Pharma compliance under stricter new anti-corruption rules

New rules substantively lower criminal thresholds across the food, drug and healthcare sectors with Judicial Interpretation II on Certain Issues Concerning the Application of Law in Handling Criminal Cases Involving Corruption and Bribery, taking effect on 1 May.

The stricter rules – jointly issued by the Supreme People’s Court and Supreme People’s Procuratorate – also align sentencing standards for non-state functionary offences with those for public officials, while introducing look-through rules targeting sophisticated forms of concealed corruption, including bribery disguised as expected investment returns or nominee-held gains.

Consequently, anti-corruption enforcement in healthcare has entered a highly intensive, institutionalised phase, posing unprecedented challenges to pharmaceutical compliance frameworks.

Additionally, as a national pharmaceutical hub pioneering medical innovation, the Guangdong-Hong Kong-Macau Greater Bay Area has also aggressively intensified its crackdown on commercial bribery in recent years, with Shenzhen and neighbouring cities prosecuting several high-profile corruption cases.

In response, the Guangzhou Guangdong-Hong Kong-Macau Greater Bay Area Federation for Enterprise Compliance and Anti-corruption – alongside the Medical and Food Law Research Committee of Guangdong Law Society and other regulatory bodies – has jointly issued the Compliance Guidelines for Biopharmaceutical and Health Companies in the Greater Bay Area.

Against this regulatory backdrop, this article analyses strategic compliance frameworks and practical defence paths for pharmaceutical companies navigating the critical shifts introduced by interpretation II.

Impact of new rules

A substantive lowering of the threshold for criminal liability for bribery by entities. Article 2 of interpretation II clarifies the conviction and sentencing standards for bribery by an entity. Where relevant circumstances would not have met the threshold for prosecuting a basic offence under original provisions of the Criminal Law, criminal liability may now still be pursued if bribery in sectors such as healthcare is involved. This alone substantially lowers the effective prosecution threshold compared with previous practice. Bribery in healthcare is now expressly listed as a statutory circumstance for criminalisation and sentence escalation.

Criminal thresholds for non-public medical personnel align with those for public officials. Article 8 of interpretation II sets out conviction and sentencing standards for bribing non-state personnel, as well as non-state personnel accepting bribes, by reference to the standards for giving bribes and accepting bribes, respectively.

Previously, the monetary thresholds for bribery involving non-public personnel were far higher than those for public officials. Since interpretation II, however, an individual bribe of RMB30,000 (USD4,400) is sufficient to trigger criminal liability.

Look-through recognition of new forms of concealed corruption. To target grey-market practices such as “expert equity incentives” and “physician-shareholding in research collaborations”, article 11 of interpretation II explicitly mandates that, where stocks or expected equity returns are accepted as bribes, the bribe amount shall be determined based on actual realised profits or market price premiums at the time the case is brought before the courts.

Under the substance-over-form approach, disguising quid pro quo kickbacks for prescriptions or tender awards as lawful equity or dividend structures will no longer shield parties from liability.

Significant advance of procedural deadline for leniency based on disgorgement. Interpretation II moves the deadline for determining a “failure to return” from pre-first-instance judgment stage to the pre-public prosecution stage. This incentivises companies to return unlawful gains early during the examination and prosecution phase, preserving a window for lenient treatment.

Identification of core risks

Driven by the rigorous anti-corruption mandate of interpretation II, legal risks have escalated across the pharmaceutical business chain.

In marketing and sales, sham lecture fees, inflated consulting fees and luxury travel face heightened scrutiny as disguised bribery. Diverting conference sponsorships for personal use may also trigger commercial bribery charges.

Crucially, look-through enforcement allows regulators to pierce third-party arrangements – such as distributors or contract sales organisations (CSOs) – exposing manufacturers to joint and several liability or joint-crime charges.

In R&D and clinical trials, colluding, tampering or falsifying data to accelerate market launch risks prosecution for the crime of providing false documentary evidence. In procurement, companies must guard against bid rigging and potential bribery aimed at securing commercial opportunities.

Finally, finance remains a high-risk area; illicit fund extraction via fraudulent accounting or sham invoicing raises a red flag for commercial bribery and can independently constitute the crime of falsely issuing special VAT invoices.

Building a compliance system

Establish an independent compliance structure. Pharmaceutical companies should set up an independent anti-commercial bribery compliance management committee, chaired by the legal representative or principal person in charge.

Business entities should bear first-level review responsibility, with compliance departments taking second-level review responsibility and audit and finance functions overseeing supervisory and blocking responsibility.

Common arrangements in which one person holds multiple roles, or compliance and sales operate together, are likely to be rejected in look-through audits.

Adopt a three-stage review process for common business scenarios. The Compliance Guidelines for Pharmaceutical Companies on Preventing Commercial Bribery Risks, issued by the State Administration for Market Regulation in 2025, identify nine major scenarios including academic visits and exchanges, consultancy services, outsourced services, and donations and sponsorships.

Companies should therefore establish a three-stage review mechanism covering before, during and after the event. Beforehand, compliance review should be a mandatory step before any co-operation agreement is signed, examining the authenticity and necessity of the services and fairness of payment. During execution, frontline business teams and third parties should be subject to real-time oversight, and finance should refuse payments where supporting documents are lacking.

Afterwards, companies should carry out regular compliance assessments and audits, promptly preserving records and imposing accountability where violations are found.

Apply full-cycle controls to third parties. Companies should implement full lifecycle management for third parties such as CSOs and promotional service providers.

This means: conducting entry due diligence, including on related-party relationships, tax compliance and prior case involvement; requiring anti-commercial bribery compliance undertakings with high liquidated damages clauses; establishing suspicious transaction alert mechanisms for matters such as high service fees, low-substance deliverables and payments linked to sales volume; and requiring high-risk third parties to submit annual compliance self-inspection reports.

Build digital evidence chains and align the four flows. Companies should establish a look-through verification mechanism – aligning “contract flow, fund flow, invoice flow and service flow” – so that every payment is supported by a genuine contract, evidence of genuine services, a compliant invoice, and a traceable fund path.

A digital compliance management system should be introduced to set warning thresholds for sales expenses, consultancy fees and similar items by payee, single payment amount and annual cumulative amount.

Wang Zheng is a partner and Zeng Yongshan is an associate at ETR Law Firm