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URGENT CIRCULAR CONCERNING FURTHER STRENGTHENING THE ADMINISTRATION OF MEDICINE

    Medicine is a special kind of commodity that has considerable bearing on
the lives and health of the people. Therefore, strengthening medical
administration, guaranteeing the quality of medicine and ensuring people
convenient, timely, safe and effective application of medicine are important
tasks which safeguard the people's health, maintain social stability and
ensure a successful progress of economic construction and the smooth conduct
of reform and opening. Since the reform and opening, the cause of China's
medicine has undergone a rapid development. Nonetheless, in order to further
strengthen the administration of medicine, the state has enacted the "Law of
the People's Republic of China on the Administration of Medicine" (hereinafter
referred to as the "Law on the Administration of Medicine"), formulated a
series of related administrative regulations and worked out a set of documents
having legislative character. And forces have, time and again, been organized
to wage concentrated crackdown on criminal activities in respect of the
manufacture and sale of false and inferior medicine, resulting in certain
effectiveness. We must be aware, however, that problems still persist
regarding the administration of medicine, some of which are rather serious.
The outstanding expression is the fact that criminal activities involving the
illegal manufacture and sale of false and inferior medicine has not been
eliminated despite repeated prohibitions thereof and in some areas numerous
kinds of false and inferior medicine are produced and sold on a large scale.
Such criminals have lost sight of social virtue because of their unscrupulous
commitment to illicit profits, thus bringing about serious consequences. Some
districts and departments, in an attempt to grab self-interest, have broken
the law on administration of medicine, and have competed for the establishment
of medicine-producing and selling enterprises as well as trade fair markets
for medicine. And as a result, disorder has arisen in respect of medicine
production and sales, and malpractices including bribery, demand for bribery
and illegal rebates have prevailed in the purchase and sales of medicine.
Moreover, advertisements of medicine in violation of law filled with
outrageous overstatements have gone unchecked, and development of new
medicines has not been sufficiently protected. Criminal activities in
producing and selling false and inferior medicine have seriously endangered
people's lives and health, impaired the nation's interests, disturbed the
economic order, corrupted social morality, produced adverse effect on social
stability and defamed the reputation of the Party and government, and to these
people from various circles have reacted strongly. Therefore, the time has
come when great efforts must be made to find a solution for them. Thus
following urgent circular on related matters is hereby publicized:

    1. The people's governments and departments at various levels should raise
the level of understanding and practically strengthen leadership regarding the
administration of medicine.

    One of the important reasons that criminal activities in producing and
selling false and inferior medicine has not been eliminated despite repeated
prohibitions is the fact that some local governments and departments have not
understood the significance of medicine as a special kind of commodity in
relation to the people's lives and health, under a mistaken idea that
administration of medicine may be slackened when the establishment of
socialist market economic system is under way. Some districts and departments
have, for their own partial and local interests, gone so far as to protect the
criminal activities in producing and selling false and inferior medicine.

    The people's governments and related departments at various levels shall,
with a sense of high responsibility for the country and people and an overall
view of the situation, unify the understanding of the significance of
strengthening administration of medicine, adopt effective measures to
implement seriously laws and administrative regulations on administration of
medicine, strengthen supervision and administration as well as macro-control
by the state of medicine production and sales, so as to rectify and
standardize production and sales thereof and, in combination with the struggle
against corruption, to investigate and deal with cases involving violation of
laws and discipline, with a view to the establishment of a unified, open,
competitive and orderly system for medicine production and sales.

    The people's governments at various levels should establish a system
whereby status of the targets set for the government leaders pertinent to the
administration of medicine within their terms of office can be evaluated. The
principal responsible comrades of the people's governments at various levels
should practically bear the leadership's responsibility for the administration
of medicine within their respective regions, and the leaders of the
governments and relevant departments of the areas where disorder exists in the
administration of medicine shall, in accordance with law, be investigated for
responsibility.

    2. Effective measures should be taken to significantly strengthen law
enforcement and administration of medicine production and sales.

    Presently, the people's governments at various levels and relevant
departments should attach great importance to the performance of following
work:

    (1) Rectify and standardize the production and sales of medicine
enterprises and individual industry and commerce.

    In the light of the present situation which involves excessive medicine
producing and selling enterprises and disorder, the people`s governments at
various levels and the departments in charge of medicine production and sales,
the departments for the administration of health and the departments for the
administration of industry and commerce, shall, according to law, strictly
enforce procedures for examining the conditions and for the examination and
approval of the establishment of medicine producing and selling enterprises.
In case of failure to conform with the conditions for setting up or with the
procedures for examination and approval, the departments in charge of medicine
production and sales, the departments for administration of health and the
departments for administration of industry and commerce shall not grant the
approval for setting up. Those enterprises which are already operating but
have not satisfied the conditions for examination shall be banned according to
law.

    Health administration departments shall organize investigations into
various types of medicine produced by existing production enterprises, and
regarding medicine which are found to be producing unproven effectiveness,
giving adverse reactions or endangering the health of the people for other
reasons, the reference number for approval thereof shall be timely withdrawn.
The department in charge of medicine production and sales, when processing the
applications for establishing medicine-producing enterprises, shall devote
particular attention to ascertaining whether the types of medicine to be
produced are new medicines or the types of important medicine the country is
to develop, and shall grant no approval for such enterprises without the new
medicine being approved by the department for administration of health under
the State Council or whose medicine is not the type of important medicine the
country is to develop. With regard to the medicine which is reproduced at low
level, directives shall be given to the enterprises for them to make timely
adjustment of the structure of products. Enterprises engaged in wholesale
distribution of medicine shall be examined to determine whether they have the
ability to supply within 24 hours the types of medicine listed in the national
catalogue for basic medicine, and the ability to supply medicine to specially
designated regions or units appointed by the departments in charge of medicine
production and sales under the local people's governments at the county level
or above. Wholesale of medicine enterprises which do not possess the ability
to supply the medicine referred to above shall be banned from engaging in the
wholesale business according to law.

    Individual industry and commerce may, according to law, apply for retail
business, but shall not engage in production and wholesale distribution
(except the wholesale of traditional Chinese herbs in the specialized markets
for traditional Chinese herbs approved according to law).

    All those engaged in medicine production must, according to the legal
procedures, obtain the "qualification certificate for medicine-producing
enterprise", the "permit certificate for medicine-producing enterprise" and
the "business license". All those engaged in the wholesale and retail sale of
medicine must, according to the legal procedures, obtain the "qualification
certificate for medicine-selling enterprise", the "permit certificate for
medicine-selling enterprise" and the "business license". All those already in
operation without the mandated certificates and licenses must be banned
according to the law.

    Applications for setting up medicine-producing enterprises or
medicine-selling enterprises for wholesale, must be examined and certified by
the departments in charge of the production and sale of medicine under the
people's governments of the provinces, autonomous regions and municipalities
under the Central Government that issue the "qualification certificate for
medicine-producing enterprise" or the "qualification certificates for
medicine-selling enterprise". Then they may apply to the department for the
administration of health at the same level for the "permit certificate for
medicine-producing enterprise" or the "permit certificate for the
medicine-selling enterprise". Without the "qualification certificate for
medicine-producing enterprise", or the "qualification certificate for
medicine-selling enterprise" issued by the department in charge of the
production and sale of medicine upon examination and agreement, the department
for the administration of health shall not accept the application. Without
obtaining the "qualification certificate for medicine-producing enterprise",
the "permit certificate for medicine-producing enterprise" or the
"qualification certificate for medicine-selling enterprise", the "permit
certificate for medicine-selling enterprise", the department for the
administration of industry and commerce shall not check and issue the business
license.

    The applications for retail of medicine business by enterprises, or
individual industry and commerce, shall be examined by the departments in
charge of the production and sale of medicine under the people's governments
of the autonomous prefectures, cities or counties, according to the needs for
medicine and the program for the retail of medicine network within their
regions, and if agreed upon examination, the "qualification certificate for
medicine-selling enterprise" shall be issued. The retail of medicine
enterprise, and the individual industry and commerce, shall take the
"qualification certificate for medicine-selling enterprise" to the departments
for the administration of health at the same level for application and, after
obtaining the "permit certificate for medicine-selling enterprise", may apply
to the departments for the administration of industry and commerce for the
issuance of the business license.

    Certificates and licenses that have not been issued according to the
procedures for examination and approval referred to above by the departments
in charge of the production and sale of medicine, the departments for the
administration of health and the departments for the administration of
industry and commerce, become invalid, and the losses caused therefrom shall
be compensated by the issuing departments according to law, and the persons in
charge who are directly responsible and the persons directly responsible shall
be investigated for responsibility.

    (2) The order for medicine production and sale should be rectified and
standardized, and the administration of the sale of medicine shall be
strengthened according to law.

    Those who have not obtained, according to law, the "qualification
certificate for medicine-producing enterprise", the "permit certificate for
medicine-producing enterprise" or the "qualification certificate for
medicine-selling enterprise", the "permit certificate for medicine-selling
enterprise" and the business license, shall not be engaged in the production
and sale of medicine. The units and individuals engaged on their own decision
in the production and wholesale of medicine shall be resolutely banned.
Enterprises engaged in the production and wholesale distribution of medicine
shall not be contracted by individuals for business.

    Medical institutions and medicine-selling enterprises must purchase
medicine from enterprises that have obtained lawful qualifications for
medicine production and sales, and are strictly prohibited from purchasing
medicine from unlawful dealers.

    The supply of medicine to medical clinics in rural areas shall be the
responsibility of the medicine wholesalers and the township's hospital
entrusted by the wholesalers jointly appointed by the departments in charge of
medicine production and sales and those for the administration of health under
the local people's governments at the county level.

    The preparations manufactured by medical institutions are limited to those
needed for clinical purposes and scientific research conducted by the units
themselves, and which are not supplied or inadequately supplied in the
markets. The sale in a disguised manner of such products shall be strictly
prohibited. Medical institutions shall not, in any disguised manner, engage in
the wholesale business.

    Fair competition shall be practiced in the purchase and sale of medicine
between the production and management of medicine enterprises and medical
institutions, and in purchases and sales, malpractices such as rebates, or
bribery and requesting bribes are prohibited.

    Departments responsible for the administration of health shall strictly
examine the contents of publicity materials and advertisements and in
coordination with the relevant departments, shall, according to law, punish
illegal acts such as advertising medicine in violation of regulations,
unfounded propaganda regarding effectiveness and other acts which mislead
patients.

    (3) The specialized markets for the traditional Chinese herbs should be
rectified and standardized.

    The state prohibits the setting up of trade fair markets for medicine,
except specialized markets for traditional Chinese herbs, and prohibits in the
specialized markets for traditional Chinese herbs the sale of traditional
Chinese herbs and ready-made medicine, tablets of Chinese herbs, medicine of
chemical raw materials and its preparations, antibiotics, biochemical
medicine, radiate medicine, serum vaccine, blood products and diagnostic
medicine of which sales are restricted as stipulated by the state.

    The specialized markets for traditional Chinese herbs must be set up in
selected principal producing or distributing places of traditional Chinese
herbs according to overall plans drawn up by the department under the State
Council in charge of production and sales of medicine, and must also be
examined and approved by the department in charge of the production and sales
of medicine, the department for the administration of health and the
department for the administration of industry and commerce under the State
Council. The local people's governments at various levels and the other
departments are not authorized to examine and approve the establishment of
specialized markets for traditional Chinese herbs.

    The existing specialized markets for traditional Chinese herbs shall be
rectified, and the criteria shall be formulated by the department in charge of
the production and sales of medicine, the department for the administration of
health and the department for the administration of industry and commerce
under the State Council. Specialized markets for traditional Chinese herbs
which have already been set up but are not in compliance with the criteria
shall be closed without exception. Any other trade fair markets for medicine
except specialized markets for traditional Chinese herbs that have been set up
without proper authorization shall be banned according to law by the local
people's governments.

    Traditional Chinese herbs being sold in trade fair markets for
agricultural products shall be supervised strictly by the department for the
administration of health. Those who sell types of traditional Chinese herbs on
their own decision that are prohibited by the state from being sold and the
medicine other than the traditional Chinese herbs without certificate in trade
fair markets for agricultural products in violation of the "Law on the
Administration of Medicine" shall be investigated and punished by the relevant
departments according to the provisions of the "Law on the Administration of
Medicine".

    (4) The protection for the intellectual property rights for medicine shall
be strengthened, and enterprises are encouraged to research in and develop new
medicine.

    The department for administration of health and the department in charge
of the production and sales of medicine under the State Council, shall develop
practical plans for encouraging enterprises, scientific research units,
universities and colleges to promote research and develop new medicine.

    The "Regulations on the Protection of the Types of Chinese Medicine"
issued by the State Council shall be further implemented in various places.
The types of Chinese medicine already listed for national protection shall not
be imitated and manufactured by enterprises without the protection
certificate. The relevant departments and examining and appraising organs
shall conscientiously do a good job to protect the types of Chinese medicine
in order to promote development of Chinese medicine.

    3. There should be an intensified crackdown on criminal activities
involving the production and sales of false and inferior medicine. In
addition, investigations should be conducted into cases involving violations
of law and discipline with regard to the production and sales of false and
inferior medicine. These activities shall be considered of great importance
with regard to combating corruption.

    In order to check resolutely law-breaking and criminal activities in
producing and selling false and inferior medicine, local people's governments
at various levels and the relevant departments, shall carry on further blows
on the law-breaking and criminal activities in producing and selling false and
inferior medicine. In cracking severely the law-breaking and criminal
activities in producing and selling false and inferior medicine, they should
strictly enforce laws and intensify law enforcement regarding these issues.
The national and local coordinating institutions for "striking the false" at
various levels shall organize the relevant departments of health, medicine,
administration of industry and commerce, technical supervision and public
security in investigating into and dealing with the law-breaking and criminal
activities in producing and selling false and inferior medicine, which shall
be made an important task for "striking the false". The criminal elements
producing and selling false and inferior medicine shall be resolutely punished
according to the "Decision of the Standing Committee of the National People's
Congress on Punishments for Crimes in Producing and Selling False and Inferior
Commodities". Influential and typical cases shall be singled out for exposure.

    The people's governments at various levels shall treat cases of producing
and selling false and inferior medicine and other instances in violation of
law and discipline as important issues to be addressed in combating
corruption. Therefore, supervisory departments of the people's governments at
various levels shall, according to the provisions of the "Regulations of the
People's Republic of China on Administrative Supervision", exercise
supervision over the implementation of law and administrative regulations by
staff workers of the departments for administration of health, the departments
in charge of the production and sales of medicine, the departments for the
administration of industry and commerce and the departments for technical
supervision. Those who have abused their power, been negligent in their
duties, acted illegally by deception for personal interests and acted in
violation of law and discipline through other means, must be dealt with
severely according to law. For those engaged in providing unjustifiable
protection and support for criminal activities in producing and selling false
and inferior medicine for the interests of their own districts or departments
and causing serious losses to the people, the leaders of the local governments
and the relevant departments as well as the persons in charge and the persons
directly responsible must be investigated for responsibility according to law.
And if the case is so serious as to constitute a crime, the offender must be
investigated for criminal responsibility according to law.

    4. The harmonious cooperation among the departments of the governments
shall be strengthened, and the administration of medicine shall be raised to a
higher level.

    The administration of medicine is a complicated and systematic project,
and the relevant departments of the people's governments at various levels
must jointly do a good job in the administration of medicine according to the
division of duties, by shouldering their respective duties, and through mutual
support and full cooperation.

    The departments for the administration of health at various levels are the
government's functional departments that exercise supervision and
administration of medicine. The people's governments at various levels and the
relevant departments shall fully support and assist the departments for the
administration of health in exercising, according to law, its function with
respect to its responsibility to supervise and administer medicine.

    The offices of the State Administration of Medicine and the State
Administration of Traditional Chinese Medicine and Pharmacy are the
departments of the State Council in charge of medicine production and sales,
and the local departments in charge of medicine production and sales at
various levels shall, according to law, exercise the governmental function of
administration of medicine production and sales. The medicine-producing and
selling enterprises shall, except otherwise provided by the state, be taken
into the scope of the administration of the medicine industry, irrespective of
the forms of ownership and the subordinating relationship. The people's
governments at various levels and the relevant departments thereof shall fully
support and assist the departments in charge of medicine production and sales
in the administration of medicine according to law.

    The administration of industry and commerce and the departments for
technical supervision and public security, shall strengthen the administration
of medicine markets according to their respective duties along with the
departments for the administration of health and the departments in charge of
medicine production and sales.

    In case of disorder in the administration of medicine caused by
quarreling, leaving duties and responsibility for others and undermining each
other's work, the leaders of the relevant administrative departments shall be
investigated for responsibility according to law.

    The departments for the administration of health and the departments in
charge of medicine production and sales must, according to the provisions of
the Central Committee of the Communist Party of China and the State Council,
put into practice the separation of government from enterprises, and shall not
use administrative rights to interfere with the enterprises' production and
sales. All malpractices applied in purchasing and selling medicine must be
resolutely stopped. Fairness and justice, honesty and authority in official
duties of the administrative justice departments and the departments in charge
of the industry shall be maintained.

    The State Council shall organize the relevant departments in the
performance of an in-depth study to revise and perfect the law and regulations
on the administration of medicine, further put in order the administrative
system for medicine, reform the administrative system for the price of
medicine, perfect the supervising system for the quality of the medicine,
further raise the country's level for the administration of medicine and
promote continued, fast and healthy development of the country's medicine.

    The people's governments of the provinces, autonomous regions,
municipalities under the Central Government and relevant departments of the
State Council shall, according to the requirements of this Circular, take
practical measures to carry out an overall rectification in respect of the
present situation regarding the administration of medicine within their
regions and departments, and submit reports on the rectification to the State
Council before March 1, 1995.