Avoid ‘academic promotion commercial bribery’ in medicine marketing

By Cindy Hu, East & Concord Partners
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Medicine marketing has long had a high risk of being prone to commercial bribery. As such, it is not surprising this has been a business that China strictly regulates and has cracked down on in recent years. It is important to uncover, as well as prevent, commercial bribery in medicine marketing, be it in daily operations, in mergers and acquisitions or capital operations of pharmaceutical enterprises.

胡晓华 Cindy Hu 天达共和律师事务所 合伙人 Partner East & Concord Partners
Cindy Hu
Partner
East & Concord Partners

The Supreme People’s Court and the Supreme People’s Procuratorate jointly issued in 2016 further clarifications on the interpretations concerning some issues on the application of the law in handling cases of corruption and bribery. The clarifications cover “property interests” in bribery crimes, including material benefits, such as house decoration and debt relief, which can be converted into money and other benefits like membership services and travel. The newly revised law against unfair competition also enumerates the specific types of commercial bribery, where the “kickback” clause is deleted and the provision, “where the employee of a business operator offers bribes, such act should be found to be an act of the operator”, is added.

The promulgation and implementation of these new regulations pose new challenges to the compliance work of pharmaceutical enterprises in medicine sales, especially their widespread use of “medicine promotion in the name of academics”, including cases of “property interests” being tunnelled to doctors and academic staff and, thus, deemed to be commercial bribery. This is also a common concern of pharmaceutical enterprises.

Based on the understanding and practical experience of relevant applicable laws and regulations, this article discusses and analyses the identification and prevention of legal risks related to “academic promotion commercial bribery” in medicine marketing.

Risk Identification

Bribery in the name of academic promotional activities mainly refers to situations where pharmaceutical enterprises, in hosting an academic conference, provides financial support to sponsors (all kinds of pharmaceutical profession associations and medical institutions) and participating doctors. The pharmaceutical enterprises also help with expenses for board and lodging, transportation, registration and expert instructions for the conference. As for participating doctors, they induce the benefit receivers to violate their legal obligations or professional ethics and use their power and influence to seek benefits or induce transactions for the bribe givers. The risk manifestations include, but are not limited to:

  1. Sponsoring conferences organized by pharmaceutical profession associations;
  2. Sponsoring conferences organized by medical institutions;
  3. Sponsoring third-party conference service companies entrusted by the profession association or medical institution;
  4. Inviting and sponsoring doctors to attend the academic conferences held by the pharmaceutical enterprises themselves;
  5. Sponsoring doctors to participate in academic conferences held by third parties and bearing the expenses for transportation, board and lodging, and registration fees of the attending physicians;
  6. Providing expenses for transportation, board and lodging and registration to participating doctors in the form of expense reimbursement.

Risk prevention

The writer of this article makes the following compliance suggestions for sponsoring hospitals or associations to hold academic conferences:

i. Review the nature of the event in advance to ensure it is an academic conference related to treatment technologies;

ii. Avoid sponsoring the internal business department or functional department of a hospital or an internal organization of an association;

iii. Sign a written agreement to make clear that the sponsorship funds can only be used for the conference so as to ensure the exclusive use of the special funds;

iv. Sponsorship funds must be “public to public”, and the receiving unit shall issue the uniform bill for donation of public welfare undertakings or the invoice for conference sponsorship to avoid giving sponsorship money to individuals or certain departments.

This writer also makes the following compliance suggestions for sponsoring doctors to attend third-party conferences or academic conferences held by enterprises themselves:

a. Retain materials connected to the doctors’ actual attendance. It should be noted that the invitation letters, conference notices, agendas, invoices of registration fees of the participating doctors, sign-in forms, photos of the scene, PPT and other conference materials, should be retained to prove the authenticity of the academic conference itself and the doctors’ attendance.

b. Reasonably arranging the schedule and choosing the venue. When a doctor is sponsored to attend a third-party conference, the travel time should be arranged appropriately tight; the itinerary should be arranged in such a way as to avoid the abnormal passage through the tourist city or scenic spots and long stays. For conferences that enterprises host, it is not suitable to choose a venue in scenic places.

Avoiding extraneous expenses. Expenses shall be limited to the normal expenses of transportation, accommodation, catering and registration, and the occurrence of abnormal expenses not related to the conference, such as entrance tickets, tour guide service fees, tour guide overtime fees, and miscellaneous expenses for unknown purposes irrelevant with the conference should be avoided.

Sponsorship should not be too specific. It is neither advisable to sign sponsorship agreements with individual doctors, nor sign sponsorship agreements with hospitals that are too specific in their direction.

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Avoiding too high sponsorship fees. To sponsor a doctor for a third-party conference, if the organizer has a unified plan for board and lodging, its arrangement shall be followed and it is not advisable to offer other alternatives at higher price ranges. When the organizer of the enterprise’s own conference or third-party event makes no arrangement for board and lodging, attention should be paid to keeping the consumption per person within a reasonable range. First-class cabins and seats should be avoided in terms of transportation costs.

Cindy Hu is a partner at East & Concord Partners

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