Distribution and marketing of drugs in China: overview
A Q&A guide to distribution and marketing of drugs law in China.
The Q&A gives a high level overview of distribution and marketing of drugs law, including pre-conditions for distribution; licensing; wholesale distribution; marketing to consumers; marketing to professionals and engagement with patient organisations.
To compare answers across multiple jurisdictions, vist the Distribution and Marketing of Drugs Country Q&A Tool.
This Q&A is part of the global guide to Distribution and Marketing of Drugs.
Pre-conditions for distribution
The term "drug" is defined in the Drug Administration Law of the People's Republic of China (PRC) (Drug Administration Law), as substances used in the prevention, treatment, and diagnosis of human diseases and intended to regulate the physiological functions of human beings, for which indications, usage, and dosage are established. This definition of drugs includes:
Traditional Chinese drug materials.
Prepared slices of traditional Chinese drugs.
Traditional Chinese medicine preparations.
Crude chemical drugs and their preparations.
Drugs must be licensed for distribution in China. Before a drug can be distributed legally, the following must apply:
The drug must be registered and approved by the China Food and Drug Administration (CFDA).
The distributor must receive a valid drug distribution licence.
The distributor must have good supplying practice for pharmaceutical products certification (GSP certification).
For more details, see Question 3.
The drug approval and registration process for imported drugs is not the same as the drug approval and registration process for drugs produced domestically (domestic drugs). Drugs distributed wholesale are also subject to a different approval process than drugs that are distributed retail. Details of the drug approval process are outlined below. For details on obtaining a drug distribution licence and GSP certification in China, see Question 3.
Imported drugs. Imported drugs must first be registered with the CFDA and receive an imported drug registration certificate (import certificate) from the CFDA.
Domestic drugs. Domestic drugs can be classified as either new or generic. "New" drugs refer to drugs that have never been marketed in China before. "Generic" drugs refer to drugs that have already been approved for marketing by the CFDA. The application processes for new drugs and generic drugs are the following:
New drugs. Before producing a new drug, domestic manufacturers must apply for a new drug certificate. Applications are first submitted to the provincial Food and Drug Administration (provincial FDA) in the jurisdiction where the manufacturer is located. The provincial FDA then organises an on-site inspection and takes samples for examination. The CFDA's drug review centre conducts a technology review and evaluates the application materials once the materials are submitted from the provincial FDA. If the application passes this evaluation, the CFDA's drug review centre will notify the applicant to apply for an on-site inspection and will also notify the CFDA's drug accreditation management centre. The results of the technology review and the examinations of the samples are then sent to the CFDA for a decision on whether to issue a new drug certificate and drug approval number or a clinical trial approval document, depending on which phase the drug is in.
Generic drugs produced in China. Domestic drugs must receive a drug approval number (or clinical trial approval document) from the CFDA. Applications for generic drugs are submitted to the provincial FDA in the jurisdiction where the manufacturer is located. The provincial FDA then organises an on-site inspection and take samples for examination. The provincial FDA will send the results to the CFDA for a decision on whether to issue a drug approval number.
Categories such as compassionate use do not currently exist under PRC law.
However, drugs can be imported into China without an import certificate if either of the following applies:
The CFDA considers the drug safe, effective, and urgently needed (this may be possible even if the drug is not approved in the country or region where it is being produced).
Medical institutions apply to the CFDA for permission to import small amounts of drugs that are necessary and urgently needed and the CFDA grants such permission.
In certain circumstances, provinces may issue one-time import registrations which allow a drug to enter China without an import certificate. For example, in Guangdong province, the following may be approved for import by the CFDA without an import certificate:
Drugs that are necessary in major disasters and epidemics.
Drugs needed for special and urgent treatments.
Donated drugs, for example donated drugs from overseas used in natural disaster relief.
Distribution licences are divided into two categories:
Wholesale. Wholesalers sell drugs to manufacturers, other wholesalers, retailers, and medical institutions. For more information about wholesalers, see Question 16.
Retail. Retailers sell drugs directly to consumers.
The application procedures for wholesale and retail licences vary slightly.
Wholesale drug distribution licensing procedure
An application to establish a wholesale drug distribution enterprise must be filed with the provincial Food and Drug Administration (provincial FDA) where the enterprise is to be established. The provincial FDA must, within 30 working days from accepting the application, make a decision on whether to permit initial preparations to establish the wholesale drug distribution enterprise and notify the applicant in writing. If the provincial FDA does not grant the applicant the right to complete the initial preparations, an explanation of why such right was denied and a notification of the applicant's right to apply for administrative reconsideration or institute an administrative hearing must be sent to the applicant.
If approved, the applicant can complete the initial preparations. After completing the initial preparations, the applicant must request the provincial FDA to confirm completion (known as the application for examination and acceptance). The provincial FDA must, within 30 working days from receipt of the application, accept and examine the application and decide whether or not to issue the drug distribution licence.
Enterprises that meet the requirements will then be issued the drug distribution licence. Those not meeting the requirements must be notified in writing with an explanation of why the provincial FDA issued a denial.
Retail drug distribution licensing procedure
The procedures are the same as those regarding the sale of drugs wholesale, apart from the following:
The applicant must file an application with the municipal or county-level FDA where the enterprise is to be established rather than to the provincial FDA.
The municipal or county-level FDA after receipt of the application must, within 15 working days, rather than 30 working days from the date of receipt of the application for examination and acceptance, accept and examine the application and make a decision on whether or not to issue the drug distribution licence.
Domestic drug manufacturers must receive a drug manufacturing licence before producing drugs in China. Those with a drug manufacturing licence do not need an additional drug distribution licence to distribute the drugs that they have produced. However, they can only distribute the drugs that they have produced.
Medical institutions can also sell drugs to patients in China. A medical institution is an institution that engages in the diagnosis and treatment of diseases (for example, hospitals and clinics). To form a medical institution, an organisation must apply for and receive a medical institution licence.
The 2016 Good Supplying Practice (GSP) for Pharmaceutical Products
All drug distributors must also attain GSP certification demonstrating compliance with the 2016 version of the GSP for pharmaceutical products (2016 GSP). The 2016 GSP (a revision of the 2015 GSP) was promulgated by the CFDA and took effect on 13 July 2016. Under the 2016 GSP, drug distributors must:
Take effective quality control measures to guarantee the quality of drugs in the process of drug purchase, storage, sales and transportation.
Establish a system to ensure the traceability of drugs.
A GSP certification is attained after receiving the appropriate distribution and business licences. The CFDA aims to gradually integrate the drug distribution licence and the GSP certification into one administrative licence. Several provinces, such as Fujian Province and Guizhou Province, have already begun reforming their administrative procedures to merge the two licences.
Drug manufacturers and medical institutions are not defined as drug distributors under PRC law, even though they may sell drugs under certain circumstances. As a result, they are not required to attain GSP accreditation. However, they may be subject to other rules and regulations. For example, drug manufacturers are required to comply with the good manufacturing practice standards.
See above, Structure.
There are no simplified licensing procedures for drugs that have already been licensed for distribution in another jurisdiction. Those that are interested in importing drugs produced by foreign enterprises into China must apply for an import certificate from the China Food and Drug Administration (CFDA) under the same registration procedures as any other imported drug.
The CFDA follows the Drug Registration Management Measures (Drug Registration Measures) when reviewing a drug application for an import certificate. Under the Drug Registration Measures, certain types of drugs (that is, chemical and biological), which are approved for licence in another jurisdiction, can substitute some clinical research required by the application. However, the licensing procedures themselves are not simplified.
There are no rules regulating the parallel imports of drugs under PRC law.
Fees are charged for processing drug registration, approval, and distribution licence applications.
Drug registration and approval costs
On 27 May 2015, the CFDA published a new fee schedule for drug and medical device registrations. Previously, approval and registration fees generally ranged between RMB13,500 and RMB24,300 depending on the type of drug (that is, imported, produced domestically, new, and/or generic). Generic drugs generally cost less than new drugs. The relevant drug regulatory body may also charge fees for clinical trials for drugs produced domestically and for drug tests. In the past, the registration fees for importing drugs were RMB45,300.
After the publication of the new fee schedule in May 2015, drug registration fees dramatically increased. For example, the new drug registration fee for an imported drug is comprised of an RMB376,000 clinical trial fee and an RMB593,900 manufacturing and marketing fee. For imported generic drugs, the registration fee is divided into two categories depending on whether the drug needs clinical trials before they are manufactured and put into the market. The registration fee for an imported generic drug that does not need clinical trials is RMB367,600 and the registration fee for an imported generic drug that needs clinical trials is RMB502,000.
Drug manufacturers are also subject to registration fees for supplemental applications. An imported drug's supplemental application fee is RMB9,600 for regular items and RMB283,600 for items that require technical review. In addition, drug re-registration fees of imported drugs must be paid once every five years at a price of RMB227,200 per drug.
The above fees are calculated on the basis that one active pharmaceutical ingredient/preparation is classified as one type of drug specification. Adding another specification will incur an additional 20% charge in registration fees depending on whether the drug is a domestic drug or an imported drug.
These costs are mainly governmental fees directly associated with obtaining a licence for a drug. It is difficult to estimate other related expenses and costs, which in practice vary on a case by case basis.
Drug distribution licensing costs
Drug distribution licence fees differ depending on the locality. The application fee for a drug distribution licence is usually minimal (for example, RMB10 or less). As mentioned in Question 3, distributors now must also apply for GSP accreditation. Factors that may affect GSP accreditation fees include the:
Turnover of the enterprise.
Number of chain stores.
Location of the distributor.
Distribution to consumers
After approval and licensing, the distribution of drugs is primarily classified under two categories:
Non-prescription drugs are further divided into two subcategories: "Type A" and "Type B". Type A non-prescription drugs are considered more hazardous and are more strictly regulated than Type B non-prescription drugs which are generally considered safer. For more details, see Question 9.
As discussed in Question 3, drug distribution licences are held by wholesalers and retailers. Each licence lists the types of drugs (prescription and non-prescription) that the distributor is able to sell.
A drug retailer can sell drugs directly to consumers, but can only sell prescription drugs to consumers if:
The customer has a written prescription from a licensed physician.
The drug falls within the category of prescription drugs permitted by the drug distribution licence.
A pharmacist at the retailer reviews and signs the prescription before the drug is distributed to the consumer.
The prescription must be kept for two years at the retailer for inspection.
As a general rule, only a drug retailer is entitled to distribute non-prescription (over-the-counter) drugs. A drug retailer can sell non-prescription drugs to consumers if it has obtained a drug distribution licence and the drugs fall within the category of non-prescription drugs permitted by the drug distribution licence.
Non-prescription drugs can be purchased and used by patients without prescriptions from a licensed physician or licensed physician's assistant. The types of enterprises permitted to sell non-prescription drugs directly to consumers include the following:
Retail pharmacies or enterprises. The sale of Type A non-prescription drugs (which bears more restrictions than Type B non-prescription drugs) requires a drug distribution licence and must be sold by an in-store licensed pharmacist or pharmacy technician.
Regular business enterprises. The sale of Type B non-prescription drugs requires that the enterprise have full-time employees who are well trained and authorised to sell these drugs.
Other businesses. Other businesses include supermarkets, grocery stores, hotel shops, and shopping malls that have a separate stall or counter for the purpose of operating as a drug retailer. Other businesses can only sell Type B non-prescription drugs if authorised to do so.
Medical institutions. Medical institutions can decide or recommend the use of non-prescription drugs in accordance with medical needs.
The direct sale of prescription drugs by a drug manufacturer or distributor to the public by mail or through the Internet is forbidden. Medical institutions are also prohibited from selling prescription drugs directly to the public by mail or through the Internet.
In May 2014, the China Food and Drug Administration (CFDA) published the Draft of the Measures for the Supervision and Administration of Internet Food and Drug Business Operations (Draft Measures) for public comment. The Draft Measures propose allowing drug manufacturers and distributors with valid qualification certificates for internet drug transactions to sell prescription drugs online when prescriptions are shown. No official version of the Draft Measures has been published yet. It is advisable to monitor developments related to the Draft Measures since they may be promulgated in the future.
Non-prescription drugs can be sold by direct mail/distance selling by currently licensed distributors if a copy of the drug distribution licence or the certificate issued by the local FDA is submitted to the post office that is mailing the drugs. In addition, a drug distributor can sell non-prescription drugs to consumers through the Internet by obtaining an Internet transaction of drug services certificate issued by the CFDA and its local branches.
With regard to narcotics and psychotropic drugs, the sender must, for each mailing, apply for and obtain a certificate for the mailing of narcotics and psychotropic drugs at the provincial FDA by submitting the relevant documents, which must then be presented to the post office when mailing the narcotics and psychotropic drugs.
There is no specific law regulating the sale of drugs beyond the borders of China. However, if the drug is imported from outside of China, then the relevant laws regarding the importation of drugs will apply.
There are many agencies that are responsible for supervising distribution activities regarding consumers.
The China Food and Drug Administration (CFDA) and its local FDA branches are the primary agencies responsible for drug supervision. These are the agencies that issue drug registration certificates, distribution licences, and manufacturing licences and that conduct inspections to ensure that drugs meet quality standards. The CFDA is responsible for managing and supervising issues related to drugs at the national level while the local FDAs are responsible for the supervision and management of drugs in their respective geographic areas.
The State Council of the PRC (State Council) and provincial-level governmental departments also play a role in the overall supervision and promulgation of policy regarding drug distribution. The State Council is responsible for the overall supervision and management of drug-related work at the national level. Provincial-level governmental departments are responsible for the overall supervision and management of drug-related work in their respective geographic areas.
In addition, the Administration of Industry and Commerce (AIC), which supervises market operations in China, may also regulate drug distribution at various levels because drugs are considered commercial products.
The legal remedies against decisions made by the agencies in Question 13 include filing for administrative reconsideration or initiating an administrative lawsuit.
Under PRC law, consequences for non-compliance can be criminal, administrative, or civil. Violators may be subject to the following penalties, among others:
Seizure of assets.
Mandatory corrections within a specified period of time.
Revocation of licences.
Confiscation of illegal income.
Under PRC Criminal Law, whoever produces or sells counterfeit or substandard drugs will be sentenced and fined. If the production or sale of counterfeit drugs causes death or other severe consequences, the offender is subject to a fixed-term of imprisonment of no less than ten years, life imprisonment or the death penalty, and fines or confiscation of property.
In November 2014, the Supreme People's Court and the Supreme People's Procurator issued the Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases Related to Endangering Drug Safety (Interpretation). The Interpretation provides for criminal penalties for counterfeiting and substandard processing. It provides harsher penalties for certain types of drugs (for example, narcotics, contraceptives, and vaccines). Harsher penalties are also provided for in cases where there are drug violations involving the sale of drugs to pregnant women, infants, and children and under certain circumstances (for example, drug violations involving responses to natural disasters, repeat offences, failure to secure a business licence, among others). Penalties also vary in accordance with the severity of the injury caused and the volume of profits attained from the sale.
The drug supervisory and regulatory department may impose different penalties depending on the circumstances, as described below:
If drugs were distributed without a drug distribution licence, the distributor will be subject to regulations that require the confiscation of the illegal product and income, and either a fine will be imposed, or in serious cases, the distributor may be subject to criminal liability.
If a medical institution sells prescription drugs directly to the public by mail or through the Internet, they will be instructed to rectify the error, given a warning, and given a fine.
If the distribution of drugs involved secret kickbacks, or the drug distributor or its agents offered property or other items of interest to the staff, physicians, and other relevant personnel of the medical institution that purchased the drugs from the distributor, a fine will be imposed and any illegal gains will be confiscated. In cases of serious violations, the distributor's business licence and the drug distribution licence will be revoked. Criminal liability may also be imposed if these acts constitute a crime.
If a medical institution unlawfully accepts public donations and sponsorships or accepts donations and sponsorships that may have an adverse effect on fair competition, such activities must be handled by the relevant authorities in accordance with the law.
The legal regime regulating wholesale distribution of drugs is outlined in Questions 1 and 2. A drug wholesaler is a drug enterprise that purchases drugs and then sells them to drug manufacturing enterprises, drug distributors, and medical institutions.
Several requirements are necessary to receive and maintain a wholesale distribution licence, including:
Licensed pharmacists. The applicant must have a certain number of licensed pharmacists that are commensurate with its business scale, that is, the larger the business, the more licensed pharmacists that are required. The person responsible for quality control must hold a bachelor's degree or above, and must be a licensed pharmacist.
Warehouse temperature. The applicant for a wholesale distribution licence must have warehouses that maintain room temperature, and warehouses that maintain relatively colder temperatures or refrigerators to satisfy storage requirements commensurate with its drug varieties and business scale. The warehouses must be equipped with installations and equipment that qualify it as a modern logistics system for drugs.
A drug wholesaler is also subject to certain good supplying practice (GSP) requirements, including:
Quality management. The drug wholesaler must establish a specialised quality management department that maintains quality management and upholds internal standards on drug quality within the corporation.
Drug inspection. The drug wholesaler must set up drug inspection, acceptance and maintenance departments that correspond to the scale of its operations. The drug inspection and acceptance department must be closely linked to the quality management department.
Purchasing procedure. For drug wholesalers, quality must be the primary factor when selecting drugs and suppliers. Procedures that govern the purchase of drugs must be established to ensure quality standards are met when purchasing drugs.
The government agencies supervising wholesale distribution activities are the same as the government agencies supervising retail activities (see Question 13).
The government agencies supervising wholesale distribution activities are the same as the government agencies supervising retail activities (see Question 13).
Rights of appeal
The government agencies supervising wholesale distribution activities are the same as the government agencies supervising retail activities (see Question 14).
See Question 15 for more information about criminal consequences of non-compliance. In addition to criminal consequences, administrative consequences include warnings, fines, mandatory corrections under time limits, confiscation of drugs and income, and other administrative penalties.
In China, there is no specific legislation dedicated to the marketing of drugs. Instead, the controlling regulatory authority is referred to in many drug-related laws and regulations. These laws include the Drug Administration Law, the Law of the PRC on the Protection of Consumer Rights and Interests (Consumer Protection Law), the Advertising Law of the PRC (Advertising Law), the Criminal Law, the Provisions for the Supervision of Drug Distribution, and the Standards for the Examination and Publication of Drug Advertisements (Drug Advertising Standards).
Marketing of drugs can be divided into two categories:
Limits to marketing activities
Certain types of drugs are prohibited from advertising to the public (see Question 22). Additionally, bribery in marketing activities is strictly prohibited and violation may incur criminal liabilities.
The Research and Development-Based Pharmaceutical Association Committee (RDPAC) is a member-based, self-regulating industry association that regulates interactions between drug suppliers and healthcare professionals in China. RDPAC currently has 38 members, which are all major multinational, research-based drug companies with substantial investments in China. Members include:
GE Healthcare Genzyme.
Novo Nordisk Nycomed.
The most recent version of the RDPAC Code of Practice on the Promotion of Pharmaceutical Products (RDPAC Code) was published in 2015. The 2015 RDPAC Code is limited to prescription drug products, but regulates nearly all interactions with healthcare professionals. For more information on the RDPAC Code, see Question 27.
The RDPAC Code is voluntarily implemented by its members and not legally enforced or mandatory. Therefore, it is not a source of law.
Marketing to consumers
In China, there is no specific legislation for the marketing of drugs. Instead, the relevant provisions are interspersed throughout various provisions of other drug-related laws and regulations.
Since a drug is a product, it must comply with both safety and efficacy standards according to the Drug Administration Law. In addition, when a drug product is to be marketed to consumers, the drug manufacturer must ensure compliance with various laws including the Advertising Law and the Consumer Protection Law.
Generally, activities not expressly prohibited by law are considered permissible. Under the Circulation and Supervision Regulations and the Interim Provisions, the following conduct is prohibited:
A drug manufacturing or distribution enterprise must not sell drugs available on-hand at exhibitions, expositions, trade fairs, order placement meetings, or product advertisement meetings.
Drug manufacturers or distribution enterprises must not give any prescription drug or any type a non-prescription drug to the public through tie-in sales, or through the provision of drugs to those who buy other drugs or other (non-drug) products.
Prescription drugs must not be sold directly to the public by mail or through the internet.
Drug wholesale enterprises must not directly recommend or sell prescription drugs to patients in any manner.
Prescription drugs and non-prescription drugs must not be sold via the winning of prizes through drug purchases, or via the receipt of free drugs or gifts with purchases.
Ordinary commercial enterprises (for example, supermarkets, grocery stores, hotel shops, shopping malls, that have a separate stall or counter for the purpose of operating as a drug retailer) must not:
sell prescription drugs and Type A non-prescription drugs;
sell Type B non-prescription drugs via the winning of prizes through purchases, or via the receipt of free drugs or gifts with purchases; and
sell non-prescription drugs of Type B online (this may be subject to change in the future).
Under the Drug Administration Law, the Advertising Law, and the Drug Advertising Standards, the general rule is that prescription drugs must not be directly advertised to consumers by any drug manufacturing or wholesale enterprise.
Approval. Advertisements of drugs must be approved by the provincial drug supervisory and regulatory department where the enterprise is located and must be issued an advertisement registration number. Without a registration number, the drug cannot be advertised. The content of the drug advertisement must be true, legitimate, and consistent with the drug label instructions (or the included manual).
The following drugs must not be advertised:
Narcotics, psychotropic drugs, poisonous substances for medical use, radioactive drugs, chemicals in medications which are easily used to make drugs, medications, medical devices, and treatment for drug detoxification.
Drugs prepared by medical institutions.
Drugs needed by the military.
Drugs whose production, distribution, and use have been suspended or prohibited as expressly ordered by the then State Food and Drug Administration (SFDA) (now the CFDA) according to the law.
Drugs approved for trial production.
The following restrictions apply to drug advertisements:
Drug advertisements must not directly or indirectly unduly induce people to purchase and use drugs below or in excess of its required dosage. PRC laws also expressly prohibit certain content in drug advertisements. For example, drug advertisements must not contain any baseless (non-scientifically tested) statements/assertions, that is, referring to a drug's effects, safety, awards won or rankings (such as, "best" and "number one") or referring to any institutions, experts or military entities.
Content such as the general name of the drug, advice, drug advertisement licence numbers and drug production licence numbers must be stated in the drug advertisement. The drug advertisement must state the name of the manufacturing or distribution enterprise of the drug.
Drugs must not be advertised in publications, radio or on television or on any programs targeting minors (that is, persons under 18 years old).
Advertisements of substances that are not drugs must be separate from the advertisements of drugs. Additionally, non-drug advertisements must not make reference to drugs.
Advertisements of prescription drugs. The following restrictions apply specifically to the advertisements of prescription drugs:
Prescription drugs can be advertised in professional medical science or drug publications jointly designated by the Health Administration under the State Council and the CFDA, but must not be advertised in any mass media or in any other form directed towards the general public.
Prescription drugs must not be advertised to the general public through the presentation of professional medical science and drug publications or in any other way.
Advertisements of non-prescription drugs. The following restrictions apply specifically to the advertisements of non-prescription drugs:
Subject to approval, non-prescription drugs can be advertised through any mass media outlet to the general public.
The advertisement of a non-prescription drug must include the special "OTC" drug symbol.
If the chemical/generic name of a prescription drug is used as the title of an advertisement, only the chemical/generic name of the drug can be advertised.
Currently, there are no regulations specifically regulating free samples for consumers. However, the general consensus among the food and drug administration officials at the local level is that drugs distributed to consumers must be registered and approved, and providing consumers with free samples is prohibited.
In relation to restrictions on special offers, according to the Circulation and Supervision Regulations and the Detailed Implementation Management Rules to Regulate the Quality of the Drug Trade, no drugs can be given as free gifts with respect to purchases. Accordingly, special offers such as "buy-one-get-one-free" offers are not permitted.
Several laws and regulations directly address or extend their scope to cover advertising on the Internet and social media. For example:
Drugs cannot be advertised in publications, broadcasting or television channels or programmes targeted at minors (persons under 18 years old).
Prescription drugs can be advertised in professional medical science or pharmaceutical publications jointly designated by the Ministry of Health and the China Food and Drug Administration (CFDA), but must not be advertised in any mass media or in any other form toward the general public.
Prescription drugs must not be advertised to the general public by way of presenting professional medical science and pharmaceutical publications or in any other way.
Non-prescription drugs can be advertised through any mass media medium directed towards the general public on approval.
Under the Research and Development-Based Pharmaceutical Association Committee (RDPAC) Code, the following applies to drug related websites:
The identity of the drug company and of the intended audience must be readily apparent.
The content must be appropriate for the intended audience.
The presentation (content, links) must be appropriate and apparent to the intended audience.
Country-specific information must comply with local laws and regulations.
The above rules may also apply to the use of the internet/social media with respect to drugs and their advertising.
The regulatory authorities for the oversight of marketing activities to consumers include the China Food and Drug Administration (CFDA), its local FDA branches, and the administration of industry and commerce.
The CFDA and its local FDA branches are the primary regulatory institutions responsible for overseeing marketing activities to consumers. For drug advertising, local FDA branches review and approve drug advertisements for their respective jurisdictions. The administrations of industry and commerce above the county level supervise and manage such advertisements.
Rights of appeal
The legal remedies against decisions made by the agencies above include filing for administrative reconsideration or initiating an administrative lawsuit.
If drugs are sold at exhibitions, fairs, trade fairs or product promotion meetings, the illegally sold drugs and any illegal income will be confiscated, and a fine of two to five times the amount of the value of the illegally sold drugs will be imposed.
In cases involving the unlawful gifting of any prescription drugs or any Type A non-prescription drugs to the public through tie-in sales, or through gifting drugs to those who buy other drugs or other (non-drug) products, violators will be ordered to redress the situation within a specified period of time, and will be admonished. If the violator fails to make the requisite corrections within the time limit or if the circumstances are severe, a fine must be imposed.
Marketing to professionals
PRC law strictly prohibits distributors from offering money or things of value to professionals in the course of selling drugs. However, there is no law in China specifically regulating marketing to professionals. However, the Research and Development-Based Pharmaceutical Association Committee (RDPAC) extensively regulates interactions between drug suppliers and healthcare professionals (see Question 20).
Under the RDPAC Code, many marketing activities directed at professionals are permissible. However, permissible activities are regulated and include:
Distribution of printed and electronic promotional materials.
Events and meetings.
Sponsoring medical professionals to attend events.
Distribution of promotional aids.
Distribution of medical utility items.
Distribution of samples.
Engaging in services such as consulting, advisory, speaking, the chairing of meetings, involvement in scientific studies, clinical trials, training services, and market research.
For RPDAC restrictions on the above activities see Question 28.
Under PRC law, offering money or items of value to healthcare professionals in the course of selling drugs is strictly prohibited.
Under the Research and Development-Based Pharmaceutical Association Committee (RDPAC) Code, the provision of personal gifts, cash, entertainment and leisure events is strictly prohibited. The following restrictions also apply:
Promotional materials must be consistent with approved labelling and uses, possess a non-misleading nature, and only contain claims that can be validated.
Printed and electronic materials must:
list the active ingredients of the drug;
include the name and address of the pharmaceutical company; and
include a statement of the drug's side effects.
Promotional aids must be of minimal value.
Medical utility items must be of modest value.
Engaging a healthcare professional for consulting or advisory purposes requires a written contract specifying the nature of the services and a legitimate need for the services, among other requirements.
For restrictions with respect to events and meetings, see below, Provision of hospitality.
For restrictions with respect to samples and sponsoring, see Question 31.
Regarding the sale of drugs, the term "sales representative" is not clearly defined under PRC law. In 2008, the then Ministry of Health published the Draft on Managing Medical Representatives (Draft), which has not yet been enacted. The Draft defines medical representatives as personnel employed by drug manufacturers and distributors for drug publicity and promotion, including personnel who go to medical institutions for business activities under the name of drug manufacturers and drug distributors. It requires that such personnel be formally employed by the drug manufacturer or distributor.
The Draft proposes that medical representatives be reviewed by and registered with each health institution before they can conduct business there. Permitted activities are limited to promoting pharmaceutical products and collecting information on the drugs sold by the representative (including adverse drug reaction information). Promotion methods are limited to:
Distributing promotional materials.
Other approaches agreed to by the medical affair management department of the health institution.
No healthcare professional or other personnel can meet with medical representatives in private and all meetings must be approved by the personnel in charge of the medical department. Medical representatives must report to the healthcare institution's medical affair management department for the business activities that they participated in within seven days after such activities are finished.
As the Draft has not yet been enacted, it can only be used for reference at this point.
Provision of hospitality
Apart from the Draft on Managing Medical Representatives, there are no express provisions under PRC law regulating meetings with professionals or hospitality.
The objective of events must be limited to providing scientific or educational information and/or informing healthcare professionals about product information.
Events must avoid extravagant venues and can only provide meals and refreshments that are moderate, reasonable, and limited to the main purpose of the event.
A company can only organise events involving foreign travel if it is justified, that is, either:
a significant proportion of the invited healthcare professionals are travelling from outside of their home country, and it makes greater logistical or security sense to hold the event in this other country; or
the relevant resource or expertise, that is the subject matter of the event, is located outside of the healthcare professional's home country.
No payments can be made to healthcare professionals for time spent attending events.
Companies must not pay the costs of the guests of the invited healthcare professionals.
No entertainment or other leisure or social activities should be provided or paid for by members.
Drugs are generally treated as a distinct category of products under PRC law. However, they are also regulated as common products under the Product Quality Law, the Consumer Protection Law, the Advertising Law, and other relevant laws and regulations.
The Advertising Law provides that drugs must not be compared to other drugs in advertisements with respect to the function and safety of the drugs.
PRC law does not provide for indirect incentives. However, legal documents and the Research and Development-Based Pharmaceutical Association Committee (RDPAC) Code contain relevant regulations on discounts, samples, and sponsorships.
Relatively strict regulations regarding drug pricing in China can be found in the Drug Administration Law. Discounts are permitted in the course of the purchase and sales of drugs only if they are explicit and recorded faithfully in the account book of both parties. Off-the-book kickbacks are considered bribery under PRC law.
Apart from the Draft on Managing Medical Representatives (Draft) (see Question 28), PRC law does not specifically regulate the distribution of samples to healthcare professionals. Under the Draft, sample drugs provided to healthcare professionals must be clearly marked as "sample" or "not for sale" on the package. It also states that the drug supplied and the amount supplied must be commensurate with the relevant business activities.
Under the RDPAC Code, samples can be provided to enhance patient care if the samples are marked as samples. This is to ensure that they cannot be resold, or otherwise misused, and are limited in quantity. These samples can be used to promote familiarisation with the product. Additionally, companies that distribute samples must have adequate control of the samples provided to healthcare professionals, including monitoring of the samples while they are in the possession of healthcare professionals, and will be held accountable for the samples.
Sponsorship of professionals
Sponsoring of professionals is allowed under certain circumstances. According to the Interim Provisions on Medical Institutions Receiving Public Donations and Sponsorships (Donations and Sponsorships Provisions), the following applies:
Medical institutions receiving public donations and sponsorship (for example, the provision of funds, supplies and other forms of assistance by natural persons, legal persons, and other organisations voluntarily and without compensation to medical institutions) must not harm the public interest and/or the lawful interests of citizens. Any donations and sponsorship with conditions attached that may affect fair competition and that connect donations and sponsorships with the purchase of products or services are prohibited.
Public donations and sponsorship must be managed and used properly. Departments or individuals of medical institutions must not accept donations and sponsorship. If the donor and/or sponsor require a donation and/or sponsorship to be accepted in the name of an individual, it must be reported to and approved by the governing body of the medical institution in advance, and managed and administered solely by the finance department of the medical institution.
Medical institutions must complete certain entry procedures under the relevant laws if they are receiving donations and sponsorships from abroad. Medical institutions must not accept donations and sponsorships from abroad which do not comply with the laws regarding quantity and environmental protection, among others.
The conditions for receiving donations and sponsorships are the following:
If a medical institution accepts public donations and sponsorships, the donation and sponsorship plan of the donor and sponsor must be examined and verified by the medical institution. The institution will then decide whether to accept the donations and sponsorships.
Medical institutions must enter into written agreements with donors and sponsors when accepting public donations and sponsorships. The donors and sponsors must perform their obligations under the relevant agreements lawfully and must deliver the donated and sponsored property to the medical institutions. Medical institutions must issue receipts to the donors and sponsors.
The use of the property from public donations and sponsorships is regulated in the following ways:
Property from public donations and sponsorships received by medical institutions must be used primarily for:
the treatment of poor patients;
public health education;
training for health personnel;
construction of service facilities for medical institutions; and
other non-profit business activities.
Medical institutions must not unilaterally change the restrictions set out in the agreement. The donated and sponsored funds must not be used for the payment of employee bonuses, allowances and other personal outlays, and no management expenses may be extracted.
Under the RDPAC Code, companies can sponsor healthcare professionals to attend events provided that:
No payment is made for time spent attending events. Compensation must be limited to travel, meals, accommodation, and registration fees.
Companies must not make payments or transfer any sponsorship fund directly to a healthcare professional or a hospital department.
Any sponsorship must not be conditional on an obligation to prescribe, recommend, purchase, supply, administer, or promote any pharmaceutical product.
Other promotional items or activities
The RDPAC Code also provides that:
Payments of fees and reimbursement of out-of-pocket expenses must be reasonable and based on fair market value and can be provided to healthcare professionals who are providing genuine services as speakers or presenters on the basis of a written contract.
Companies must not make any payments for the service in cash or in a cash equivalent.
Members can offer or provide items of medical utility free of charge provided that the items are of modest value and are beneficial to the provision of medical services and for patient care, such as an anatomical model or medical textbooks.
The regulatory authorities for the oversight of marketing activities regarding professionals include the China Food and Drug Administration (CFDA), its local FDA branches, and the administration of industry and commerce.
The CFDA and its local FDA branches are mainly responsible for the oversight of marketing activities regarding professionals. For drug advertising, local FDA branches review and approve drug advertisements for their respective jurisdictions. The administrations of industry and commerce above the county level supervise and manage these advertisements.
Rights of appeal
The legal remedies against decisions made by the agencies above include filing for administrative reconsideration or initiating an administrative lawsuit.
For an overview of the legal consequences associated with non-compliance, see Question 15. Additionally, according to the Opinions Concerning the Application of Law in Criminal Commercial Bribery Cases published by the Supreme People's Court and the Supreme People's Procuratorate, the following applies:
Public servants of medical institutions who, by abusing their positions in purchasing medicines, medical apparatuses, medical hygiene materials and other medical products, solicit property from sellers, or illegally accept any property from the sellers in consideration of acting in favour of such sellers will be convicted for accepting bribes and will be sentenced (Article 385, Criminal Law).
Non-public servants of medical institutions who commit the offence specified in the previous paragraph will be convicted for accepting bribes as a non-public servant and will be sentenced if the value of the bribes in question is relatively high (Article 163, Criminal Law).
Medical staff of medical institutions who, by abusing their power to give prescriptions, illegally accept any property of a relatively high value from the sellers of medicines, medical apparatuses, medical hygiene materials, and other medical products for any reason in consideration of acting in favour of the sellers will be convicted for accepting bribes as a non-public servant and will be sentenced (Article 163, Criminal Law).
Engagement with patient organisations
There are currently no official national patients' associations in China. A small number of local or provincial associations are known to exist (for example, the Patient Right and Interest Protection Association in Gansu Province). However, there currently are no systematic regulations determining which activities are or are not permitted relating to engagement with these organisations.
There are no restrictions imposed on relationships with patient organisations.
On 24 April 2015, the Standing Committee of the National People's Congress passed both the newly amended Drug Administration Law and the amended Advertising Law.
The highlights of the 2015 amendment are:
Cancellation of the "drug licence before business licence" system for establishing drug manufacturing or distribution enterprises.
Removal of the fixed pricing and guided pricing mechanisms.
After April 24, obtaining a drug manufacturer's licence or drug distribution licence is no longer a pre-condition for registration with the Administration of Industry and Commerce (AIC). Additionally, the new system for establishing drug manufacturing and distribution enterprises conforms to the procedures for establishing general enterprises. This has simplified the process.
Under the old regime, drugs were priced in three ways:
The government fixed prices.
The government guided prices.
The market regulated prices.
The 2015 amendment has transformed the government planned pricing model to a market pricing model and allows medical institutions to autonomously negotiate purchase prices with drug enterprises. PRC regulators will check drug prices to ensure that their prices correspond to their quality and are determined in accordance with the principles of fairness, rationality, honesty, and good faith.
The amended Advertising Law will take effect on 1 September 2015. It enlarges the scope of prohibited advertisements to cover chemicals in medications which are easily used to make drugs, medications, medical devices, and treatments for drug detoxification. Additionally, it provides that advertisement of medication must be consistent with the drug's instructions and contraindications. It also states that adverse reactions must be prominently labelled. The use of endorsements in drug advertisements and publication of such advertisements in public media targeting minors are now prohibited. These provisions may affect the ability of drug manufacturers to reach out and market to consumers.
Jianwen Huang, Partner
King and Wood Mallesons
Professional qualifications. People's Republic of China, Attorney, 1996
Areas of practice. Healthcare; foreign direct investment; outbound investment; M&A; general corporate.
Non-professional qualifications. LLM, New York University School of Law; Master of Philosophy in Law, City University of Hong Kong; LLB, Beijing Economics and Trade University
- Assisted Pfizer Inc with its divestment of its animal vaccine business to Harbin Pharmaceuticals.
- Assisted Bayer (China) Limited with the importation of medical devices into China.
- Assisted Siemens with its IVD device-related issues.
- Assisted RegeneRx with its investment structures, establishment of Chinese entity, importation licence, among others.
- Advised Mitsui & Co Global Investment Ltd on China's medical device regulations.
- Assisted Lundbeck with its investments, drug licensing, and drug repackaging issues in China.
- Assisted Genzyme Corporation in establishing its China corporate structure.
- Assisted GE Healthcare with its China investments.
Languages. Chinese, English
Professional associations/memberships. Beijing Lawyers Association; The Inter-Pacific Bar Association.
- "Recent Trends in China's Pharmaceutical Industry", November 2012 edition of Asia Legal Business-China.
- A chapter on foreign investments in China in the first edition and second edition of The Foreign Investment Regulation Review.
- "Barriers lifted for foreign projects", China Law and Practice (November/December 2014).
- "Drug Listing Permit Holder System: Exploration", China Legal Review (June 2016).
- "Registration and Record Filing of Health Foods", China AmCham Daily (8 March 2016).