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

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

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 part of this article, please look at 6+1 new legal measures making healthcare affordable.

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

1.What is commercial bribery in the drugs purchase and sales industry?

Perhaps our understanding of commercial bribery in the drugs purchase and sales sector remains within the realm of the entertainment industry where medical representatives bribe doctors.

In practice, what is the legal definition of commercial bribery in the drug purchase and sales industry?

According to the “Adverse Records Provision,” mentioned in the last article, commercial bribery in the drugs purchase and sales industry (hereinafter referred to “commercial bribery”) is defined as:

“The act of drug production and distributors, and their agents (hereinafter referred to “briber”) bribing medical and health institutions and their employees (hereinafter referred to “people who received the bribe”) with physical gifts or by other means such as favorable sale contracts of medical and pharmaceutical products.”

The essence of commercial bribery is unfair competition

For example, with the aim of gaining economic interests such as transaction opportunities or to acquire a competitive market advantage, the briber knowingly violates the principle of fair trade and relevant laws and regulations by giving illicit benefits to related parties of the transaction.

The primary victims of commercial bribery are both the other fair players on the field and fair competition in the market economy order. As a result, industry competitors are unable to enter the relevant market or to compete fairly in the market.

How to combat commercial bribery?

Is it right to consider that the main aim of crackdown on commercial bribery is the people who received the bribe?

Wrong!

In practice, the briber shall be the ultimate target of the enforcement. Drug producers and distributors should note that there is a strict separation between the commercial bribery and the crime of offering a bribe. The main goal is to combat bribers. 

1. Where they have constituted the crime of offering bribes as ruled by the People's Court or are deemed as having committed minor circumstances of crime and exempted from criminal punishments as ruled by the People's Court in accordance with the Criminal Law;
2. Where the People's Procuratorate has made a non-prosecution decision for a minor circumstance of the crime of offering bribes;
3. Where the discipline inspection and supervision authorities of the CCP (these two authorities have been merged into one official institution) have filed a case of bribery for investigation and handled it in accordance with the law;
4. Where they have been subjected to administrative punishments imposed by the Department of Finance, the Administration for Industry and Commerce, the Food and Drug Administration or other departments due to the act of offering bribes.

Additionally, according to the Reception Provision, Opinions on Crack Down on Kickbacks and Medical Representative Registration, the briber may also be included in the adverse record for several matters such as: illegal marketing or prescription statistics; violating the reception rules that certain personnel shall be received at designated places at specific times with records compiled for this purpose; and providing untruthful registration information.

The relevant measures taken after being included in the adverse record are shown in the following table. The ones regarding pharmaceutical products are particularly severe:

Establishing adversity records and a medical representative registration system, accompanied with deduction of product scoring during procurement or even a ban from the industry, could indeed relieve commercial bribery.

However, the measures of suspending the registration qualification of drug producers and distributors, and medical operation enterprises and their agents, as well as disallowing normal market access, will have a great impact on the normal promotion and supplement of drugs, even in disease treatments.

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