6+1 New Legal Measures Making Healthcare Affordable [Part III]

6+1 new legal measures making healthcare affordable [Part III]

Vincent Zhu, Senior Partner

Wing Wei, Attorney

The affordability of healthcare and medicines has always affected our lives in some capacity. In recent years, China has issued a series of provisions in order to regulate illicit activities within the pharmaceutical industry. For more information on the first and second parts of this article, please look at 6+1 new legal measures making healthcare affordable [Part I] and 6+1 new legal measures making healthcare affordable [Part II].

This is the third part of an article that explains the legal measures taken by healthcare authoritiesin Shanghai. These measures are especially relevant for drug producers and companies operating in the healthcare and pharma industry.

1-C. Measures against those who received bribes.

Strengthening pharmaceutical affairs and prescription management, improving pharmaceutical information systems, and establishing a hierarchy of responsibilities.

The medical and pharmaceutical industry has unique characteristics that are different to other markets. Those characteristics often result in bribers taking various improper means to convince medical personnel to receive kickbacks and gain market share.

Let’s see three common unique characteristics in this context.

Firstly, people who received bribes commonly control the entrance of medical and pharmaceutical products into the consumer market. They also hold both the rights of dominion and choice of the medical and pharmaceutical products, which are natural hotbeds for commercial bribery.

Secondly, medical and pharmaceutical services are highly specialized and technically complex, in addition to limited elasticity of demand and demand-substitutability, which could easily form a monopolization of supplement.

Thirdly, information asymmetry between doctors and patients often means that medical personnel can easily use their knowledge advantage and their access to information to induce demand, create consumption, and provide excessive or unnecessary medical and pharmaceutical services.

In order to cut off the profit chains from the source and strengthen source management,the Pharmaceutical Committee Provision and the Prescription Comment Provision require stronger pharmaceutical management, pharmaceutical product selections and prescription comments. Both provisions also exercise strict control over the purchase of pharmaceutical products for use by hospital.

Moreover, the Adverse Records Provision and the Information System Provision list the actions that medical personnel are prohibited from engaging in, and require medical institutions to establish and improve the use of information systems. Otherwise, hierarchal legal accountability shall be applied. 

This accountability implies that the medical institution, including the person in charge of the institution, shall bear primary responsibilities, the competent departments shall bear management accountabilities, and the Shanghai Municipal Commission of Health and Family Planning shall bear supervision responsibilities.

Here is a table showing a summary of how the punishments are implicated between the hierarchies:

Source: A&Z own elaboration.

The aim of all these provisions and measures is to deter commercial bribery. This can take different forms such as strengthening pharmaceutical management, focusing on prevention efforts and key positions, applying hierarchal legal accountability, and explicitly listing the prohibited acts.

At the same time, there are other measures that should be taken into consideration such as to substantially increase the legal income of medical personnel. This could prevent the medical personnel from taking advantage of his/her position by obtaining illegal benefits, and avoiding other bribery temptations, alongside taking measures against illegal acts through different hierarchies.

Stay up to date on the latest news on commercial bribery in the healthcare sector by following A&Z’s official WeChat account and website updates.