The holding and sponsorship of medical conferences by pharmaceutical enterprises can easily lead to a finding of commercial bribery.

The following were cases of law violation: (1) in 2015, the Market Supervision Administration of Changning district, Shanghai, penalized Shanghai Kingmed Diagnostics because it paid the travel and accommodation expenses, and conference registration fees, for physicians that attended a medical conference; (2) in 2017, the Market Supervision Administration of Putuo district, Shanghai, penalized Chiesi Pharmaceutical (Shanghai) because it invited doctors from hospitals to a conference and for travel, and received sponsorship fees from its parent for organizing the conference; and (3) in 2017, the Market Supervision Administration of Yangpu district, Shanghai, penalized Sino-American Shanghai Squibb Pharmaceuticals because it paid the return business-class tickets of hospital department heads to attend a conference in Europe.

If the pharmaceuticals procured by a hospital are sourced from a pharmaceutical enterprise that holds or sponsors a medical conference, it is difficult for the pharmaceutical enterprise to argue that it did not take advantage of this to secure a trading opportunity or competitive advantage.

Pursuant to such regulations as the Administrative Measures for the Holding of Conference and Forum Activities by Social Organizations, and the Several Provisions for Regulating the Acts of Foundations (for Trial Implementation), social organizations may hold medical conferences and forums. So, in order to avoid breaking the law, many pharmaceutical enterprises no longer sponsor medical conferences, but participate in academic conferences organized by social organizations.

But if their attending is involved in using improper means to secure a trading opportunity or competitive advantage, it will be suspected of breaking the law. For example, in 2018, the Market Supervision Administration of Qingpu district, Shanghai, penalized Lepu Medical Technology (Shanghai) because through such means as paying honorariums to the lecturing experts that attended the conference, and assisting them in preparing their lectures, it sought to influence the content of the experts’ lectures so as to achieve its objectives of publicizing its products to the physicians in attendance, and influencing their professional judgments.

When holding a medical conference, a social organization is required to comply with relevant laws and regulations. The following Q&As attempt to clarify the bottom line that social organizations are required to adhere to when holding medical conferences.

Must the scope of business of a social organization holding a medical conference include the holding of forums? In practice, the scope of business of many social organizations does not include the holding of forums. For example, the scope of business of the medical doctors’ association of a certain province includes exchange of expertise, publicity, education, consulting services, etc., but does not expressly include the holding of forums.

The authors argue that the holding of conference or forum activities by a social organization is required to comply with the purpose and scope of business specified in its articles of association. As long as the theme of a conference is directly related, and does not run counter to the scope of business specified in the social organization’s articles of association, that is all that is required in order to encourage academic exchanges. However, the objective of the conference should be to promote discussion of the business in the social organization’s sector and academic exchange.

May a fee be charged when holding a medical conference? Pursuant to the Accounting System for Private Non-Profit Organizations, a social organization holding a medical conference may receive income, but all such income is required to be entered into the entity’s statutory accounts. If it is a charity organization that is holding a medical conference, the charity may additionally accept donations, but is required to distinguish each item of income, either as exchange trading income or donation income.

May the fee charged for a medical conference be linked to brand promotion? The linking of fees with brand promotion is categorically prohibited. In the past, the National Audit Office demanded that the Chinese Medical Association effect rectification due to business income in excess of RMB800 million (US$116 million), and suspended its academic conference and business solicitation activities.

In practice, it is not easy to determine whether a specific act constitutes “fee-linked brand promotion”. For example, if a certain pharmaceutical enterprise pays a fee to a social organization to purchase mineral water, on which is printed the enterprise’s name, to be provided at the conference, can this be found to constitute fee-linked brand promotion?

The authors argue that any such determination needs to be made based on the specific circumstances. If the fee greatly exceeds the normal expenditure for the purchase of mineral water, the same should be found to constitute fee-linked brand promotion. If the reasonable limit is not exceeded, this would be similar to the pharmaceutical enterprise donating the mineral water to the conference, and although the enterprise’s name is printed on the bottles, it should not invariably be found to constitute fee-linked brand promotion.

Can a foundation promote a product or brand free of charge? Where a social organization does not charge a fee, it can carry out objective evaluation or promotion of a brand, but laws and regulations set out stricter requirements for foundations. Even if it does not charge a fee, a foundation may not directly publicize, promote or sell an enterprise’s products or brand at medical conferences.

As the word implies, “publicity” means to communicate and publicize. What about “directly”? The authors argue that the “directly” here should be determined by whether the informing is necessary. For example, if a foundation were to inform the public that a batch of a certain good was donated by a certain enterprise, although this might objectively have the effect of publicizing the enterprise in question, such informing of the public aims to disclose the donor and could not be avoided. In contrast, if there is no need to mention a certain enterprise, but the foundation nonetheless actively publicizes it, this can be found to be “directly”.

Can food and drinks or travel be offered, or gifts distributed, to conference attendees?Regardless of whether the funds for a conference come from trading income or donation income, such funds may not be used to provide any food and drinks, or travel, or to distribute gifts in a disguised manner to conference attendees. When a social organization holds a medical conference, the size should be appropriate and the funding reasonable.

Chen Bo is a partner and Wang Li is a senior associate at AllBright Law Offices

Chen Bo
Partner
AllBright Law Offices

Wang Li
Senior Associate
AllBright Law Offices