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Provisional Regulation for Administration of Centralized Purchasing of Drugs Through Tendering for Medical Institutions - 2001

CHAPTER 1: GENERAL PROVISIONS

Article 1 "Provisional Regulation for Administration of Centralized Purchasing of Drugs through Tendering for Medical Institutions" is promulgated according to relevant Chinese laws and regulations in order to implement "Guideline on Reform of Medical and Health System in Urban Areas" and related documents released by the State Council and "Working Standards for Centralized Purchasing of Drugs through Tendering for Medical Institutions (Provisional)", to strengthen administration of centralized purchasing of drugs through tendering for medical institutions, and to ensure standardization and orderly implementation of such purchasing activities.

Article 2 This Regulation is applicable to centralized purchasing of drugs through tendering for medical institutions.

Medical institutions governed by the Regulation include non-profit medical institutions run by people's governments at and above county levels and state-owned enterprises (including state-owned holding enterprises).

Article 3 Centralized purchasing of drugs through tendering for medical institutions must follow the principles of openness, fairness, impartiality and credibility, and accept administration by relevant government authorities, the society and the public opinion.

Article 4 Parties in centralized purchasing of drugs through tendering for medical institutions shall strictly observe relevant laws, regulations, policies and working standards to centralized purchasing of drugs through tendering for medical institutions.

CHAPTER 2: ADMINISTRATIVE AGENCIES AND THEIR DUTIES

Article 5 Administrative agencies, rectification institutions, price authorities, commissions of trade and economic relations, health authorities, administrations for industry and commerce, drug administration authorities and administrations for Chinese medicine shall perform their respective duties and work together to administer centralized purchasing of drugs through tendering on the basis of a joint administration mechanism, and corresponding administration organizations shall be established. Such organizations shall perform the duties of coordinating various functional departments in administering the conduct of parties in centralized purchasing of drugs through tendering according to the respective division of work and related laws and regulations, monitoring the full process of centralized purchasing of drugs through tendering, handling claims from the parties in centralized purchasing of drugs through tendering, and investigating and correcting various sorts of practices against laws or regulations during the purchasing process.

Article 6 The organization form of administration work for centralized purchasing of drugs through tendering shall be determined in accordance with the local conditions.

Article 7 Administration agencies and rectification institutions shall perform the following duties according to relevant laws and regulations including "Law of Administrative Supervision", etc.

(1) Work together with related departments to develop methods for administration of centralized purchasing of drugs through tendering; and coordinate implementation between by relevant departments.

(2) Handle reports, investigation and prosecutions regarding centralized purchasing of drugs through tendering.

(3) Supervise the performance of duties and the implementation of laws, regulations and policies by relevant government agencies, their staff, and other personnel designated by the State administrative agencies in centralized purchasing of drugs through tendering; investigate and punish according to law their non-performance, illegal administration implementation, hidden conduct to engage in illegal activity, illegal interference or participation in centralized purchasing of drugs through tendering, pursuing benefits for the organizations or personal benefits, corruption, accepting bribes, etc.; make "Investigation Decision" or put forth "Investigative Recommendation" to relevant departments according to law; and transfer criminal cases to judicial organs.

Article 8 Health departments are responsible for administration of centralized purchasing of drugs through tendering for medical institutions; and shall investigate, punish and correct the conduct medical institution personnel who violate regulations such as "Law for Professional Doctors", "The Drug Administration Law of PRC" and other relevant laws and regulations. They shall also work together with drug administration authorities to monitor behavior of agents for drug tendering in accordance with "The Tendering and Bidding Law" and "Regulation for Qualification Certification and Supervision of Agents for Drug Tendering" ("Methods for Supervision of Agents").

Article 9 Chinese medicine authorities are responsible for administration of the centralized purchasing of drugs through tendering conducted by hospitals of Chinese medicine and investigating, sanctioning and correcting the conduct of medical institution and their personal which violate relevant regulations in accordance with "Law for Professional Doctors", "The Drug Administration Law of PRC".

Article 10 Price administration authorities are responsible for administering conduct regarding price or fees by parties involved in centralized purchasing of drugs through tendering, and investigating, sanctioning and correcting price-related offenses in accordance with "The Price Law" and "Regulation of Administrative Punishment against Price-related Violations", etc.

Article 11 Commissions of trade and economic relations are responsible for administration in accordance with "The Tendering and Bidding Law" the conduct of enterprises winning bids in centralized purchasing of drugs through tendering.

Article 12 Drug administration authorities are responsible for administering and controlling quality of drugs winning bids in centralized purchasing of drugs through tendering; supervising drug manufacturers and distributors engaged in centralized purchasing of drugs through tendering in compliance with "The Tendering and Bidding Law" and "The Drug Administration Law of PRC" and investigating and sanctioning their behavior which violates relevant regulations; and working together with health administrations to monitor the conduct of agents for drug tendering in accordance with "The Tendering and Bidding Law" and "Regulation for Administration of Agents".

Article 13 Administration authorities for industry and commerce are responsible for administration of contracts signed in centralized purchasing of drugs through tendering; and on the basis of "Law of Anti-unfair Competition", "The Tendering and Bidding Law", "The Drug Administration Law of PRC", "Contract Law" and "Provisional Regulation regarding Prohibition of Business Bribes" etc., investigating, sanctioning and correcting unfair competition of parties in centralized purchasing of drugs through tendering, contract-related fraud of either the purchasers or the suppliers, and other contract-related violations damaging the interests of the country or society

Article 14 Relevant departments responsible for administration of centralized purchasing of drugs through tendering shall disclose their working procedures to the public; accept supervision of the public; duly receive, investigate and handle problems; and protect the legitimate rights and interests of all parties in centralized purchasing of drugs through tendering.

CHAPTER 3: ADMINISTRATION

Article 15 According to relevant regulations regarding centralized purchasing of drugs through tendering, health departments (or administration authorities for Chinese medicine) shall sanction medical institutions involved in the following conduct by criticism or reprimand in accordance with the severity of the conduct, and shall punish leaders or principals in serious cases.

(1) Failure to participate in centralized purchasing of drugs through tendering according to relevant regulations; or fail to execute such purchasing based on the requirements regarding drug types; or avoidance of such purchasing through various means.

(2) Changing result of bidding without approval after release of Notice of Bid Winning.

(3) After release of Notice of Bid Winning, failure to duly sign contract; fail to honestly or refuse to enter into contract with enterprise without due cause.

Article 16 According to relevant regulations, administrations for industry and commerce and health authorities shall sanction medical institutions or their principals, personnel handling drug purchasing, doctors and pharmacists that accept material or other benefits offered by drug manufacturers, distributors or their agents.

Article 17 Based on relevant regulations, price authorities shall sanction medical institutions which engage in the following conduct: fail to adjust retail price of drug winning the bid in accordance with the specified schedule and pricing principles; fail to issue invoices in line with actual transaction price; fail to maintain honest book-keeping; collect random charges and develop random standards in the process of centralized purchasing of drugs through tendering; and other price-related violations.

Article 18 The following violations by medical institutions shall be handled according to relevant provisions of The Contract Law: refusing to purchase the drug winning the bid according to the drug purchase contract or establishing additional requirements in the contract without due reason; failure to pay based on schedule set forth in the contract; and other contract breaches.

Article 19 Administrations for industry and commerce shall punish medical institutions engaged in the following conduct:

(1) Disclose to other persons the names and number of potential bidders who have obtained tendering documents, or other information that may hamper fair competition; or infringe on other's business secret.

(2) Procure drugs which won the bid through channels other than the one specified in the drug purchase contract; or procure other drugs without approval to substitute for drugs which have won the bid.

(3) Fail to sign drug purchase contract with the bid winner according to relevant requirements; or enter into other agreement with the winning bidder that is against the substantial content of the drug purchase contract.

Article 20 Price administration authorities shall sanction the leadership organizations of handling agencies jointly established by medical institutions if they are found to engage in the following:

(1) failure to duly report prices of drugs winning bid to the price administrations for filing as required;

(2) failure to implement the national regulations relating to fees in centralized purchasing of drugs through tendering; or charge random fees and set random standards.

Article 21 If medical institutions authorize institutions without the necessary qualifications required for agents for drug tendering, the tendering will be invalid, and the medical institutions shall independently cover all resulting economic losses. Similarly, administrations for industry and commerce shall sanction the illegal agents according to relevant regulations.

Article 22 Drug administration authorities shall sanction according to relevant regulations the drug manufacturers or distributors that provide false qualification certificates, certification documents evidencing drug approval, certification documents regarding drug inspection and or other sale certification materials.

Article 23 Price authorities or administrations for industry and commerce shall sanction according to relevant regulations drug manufacturers or distributors who engage in the following conduct:

(1) Collaborate with each other or with handling agencies or purchasers to inform of each other's bids or quotations so as to exclude fair competition from other drug suppliers and thus damage the legitimate interest of the purchasers or the other drug suppliers.

(2) Take the opportunity of centralized tendering to collaborate with each other to raise price, control bidding prices or engage in price monopolistic practices.

Article 24 If a drug manufacturer or distributor bids with price lower than drug cost so as to exclude competitors, bids granted to the manufacturer or distributor shall be invalid, and price authorities or administrations for industry and commerce shall sanction it in accordance with related regulations.

Article 25 The bid of a drug manufacturers or distributor who has engaged in any of the following conduct shall be invalid, and price authorities or administrations for industry and commerce shall sanction such manufacturer or distributor according to relevant regulations:

(1) bribing tendering institutions, handling agencies, experts involved and related government officials for the purpose of winning bid; and

(2) bidding in another party's name or engaging in other dishonest means to win the bid.

Article 26 According to relevant regulations, administrations for industry and commerce shall sanction drug manufacturers or distributors that carry out clinical marketing through unfair competition after winning a bid.

Article 27 After entering into drug purchase contracts, if the drug manufacturer or distributor fails to deliver drugs in accordance with the contracts, it shall be sanctioned in accordance with relevant provisions in the "Contract Law" and "The Tendering and Bidding Law".

Article 28 A drug manufacturer or distributor that withdraws a bid or violates relevant regulations within the validity period for bidding after the bid has been opened shall have the reputation factor in its score deducted accordingly; for those involved in serious legal violations, their bidding qualifications shall be cancelled; any bid granted to such a manufacturer or distributor shall be nullified, and health institutions nationwide shall not accept its bids for centralized purchasing through tendering within two years after the violation.

If a drug manufacturer or distributor fails to sign drug purchase contract or to perform the contract within the specified term after it wins the bid, relevant departments shall make special records thereof and publicize the records, and its score for reputation factor shall be deducted accordingly in future bid appraisals for centralized purchasing of drugs through tendering.

Article 29 According to relevant regulations, health departments and drug administration authorities shall sanction agents for drug tendering that engage in the following conduct:

(1) fail to verify certification documents that should be presented by bidders and to ensure completeness of the documents;

(2) violate the procedures and working standards for centralized purchasing of drugs through tendering; and,

(3) fail to provide materials for filing according to requirements of relevant departments.

Article 30 According to relevant provisions, health administration departments, drug administration authorities and administrations for industry and commerce shall separately sanction any agent for drug tendering that engage in the following conduct:

(1) Alters or transfers to another its qualification certificate.

(2) Accepts authorization of organization without "Professional License for Medical Institution" and acts as its agent in drug tendering; or accepts medical institution's authorization to execute drug tendering with enterprises without "License for Drug Production" or "License for Drug Distribution".

(3) Attempts to become agent for drug tendering or obtain illegal benefits of other types by bribing or other unfair means.

Article 31 According to relevant regulations, administrations for industry and commerce, or health departments and drug administration authorities shall sanction any agent for drug tendering who engages in the following conduct:

(1) Restricts or excludes potential bidders by setting unreasonable qualification requirements; engages in discriminatory treatment of potential bidders; or restricts the open, fair and impartial competition among bidders.

(2) Collaborates with purchasers or suppliers in dishonest practices and thus damages the legitimate rights and interests of other parties; or discloses bidder's business secret and secrets regarding the bid appraisal process; or reveal information regarding the tendering and bidding activities which should be kept confidential that may affect the fairness of the tendering.

Article 32 According to relevant provisions, health administration departments, administrations for industry and commerce shall sanction any agent for drug tendering engaged in monopolistic behavior which restricts fair competition of other agents.

Article 33 Drug administration authorities shall sanction in accordance with relevant regulations the agents for drug tendering who are engaged in drug distribution.

Article 34 Price administration authorities shall sanction in accordance with relevant regulations the agents for drug tendering that fail to execute national regulations regarding fees in drug purchasing through tendering, or collect random fees and set random standards, or fail to report prices to authorities for filing as required.

Article 35 Participation in the bid appraisal committee of any member engaged in the following conduct shall be cancelled; and administrations for industry and commerce, health departments and drug administration authority shall also separately sanction the member in accordance with relevant regulations:

(1) Privately contacts bidders; accept visit invitation, gifts or banquet invitation that are offered by drug manufacturers or distributors that may affect impartiality of bid appraisal; or ask for or accepts money, material or other benefits from drug manufacturers or distributors.

(2) Seek personal benefits for his spouse, children or relatives by taking advantage of the post he/she holds.

(3) Reveals business secrets regarding centralized purchasing of drugs through tendering for medical institutions.

Article 36 Participation in the bid appraisal committee of any member engaged in the following conduct shall be cancelled; and health departments and drug administration authorities shall also separately sanction the member in accordance with relevant regulations:

(1) Engages in drug production or distribution, or has a part-time job in drug manufacturing or distribution enterprise for which he receives compensation.

(2) Receives compensation for intermediary services regarding centralized purchasing of drugs through tendering for medical institutions.

(3) Engages in other conduct that affects the fairness of centralized purchasing of drugs through tendering for medical institutions.

Article 37 Relevant departments shall sanction according with relevant provisions the parties in centralized purchasing of drugs through tendering that commit other violations of laws or regulations.

Article 38 In sanctioning parties whose conduct violates regulations in centralized purchasing of drugs through tendering, relevant authorities shall separately establish registration system and system of punishment announcements in designated media; and the local administrative organization for centralized purchasing of drugs through tendering shall regularly publicize such conduct of parties.

Article 39 In performing administration functions, relevant authorities shall sanction in accordance with relevant regulations the investigated organizations or personnel that refuse to provide materials, information or explanations as required, or provide false materials, information or explanations or transfer, alter or destroy evidence.

CHAPTER 4: SUPPLEMENTARY PROVISIONS

Article 40 Administration and management of centralized purchasing of drugs through price negotiation shall be implemented according to this Regulation, unless special requirements or regulations have been adopted.

Article 41 Health departments of the Chinese People's Liberation Army shall develop detailed regulations for the administration and management of centralized purchasing of drugs through tendering for medical institutions of the Army and the armed police.

Article 42 This Regulation is implemented from the date of publication.

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