China Life Sciences Compliance Update: Kickback and Third-Party Case Study

A recent criminal judgment¹ published by the Gao’an People’s Court in Jiangxi province (江西省高安市人民法院) in June 2025 has drawn public attention to Jiangxi Baishen Pharmaceutical Co., Ltd. (江西百神药业股份有限公司) (Baishen Pharma).

According to the judgment, from 2018 to 2024, a Baishen Pharma sales representative paid kickbacks to doctors at two hospitals in Gao’an city to boost sales of a Baishen Pharma product. The illicit payments were made to 18 doctors at the two hospitals and totaled approximately RMB 1.92 million (approximately $270,000).

The kickbacks took place during Baishen Pharma’s IPO preparation window. Baishen Pharma submitted its listing application to the Shenzhen Stock Exchange (SSE) in July 2022 but withdrew the application in September 2023 amid regulatory scrutiny of its sales expenses. From 2020 to 2022, Baishen Pharma reported over RMB 900 million (approximately $124 million) in sales costs, including nearly RMB 800 million (approximately $110 million) in “marketing and academic promotion fees” (市场及学术推广费). Baishen Pharma’s frequent conferences and its use of questionable third-party promoters raised red flags with the SSE, prompting SSE inquiries.

The SSE’s inquiries highlighted that Baishen Pharma held an unusually high number of promotional events (1,495, 855, and 751 sessions in 2020, 2021, and 2022, respectively). These activities were scrutinized along with the profiles of its third-party promotion service providers. The SSE also pointed out that several key promotional vendors used by Baishen Pharma were engaged almost immediately after their establishment, with one of these third parties deriving most of its income from Baishen Pharma. Although the SSE did not explicitly make such allegations, media reports suggested an underlying concern that these vendors could have been used to channel illicit payments to healthcare professionals.

This case serves as a reminder of the persistent compliance risks with sales and promotional activities and underscores the necessity for robust internal controls and continuous monitoring of third-party vendors.

For questions on this or any other subject, please reach out to the authors or any of their colleagues in Arnold & Porter’s Life Sciences or White Collar Defense & Investigations practice group.

Jialing Xiong contributed to this Blog. 

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.