SHANGHAI (Reuters) - China’s drug watchdog published details on Tuesday of an investigation into a second firm found to have made inferior vaccines, after cabinet vowed tough penalties and fines over a vaccine safety scandal that has sparked widespread anger.

Slideshow ( 3 images )

Public confidence in domestic-made drugs and medical products has been shaken by such scandals in recent weeks and the prices of healthcare shares in China have dropped.

China has already ordered the arrest of 18 people at Changsheng Bio-technology Co Ltd, the vaccine maker at the heart of the scandal, including its chairwoman Gao Junfang.

The firm was found to have falsified data and sold ineffective vaccines. It also fabricated production and inspection records relating to a rabies vaccine used for infants. Changsheng has apologized publicly for the incidents.

A meeting of the State Council chaired by Premier Li Keqiang on Monday said enterprises and individuals should be severely punished and banned from the pharmaceutical industry for life.

It ordered further investigations to determine the criminal responsibility of other serious offenders involved in the Changsheng case, according to a notice posted late on Monday.

The State Council also called for a full investigation into any potential regulatory failings, including possible dereliction of duty by officials, and said a long-term mechanism should be established to ensure public safety.

A special cabinet investigation team said on Friday Changsheng had systematically falsified production and testing records to avoid regulatory scrutiny, and had also sold 252,600 doses of ineffective DPT vaccines to inoculate children against diphtheria, whooping cough and tetanus.

The China Food and Drug Administration also published details on Tuesday of its investigation into Wuhan Institute of Biological Products which, with Changsheng, was found to be producing inferior vaccines in November 2017.

The regulator said on its website the cause of Wuhan’s substandard vaccines was accidental because its packaging equipment had experienced a temporary malfunction that caused ingredients in the vaccine to be unevenly distributed.

The company recalled and destroyed all 400,520 inferior vaccine doses on May 4 and was also fined an unspecified amount, the regulator said.

It said Wuhan was considered to have fixed its production issues after passing inspections in March.

The company did not respond immediately to requests for comment.

Fitch Ratings said in a report on Tuesday such scandals highlighted the risks facing China’s pharmaceutical companies, which focus primarily on the bulk production of a small number of products, making them vulnerable to safety incidents.

“Concentration on low-quality generic drugs, high product concentration and heightened regulatory risks will continue to constrain most Chinese drug makers’ business profiles to non-investment grade levels,” it said.