On March 1, 2014, Circular No. 50, which the Chinese National
Health and Family Planning Commission (NHFPC) recently promulgated
to regulate the conduct of pharmaceutical and medical device
companies that do business in China, went into effect. Circular No.
50, together with Circular No. 49, which a NHFPC sub-agency
issued in December 2013 to regulate the compliance conduct of
hospitals in China, follow closely on the heels of the Chinese
government's recent investigation into GlaxoSmithKline's sales and marketing
practices. Although the extent to which these new circulars will be
enforced remains to be seen, pharmaceutical, medical device, and
other healthcare companies doing business in China should ensure
that their global compliance programs conform to the latest local
Circular No. 50 updates the NHFPC's "Rules on the
Establishment of Commercial Bribery Blacklists for Purchase and
Distribution in the Health Care Industry," originally released
in 2007. The new circular establishes a revised
"blacklist" system for punishing pharmaceutical and
medical device companies that engage in bribery, whether or not
criminal liability is pursued or any individual is actually
convicted of bribery. A company or its personnel may be blacklisted
for any of the following reasons:
Being convicted for bribery under criminal or administrative
Committing "minor" acts of bribery that Chinese
prosecutors decide not to charge;
Being investigated and disciplined by Communist Party
authorities for acts of bribery;
Being punished/penalized by administrative authorities for
Other factors determined by laws and regulation.
Prior to being blacklisted, companies will have an opportunity
to defend themselves at a hearing. Once a company is blacklisted,
however, the consequences are crippling: public hospitals and other
state-funded medical institutions in the Chinese province where the
bribery occurred will be prohibited from purchasing any goods or
services from the blacklisted company for two years. If a company
is blacklisted two or more times within a five-year period, the
company will be prohibited from selling its goods or services to
any public hospital or medical institution nationwide.
Whereas Circular No. 50 regulates
pharmaceutical and medical device companies in the offering of
bribes, Circular No. 49, which translates to a "Notice on
'Nine Prohibitions' to Strengthen Health Care Industry
Compliance," regulates the conduct of hospitals, medical
institutions, and their personnel (including physicians) in China,
and prohibits the acceptance of bribes, kickbacks or other improper
payments. The "Nine Prohibitions" roughly translate to
the following prohibitions:
A violation of the "Nine Prohibitions" may result in a
variety of disciplinary actions, from a simple warning to the
suspension or cancellation of a physician's license.
China's anti-corruption enforcement efforts have been
steadily ramping up since June 2010, when the Chinese Ministry of
Health (MOH) launched its own nationwide campaign against
pharmaceutical industry corruption and established its own
"blacklist" of companies accused of paying commercial
bribes in connection with the purchase and sale of pharmaceutical
products. These efforts escalated dramatically in summer 2013, as
reports about high-level managers detained in various cities as
part of an investigation into potential "economic
crimes," and the Chinese State Food and Drug
six-month crackdown on misconduct in its drug market. As we
reported, GlaxoSmithKline has already implemented compliance
policy changes to its sales and marketing practices, likely as a
response to China's strengthened enforcement posture against
bribery and corruption in the health care industry.
In reality, if a pharmaceutical or medical device company doing
business in China has robust U.S. Foreign Corrupt Practices Act or
U.K. Bribery Act compliance policies in place, the prohibited
activities under Circular Nos. 49 and 50 should already be covered.
Nevertheless, the crippling threat of being blacklisted should
prompt such companies to reevaluate and, if necessary, revise their
compliance policies, and to ensure that the proper "tone at
the top" is conveyed globally.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
What happens if a patient, particularly a mental health patient,.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).