On August 14, 2017, the Supreme People’s Court and Supreme People’s Procuratorate jointly issued a judicial interpretation around falsifying drug and medical device regulatory submissions. Effective on September 1, 2017 under Article 229 of the Criminal Law of the People’s Republic of China, the interpretation implicates non-clinical and clinical research institutions, contract research organizations, laboratories, etc. – essentially anyone who could falsify research data for product registration. Article 229  states “If a member of an intermediary organization, whose duty is to make capital assessments, verification or validation, to do accounting or auditing, or to provide legal services, etc., deliberately provides false documentary evidence, and if the circumstances are serious, he or she shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention and shall also be fined.”
Additionally, the interpretation outlines what would be considered serious circumstances which can be punishable by up to five years of imprisonment. This includes intentionally using falsified or fabricating clinical and non-clinical study data, concealing serious adverse events, or destroying original study data. As reported by The FCPA Blog, this includes “having a history of submitting falsified documents in connection with registration of drugs or medical devices.”
Life science companies that file for registration can also be held liable. Knowingly hiring organizations that are not qualified to conduct research, or pay for services outside of the range of fair market value, can hold a company as responsible as the organizations they hire . The interpretation comes on the heels of the director of China’s Food and Drug Administration, Bi Jingquan’s pledge to take measures to speed up its already hard-to-navigate approval process. For example, products can only apply for initiating a clinical trial after it has gone through Phase I abroad, and could also go through Phase I testing in China. With the understanding that a long approval process could delay getting therapies to patients, an effort to revisit regulations is currently underway.
Ensuring compliant business practices in China continues to be a hot topic, not only because of the cultural nature of gift-giving, but because of the complexity of whether or not state-owned businesses are considered government officials. Considering companies will be liable for doing business with an organization that ‘historically’ falsified data, life science companies operating in China will be required to revisit and evaluate the effectiveness of their third-party compliance programs. Key areas to consider are due diligence processes – are they robust enough? Are they being conducted in a timely manner? How robust are your monitoring programs? Can you effectively document findings and remediation efforts? Is your fair market value analysis sound?
Life science companies are continually challenged to adapt to regulatory changes. Although China’s interpretation speaks to the mantra companies follow to provide safe and effective therapies for patients, it adds another layer of control to make sure that companies deliver on what they promise.
Author: Jenny McVey, Associate Director, FRA Life Sciences
 Permanent Mission of the People’s Republic of China to the United Nations and Other International Organizations in Vienna – Criminal Law of the People’s Republic of China.