U.S. to China Health Care Arrangements: New Rules for Medical Institution and Service Advertisements

As U.S. hospitals and health care providers continue to explore China’s market for international health care business opportunities, including telemedicine, they often consider providing services or products to consumers through partnerships with Chinese medical institutions and other entities. U.S. hospitals and health care providers should know how their services or products are being advertised and promoted by their China partners, particularly in light of proposed China rules regarding medical advertisements. Being aware of and addressing these specific issues in the contractual arrangements on the front end is a prudent decision.

The State Administration for Industry and Commerce of China solicited public comments between July 9, 2015 and August 1, 2015 on a draft version of the Management Measures on Medical Advertisement [关于《医疗广告管理办法（修订稿）》（征求意见稿）公开征求意见的公告] (“the Measures”). The draft Measures, if implemented in their current version, could significantly affect how medical advertisements – defined as “advertisements which use various media or forms directly or indirectly to introduce the medical institution or medical services” – are regulated in China.

Here are three highlights that may affect U.S. to China health care provider arrangements:

1. Non-medical institutions are prohibited from advertising medical services (Section 5 of the draft Measures). Under current Chinese law, medical institutions refer to those organizations which have been registered and have obtained a “medical institution practice license” in China. Medical institutions can include diagnostic clinics, treatment hospitals, health clinics, nursing homes, health centers/rooms, first-aid stations and other institutions. U.S. hospitals and health care providers not licensed as medical institutions in China (the typical situation), will not be treated as medical institutions under the draft Measures. Any non-medical institution that advertises medical services is subject to sanctions under the “illegal medical practice ” rules in the draft Measures. (Section 19 of the draft Measures). Accordingly, U.S. hospitals and health care providers should carefully consider their Chinese partners’ medical institution qualifications prior to engaging in any activities with these partners.
2. Medical advertisements cannot be endorsed using the names and images of patients, medical personnel, or medical education and research institutions (Section 6.8 of the proposed Measures). U.S. hospitals and health care providers that collaborate, contract, or partner with Chinese medical institutions should thoughtfully consider and address the risk of their services or products being unlawfully advertised, using the proposed Measures as a guide. As advertising and promotion of these collaborative international services is an important element of such arrangements and offerings, this Section of the proposed Measures is particularly important. These issues are most preferably handled through the contracts, and can avoid unintended potential liabilities.
3. All medical advertisements prepared by a medical institution must be reviewed by and obtain a Certificate of Medical Advertisement Review from the Chinese authorities before being published (Section 3 of the draft Measures). This review includes assessment of where the advertisement is being placed. The draft Measures does provide very generic description on the means for the advertisement placement by stating that advertisements under the Measures take place using “various media or forms” (Section 2 of the draft Measures). Arguably, a medical institution’s own web page describing the medical institution and medical services offered by it might conceivably be considered medical advertisements, and consequently be subject to the draft Measures. This issue should hopefully be addressed in further regulatory clarification (e.g., other relevant laws and drafts such as the newly amended Advertisement Law and the draft Interim Measures on the Supervision and Management of Internet Advertisement). With this in mind, U.S. hospitals and other health care providers should carefully choose their Chinese partners prior to engaging in any health related activities and monitor their partners’ promotion activities in such joint efforts.

There are tremendous opportunities in offering medical services and products to China’s rapidly growing health care market. In anticipation of this growth, it is evident the Chinese government is developing a regulatory structure for medical advertisements to protect its people. This should not be viewed as a bar to U.S. hospitals and health care providers expanding their business in China, but is instead another reason to be cognizant of the China-specific rules when developing such business and negotiating and drafting related contracts. Taking steps early to develop proper contractual rights and obligations can best position both parties to harness these international opportunities.