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The Trump administration has issued a fourth set of proposed tariffs on an additional $300 billion of goods related to China, this time adding a range of commercial goods across industries. This round affects medical devices and their components, certain chemicals and precursors that are in pharmaceuticals and dietary supplements, and other FDA-regulated products. The administration continues to try to use tariffs as a means of balancing the trade deficit with China and to bring the Chinese government to the negotiating table on a longstanding set of issues related to intellectual property (IP), cyber, and technology transfer. There are two steps to the tariff process:

  1. At the proposed stage, parties can submit comments on why the proposed tariffs are damaging to US interests while not addressing the root cause of either the trade imbalance or China’s policies in the IP, cyber, and technology transfer areas. The Office of the United States Trade Representative (USTR) (and other government agencies) will consider the rationale for the comments and factor into the finalization of the tariffs whether the changes proposed in the comments would meet the US government’s objectives. Generally, this administration finds tariffs to be a useful tool,
  2. Once the tariffs are implemented, parties can request “exclusions” for their particular products. Exclusions require a party to indicate why application of the tariffs to its product would be damaging to US interests, disrupt the supply chain, significantly adversely affect the industry, or prevent a US company from providing products, services, or technical assistance based on the cost of the products under the tariff. Other fact-specific arguments can also be presented.

The PRC Ministry of Finance has announced it will audit 77 randomly selected drug makers in China, examining the companies' costs and profits to determine the reasonableness of their drug pricing mechanisms, in a bid to drive down medical costs. The audit will include some of the largest domestic drug makers as well as Chinese subsidiaries of three international pharmaceutical conglomerates.

Read the full LawFlash for more insight on the audit's key areas of focus. This initiative marks the first time the Ministry of Finance has launched a nationwide audit specifically targeting pharmaceutical companies, and it could be expanded if evidence is found to suggest issues are prevalent across the industry.

The Administration for Market Regulation of Jing’an District in Shanghai (AMR) on May 7 announced an administrative penalty decision against the Shanghai branch of a multinational pharmaceutical company for speaking fees it paid to physicians. According to the decision, the AMR found that the speeches in question never actually occurred and that the “speaking fees” were actually bribes. The AMR held that the physicians had utilized their official positions to unduly influence patients to purchase medical products promoted by the company branch, and that the payment of the fees constituted commercial bribery in violation of Article 7, Section 1(i) of the Anti-Unfair Competition Law of the People’s Republic of China.

The payment of speaking fees in the pharmaceutical industry has attracted heightened scrutiny from the Chinese government in recent years, and this case is not the first time the Shanghai AMR has targeted the practice. Read the full LawFlash for more details.