Lack of due diligence in poisoned medicine

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The need for comprehensive due diligence was made painfully clear this weekend when The New York Times ran a report tracing the path of a toxic syrup from Panama where it lead to a reported 365 deaths, 100 which are confirmed, back to its production facility in the Yangtze River Delta. Walt Bogdanich and Jake Hooker write:

Forty-six barrels of the toxic syrup arrived via a poison pipeline stretching halfway around the world. Through shipping records and interviews with government officials, The New York Times traced this pipeline from the Panamanian port of Colon, back through trading companies in Barcelona and Beijing, to its beginning near the Yangtze Delta in a place local people call “chemical country.”

This report follows ones about contaminated pet food and fake baby formula being produced in China, but what it illustrates most clearly to those who are looking at entering China is the need for strict due diligence when doing business, not only in China, but in a world where a global supply chain means goods can arrive from anywhere. Two aspects of the Times report illustrate this point.

Panamanians wanting to see where their toxic nightmare began could look up the Web site of the company in Hengxiang, China, that investigators in four countries have identified as having made the syrup — the Taixing Glycerine Factory. There, under the words “About Us,” they would see a picture of a modern white building nearly a dozen stories tall, adorned by three arches at the entrance. The factory, the Web site boasts, “can strictly obey the contract and keep its word.”

But like the factory’s syrup, all is not as it seems.

There are no tall buildings in Hengxiang, a country town with one main road. The factory is not certified to sell any medical ingredients, Chinese officials say. And it looks nothing like the picture on the Internet. In reality, its chemicals are mixed in a plain, one-story brick building.

This is not an uncommon story in China, where businesses will often keep two sets of books, pad company payrolls with family members, or even set up whole shadow operations. What is truly shocking is that no one seemed to bother to check the provenance of the syrup, or it’s quality, at any point after it left the factory. As Bogdanich and Hooker explain:

Original certificates of analysis should be passed on to each new buyer, said Kevin J. McGlue, a board member of the International Pharmaceutical Excipients Council. In this case, that was not done.

Fortune Way translated the certificate into English, putting its name — not the Taixing Glycerine Factory’s — at the top of the document, before shipping the barrels to a second trading company, this one in Barcelona.

Upon receiving the barrels in September 2003, the Spanish company, Rasfer International, did not test the contents, either. It copied the chemical analysis provided by Fortune Way, then put its logo on it. Ascensión Criado, Rasfer’s manager, said in an e-mail response to written questions that when Fortune Way shipped the syrup, it did not say who made it.

Several weeks later, Rasfer shipped the drums to a Panamanian broker, the Medicom Business Group. “Medicom never asked us for the name of the manufacturer,” Ms. Criado said.

A lawyer for Medicom, Valentín Jaén, said his client was a victim, too. “They were tricked by somebody,” Mr. Jaén said. “They operated in good faith.”

In Panama, the barrels sat unused for more than two years, and officials said Medicom improperly changed the expiration date on the syrup.

During that time, the company never tested the product. And the Panamanian government, which bought the 46 barrels and used them to make cold medicine, also failed to detect the poison, officials said.

What is most regrettable is that all the deaths in Panama could have been prevented had one person along the supply chain taken a the time to test the barrels and verify the contents.

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