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U.N. Sanctions Leave North Korean Drug Maker on Life Support

The Wall Street Journal logo The Wall Street Journal 12/8/2017 Ian Talley

WASHINGTON—North Korea’s only World Health Organization-certified manufacturer of medicines faces closure within weeks if the United Nations doesn’t give the company an exemption from new sanctions, the company’s top officials said.

Pyongsu Pharma was already struggling to produce basic drugs as international sanctions escalated, but a new U.N. resolution approved in September banning foreign joint ventures with North Korea will force the company to close if it doesn’t secure a special allowance. Pyongsu officers said the company had made requests of several U.N. member states.

“At this stage, no member state has offered to do so,” Rémy Lardinois, one of the firm’s top officials, told The Wall Street Journal. The U.N. didn’t immediately respond to a request for comment.

Pyongsu’s predicament shows the challenge world leaders face in trying to squeeze North Korea’s ruling regime without further harming the isolated country’s endangered population.

Human-rights organizations blame the country’s impoverishment on Kim Jong Un’s government, calling it one of the world’s most oppressive authoritarian regimes and criticizing it for prioritizing a nuclear-weapons program and governing elites over the care of its people.

“The state of health is terrible,” said Greg Scarlatoiu, executive director of the Committee for Human Rights in North Korea. “There have been very serious shortages for a long time, particularly antibiotics, painkillers and other basic medicines.”

Without antibiotics, he said, amputations are far more common. Multidrug-resistant tuberculosis has become one of the most serious health problems in the country, human-rights groups and health experts said.

a man standing in front of a store © Provided by The Wall Street Journal.

“DPRK faces a critical shortage of essential medicines,” said Matthew Cochrane, a Red Cross spokesman, using an acronym for the country’s formal name. Mr. Cochrane said supply kits the Red Cross had contracted from Pyongsu over the past decade to distribute in the country were for medicines such as aspirin, paracetamol and zinc.

Another sign of the extent of North Korea’s health woes came in November, when a North Korean soldier who was shot while defecting into South Korea was reported to have been infested with parasitic worms, including a near- footlong roundworm found in his intestines. Besides inadequate health care, Mr. Scarlatoiu said the infestation is likely the product of trying to supplement scarce military rations with foraged foods such as mice, snakes or fish.

Swiss- and Hong Kong-based Parazelsus Group, through its subsidiary, Northern Development Pharmaceutical Consortium Ltd., started Pyongsu Pharma with North Korea’s Ministry of Health more than a decade ago.

Parazelsus Chief Executive Peter Zuellig, the former head of Zuellig Group, an Asian conglomerate, said his firm decided to maintain links to its joint venture with North Korea so it could ensure the population maintained access to basic medicines.

It is unclear from the firm’s financials how much the company has made from its North Korea operations, though five-year-old presentations on the firm’s website indicate it was a tiny fraction of its total revenue across Asia. Pyongsu’s website says sales from its manufacturing and pharmacies totaled roughly $1.8 million in 2013. A 2017 presentation on the Parazelsus website said the company currently handles around $300 million in annual business.

Parazelsus, which also operates in India, Pakistan, Afghanistan and Bangladesh, maintains ties with Pyongsu through a trust it established after the U.N. started ratcheting up sanctions against North Korea over the past few years, Mr. Zuellig said.

“We cannot just walk away from responsibility,” he said in an interview. “Pyongsu has been one of the few companies that has tried to hang on and do its job,” he said. “I am personally interested in that country developing in a peaceful way.”

According to Kharon, a U.S.-based private technology firm that identifies sanctions-related risk, dozens of North Korean joint ventures established before the current U.S. and U.N. sanctions authorities may still be operating.

“Financial institutions and firms with possible exposure to these ventures may need to ensure they are in a position to identify the risk,” Kharon said.

Mr. Zuellig said the firm—which produces painkillers, cough syrups, antibiotics and other basic medicines—doesn’t export its medicines from North Korea. He said Pyongsu hasn’t been able to secure new contracts with the WHO and the International Federation of the Red Cross because it is “near impossible” to get the needed source ingredients for medicine manufactured into the country because of sanctions. Sanctions have also restricted foreign currency flows in and out of the country, he said.

Mr. Lardinois, who works for Hong Kong-based Northern Development Consortium Pharmaceutical, the international firm working with North Korea’s Ministry of Health in Pyongsu to supply the isolated country with basic medicines, said the North Korean joint venture had to turn down an offer in August to bid for another Red Cross medicine-supply contract because of the difficulties of getting resources into the country.

Asked about the sanctions exemption Pyongsu is seeking, Mr. Scarlatoiu said, in general, that his organization supports humanitarian assistance “that is adequately monitored and goes to the most vulnerable.”

Pyongsu’s website said that besides manufacturing medicines, it also offers international pharmaceutical companies distribution and warehousing opportunities and “strategic consulting for investors looking to penetrate the North Korean market.”

Mr. Lardinois said that aspect of Pyongsu’s business—helping introduce foreign investors “to the right partner in the right ministry” and helping outside firms sell their products through the company’s pharmacy chain—hasn’t grown. “Under the current climate, investors aren’t exactly queuing at the door.”

Write to Ian Talley at


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