BEIJING - China's ongoing battle to curtail corruption was the topic of PharmAsia News' Aug. 27 audioconference, "Anti-Bribery Compliance in China - Avoiding the Pitfalls."

"Administrative and criminal prosecution for bribery is becoming much more frequent in China," Sidley Austin attorney Tang Zhengyu told the conference.

China's central government is expanding its arsenal of laws to fight corruption, through an amended criminal law and an Anti-unfair Competition Law, and an army of inspectors to root out bribery, which currently includes everyone from State Administration for Industry and Commerce cadres to police and prosecutors.

"There are now efforts to attack corruption from many directions, including the criminal law and the SAIC," Tang explained.

Two years ago, legislators widened the boundaries on who could be criminally prosecuted for offering or accepting bribes, and the premier's office ordered a focus on bribery in the health care industry .

Under the current law, government officials are treated more harshly for accepting bribes than private individuals or businesses, Tang said. "Government officials can be punished with fines, imprisonment or even the death penalty for taking bribes - this is a big difference with U.S. law," he told the conference.

In May of last year, the former head of China's State FDA was tried after being charged with accepting more than RMB 5 million in bribes for helping companies obtain speedy or relaxed procedures for regulatory approvals. Within six weeks, he had been found guilty, lost all available appeals and was executed (Also see "China Executes Former Food And Drug Head" - Scrip, 10 July, 2007.).

The severity and swiftness of the punishment "sent a strong message to the entire health care industry across China," said Tang.

Under China's expanding definition of corruption, bribes can "include kickbacks, illegal fees in commercial dealings, gifts, [and] payments disguised as honoraria," he explained.

Payments of cash, company stock or gifts must be aimed at seeking improper benefits in the form of business transactions or eased application of government regulations to be classified as bribes.

And government officials subject to the strictest penalties include permanent employees of any state-owned institution or organization, which covers doctors and professors in government-run hospitals, he said.

Foreign-invested health care and pharmaceutical outfits contemplating hiring a doctor at a Chinese government hospital as a consultant need to be careful in creating an open and legal relationship through a formal contract, and all payments should be accurately reported in accounting records, Tang explained.

Meanwhile, a widening array of government watchdogs have been empowered to investigate and penalize cases of bribery, Tang said. The State Administration of Industry and Commerce serves as a business sentinel, and metes out administrative penalties including fines for offering or accepting bribes.

Yet the SAIC may also transfer serious cases to the local prosecutor's office, which could open a criminal investigation of bribery charges.

The Ministry of Health, which oversees the State FDA and hospitals across the country, has ordered provincial-level FDA organizations to create a Web-published blacklist of companies found to have engaged in bribery (Also see "China's Ministry Of Health Investigates More Than 1,000 Bribery Cases In 2007" - Scrip, 6 April, 2008.).

"Device and drug manufacturing and trading enterprises are placed on the official commercial bribery blacklist if they have provided property or other benefits to management personnel, medical staff, and/or purchasing staff of medical care entities," the lawyer explained.

"If blacklisted, medical care entities are prohibited from purchasing medical devices, pharmaceutical products, and medical consumables [from these offenders] for two years," he added.

"All provinces have established these blacklists," Tang said.

But many companies found to have engaged in bribery have apparently slipped through the cracks when it comes to being publically identified on official FDA websites across China. "Only a small minority of companies engaging in bribery have ended up on these blacklists," he noted.

- Kevin Holden (pharmasia@elsevier.com )

[Editor's Note: If you missed this PharmAsia News audioconference, you can order a recording of it here.]

China Expanding Anti-Corruption Drive Across Health Sector

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