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Overview

Healthcare funding

In general terms, how is healthcare, including access to medicines and medical devices, funded in your jurisdiction? Outline the roles of the public and private sectors.

China’s healthcare system comprises of both publicly and privately funded services.

Publicly funded healthcare

China has established a basic healthcare system with a stable participation rate at 95 per cent. The basic healthcare system consists of three major schemes:

  • urban employee basic medical insurance;
  • urban resident basic medical insurance; and
  • a new rural cooperative medical scheme.

Urban employee basic medical insurance is mandatory for employees working in urban areas and is mainly financed from employees’ income via payroll taxes. The healthcare funds are reserved through two channels, a government fund pool and a personal savings account. The government fund covers expenses for hospitalisation and serious diseases, while the personal savings account covers outpatient treatment and deductibles.

Urban resident basic medical insurance is voluntary at the household level and covers non-working or self-employed individuals living in the urban areas, such as children, students and the elderly. It is financed mostly by the government and partially by contributions from individual households. This scheme only covers expenses for hospitalisation and serious diseases.

The new rural cooperative medical scheme is also voluntary and benefits the rural population. Its contributions come from the government, collective enterprises and individuals. This scheme is mainly for serious diseases but also pays for the treatment of normal illness.

Privately funded healthcare

Commercial insurance policies are mainly offered by for-profit companies. They provide a higher degree of reimbursement and can cover the costs of advanced and expensive medical procedures. These are most commonly for the treatment of serious diseases, which is often excluded from the scope of public insurance.

Delivery

In general terms, how is healthcare delivered in your jurisdiction? Outline the roles of the public and private sectors.

Healthcare services in China are mainly delivered by hospitals and grassroots medical institutions. Urban cities have been welcoming an increase in private hospitals, while most hospitals in rural areas and grassroots medical institutions remain publicly run. According to the latest statistics published by the National Health and Family Planning Commission, among the patients who went to hospitals for medical care in the first quarter of 2018, approximately 85.5 per cent went to public hospitals and the remaining 14.5 per cent went to private hospitals.

Key legislation

Identify the key legislation governing the delivery of healthcare and establishing the regulatory framework.

Key legislation that establish China’s regulatory framework governing the delivery of healthcare are the Administrative Regulations on Medical Institutions (revised in 2016) promulgated by the State Council, and the Implementing Rules for Administrative Regulations on Medical Institutions (revised in 2017) promulgated by the National Health and Family Planning Commission.

Responsible agencies

Which agencies are principally responsible for the enforcement of laws and rules applicable to the delivery of healthcare?

The former National Health and Family Planning Commission (NHFPC), its subordinate agencies, and local branches were principally responsible for enforcing the laws and regulations applicable to the delivery of healthcare in China. While the NHFPC has the authority to levy fines and confiscate illegal gains, its funding does not depend on such enforcement activities. Instead, it receives funding from the budget allocated by the Ministry of Finance.

Following the State Council’s restructuring in March 2018, the National Health Commission (NHC) was established to replace the NHFPC and take over the responsibilities of the NHFPC and some other former governmental agencies.

Scope of enforcement

What is the scope of their enforcement and regulatory responsibilities?

The newly established NHC is mainly responsible for:

  • formulating national health policies;
  • coordinating and advancing the reforms of the medical and healthcare systems;
  • forming a national basic medicine system;
  • supervising and administering public health, medical services, and health emergencies;
  • managing family planning and its services;
  • formulating policies and measures to address the problems associated with an ageing population; and
  • integrating medical and old-age care.

Regulation of pharmaceutical products and medical devices

Which agencies are principally responsible for the regulation of pharmaceutical products and medical devices?

The former China Food and Drug Administration (CFDA) and its provincial branches were principally responsible for the regulation of pharmaceutical products and medical devices. Following the State Council’s restructuring in March 2018, the CFDA was replaced by the newly formed China National Drug Administration (CNDA). The CFDA received and the CNDA will receive funding from the government budget, but not from their enforcement activities.

Scope of enforcement

What is the scope of their enforcement and regulatory responsibilities?

The former CFDA was mainly responsible for:

  • drafting laws and regulations on the administration and supervision of food safety (including food additives and health food), drugs (including traditional Chinese medicine and ethno­medicine), medical devices and cosmetics;
  • formulating regulations on the administrative licensing of food and supervising their implementation;
  • organising the formulation and issuance of the national pharmacopoeia, and other drug and medical devices standards, and a classification system, and supervising their implementation;
  • developing good practices on research, production, distribution and use of drugs and medical devices, and supervising their implementation;
  • registering drugs and medical devices and supervising and inspecting the registration process;
  • establishing a monitoring system for adverse drug reactions, adverse events of medical devices, and undertaking monitoring and response activities.

The current CNDA will be mainly responsible for registering drugs, medical devices and cosmetics, and reports to the State Administration for Market Regulation, which will take over responsibilities for regulating food.

Other agencies

Which other agencies have jurisdiction over healthcare, pharmaceutical and medical device cases?

In addition to the CFDA and its local branches, the State Administration for Industry and Commerce (SAIC), the NHFPC, and their local branches have also had jurisdiction over healthcare, pharmaceutical and medical cases in China. According to the 2016 statistics, the NHFPC’s local branches mainly enforced the illegal disposition of medical waste, while the SAIC’s local branches mainly enforced the illegal advertising of pharmaceutical and medical device products.

Following the restructuring scheme in March 2018, the newly established State Administration for Market Regulation, its subordinate agencies and local branches have assumed SAIC’s previous responsibilities.

Simultaneous investigations

Can multiple government agencies simultaneously conduct an investigation of the same subject? Does a completed investigation bar another agency from investigating the same facts and circumstances?

Yes, government agencies in China often cooperate with each other to conduct joint investigations, especially when a problematic incident or significant medical phenomenon occurs.

According to the People’s Republic of China’s (PRC) Administrative Penalties Law, a person may not be fined twice for a single unlawful act. However, where the unlawful act violates different administrative regulations, different governmental agencies with competent jurisdictions may conduct separate investigations on such an act.

Regulation of pharmaceutical products and medical devices

Monitoring powers

What powers do the authorities have to monitor compliance with the rules on drugs and devices?

As stipulated under the current PRC Drug Administration Law and the current Regulations on Supervision and Administration of Medical Devices, the regulatory authorities have wide-ranging powers to monitor compliance with the rules on drugs and medical devices.

Their powers generally include:

  • the right to conduct on-site inspections of drugs, medical devices and manufacturing premises;
  • the right to take samples to test the quality of drugs and medical devices;
  • the right to access, copy or seize documents or other materials.

Investigation time frames

How long do investigations typically take from initiation to completion? How are investigations started?

Investigations concerning drugs and medical devices in China typically start as a result of third-party reports or the government’s proactive monitoring.

The regulatory authorities have not published figures on the typical length of time their investigations take. To our knowledge, investigations can last from weeks to months, depending on the complexity and nature of the incident at issue.

Access to investigation materials

What rights or access does the subject of an investigation have to the government investigation files and materials?

As per Article 42 of the PRC Administrative Penalties Law, under certain circumstances the subject of the investigation is entitled to a hearing if he or she requests, during which the investigator will present facts, reasoning and proposed administrative sanctions.

These circumstances include, but are not limited to, when the regulatory authority intends to impose penalties such as the revocation of a permit or licence, the suspension of business and production, or hefty administrative fines. Otherwise, the subject of the investigation does not have the rights to review, copy or access government investigation files and materials.

Investigations abroad

If pharmaceutical products or medical devices are made in a foreign country, may the authorities conduct investigations of the manufacturing processes in that other country?

Yes, the CFDA has, and exercises, the authority to conduct overseas inspections on the manufacturing sites of imported drugs and medical devices. The CFDA has been conducting overseas inspections on manufacturing sites of imported drugs since 2011, and that of imported medical devices since 2015.

As reforms in the life sciences industry expands in scope and depth, the CFDA has been exercising increasingly stricter supervision on the quality and safety of both domestic and imported drugs and medical devices. In order to standardise its overseas investigations, the CFDA published the Regulation for Management of Overseas Inspections of Drugs and Medical Devices (Draft for Comment) on 28 December 2017 to gather public opinion.

Drugs

According to CFDA’s 2017 Drug Inspection Report (available in both Chinese and English), which was recently published in June 2018, a total of 41 inspection teams were dispatched to conduct overseas on-site inspections of 51 categories of imported drugs. The CFDA mainly focused its inspections on European and North American countries, and increased the frequency of its inspections in countries such as India.

Among the 51 categories of inspected imported drugs, nine categories were determined as non-compliant with good manufacturing practices, and six categories were barred from being imported into the Chinese market thereafter.

On 25 December 2017, the CFDA published the Notice to Commence Overseas Inspections on Manufacturing Sites of Drugs In 2018, announcing 33 categories of imported drugs to be included its list of overseas inspections for 2018. The manufacturers of these 33 categories of imported drugs were also named in this list.

Medical devices

On 28 November 2017, the CFDA published the results of its on-site inspections of imported medical devices during 2016 for the first time. In December 2017, CFDA subsequently suspended the importation of two imported medical devices due to severe deficiencies. After that, the CFDA also published the results of its overseas inspections two more times on 17 January 2018 and 27 February 2018.

According to CFDA’s reports, it conducted on-site inspections on 33 categories of imported medical devices manufactured by 19 medical device manufacturers located in eight foreign countries in 2016. In 2017, it inspected the manufacturing sites for 46 categories of imported medical devices, which involved 24 medical device manufacturers from the US, Germany, UK and another seven countries.

Enforcement proceedings

Through what proceedings do agencies enforce the rules?

The regulatory authorities in China are granted administrative enforcement powers through legal provisions under the PRC Drug Administration Law and the Regulations on Supervision and Administration of Medical Devices. Possible administrative penalties include the issuance of warning letters, confiscation of unlawful drugs or medical devices, imposition of fines, confiscation of illegal gains, revocation of licence certificates, orders to suspend production or business operation, debarment of responsible individuals, etc.

In serious cases where the circumstances would constitute a crime, the regulatory authorities will submit the case to the Public Security Bureau or prosecutors for further investigation and prosecution through criminal proceedings.

Sanctions

What sanctions and other measures can the authorities impose or seek in enforcement actions against drug and device manufacturers and their distributors?

During administrative enforcement actions in China, the regulatory authorities have the power to issue warning letters, confiscate unlawful drugs or medical devices, impose fines, confiscate illegal gains, revoke licence certificates, order to suspend production or business operation, debar responsible individuals, etc. The regulatory authorities should give extensive consideration of different factors and impose corresponding sanctions as legally stipulated under applicable provisions.

Actions against employees

Can the authorities pursue actions against employees as well as the company itself?

Yes, regulatory authorities have the power, and also typically choose, to impose penalties on responsible individuals and the company, either respectively or concurrently.

For example, according to the PRC Drug Administration Law, if a company has obtained the Drug Manufacturing License, but engages in the manufacturing of fake or inferior drugs, the regulatory authorities may impose administrative sanctions against it, and may also prohibit the responsible individuals from engaging in drug manufacturing activities for 10 years.

Defences and appeals

What defences and appeals are available to drug and device company defendants in an enforcement action?

While available defences in administrative proceedings initiated by regulatory authorities in China will vary depending on the actual situation, most assert the legitimacy of the acts in question or claim procedural errors during the investigation.

According to PRC Administrative Penalties Law, those who disagree with the administrative decision issued by regulatory authorities generally have the right to apply to a higher legal authority for review or reconsideration within a prescribed time limit. If they disagree with the review decision made by such higher legal authority, they may file an administrative lawsuit with a competent court to appeal the review decision within a prescribed time limit.

Minimising exposure

What strategies should companies adopt to minimise their exposure to enforcement actions and reduce their liability once an enforcement action is under way?

China has been experiencing rapid developments in its legal framework governing drugs and medical devices. Therefore, companies should closely monitor recent legislative and regulatory developments, familiarise themselves with relevant legal and regulatory requirements, and consult professionals for compliance matters.

Once an enforcement action is under way, companies should conduct internal investigations to understand the situation and collect and preserve useful evidential materials. Companies should also make proactive efforts to eliminate or mitigate negative consequences of their acts, cooperate with the regulatory authorities in furtherance of relevant investigation, and take mitigatory measures which are stipulated in law. It is also advisable for companies to seek professional advice when carrying out any of the aforementioned measures.

Recent enforcement activities

What have the authorities focused on in their recent drugs and devices enforcement activity and what sanctions have been imposed?

Statistics demonstrate that CFDA’s drug enforcement activities in 2017 mainly targeted the manufacturing, distribution and/or use of drugs with non-compliant percentages of ingredients. On the side of medical device enforcement, its activities in 2017 mainly targeted the use of unregistered, expired or obsolete medical devices.

On 2 April 2018, the Annual Report on Food and Drug Supervision (2017) was released. In 2017, 112,000 drug-related cases investigated by drug regulatory authorities led to prosecutions. These drugs had a combined value of 330 million Chinese yuan. A total fine of 400 million Chinese yuan was imposed, and illegal gains amounting to 110 million Chinese yuan were confiscated. Regulatory authorities suspended production for 1,569 entities, revoked 162 licences and transferred 1,951 cases to judicial offices.

In addition, 17,000 medical devices-related cases were prosecuted by the relevant authorities in 2017. They had a combined value of 180 million Chinese yuan. A total fine of 430 million Chinese yuan was imposed, and illegal gains of 19.691 million Chinese yuan were confiscated. Regulatory authorities also ordered 98 entities to suspend production, revoked 13 licences and transferred 62 cases to judicial offices.

Self-governing bodies

Are there self-governing bodies for the companies that sell pharmaceutical products and medical devices? How do those organisations police members’ conduct?

The China Association of Pharmaceutical Commerce (CAPC) is a national industrial association with a membership of 406 companies, which engage in the distribution of pharmaceutical products and medical devices and other associated businesses. With its own code of association, CAPC provides guidance on appropriate compliance with applicable laws and regulations and serves as a bridge between the regulatory authorities and its member companies. CAPC requires its member companies to adhere to the CAPC’s code of association and has the authority to dismiss its members in the event of serious violation of its code.

There are also other self-governing bodies in each sector of the life sciences/healthcare industry. For instance, the China Pharmaceutical Industry Association represents companies which develop and/or commercialise chemical drugs, the China Association for Medical Devices Industry represents companies which develop and/or commercialise medical devices, the China Association of Traditional Chinese Medicine represents those which develop and/or commercialise traditional Chinese medicine, and the R&D-based Pharmaceutical Association Committee represents companies with foreign investments in possession of pharmaceutical R&D capability. All these self-governing bodies have their own codes of association and require adherence from their member companies.

Relationships between healthcare professionals and suppliers

Relationship rules

What are the rules prohibiting or controlling the financial relationships between healthcare professionals and suppliers of products and services?

Article 27 of the PRC Medical Practitioners Law (Revised in 2009) prohibits healthcare professionals from taking advantage of their occupation to solicit or illegally accept/acquire improper benefits. Article 58 of the PRC Drug Administration Law (Revised in 2015) prohibits the offer and acceptance of financial benefits or any other benefits between drug manufacturers and drugs distributors, and healthcare professionals or persons in charge of drug procurement at medical institutions.

In 2012, the former Ministry of Health published the Code of Conduct for the Practitioners of Medical Institutions, of which Article 8 prohibits healthcare professionals from acquiring improper benefits by taking advantage of their occupation, and lists the following illegal acts, among others, as examples:

  • accepting rebates or commissions offered by manufacturers or distributors of medical devices, drugs or reagents;
  • attending commercial entertainment activities arranged, organised or funded by manufacturers or distributors of medical devices, drugs or reagents; and
  • illegally participating in medical advertisements and publicity or the promotion of medical devices.

All financial relationships between healthcare professionals and their suppliers must also comply with the stipulations prohibiting commercial bribery under the PRC Criminal Law, PRC Anti-Unfair Competition Law and SAIC’s Interim Regulations on Prohibition of Commercial Bribery.

Enforcement

How are the rules enforced?

The NHFPC and its local branches are responsible for enforcing these rules against healthcare professionals. The SAIC and its local branches are responsible for enforcing these rules against drug manufacturers and distributors. In the event of a violation by a healthcare professional, the NHFPC and its local branches have the authority to issue a warning letter, order suspension of medical practice, or even revoke his or her certificate of practice. Cases evolving to criminal offences will be subject to criminal prosecution.

Reporting requirements

What are the reporting requirements on such financial relationships? Is the reported information publicly available?

Entities and individuals in China are legally required to report violations of the applicable laws and regulations to the relevant authorities upon becoming aware of any them. There is no specific platform or form for such reporting. Companies may have some internal reporting requirements, but it is unlikely that they would disclose such information to the public.

According to the Provisions on the Establishment of Adverse Records of Commercial Briberies in the Medicine Procurement and Sales Industry published by the NHFPC in 2013, suppliers that have received administrative penalties from regulatory authorities for relevant commercial briberies, or committed or have been convicted of crime of relevant commercial briberies, will be included in the Adverse Records of Commercial Briberies to be first released on the website of the relevant NHFPC’s provincial branches, and then reported to the NHFPC and reposted on NHFPC’s website.

Regulation of healthcare delivery

Authority powers

What powers do the authorities have to monitor compliance with the rules on delivery of healthcare?

According to Administrative Regulations on Medical Institutions (Revised in 2016), the authorities are given broad powers of supervision and administration powers by law, including:

  • approving the setup, practice registration and verification of medical institutions;
  • inspecting and guiding practice activities of medical institutions;
  • setting up the review of medical institutions; and
  • punishing acts which violate the Regulations.

Investigation time frames

How long do investigations of healthcare providers typically take from initiation to completion? How are investigations started?

See question 11.

Access to investigation materials

What rights or access does the subject of an investigation have to the government investigation files and materials?

See question 12.

Enforcement agencies

Through what proceedings do agencies enforce the rules?

As is provided in PRC Administrative Penalties Law, the agencies enforce the rules through their own administrative proceedings, including summary, ordinary, and hearing procedures. Nevertheless, the agencies would transfer the matter to a judicial organ if the acts constitute a criminal offence.

Sanctions

What sanctions and other measures can the authorities impose or seek in enforcement actions against healthcare providers?

This depends on the severity of the unlawful activities. There are multiple administrative sanctions which can be imposed including:

  • the issuance of a disciplinary warning;
  • confiscation of unlawfully obtained financial gains, drugs, or devices;
  • imposition of a fine;
  • orders for suspending business or production; and
  • revocation of the healthcare providers’ licences.

As discussed above, if the acts constitute crimes, the authorities would transfer the matter to a judicial organ and the healthcare providers may be subject to criminal liabilities.

Defences and appeals

What defences and appeals are available to healthcare providers in an enforcement action?

Individuals or entities that are being investigated usually retain rights:

  • to make their own statements;
  • to defend themselves; and
  • to a hearing during the enforcement action on a case-by-case basis.

Those who refuse to accept administrative penalties in the enforcement action have the right to apply for administrative reconsideration or to bring forth an administrative lawsuit.

Minimising exposure

What strategies should healthcare providers adopt to minimise their exposure to enforcement actions and reduce their liability once an enforcement action is under way?

See question 18.

Recent enforcement activities

What have the authorities focused on in their recent enforcement activity and what sanctions have been imposed on healthcare providers?

The authorities have been focusing on examining the licences and qualifications of healthcare institutes and medical employees (physicians, nurses), management of medical employees by healthcare institutes, handling of medical records, and legality of healthcare delivery. Also, actual and potential instances of commercial bribery in China’s healthcare industry have been under strict examination. Sanctions imposed include warnings, fines and revocation of licences. If the illegal activities are deemed criminal in nature, then the healthcare provider may be prosecuted.

Self-governing bodies

Are there self-governing bodies for healthcare providers? How do those organisations police members’ conduct?

There are many self-governing bodies for medical institutes in China, such as nationwide associations like the Chinese Hospital Association, Chinese Non-Governmental Medical Institutions Associations, and local associations like the Shanghai Hospital Association. The organisations create their own standards for members, police them, and ensure that members follow such standards. They also hold seminars focusing on the industry’s contemporaneous and pressing issues. They also circulate current regulatory trends and advise institutes on how to improve the quality of healthcare that they provide.

In addition, there are self-governing bodies for medical professionals in China, such as the Chinese Medical Association for physicians and the Chinese Nurse Association. They usually set moral codes for members and will punish them internally for violating codes.

Remedies for poor performance

What remedies for poor performance does the government typically include in its contracts with healthcare providers?

The Chinese Medical Insurance Bureau and its local branches enter into agreements with local medical institutions for treating patients covered by public health insurance. There is no uniform contract template. However, contracts usually stipulate that, in case of poor performance by healthcare providers, the government may retrieve, withhold, or incrementally decrease payments. They can also suspend and terminate the contract.

Private enforcement

Causes of action

What private causes of action may citizens or other private bodies bring to enforce a healthcare regulation or law?

There are certainly some causes of action which cannot be directly, privately enforced - this includes the example of when an institute lacks a licence for operation. However, it is arguable that citizens indirectly enforce these causes of action given they have the right to report to the authorities, which in turn enforce these regulations and laws.

If healthcare providers injure private citizens or bodies due to violations of health regulations and laws, they are entitled to sue the responsible healthcare providers, manufacturers, and suppliers of drugs or medical devices. This can be done via breach of contract or tortious claims.

Framework for claims

What is the framework for claims of clinical negligence against healthcare providers?

According to the People’s Republic of China’s Tort Law, medical institutions are liable to patients who are injured due to healthcare professionals’ failure to meet the requisite standard of care. The standard of care - a healthcare provider’s diagnostic and treatment obligations - corresponds to the level of medical expertise and technology of that time.

While China’s tort laws are silent on the definition of medical negligence, they require the plaintiff to prove medical treatment from the defendant as well as evidence of injury. The burden of proof then shifts to the defendant, who has to prove that he or she was not at fault and that the plaintiff’s injury was not caused by the defendant’s act.

The health providers will be presumed to be at fault if:

  • its medical professionals have violated laws, administrative regulations, rules, or other relevant requirements on diagnostic and treatment practices;
  • its medical professionals have concealed or refused to provide medical records relating to the dispute; or
  • its medical professionals have forged, tampered with or destroyed medical records.

Courts are not reluctant to penalise public or quasi-public health providers as long as the plaintiff meets its burden of proof and the defendant cannot show otherwise.

Damages in the lawsuit may include medical expenses, nursing expenses and transportation expenses, lost wages, disability allowances, funeral expenses and death compensation (where applicable).

Seeking recourse

How and on what grounds may purchasers or users of pharmaceuticals or devices seek recourse for regulatory and legal infringements?

Purchasers and users may sue manufacturers and sellers of pharmaceuticals if they can prove harm was sustained, and at a preliminary stage, prove causation between consuming the pharmaceuticals and the harm.

Patients may also sue manufacturers, sellers and healthcare providers in tort if they sustain harm due to the defective medical services.

Compensation

Are there any compensation schemes in place?

There is no fixed scheme for compensation in cases of medical accidents. The aggrieved party may negotiate the amount of compensation with healthcare providers, manufacturers or sellers of pharmaceuticals if they choose to settle the dispute, or can leave the matter and amount of compensation for the court. Compensation granted by court can be extensive, including compensation for consequential loss - such as the cost of medical treatment, lost wages, accommodation fee, nursery expenses, compensation for emotional distress, funeral expenses (if any), etc.

Class and collective actions

Are class actions or other collective claims available in cases related to drugs, devices and provision of care?

Collective actions available in China include joint actions, representative actions and public interest actions. Cases related to drugs, devices and provision of care are not excluded from collective actions.

There are two types of certification for collective actions: first, when the plaintiff consists of two or more persons (in representative and public interest actions, the plaintiff should consist of 10 or more people) and the subject matter of the claims are the same; and second, the plaintiff consists of two or more persons (in representative and public interest actions, the plaintiff should consist of 10 or more people) and the subject matter of the claims differ, but fall within the same category.

The second type of certification requires the court to believe the claims can be adjudicated in a single case, and for the parties involved to consent to their claims being incorporated into a single case.

There are two options for the claimant: they can voluntarily file the class action on their own, or they can participate in a collective action after the court informs them of such an option.

Where there are an undefined number of members as the claimant in a class action, the court may publish a notice to allow other potential parties to join the class action.

Review

Are acts, omissions or decisions of public and private institutions active in the healthcare sphere subject to judicial or administrative review following a complaint from interested parties?

Yes. If unsatisfied with the acts, omissions or decisions of a health institution, the aggrieved party may file a complaint to the administrative authorities, (eg, file with the NHFPC and local health and family planning commissions for review or directly file a lawsuit against the health institution).

If the aggrieved party is unsatisfied with the decision, action or omission of an administrative authority, it may initiate an administrative suit in court within six months following the authority’s specific conduct. Alternatively, the aggrieved party may further appeal the decision in the administrative branch (Administrative Review) within 60 days following the specific acts. If the aggrieved party is still unsatisfied after the Administrative Review, it may file an administrative suit against the authorities within 15 days of the Review.

Where citizens, legal persons or other organisations believe acts, or personnel of administrative organs, have infringed their legitimate rights and interests, they are entitled to institute an administrative suit.

The complaint has a high chance of success if it successfully challenges the validity of the act, or proves the decision lacked a factual basis, or the application of the law was erroneous, or the statutory procedure was not complied with.

Available remedies include a declaration of illegality or an annulment of the administrative decision, or ordering of the administrative body to make the decision again, to perform its duties within a specific time period or to take remedial measures.

Whistleblowers

Are there any legal protections for whistleblowers?

In general, government authorities in China are required to protect whistleblowers’ rights, by holding in strict confidence the whistle­blowers’ personal information and protecting whistleblowers from retaliation. In the sphere of pharmaceutical industry and healthcare, relevant rules include, for example, Administrative Measures for Food and Drug Complaints and Reports.

Does the country have a reward mechanism for whistleblowers?

There is no universal reward mechanism adopted in China. Different authorities may adopt different rules of rewarding whistleblowers. In the sphere of pharmaceutical industry, CFDA adopts the mechanism stipulated in the Measures for Granting Rewards for Reporting Food and Drug Violations (the Measures), promulgated by both the CFDA and the Ministry of Finance.

According to the Measures, those who report illegal acts related to the research and development, manufacture, operation and usage of pharmaceuticals and medical devices may be rewarded. To be eligible for reward as per the Measures, there are three requirements:

  • the whistleblower must point to a specific target and specific illegal facts or clues;
  • the facts or clues are not already known to relevant authorities; and
  • after the investigation, the reported contents must be proved to be true and the target of report is administratively or criminally penalised accordingly.

The rewards are categorised into three classes, according to the quality of evidence provided and the subsequent verification of facts:

  • if the whistleblower provides detailed factual information, clues and direct evidence of illegal acts, which are completely consistent with actual facts, then the whistleblower is eligible for a class I reward;
  • if the whistleblower provides factual information, clues and some evidence of illegal acts, which are consistent with actual facts, then the whistleblower is eligible for a class II reward;
  • if the whistleblower provides certain factual information or clues of illegal acts, which are generally consistent with actual facts, then the whistleblower is eligible for a class III reward.

The rewards are calculated accordingly as follows (with a cap of 500,000 Chinese yuan in principle), yet they may be adjusted by provincial authorities according to the actual circumstances:

  • as for a Class I reward, the amount is usually 4 to 6 per cent of the value of goods involved or confiscated, with a minimum of 2,000 Chinese yuan;
  • as for a Class II reward, the amount is usually 2 to 4 per cent of the value of goods involved or confiscated, with a minimum of 1,000 Chinese yuan;
  • as for a Class III reward, the amount is usually 1 to 2 per cent of the value of goods involved or confiscated, with a minimum of 200 Chinese yuan;

If no goods are involved or confiscated, but the contents of report are proved to be true, the authority may grant a reward from 200 Chinese yuan to 2,000.

Are mechanisms allowing whistleblowers to report infringements required?

According to the Measures for Complaints to Hospitals, both private and public hospitals in China are required to establish a specific department designed to handle complaints filed by patients, which is under the supervision of the local HFPC.

In the meantime, administrative authorities such as NHFPC and CFDA have set up different mechanisms to receive complaints from the public (eg, by setting up a specific hotline or mailbox and designating specific persons to be responsible for such complaints), and they supervise the implementation of the mechanisms at the local level.

Cross-border enforcement and extraterritoriality

Cooperation with foreign counterparts

Do prosecutors and law enforcement authorities in your country cooperate with their foreign counterparts in healthcare cases?

If a healthcare case involves criminality, then Chinese prosecutors and law enforcement authorities may cooperate with their foreign counterparts. China retains cooperation with other countries through treaties, agreements, and memorandums. For example, the China-US Joint Liaison Group, established as per the joint statement made by China and US in 1998, is a platform for cooperative law enforcement between the two countries in fighting criminal cases involving cybercrimes, anti-corruption, Intellectual Property Rights crimes, drug control, illegal immigration, etc.

Triggering investigations

In what circumstances will enforcement activities by foreign authorities trigger an investigation in your country?

Usually, enforcement activities by foreign authorities will not trigger an investigation in China. Nevertheless, if the subject being investigated may have conducted similar acts in China, which would then violate Chinese law or regulations, or cause detriment in China, the Chinese authorities may initiate investigation at their discretion.

Pursuing foreign entities for infringement

In what circumstances will foreign companies and foreign nationals be pursued for infringements of your country’s healthcare laws?

The Chinese healthcare laws do not distinguish between foreign and Chinese companies and nationals. In the case of infringement, foreign companies and nationals will be treated the same as their Chinese counterparts, as long as Chinese courts have jurisdiction over them.

A Chinese court has jurisdiction over foreign companies or nationals in an infringement case if:

  • the foreign party has a domicile in the territory of China;
  • the underlying act takes place in Chinese territory; or
  • the underlying act causes detriment in Chinese territory.

Update and trends

Current developments

What are the authorities’ enforcement priorities likely to be in the coming year? Are there any noteworthy cases pending? Are there any current developments or emerging policy or enforcement trends that should be noted?

Over the last three years, China has been unveiling sweeping regulatory reforms in its life sciences industry with the mission to encourage innovation and ensure the quality and safety of drugs and medical devices. Proposals have been made to optimise the clinical trial approval procedures from ‘express approval’ to ‘implied approval’, to allow reference to clinical data obtained abroad, to improve intellectual property protection by enhancing data exclusivity and exploring patent restoration systems, and to facilitate contract manufacturing and product licensing by expanding the pilot Market Authorization Holder scheme nationwide.

As outlined by the CFDA in March 2018, it plans to focus its 2018 enforcement activities on examining data reliability after the implementation of the Regulations on Drug Data Management. It also aims to supervise Market Authorisation Holders’ assumption of product liabilities. Finally, it will also conduct random inspections on the manufacture and distribution of vaccines and blood products.

Despite its restructuring, we expect the new CNDA’s enforcement priorities in the coming year to be largely consistent with CFDA’s enforcement plans for 2018.