Pharmaceutical Industry Crackdown: Chinese Authorities Target Misconduct and Strengthen Regulatory Measures

In recent developments within the pharmaceutical industry, Chinese authorities have taken decisive actions to address misconduct and enhance regulatory oversight. This article will explore two key areas of focus: the disclosure of 26 pharmaceutical companies implicated in dishonest practices, potentially involving kickbacks, and the intensified scrutiny of over 600 pharmaceutical company representatives.

1. Disclosure of 26 Pharmaceutical Companies Implicated in Dishonest Practices:
Chinese medical insurance authorities recently released the "Credit Assessment Results for 'Significantly Serious' and 'Serious' Dishonesty in Price Bidding and Procurement (7th Edition)," which disclosed 26 pharmaceutical companies. Among them, three were categorized as having "significantly serious" dishonesty, while 23 were classified as having "serious" dishonesty.

China's medical insurance authorities have established guidelines for the evaluation of the credibility of pharmaceutical companies in price bidding and procurement processes. Based on factors such as the nature, severity, timeliness, and impact of dishonest behavior, pharmaceutical companies are assigned one of four levels of dishonesty: general, moderate, severe, or significantly serious. Depending on the credit rating of the pharmaceutical company, various measures are implemented, including written warnings, restrictions, suspension of drug or medical consumable listings, and other appropriate actions.

Companies categorized as having "serious" or "significantly serious" dishonesty under the credit assessment system may face the suspension of all drug or medical consumable listings, bidding eligibility, or distribution qualifications. Although the specific reasons for the dishonesty ratings have not been disclosed, previous documents from China's medical insurance authorities indicate that such ratings may result from acts of commercial bribery, such as providing kickbacks, by company personnel exceeding a certain threshold or due to abnormal drug or medical consumable pricing.

The credit assessment system for price bidding and procurement encompasses pharmaceutical companies' pricing, bidding, performance, and marketing activities. While the exact reasons for the companies' dishonesty ratings are undisclosed, the focus of the system is to hold accountable those engaged in kickback behaviors and address price-related dishonesty. Regardless of the source of the kickbacks, the money used for such purposes inevitably becomes part of the drug pricing. Under the credit assessment system, pharmaceutical companies are required to submit written commitments to relevant procurement institutions in their capacity as independent legal entities. According to regulations, whether it is an in-house team or an external agent, any issues arising during the promotion process can be attributed to the pharmaceutical companies that submit the credit commitments.

2. Intensified Scrutiny of Over 600 Pharmaceutical Company Representatives:
The relationship between pharmaceutical companies and their representatives, known as medical representatives, is closely intertwined. Currently, regulatory efforts are escalating from pharmaceutical companies to medical representatives.

On November 17th, the Market Supervision Bureau of Lvliang City in Shanxi province issued a notification titled "Cracking Down on Illegal and Irregular Practices in the Operation and Use of Drugs to Ensure the Concentrated Rectification of Corruption Issues in the Pharmaceutical Field." The notification emphasizes the need for strict crackdowns on illegal and irregular practices in the operation and use of drugs. It also calls for intensified inspections of key personnel and positions within drug operation and use enterprises, particularly focusing on legal representatives, key executives, medical representatives, and sales personnel to ensure compliance with regulations.

The notification further requires enterprises to strengthen the management of medical representatives, promptly and accurately record their information, and regulate, correct, and standardize their academic promotion activities.

Since the official release of the "Interim Measures for the Filing Management of Medical Representatives" by the China Food and Drug Administration in December 2020, various regions have implemented the filing management of medical representatives. In recent months, several provinces, including Anhui and Hainan, have issued notifications emphasizing the filing management of medical representatives, indicating an overall tightening of regulations.

Specifically, some hospitals have directly proposed specific penalties for violations. For instance, on November 16th, Liuzhou People's Hospital Medical Group held a "Collective Integrity Meeting with Suppliers for 2023" at its integrated Chinese and Western medicine hospital, where 19 supplier leaders involved in the supply of medical equipment, consumables, drugs, and logistical materials were collectively interviewed on integrity issues. During the meeting, it was explicitly stated that when sales representatives from suppliers visit the hospital for business negotiations, they must comply with the hospital's management system for internal visits by medical representatives. Any companies engaging in misconduct will be blacklisted, resulting in the cancellation of their supply qualifications.

Based on incomplete statistics, numerous hospitals across the country have held integrity meetings with pharmaceutical and medical device suppliers in the past three months. From the hospitals that have disclosed data alone, over 600 pharmaceutical company representatives have been subject to interviews.

China's pharmaceutical industry is witnessing a significant crackdown on dishonest practices, with both pharmaceutical companies and medical representatives facing intensified regulatory scrutiny. The disclosure of companies involved in dishonest practices and the increased focus on medical representatives reflect the authorities' commitment to ensuring transparencyand integrity in the pharmaceutical sector. These measures aim to address issues such as kickbacks, abnormal pricing, and other forms of misconduct. By holding companies accountable and intensifying inspections and regulations, Chinese authorities are working towards a more trustworthy and compliant pharmaceutical industry.