An audit has shed light on the use of third-party business promotion companies as a core method for illicit payments within the pharmaceutical sector. From 2021 to May 2023, three provincial pharmaceutical companies paid fees to 1,936 third-party business promotion companies, generating fake service fees and names to withdraw funds exceeding RMB 4 billion. This behavior is linked to increased ex-factory prices. Additionally, from 2020 to May 2023, a hospital in the province designated an affiliated enterprise to supply medical consumables worth over RMB 100 million, with the affiliated enterprise making a profit of nearly RMB 7.5 million, indicating an average markup rate of 6.6% for consumables.
Focus on Fees and Expenses Paid to Medical Experts
The audit report also highlighted the fees and expenses paid by pharmaceutical and device companies to medical experts, a long-accepted market practice. Domestic distributors were required to allocate 2% of their annual sales budget for expert accommodation, transportation, and other expenses. In 2022, a brand distributor paid nearly RMB 16 million for transportation, accommodation, and catering expenses for medical experts and related personnel through nine travel agencies.
Foreign-Funded Pharmaceutical Companies’ Practices Under the Spotlight
The transfer of benefits to medical personnel by foreign-funded pharmaceutical companies included payments in the name of conference registration fees. The audit report shows that several foreign-funded pharmaceutical companies in the province paid registration fees totaling RMB 1.38 million for 4,782 medical personnel participating in 40 academic conferences organized by the provincial pharmaceutical association. The report also reveals that four experts from public hospitals received targeted donations of RMB 2.37 million from pharmaceutical companies through a foundation under the provincial pharmaceutical association.
Pharmaceutical Industry Association’s Role in Interest Transfers
The audit report emphasizes that “the chaotic management of the pharmaceutical industry association has become a platform for pharmaceutical companies transferring interests.” Data cited in the report indicates that the provincial pharmaceutical association has accepted sponsorship fees of over RMB 50 million from 329 pharmaceutical companies, primarily used for promoting “satellite meeting” products during academic conferences. In 2022, the province held a total of 582 satellite meetings. Furthermore, the provincial pharmaceutical association fraudulently distributed lecture fees and preparation fees of nearly RMB 170,000 to experts in violation of regulations.-Fineline Info & Tech
