By Allan Dodds Frank and Lisa Rapaport

Aug. 16 (Bloomberg) — A global manhunt launched by Johnson & Johnson has tracked to China counterfeit versions of an at- home diabetes test used by 10 million Americans to take sensitive measurements of blood-sugar levels.

Potentially dangerous copies of the OneTouch Test Strip sold by J&J’s LifeScan unit surfaced in American and Canadian pharmacies last year, according to federal court documents unsealed in June. New Brunswick, New Jersey-based J&J, the world’s largest consumer-health products maker, learned of the counterfeit tests after 15 patients complained of faulty results last September.

Tipped off by J&J, the U.S. Food and Drug Administration issued a nationwide consumer alert in October without disclosing the link to China. While no injuries were reported, inaccurate test readings may lead a diabetic to inject the wrong amount of insulin, causing harm or death, the agency said. Fake medicines are a $32 billion global business, says the World Health Organization, and the FDA says it ran 54 counterfeit investigations in 2006, almost double the year before.

“Growth in counterfeit medicines and devices is probably the biggest health threat besides infectious disease,” says Peter Pitts, director of the Center for Medicines in the Public Interest in New York and formerly an FDA official investigating knockoff drugs.

The court filings disclose, for the first time, that China is the source of about one million phony test strips that have turned up in at least 35 states and in Canada, Greece, India, Pakistan, the Philippines, Saudi Arabia, and Turkey.

`China, Through Canada’

“The source was from China, through Canada, to the United States,” says Steven Gutman, director of the Office of In Vitro Diagnostic Devices and Evaluation at the FDA in Rockville, Maryland. “As far as we can tell, the counterfeiter has been put out of business in the U.S.”

The court documents reveal, also for the first time, a worldwide distribution chain discovered in the past year by investigators hired by Johnson & Johnson. The trail, initiated by consumer complaints to a LifeScan hotline, first led detectives to 700 pharmacies where the products were sold, then to eight U.S. wholesalers, and then to two importers, one in the U.S., who was tracked down in a hotel room in Las Vegas, and another in Canada.

Records seized from the importers show the counterfeit strips were bought from Henry Fu and his company, Halson Pharmaceutical, which according to its Internet site is based in Shanghai.

Started with One Box

“When we started down this road, we had one box of product,” Geoffrey Potter, the lead lawyer for J&J, told the U.S. District Court in Brooklyn. “The box looked like a counterfeit $100 bill looks, perfect. They were made of parts we don’t have in our factory.”

Potter’s firm, New York-based Kramer Levin Naftalis & Frankel, on behalf of J&J has brought an anti-counterfeiting and trademark action against more than a dozen companies.

“Our ongoing market surveillance hasn’t revealed any new cases of counterfeit products in the U.S. for several months,” David Detmers, a spokesman for Milpitas, California-based LifeScan, said in an e-mailed statement. “We recommend customers obtain their diabetes testing supplies from reputable sources to reduce their risk of receiving counterfeit product in the future.”

Halson’s Web site says the company distributes and manufactures medical supplies, such as syringes, and is run by Fu, who, according to a court order, is also known as Su Zhi Yong. Fu was arrested by Chinese authorities and remains in prison in China, awaiting resolution of his case in the Peoples’ Court of Shanghai.

The Shanghai address listed on Halson’s Web site doesn’t exist. Calls to phone numbers on the site and to his home went unanswered.

Consumer Scares

China, the biggest exporter of consumer products, has created a series of worldwide consumer scares this year ranging from contaminated toothpaste to drug-tainted seafood. The communist country executed its former chief drug regulator last month for taking bribes and the nation said it will take five years to stamp out counterfeiting.

Just this week, Mattel Inc., the world’s biggest toymaker, said it is recalling 18.2 million Barbie dolls and other products with magnets children risk swallowing.

Most of China’s toy exports are safe and it’s “irresponsible” to criticize the overall quality of products based on a handful of incidents, Wang Xinpei, spokesman for the Ministry of Commerce, said at a press briefing in Beijing today. Wang declined to comment by telephone on the LifeScan case.

LifeScan sells a variety of strips under the OneTouch Ultra and OneTouch Basic Profile names. The test sells in the U.S. without prescription for about $1 per strip, in boxes of 25, 50 and 100.

Investigators

Johnson & Johnson officials first learned that corrupted strips were being sold “between September 18 and September 28, 2006, when LifeScan received complaints from 15 customers from various states, including Wisconsin, New Jersey and New York, concerning the same lot,” according to a J&J statement in court papers. “The complaints included, but were not limited to, allegations of inaccuracy and error messages.”

On Oct. 5, investigators hired by LifeScan visited three pharmacies in Wisconsin and found OneTouch packages with a lot number not created by the company’s plants in Inverness, Scotland or in Cabo Rojo, Puerto Rico, the papers say. On the same day, another investigator, following a call to LifeScan’s toll-free hotline, found a package with the same phony lot number in a Brooklyn, New York drugstore.

Consumer Alert

“The first box we found, in fact, had a unique lot number,” Potter said at a hearing held July 13 by U.S. District Judge Sandra Townes in Brooklyn. “The counterfeiters counterfeited every element from the original box except they put a fake lot number. They really did us a favor and we were able to advance this case quite rapidly because of that. We tracked one box all over the country and up a chain of distribution.”

On Oct. 13, the U.S. FDA published its consumer alert and LifeScan issued a press release and notified pharmacists, distributors and wholesalers to watch for packages with four separate lot numbers.

Patients place blood from a finger prick onto the strip and insert it into a plastic test device that looks somewhat like a hand calculator. The results help patients make sure the right amount of insulin is used to keep glucose, or blood sugar, from rising to dangerous levels.

Gray Market

As diabetics without insurance may spend $100 to $200 a month for the strips, pharmacies with low-income customers are tempted to buy discounted tests from gray market distributors. The U.S. and Canadian defendants say they believed the counterfeit strips were lower-priced gray market products diverted from normal distribution channels.

“I think it’s very important before I take my shot before I eat something, I need to know what my blood sugar is,” says Gamze Tufekci, a 38-year old New York adult education teacher who uses LifeScan’s Ultra Strips. “Sometimes it goes low and it’s too high so I need to know exactly what the result is so I can eat or I can take more insulin.”

Pharmacists told investigators they bought the strips from wholesalers who, in turn, said they had purchased the product from Royal Global Wholesale Corp., of Boynton Beach, Fla. That company is run by Jacques Duplessis from his home.

A J&J team raided the Duplessis Boynton Beach home and discovered he was vacationing in Las Vegas. So at 6:30 p.m. on Oct. 11, 2006, J&J obtained a seizure order from federal court to “take possession of business records, computer, rolodex cards, etc. of Royal Global Wholesale Corp. or Jacques Duplessis in room 539 of the Imperial Palace Hotel” in Las Vegas.

Importer

“My client is very distraught that he was distributing test strips that were alleged to be counterfeit,” says Steven Horowitz, a New York attorney for Duplessis. “Basically he was duped by his supplier, who still owes him a lot of money.”

The other importer from China, according to court documents, is a Montreal company known as Zoe Diagnostics Inc., owned by Alexander Vega. He had worked for LifeScan for nine years and owns another Canadian company called Blue Sky World Corp. with Duplessis. J&J sued Vega in both Brooklyn and Quebec, where a raid seized counterfeit products from a storage locker.

Investigators linked Vega to Henry Fu from seized e-mails, purchase orders and wire transfers of money.

“Our clients reiterate their denial that they ever engaged in the sale of counterfeit product and expect that their position will eventually be vindicated before the courts,” George Pollack, Vega’s attorney in Montreal, said in an e-mailed statement.

The case is Johnson & Johnson v. Champion Sales Inc, 06-cv- 05451, U.S. District court for the Eastern District of New York (Brooklyn).

Most of recalled products made in China
By Jen Haberkorn and Kara Rowland
August 16, 2007

Two-thirds of the products recalled in the United States so far this year were manufactured in China, according to analysis by The Washington Times.

Of the 234 items recalled by the U.S. Consumer Product Safety Commission (CPSC) this year, 154 were manufactured in China, 43 were manufactured in the United States and 37 were manufactured elsewhere in the world.

Recalled products run the gamut from children’s jewelry, car seats and toys to gas grills, furniture and all-terrain vehicles. Many products were recalled without injuries. But some did cause injuries, including a remote-controlled airplane that exploded as it left the user’s hand on numerous occasions and injured 33 persons.

The number of Chinese-made product recalls in the United States has doubled in the past five years, according to the nonprofit Consumers Union, which publishes Consumer Reports magazine. Chinese products accounted for 60 percent of the total recalls in the U.S. last year, which numbered 467 — a record.

Earlier this week, U.S. toy manufacturer Mattel Inc. announced a massive recall of 19 million toys worldwide — 9.5 million in the U.S. — that have been found to be potentially dangerous to children because of defects such as lead paint or loose magnets. It was Mattel’s second toy recall this month.

Safety fears likely extend beyond toy companies such as Mattel that have voluntarily recalled their products, said Stephanie Oppenheim, who publishes the Oppenheim Toy Portfolio, a consumer guide to toy safety.

“I don’t think it’s realistic to assume lead paint is only an issue for Mattel or RC2,” Ms. Oppenheim said, referring to the makers of Barbie dolls and Thomas and Friends toys, respectively. “Both of them are leading companies on the issue. I think this is really the tip of the iceberg.”

Voluntary recalls are not adequate, Ms. Oppenheim said, arguing that the CPSC needs to require independent testing.

“All companies, large and small, should be required to do what Mattel says it’s doing going forward, and that’s batch testing,” she said, referring to the practice of stopping in the middle of each production unit and checking for quality among units.

But, while large toy makers or retailers can afford expensive testing, “the real issue that no one’s been talking about is what happens to the smaller and mid-sized toy companies,” Ms. Oppenheim added.

Furthermore, food and drugs are the only imported goods that the government inspects for safety when they enter the United States. Other products, whether clothing, toys, paper products or electronics, are inspected only by the private companies that manufacture them.

“Most products that are traded are not inspected, at least not for [consumer] safety reasons,” said Bill Primosch, senior director of international business policy for the National Association of Manufacturers, a Washington trade group. “We expect that manufacturers and importers will adhere to the appropriate health safety and environmental standards — and most do.”

But the manufacturing industry cautions that the recalls represent a small portion of the goods coming into the United States from China.

“Most of the products that come from China appear to be safe,” he said. “Many of the products imported are made in U.S.-operated plants in China that meet the high quality standards that they insist on their production in the U.S.”

Ed Mierzwinski, consumer program director for U.S. PIRG, the federation of state Public Interest Research Groups, said the Mattel recalls this week should serve as a wake-up call to Congress to allocate more money to U.S. regulators.

“The CPSC lacks the leadership, the money, the staff and the legal authority it needs to protect us from dangerous imported or domestically produced products,” he said.

• Bryce Baschuk contributed to this report.

By Tom Spalding and John Russell
John.Russell@indystar.com
           
Gilchrist & Soames, which supplies high-end toiletry products for hotels in over a dozen countries, said today it is initiating a worldwide recall of a toothpaste manufactured in China.

The product is Gilchrist & Soames, 0.65-ounce tube made by Ming Fai Enterprises International Co., LTD.

Independent tests showed some samples of the toothpaste contained diethylene glycol, or DEG. Among DEG’s uses is as a coolant in automobiles.

Kathie De Voe, president of Indianapolis-based Gilchrist & Soames, said in an interview today that the company contacted its two Chinese toothpaste suppliers and initiated a series of independent lab tests in both Hong Kong and the United States after receiving an FDA alert June 1 about tainted toothpaste manufactured in China.

“We’re just concerned about getting this problem cleaned up and we’ll deal with the financial impact later, De Voe said. “But we’re a global company, and financially very stable, and this isn’t anything that will change any of our business strategies. We’re more concerned right now with the safety of our hotel guests.”
The U.S. Food and Drug Administration is not aware of any U.S. reports of poisonings from toothpaste containing DEG, but is concerned because of a “low but meaningful” risk of toxicity and injury to children or individuals with kidney or liver disease.

Hotels in the United States, Canada, Mexico, Bermuda, Barbados, Dominican Republic or Turks & Caicos as well as the United Kingdom, Ireland, Spain, Belgium, France, Italy, Germany, Switzerland and the United Arab Emirates are being asked to destroy any remaining inventory.

American consumers have good reason to be cautious as product after product — all originating in China — have been yanked off U.S. shelves. Here is a list, based on alerts from the responsible U.S. agencies, of some of the is year’s problem products:
Research by Kristin Deasy

Easy-Bake Oven: 249 reports of children getting their hands or fingers caught in a small opening in the oven, including 77 burns (16 of which were second- and third-degree). Manufactured by Hasbro and distributed by Toys R Us, Wal-Mart, Target and KB Toys through July. Oversight agency: Consumer Product Safety Commission (CPSC).

Seafood: The Food and Drug Administration has asked importers to provide third-party laboratory results for all catfish, basa, shrimp, dace and eel from China. All repeatedly contained drug traces, prompting multiple alerts to retailers, including Wal-Mart, and restaurants, including Red Lobster. China is among the top three seafood exporters to the USA, and the FDA rejects more seafood imports from China than from any other country. Product alert: July. Oversight agency: FDA.

Tires: At least two people died in car accidents linked to faulty tires made in China; 450,000 tires were recalled because they were sold without the “gum strip,” or the piece that keeps the treads from separating and the tire from coming apart. Manufactured by Hangzhou Zhongce Rubber and sold under brand names Compass, Telluride, Westlake and YKS. Product alert: June. Oversight agency: National Highway Traffic Safety Administration. 
 

Toothpaste: Four products — Cooldent Fluoride, Cooldent Spearmint, Cooldent ICE and Shir Fresh Mint Fluoride Paste — were found to contain diethylene glycol, which is toxic and potentially fatal. Manufactured by Goldcredit International Trading and Suzhou City Jinmao Daily Chemicals Co. Product alert: June. Oversight agency: FDA.

Pet food: 4,150 U.S. pet deaths have been linked to pet food with wheat protein tainted with toxic chemicals; 5,300 product lines were affected. Product alert: April. Oversight agency: FDA.

Lawn trimmers: Pieces could fly off while in use, becoming dangerous projectiles. Some units also overheated. There were 58 injuries out of 707 incidents reported. The GH1000 Grasshog XP String Trimmer/Edgers are manufactured by Black & Decker and were distributed through January. Oversight agency: CPSC.

Remote-control airplanes: 45 airplanes exploded. Twenty-two consumers reported that their hearing was affected or pained; 10 reports of other injuries. The Model 4116 Sky Rangers Park Flyer planes were distributed through December by Estes-Cox Corp. Oversight agency: CPSC.

U.S. exports to China last year totaled $52 billion, which pales in comparison to the $285 billion in Chinese imports coming into the U.S. The result is not only a record trade deficit, but also a blow to our GDP, lost jobs, unsafe products, and an erosion of our manufacturing base.
 
By the way, some of our fastest growing exports to China are waste — scrap metal, scrap copper, scrap paper and the like. Not products that will create the good-paying jobs of the future.

Ironically — or perhaps not — a study released last week concludes that the Chinese government is subsidizing its steel industry to the tune of $52 billion. While American companies are eager to compete in the global marketplace, it’s impossible to compete with these subsidies, which violate all sorts of trade rules.

Congress is poised to act on China’s illegal currency manipulation, which gives Chinese producers a 40 percent price advantage over American production, for the first time. But the Bush administration indicates that it still opposes any and all interventions.

That opposition is shortsighted. Unless the Chinese government understands that there are consequences for its market-distorting practices, the regime in Beijing won’t be inclined to change them, no matter how many trips Treasury Secretary Henry Paulson makes there.

There is another opportunity to secure good-paying jobs. The International Trade Commission has been reviewing the case of below-cost steel imports from China and other countries. It has heard testimony from dozens of Senators, Members of Congress, workers and domestic steel companies about the damage this dumped steel causes to one of our nation’s most important strategic industries. Hopefully, the ITC will make the right call and continue to ensure that American workers and manufacturers have the same opportunity to compete as their overseas competitors.

Standing up for accountability and fairness in our trade policy doesn’t mean you are anti-China or protectionist. Rather, it means you support the rule of law and eliminating market-distorting practices. These are lessons the Bush administration and mainstream media should learn.