U.S. Drug Manufacturers Beware: Application of the PRC Antibribery Law to Drug Marketing and Promotional Practices in China

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U.S. Drug Manufacturers Beware: Application of the PRC Antibribery Law to Drug Marketing and Promotional Practices in China

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Title: U.S. Drug Manufacturers Beware: Application of the PRC Antibribery Law to Drug Marketing and Promotional Practices in China
Author: Mou, Rong
Citation: U.S. Drug Manufacturers Beware: Application of the PRC Antibribery Law to Drug Marketing and Promotional Practices in China (2002 Third Year Paper)
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Abstract: China’s ongoing economic growth and tremendous market potentials have presented many opportunities for American pharmaceutical manufacturers. According to a report issued by the Pharmaceutical Research and Manufacturers of America (PhRMA), up to April 2000 there are 17 major American research-based pharmaceutical companies in China which enjoy a 12 percent share of the Chinese pharmaceutical market of US$6 billion, or around US$720 million in annual sales. Doing business in China, however, the U.S. pharmaceutical companies are in a business and legal environment that is remarkably different from what they are familiar with in their home country. Among other barriers, restrictions on the communication between pharmaceutical companies and physicians/pharmacists recently caused significant concerns of the industry. Beginning in late 1999, a number of Chinese provinces and cities began to enact regulations and take enforcement actions that prohibit pharmaceutical sales representatives from entering jurisdiction hospitals with the intent to promote pharmaceutical products to physicians and pharmacists. These government regulations and actions resulted from the market irregularities mostly committed by domestic Chinese pharmaceutical companies, but have had serious negative impacts on the business of foreign pharmaceutical companies in China as well. Since the U.S. research-based pharmaceutical industry has long employed the communications with prescribing physicians by sales representatives as an effective and efficient method of promotion and marketing, these regulations and enforcement actions may substantially reduce the U.S. pharmaceutical manufacturers’ competitiveness. The Chinese government’s enforcement actions are based on a set of roughly-drafted regulations targeting the corrupt practices in general commercial transactions, and other rules that are particularly applicable to the health care industry. In this article, these regulations are collectively termed as the “PRC antibribery law.†This article begins with an examination on the background for the Chinese government to initiate stringent scrutiny over the health care industry, and then analyzes the pitfalls and loopholes of the PRC antibribery law and its application to the U.S. pharmaceutical manufacturers’ promotional and marketing activities in China. It also discusses the guidelines provided by the American Medical Association (AMA) and the International Federation of Pharmaceutical Manufacturers Associations (IFPMA), which might be of some reference to U.S. companies’ China operations, and proposes certain responding strategies for the industry and rules-changing suggestions for the regulator.
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Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:8965549

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