Friday, June 01, 2007

Industrial food and medications from unregulated markets

Regulatory and litigation costs substantially increase the costs of manufactured products, including medications and manufactured food. The obvious solution is to transfer production to non-regulated markets. Emphases mine. (See also and also and the American Meat Industry is fighting traceability.)

McClatchy Washington Bureau | 05/31/2007 | China has cornered the global market for vitamins


... In less than a decade, China has captured 90 percent of the U.S. market for vitamin C, driving almost everyone else out of business.

Chinese pharmaceutical companies also have taken over much of the world market in the production of antibiotics, analgesics, enzymes and primary amino acids. According to an industry group, China makes 70 percent of the world's penicillin, 50 percent of its aspirin and 35 percent of its acetaminophen (often sold under the brand name Tylenol), as well as the bulk of vitamins A, B12, C and E.

In the wake of a pet food scandal, in which adulterated wheat gluten from China led to the deaths of thousands of pets in North America, and other instances of food and toothpaste tampering, China's vitamin producers are reaching out to reassure U.S. consumers that their vitamins are safe.

Whether that's true isn't clear, however. Foreign food-safety experts say China's larger companies have reputations to protect. The question is how they maintain quality control.

In this pharmaceutical hub, a two-hour train ride south of Beijing, managers at what may be the world's largest vitamin C factory said they're constantly improving quality control to keep pace with the tenfold increase in production this decade.

"We used to only comply with domestic standards. Now we must comply with international standards," said Liu Lifeng, an aide to the general manager at the Weisheng Pharmaceutical Co. Ltd.

Food and drug safety inspectors drop in at the plant from time to time.

"The authorities come unexpectedly without telling us," added Tian Yumiao, the senior director of the quality control department of Weisheng.

But the inspectors aren't exactly neutral guardians of public health. They work for the city government, which is a part owner of the parent company of Weisheng Pharmaceutical. That kind of relationship between food and drug inspectors and China's booming agricultural and pharmaceutical industries is coming to the fore as an issue in the food safety debate. The local government in this thriving city of 2 million people would suffer if it did anything to hurt the growth of local vitamin and drug producers, and local officials might be reluctant to admit that a public safety issue had arisen....

... Since U.S. laws don't require food and drug sellers to label products with the country of origin of ingredients, it's impossible for consumers to know where food or supplements are coming from, not to mention what factory produced them. [jf: the American Meat Industry is fighting traceability. Europe requires traceability.]

Vitamins fall into an area in China that straddles the food industry, comprising some 2 million businesses that exported $2.5 billion worth of goods last year, and the drug industry, which has 5,000 companies. Cases of adulterated or mislabeled products have hit both food and drug companies.

Fake drugs to treat impotency and help with weight loss are legion in China. Some African nations complain of fake Chinese medicines hitting their pharmacy shelves. Shady small pharmaceutical firms have exported bogus anti-malaria medication to Southeast Asia, where the illness is prevalent, allowing sick people to grow sicker...

... "Cheap labor has given China Inc. its edge in manufacturing. But pharmaceutical laboratories, which aren't labor intensive, benefit from subsidized rates on water and energy consumption, and often-lax oversight of environmental rules.

China's entry into vitamin C involved ingenuity - and an unwitting assist from the U.S. Department of Justice. In the late 1970s and early 1980s, several big Chinese drug companies, working with the government-backed Chinese Academy of Sciences, devised a method to cut the normal five-step process for making vitamin C to a two-step fermentation process, leaving European, U.S. and Japanese firms a step behind.

The new method cut costs and gave China a manufacturing edge. It wasn't until 1997, when U.S. attorneys broke up what they said was a price-fixing cartel of European and Japanese producers, [jf: "said" is an understatement -- it was a major criminal cartel beyond a doubt] that the door swung wide open for the Chinese producers...

... then Weisheng and three other big vitamin C producers appeared to take cues from their shattered competitors. Critics say the Chinese companies practiced predatory pricing, undercutting the remaining producers, with an eye to cornering the world market and making an eventual killing.

"They formed the cartel in December 2001 when the prices were under $3 a kilogram...

Today, only one Western company still makes vitamin C - Dutch-based DSM - and as China monopolizes vitamin C production, prices have hit $6 a kilogram...

This is in line with an April 23/07 article in WaPO by a food ingredient management consultant. This story adds some important background. China's dominance in part arose from technological innovation, partly from criminal corruption in the European monopolies, and lastly from development of a predatory Chinese monopoly. Underlying it all, however, is the ability to evade the costs of regulation and litigation borne by European and American manufacturers.

The next step is clear. Contact your representative and tell them you want European-class traceability of products and ingredients to the factory level

There's on other interesting angle to this story. In the last few years a number of clinical trials of vitamin therapy have had surprisingly negative results in the experimental groups. Not just no effect, but a negative effect. I believe that's intrinsic to the biological activity of the vitamin, but our experience with production of pet food by non-litigated non-regulated markets suggests that we should at least review the data associated with those studies.

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