How Faulty Vaccines Sparked Consumer Panic in China

(Bloomberg) -- Chinese consumers are outraged and panicked by revelations that two drugmakers sold ineffective vaccines. Protesters have picketed government offices and worried parents have run to Hong Kong for foreign-made vaccines. China is trying to contain the backlash, and restore faith in the country’s $122 billion drug industry.

1. What happened?

The consumer outcry followed news in July that Chinese health-care company Changsheng Bio-technology Co. was fined by the nation’s drug regulator for having produced 250,000 low-quality vaccines for infants. It was also found to have fabricated production and inspection data for a rabies vaccine as far back as 2014, using expired materials in making some batches. Regulators also found that state-owned Wuhan Institute of Biological Products Co., another major vaccine maker, produced more than 400,000 low-quality infant vaccines, according to Xinhua.

2. What’s wrong with the vaccines?

They don’t work, according to the Chinese government. Although the vaccines have not yet been tied to any deaths or illnesses, the DPT vaccine, which is compulsory for infants, can’t sufficiently protect them from potentially deadly diphtheria, pertussis and tetanus. Changsheng’s rabies vaccine was also a problem as the government’s findings of falsified records meant the drug might not effectively shield people from the disease.

3. What was the public reaction?

The prospect of every child in China potentially at risk from ineffective inoculations created a rapidly growing wave of anger. Social media users on platforms WeChat and Weibo criticized what many said was lax enforcement by the government; some posts were censored after publication. Worried parents also shared articles about how poor-quality vaccines can hurt kids. On July 30, demonstrators gathered outside the National Health Commission in Beijing demanding tougher regulation of vaccine sales, according to videos posted on Twitter.

4. Has something like this happened before?

Yes. There was a similar uproar after it was revealed in 2016 that expired vaccines were being sold nationally. And there have been a series of scandals involving consumer products: Melamine-tainted milk and formula killed at least six infants and sickened tens of thousands more in 2008; scores were arrested in 2011 for reprocessing used oil from restaurant waste and reselling it as cooking oil; and a meat production plant was shut in 2011 after it was revealed that its pigs were being fed clenbuterol, an illegal drug that makes hogs grow leaner meat.

5. What are officials doing in response?

President Xi Jinping described the situation as “shocking” and China’s top governing body vowed to punish those involved. The government detained Changsheng Chairwoman Gao Junfang and four other executives within 48 hours of the initial social media outcry. Compared with the three months of inaction following the tainted milk scandal a decade ago, the quick responses illustrate the increasing impact of social media and the government’s willingness to respond to public outcry.

6. What are families doing to protect their kids?

Some are taking them to Hong Kong for inoculations, as the island has access to foreign vaccines. Hong Kong Vaccination Station, a private clinic in Kowloon’s Tsim Sha Tsui, said appointments for some child immunizations are fully booked through August because of a surge in demand. Manna Wang, an insurance agent in Shenzhen, said she booked 20 vaccination appointments for clients in the week after the scandal broke, compared to an occasional request before. A similar scenario took place during the tainted milk scandal, as mainlanders rushed to Hong Kong to buy infant formula.

7. What is the impact on companies?

The scandal has put pressure on one of the China stock market’s best-performing sectors this year. Changsheng has been in a downward spiral, losing 70 percent since July 13. The fallout has spread beyond vaccine makers, with all the health-care companies trading in the Shanghai Shenzhen CSI 300 index lower since the scandal began.

8. Are there larger repercussions?

The scandal adds impetus to China’s drive to open up its pharmaceuticals market. Many medicines and vaccines commonplace around the world have been unavailable because of a long and arduous approval system that was designed to protect local drugmakers. The situation is already changing, with the country’s regulator in October having abolished a rule that required companies to repeat all drug trials in China before giving its blessing. The changes come as a wealthier middle class is demanding better health care: consumers have more medical insurance than ever, and are willing to pay for western treatments that aren’t covered. The pressure on Chinese authorities is also intensifying as the population ages rapidly and as diet, pollution and heavy workloads increase the prevalence of obesity, diabetes and other diseases.

The Reference Shelf

• A Chemistry World article notes that many of China’s smaller drug manufacturers can’t afford to comply with regulations.
• How the vaccine scandal is punishing some of the best-performing stocks in China.
• China starts to open up its drugs market.
• A Bloomberg QuickTake on incorrect fears about vaccines in the U.S. and Europe.

--With assistance from Grant Clark and Rachel Chang.

To contact the reporters on this story: Jinshan Hong in Hong Kong at jhong214@bloomberg.net;Daniela Wei in Hong Kong at jwei74@bloomberg.net

To contact the editors responsible for this story: K. Oanh Ha at oha3@bloomberg.net, Jeff Sutherland, Anne Cronin

©2018 Bloomberg L.P.