China Detains 2000 Suspects in Counterfeit Drug Scheme - Wall Street Journal

By LAURIE BURKITT

BEIJINGâ€"Chinese police said Sunday they seized more than $182 million worth of counterfeit pharmaceuticals last month in the latest attempt to clean up a food and drug market that has been flooded with fakes.

Around 18,000 police across the country detained nearly 2,000 suspects, China's public security ministry said in a statement Sunday. The detentions and seizure, which occurred in late July but were announced Sunday, included drugs that are typically sold on the regulated market for patients with diabetes, high blood pressure and even rabies, the statement said, noting that the counterfeit drugs likely contained harmful, toxic substances.

It wasn't clear from the statement whether the drugs were meant for the domestic or international market.

China's government frequently reports detentions and seizures to demonstrate its dedication to overhauling the country's scandal-ridden food and drug markets, which threaten public trust and social stability. While this crackdown is one of the largest in recent months, in November 2011 authorities said they seized $30 million worth of counterfeit drugs and arrested 114 suspects.

Chinese officials are aiming to protect the pharmaceutical market, as China's own universities and pharmaceutical companies are investing in the development of future drugs. Foreign companies such as Roche Holding AG and Pfizer Inc. also have invested heavily in the country over the past few years.

Sales of pharmaceuticals in China are expected to hit $115 billion by 2015, nearly tripling from $42 billion in 2010, according to data from market researcher IMS Health.

Drug sales have become a problem spot in China recently. Many provinces across the country have created bidding systems in which drug companies win hospital and pharmaceutical contracts by promising quality drugs at the lowest prices, pressuring drug manufacturers to produce at the lowest cost possible while preserving their profits.

Industry insiders say the price squeeze has had unintended consequences. In April, China's drug regulator suspended the sale of 13 drugs using capsules allegedly made with excessive chromium levels. The capsules were made from leather scraps containing industrial gelatin that uses chromium as part of the tanning process, according to China's state-run China Central Television.

Public security officials are aware of the problem. "The crime of making fake drugs is still far from eradicated, and criminals are coming up with new schemes, becoming craftier and better able to deceive," the public security statement said.

Write to Laurie Burkitt at laurie.burkitt@wsj.com