Selling substandard drugs fined 1.11 million! All pharmacies must stay vigilant.

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A typical case has been exposed: A pharmaceutical company was fined 1.11 million yuan for selling substandard traditional Chinese medicine decoction pieces. Currently, nationwide inspections focusing on these medicinal materials are underway, and all pharmacies are urged to remain vigilant.

Typical case exposed: A pharmaceutical company fined 1.11 million.

Recently, the Fujian Provincial Drug Administration announced a typical administrative penalty case: a pharmaceutical company was fined 1.11 million yuan for selling substandard Gualou medicine. The reason this case is considered "typical" lies in two key factors.

First, this case was uncovered following the nationwide crackdown on traditional Chinese medicine decoction pieces initiated by the National Medical Products Administration. As mandated, all regions across the country conducted a year-long, concentrated inspection of these products—from July this year to June next year. Unfortunately, this pharmaceutical company became a prime example during the enforcement effort.

Secondly, starting December 1 last year, the "strictest-ever" Drug Administration Law officially came into effect. Yet, at this critical juncture, the pharmaceutical company triggered a major backlash by being caught selling substandard drugs, resulting in a hefty penalty totaling 1,110,903.49 yuan—comprising fines and confiscated funds.

Illegal gains totaled 4,460.86 yuan, with a fine of 1.1 million yuan.

No need for further ado—first, let me walk you through the reasons why this pharmaceutical company was penalized (or, more accurately, the main violations it committed).

According to the Fujian Provincial Drug Administration's Public Information Table of Administrative Penalties, the party's act of selling substandard drug Gualou prior to December 1, 2019, violated Article 49, Paragraph 1, of the "Drug Administration Law of the People's Republic of China (Revised in 2015)"; after December 1, 2019, the violation shifted to Article 98, Paragraph 1, of the "Drug Administration Law of the People's Republic of China (Revised in 2019)."

The information disclosure form also reveals that, despite being aware—or reasonably expected to be aware—that this batch of Gualou was an unqualified pharmaceutical product, the party involved failed to take legally mandated measures to halt sales and continued distributing substandard drugs instead. This behavior contravenes the provisions outlined in Article 87 and Article 117 of the "Good Practice for Pharmaceutical Distribution," as well as Article 16, Paragraph 1 of the "Drug Administration Law of the People's Republic of China (Revised in 2015)" and Article 53, Paragraph 1 of the "Drug Administration Law of the People's Republic of China (Revised in 2019)."

Meanwhile, the parties involved failed to conduct acceptance checks as required by Article 78 of the "Good Supply Practice for Pharmaceutical Products," resulting in substandard drugs entering the market—a violation of Article 17 of the "Drug Administration Law of the People's Republic of China (2015 Amendment)" and Article 56 of the "Drug Administration Law of the People's Republic of China (2019 Revision)."

According to relevant regulations, the following penalties are decided:

1. Confiscated 43.254 kg of substandard Gualou traditional Chinese medicine slices;

2. Confiscated the illegal proceeds of 4,460.86 yuan from the sale of substandard medicinal loquat herbal slices.

3. For violations that occurred before December 1, 2019, a fine equivalent to 1.3 times the value of the illegally sold substandard medicinal herb Gualou decoction pieces will be imposed, totaling 6,442.63 yuan.

4. For violations occurring after December 1, 2019, a penalty of 11 times the value of the illegally sold substandard medicine—Gualou Chinese medicinal herb slices—will be imposed (if the value of the illegal drugs is less than 100,000 yuan, it will be calculated as 100,000 yuan), totaling 1,100,000 yuan. In addition, confiscation and fines amount to 1,110,903.49 yuan.

Selling counterfeit drugs carries a minimum penalty of 1.5 million, while retailing substandard drugs faces a minimum fine of 100,000.

Through this case, the author would like to remind everyone once again: nowadays, the cost of breaking the law is extremely high—especially when it comes to selling counterfeit or substandard drugs. No matter how small the quantity, under the new version of the *Drug Administration Law*, sellers of fake drugs face a minimum fine of 1.5 million yuan, while retailers of inferior drugs must pay at least 100,000 yuan in penalties.

According to Article 98 of the new Drug Administration Law, the production (including compounding, the same applies hereinafter), sale, and use of counterfeit or substandard drugs are prohibited.

A drug is considered counterfeit if any of the following circumstances apply: - The drug contains ingredients that do not match those specified in the national pharmaceutical standards; - The drug is marketed as a non-pharmaceutical product disguised as a medicine, or as one type of medicine masquerading as another; - The drug is deteriorated or spoiled; - The drug’s indicated therapeutic claims or intended functions exceed the approved scope.

Medicines are classified as substandard if any of the following circumstances apply: - The content of active pharmaceutical ingredients does not meet national drug standards; - The medicine is contaminated; - The expiration date is missing or has been altered; - The product batch number is missing or has been changed; - The medicine has expired; - Preservatives or excipients have been added without authorization; - Any other condition that fails to comply with drug standards.

According to regulations, if a company engages in the above-mentioned behaviors, it will be subject to the following legal liabilities.

First, for producing or selling counterfeit drugs, the illegally produced or sold medications and any illegal gains will be confiscated. The entity will also be ordered to cease production and business operations for rectification, have its drug approval documents revoked, and face a fine ranging from 15 to 30 times the value of the illegally produced or sold drugs. If the value of the drugs is less than 100,000 yuan, it will be calculated as 100,000 yuan. In cases of severe violations, the entity’s drug manufacturing license, drug distribution license, or medical institution preparation license may be revoked, and no related applications will be accepted for a period of 10 years. Additionally, if the marketing authorization holder is a foreign company, the import of its drugs will be prohibited for 10 years.

Second, for producing or selling substandard drugs, the illegally produced or sold drugs and any illegal gains will be confiscated, and a fine of more than 10 but less than 20 times the value of the illegally produced or sold drugs will be imposed. If the value of the illegally produced or wholesale drugs is less than 100,000 yuan, it will be calculated as 100,000 yuan; if the value of the illegally retailed drugs is less than 10,000 yuan, it will be calculated as 10,000 yuan. In cases with serious circumstances, the authorities may order suspension of production and business for rectification, up to and including revocation of the drug approval document, drug manufacturing license, drug distribution license, or medical institution preparation license. Additionally, if the Chinese medicinal materials processed into traditional medicine preparations do not meet pharmaceutical standards but do not yet compromise safety or efficacy, the manufacturer will be ordered to make corrections within a specified time frame and receive a warning; meanwhile, a fine ranging from 100,000 yuan to 500,000 yuan may also be imposed.

Moreover, in cases of serious violations, the individuals directly responsible will also face penalties. For legal representatives, key executives, senior managers directly accountable, and other personnel with relevant responsibilities, their income earned from the unit during the period when the illegal act occurred will be confiscated, and they will be fined an amount between 30% and three times their ill-gotten gains. Additionally, they will be permanently banned from engaging in pharmaceutical production and business activities, and may even face detention by public security authorities for a period of 5 to 15 days. Meanwhile, any raw materials, excipients, packaging materials, or production equipment specifically used by manufacturers to produce counterfeit or substandard drugs will be confiscated.

It should be noted that anyone who knows or ought to know that certain drugs are counterfeit, substandard, or fall under items 1 through 5 of Paragraph 1 of Article 124 of this Law, and yet provides convenience such as storage or transportation for these drugs, shall have all their storage and transportation earnings confiscated and be fined an amount between one and five times the illegal income. In cases of serious circumstances, the fine may increase to between five and fifteen times the illegal income; if the illegal income is less than 50,000 yuan, it will be calculated as 50,000 yuan.

The specific drugs stipulated in Article 124, Paragraph 1, Items 1 through 5 are as follows:

(1) Producing or importing drugs without obtaining the required drug approval documents;

(II) Producing or importing drugs using drug approval documents obtained through deceptive means;

(III) Manufacturing drugs using active pharmaceutical ingredients that have not undergone review and approval;

(4) Selling pharmaceuticals that should have been inspected but were not;

(5) Producing or selling drugs prohibited by the drug regulatory authority under the State Council;

The country is currently inspecting traditional Chinese medicine decoction pieces, including those sold in retail pharmacies.

Additionally, in accordance with the National Medical Products Administration's "Special Rectification Plan for Traditional Chinese Medicine Pieces" (NMPA [2020] No. 12), inspections are being conducted at manufacturers of TCM pieces and preparations, as well as at entities involved in the distribution and use of TCM pieces.

Among these, units engaged in the operation and use of traditional Chinese medicine slices should be重点 inspected for illegal production and sales of such slices, as well as for purchasing them through unauthorized channels. Specifically:

1. Illegal production and operation of processed Chinese medicinal materials. Inspect whether there are cases of selling illegally processed or repackaged Chinese medicinal herbs; check for instances of establishing "off-site warehouses" to store these herbs or engaging in shell-company operations involving them; and verify whether any venues, qualification documents, invoices, or other resources have been provided to others engaged in the illegal trade of Chinese medicinal herbs.

2. The act of purchasing Chinese medicinal herbs from illegal channels. Inspect whether there are instances of acquiring these herbs from entities lacking the requisite qualifications; verify if the required qualification certificates, legal invoices (including sales lists, accompanying delivery notes, etc.), and batch-specific product inspection reports have been obtained as mandated; and ensure that the procurement, acceptance, storage, maintenance, and outgoing-receipt verification processes for Chinese medicinal herbs are effectively managed according to regulations, with thorough records maintained throughout.

Analysis reveals that, in recent times, numerous cases have emerged of penalties imposed on entities selling counterfeit or substandard Chinese medicinal herbs—and this includes pharmacies, ranging from small, independent shops in remote mountain areas to well-known, publicly listed chain stores across the country.