How the coronavirus triggers off global drug shortages - Shaun Rein

Shaun Rein

Health organizations have been warning for shortages in essential drugs, now supplies from China are disrupted. But the problems are more fundamental than a concentration of drug production in China, also Indian manufacturers get into trouble, warns business analyst Shaun Rein at the BBC.

The BBC:

The world's biggest supplier of generic drugs has restricted exports of 26 ingredients and the medicines made from them. 

The restricted drugs include Paracetamol, one of the world's most widely-used pain relievers. 

It comes as many drug ingredient makers in China remain shut or cut output. India's drug makers rely on China for almost 70% of the active ingredients in their medicines, and industry experts have warned that they are likely to face shortages if the epidemic continues. 

"Even drugs that aren't produced in China get their base ingredients from China. Globally there could be a shortage if China and India both get hit," warned analyst Shaun Rein from the China Market Research Group. 

The list of ingredients and medicines accounts for 10% of all Indian pharmaceutical exports and includes several antibiotics, such as tinidazole and erythromycin, the hormone progesterone and Vitamin B12.

More at the BBC.

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China: a hub for money laundering - Sara Hsu

Sara Hsu

China is becoming a center point for money laundering activities from Latin America, writes the military magazine Dialogo. Financial expert Sara Hsu explains how those links could work out.

Dialogo:

In August 2018, a special jury in Colorado pressed charges against 16 narcotraffickers who moved cocaine from Mexico to the United States and laundered money through Chinese banks. The process isn’t new: In 2017, the U.S. Drug Enforcement Administration (DEA) warned about criminal groups in Mexico, Colombia, and Venezuela that used their contacts with Chinese mafias to launder money through banking entities in the Asian nation. 

Sara Hsu, an associate professor of Economics at the State University of New York and specialist in the Chinese financial system, explains that the Asian nation is an attractive destination to launder money coming from Latin American criminal activities. One of the reasons is the strengthened link between groups such as Mexican drug cartels and Chinese mafias. 

“It’s true that Chinese regulations on money laundering were less rigorous in the past,” Hsu told Diálogo. “But the incentive comes from some Chinese gangs’ willingness to cooperate with Latin American criminals to launder money and participate in other illegal activities. As such, they become important facilitators for Latin American [criminal] organizations.” 

Hsu’s description fit what the DEA indicated in its 2017 National Drug Threat Assessment on the role of Chinese criminal organizations—particularly those operating in the United States—as money laundering facilitators for Latin American criminals. According to the report, Asian transnational criminal organizations (TCOs) “play a key role in the laundering of illicit drug proceeds. Asian TCOs involved in money laundering contract their services and in some cases work jointly with other criminal groups, such as Mexican, Colombian, and Dominican TCOs.” 

According to Hsu, some of the most common money laundering techniques are the purchase of Chinese products and fake commercial exchanges through casinos in Macau and Chinese money exchange houses.

More in Dialogo.

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Drug scandals will dwarf China's food scandals - Jeffrey Towson

Jeffrey Towson

Beida business professor Jeffrey Towson gives on his weblog reasons why China's drug scandals will be larger than any of its past food scandals. Morbidity is larger. Drug scandals are harder to detect and the profitability of the fake drug industry is higher. More troublesome: the industry is going global.

Jeffrey Towson:

#4 Unlike most food scandals, drug scandals are a global problem. 

If you are taking a pill in the US, part of it probably came from China. Over 80% of the world’s active pharmaceutical ingredients are now made in China and India (but mostly in China). So these drug problems have global reach. 

The most famous example of this was the 2008 Heparin scandal. Tainted Heparin from China ended up killing over 240 Americans. As a result, 34 China facilities (via Baxter International) were banned from exporting. 

And it gets more complicated. A lot of these quality problems are actually in the chemistry, as opposed to just in the final drug or in the active pharmaceutical ingredient. In 2012, police in China detained +60 people who were making chromium-tainted gel capsules with industrial waste. The police seized over 77 million gel capsules and shut down 80 production lines. Think about those numbers for a moment. 77M capsules and 80 production lines. 

But the biggest “global” aspect of this problem is likely in other developing economies. Fake drugs are everywhere in SE Asia and Africa. And many are coming from China. The morbidity and mortality resulting from this is hard to overstate. For example, the Wellcome Trust estimated that one-third of the malaria drugs in Uganda may be fake or substandard. 

Final Point: Pharmaceuticals in China are going to grow. But absent improvements, drug scandals could also become much bigger as well. 

Healthcare spending today in China is about 6% of GDP, up from 4-5% a few years ago. It is likely on its way to 12-13%. And China’s pharmaceutical market, already big at $108B (2015), is growing along with this. All of this is good news. It follows naturally from growing domestic demand (aging + increasing wealth + more chronic disease) and a continued movement of pharmaceutical production to China. 

So this is a big market that is growing fast and developing in sophistication. But it logically follows that any future quality problems will also be larger in scale. That is worrisome.

More at Jeffrey Towson's weblog.

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