By staff writers Zhao Hejuan and Li Hujun

It probably never crossed the mind of Shanghai mother Lu Yi that the "life insurance" -- an umbilical cord blood autologous bank service -- she elected to invest in for her daughter two years ago would result in such lengthy and ongoing tribulation -- and a dispute that has rocked China’s medical community.

What are known as autologous cord blood banks provide a private service for mothers-to-be who choose to pay for having blood taken from umbilical cords at birth and stored for possible future needs of the child. In addition to autologous blood banks (in which an individual can have his or her blood stored for personal use), there are also public banks where a mother may choose to donate cord blood for the benefit of any who need it, whether a member of the general public, or her own child.

“Cord blood bank” is the popular name for an umbilical cord hematopoietic stem cell bank -- a unique type of blood bank that collects, processes and stores hematopoietic stem cells from the umbilical cord blood that’s extracted when a mother gives birth. The cells can be used later in transplant operations.

On December 14, 2005, at Shanghai’s International Peace Maternity and Child Health Hospital, Lu signed an agreement for autologous cord blood storage with a staff member from the Shanghai Cord Blood Bank. Eleven days later and moments after her newborn daughter’s first cry, Lu’s umbilical cord blood began a special journey.

Under the agreement, the Shanghai Cord Blood Bank would store the blood for 20 years, a service for which Lu paid a one-time fee of 16,060 yuan. The blood bank sent her a report about tests performed on the cord blood one month after the girl was born, saying the blood had met all standards during a variety of tests.

Then in early September, an anonymous text message shattered Lu’s peaceful life as a new mother. She received the message which read: “Your baby’s blood tested positive for anaerobic bacteria. Storing it is completely pointless. You have been defrauded.”

More than 200 other new mothers who had also signed up for the cord blood bank service received the same message at the same time. Soon, these women joined together to try to find out whether the text message was true. They contacted the blood bank in hopes of obtaining the original test reports. But their repeated requests were denied.

Later, the women tried working with Shanghai No. 6 People’s Hospital, which was in charge of the actual testing. These requests for documentation were similarly refused.

A Nationwide Scandal

Having failed to resolve the issue with the blood bank, Lu and a dozen other mothers filed a class-action lawsuit in November 2006 with the People’s Court in Shanghai’s Changning District.

The following April, in hopes of avoiding judicial proceedings that might increase the negative impact of the incident, the Shanghai municipal Bureau of Health sent an internal memo to the blood bank requiring it rectify the situation. The bureau also exacted administrative penalties on the blood bank based on irregularities in operating practices revealed by the dispute.

However, most users of the blood bank’s services were not satisfied. So last November, a year after launching the legal proceedings, Lu and her co-plaintiffs again approached the Changning court to ask that their suit proceed as soon as possible. The court refused to set a timetable, though, instead asking the parties to engage in further arbitration.

In January, following additional reports by major media including China National Radio and the newspaper Southern Weekend, the controversy that had dragged on for more than a year once came to the fore of public attention.

A Shanghai health bureau spokesperson responded January 15, stating that in November 2006 the bureau had arranged for a special investigation to be conducted by its own Center for Health Supervision and other agencies. This investigation had found that the blood at the center of the scandal had initially tested positive (for bacteria) before being accepted by the blood bank for storage. The blood bank, following its own standards for storage, had re-tested the blood, found it to be negative, and accepted it for storage.

Both the initial and repeat tests were double-blind, and both had produced objective results, the spokesperson said. Nor was there any evidence of tampering.

The spokesperson did, however, say that the health bureau had clearly told the blood bank that it was obliged to fully inform all mothers using its services that if their blood initially tested positive, but showed negative on re-testing, and the women were unwilling to use the service, then the agreement to store the blood would be void and the fees refunded. In the future, results of blood tests should be made known to the women the blood had been taken from, the bureau said, and the blood would be stored only after permission had been received from the women.

Finally, 16 months after the media exposed suspicions that the Shanghai blood bank was storing “tainted” blood, China’s highest health sector authority gave a public response to the affair. The National Ministry of Health’s response came during a routine news conference February 18.

Mao Qun An, speaking on behalf of the ministry, said senior officials had set up a team of experts to investigate cord blood banks and also had issued a call for all local authorities to improve oversight and monitoring of the quality of umbilical cord blood stem cell storage services. The duty of such service providers to provide full disclosure of test results was also made clear, so as to uphold the public’s right to know and right of free choice. These measures were aimed at ensuring the healthy development of cord blood bank stem cell services.

However, it is not known whether the results of the expert team’s investigation into the sector will be made available for public scrutiny, nor precisely what measures supervisory agencies are expected to adopt to improve oversight. Caijing wrote to the ministry seeking further clarification of these matters, but as this article went to press February 29, no response of any kind had been received.

Value of Blood Storage

Lu and her co-plaintiffs, having been caught in this marathon dispute, were perhaps left unsure about the value of autologous cord blood storage they paid for, since the blood in question had supposedly satisfied the medical requirements.

By the health bureau’s account, the blood bank by the end of 2007 had accepted more than 3,000 donations and collected more than 5,000 autologous cord blood samples. Yet to date, all the cord blood stem cells provided that Shanghai Cord Blood Bank -- for 10 patients suffering from diseases such as acute myeloid leukemia, acute lymphoblastic leukemia and aplastic anemia -- came from its stock of publicly donated blood.

This explains why the blood bank has yet to prove the value of its autologous blood storage service through clinical practice. Interviews by Caijing reporters with all of China’s specialists in umbilical cord stem cell transplants found none able to offer a conclusive, domestic example of a successful transplant operation.

In 1988, umbilical cord blood was for the first time anywhere in the world used to successfully treat a child suffering from Fanconi’s anemia, marking the beginning of a new era where cord blood came to be used in clinical medicine. Research had led many to believe that transplanting the somatic stem cells contained in cord blood cord work in the same way as bone marrow transplants, with enormous potential in the treatment of diseases such as blood system cancers and those affecting the immune system.

Even internationally, privately stored cord blood at present accounts for just a tiny portion of the actual application of this therapy. The world’s largest private cord blood bank, the Cord Blood Registry in the United States, has existed for 15 years and now holds more than 200,000 blood samples. Yet, as of January, it had supplied a mere 60 samples for actual use in treatment. Nineteen of these were transplants back to the original child whose cord the blood had come from, one was a transplant given to a mother, and the other 40 were transplants to siblings of children whose cord blood had been stored.

Over the past few years in China, private cord blood banks have grown to surpass public cord blood banks in terms of their scales of operation, although the international controversy over the necessity and appropriateness of autologous cord blood storage has continued.

In March 2004, the European Group on Ethics in Science and New Technologies (EGE) formally reported its opinion on the issue for the European Commission. It said commercial, autologous cord blood banks “could be entirely disregarded” for lacking any real value as a clinical choice, thus bringing the appropriateness of such services into question. EGE is an independent advisory committee of experts whose 15 members are appointed by the president of the European Commission.

Although EGE did not recommend closing cord blood banks, it did emphasize the need for stringent government controls on advertising for such services to prevent exaggerated claims and one-sided information.

A June 2006 report by Britain’s Royal College of Obstetricians and Gynaecologists also cast doubt on the value of autologous cord blood banks. The report said the probability of a person needing autologous cord blood before age 20 was extremely low, estimated in the range of between 1 to 2,700 and 1 to 20,000. Should a cord blood transplant be necessary, and the patient suffered from a hereditary condition as in the case of some leukemias, it would not be suitable for use in a transplant operation since autologous cord blood would carry the same genetic flaws.

Current mainstream, international medical opinion thus remains cautious about private cord blood banks. In many European countries, the government does not encourage the commercial provision of such services. In Italy, their provision is illegal. In Japan, the only cord blood banks are public bodies.

Speaking to Caijing, Dr. Nathan Cox of the obstetrics department at Cornell University Medical College said the use of private cord blood banks is of "effectively zero" added value because public blood banks are continuing to expand and can well satisfy the demand created during the rare instances when children require such services.

For example, the National Cord Blood Program set up by the New York Blood Center in 1992 currently holds more than 30,000 cord blood samples and is the world’s largest public cord blood bank. Of patients requiring cord blood, 99 percent are able to find blood in which only two of six antigens do not match, 65 percent can get blood with just one unmatching antigen, and in 11 percent of the cases the cord blood perfectly matches their own. Even when one or two antigens do not match, a transplant is possible, although a complete match may have a better outcome.

China’s first cord blood bank was established in Beijing in 1996. There are now six in the country, with others in the cities of Tianjin and Shanghai, as well as the provinces of Guangdong, Sichuan and Shandong. The Ministry of Health is planning for up to 10 such banks by 2010.

Health ministry spokesperson Mao said specialists calculate that all the clinical requirements for treating sick children in China could be met if citizens nationwide donate 70,000 to 100,000 samples to cord blood banks. To date, the country’s six public blood banks already hold 25,000 samples and have contributed stored blood for more than 400 successful, clinical transplants.

Spotlight on the Profit Model

Another source of confusion for Lu and the other mothers in Shanghai was the identity of the blood bank’s financial backer. A 1999 law forbids any institution or individual from providing cord blood collection services for profit. And a government blood bank management circular said in 2006: “The state does not permit the establishment of for-profit special blood banks such as umbilical cord blood stem cell banks.”

Documentation from the Bureau of Industry and Commerce showed that the bank’s controlling shareholder was a private enterprise, Shanghai Jukang Biotechnology Development Co. Ltd., which held a 70 percent stake. Two, smaller shareholders are the Shanghai Red Cross, which held 20 percent, and the Shanghai Blood Center, a 10 percent stakeholder.

Si Weijiang, a lawyer who has been advising the group of mothers for their lawsuit, told Caijing that the blood bank’s charter contains clear provision for the division of profits and, in itself, sufficiently shows that the company is a typical, for-profit legal entity.

But the Shanghai company is not the only blood bank in trouble. Caijing has learned that the Shanghai bank was modeled after two other institutions -- cord blood banks in Beijing and Tianjin, which are also controlled by private businesses. An examination of the company charters of these private businesses reveals no hint whatsoever of any charitable purpose.

The Beijing Municipal Cord Blood Bank was the first to receive an operating license from the Ministry of Health. After a dizzying series of stock transfers, the blood bank’s ownership wound up with Beijing Jiachenhong Biotechnology Ltd. -- a wholly owned subsidiary of a foreign-invested enterprise called China Stem Cell Holding Ltd., a company registered in the Cayman Islands.

The story behind the Tianjin Cord Blood Bank is perhaps more representative. It is currently owned by Tianjin Union Stem Cell Genetic Engineering Ltd., which has registered capital of 100 million yuan and is controlled through a 57 percent stake by Shanghai Met (Group) PLC (SSE:600645). The China Academy of Medical Science, China Union Medical University Hematology Research Center’s Institute of Blood Diseases holds a 33 percent stake. And the remaining 10 percent is held by Huayin Investment Holdings Co. Ltd.

Tianjin Union was launched in 2001. Its first CEO was Han Zhongchao, who also directed both the Hematology Research Center and the Institute of Blood Diseases. Well-known domestically as an expert on blood disease, Han was widely regarded as an enthusiastic promoter of autologous cord blood storage in China.

Meanwhile, Shanghai Met PLC, which controls the Tianjin Blood Bank through Tianjin Union Stem Cell, stated that the blood bank is its core business. A company report in August 2001 said it would “strive to realize strong economic returns within the same year our investment in this venture was made.”

Since national law quite clearly states that for-profit cord blood hematopoietic stem cell banks are not allowed, how did these profitable investments prosper in a non-profit sector? The answer can be found by turning back to the earliest investment model in which “banks were used to pay for banks.”

A Frankenstein Process

Private capital holders were able to obtain the right to operate commercial cord blood banks like those in Shanghai, Beijing and Tianjin because they had dual identities -- acting simultaneously as operators of public blood banks that accepted donated blood.

As the sector’s supervisory agency, the health ministry had conceived a system whereby commercial profit from businesses such as cord blood autologous storage services could be used to support the development of public blood banks. This process could resolve the problem of public funding shortfalls.

Real-world evidence shows the concept took a radical turn when put into practice. If a balance were possible that allowed private banks to pay for public banks, the most important factor was guaranteeing a proper ratio of the two. Otherwise, an enterprise could expand a private blood bank and contract public ones, turning what should have been a charitable enterprise into a instrument for profit.

The Shanghai blood bank’s charter says the company has the right to set this ratio itself. Currently, holdings of cord blood in public banks in Shanghai are only 60 percent of those in private banks.

The situation in Tianjin is even more astounding. The official Web site of Tianjin Union says its cord blood bank holds some 300,000 samples. Yet Ministry of Health data puts the total amount of cord blood in public banks nationwide at just 250,000 samples. Based on these figures, the amount held in banks is at least 10 times the storage in public institutions.

Behind this loss of balance between public and private entities, and as supervisory agencies remain silent, this charitable enterprise inevitably developed into an unregulated battleground for private capital. By 2003, the struggle to capture the private autologous cord blood storage market was growing ever more intense. The health ministry was forced to try regulating the sector, stipulating that only one cord blood bank could be set up in a given region. During this effort, a branch of Tianjin Union that had been operating in Shanghai was forced to close, and the Shanghai blood bank appeared on the scene.

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Yet the ministry had merely regulated competition between geographical regions for private blood storage and had done nothing about the “using banks to pay for banks” model. Critics said this model was not only fundamentally unsuitable for expanding the scale of public blood banks in China, but it also made it easy for commercial enterprises to trump supervisory agencies, preventing government supervisors from acting impartially.

During the Shanghai scandal, most users of the private storage services had strong suspicions about the impartiality of the investigation into the blood bank’s practices, since the Shanghai Red Cross and Shanghai Blood Center had official ties and an intimate network of connections within health sector regulatory agencies. They also wondered about the objectivity of the health agencies, which apparently expected to receive funds from the private blood bank.

Regulate or Relegate?

Despite heavy criticism, health authorities have yet to give any indication that they intend to abandon the “using banks to pay for banks” model. In their response to public doubts, both the Ministry of Health and the Shanghai Bureau of Health failed to address this issue.

Light on the matter was shed during a February 1 interview with Medical Business News by Dr. Lu Daopei, an expert on hematology who is known as the father of hematopoietic stem cell transplants in China, and who also chairs the health ministry’s committee of experts on cord blood banks. Lu said, “We need to regulate the ‘using banks to pay for banks’ model rather than ban it altogether.”

But if the current model is to be maintained, a key question must still be addressed: How can supervisory authorities be extricated from the bind they currently find themselves in?

How, for example, should standards applied to blood samples accepted for storage at public and autologous cord blood banks be determined? At organizations such as the Shanghai blood bank, the standard for autologous samples has been lower than that for donated cord blood.

Internationally, since 2005, the U.S. National Academy of Sciences has been pushing for a common standard for all stored cord blood. Han, the science academy expert, told Caijing that, from a medical perspective, the standard should be the same for both public and private cord blood banks. The logic behind this is quite simple. Should a patient’s stored autologous blood be insufficient to meet their needs, they would be obliged to turn to a public service. And if the public and private banks are operating at different standards, patient risks and procedural difficulties would increase.

Yet it would not be an exaggeration to call the “using banks to pay for banks” model a uniquely Chinese arrangement. In Britain, the United States and Japan, public blood banks are entirely funded from the public purse, and private investments are not allowed. These operate independently of commercial autologous services.

In one example from Britain, billionaire entrepreneur Richard Branson of the Virgin Group once tried to donate 3 million pounds to a cord blood bank under the national blood transfusion agency. But the public body turned the private donation. Eventually, Branson set up a private blood bank.

At the cord blood bank created by Branson, the charge for storing a single sample is around 1,500 pounds. One-fifth of the donated cord blood is kept in private storage for the donor, while the remaining four-fifths goes into a general access public bank. Of course, if there are no breakthroughs in technology to replicate cord blood stem cells on a large scale, and should the donating child need a transplant in the future, a mere 20 percent of their original donation of cord blood would not be sufficient. But it’s likely that the 80 percent given to the public bank will not have been used for anyone else. And the larger the scale of public blood storage, the greater the chance that the public bank will contain a suitable blood match for the sick child.

Branson says all profits that he and Virgin Group receive from the blood bank will be donated to charitable stem cell initiatives. Nor is Branson’s private facility making exaggerated claims in its advertising, unlike so many other private banks. Its Web site says frankly that the chances of a child benefiting from the use of a private cord blood bank are very small.

Industry insiders say the time is now ripe in China for a fresh look at the cord blood bank system. Even if the current model did, to some extent, make up for shortfalls in state funding in the early days, more drawbacks of the model have been exposed. The downsides are now obvious, adding clout to critics who say it’s time for public and private storage to go their separate ways. This is perhaps the only way that the dubious links between the two kinds of blood banks can be broken, allowing for fair and independent oversight of the sector.

This is a step that has already been taken by the Guangzhou Cord Blood Bank. From its very inception, aside from accepting donations, the blood bank never offered commercial autologous services and has entirely operated under the government as a public cord blood bank. It requires just a few million yuan -- a cost that metropolises such as Beijing, Shanghai and Tianjin could surely sustain.

Of course, once public and private are separated, more questions will arise. Should China allow private cord blood banks and, if so, should they follow the Branson charitable model or operate purely as commercial, for-profit services? And how can China guarantee that private cord blood banks operate to acceptable standards?

Before answering these questions, though, one key problem will be whether China can truly relegate the “using banks to pay for banks” model to the pages of history.

1 yuan = 14 U.S. cents

http://www.caijing.com.cn/English/society&culture/2008-03-07/51309.shtml