections there. The regulatory culture in China is, to be charitable, quite minimalist. This means that problems that would rarely, if ever, occur in the U.S. or Europe, can happen in China quite dramatically. The recent melamine disaster, which killed dozens and sickened thousands of Chinese babies who drank tainted milk, might be just the tip of a very large iceberg.
As reported in today’s New York Times, generic drugs appear to be the area of greatest vulnerability:
Consumers like their commodities cheap, in the case of aspirin as with everything else. China now produces about two-thirds of all aspirin and is poised to become the world’s sole global supplier in the not-too-distant future. But are the Chinese factories safe? Who knows? The U.S. Food and Drug Administration, the European Medicines Agency and other competent government regulators rarely, if ever, inspect them … Companies that import Chinese pharmaceutical ingredients, including aspirin, are required to test the supplies before using them, and some send private inspectors to China to ensure that suppliers use adequate controls. No pharmaceutical maker wants its name to become synonymous with disaster, and the vast majority of drugs that are consumed in the United States are safe. But some industry executives told me that price sensitivity in the generics industry makes it more difficult to fully vet their low-cost suppliers.
China is a society well-organized enough to create a regulatory umbrella similar to those in Western nations. It is fully capable of ensuring that the needed inspections occur.
The question is: how large a disaster will be required before their government acts?
