March 6, 2014

Good Manufacturing Practices: China's new recipe for food
An eFeedLink Exclusive
The relationship between food safety, feed supplements and veterinary drugs has come under scrutiny. To address these concerns, China is introducing GMP regulations designed to consolidate and reinvent its animal health industry.
by YANG Yang
As consumers, whenever we go to a store to purchase food items, be it a bottle of milk, a rack of eggs, or a pack of ham, what gives us the confidence that the goods we pay to swallow are absolutely safe? We so often take things for granted that we just grab it off the shelf and tell ourselves: everyone buys it at the store, it must be safe; and we certainly don't want to act paranoid checking every inch of the package for meaningful signs about safety, or give it to the shop assistant for a toxic test. However, the reality is that every now and then we hear about incidents involving unsafe food around the world, with some stories presenting appalling accounts of death.   
In 2008, though packs came with seals of official approval, Sanlu Group's infant formula was discovered to have been adulterated with melamine, causing the death of six children from kidney stones and serious health problems for another 300,000 babies. Sanlu Group eventually went bankrupt, its executives were prosecuted, and the Chinese dairy business's prospects have been darkened ever since. More than five years later, Chinese consumers are still afraid of buying locally-produced infant formula, despite lower prices compared to foreign brands. 
Although directly analysing food ingredients gives us an idea about its safety, we are not looking at the whole picture yet, because what is more alarming is that danger lurks somewhere else in the food we consume.
In the livestock industry, animal drugs for treating diseases and feed additives for stimulating growth or promoting meat quality are potential threats to human health, as harmful residues may remain in milk, eggs or meat. For example, dioxins can be found in food, especially dairy products, meat and fish, and it is one of the most toxic chemicals known. Higher levels of this compound can cause serious reproductive problems, birth defects or even cancer.
In 2008, the discovery of dioxin contaminated feed led to an international recall of pork products from Ireland, and fears over dioxin poisoning prompted the Irish government to cull 100,000 pigs.
In 2011, after finding out that chickens and pigs had eaten feed contaminated with dangerous levels of dioxins, Germany blocked the sale of meat and eggs from 4,700 farms in the country. It also sent jitters across the EU, as Europe's food industry is so highly integrated that it was difficult to trace all the contaminated products.
Chinese consumers need not be reminded that about a year ago, KFC made headlines when local media reported that the fast food chain used "fast-growing chickens", which were fed with excessive levels of antibiotics by its main poultry supplier, Liuhe Group. The scandal stoked fear among local consumers, causing sales of KFC's China unit to plunge in the fourth quarter of 2012.
It is through such horrifying news that we learn about the danger of unsafe food. We now know that food-safety issues do not only arise during the processing, but also occur on farms. However, without a mechanism in place to prevent disasters like these, we would be constantly worried about the food we are about to send down to our stomach, or we would end up getting obsessive-compulsive disorder by frantically researching the effects of exotically named chemical compounds, which we may never fully understand. (Many consumers may not have heard of the terms "melamine" or "dioxins" before these news broke out, and there are far more exotic sounding chemical names in many processed foods.)
What is GMP?
This is where Good Manufacturing Practice (GMP) comes into play. GMP is a series of regulations designed specifically to govern the processing or production of food, medicine and veterinary drugs. It is a system to ensure that products are manufactured in a consistent way through a controlled process, with the ultimate goal of safeguarding human health.
According to a paper titled, "Research on Solutions to China's Food Safety Control Based on Innovative Society Management Background" by Xiaoqin Li, a researcher at Chongqing Technology and Business University, melamine-tainted milk and some other food safety scandals happened because "China's food industry has not yet developed specific practices [Good Manufacturing Practice a.k.a. GMP]."
The researcher also pointed out the need to develop "national standards and rules for special operation in important areas and industries as soon as possible, such as national standards of veterinary drug residues in food; specific practice standards for dairy products, beverages and others (GMP)."
In response to the dire situation in China's infant formula sector, Chinese authorities released "Opinions on Further Intensifying the Quality and Safety of Infant Formula" in June 2013. One of the proposed policies stated that it will be mandatory for infant formula manufacturers to comply with the National Food Safety Standard: Good Manufacturing Practice for Powdered Formulae for Infants and Young Children (GB 23790-2010).
GMP covers all aspects in the manufacture of food, medicinal products and veterinary drugs, including buildings and facilities, equipment, personnel, raw materials, production, laboratory controls, records, labelling, complaint handling and others. The World Health Organisation (WHO) has established detailed guidelines for GMP, which are widely used in developing countries; while in developed countries, more sophisticated requirements are put in place. In the European Union, United States, Australia, Canada, Japan, New Zealand and Singapore, GMP requirements are more stringent. In many countries, it is mandatory for manufacturers of pharmaceutical products, including veterinary drugs, to abide by these rules.
Inspection in each country is undertaken by the relevant authority. In Britain, it is performed by the Medicines and Healthcare products Regulatory Agency (MHRA); in the United States, it is conducted by the Food and Drug Administration (FDA), while in Australia, it is under the purview of the Therapeutical Goods Administration (TGA). In terms of strictness, FDA is often held in high regard, as the agency often rigorously pushes companies to invest time or money to do what is right for consumers. This is also one of the reasons why the American pharmaceutical industry has long been a world leader.
FDA regularly inspects the pharmaceutical manufacturing facilities to check whether GMP requirements are being followed. According to Brian Hasselbalch, FDA's acting associate director for policy and communication, in 2012 alone, the agency performed about 500 pre-approval-type inspections and about 1,900 GMP-type inspections of facilities connected with human drug manufacturing in the United States and overseas.
FDA does not only reign in the domestic drug industry, but also asserts its authority over any producer that exports drugs or Active Pharmaceutical Ingredients (APIs) to the United States. Similarly, to export pharmaceutical products to the EU, the manufacturer of the products needs to conform to standards of EU GMP.
With so many versions of GMP and unique enforcement policies undertaken by different countries, it is hard for companies to import or export pharmaceutical products or active pharmaceutical ingredients without going through countless inspections. That does not only result in extra costs, but also delays in delivery to the market.
In 1999, the International Conference on Harmonisation (ICH) published GMPs for Active Pharmaceutical Ingredients, which was approved the following year by three regulatory bodies in the European Union, United States and Japan. As signatories to the ICH, the EU, United States and Japan apply similar GMP requirements, while Australia, Canada, and Singapore have adopted the ICH guidelines.
History of GMP in China
China's Ministry of Health introduced its own GMP standards in 1988, and subsequently revised the rules in 1992 and 1999. Drug companies are required to submit applications to provincial or municipal authorities. If their facilities pass inspection by qualified assessors, the state administration would issue a GMP certificate of five-year validity.
Unfortunately, it is an open secret that the GMP standards were not strictly enforced in China, where many drug manufacturers continued to operate without GMP certification. China's State Food and Drug Administration (SFDA) later changed the playing field by announcing the strict enforcement of requirements by 2004.
It should also be noted that with only 88 articles, the original Chinese version of GMP is a mere compilation of basic quality control requirements. Even so, despite China's relatively loose GMP regulations compared to those in Europe and the United States, it led to the closure of about 2,000 companies, about one third of China's pharmaceutical firms at the time.
Realising the negative impact on China's drug export business, the government's SFDA announced new, stricter standards in 2010. Called GMP2010, it took effect on March 1, 2011. Compared to the original version, which contains only 88 articles and requires 56 areas to be certified, the revised version includes 313 articles and demands certification for 101 areas.
Moreover, China's government is committed to strictly enforcing these new regulations. Manufacturers of blood products, vaccines and injections are required to comply with the new GMP requirements by December 31, 2013; while other manufacturers are required to comply by December 31, 2015, or will be ordered by the government to halt production.
In an analysis published by The Food and Drug Law Institute, an associate from the Sidley Austin LLP Beijing office, Lei Li, summarised the major changes in GMP2010. They include a new concept of Quality Risk Management that covers key aspects of quality control in the drug manufacturing process; more specific requirements for the development and update of standard operating procedures; and detailed requirements for batch record keeping. GMP2010 also lists out key technical requirements and maps out the responsibilities of key personnel involved in drug manufacturing processes and quality control.
More aligned with the GMP provisions in the EU and United Sates, GMP2010's requirements regarding the drug manufacturing process, logistic chains, and workers' abilities are stricter, and emphasise protection from bacterial contamination. An assessment of the new standard by the European Compliance Academy (ECA) stated that the concept of GMP2010 "was mainly taken from EU GMP Guideline Part I" and many of the requirements are "comparable to those of EU GMP Guideline Part I."
President of Beijing-based pharmaceutical consulting firm Accelovance, Keyong Ren commented to Chemistry World that, "Compared with the old version, which required more regulation of 'hardware' such as equipment, the new GMP rules focus more on 'software' aspects such as drug manufacturing management, production techniques, risk management and the auditing of raw material suppliers."
However, Sidley Austin LLP's Li also pointed out that there was still a gap between China's new regulations and standards in the EU and United Sates, namely in the following two areas: First, APIs manufactured solely for export was exempted from GMP2010; second, it is not mandatory for drug excipients to be GMP certified. This means that the GMP2010, albeit a stricter version compared to its predecessor, lags behind its peers in the EU and United States, and creates barriers for China to export APIs to those regions. 
Impact of China's new GMP regulations 
Not surprisingly, large-scale companies in China are welcoming the introduction of the new standard. They are well capitalised enough to afford the cost of complying with new GMP regulations, and see them as an opportunity to further consolidate their market positions.
It is estimated that a Chinese pharmaceutical company will need to fork out an investment of RMB10 million to RMB20 million (US$1.65 million to US$3.30 million) to meet the new GMP requirements. According to official data from the China Congress of Veterinary Medicine (CCVM), as of December 31, 2011, close to 65% of China's 1,386-strong veterinary enterprises were only able to hit the mark of RMB10 million (US$1.65 million) in annual sales, while less than 25% could achieve the target of RMB50 million (US$8.26 million).
This means that for 90% of China's veterinary drug industry, a large share of annual profits will have to go into obtaining the new GMP certification. There is no doubt that with the implementation of these new requirements, China's animal drug industry is bound to undergo an accelerated pace of consolidation. "GMP [2010] will be a harsh strike to the industry," Accelovance's president Ren was quoted as saying, as he expects many small or medium sized companies to be eliminated.
In an interview with Chemistry World, Jiali Luo, vice president of Zhejiang Hisun Pharmaceutical Co. Ltd. (Hisun) explained the advantages enjoyed by big pharmaceutical manufacturers, "We adopted EU GMP rules a long time ago, which makes our production costs higher than domestic counterparts," says Luo. "With the new regulations, average industrial costs will increase while our price disadvantage will be reduced."
Tanping Lai, general manager of Lifecome Biochemistry Co., Ltd. (Lifecome), a Fujian-based animal health company that has obtained American, EU and Australian GMP certifications, said to eFeedLink, "Every inspection helps us improve the quality management in our production process."

The confidence expressed by Luo and Lai bodes well for the future of the Chinese pharmaceutical industry. The new GMP rules will make it more consolidated, with each large, surviving player taking a larger share of the market. This trend follows the industry's development path in Europe and the United States, where stringent GMP regulations are enforced.
Chinese animal health industry trends
Despite a few rounds of reshuffling, the size of the Chinese pharmaceutical industry remains large. According to a 2012 veterinary drug industry report compiled by the China Veterinary Drug Association (CVDA), there were about 1,400 Chinese companies jostling for market share as of 2010. By comparison, the same report reveals that the European animal drug industry comprises about 400 companies; while in America, the 16 largest companies account for 85% of the US market.
For Chinese companies to continue to grow their business, they will need to reach beyond China's border and compete in the global market. Statistics from Vetnosis, a research and consulting firm specialising in global animal health and veterinary medicines, show that the global market for animal health products grew about 2% to 3% annually over the past 10 years, and was worth US$22.5 billion as of 2012. Approximately 78% of its total market value is accounted for by North America, South America and Europe.
In order to export to these western markets, the first step Chinese companies need to undertake is to obtain internationally-recognised GMP certification. As of now, only a handful of Chinese companies have successfully passed GMP inspections by the American or EU authorities, including Hisun, Lifecome, and North China Pharmaceutical Corporation (NCPC). With their innovative capability and financial strength, these companies are bound to emerge stronger from their industry's impending GMP-induced reshuffling. A look at the might of these companies will indicate their standing in the market.
Zhejiang-based Hisun is an API manufacturer, and offers products that range from human health to veterinary drugs. The company has earned a reputation in the international market for its statins APIs and anthracycline anti-tumour and antibiotic APIs. To date, 40 of Hisun's products have received certification from the US FDA, European Directorate of the Quality of Medicines and Healthcare (EDQM) and Australia's Therapeutical Goods Administration (TGA), and are sold to more than 30 countries.
Headquartered in Hebei province, NCPC owned RMB15.8 billion (US$2.61 billion) in assets as of 2012, with more than 40 subsidiaries and 20,000 employees across China. NCPC produces over 590 varieties of products, including human health products, pesticides and veterinary drugs. Leveraging technological advantages accumulated in the field of traditional fermentation since 1984, NCPC has initiated a biotechnological research programme and set up a biotech drugs development system.
Located in Pucheng county, Fujian province, Lifecome's corporate mission is to "Create a world-class pharmaceutical enterprise", and is committed to producing animal health products under international GMP requirements. In a short span of 10 years, Lifecome has passed a string of international GMP inspections by authorities from the United States, Germany, Australia and Hungary. The company has gained approval for the sale of its products in more than 30 countries, and its sales revenue has risen steadily at an average of 30% over the past five years.

Recognised by the Chinese government as a national high-tech enterprise, Lifecome has obtained six patents, a new veterinary drug certificate, and received multiple Municipal and Provincial Science and Technology Progress Awards. With forty 65-tonne steel fermentation tanks, twelve 1.5-tonne-per-hour spay drying towers, one 2,600-tonne-per-day waste water treatment facility and other state-of-the-art equipment, Lifecome boasts the world's largest production capacity of bacitracin products for animals. It is also the only company developing the Chinese veterinary drug standard for bacitracin products. To maintain its innovative edge and achieve a sustainable developmental model, Lifecome has been collaborating with leading Chinese universities on a myriad of research projects.
Speaking of the advantages of gaining approval from regulatory authorities in Europe, the United States and Australia as a GMP-certified company, Lifecome's general manager Lai stated to eFeedLink that, "Every suggestion from the inspectors and each step we take to enhance our products' quality bring us closer to becoming an international animal health company."
Lai adds that, "With our devotion to microbial fermentation technology and commitment to taking the lead in the Chinese veterinary drug industry, Lifecome will continue to contribute to ecological farming and food safety." 

It is the likes of Lai's assurance that will put consumers' mind at ease, as food safety remains a major concern in our daily life. With the Chinese government stipulating that all pharmaceutical companies must comply with GMP2010 by the end of 2015, we will see Lifecome, NCPC, Hisun and other internationally GMP-certified companies change the landscape of the Chinese animal health industry. Over the long run, this will enable China to improve its food-safety record and enable its agribusiness industry to regain the confidence of consumers.

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