A Chinese Reformer Betrays His Cause, and Pays

By DAVID BARBOZA

BEIJING, July 12 — Zheng Xiaoyu once ranked as one of the most powerful regulators in China. He rose from modest beginnings to help create and lead Beijing’s version of the Food and Drug Administration in the United States.

For 2 Children, Ban of a Drug Came Too Late (July 13, 2007) But last March, locked up in the Qincheng Prison here, he wrote a short confession. “Why are the friends who gave me money all the bosses of pharmaceutical companies?” he wrote in his letter, entitled How I Look on My Mistakes. “Obviously because I was in charge of drug administration.”

In his confession, Mr. Zheng acknowledged that during his eight-year tenure, he had accepted gifts and bribes from eight drug companies that sought special favors: a car, a villa, furniture, cash. And corporate stock. All told, he and his family accepted gifts valued at more than $850,000 — in a country where the average worker earns less than $2,000 a year.

For his crimes, the 62-year-old was executed on Tuesday, making him one of the highest-ranking Chinese officials ever to be put to death.

The rise and fall of Mr. Zheng offers a rare glimpse inside China’s flawed regulatory system. He started out as an idealistic reformer. Concerned about China’s unsafe drug supply, he lobbied for the creation of the State Food and Drug Administration. But in the end, according to friends and associates, he was corrupted by the very system he sought to change — even enlisting his wife and son to solicit bribes.

“There were so many companies going to him and he simply couldn’t resist the temptation,” said one drug company executive who befriended Mr. Zheng in the 1980s and did not want to be identified discussing the delicate issue.

While China’s tainted exports have attracted international attention, China’s own citizens suffer most from the shortcomings of its drug regulators. Tens of thousands of crates of unsafe pharmaceuticals have reached the local market — from antibiotics to vaccines, from drugs to treat erectile dysfunction to ones to strengthen the immune system. The government does not know how many deaths and serious illnesses have resulted from faulty drugs.

Corruption is not the only problem, say industry insiders. Agencies battled over who had the authority to fine companies and who was responsible when things went wrong. The rapid growth of the drug industry has also made it hard for regulators and their staffs to keep up.

During Mr. Zheng’s tenure, for instance, his agency approved over 150,000 applications for new drugs, an approval rate that dwarfs the F.D.A., which approves only about 140 new drugs each year.

And when regulators do discover counterfeit pharmaceutical operations, powerful local officials often seek to shield companies in their area from punishment.

As much as his own greed, all these larger problems stymied the intelligent but na?ve Mr. Zheng. “He was smart in a technical way,” says a drug company executive who knew him for more than 20 years. “But he didn’t have political skills. He should have never gone into government.”

Zheng Xiaoyu was born in coastal Fujian Province in 1944, when China was still being torn apart by war. He and several siblings were raised by an aunt, friends say. Mr. Zheng was bright enough to gain acceptance to the prestigious Fudan University in Shanghai, where he studied biology and played the trumpet in the school band.

After graduation, he got a job as a technician at the state-owned No. 1 pharmaceutical factory in nearby Hangzhou, where he eventually rose to become factory manager.

Colleagues remember him being passionate about his work. “He was innovative and liked new ideas,” said one retired worker who knew Mr. Zheng well, but asked not to be identified. “In the 1980s, he even bought computers for the factory in an attempt to computerize manufacturing and management.”

Later, in the mid-1990s, Mr. Zheng took a job in the country’s pharmaceutical regulatory administration. There he pushed the government to create a separate body to regulate food and drug safety, one with more power to protect Chinese consumers.

In 1998, Beijing did. The amiable Mr. Zheng headed the state agency for the next eight years, pushing a modernization plan that was supposed to help transform China into one of the world’s leading centers for pharmaceutical production.

To improve industry standards, the agency cracked down on fake drugs and illegal factories. Mr. Zheng would occasionally show up at the side of victims to grieve and declare his own fears about product safety.

One of his boldest reforms was an effort to push new production standards, giving companies a “good manufacturing practice” seal of approval. Mr. Zheng promised to use the standards to weed out irresponsible manufacturers. His agency declared that any pharmaceutical company that did not get G.M.P. approval by July 2004 would lose its license.

“The intention of the G.M.P. certification was good,” says Yang Yue, a professor at the Shenyang Pharmaceutical University. “You don’t know what horrible conditions some drug makers had been in. For example, in some traditional Chinese medicine companies, workers stirred the drugs with their feet.”

The plan had its intended impact: the industry shrank from 6,700 drug makers to about 4,000.

But the agency’s higher standards coincided with an effort by Beijing to curb soaring drug prices. Companies were caught between the mandatory government price cuts and the increased costs to upgrade equipment and retrain staff members to meet Mr. Zheng’s modernization plan.

Companies complained that because of their shrinking profit margins, they did not have the money to develop new drugs. Some producers switched to drugs not covered by the government’s price caps, or simply changed the dosage of existing drugs to maintain higher prices, exploiting a loophole in the pricing regulations. And companies bribed agency officials to get speedier drug approvals or other special favors.

Those officials included Mr. Zheng, according to court records. His wife, Naixue, and son, Hairong, eventually formed a consulting company in Shanghai that helped solicit bribes from companies.

Court records show that when a company named the Double Dove Group sought to register disposable syringes, it offered shares to Mr. Zheng’s wife; his son received a used Audi, consulting fees and property in Shanghai.

When a Beijing drug maker needed approval to import more Madame Pearl’s Cough Syrup from Hong Kong and to distribute a new intravenous drug, the company’s chairman helped Mr. Zheng’s wife pay for a villa and then went shopping with her for furniture. Decorating fees came to about $30,000.

The court offered detailed accounts of other bribes: secret payoffs at a Beijing hotel, checks handed to Mr. Zheng in his office; and instructions for Mr. Zheng’s son to fly to Hong Kong, where he got over $120,000 that he later told prosecutors he put away for his parents’ retirement.

At least eight other senior drug agency officials have been accused of taking bribes, according to court records and the state-controlled media. Mr. Zheng’s top deputy, Hao Heping, the director of the medical devices division, accepted cash, expensive golf memberships and a Honda Accord.

Cao Wenzhuang, head of the drug registration division, accepted at least $300,000 in gifts and bribes. Both men also worked with their wives to solicit the money.

The court that handed down Mr. Zheng’s death sentence said at least six drugs that had been approved by the State Food and Drug Administration during his tenure were fake. The agency’s current leaders say hundreds of fake drugs are on the market at any given time — some approved, many not.

According to state-run media accounts, prosecutors began hearing from informants about corruption at the highest levels of the S.F.D.A. beginning in 2002, when a drug regulator who had worked with Mr. Zheng was sentenced to death for corruption. (That official received a reprieve and was never executed.)

Soon, several other agency officials came under scrutiny. One drug industry insider, who asked not to be named discussing government agency rivalries, said bureaucratic battles also worsened between Mr. Zheng’s drug watchdog and the Ministry of Health, which had primary oversight over the drug market before Mr. Zheng’s agency was formed. That fight, according to this official, could have led his rivals to inform on Mr. Zhang.

In June 2005, Zheng Xiaoyu quietly stepped down as director of the State Food and Drug Administration. Rumors spread that he was under investigation.

But Mr. Zheng’s arrest did not come until a year later. In the meantime, he remained head of the China Pharmaceutical Association, even attending high-level government meetings, according to China Vitae, a Hong Kong Web site that tracks government officials.

About the same time, Mr. Zheng’s wife and son, sometimes at his direction, began returning some of the gifts they had received from drug company executives, including the $30,000 dividend Hairong had been paid for his stake in the Double Dove property. Naixue returned some of her consulting fees.

Two months later, the State Council, China’s highest governing body, held a special meeting to consider Mr. Zheng’s crimes. Prime Minister Wen Jiabao attended. The council was told that Mr. Zheng had “neglected his duty to supervise the drug market, abused the administration’s drug approval authority, took bribes and turned a blind eye to bad practices by relatives and subordinate officials.”

Mr. Zheng was officially arrested in March. Soon after, the entire Zheng family was undergoing intense interrogation. All three members confessed to soliciting and accepting bribes.

“Some money wasn’t given to me directly, but through Naixue and Hairong,” Mr. Zheng wrote in his confession. “Naixue was retired and stayed at home. Hairong was just a student. So their target was still me. Indirect ways were easier for me to accept. So I agreed, consented. This was bribery.”

Eventually, the court found him guilty of accepting bribes from eight drug companies, condemned him for dereliction of duty for failing to police the drug industry or his subordinates and creating regulatory schemes that allowed dangerous drugs to come to the market.

Industry officials say Mr. Zheng probably accepted many more bribes, but the government did not need evidence of any more to ask for the death penalty.

Many drug company officials still defend Mr. Zheng, arguing that he was a good man, undone by temptations that would have corrupted many people. They say that the industry was plagued by dishonesty that no regulator could have controlled; and that in a country where counterfeiting is rampant in all types of industries, where doctors and hospitals regularly accept kickbacks, that Mr. Zheng was made a scapegoat for national ills.

Mr. Zheng’s lawyer pleaded for leniency, saying his client had cooperated with the authorities and, at times at least, had actually worked to improve the drug industry.

But on July 10, the state-run media issued a terse statement: “Zheng Xiaoyu, former director of China’s State Food and Drug Administration, was executed Tuesday morning with the approval of the Supreme People’s Court.”

Whether Mr. Zheng’s wife and son will be tried is not clear.

The day after his execution, the agency Zheng Xiaoyu had helped found said it was dismantling his drug approval system and putting in place new measures to bring transparency to the drug approval system. The agency also said it would start making unannounced visits to check on drug factory production.

Industry analysts say Beijing will have to do a great deal more to solve the country’s food and drug safety problems “If the head of the drug agency is corrupt,” said James J. Shen, a longtime industry analyst in Beijing and the publisher of Pharma China, “you can imagine how corrupt the whole system is.”