No More Mooncakes: New Pharma Code Bans All Rx Company Gifts

Jan. 3, 2019, 11:15 AM

It’s a whole new world for drugmakers operating abroad.

Starting Jan. 1, companies can no longer give gifts or cash payments to business associates—traditions that are accepted and sometimes expected—in China and other parts of the world. The change is causing concern among both U.S.-based and multinational companies like Astra Zeneca, Bristol-Myers Squibb, Johnson & Johnson Inc., and Pfizer Inc. about how to balance appropriate business behavior with respect for cultural norms in other countries.

Companies will no longer be able to gift “mooncake” pastries to business associates, a common exchange in China, and cash payments to mark significant religious or cultural occasions in foreign countries won’t be sanctioned.

It’s all because of a new research and development biopharmaceutical industry Code of Practice taking effect in 2019. The new code implements a global ban on using gifts or promotional aids to promote prescription medicines. The code applies to all biopharmaceutical industry professionals wherever they operate and brings the rest of the world in line with current European and U.S. guidance for industry behavior.

The major changes in the International Federation of Pharmaceutical Manufacturers and Associations’ (IFPMA) Code of Practice include a ban on gifts and promotional aids for prescription medicines wherever the association’s member companies operate.

“The very nature of our business requires us to earn and maintain the trust of the people we serve. Our ethos ensures we have a solid foundation on which to build trust with doctors, nurses, patients, and those who care for patients as well as groups that represent them,” Melissa Barnes, chair of the IFPMA Ethics and Business Integrity Committee, said in a statement. Barnes is senior vice-president for enterprise and risk management and chief ethics and compliance officer at Eli Lilly & Co.

Some of the biggest compliance challenges life sciences companies face operating internationally include the continued belief that “we are different” in the U.S. and Europe. Some activities, no matter whether they make sense in one country’s culture, cannot be executed in an appropriate way globally, Ann E. Beasley, director of life sciences governance, risk management, and compliance at the consulting firm Navigant, told Bloomberg Law.

“The notion of ‘bribery’ is not universally understood, nor is ‘conflicts of interest,’ and this creates barriers to effective implementation of company principles,” Beasley said. “Trying to have people follow processes without understanding the ‘why’ behind it will inherently create risk and misapplication of standards,” she said.

The changes to the code reflect increasingly complex dilemmas faced by R&D biopharmaceutical industry professionals, the international association said. The new Code of Practice aims to improve guidance to members on how to conduct business when interacting with the health-care community worldwide.

Global organizations have less time to manage nuanced, local interpretations of giving customs, she said, and are more focused on establishing core, measurable approaches to common business practices that pose common risk.

New Code Sets High Bar

The code, first published in 1981, has been revised five times over recent decades, and the most recent edition—the sixth—sets the bar for conduct at its highest level yet, the IFPMA said.

The 2019 code gets rid of any exceptions for gifts, including such things as mooncakes or condolence payments.

Mooncakes, a traditional Chinese pastry frequently given as gifts to business associates, and cash exchanged as “condolence money” are examples of gifts that have been associated with bribery.

Condolence payments are envelopes of money sent to express condolences for the death of a loved one. In many Asian countries, condolence payments are often sent if a guest is unable to attend a funeral.

Mooncakes have received bad press as a way to bribe Chinese officials. The hockey puck-sized pastries were becoming more and more elaborate, morphing from simple pastries filled with lotus seeds, green beans, salted egg, or sesame paste to mooncakes made of out of solid gold and silver presented in jewel-encrusted boxes. In 2013, the Chinese government cracked down on these gifts but sales of the treats may be on the rebound. Mooncake sales were expected to increase anywhere from 5 percent to 10 percent in the coming year, according to a recent forecast from the China Association of Bakery and Confectionery Industry.

The 2012 edition of the code had already banned gifts for the personal benefit of a doctor or clinician, such as tickets to sporting or entertainment events. The revised code puts additional limits on gifts and excludes “social courtesy gifts” such as mooncakes or condolence payments in China. The exclusion takes into account the possibility that even small cultural gifts could influence the prescribing patterns of local health-care providers.

“Part of this has evolved from increased global enforcement of bribery laws and more aligned industry regional and national codes,” Beasley said. “Global corporate compliance officers and programs need to understand and manage the risks that flow across borders, establish global principles and core standards, and help set and reinforce the company’s ethical and compliance culture.”

“It’s not just what pharmaceutical innovation achieves that matters, but also how the industry goes about achieving it,” Thomas Cueni, IFPMA Director General, said in a statement.

“The IFPMA Ethos was developed to help instill a culture of ethics and integrity needed to guide business behaviors and interactions between IFPMA members and the healthcare community, no matter how testing the circumstances,” the association said. It’s based in Geneva.

To contact the reporter on this story: Dana A. Elfin in Washington at delfin@bloomberglaw.com

To read more articles log in.

Learn more about a Bloomberg Law subscription.