Ensuring compliance at pharmaceutical academic conferences

In the medical industry, academic conferences are an important platform for sharing research and expertise, keeping up to speed with latest cutting edge developments and promoting advancement in pharmaceutical technology.

The state strongly supports and encourages compliant academic conferences and regular medical activities, but using them to illegally funnel benefits, such as “sale with rebate”, is the focus of a law enforcement crackdown.

Since the National Health Commission (NHC), in concert with 10 other authorities, jointly launched a one-year nationwide campaign to tackle corruption in the medical field in mid-2023, several upcoming academic conferences have been postponed or cancelled.

The NHC subsequently issued a Q&A advisory explicitly highlighting the illegality of practices such as fabricating non-existent academic conferences, using false titles for academic events to facilitate improper benefit transfers, or unlawfully diverting sponsorship funds for personal gain.

Given the elevated professional standards within the medical industry, how can pharmaceutical companies navigate the legal and compliance aspects of organising academic conferences?

Illegal acts

According to relevant provisions of the Anti-Unfair Competition Law, the Pharmaceutical Administration Law and the Interim Provisions on Prohibiting Commercial Bribery, the act of bribing other parties or individuals by using various pretexts – such as promotional, advertising, sponsorship, research, labour and consultation fees, and commissions – for the purpose of selling or purchasing goods, or reimbursing expenses, including domestic or international travel and inspections, constitutes commercial bribery.

As sponsors or supporters of major academic conferences, pharmaceutical enterprises often both participate and organise small discussion groups – or ‘satellite’ gatherings of small conferences – where some enterprises take advantage to funnel illegal benefits to relevant institutions or persons to gain a competitive advantage.

Such non-compliant acts can manifest in the following ways:

1. Fabricating conference payments for speaking fees. For example, creating fictitious addresses, itineraries and conference agendas, registering a false account in the name of the expert attending the conference, or forging or reusing the photographs and sign-in sheet of a previous conference.
2. Fraudulently reporting the actual number of persons in attendance; reimbursing travel expenses that do not correspond with actual expenses incurred; paying a service fee or consulting fee inconsistent with the services provided; and giving high-value gifts and souvenirs exceeding what was actually required by the conference arrangements or travel and entertainment itinerary.
3. Paying the conference service provider higher than market remuneration by reaching a fraudulent service contract with a third party, forging conference documents, and facilitating undue benefits for a medical institution.

In practice, the major risk of commercial bribery associated with an academic conference lies in whether an enterprise takes advantage of its sponsorship to funnel undue benefits – especially unreasonable conference sponsorship fees or lecture fees – to a relevant person or institution with the intent of securing a trading opportunity or competitive advantage.

Compliance review

On 7 August, the CCP Propaganda Department and nine other authorities jointly issued the Notice on Further Strengthening the Standardised Management of Forum Activities, specifying 10 working requirements for various entities that publicly organise forums.

Drawing from previous administrative and criminal penalty cases, compliance with medical academic conferences is typically assessed based on the following perspectives.

Authenticity of a conference. The primary factor in determining whether commercial bribery occurs lies in the genuine organisation of conferences, the actual participation of doctors, and the authentic occurrence of lecturing corresponding to lecture fees.

Lecture fees serve as compensation for doctors’ genuine and necessary contributions to medical exchange activities. Otherwise, pharmaceutical companies are prohibited from paying lecture fees. The authenticity of an academic conference requires comprehensive evidence and supporting materials.

Therefore, it is recommended that pharmaceutical companies:

• Formulate a sound and compliant procedure to scrutinise the nature of relevant conferences and the attendance of medical personnel, leaving timely traces of the related procedures;
• Enter into written lecture agreements with medical professionals, ensuring the retention of documents such as invitations, conference agendas, attendance sheets, on-site photos, lecture materials and other records verifying the authenticity of the conference; and
• Avoid directly linking speaker fees or lecture fees to product sales, ensuring the objective neutrality of the lecturing party, and avoid the mention of specific product names.

Reasonable fees. The scrutiny of lecture fees focuses on instances where fees are inflated, significantly deviate from industry standards, or are paid excessively and frequently.

To address this, pharmaceutical companies are advised to base compensation for services like lecturing on fair market prices and industry benchmarks, ensuring a thorough review of expense appropriateness.

Reference can be made to the Management Measures for Training Expenses of Central and State Authorities, jointly issued by the Ministry of Finance and other authorities in 2017:

• Arrange the schedule and personnel reasonably, and avoid inviting the same person multiple times; and
• Subject the fee payment procedure to the necessary approval procedure, and withhold individual income tax in accordance with regulations.

Non-profit orientation. Engaging in or sponsoring academic activities should prioritise fostering public academic exchange and advancing medical standards. Payments for conference fees and related expenses should not be linked to product sales or procurement.

In light of this, pharmaceutical companies are advised to:

● Scrutinise payment standards to avoid excessive fee payments;

●Avoid associating payments with product sales activities through misleading practices; and

●Refrain from sponsoring specific business departments, functional units within medical institutions, or internal organisations of associations.

The core of hosting compliant academic conferences lies in pharmaceutical companies refraining from offering money or other undue benefits to individuals, such as doctors with special powers or influence, with a view to securing a competitive advantage, trading opportunity or other undue benefit relating to the sale of a pharmaceutical product.

It is imperative for pharmaceutical enterprises to optimise their compliance system and procedures for promoting its products – and enhance self-compliance operational capabilities amid intense market competition.

Additionally, enterprises should pay close attention to anti-corruption trends and further strengthen compliance management in holding academic conferences to ensure their authenticity and integrity.

Wei Jie is a partner and Han Xiangli is an associate at Blossom & Credit Law Firm.