Do You Really Know Your China Telemedicine Partners? China Anti-Corruption Effort Focuses on Major Medical Institutions

by Foley & Lardner LLP
Contact

This post is the fourth in Foley’s blog series, “Realizing the Potential of Telemedicine in China,” meant to address top issues facing U.S. companies looking to enter the Chinese telemedicine market.

As U.S.-based health care providers look to China for new telemedicine opportunities, it is important to know your China partners before signing the contract. It is equally important take steps to ensure your own business development activities in China comply with both U.S. laws (such as the Foreign Corrupt Practices Act or FCPA) and China regulations (such as the “Nine Prohibitions”).

In February, the National Health and Family Planning Commission of the People’s Republic of China (NHFPC) released a “Work Plan on Inspection of Large Hospitals (2015-2017)” [大型医院巡查工作方案(2015-2017年度)].

U.S. health care providers are already familiar with the U.S. Department of Health and Human Services, Office of Inspector General’s (OIG) annual Work Plan, in which OIG sets forth the compliance and enforcement projects and priorities it intends to pursue in the coming year. The OIG’s Work Plan does not offer details on investigations and litigation involving specific hospitals and providers, but is instead an aspirational document in which many projects are carried over from year-to-year as priorities shift and projects planned in the beginning of the year are set aside. You can learn more by reading our annual coverage of the 2015 OIG Work Plan.

Unlike the U.S. OIG Work Plan, the NHFPC’s Work Plan contains much more specific detail, including the names of those China medical institutions that will be inspected for regulatory compliance. The NHFPC Work Plan arises from broader government efforts to curb corruption and other disruptive practices in China. The NHFPC Work Plan states that, in specific years during the 2015-2017 time frame, the more than 40 listed large medical institutions in China will be inspected by regulators. Although larger medical institutions are the focus of this particular inspection campaign, the NHFPC Work Plan is aimed at sending a broader message to institutions and businesses in the health care sector throughout China.

The key focus of the inspections will be China’s so-called “Nine Prohibitions.” They are:

  1. Prohibition on linking a physician’s income to pharmaceutical/drug and examination income;
  2. Prohibition on receiving commissions for pharmaceutical/drug and examination prescriptions;
  3. Prohibition on charging patients for services and items which are not included in the institutions medical service items;
  4. Prohibition on accepting “illegal” social donations;
  5. Prohibition on participating in pharmaceutical/drug, food, and nutritional product promotion and “illegal” medical advertising;
  6. Prohibition on providing pharmaceutical/drug and medical consumable statistics for commercial purposes;
  7. Prohibition on “illegal” procurement of medical products;
  8. Prohibition on acceptance of “kickbacks;” and
  9. Prohibition on acceptance of “red envelopes” (cash gifts, such as at the Lunar New Year, are traditionally placed in red envelopes in China).

The inspections during 2015-2017 will focus on the following aspects in particular:

  1. Anti-corruption;
  2. General implementation of the “Nine Prohibitions;”
  3. Hospital management; and
  4. Hospital (and associated medical personnel) financial management.

Here are key aspects of China hospital implementation of the “Nine Prohibitions:”

  1. Establishing a scientific medical-performance evaluation mechanism and an internal distribution and incentive mechanism;
  2. Implementing a pricing publicity system and increasing cost transparency;
  3. Drafting implementation rules on the management of social donations;
  4. Requiring that medical advertisements comply with national law and specifying that the advertisement content must be authentic and reliable;
  5. Strengthening the management of Chinese medicine and medical consumable materials use;
  6. Establishing a formal sanctions/discipline system and strict implementation plan for corrupt activities, including receipt of kickbacks; and
  7. Establishing a complete “red envelope disclosure” and “red envelope agreement” system.

Keep in mind, a China medical institution named in the NHFPC’s Work Plan does not necessarily indicate the NHFPC believes that medical institution has violated the “Nine Prohibitions” or is otherwise noncompliant with China regulations. That said, the issuance of the NHFPC Work Plan underscores China’s intensified vigilance in regulatory oversight in the health care sector. It similarly serves as renewed caution to U.S. medical institutions and business partners seeking to do business in China.

Like the “Nine Prohibitions,” the Foreign Corrupt Practices Act (FCPA)similarly prohibits providing anything of value to “foreign officials” – a category that includes most health care providers in China – in order to obtain or retain business. The takeaway: U.S. companies should maintain meaningful compliance programs to govern not only their domestic activities, but internationally as well, including provisions for adherence with the Foreign Corrupt Practices Act.

Without doubt, telemedicine continues to attract attention within China and from international partners, placing China squarely on track to become one of the largest telemedicine markets in the world. U.S. health care business have ample opportunities to partner with Chinese medical institutions, but should first learn how to conduct proper due diligence on potential China business partners. U.S. health care business should also take steps to ensure their business development activities in China comply with U.S. laws and China regulations.

Are you interested in learning more about telemedicine in China? Foley offers opportunities to get up to speed with the latest developments:

  1. English Translations of China’s NHFPC Opinions (August 2014)

Foley’s Telemedicine and China Practices have completed English-language translations of two opinions issued in August 2014 by the NHFPC, available free for readers at Promotion of the Medical Institution Telemedicine Services.

  1. China’s Plans for National Telemedicine Network (January 2015)

China issued a new document, outlining an ambitious plan to build a uniform national telemedicine service network in China. The document, “Technical Guideline for Telemedicine Information System Construction (2014)” (Technical Guidance), is a visionary 200-page blueprint for the creation of an interoperable, uniform service network in China, designed to allow China patients and medical institutions to enjoy seamless telemedicine services anywhere in China.

  1. Web Conference “Telemedicine: Doing Business in China”

Access a recording of Foley’s “Telemedicine: Doing Business in China” webinar, geared toward U.S. health care providers, start-ups, and manufacturers interested in entering the China market to sell telemedicine devices, software, or services. A panel of industry speakers share their thoughts on the reasons why (and why not) entering the China telemedicine market makes business sense for U.S. companies.

Written by:

Foley & Lardner LLP
Contact
more
less

Foley & Lardner LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.