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CIRCULAR OF THE GENERAL OFFICE OF THE STATE COUNCIL CONCERNING CONTINUING TO RECTIFY AND REGULATE THE ORDER OF MEDICINE PRODUCTION AND SALE AND TO STRENGTHEN THE ADMINISTRATION OF MEDICINE

    Since the issuance of the Urgent Circular of the State Council Concerning
Further Strengthening the Administration of Medicine (hereinafter referred to
as "Urgent Circular"), people's governments of provinces, autonomous regions
and municipalities directly under the central government and the relevant
departments under the State Council have been strengthening the leadership
over the administration of medicine in accordance with the arrangement made
by the State Council. Measures have been taken in the light of practical
conditions to check up the administration of medicine within their own
localities or departments. As a result, some unlawful trade fair markets for
medicine have been banned, a number of units and individual businesses been
punished for the unlawful production and sale of medicine, and disciplinary
actions been taken against the law-breaking and criminal activities involving
the production and sale of false and inferior medicine. Certain effectiveness
has produced in rectifying and regulating the order of medicine production
and sale. Nevertheless, we must notice that localities and departments do the
work at much different paces. Serious problems regarding the administration
of medicine have not been solved. Main facts can be enumerated as follows.
There are someone continuing the unlawful production and sale of medicine
without any licence or without all the required certificates, or with a
licence rented or transferred from others. There are some trade fair markets
for medicine still in operation, and others opening for business again
without approval after being banned or changing their appearances to continue
the unlawful medicine trade. Slow progress is made in rectifying and
regulating special markets for Chinese traditional medicinal materials, some
of which fail to meet the standards but have not yet been closed down.
Prepared Chinese traditional medicine, prepared Western medicine and
processed Chinese traditional medicine in ready-to-use forms are allowed to
enter such markets by violating state provisions. A few localities go
exclusively after their own benefits so that Law-breakers, being backed and
connived at by some officials of local governments, commit without scruple the
activities such as illegally producing and selling false and inferior medicine
and establishing trade fair markets for medicine. A few departments hesitate
about self-examination and rectification, take no effective measures and
quarrel with each other instead of cooperating well. Especially, the demand
for rebates prevails in the purchase and sale of medicine and the law-breaking
activities of this kind are showing an unhealthy tendency with serious
harmfulness. It's urgent to eliminate the low-level repeated production of
medicine. Therefore, to strengthen the administration of medicine is still an
arduous task which each locality and department concerned must attach great
importance to. For the purposes of acting in the spirit of the "Urgent
Circular", continuing to rectify and regulate the order of medicine production
and sale and strengthening the administration of medicine, the following
matters are hereby circulated with the approval of the State Council:

    1. People's governments at various levels and the relevant departments
shall be fully aware of the importance of strengthening the administration of
medicine.

    People's governments at various levels and the relevant departments shall
be fully aware of the importance of strengthening the administration of
medicine. They must deeply understand the work of importance to the health and
lives of the people, to the social stability, and to the national economy and
social development. Regard must be paid to the administration of medicine and
the quality of medicine as well as the people's safe, effective, convenient
and timely application of medicine. They must treat the work as a major issue
in order to make some achievements. Facts have proved that, the work of
rectifying and regulating the order of medicine production and sale and
strengthening the administration of medicine depends on the understanding and
determination of people's governments at various levels and their sense of
responsibility to the people. Local people's governments at various levels and
the relevant departments shall, proceeding from the general situation,
strengthen the leadership and take effective measures in order to increase the
force in rectifying and regulating the order of medicine production and sale
and to punish the law-breaking and criminal activities strictly. They must
fight against the local protectionism and ensure the application of state laws
and government orders. Principal leaders of local people's governments at
various levels and the relevant departments shall bear the responsibility for
leading the administration of medicine within their own regions and
departments. Local people's governments at or above the county level shall on
their own initiatives report the administration of medicine in their
respective regions to, and accept the supervision of, the standing committees
of people's congresses at their corresponding levels. Supervisory departments
of people's governments at various levels shall, in accordance with their
functions and the relevant provisions, intensify the supervision over the
enforcement of the Pharmaceutical Administration Law of the People's Republic
of China (hereinafter referred to as the "Pharmaceutical Administration Law")
and the "Urgent Circular". In exercising the supervision over law enforcement,
they shall make supervisory proposals for resolving problems they have found
and shall impose administrative or disciplinary sanctions upon leading cadres
who neglect duties, commit malfeasances, take advantage of their positions for
personal gain, or commit other actions violating laws or disciplines. A higher
level government shall examine seriously and appraise the administration of
medicine conducted by a leading member of its lower level government during
his period of office.

    2. Unlawful rebates in purchasing and selling medicine shall be
investigated strictly.

    Recently, the demand and acceptance of unlawful rebates, or rebates in the
form of discounts or price reductions, prevails in purchasing and selling
medicine. This kind of illegal activities results in the loss of state taxes
and unfair competition between enterprises, promotes the rise of medicine
price, adds to the burdens of enterprises and patients, disturbs the social
and economic order, corrupts a number of staff members and gives a chance of
law-breaking and criminal activities of manufacturing and selling false and
inferior medicine. It is necessary to make major efforts to conduct a thorough
investigation. The relevant departments under the State Council shall
cooperate closely with each other, coordinate their actions and take effective
measures in order to investigate and punish seriously the law-breaking
activities involving rebates and check resolutely the unhealthy tendency. By
grasping the underlying reasons for this tendency, comprehensive measures
shall be taken to eliminate such phenomena fundamentally.

    Administrative departments of health at various levels and administrative
departments in charge of medicine production and sale shall, while building
contingents and conducting the education in professional ethics, pay close
attention to self-examination and rectification of demand for rebates in the
purchase and sale of medicine throughout their own industries. They must also
take further steps to establish and perfect the relevant rules and regulations
for exercising strict control and stopping loopholes. Rebates found out by
self-examination shall be handed over to the treasury department according to
the relevant provisions.

    The State Council has decided to carry out a special inspection of the
law-breaking activities involving rebates in the purchase and sale of
medicine. The State Administration for Industry and Commerce has been ordered
to organize the inspection in collaboration with such departments or
organizations as the Ministry of Public Health, the State Administration of
Medicine, the State Administration of Traditional Medicine and the State
Council Office for Correcting Malpractices in All Trades and Professions and
in accordance with a working plan they draw up together. A joint inspection
group shall be established in order to make selective examinations of the
production and sale of medicine in medicine producing and selling enterprises
and medical institutions, with the focus of investigation on typical cases.
Organizations or individuals under investigation shall, in addition to
confiscation of rebates or other unlawful gains they accepted, be punished for
demand for or acceptance of bribes. If a crime has been constituted, the
judicial organs shall investigate the offender for criminal liabilities. Any
organization or individual who commits an offence regardless of state
prohibitions, if the circumstances are serious, shall be punished sternly and
exposed by news media in order to frighten and educate offenders.

    For the purposes of dealing with the disorder of medicine prices and
checking malpractices related to rebates, it is necessary to strengthen the
control and supervision of medicine prices and to deepen the reform of
medicine prices.

    Medical institutions shall separate the accounting of medical service
income from that of medicine sale income and shall control them separately.

    3. The medicine supply in rural areas at the grass-roots level shall be
controlled strictly in order to ensure the people the application of medicine.

    The main channel of medicine supply in rural areas at the grass-roots
level shall be amplified and improved. Medicine needed by township's
hospitals, village's clinics and private medical clinics in rural areas
shall be planned by administrative departments of health at the county level
in consultation with administrative departments in charge of medicine
production and sale at the county level, and shall be supplied in a unified
way by state-owned medicine (medicinal materials) companies at the county
level. The supply of medicine to villages in some remote border areas that
have not linked up with any supply network for the time being and are thinly
populated shall be entrusted to township's hospitals or supply and marketing
cooperatives in rural areas. The State Administration of Medicine and the
State Administration of Traditional Medicine shall, within the period of this
year, work out a detailed practical plan for completing the construction of
national networks of medicine supply in rural areas before the year 2000 in
order to ensure the people the safe, effective, convenient and timely
application of medicine.

    Administrative departments of health of local people's governments at
various levels shall finish the inspection of private medical clinics and the
re-issuance of "Practising Permits" within the period of this year. They shall
strengthen the supervision and administration of private medical clinics.
Anyone who illegally sells medicine under the guise of practising medicine
shall be banned and his "Practising Permit" be revoked.

    4. Law enforcement shall be intensified in order to rectify the order of
medicine production and sale firmly.

    (1) Enterprises and individual businesses engaging in the medicine
production and sale shall be strictly examined and controlled.

    The relevant departments under the State Council shall, based on the
results of checking up and rectification conducted at the earlier stage, make
strict self-examination and rectification of the administration of medicine in
their own departments and shall make some achievements therein. People's
governments at various levels and their administrative departments in charge
of public health, medicine production and sale, and industry and commerce
shall continue to organize forces to check up enterprises and individuals
engaging in the medicine production and sale and shall revoke its
qualification certificate and permit for medicine production and sale and
business licence according to law if any of them violates the Pharmaceutical
Administration Law, the Urgent Circular, and other relevant laws and
regulations. Medicine producers and sellers without any licence or without all
the required certificates shall be firmly banned by the administrative
department of health that takes the lead and collaborates with the
administrative department for industry and commerce, the administrative
department in charge of medicine production and sale and the public security
organ. Administrative departments in charge of medicine production and sale of
people's governments of provinces, autonomous regions and municipalities
directly under the central government shall supervise the self-examination
conducted by state-owned medicine producing and selling enterprises. If a
state-owned medicine producing and selling enterprise or its agency is
contracted by an individual for business, or transfers or leases its permit or
business licence to another person, such a situation shall be checked up and
rectified within a fixed time limit. If the self-examination and rectification
have not been completed upon the expiration, the person in charge of the
medicine producing and selling enterprise and other persons involved shall be
imposed upon disciplinary sanctions and even the qualification certificate and
permit for medicine production and sale and business licence be revoked
according to law. The tasks above-mentioned shall be finished before July 31,
1996.

    Local people's governments at various levels and the relevant departments
shall further crack down on the law-breaking and criminal activities of
producing and selling false and inferior medicine. They must treat the
investigation and dealing with of cases involving the production and sale of
false and inferior medicine as a major task in the anti-corruption struggle so
as to make an achievement therein.

    (2) Medicine varieties and quality shall be controlled strictly and close
attention be paid to the problem regarding the low-level repeated production
of medicine.

    Recently, the low-level repeated production of medicine and the
competition for imitating medicine of the same variety have obstructed the
improvement of medicine quality and are detrimental to the research and
development of new variety and the intellectual property protection of
medicine producing enterprises. Such medicine production not only hinders the
progress of medicine industrial modernization, but also aggravates the
disorder of medicine production and sale.

    Administrative departments of health of people's governments of provinces,
autonomous regions and municipalities directly under the central government
shall check up and rectify the medicine production which have been approved
and shall, during the period of such checking up and rectification, suspend
the approval of imitating medicines and health care medicines which have been
assigned registration numbers.

    If the protection of a variety of Chinese traditional medicine is applied
for in accordance with the provisions of the "Regulations on the Protection of
the varieties of Chinese Medicine", the administrative department of health
may not issue a registrated document of approval to other enterprises for the
production of this variety of medicine during the period of time when the
State Examining and Appraising Committee for the Protection of Chinese
Medicine Varieties accepts the application and appraises the medicine variety.
The administrative department in charge of medicine production and sale shall,
in consultation with other competent departments, guide medicine producing
enterprises in adjusting the structure of products in order to resolve as soon
as possible the problem regarding the low-level repeated production of the
same medicine variety.

    The administrative department of health shall, in consultation with other
competent departments, organize an inspection of medicine quality of the same
variety. Medicine inspection organs at various levels shall strengthen the
inspection and selective examination of medicine quality. If a batch of
medicines in stock for leaving factory does not meet the medicine standards of
the state or of the province, autonomous region and municipality directly
under the central government upon a selective examination, and does not meet
the standards again when being re-examined, its registrated document of
approval shall be resolutely withdrawn according to law.

    Medical units shall, in strict accordance with the provisions of the
"Pharmaceutical Administration Law", restrict medicinal preparations made by
themselves to those which are used by themselves for clinical needs and in
scientific research but cannot be supplied or adequately supplied on the
market. They are not permitted to make any other medicinal preparation. It is
prohibited to sell, or sell in a disguised form, medicinal preparations made
by a medical unit on the market. If any medical unit has been found to sell or
sell in a disguised form medicinal preparations on the market, it shall
resolutely be disqualified from making medicinal preparations and its
dispensing permit be revoked.

    In order to put an end to the repeated production of medicine due to
excessive medicine producing enterprises, any medicine producing enterprise
newly established shall be examined and approved by the Ministry of Public
Health together with the State Administration of Medicine and the State
Administration of Traditional Medicine before completing the formalities
concerning the application, examination and approval according to the relevant
provisions. The construction of new, expanded and reconstructed medicine
producing enterprises or workshops shall conform to the Guidelines on Quality
Control of Medicine Producing Enterprises (GMP) and shall pass the
authentication before the issuance of the Qualification Certificate for
Medicine Producing Enterprise and the Licence for Medicine Producing
Enterprise. The Ministry of Public Health, the State Administration of
Medicine and the State Administration of Traditional Medicine shall jointly
work out a programme to rectify and transform within a fixed time limit
enterprises that have not conformed to GMP. Enterprises that fail to meet the
standards upon the expiration shall be closed down.

    (3) All trade fairs for medicine shall be banned and steps be sped up to
rectify and regulate special markets for traditional medicinal materials.

    Local people's governments shall urge the competent departments to ban
resolutely trade fairs for medicine according to law. All kinds of trade fairs
for medicine, which operate under the guise of a medicine sales prohibition
center, medicine information center, Chinese traditional medicine world,
health food wholesale market, special market for traditional medicinal
materials, etc., must be closed down. Problems arising from the work shall be
resolved.

    The State Administration of Medicine, the State Administration of
Traditional Medicine, the Ministry of Public Health, the State Administration
for Industry and Commerce and local people's governments concerned shall speed
up the rectification and regulation of special markets for traditional
medicinal materials. Some special markets which are located in central areas
growing traditional medicinal materials of major varieties in history, or in
traditional distribution centers for medicinal materials shall be rectified
and regulated in strict accordance with the provisions of the Circular
Concerning the Issuance of the Standards for Rectifying Special Medicinal
Materials Markets formulated jointly by the competent departments under the
State Council (i.e. the Document guozhongyiyaosheng No.7[1995], hereinafter
referred to as the "Standards"). They must undergo the formalities regarding
the report, examination, acceptance and approval as soon as possible in order
to provide experience for rectifying and regulating special markets. Existing
special markets, if they conform to the relevant provisions of the "Standards"
through rectification, with permits and licences issued according to statutory
procedures, may continue business and shall be managed strictly. Those not
conforming to the "Standards" shall be closed down.

    The work of rectifying and regulating the order of medicine production and
sale must be finished before September 30, 1996.

    People's governments of provinces, autonomous regions and municipalities
directly under the central government and the relevant departments under the
State Council shall take measures as required by this Circular and make joint
efforts to improve the administration of medicine. The relevant departments of
people's governments at various levels shall cooperate and support each other
and may not pass the buck to each other. The Ministry of Supervision, the
Ministry of Public Health, the State Administration for Industry and Commerce,
the State Administration of Medicine, the State Administration of Traditional
Medicine and other competent departments shall organize a joint inspection
group when necessary to make selective examinations of each locality's
strengthening the administration of medicine by means of observation and
investigation. The joint inspection group shall investigate local governments
responsible for the disorder of the administration of medicine and leading
members in charge of the relevant departments for corresponding liabilities
according to law and shall issue circulars of criticism therefor.