VZCZCXRO0749
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #2155/01 1560849
ZNR UUUUU ZZH
P 040849Z JUN 08
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 7714
INFO RUEAUSA/DEPT OF HHS WASHINGTON DC
RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 03 BEIJING 002155 
 
HHS FOR OGHA/STEIGER AND PASS TO FDA/LUMPKIN 
STATE PASS USTR FOR STRATFORD/WINELAND/READE/WINTERS 
NSC FOR SHRIER/TONG 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR ETRD HHS PREL CH
SUBJECT: SFDA'S TREATMENT OF BAXTER IN CHINA 
 
(U)THIS MESSAGE IS SENSITIVE BUT UNCLASSIFIED. 
PLEASE HANDLE ACCORDINGLY. NOT FOR INTERNET 
DISTRIBUTION 
 
 
¶1.  (SBU)  SUMMARY: Representatives of Baxter 
Healthcare (protect) visited the U.S. Embassy 
in Beijing to present their concerns about the 
deterioration of relations with China's State 
Food and Drug Administration (SFDA) amid 
concerns that the agency may try to shift 
responsibility for the heparin problem away 
from China, to the detriment of Baxter.  END 
SUMMARY 
 
UNANNOUNCED INSPECTIONS 
------------------------ 
¶2.  (SBU)  On May 27, three representatives of 
Baxter Healthcare, including Stanley Lau 
(protect), the General Manager for Baxter in 
China, Marie Kissel (protect), the Regional 
Director for Government Affairs, and Charles 
Chen (protect), an Assistant General Counsel, 
visited the U.S. Embassy in Beijing to brief 
HHS Health Attache and Econoff.  The company 
presented concerns about the deterioration of 
relations with China's State Food and Drug 
Administration (SFDA) and the possibility that 
the SFDA may be looking to retaliate for 
perceived uncooperative behavior when SFDA 
staff visited the company's Cherry Hill 
facility in April. COMMENT: This SFDA visit, to 
the facility where Baxter's recalled heparin 
sodium U.S.P. was manufactured, followed the 
April 17-18 International Regulators Meeting on 
Heparin in Washington DC sponsored by the U.S. 
Food and Drug Administration (FDA) which 
gathered heparin experts and representatives 
from 12 different drug-regulating authorities 
to discuss the ongoing heparin investigation 
and its methodology. END COMMENT. 
 
¶3.  (SBU) General Manager Stanley Lau stated 
that Baxter's plant in Guangzhou has been 
investigated twice in recent weeks by two 
separate SFDA ''flying-squad'' teams.  Unlike 
previous visits, when the local FDA had been 
notified and informed of a pending inspection, 
the SFDA inspectors arrived unannounced and 
without informing the local FDA about the 
inspection.  The manner and tone of the 
investigators was aggressive and the inspectors 
seemed not to listen to any of the explanations 
offered by the facility managers.  The first 
investigation yielded a laundry list of 20 
problems at the facility and the second cited 
five problems (3 as being critical and 2 listed 
as major). 
 
SFDA APPEARS TO CUT OFF COMMUNICATION 
--------------------------------------- 
¶4.  (SBU) Stanley Lau stated that relations 
with SFDA were positive until a small SFDA 
group traveled to the Baxter plant in Cherry 
Hill, New Jersey in April 2008.  In traveling 
to the U.S. to attend the International 
Regulators Meeting on Heparin, the SFDA team 
had hoped to gain some insight into downstream 
segments of the heparin market.  The SFDA 
requested the Cherry Hill plant visit in an 
informal late night call placed to Baxter, and 
the FDA learned a few days in advance of the 
proposed visit when Baxter called to discuss it 
with them.  SFDA officials attending the FDA- 
sponsored International Regulators meeting on 
heparin were informed by the FDA in advance 
that they would not have the legal right to 
demand drug production samples (as the product 
was neither sold in China nor regulated by 
SFDA).  During the SFDA visit, Baxter expressed 
its preference to provide samples through 
official USG channels.  When SFDA was not able 
to obtain heparin samples on site, relations 
appeared to sour.  NOTE: During the recent 
 
BEIJING 00002155  002 OF 003 
 
 
February FDA inspection at Baxter's affiliated 
plant, Changzhou SPL, where SFDA was an 
observer, FDA investigators asked and received 
samples of specifically requested production 
lots held at the plant.  The SFDA similarly 
requested and later received samples from these 
same lots. END NOTE.  SFDA officials told 
Baxter privately at the Cherry Hill facility 
that they could not "get to" Baxter through the 
U.S. but they have total authority in China. 
 
¶5.  (SBU) Baxter employees said that through 
some miscommunication, the SFDA team also came 
away from the meeting at Cherry Hill with the 
mistaken impression that records related to the 
incident had been destroyed (as reported by the 
Chinese side).  Baxter tried to provide related 
documents to SFDA and was told to use official 
channels in all future contact with the 
government agency. 
 
¶6.  (SBU) Since then, on April 22 and April 29, 
the company tried to follow up with SFDA to 
provide the requested additional paperwork 
(redacted medical records of those patients 
suffering from the adverse allergic drug- 
reactions).  These documents were sent by 
Baxter to SFDA via courier, and the first 
shipment seemed to have been received; the 
second shipment was refused and returned. 
Baxter also indicated that it asked SFDA for a 
specific address to ship the requested samples, 
but SFDA has not answered Baxter on where the 
samples should be sent.  To date, no production 
samples have been shared by Baxter due to this 
lack of a specific recipient and address 
provided by SFDA.  In the subject meeting, 
Baxter indicated its preference to provide the 
sample to the FDA, which might retain a portion 
as a control sample and then have FDA ship it 
directly to SFDA. 
 
¶7.  (SBU) Baxter believes SFDA  working level 
authorities are taking out their frustrations 
over miscommunication and the visit to the 
Cherry Hill plant.  Those officials who visited 
the Cherry Hill facility are affiliated with 
SFDA's National Institute for the Control of 
Pharmaceutical and Biological Products (NICPBP) 
and were responsible for performing the tests 
on heparin samples to determine whether there 
was, or was not contaminant present in the 
samples tested in China. 
 
¶8.  (SBU) Baxter requested in the subject 
meeting whether the Health and Human Services 
Attache could personally deliver requested 
production samples to the appropriate SFDA 
office.  The HHS Attache agreed to check with 
FDA about this, and expressed concern over the 
chain of custody in doing so, but promised to 
get back to Baxter.  Baxter hopes to maintain 
constructive ties with SFDA authorities on both 
sides and to get through the current impasse. 
 
 
DRUG SAFETY LOOPHOLES STILL APPARENT 
------------------------------------- 
¶9.  (SBU)  Under current regulations, 
pharmaceutical companies in China that 
manufacture only for the export market are not 
subject to the authorities and regulations of 
SFDA, since the product would not be used in 
the domestic China market.  Moreover, certain 
pharmaceutical ingredients that are declared or 
classified as chemicals are not subject to SFDA 
regulations and authorities either, even if 
their only real applications are in 
pharmaceuticals. This issue, regulation of 
active pharmaceutical ingredients (API), and 
the apparent black-hole this represents in the 
normally tightly-controlled regulatory 
environment for pharmaceuticals, was discussed 
during the negotiations that occurred between 
 
BEIJING 00002155  003 OF 003 
 
 
SFDA and HHS/FDA last fall leading up to the 
signing of the Memorandum of Agreement for Drug 
and Medical Product Safety at December 2007's 
SED.  Vice Premier Wu Yi in her closing remarks 
at the December 2007 JCCT even noted this lack 
of control and regulation of APIs as a concern 
that needed to be addressed by China and 
indicating that the State Council would likely 
begin to address this in the coming year. 
 
A SHIELDING STRATEGY AT SFDA? 
------------------------------ 
¶10.  (SBU) COMMENT: The heparin incident and 
the aforementioned loopholes have created a 
liability and public opinion problem for which 
the SFDA is reluctant to take responsibility. 
In its press statements, the SFDA has 
continually indicated that the heparin-issue is 
an American problem, as the plant in question 
(Changzhou SPL) is an American joint-venture 
manufacturing its heparin sodium U.S.P. solely 
for export to its parent American firm, for use 
by Baxter.  SFDA has reiterated that the China- 
based plant was neither under SFDA 
responsibility nor regulation. The aftermath of 
the 2007 food and product scare, as well as the 
internal shakeup of SFDA in 2006-7 and the 
execution of the SFDA Commissioner last year 
have weakened the SFDA to the point that it has 
little political capital to expend.  Further 
deterioration of the SFDA's credibility would 
have a major impact for consumer confidence in 
China as a safe source of pharmaceuticals.  It 
appears possible that concerned officials may 
try to shift or spread blame in order to shield 
the agency from further criticism and in order 
to protect China's image among consumers.  A 
recent decision to bring SFDA back under the 
Ministry of Health (MOH) is part of a 
government-wide plan to streamline and 
coordinate authorities while intensifying 
regulation of drug products.  This change, an 
outcome of the March 2007 National Party 
Congress (NPC), will likely enhance SFDA's 
ability to enforce drug regulations and to 
develop a stronger regulatory framework with 
the MOH. END COMMENT. 
 
PICCUTA