By King & Wood Mallesons’ Compliance Group

In order to strengthen the administration of pharmaceutical industry, to regulate the purchase of drugs, medical devices and medical disposables, to prohibit illegal transactions and to fight against commercial bribery, on December 25 the National Health and Family Planning Commission (the “NHFPC”) published the amended “Provisions on the Establishment of Commercial Bribery Blacklist in the Pharmaceutical Purchase and Sales Industries” issued by the former Ministry of Health on January 19, 2007. The New Provisions will come into effect on March 1st, 2014.

The New Provisions will affect pharmaceutical production and sales enterprises on following aspects:

To further affect the public image of the enterprises through publishing the blacklists on the central administrative body’s websites. The New Provisions require the NHFPC to republish the regional blacklists on its website,so that such blacklists are more public.

To sign an Integrity Purchase and Sales Agreement along with the Purchase Contract. The New Provisions require that Medical institutions must sign purchase contracts along with an integrity purchase and sales agreement that list the name of the appointed representative of the enterprise and that include terms stating the enterprises will be blacklisted in the event of commercial bribery.

To restrict medical institutions from taking bids or procuring the listed enterprises’ products. The number of times being listed on the blacklist affects the enterprises’ business relationship with the public medical institutions, which could be viewed on the table below:

The blacklists will include those found guilty of relatively minor bribery but who may not have been punished by China’s courts or prosecuted by the procuratorates, as well as those who have received administrative punishments from sector and financial watchdogs or investigations from discipline inspection organs.