China fines local pharma for bribing former hospital president

Hainan Province Administration of Industry and Commerce (AIC) recently imposed a fine of 833,186.97 RMB (about $129,000) to Hainan Xi Fu Hua Pharmaceutical Company Limited.

The AIC said that during 2010-2013, the legal representive of Hainan Xi Fu Hua Pharmaceutical, Huang, bribed the former president of Wanning People’s Hospital, Lin Junjie, on eight occasions in the total amount of 80,000 RMB (about $12,300), which was not reflected in the company’s accounting records.

The AIC cited Section 8.1 of the Anti-Unfair Competition Law, which provides that “it is an offense of bribe-giving to give kick-backs to counterparties that are not reflected in accounting records”, as well as Section 8 of the Temporary Rules on Prohibition of Business Bribery, which states that “operators shall not give cash or gifts in business transactions, with the exception of customary small advertising gifts.”

Claiming that this case is a “serious violation” under the Temporary Rules, the AIC issued a fine of (1) disgorgement of illegal proceeds of 633,186.97 RMB (about $97,000), and (2) a penalty of 200,000 RMB (about $31,000)pursuant to Section 22 of the Anti-Unfair Competition Law. 

To date, Hainan Xi Fu Hua Pharmaceutical has not appealed the AIC’s decision. It is also unclear whether there is any criminal charge against the Company — although under the China Supreme Court’s judicial interpretations, a person giving a bribe more than 10,000 RMB (about $1,550) is criminally liable under Section 390 of the Criminal Law.

This case is another example of AICs’ recent effort applying anti-bribery provisions of the Anti-Unfair Competition Law, and also shows that pharmaceutical industry is particularly under the attention of the Chinese regulators.

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Chang Liu is an attorney in Kaufman Dolowich & Voluck, LLP based in the firm’s Woodbury, New York office. Prior to law school at Hofstra University, he worked for a defense contractor in China on cross-border transactions. He’s fluent in Chinese and Spanish. He can be contacted here.