At present, the epidemic situation of new coronavirus outbreak is still severe, and the special epidemic prevention materials for fighting against the epidemic are in urgent need. Some medical institutions also release announcements through various channels, hoping to accept social donations, such as medical materials or funds. At this time, many organizations, enterprises and individuals at home and abroad have extended their help to medical institutions in severe epidemic areas, including many pharmaceutical enterprises.

Although the current epidemic situation is special and there may be some special cases, the compliance red line of laws and regulations can not be relaxed, especially for the medical industry with strong supervision, this article gives relevant tips on the compliance of pharmaceutical enterprises' donations to medical institutions

The mainly related domestic laws and regulations of medical donation are as follows: The Government Procurement Law of the PRC, Welfare Donations Law of the PRC (“Welfare Donations Law”), Law of the PRC against Unfair Competition, Law of the PRC on the Administration of Drugs, Good Supply Practice for Pharmaceutical Products, Administrative Measures for the Receipt of Public Welfare Donations by Health and Family Planning Agencies (for Trial Implementation) (“Donations’ Administrative Measures”)

At the same time, many pharmaceutical enterprises, especially foreign pharmaceutical enterprises also need to comply with relevant domestic and foreign industry standards, such as RDPAC Code of Practice, IFPMA Code of Practice, PhRMA Code on Interactions with Healthcare Professionals, EFPIA Code of Practice, etc.

Medical institution generally refers to: the hospital that is engaged in the activity of disease diagnosis and treatment, sanatorium, outpatient department, clinic, health center (room), first aid station and other institutions having obtained the "medical institution practice license".

Pharmaceutical enterprises can make donations to either public welfare or non-public welfare medical institutions. However, it should be noted that the donation objective should be the medical institutions themselves, and it should be avoided to donate to a certain department, internal functional department, individual doctor or other units designated by the donee.

According to the provisions of Donations’ Administration Measures, medical institutions shall specify a functional department to manage donations and take charge of daily affairs ("Donation Management Department"). Donations made by Donors shall be accepted by this Donation Management Department. Other internal functional departments or individuals of medical institutions shall not accept the donation directly.

In addition, it is stipulated that pharmaceutical enterprises shall make their donations in the purpose of public welfare. At the same time, the donation shall not constitute an incentive for the recommendation, prescription, purchase, supply or sale of certain drugs.

According to the provisions of Welfare Donations Law:

The scope of acceptable donations for public welfare undertakings is:

(1) medical expense relief;

(2) public health services and health education;

(3) training or education provided for health and family planning personnel;

(4) academic activities in the health and family planning field;

(5) scientific research in the health and family planning field;

(6) development of public facilities and equipment for health and family planning agencies;

(7) other non-profit welfare health and family planning activities for public welfare.

The scope of unacceptable donations is:

(1) does not comply with laws or regulations of the state;

(2) involves for-profit commercial activities;

(3) is suspected of unfair competition or commercial bribery;

(4) is linked up with the procurement of goods (services) by the Health and Family Planning Agency;

(5) has incidental rights and claims for economic benefits, intellectual property, scientific research achievements, industrial data and information that are related to the donation;

(6) is not compliant with national standards or requirements for quality or environmental protection;

(7) has political purposes or other ideological tendencies;

(8) harms public interests or the legitimate rights and interests of other citizens;

(9) involves bribes, apportionment or apportionment in a disguised manner;

(10) governmental agencies undertaking supervision and enforcement tasks shall not receive any donation that may have a stake in their supervision and enforcement tasks.

Generally speaking, the pharmaceutical enterprises can donate money, drugs, medical devices, other materials and equities. However, in the current situation of coronavirus outbreak, drugs and medical devices are in urgent need.

For drug donation, it should be noted that the compliance requirements are different between domestic and imported drugs:

(1) Donating domestic drugs: the drugs must be approved by the State Administration of Drugs for production, granted the approval number and in compliance with the quality standards. The expiry date shall be valid for more than 6 months from the date of donation. 

(2) Donating imported drugs: according to the Provisions of the State Administration of Imported Donated Drugs, the donated drugs shall be those approved for import and registration in China, the expiry date shall be valid for must be more than 12 months from the date of donation. If the period of validity of drug approval is 12 months or less, the expiry date must be more than 6 months from the date of donation. Meanwhile, the words "Donated Drugs, Not for Sale" or similar words shall be marked on the package or label of donated drugs, accompanied by Chinese instructions. Donated drugs shall not be sold on the market or charged to users.

Enterprises shall be responsible for the quality and safety of donated drugs even if they are gratuitous,. A list of product and inspection reports should be provided at the time of donation. If the donation has a special purpose, it is suggested that a detailed plan should be attached.

Given that it is currently in a special period, according to the Notice No. 17 of the General Administration of Customs issued on January 25, 2020 and the Latest Notice on January 27: pneumococcal vaccines, blood products, reagents and other special articles used for the treatment, prevention and diagnosis of novel coronavirus infection may be released upon the proof from the relevant competent authorities.

For the donation of medical devices, we suggest that pharmaceutical enterprises should pay attention to:

(1) Donating domestic medical devices: “Medical Device Product Registration Certificate” shall be obtained. The donated medical devices should be acceptable under the law. It is not allowed to donate medical devices that have not been registered or put on record, or that have no qualified certificates. Expired, invalid or obsolete devices are also not allowed. The period of validity of disposable sterile medical devices shall be more than 6 months from the expiration date. The donated medical devices shall meet the mandatory standards and the technical requirements for registered or recorded products. We suggest the donor enterprise keeping the supplier's qualification certificate, medical device registration certificate and other product qualification documents for the Donee to examine, and cooperate with the Donee for acceptance. Meanwhile, for medical devices with special storage and transportation requirements, enterprises should also ensure that the storage and transportation conditions meet the requirements from product’s specifications and labels. As required by laws and regulations, labels such as "donation inspected" should be attached.

(2) Donating imported medical devices: according to Announcement on Enhancing Supervision and Administration over Donated Medical Appliances from Abroad, the donated medical devices shall be new products, and have been registered as medical devices in China (namely “Imported Medical Device Product Registration Certificate” should be obtained). According to the product import requirements, the manufacturer’s license, the registration certificate and the test report should also be provided.

To fulfil the above legal procedures often takes a long time, it is obviously unpractical for the prevention and control of the epidemic and the public interests in the current situation. The latest notice issued by Therefore, the General Administration of Customs announced on January 27, 2020 the suspension of  the record registration of donated medical devices from overseas. Donated medical devices that have not been registered in China can be quickly released with the certificate issued by the competent government department in charge of local medical devices. In special cases, it is allowed to register for release first, and then go through the relevant formalities. 

The above is the brief process stipulated in the Donations’ Administrative Measures, among which the parts with risks are:

1. Pre-evaluation of donations shall not be neglected

"Pre-evaluation of a donation" refers to the evaluation of a donation conducted by medical institutions prior to the receipt of the donation upon receipt of donation application filed by the Donor. According to Article 11 of the Donations’ Administrative Measures, the medical institutions shall establish a system for pre-evaluation of donations prior to the receipt of donation application.

Pre-evaluation of donations shall include the following: (1) whether the donation complies with applicable national laws and regulations; (2) whether the donation conforms to the duties, purposes, business scope, and field of activities of the medical institutions; (3) background and business conditions of the Donor and its relationship with the Donee; (4) whether the donation complies with relevant regulations; (5) feasibility of making the donation; (6) the internal department for the use of donated property; (7) whether the quality and qualifications of the donation conform to national standards and requirements; (8) other particulars that the medical institutions considers necessary.

In short, the evaluation is about the eligibility of the Donor, the due process of the donation, and the quality of the donated materials. For pharmaceutical enterprises that donate drugs and medical devices, whether the products are produced by the Donor themselves or purchased from a third entity, they shall ensure that the above donation requirements are met. Medical institutions shall, with reference to the relevant provisions on procurement of drugs and medical devices, examine the relevant administrative licensing materials on registration, production and marketing, as well as the product qualification certificates.

After the pre-evaluation of donations, the Donation Management Department shall issue a written evaluation opinion, and notify the Donor in writing in the name of the medical institution after an internal procedure. If the donation is not accepted, the medical institution shall explain the reasons for the rejection to the donor.

Despite the shortage of materials under the current circumstances, medical institutions should pay strict attention to the quality and safety of donated materials. Medical materials from unknown manufacturers or sources should be treated with caution to avoid the follow-up risks caused by disqualification.

2. Donation Agreements

According to the Donations’ Administrative Measures, a written donation agreement shall specify:

(1) the names and domiciles of the Donor and the Donee;

(2) the type, quantity, quality and value of the donated property, and a commitment about the legality of its source;

(3) intent of the donor and the donation purpose specified or unspecified; if the donation purpose is specified, a detailed budget or budget plan shall also be provided;

(4) requirements for the management of the donated property;

(5) the timeline, venue and method for the implementation of the donation;

(6) the rights and obligations of the Donor and the Donee;

(7) the method for settling disputes;

(8) liability for breach of contract.

In special periods, Donations’ Administrative Measures also have made adaptations: to receive a donation at the time of response to a public health emergency or undertaking any other special mission, a medical institution may simplify the written donation agreement in the light of the actual situation.

Nevertheless, we sugguest that the name and domicile of the donor and donee, the type, quantity, quality and value of the donated property, and the source legitimacy commitment shall remain essential elements in the agreement. Relevant medicines and medical devices shall also have complete qualification certificates for traceability.

3. Implementation of donation agreement

Receipt of Donations

The donor, the pharmaceutical enterprise, delivers the donated property in full amount on schedule in accordance with laws, regulations and the donation agreement. Donations shall be accepted by medical institutions only. For a donation in cash, the donor is required to remit the donation in cash into the account of the corporate Donee by way of bank transfer in principle. For a non-monetary donation, the Donee is encouraged to entrust a third-party evaluation agency with determination, confirmation or notarization of the value of the non-monetary donated property.

Upon receipt of a donation, the medical institution shall issue a public welfare donation receipt uniformly printed by the finance authorities, with the seal of the corporate affixed, as per the actual amount of the donation in cash or the value of the non-monetary donation actually received,

Management of Donations

All the donated property received by a Donee shall be centrally managed and subject to separate accounting by the Donee's financial department. Where necessary, the Donee may apply for opening a bank account dedicated for donations in cash. The finance department of a Donee shall check the donated property item by item under the written donation agreement and enter it in account in a timely manner. For a non-monetary donation received by a Donee, the finance department, together with the asset management department and the user department shall, in accordance with the contract, check the materials before acceptance, store it in warehouse, and enter it into the account for unified management.  If the threshold for fixed assets accounting is reached, it shall be managed in accordance with the relevant provisions on fixed assets.

Use of Donated Property

The pharmaceutical enterprises may specify the requirements and specific purposes of the donated property in the agreement. For a monetary donation, pharmaceutical enterprises can work with medical institutions to formulate the measures for use and management of the special funds, and specify the scope of expenditures, criteria for expenditures, beneficiary generation methods, information disclosure and feedback procedures. A Donee shall respect the Donor's intent and carry out non-profit business activities under its purposes and the donation agreement. It shall not use the donation for any profitable activities. The Donee shall not change the purpose of donation as agreed in the donation agreement without authorization. If it is necessary to change such purpose, the written consent from the Donor is required. 

Management of Surplus Funds

The surplus funds achieved after the completion of a donation project shall be used under the donation agreement if the purpose of such funds is specified in the donation agreement; in the absence of the purpose of such funds in the donation agreement, the Donee shall take the initiative to negotiate with the Donor and make a proposal on the use of such funds.

We suggest that pharmaceutical enterprises should pay attention to the proper use and management of the donated property according to the agreement, so as to avoid the compliance risk of interest transfer to medical institutions or individuals .

4. Information Publicity

According to the Donations’ Administrative Measures, to improve the transparency of the use and management of donation, medical institutions shall establish and improve the system for the disclosure of donation information, and make the relevant information of donation truly, accurately, timely and completely available to the public in a way that is convenient for the public.

Information to be disclosed

Donation management system; donation acceptance workflow; donation management department and contact information; total amount and use of donated property; audit report of donated project; other information that should be disclosed according to laws and regulations.

Time limit of information publicity

Before the end of each fiscal year, the use and management of the donated property of the unit in the previous year shall be announced; within 30 working days after the completion of the audit report of the donated project; the specified time for disclosure as agreed in the donation agreement; the information disclosure as required by the relevant national laws and regulations.

Approaches of information publicity

Medical institutions shall publicly disclose the donation information on its official website.

5. Supervision and Administration

Medical donations are under internal and external supervisions including regular inspections and temporary spot checks. Donations are also supervised by the public through information disclosure. The rational use of donations shall be ensured through multi-angle supervision.