By Li Zhang 张丽 / Youwen Feng 冯友文
On February 9, 2017, the State Council issued the Opinions on Further Reform and Improvement of Drug Manufacturing and Distribution Policies国务院办公厅关于进一步改革完善药品生产流通使用政策的若干意见 (the “Opinions”) [1]. The Opinions require relevant government authorities (including but not limited to the National Health and Family Planning Commission (NHFPC), China Food and Drug Administration (CFDA) and commercial counterparts) to implement 17 items to further reform China’s pharmaceutical and healthcare industry, covering almost all major aspects including drug approval, manufacturing and distribution of pharmaceutical products.
Article 11 of the Opinions specifically provides that CFDA shall enhance the regulation of medical representatives (“MRs”) by establishing the registration and filing system of MRs and the registration information will be made available to the public. Moreover, it is stipulated that MRs shall only be allowed to conduct activities of “academic promotion” and “technical consultancy,” and NOT allowed to “assume sales responsibility.” Any violation shall be entered into their individual credit record. This item calls for significant impacts on MRs and the relevant drug/medical device companies. Below we provide a brief summary as well as a preliminary observation on this topic for your reference.
1. Impacts on MRs
1) Definition and Scope of MRs
It is provided in the Opinions that the CFDA shall soon establish and implement a registration and filing system for MRs, and the regulation of MRs will be tightened. However, the scope of MRs is yet to be clearly defined - who shall be registered as “MRs” in the system? Do MRs include the sales manager, marketing manager and each of the sales and marketing staff in a drug/medical device company?
2) Filing and Registration of MRs
Secondly, how to file and what information shall be provided for such registration (as the registration information will be available to the public)? Will MRs do the registration individually or will the company do the registration collectively for its MRs?
3) Consequence of Violation
Thirdly, how will the registration record influence the MRs’ individual credit record? Will the MRs’ violation of laws related to the Opinions influence their financial credit record?
Also, it is not clear that whether the drug/medical device company will be penalized if its employees (i.e. the MRs) violate the Opinions. If so, what will be the punishments? Drug/medical device companies should closely monitor any subsequent developments.
For the time being, the local CFDA cannot provide details of the above issues and significant uncertainties still exist.
4) MRs’ Individual Occupational Risk
Violation of the Opinions may affect MRs’ personal credit records, which increases their occupational risk. However, it is not clear what activities will be deemed as violations, since the exact meaning of "drug sales responsibilities" is yet to be clarified. On the other hand, the increasing occupational risk to MRs may diminish people’s willingness to work as MRs, which might cause the companies to have to pay more “incentives” to attract MRs.
2. Impacts on Corporate Responsibility
It is generally provided that MRs are only allowed to conduct activities of “academic promotion” and “technical consultancy,” and NOT allowed to “assume sales responsibility.”
By allowing “academic promotion,” MRs are now legally recognized and permitted to take their promotion roles – which is actually a notable positive side - in an academic way, such as hosting academic events to promote pharmaceutical products. The permission of “technical consultancy” gives MRs the option to work as a technical consultant, especially when dealing with sophisticated medical device products. By explicitly ruling out “sales responsibility,” it seems that the lawmakers expect drug/medical device companies to revise their KPI system and incentive scheme for MRs (so that the MRs’ remuneration mode of “base salary plus bonus calculated based on sales achievement” may, to some extent, also be required to change) by removing the sales volume/value-related KPIs. In this regard, it is anticipated that MRs should be taking promotion roles, rather than working as sales. However, in reality, it is difficult to separate “promotion” and “sale,” since promotion and sales personnel work extremely closely in product distribution.
Speaking from the companies’ perspective, if the companies decide not to use the said KPI system, how would they evaluate the performance of their sales force? If they decide to continue using the sales volume/value –related KPI system, is it proper to use sales volume/value–related KPI system to evaluate MRs’ non-drug sales activities?
The changed responsibilities might require different and additional skill sets to fulfill an MR’s tasks. However, it is not uncommon that MRs lack medical education or medical professional training. If they are only allowed to be engaged in “academic promotion” or “technical consultancy” activities, the MRs team may need to reorganize and some of them may be laid off, which might bring more potential labor disputes to the companies.
More clarity for this is to be provided by the CFDA when the specific agency rules come out, and we will keep an eye on this.
Considering that the Opinions provide clear (while quite general) guidance on the MR issue, companies are not required to take any immediate action before implementation details are made available through agency rulemaking. But they should start internal assessment and preparation for the upcoming change in regulatory environment.
[1] http://www.gov.cn/zhengce/content/2017-02/09/content_5166743.htm 国务院办公厅关于进一步改革完善药品生产流通使用政策的若干意见 国办发〔2017〕13号
