Drug Research in China Falls Under a Cloud

July 22, 2013

Drug Research in China Falls Under a Cloud


Executives at the British drug maker GlaxoSmithKline were warned nearly two years ago about critical problems with the way the company conducted research at its drug development center in China, exposing it to potential financial risk and regulatory action, an internal audit found.

The confidential document from November 2011, obtained by The New York Times, suggests that Glaxo’s problems may go beyond the sales practices that are currently at the center of a bribery and corruption scandal in China. They may extend to its Shanghai research and development center, which develops neurology drugs for Glaxo.The failings, some experts said, underscore the problems that can arise when major drug companies export their scientific development to emerging markets like China.

Since 2006, 13 of the top 20 global drug makers have set up research and development centers in China, according to a report by McKinsey & Company. “It’s cheaper to do research there,” said Eric G. Campbell, a professor of health care policy at Harvard Medical School. However, “I have absolutely no doubt that with cheaper research comes greater risk.”

Auditors found that researchers did not report the results of animal studies in a drug that was already being tested in humans, a breach that one medical ethicist described as a “mortal sin” in the world of drug research. They also concluded that workers at the research center did not properly monitor clinical trials and paid hospitals in ways that could be seen as bribery.

Last year, Glaxo said, a more favorable audit found the concerns had been addressed. But several outside experts said the problems outlined in the initial audit were grave and painted a picture of an organization that failed to keep tabs on a crucial research center as it expanded both in size and scope. And it indicates that the problems there were more extensive than were reported in June, when the company fired the head of research and development in China after discovering that an article he helped write in the journal Nature Medicine contained misrepresented data.

In a statement, Glaxo said it was committed to conducting “robust” audits of its business practices, and in this instance, “the process worked exactly as intended.” It added, “Patient safety is paramount and the audit reports do not show that this was compromised.”

Glaxo’s research and development center opened in 2007 with lofty ambitions not only to help the company’s drugs get approved in China, but also to serve as one of its primary research hubs. The center grew quickly, expanding from one employee in 2007 to 460 in 2011, according to the audit. But as it grew, supervisors did not always ensure that the work done there was of high quality, auditors found.

One of the most troubling lapses — a problem the report labeled “critical” — involved a drug known as ozanezumab, which was being developed to treat patients with multiple sclerosis and Lou Gehrig’s disease.

The report revealed that the drug’s project leader belatedly learned the results of three studies of ozanezumab in mice. During their investigation, auditors came across six studies whose results had not been reported, even though early trials in humans were already under way.

Reporting such information is crucial, ethicists said, because animal studies can identify safety risks and are among the main factors drug companies use to decide whether to pursue human trials.

“If that’s true, it’s a mortal sin in research requirements,” said Arthur L. Caplan, the head of the division of medical ethics at NYU Langone Medical Center. He served as the chairman of an advisory committee on bioethics at Glaxo from 2005 to 2008. “No one could approve human trials without having that information available, scientifically or ethically. That’s kind of a Rock-of-Gibraltar-sized ethics violation.”

The auditors said the results did not affect patient safety, but warned of the high stakes involved, saying participants could be exposed “to unnecessary risk or no benefit to the disease state.”

Glaxo said that “when the full range of data from all the studies was reviewed, GSK determined that the efficacy would not be strong enough to continue,” and it terminated a trial of ozanezumab in multiple sclerosis patients. It is still studying the drug in people with Lou Gehrig’s disease, or amyotrophic lateral sclerosis, according to the company.

In the follow-up audit, auditors said senior managers at the Chinese research unit had “embedded a compliance culture that was not evident during the prior audit,” and did not find any issues of concern, according to an executive summary of the report that was provided by Glaxo.

Outside ethics experts said the report raised questions about whether patient safety was adequately protected.

Auditors found that Glaxo employees failed to record whether research participants had signed new consent forms during the course of clinical trials. They also did not document whether participants were taking the planned dosage of drugs, or whether they followed up when they learned that participants were not following a clinical trial’s protocol.

In the statement, Glaxo said that employees were properly monitoring trials but acknowledged that they were not adequately documenting their work. The company said it had corrected the problem, and the later audit found that practices had improved.

The 2011 audit report also raised alarms about the way the Shanghai office was paying the people who were overseeing the company’s trials at outside hospitals or clinics. According to auditors, Glaxo was paying many sites a flat fee for the cost of a full-time coordinator, regardless of the number of participants enrolled in the trial.

The report warned of “reputational, financial and/or regulatory action risk where payments made to investigators regardless of actual work completed are perceived as bribery or corruption.”

Chinese investigators have said that Glaxo participated in a widespread bribery and corruption scheme in which the company used travel agencies to funnel illegal payments to doctors and government officials to bolster drug sales, and authorities have said they are also looking into the practices of other pharmaceutical companies.

On Monday, Glaxo said that some of its executives might have broken the law.

Outside experts said the payment of doctors and other hospital employees where trials were being conducted was tricky, because paying a fee based on the number of people enrolled in a study could also be seen as inappropriate.

“I’m much more concerned about people who are paid by the head to recruit,” said Dr. Campbell. Still, he said, if large payments were being made for little work, that could raise eyebrows. “It could be seen as simply another way to put money in people’s hands,” he said.

Glaxo said it had since tightened the payment procedures for clinical research coordinators. Referring to the current bribery investigation, the company said, “we have zero tolerance for any kind of corrupt behavior among our employees, suppliers and business partners and will take action wherever and whenever we find it.”

In all, company officials said that appropriate steps were taken to address the issues outlined in the audit. And in 2011, auditors noted that leaders at the research center had recently tried to address the “significant issues” there.

Dr. Jerry Avorn, a professor at Harvard Medical School, and others gave credit to Glaxo for investigating one of its own research centers.

“It is good that they detected these problems and vowed to fix them,” Dr. Avorn said, “but this report shows what can happen when a drug company rapidly expands its clinical research programs overseas without adequate quality controls.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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