China's Biostar says it has replaced 5M tainted capsules

Chinese drugmaker Biostar Pharmaceuticals ($BSPM) is letting everyone know that it is on top of the tainted capsule scandal there, testing all of its products and firing an employee for using an unauthorized supplier.

In a release Wednesday, the company acknowledged that tests of products conducted by the local office of the State Food and Drug Administration (SFDA), found unacceptably high levels of chromium in 1.2 million units of its most popular product, Xin Aoxing Oleanolic Acid Capsule, an over-the-counter medicine for chronic hepatitis B. Its own tests uncovered problems in another 3.9 million Xin Aoxing capsules.

The disclosures follow the SFDA's announcement in April that it was ordering the recall of drugs, closing down capsule manufacturers and arresting people after it discovered that some gel suppliers were using scrap leather with high levels of chromium instead of food-grade product. As in previous cases, Chinese officials have publicly taken a hard line against the practice. They detained 45 people, arrested 9 and seized 77 million contaminated capsules. Eighty illegal production lines also got the ax, officials said in a dispatch about the cleanup effort.

In Biostar's public response, CEO Ronghua Wang says the company traced the initial problem to a batch of capsules that were acquired in May 2011 from an unapproved supplier by a purchasing manager who was fired after the deal was discovered in August. Wang says Biostar did not test the capsules at that time because it wasn't required. Now it is testing all of the capsules it acquired between June of last year and April 29. It has additional testing equipment and quality-control procedures now in place to avoid problems, and Wang says everything Biostar makes now comes from food-grade gel.

- here's the release

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