China’s National Health and Family Planning Commission(” NHFPC “) has recently stepped up its efforts to strengthen the administration of healthcare industry with a serial of regulations and actions, with a focus to crack down on and actions, with a focus to crack down on commercial bribery and illegal medical practice.

  • On December 13, 2013, NHFPC and other 8 authorities jointly issued the Implementation Opinion of the Special Campaign to Correct Bad Practice in Purchase and Sales of Medical Products and Healthcare Service

The implementation opinion provides main tasks of the special campaign to correct bad practice in purchase and sales of medical products and medical service, including: (i) strictly regulating the purchase and sales activities to lower the excessively high prices of drugs and medical devices; (ii) strengthening the supervision of medical institutions and healthcare professionals (“HCPs”) to regulate the medical services; (iii) deepening the systematic reform to address issues from the roots; (iv) tightening enforcement in punishing bad practice cases to further promote the industry ethics.

  • On December 26, 2013, NHFPC issued the Nine Prohibitions for Building up a Healthy Healthcare Industry

The nine prohibitions focus on healthcare institutions and HCPs, provide general principles for eliminating corruption in the Chinese healthcare industry, and expressly prohibit nine types of non-compliant activities, including: (i) linking HCPs’ income with revenue from drug prescriptions or medical tests; (ii) charging commissions for prescriptions; (iii) charging illegal fees; (iv) accepting illegal donations; (v) participating in promotions or publishing illegally medical advertisement; (vi) collecting for commercial purposes or facilitating collection by sales representatives of prescription statistics; (vii) illegally procuring or using medical products; (viii) accepting kickbacks; (ix) accepting “red packets” from patients.

  • On December 26, 2013, NHFPC issued the Action Plan of the Special Campaign to Maintain the Order of Medical Activities and Crack Down on Medical Related Crimes

According to the action plan, a one-year special campaign to maintain the order of medical activities and to crack down on medical related crimes shall be launched since December 2013. Major measures of such special campaign include: (i) tightening enforcement in punishing irregularities and crimes infringing personal safety of HSPs and patients and disordering medical activities; (ii) improving security capability of medical institution; (iii) improving medical service quality; (iv) achieving better resolution of medical disputes; (v) identifying hidden and potential trouble of medical disputes.

  • On January 21, 2014, NHFPC, together with other 5 authorities held a teleconference meeting to summarize the working result at the current stage of the special campaign to crack down on illegal medical practices

Since October 2013, China launched a special campaign to crack down on illegal medical practices. Major targets include: medical practice without qualifications, illegal activities of medical institutions and family planning service institutions, illegal embryo sex appraisal (unless medically necessary), and illegal sex-selective termination of pregnancy as well as hospital scalpers.

According to the conference, illegal medical practices have been stemmed to certain extent after a three-month crackdown, awareness of laws applicable to medical practitioners and institutions has been strengthened, and public consciousness of boycotting illegal practices has increased. Health authorities at all levels are urged to take further measures.

  • On January 28, 2014, NHFPC issued the Regulations Governing Practitioners of the Healthcare Institutions and Family Planning Institutions Who are in Breach of the Code of Conducts (draft for comment)

Tackling medical practitioners’ bad practice which have aroused strong repercussions like accepting “red packets”, taking kickbacks from medical device/drug manufacturers and distributors, the draft for comment provides that medical practitioners breaching the code of conducts will be sanctioned with warning, record with a demerit or dismissal.

  • On February 20, 2014, NHFPC issued the Circular on Introducing Doctor-Patient Agreement of Refusing to Accept or Give “Red Packets”

According to the circular, since May 1, 2014, all level-two or above hospitals shall provide the Doctoror-Patient Agreement of Refusing to Accept or Give “Red Packets” to the patients or their representative within 24 hours after the patients are admitted into the hospital, which shall be signed by the doctor in charge of the patient or the doctor in charge of the ward on behalf of the hospital. Other medical institutions may adopt the same voluntarily. The template of such agreement was template of such agreement was promulgated together with the circular.

These legislations and activities show the recent ongoing campaign tackling irregularities in the healthcare industry is turning into a long term mechanism, which continues to increase the compliance risks faced by pharmaceutical and medical device enterprises. We are aware that a number of major market players are changing part of their sales model and code of conduct regarding interaction with madical institutions and HCPs in China, in an effort to mitigate compliance risk.