The pharmaceutical, medical device, and food (including health food) industries have always been particularly prone to illegal advertising. Since September 1st, 2015 when the new Advertising Law formally entered into force, the food and drug administrations and administrations for industry and commerce (“FDA” and “AIC,” respectively) have made greater efforts in the fight against illegal pharmaceutical and medical device advertising. As indicated by the disclosed monitoring information regarding illegal pharmaceutical and medical device advertising, some noteworthy changes have emerged with respect to the illegal advertising activity in the pharmaceutical and health fields, and there also exist some general and common problems. New Provisions Concerning Pharmaceuticals and Medical Devices in the New Advertising Law The new Advertising Law adds many new provisions regarding pharmaceuticals and medical devices, and certain provisions have been updated ranging from the scope of pharmaceuticals for which advertising is prohibited, notices in advertisements, forms of advertising, endorsements, protection of minors, and penalty rules, including in detail the following: a. Article 15: in addition to “narcotics, psychotropic pharmaceuticals, toxic pharmaceuticals, and radioactive pharmaceuticals,” for which advertising was prohibited under original provisions, “pharmaceutical precursor chemicals, as well as pharmaceuticals, medical devices, and treatment methods for drug addiction treatment” have been added to the scope of prohibited advertisements. b. Paragraph 1 of Article 16: this clause creates a new provision which, in part, prohibits the use of spokespersons for endorsements or testimonials in any advertising for medical treatment, pharmaceuticals, medical devices, or health foods. c. Paragraphs 2 and 3 of Article 16: it has been newly added that the content of pharmaceutical advertising must be consistent with that indicated in the instructions approved by the drug administration authorities. Contraindications and adverse reactions must be marked conspicuously, and if any registered certificate of a medical device product contains any contraindication or precaution, the product advertisement must display conspicuously the words "see instructions for details about contraindications or precautions.” d. Article 19: in order to prevent “advertorials” that evade advertising examination and supervision, it has been newly regulated that broadcasting stations, television stations, newspapers,
periodicals, audio and video publishing entities, and internet information service providers cannot publish advertisements for medical treatment, pharmaceuticals, medical devices or health foods in a disguised manner through the introduction of health or health maintenance knowledge. e. Article 40: a provision has been added to prohibit mass media advertising which targets minors for medical treatments, pharmaceuticals, health foods, medical devices, cosmetics, alcohol or beauty products, or advertising for online games unfavorable to the physical and mental health of minors. f. Articles 55, 57, 58, 59, and 62: the provisions concerning penalties raise the standards for fines, add the penalties of revoking business licenses, cancelling advertisement approvals, and refusing to accept advertisement examination applications by the breaching parties for a period of one year, and newly establishing legal liabilities for advertising spokespersons. Changes in Illegal Pharmaceutical and Medical Device Advertising a. Overall Growth in Illegal Pharmaceutical and Medical Device Advertising According to supervisory reports disclosed by some provinces, the rate of illegal advertising has clearly risen both overall and in the areas of pharmaceuticals and medical devices. To a certain degree, this is because, compared with the original law, the new Advertising Law has made many changes to the specific content of legal provisions and criteria for determining illegal advertising, which has resulted in broader legislation and enforcement, stricter determining criteria, and more severe punishment. Additionally, among various forms of illegal advertising, the amount of illegal advertising activity in the areas of pharmaceuticals and medical devices is strikingly high. As shown by the statistics from Beijing with respect to areas in which illegal advertising is concentrated, the amount of illegal pharmaceutical and medical device advertising ranks first or second among advertising categories which include internet, automobile sales, medical and clinic services, insurance, tourist services, and other types of household advertising. b. Clear Significance of the Handling of Illegal Celebrity Endorsements Paragraph 1 of Article 16 of the new Advertising Law adds the provision that any advertisement for medical treatments, pharmaceuticals, medical devices, or health foods cannot use spokespersons to make endorsements or testimonials. The Article 2 definition, together with this paragraph, introduces the concept of “advertising spokesperson,” which not only includes professional organizations, specialists, or ordinary persons such as “medical research institutes, academic institutions, medical authorities or experts, doctors, or patients,” as stated in the original provision, but has now been broadened to include the much criticized “celebrity spokesperson.”
In reality, celebrity endorsements do not account for a substantial amount of pharmaceutical and medical device advertising. However, due to the social effects produced by celebrity, even a single illegal celebrity-endorsed advertisement for pharmaceuticals or medical devices can spread widely, which is reflected in the penalty imposed on Hongmao Medical Liquor for an advertisement endorsed by Chen Baoguo in Shanghai shortly after the new law was implemented. It is to be inferred from the subsequent celebrity news reports and statements that celebrities have become more cautious and conservative when handling endorsements. Thus, it is quite remarkable the deterrent effect that the handling of illegal endorsement cases has had in managing the chaotic celebrity endorsement market with minimal enforcement costs. Additionally, with regard to celebrity endorsements, some have argued that provisions related to advertising spokespersons can be circumvented by distinguishing between endorsements and performances. We disagree with this notion, however, because pursuant to the basic consensus reached in a seminar recently held by the China Advertising Association, although the identity of a highly popular subject may not be stated in the advertisement, the subject’s presence should be deemed to be popular to the audience of the product or service being advertised. The subject’s presence should also be regarded as using “its own image” if the subject’s identity can be recognized by its image. c. Emergence of New Media As a new form of media, the internet has been the increasingly preferred means for a variety of advertising. Under such a background, Articles 19, 43, 44, 45, 63, and 64 of the new Advertising Law specifically regulate advertising on the internet and provide for legal liability. The China Food and Drug Administration (“CFDA”) has strengthened website inspection and punishment for publishing false information on websites, and will disclose information regarding its handling of websites that publish illegal pharmaceutical or medical device advertisements in two batches after the new Advertising Law has been implemented (Notice No. 67 and Notice No. 84 of 2015). As a newer form of mobile internet advertising, WeChat advertisements for pharmaceuticals and medical devices possess more advantages than traditional forms, such as precise consumer targeting, interactivity, low cost, and so on. However, WeChat advertisements for pharmaceuticals and medical devices do not appear to have aroused sufficient attention of administrative authorities yet, and no enforcement cases can be found in publicly disclosed information. In other words, there is a legal enforcement vacuum for such types of advertising, whether it is in the AIC’s supervision of internet advertising or in the FDA supervision of pharmaceuticals and medical devices. To a certain degree, WeChat interactive information in various forms, especially the push notifications with information which are “advertorial” in nature, such as health knowledge sharing, user interaction, and notifications of promotional information, etc., constitute pharmaceutical advertising which should be subject to yet escapes FDA examination or approval. Strictly speaking, there is no obstacle for the relevant provisions in the new Advertising Law to apply to the advertising of pharmaceuticals and medical devices on WeChat. Therefore, this enforcement vacuum is caused by the attitudes of regulatory authorities regarding enforcement instead of being a legislative gap. Analysis of Common Issues Concerning Illegal Pharmaceutical and Medical Device Advertising a. Highly Consistent Causes of Illegality Through studying publicly available cases regarding illegal pharmaceutical and medical device advertising disclosed after the new Advertising Law entered into force, it has been found that, in practice, most illegal pharmaceutical and medical device advertisements were in violation of Article 16 of the new Advertising Law and mainly involved the following three circumstances in which the advertising: i) Contained absolute affirmations or guarantees as to efficacy and safety; ii) Exaggerated the cure or effectiveness rate; iii) Used the titles or images of advertising spokespersons such as academic institutions, medical experts, doctors or patients with recommendations and testimonials. Many illegal pharmaceutical and medical device advertisements may involve two or three of these illegal activities. These illegal activities are not newly added regulated conduct, and when the original Advertising Law was implemented those activities already faced strict supervision and punishment. After the new Advertising Law entered into effect, there has continued to be a high frequency of illegal advertising violations, which means that there is much to do with respect to improving compliance with the law for pharmaceuticals and medical devices. Other common illegal pharmaceutical and medical device advertisements cited in the disclosed information also included: i) Failing to acquire an advertisement approval in accordance with law; ii) Tampering with the content of approved advertisements; iii) Failing to indicate in a conspicuous manner the contraindications and adverse reactions; iv) Failing to indicate in prominent manner that “this advertisement is for reading by medical and pharmaceutical professionals only” for prescription drugs advertisements; failing to indicate in prominent manner that “please purchase and use in accordance with the drug instructions or under the guidance of pharmacists” for advertisements of over-the-counter drugs. b. Strengthened Administrative Penalties As stipulated in the new Advertising Law, the AIC is permitted to impose the following penalties on advertisers for violations of the three most common violations cited above: suspension of advertisements, fines, revocation of business licenses, cancellation of advertising approvals, refusal to accept advertising examination applications. Among these forms of punishment, the last three measures are newly added administrative penalties under the new Advertising Law with respect to illegal pharmaceutical and medical device advertisements. According to the publicly disclosed information, regarding punishment imposed by regulatory authorities, the most common forms of punishment included suspension of advertisements, fines, and cancellation of advertising approvals. More severe forms of punishment do not yet appear to have been imposed, such as revocation of business licenses and refusal to accept advertising examination applications. Moreover, pursuant to the CFDA Notification Concerning Further Implementation Cessation of Sales of Pharmaceuticals, Medical Devices, and Health Food Involved in Severely Illegal Advertisements (Guo.Shi.Yao.Jian.Ji. [2013 No.45]), FDAs may take administrative measures against the products involved as follows: i) Adverse publicity; ii) Suspension of sales during a rectification period; iii) Order suspension of business for rectification in case of failure to implement. In October 2015, the Shandong Food and Drug Administration gave notice to impose a suspension of sales on 19 products pursuant to the notice guidelines above. However, from a legislative perspective, these three administrative measures are not administrative penalties or administrative mandatory measures provided for by laws and regulations. Thus, it may be reasoned that such FDA-imposed administrative measures may be challenged as a matter of law. c. Domestic Small- and Medium-sized Enterprises are the Main Subjects of Violations The advertisers subject to penalties for publishing illegal pharmaceutical and medical device advertisements are generally small- and medium-sized domestic enterprises, while offshore, joint-venture and large domestic pharmaceutical and medical device enterprises are seldom engaged in such violations. In the disclosed cases, we have not yet found a case in which the illegal advertising activities were committed by such offshore or larger enterprises. This phenomenon reflects, to a certain extent, the competitive market environment for pharmaceuticals and medical devices: pharmaceutical and medical device enterprises with relative advantages may take greater care to ensure compliance and choose not to take unreasonable or risky actions. In contrast, pharmaceutical and medical device enterprises which are under pressure with fewer advantages may choose to achieve sales targets by using all methods, and even risk using illegal advertising or adopting some seemingly compliant advertising techniques to create grey propaganda. At the current stage, pharmaceutical and medical device enterprises are seen as relatively small and dispersed, as the overall market concentration in the pharmaceutical and medical device industries is low. Furthermore, under the background of medical reform, the existence and business environment for pharmaceutical and medical device enterprises is influenced by the reform of public hospitals, centralized procurement and the pricing system for pharmaceuticals and medical devices, as well as reform of the review and approval system for pharmaceuticals and medical devices, which leads to added pressure for small- and medium-sized pharmaceutical and medical device enterprises. Consequently, the promulgation of the new Advertising Law does not necessarily mean that illegal pharmaceutical and medical device advertisements will be completely eliminated rapidly and effectively, and that it will be a systematic and protracted battle for the regulatory authorities and market participants to cleanse the pharmaceutical and medical device advertising market.