Legal Issues of Smuggling of Unapproved Overseas Listed Medicine

In July 2024, the Guangdong Provincial Medical Products Administration (hereinafter referred to as "GDMPA") reported a significant case of smuggling involving unapproved drugs, which has raised substantial attention from the public. This case, notable for its high level of organization and considerable financial implications, is uncommon in recent years. Authorities successfully seized over 5,000 boxes containing more than 80 different types of smuggled medicines, with the total estimated value reaching RMB 200 million. All medicines involved were unapproved for sale within China's borders and primarily included medicines intended for the prevention and treatment of cancer, as well as the treatment of diabetes and other serious illness.

The GDMPA held that none of the medicines received approval for market distribution within China. Furthermore, the individuals in the case were unable to present any documentation evidencing legal approval for these products. Consequently, the safety and efficacy of such medicines cannot be ascertained. Additionally, the conditions under which the medicines were transported were found to be substandard, failing to comply with the requisite storage and transportation standards. The variations in the composition of the medicines and their actual potencies remain undetermined, posing a significant risk of severe adverse effects upon injection, including potential fatalities. As a result, it has been concluded that the medicines pose a serious threat to public health.[1]

The ongoing investigation involves multinational pharmaceutical enterprises and their senior executives. 

This article aims to clarify the nature of importing unapproved overseas listed medicines by analyzing relevant laws and regulations, as well as precedent judicial cases. It will also offer insights and advices on how to import unapproved overseas listed medicines in compliance.

Regarding the illegal importation of unapproved drugs, offenders typically engage in two separate acts. The first act involves importing drugs that are not approved and are listed in foreign markets. The second act concerns the sale of these unapproved imported drugs within the domestic market. It is important to note that these two acts may not be carried out by the same individual. Rather, they can be conducted by different parties. Moreover, these two acts have been evaluated separately by existing laws, regulations, and relevant judicial cases are outlined as below.

A.Importing Drugs Without Approval

Importing drugs from overseas that have not been approved for sale in the domestic market may lead to criminal offenses, including the Crime of Smuggling Ordinary Goods under Article 153 of the "Criminal Law of the People's Republic of China (Amended in 2023)" (hereinafter referred to as "Criminal Law"), as well as the Crime of Smuggling Goods Prohibited from Import or Export under Article 151(3) of the "Criminal Law". Additionally, it may also lead to the Crime of Impairing Drug Administration, introduced by the "Amendment (XI) to the Criminal Law of the People's Republic of China"(hereinafter referred to as "Amendment (XI)"). The "Amendment (XI)" specifies that whoever, in violation of the regulations on the administration of drugs, imports drugs without obtaining the relevant approval documents for drugs, which are sufficient to seriously endanger the people's health, shall be convicted of the Crime of Impairing Drug Administration.

B.Selling Drugs Imported Without Approval

According to the "Amendment (XI)", Article 141 [Crime of Manufacturing or Selling Counterfeit Drugs] of the "Criminal Law" has been amended, where the act of selling drugs imported without approval is no longer deemed as the Crime of Selling Counterfeit Drugs. Rather, it shall be deemed as the Crime of Impairing Drug Administration. If someone knowingly sells imported drugs without approval documents, which are sufficient to seriously endanger the people's health, they shall be convicted of the Crime of Impairing Drug Administration.

As aforementioned, the acts of importing drugs without approval and selling drugs imported without approval may constitute the Crime of Smuggling Ordinary Goods, or the Crime of Smuggling Goods Prohibited from Import or Export. Following the "Amendment (XI)", it may also constitute the Crime of Impairing Drug Administration. Typical cases are discussed below.

A.Importing Drugs Without Approval

CaseⅠ Guilty of Smuggling Goods Prohibited from Import or Export

During the period from August to September 2020, Company A, entrusted by Korean foreign entities, imported Korean cosmetics and pharmaceuticals. Although Z, the actual controller of the company, was aware that certain imported items, such as cosmetics, injections, diet pills, etc., lacked the required approval documents, he conspired with foreign entities and entrusted a customs clearance company to submit a fraudulent declaration for the importation of these goods. The investigation revealed that Company A had improperly declared the importation of items, part of which included botulinum toxin and its formulations, which were confirmed as drugs by Shanghai Medical Products Administration and required an approval, and the rest of which included cosmetics and other general goods.[2] The court held that Company A and its actual controller, Z, committed the Crime of Smuggling Ordinary Goods as well as Smuggling Goods Prohibited from Import or Export.

Case Ⅱ Guilty of Smuggling Ordinary Goods

In 2010, H traveled from New Delhi, India, to Beijing and selected the non-declaration channel during customs processing. Upon inspection, Customs officials discovered 240 boxes of Indian generic pharmaceuticals within his suitcase. The pharmaceuticals sold in China had been imported from the United Kingdom. Subsequent investigations revealed that H purchased these pharmaceuticals on behalf of his friends.[3] The court held that H had violated customs regulations and evaded a significant amount of tax. His acts constituted the Crime of Smuggling Ordinary Goods.

B.Selling Drugs Imported Without Approval

Case Ⅲ Guilty of Impairing Drug Administration

Since 2021, G has procured more than thirty boxes of three types of imported pharmaceuticals labeled "BcnmrGcrh", "BotulinmToxinTyoeABotox", and "INIBOinj", all containing botulinum toxin, through purchasing agents. Despite being aware that these drugs were smuggled into the country, he proceeded to sell them to customers at his beauty center. He falsely claimed these products could effectively remove wrinkles and slim the face, thereby generating illicit profits. The Administration for Market Regulation had determined that these pharmaceuticals were counterfeit and sufficient to seriously endanger the people's health. [4]The court held that G violated the regulations on the administration of drugs by knowingly selling imported drugs without approval documents, which were sufficient to seriously endanger the people's health. His acts constituted the Crime of Impairing Drug Administration.

It is worth noting that according to the "Implementation Regulations of the Customs of the People's Republic of China on Administrative Penalties (Revised in 2022)", (hereinafter referred to as "Customs Administrative Penalties Regulations"), illegal purchase of goods and articles are smuggled items shall be deemed as smuggling. However, in this case, though G was aware that the drugs were smuggled, this fact was not treated as a separate instance of smuggling. Instead, G's acts were evaluated as a whole and deemed to have impaired drug administration.

C.Importing and Selling Drugs Without Approval

Case Ⅳ Guilty of Smuggling Ordinary Goods

In 2016, after a family member was diagnosed with cancer, C purchased unapproved overseas anti-cancer drugs online. In 2020, he established contact with local distributors in Bangladesh and decided to smuggle these anti-cancer drugs into China for profit. Through international postal channels, C imported the drugs by making false declarationsto Customs regarding the nature and price of these drugs. Subsequently, C sold these drugs to various individuals. [5]The court held that C evaded customs supervision and smuggled drugs from Bangladesh into the country for sale and profit by falsely reporting the nature of the trade, underreporting prices, and using other deceptive methods, which allowed him to evade a significant amount of tax. C's acts constituted the Crime of Smuggling Ordinary Goods.

Based on an analysis of publicly accessible cases, it appears that Chinese courts do not hold a standardized approach for determining the acts related to the importation and sale of unapproved drugs. The act of importation may be deemed as either the Crime of Smuggling Ordinary Goods or the Crime of Smuggling Goods Prohibited from Import or Export. In terms of the selling act, the adoption of the "Amendment (XI)" has led to a more frequent application of the Crime of Impairing Drug Administration. Instances of cases involving both importation and sale of unapproved drugs are relatively rare. In addition, following the amendments to the “Drug Administration Law of the People's Republic of China (Revised in 2019)” (hereinafter referred to as "Drug Administration Law") and the "Criminal Law" in 2020, there remains an absence of a definitive ruling on whether these two acts should be assessed independently or the act of importation can be subsumed under the act of selling.

In regard to the case introduced at the beginning of this article, the information that has been publicly disclosed indicates that this case involves both the importation and sale of unapproved imported drugs. Drawing upon the analysis of the aforementioned judicial cases, the nature of the smuggling activities in this case may be assessed as follows:

A.Crime of Smuggling Ordinary Goods or Crime of Smuggling Goods Prohibited from Import or Export

To constitute the crime of smuggling in accordance with the relevant provisions of "Criminal Law", the offender should have the intention of smuggling subjectively and should have committed smuggling acts objectively. 

As outlined in the "Customs Administrative Penalties Regulations", acts below shall be deemed as smuggling: 

Considering numerous individuals involved in the case, their acts vary due to their roles in different scenarios. However, as long as they have the intent to smuggle, they may face liability for smuggling. This intent includes knowingly assist in forging false customs clearance documents for non-drug items while aware that drugs are involved; knowingly forging and providing false low-price sales contracts and invoices despite knowing the drugs' price; and purchasing drugs that they know to be smuggled imports. If they have objectively engaged in these smuggling activities, they can be held accountable for smuggling.

The distinction between the Crime of Smuggling Ordinary Goods and the Crime of Smuggling Goods Prohibited from Import or Export predominantly rests on the presence of ingredients that are restricted or forbidden by the State. If these ingredients involve prohibited substances, such as narcotic drugs, psychotropic drugs, or other controlled drugs, the act constitutes the Crime of Smuggling Goods Prohibited from Import or Export. If the prohibited ingredients are intended for drug production, they will also be deemed as drugs, potentially resulting in charges of drug smuggling. Additionally, if the smuggling activity leads to tax evasion and the amount of evaded tax meets the legal threshold for a criminal offense,[6] the offender may face charges related to smuggling ordinary goods as well. In such instances, the offender shall be convicted and penalized in accordance with the provisions for a heavier penalty.[7]

When an offender is engaged in both the importation and sale of goods, these acts may be regarded as means and ends. In accordance with the theory of Implicated Offender, it is deemed appropriate to impose a penalty for only one of these acts. In instances where the punishment for smuggling are more severe, the acts of smuggling and selling may be subsumed under the singular offense of smuggling ordinary goods. Furthermore, there is a lack of precedential judicial cases in which individuals have been penalized for multiple offenses under similar circumstances, indicating a diminished likelihood of facing multiple charges.

B.Crime of Impairing Drug Administration

Article 142 (A) of the "Criminal Law" [Crime of Impairing Drug Administration] includes three acts:

The importation or importation and sale of drugs without the requisite approval documents falls under the above items b and c of prohibited acts.[8]

In the case introduced at the beginning, the drugs were not approved for marketing in China. Due to exceptionally adverse transportation conditions, these drugs could deteriorate and pose significant health risks upon injection. Consequently, regulatory authorities determined that these drugs have the potential to cause serious harm to human health. Therefore, importation or importation and sale of these unapproved drugs fulfill the conditions for the Crime of Impairing Drug Administration, possibly leading to such criminal charge.

Following the discussion regarding the illegal importation of unapproved overseas listed drugs, the compliant methods for the importation of such drugs will be outlined for reference.

A.Conventional Method -- Completing Drug Registration

In accordance with Article 35(2) of the "Regulations for Implementation of the Drug Administration Law of the People's Republic of China (Revised in 2019)", for importation of a drug, an application shall be made according to the drug registration provisions. The formal registration of pharmaceuticals is the most conventional method for importing drugs listed abroad. This method involves several critical steps, including the submission of a drug registration application, record filing, and drug inspection at the locality of the port, etc.[9] In addition, importation and exportation of anesthesia and psychiatric drugs requires the procurement of the importation permit or exportation permit issued by the drug administrative department.[10]

B.Special Methods for Importing Drugs without Registration

Temporary Importation Procedures

Pursuant to Article 65(1) of the "Drug Administration Law", where a medical institution has urgent clinical needs for small quantities of imported drugs, such drugs may be imported upon approval by the National Medical Products Administration (hereinafter referred to as "NMPA") or the authorized drug administration department at provincial level. Imported drugs shall be used for specific medical purposes within designated medical institutions. 

In June 2022, National Health Commission (hereinafter referred to as "NHC"), in collaboration with NMPA, issued the guidelines titled "Temporary Importation of Drugs for Clinical Urgent Needs". These guidelines explicitly outline that medical institutions shall submit requests for the temporary importation of small quantities of urgently needed drugs that are either unapproved for sale in the domestic market or not manufactured by any local enterprise, particularly when they cannot be resumed in the short term. Such requests must be directed to the NMPA or the provincial government.

Accordingly, the method for importing temporary drugs commences with initiation by a medical institution, followed by the requisite approval from the provincial government. These temporarily imported drugs must satisfy specific criteria:

In August 2024, with the approval of the NHC and NMPA, Huashan Hospital affiliated with Fudan University (Hongqiao Branch) successfully utilized a temporarily imported and unapproved drug known as "Pareptin" for the treatment of a patient diagnosed with acromegaly.[11]

Temporary Importation in Specific Areas

On December 21, 2018, the State Council issued the "Decision of the State Council on Temporarily Adjusting and Implementing the Relevant Provisions of the Regulations for the Implementation of the Drug Administration Law of the People's Republic of China in the Hainan Boao Lecheng International Medical Tourism Pilot Zone (Guo Fa [2018] No. 43)". The regulation stipulates that applications for the import of a small quantity of drugs (excluding vaccines) by medical institutions in the said Pilot Zone due to urgent clinical needs shall be subject to the examination and approval by Hainan Government. 

On March 25, 2023, Hainan Government issued the "Notice of the People's Government of Hainan Province on Promulgation of the Administrative Provisions on Import of Drugs and Medical Devices Urgently Needed for Clinical Use in the Boao Lecheng International Medical Tourism Pilot Zone in Hainan Free Trade Port (Qiong Fu [2023] No. 16)". The regulation permits designated medical institutions in the Pilot Zone to apply for use of the imported drugs (excluding vaccines) that have been approved to be marketed overseas but have not been approved to be registered in China and cannot be replaced with varieties already marketed in China, to meet their urgent clinical use. The imported drugs and medical devices urgently needed for clinical use shall be used for specific medical purposes in the designated medical institutions applying for use. The designated medical institutions may, in light of the patients' diagnosis and treatment needs and the characteristics of the products and upon full evaluation, allow patients to take away and use such imported drugs and medical devices only for personal use, in reasonable quantity and with controllable risks, under the premise that such drugs and medical devices are safe and effective.

This method can only be implemented in the Pilot Zone. It also requires designated medical institutions in the Pilot Zone to apply, followed by examination and approval by Hainan Government. Once imported, the drugs and medical devices shall be used for specific medical purposes within these designated institutions. Patients may take home the imported drugs and medical devices for urgent clinical needs that are for personal use, in a reasonable quantity, and with controllable risks, under the premise that such drugs and medical devices are safe and effective. This is contingent upon a full evaluation by designated medical institutions, considering the patient's diagnosis, treatment needs, and the characteristics of the products.

As of June 2024, a total of 412 types of imported drugs and medical devices for urgent clinical needs have been introduced into the Pilot Zone, benefiting more than 70,000 patients.[12]

Small Quantities of Drugs Brought into China by Individuals for Personal Use

According to Article 65(2) of the "Drug Administration Law", small quantities of drugs brought into China by individuals for personal use shall be handled pursuant to the relevant provisions.

Chinese Customs maintain stringent regulations regarding the importation of drugs by individuals. According to the "Measures for the Scheduling of Non-medicinal Narcotic Drugs and Psychotropic Drugs", it is strictly prohibited to bring into China scheduled non-medicinal narcotic drugs and psychotropic drugs. It is permitted to carry medicinal narcotic drugs and psychotropic substances under the principle of self-use and reasonableness. For the narcotic drugs or the psychotropic drugs of category I, injections are limited to a single supply. Other dosage forms of prescriptions for these drugs should not exceed a three-day supply. Controlled-release and sustained-release forms are limited to a seven-day supply. For the psychotropic drugs of category Ⅱ, prescriptions should also not exceed a seven-day supply. In exceptional circumstances, it is permitted to carry more dosages if physicians provide clear justification. In cases involving anabolic steroids or peptide hormones, Customs will release these substances after verifying prescriptions from medical institutions.[13]

In practice, when determining whether the drugs are intended for personal use and within a reasonable quantity, the Customs generally check medical certificates issued by medical institutions and original valid prescriptions provided by physicians brought by individuals. In general, unless the prescribing physician specifies the reason, the prescription should not exceed a seven-day supply. For the narcotic drugs or the psychotropic drugs of category I, injections are limited to a single supply, and prescriptions for other dosage forms should generally not exceed a three-day supply. Should the quantity of drugs surpass the reasonable limits for personal use, it is imperative to declare such items through the goods channel.[14]

Based on the aforementioned provisions and practical scenarios, individuals are permitted to bring drugs into the country solely for personal use, and the quantity must not exceed the prescribed dosage. Any drugs intended for non-personal use or for resale are prohibited. Furthermore, if employees of pharmaceutical companies or medical institutions obtain drugs from abroad and attempt to bring them back to China for sale by unlawfully acquiring or falsifying patients' diagnostic documents, such act will be deemed as smuggling.

转载声明：好文共赏，如需转载，请直接在公众号后台或下方留言区留言获取授权。