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China's proposal to register all medical sales reps could lead to the eventual elimination of kickbacks to physicians. Experts say it's the first step towards creating a level compliance playground for multinational and domestic drug makers.

 

 

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China's regulators have issued several rules to rein in sales representatives' commercial activities starting just days before the celebration of the Mid-Autumn Festival, traditionally a prime time for kickbacks.

 

China is a market with complexities, underscored by multiple layers of sales agents, the lack of hospital funding, and physicians relying on kickbacks to make up their meager incomes. The Mid-Autumn Festival coming Oct. 4, China’s Thanksgiving Day and biggest cultural holiday, traditionally has provided an opportunity for sales reps to use gift money and high-end mooncakes to gain access to physicians.

 

Now, the country's regulators hope to put an end to the practice of giving kickbacks to physician. China FDA has issued a draft regulation proposing a nationwide registry covering all medical sales reps. The registry will include each rep's name, identification information and records of misconduct and violations, in a bid to name and shame violators. (Also see "China Imposes Tough New Curbs On Rep Sales Activities" - Scrip, 2 Mar, 2017.)

 

Following the proposal, Shanghai regulators went one step further, requiring all sales reps operating in the city to get registered in two months after the issuance of its regulation. Shanghai also requires the employers of the sales reps to be held responsible for their conduct. In case of a violation for one sales rep, the employers need to make corrective measures; if there are violations for two or more sales reps, the registration of the whole company will be revoked.

 

The tightened grips over sales reps is a direct response to recent scandals of so-called "cash sales" in which medical sales reps reportedly give doctors cash kickbacks in exchange for drug prescriptions.

 

The registry, coupled with the harsh punishment for any violations, will have a profound impact on pharma compliance in China, noted experts attending China Healthcare Summit of Entrepreneurs, Scientists and Investors, held Sept. 23-24 in Beijing.

 

"We are regulating the not-yet-regulated area, and correcting the misconduct," said Dong Qian of the Industry Compliance Office, Healthcare Policy and Management Bureau at the China National Health and Family Planning Commission.

 

Others echo the view. "The registry is a step in the right direction," said Huang Donglin, a researcher with China Pharmaceutical Promotion and Clinical Unit (CPPCU), a consortium of trade associations, researchers and manufacturers.

 

However, the industry response to the Shanghai proposal has been fierce. Many say that the rule could violate medical sales reps' rights to conduct activities designated by China's labor laws.

 

"Our biggest challenge so far is how to deal with strong response from the industry," Dong acknowledged, adding that the regulatory agency also plays close attention to feedback to the Shanghai proposal. (Also see "Shanghai’s Tough Proposals For Medical Sales Reps Draw Ire" - Scrip, 4 Sep, 2017.)

 

Short Pains, Long Gains

The new rules, aimed to increase transparency, could help create a level playing field in which those in compliance with the code of conduct won't lose ground to those that don't follow the rules, according to the experts.

 

"The frontrunners in compliance shouldn't have to face the loss of their market shares [to those who are not compliant]," Wang Lili, head of CCPCU, said.

 

One such example is GlaxoSmithKline PLC. The UK drug maker was at the epicenter of a national compliance crackdown that has changed the industry since 2013.

 

For the next two years following the scandal, GSK essentially halted commercial activities and there were no sales, recalled Zhang Yingwei, head of government affairs and corporate communications for GlaxoSmithKline (China) Investment Co. Ltd.

 

During that time, how to rebound and whether the company could afford such a hiatus in commercial activities were questions hovering in the executive's mind, he added.

 

Thus, GSK China management made two drastic decisions: no more sales quotas for medical sales reps and no bonus for sales-related activities, and GSK won't provide any fees to physicians for promotional activities.

 

The changes were intended to shift the focus to patients and science-based academic promotions, Zhang said.

 

So far, the results show that the changes have started to bear fruit. Zhang pointed to IMS data showing that GSK’s major revenue generator in the local market, respiratory product sales, started growing in the past four quarters.

 

"Crisis also means opportunities. We built up our confidence by doing it step-by-step, and believing it is a right thing to do," Zhang stressed.

 

Compliance Culture

For China's 600,000 or so medical sales reps, the future hinges on more transparent commercial conduct and a culture of compliance, the experts stressed.

 

"Compliance should not just follow the rules, but a behavior out of consciousness, " GSK's Zhang noted.

 

A good market environment requires rules and guidance from the government's regulatory agencies; it also requires industry's code of conducts and strict compliance. Unlike multinational drug makers spending roughly 20% of their budgets on marketing and sales, domestic Chinese companies generally devote more than 50% to sales, the experts said.

 

It is thus important to provide medical sales reps compliance training and routine audits, enhance the role of medical affairs, and emphasize products' clinical value, they concluded.

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