Baxter (BAX) Takes On Mattel's (MAT) Mantle

Mattel (NYSE: MAT) may have feared it would wear the China "kick me" sign forever. Until Baxter (NYSE: BAX) came along.

The new poster boy for not keeping an eye on China suppliers has pulled its blood-thinning drug heparin off the market. The headline in The Wall Street Journal says it all: "China Planted Tied To Heparin". Reading the rest of the story is a waste of time, except for trial lawyers.

The Baxter debacle in China is yet another example of the fact that US companies will not invest money in policing their suppliers in the big Asian nation. The FDA was supposed to inspect the facility which makes the active ingredient in heparin. They did not. But, that hardly absolves Baxter of its own responsibility, especially because the drug is used in so many critical hospital procedures.

Earlier this week Baxter said it would stop production of the drug because of "reports of hundreds of allergic reactions and four deaths among the drug’s users." Baxter attorneys and management will now spend weeks preparing to testify in front of Congressmen who have recently been practicing on Roger Clemens. The FDA is also likely to be beaten like a red-headed mule.

The easy excuse for companies like Baxter is that th FDA is undermanned and companies need the agency’s help to keep an eye on China suppliers. Behind that is the reality. Baxter, and firms like it, allow products to be produced in China to save money. Unfortunately, that savings extends to not adequately monitoring what the Chinese do.

Baxter will now get its turn in the gauntlet

Douglas A. McIntyre