China Released First-of-Its-Kind Compliance Guidelines for Healthcare Companies to Prevent Commercial Bribery Risks

On January 10, 2025, China's State Administration for Market Regulation ("SAMR"), the top anti-graft regulator, put into effect its first-of-its-kind Compliance Guidelines for Healthcare Companies to Prevent Commercial Bribery Risks (医药企业防范商业贿赂风险合规指引)("Compliance Guidelines").

The Compliance Guidelines provide guidance for managing commercial bribery risks for healthcare and pharmaceutical companies and reflect the SAMR’s enforcement priorities and high-risk areas of focus observed in recent years. In relation to these high-risk areas, the Compliance Guidelines classify healthcare and pharmaceutical companies' operational compliance requirements into four levels: mandatory, permissible, recommended, and encouraged. Mandatory requirements are based on existing laws like the Anti-Unfair Competition Law. Permissible requirements reflect industry consensus and regulatory expectations but are not legally obligatory. Recommended practices represent advanced compliance experiences and typical methods for preventing commercial bribery risks, while encouraged practices aim to guide companies in establishing long-term mechanisms to combat commercial bribery.¹

In addition, the Compliance Guidelines for pharmaceutical companies to identify and prevent risks are categorized into three levels based on the severity of legal violations: prohibited, avoid, and monitor.

• Prohibited: Activities explicitly banned by laws such as the Anti-Unfair Competition Law and the Drug Administration Law should be strictly avoided in business operations.
• Avoid: Practices not clearly defined by law but considered likely to facilitate commercial bribery based on current enforcement practices and industry consensus should be avoided as much as possible.
• Monitor: Business activities that do not align with general compliance principles and may lead to commercial bribery under certain conditions should be monitored closely.²

High Risk Areas

The following provides a summary of key requirements under the Compliance Guidelines.

• Academic visits and exchanges: According to the Compliance Guidelines, companies are prohibited from assigning sales targets to their medical representatives and medical device promoters when conducting academic exchange activities with healthcare professionals ("HCPs").³ Medical representatives are defined as professionals who act on behalf of drug marketing authorization holders by transmitting, communicating, or collecting feedback information about drugs.⁴
• Business hospitality: According to the Compliance Guidelines, companies should identify and prevent risks in business hospitality activities. They should monitor unreasonable or excessive hospitality, avoid arranging hospitality at scenic spots or luxurious locations, and avoid choosing venues associated with entertainment activities.⁵ Additionally, they are prohibited from providing hospitality to close relatives or other unrelated persons of the attendees, nor offer tourism or entertainment activities during business hospitality.
• Fees-for-service for HCPs: According to the Compliance Guidelines, companies should reasonably set fee standards for consulting services provided by HCPs, based on objective factors such as project scale, service duration, and professional level, and refer to relevant regulations or market fair prices.⁶
• Service providers: The Compliance Guidelines encourage companies to establish a selection mechanism for outsourcing service providers through competitive selection.⁷ They should retain complete selection records and require necessary documentation from service providers, including registration, qualifications, financial and tax records, and more. In addition, companies should, among other things, sign service contracts with providers, detailing service content, outcomes, fee standards, service duration, compliance clauses.⁸
• Distributor and third-party discounts, rebates, and commissions: According to the Compliance Guidelines, companies should ensure proper separation of duties between departments or personnel setting discount standards and those executing them.9 This separation can potentially reduce the risk of individuals having conflicting interests and manipulating the discounts for personal gain or favoritism. Companies should also establish policy standards for discounts, rebates, and commissions, clearly specifying their scope, applicable parties, and detailed operational procedures.¹⁰
• Sponsorships, donations, and grants: When sponsoring third party commercial activities, companies should sign a commercial sponsorship agreement that clearly outlines the benefits the company will receive, such as naming rights and exhibition space. Additionally, companies should avoid directly or indirectly sponsoring healthcare institutions, their departments, or individual HCPs, and avoid using third parties to designate sponsorship recipients.¹¹ This requirement ensures that companies do not directly dictate individual beneficiaries of sponsorships.
• Free equipment: According to the Compliance Guidelines, companies should ensure that the free provision of medical equipment to healthcare institutions is based on reasonable purposes, such as collecting feedback for product development and improvement or facilitating performance evaluations.¹² They can provide equipment without transferring ownership, but must clearly define ownership in a contract.¹³  Companies are prohibited from using free equipment to bypass or interfere with the public bidding procurement process.¹⁴
• Clinical research: Companies are prohibited from using fake projects or clinical research as a pretext to provide improper benefits to clinical trial institutions and researchers.¹⁵
• Retail sales: Companies are prohibited from providing improper benefits, such as off-the-books cash rebates, to retail terminals (points of sale or retail outlets like pharmacies and drugstores).¹⁶ This highlights that the Compliance Guidelines are not solely focused on interactions with government officials and HCPs, but also extend to the distribution and retail aspects of pharmaceutical products, which help prevent anti-competitive practices and promote transparency and fairness in the industry.

Encouraging Internal Investigations and Remedial Actions

The Compliance Guidelines state that when pharmaceutical companies identify a risk of commercial bribery, they should immediately stop the risky behavior, conduct an investigation, assess the risk, and take effective measures to improve management processes.¹⁷

Encouraging Cooperation with Regulators

The Compliance Guidelines encourage self-reporting by pharmaceutical companies and require them to assist with regulatory investigations.¹⁸ The Compliance Guidelines provide that citing "trade secrets, the absence of responsible or relevant personnel, lack of authorization, or failure to follow internal approval procedures" can be considered a pretext to obstruct investigations.¹⁹ While it remains to be seen how this will be put into practice, it implies that companies need to be prepared for instances where regulators may insist on starting their search before senior company members or lawyers arrive.

The Compliance Guidelines further state that companies may receive reduced administrative penalties, if companies conduct any of the following:

• Report illegal activities before the investigation.
• Report illegal activities during the investigation and take measures to mitigate harm.
• Disclose additional illegal activities not known to regulators.
• Cooperate with the investigation by providing truthful information and relevant evidence.
• Assist in uncovering significant illegal activities.
• Commit minor violations with minimal harm.
• Play a minor role in bribery activities.²⁰

Further, companies may avoid penalties if they meet one of the following conditions:

• Commit minor violations and promptly correct them without causing harm.
• Commit their first violation, causing minimal harm, and promptly correct it.²¹

_{1 State Administration for Market Regulation, Transcript of the Press Release on Compliance Guidelines for Healthcare Companies to Prevent Commercial Bribery Risks, January 16, 2025, 08:50, https://www.gaacn.com/shows/14/483.html.
2 Id.
3 See the Compliance Guidelines, Art. 13.
4 See the Interim Measures for the Record Management of Medical Representatives  (医药代表备案管理办法（试行）) issued by the National Medical Products Administration in China on September 22, 2020.
5 See the Compliance Guidelines, Art. 16.
6 Id. Art. 18.
7 Id. Art. 21.
8 Id.
9 Id. Art. 25.
10 Id. Art. 24.
11 Id. Arts. 30, 31.
12 Id. Art. 36.
13 Id.
14 Id. Art. 37.
15 Id. Art. 40.
16 Id. Art. 43.
17 Id. Arts. 44, 45.
18 Id. Art. 46.
19 Id. Art. 47.
20 Id. Art. 48.
21 Id. Art. 49.} 

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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