China Issues New Regulations Prohibiting Commercial Bribery in the Health Care Industry

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In late December, China’s National Health and Family Planning Commission ("NHFPC"), the successor organization to the Ministry of Health, issued two sets of anti-corruption regulations for the health care industry: the 2013 Regulations on the Establishment of a Commercial Bribery Blacklist for the Purchase and Sale of Medicines (?????????????????????) ("2013 Blacklist Regulations"), and The 9 Prohibitions for Building a Healthy Medical Industry (??????????"???") ("The 9 Prohibitions"). The 2013 Blacklist Regulations target pharmaceutical and medical device manufacturers and distributors. These regulations revise and update earlier blacklist regulations issued in 2007 ("2007 Blacklist Regulations"). In contrast, The 9 Prohibitions focus on health care providers and institutions, providing general principles for eliminating corruption in the Chinese health care industry.

These new regulations are part of the Chinese government’s ongoing focus on corruption in the health care industry, and significantly increase the risks faced by pharmaceutical and medical device manufacturers and distributors.

Blacklist Regulations

The 2013 Blacklist Regulations maintain the 2007 Blacklist Regulations’ system of provincial blacklists for pharmaceutical and medical device manufacturers and distributors who are found to have engaged in commercial bribery based on any of the following criteria:

  • A judicial finding of guilt, even if the offense was so minor that a fine or other penalty did not need to be imposed
  • The bribery was so minor that the People’s Procuratorate decided not to bring criminal charges
  • Communist Party disciplinary agencies investigated and imposed discipline for bribery
  • An administrative punishment for bribery was imposed by the Treasury Department, the Administration for Industry and Commerce (AIC), the China Food and Drug Administration (CFDA) or other administrative agency; or
  • Other evidence as determined by relevant laws and regulations

Although these criteria are the same as under the 2007 Blacklist Regulations, there are a number of new developments under the 2013 regulations.

National Publication

The 2007 Blacklist Regulations called for blacklists to be maintained by each province’s local health authorities. In practice, implementation was sporadic, with many provinces never publishing a blacklist. Although the 2013 Blacklist Regulations maintain the provincial blacklist system, they call for each province to report the contents of its blacklist to the NHFPC, which will publish a national blacklist on its website.

National Punishment

Under the 2007 Blacklist Regulations, manufacturers or distributors who were blacklisted in a province could not sell to public health care entities, e.g., government-run hospitals, in that province for two years. The 2013 Blacklist Regulations maintain this prohibition, and further provide that companies that are blacklisted in any province will receive less consideration when bidding to supply public health care entities in other provinces nationwide for two years after blacklisting.

Repeat Offenders

The 2013 Blacklist Regulations contain new penalty provisions indicating that companies that are blacklisted twice in five years will be subject to a two-year nationwide ban on procurement by public health care entities.

Integrity Agreements

The 2013 Blacklist Regulations contain a new requirement that when health care entities contract with manufacturers or distributors for the purchase of pharmaceuticals or medical devices, they should also sign an "ethical sales contract," which will list the names of relevant sales representatives and contain anti-bribery language.

Detailed Listing

The 2013 Blacklist Regulations contain new, detailed requirements for the information that will be published as part of the blacklist, including the name of the manufacturer or distributor; its place of business; the name and title of the legal representative or person responsible; the reason for listing; documents relating to the finding of commercial bribery; and the duration of listing.

The 2013 Blacklist Regulations are part of an increased focus on eradicating corruption in the Chinese health care industry. In recent years, the Chinese government has issued the Regulations on Centralized Procurement of Pharmaceuticals by Medical Institutions (??????????????) in 2010; the Trial Regulations on Centralized Procurement of High Value Consumable Medical Supplies (??????????????(??)) in 2012; the Trial Regulations on Centralized Procurement of Large Scale Medical Equipment (????????????????(??)) in 2012; and the Ministry of Health Guidance on Strengthening Anti-Bribery Control at Public Medical Institutions (?????????????????????????????????), also in 2012 – all of which contain similar blacklisting provisions for commercial bribery, as well as procurement-specific provisions for blacklisting companies that provide falsified bidding documentation, etc.

The 9 Prohibitions

The 9 Prohibitions prohibit bribery, re-emphasize existing PRC regulations on donations to hospitals, and prohibit linking doctors’ income with prescriptions or medical tests. The 9 Prohibitions also forbid health care professionals from providing statistics about the use of pharmaceuticals or medical devices to manufacturers’ sales representatives. Where the 2013 Blacklist Regulations focus on medical manufacturers and distributors, The 9 Prohibitions primarily focus on health care professionals and institutions, although they instruct local officials to create commercial bribery blacklists as well.

Just as the 2013 Blacklist Regulations follow on earlier regulations, The 9 Prohibitions are not entirely new, but follow on the Health Care Professionals’ Code of Conduct (????????????), published in June 2012, and other similar regulations.

Topics:  Anti-Bribery, Anti-Corruption, Bribery, CFDA, China, Healthcare

Published In: Criminal Law Updates, Health Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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