China Rejects St. Jude Pacemakers In Move That Smacks of Retaliation

In April, quality control regulators in China found that five heart pacemakers were mislabeled – their voltage settings were not correctly identified – causing China’s government to return the devices to their manufacturer, St. Jude Medical, Inc. (STJ). Although the devices were tested in April, they were returned "recently" and an announcement was made this week.

Testing the devices, the Chinese regulators found that their pulse strength varied by more than 2% from stated parameters, the limit for acceptability.

This is not the first time that St. Jude has sent devices with problems to China. In 2001, pacemakers from St. Jude Medical were banned from China after some of them had reliability issues. The prohibition gave some room to domestic versions of the pacemakers in China. A St. Jude spokesperson belittled this latest problem, saying the incorrect labeling would not affect the safety of patients or the performance of the devices. To the Chinese, however, the problem was significant. Their spokesperson said it could lead to “major” health hazards.

Although five devices were found defective, the entire shipment of 272 devices was returned. The shipment had a value of $236,294, a small amount for a company like St. Jude. But safety issues have significant commercial ramifications, which the heart device companies like Medtronic (MDT), Boston Scientific (BSX), and Johnson & Johnson (JNJ) have discovered over the past two years. As have the Chinese, though for other products.

The most important takeaway from this story is the implication of retaliation. So far this year, the Chinese have been battered by charges of a variety of safety issues – toothpaste, dog food, cold medication, and most recently lead paint on toys. At first, they denied that a real problem existed. Then they issued a number of press releases that detailed how the government would increase surveillance to ensure that Chinese exports would be safe.

Now, they seem to be stepping up efforts that, in essence, drag everyone down to their level, the level promising that 99% of their products are safe. After all, here is an American high tech product, one that regulates a beating heart, that is poorly put together and could result in loss of life. Is it any wonder that China, working its way out of third-world status, has some safety problems at the margins of its quickly growing manufacturing enterprise?

And they made the announcement some four months after the actual event occurred. It seems they decided to use it as part of a public relations onslaught to counteract the fallout from the latest scandal.

A few months ago, Chinese and American authorities were discussing ways of handling safety disputes through official channels. The implication was that officials were concerned, but wished to avoid the headline-grabbing sort of "gotcha" stories that safety problems can easily become. To tamp down, in other words, the publicity while working to develop significant solutions. With the latest headline from China, it would seem the attempt to handle safety issues through diplomatic means is in trouble.

STJ 1-yr chart:

Disclosure: none.