I-1: Regulations on Transfer of Value (ToV)
This article summarizes the contents of 1️⃣ Regulations on Transfer of Value (ToV), "Chapter 1: Basic Structures of Regulations on Transfer of Value and Bribery to Healthcare Professionals".
For the Japanese version, please refer to the following.
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(1) Regulations by law
1)Premiums and Representations Act
Article 4 of the Act against Unjustifiable Premiums and Misleading Representations (“Premiums and Representations Act”) states that “When the Prime Minister finds it necessary in order to prevent unjust inducement of customers and secure general consumersʼ voluntary and rational choice-making, the Prime Minister may limit the maximum value of a Premium or the total amount of Premiums, the kind of Premiums or means
of offering of a Premium, or any other matter relating thereto, or may prohibit the offering of a Premium”. Premiums and Representations Act was enacted in 1962 as a special act to the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (“Antimonopoly Act”) and the Premiums and Representations Act had been operated by the Fair Trade Commission (“FTC”) until 2009, when the Consumer Affairs Agency (“CAA”) was established and thereby CAA assumed the operation of the Act.
After CAA has assumed the operation of the Act, the words that “ensuring fair competition” have been deleted from the objective of the Act and the authorization of the Fair Competition Code in Ethical Pharmaceutical Drugs Marketing Industry (“FCC”) has been switched from the FTCʼs unilateral authorization to the joint
authorization by CAA and FTC. However, conducts made in accordance with the FCC remains exempted from the application of the Antimonopoly Act (see below).
2)Administrative Notice
In accordance with the said Article 4, the administrative notice of the Restrictions on Premium Offers in the Ethical Pharmaceutical Drugs Industry, the Medical Devices Industry and the hygienic Inspection Laboratory Industry (the “Notice”) prohibits pharmaceutical companies from providing premiums to healthcare professionals/organizations (“HCPs”) beyond the scope deemed appropriate in light of normal business practices as means of unjustly inducing transactions on prescription drugs.
Although non-member companies of the Japan Fair Trade Council of the Ethical Pharmaceutical Drugs Marketing Industry (“JFTC”) are not subject to the FCC and thereby directly subject to the Notice, the regulations under the FCC are still regarded as normal business practices in the pharmaceutical industry and serve as standards by CAA for interpretation of the Notice.
In practice, the membership of JFTC is required for the certification of MRs at the MR Education & Accreditation Center of Japan, and since almost all pharmaceutical companies are members of JFTC, there are virtually no cases where the Notice is directly applied to the pharmaceutical companies.
(2) Self-regulations
1) About the FCC
Article 3 of the FCC prohibits pharmaceutical companies from providing premiums to HCPs as means of unjustly inducing transactions on prescription drugs. While the FCC is a self-regulation in the pharmaceutical industry, it is also legally supported by Article 31 of the Premiums and Representations Act and has the legal effect that the acts made in accordance with the FCC are exempted from the application of the Antimonopoly Act. The FCC was originally issued in 1983 and the lastly revised in 2016.
The rationales of the FCC are explained as follows.
Column: Historical Background of the FCC
2)Composition of the FCC
The main body of the FCC has 12 articles. The FCC also has its Enforcement Rules (having 6 articles), and 4 main Operation Standards, which further divided into 10 items. The Enforcement Rules stipulates matters related to the implementation of the FCC, and the Operation Standards stipulate matters related to the further details of its implementation.
CAA and FTC confirm that the FCC conforms to the requirements set forth in Article 31 of the Premiums and Representations Act through the authorization of the FCC, the approval of the Enforcement Rules, and the notification of the Operation Standards from JFTC to the Director-General of CAA respectively. In practice, the commentaries of the Operation Standards are also important, but the commentaries are not published (only available at the membersʼ website). On the other hand, the member companies are notified by JFTC in advance when the commentaries are revised.
3)Definition of premiums
Article 3 of the FCC states that pharmaceutical companies shall not offer premiums to HCPs as means of unjustly inducing transaction of prescription drugs. The term “premiums” refers to goods, money, or other kinds of economic benefits that pharmaceutical companies may offer to the other party, to induce customers, in connection with transactions of prescription drugs supplied by the pharmaceutical company, irrespective of the method employed (Article 2, Paragraph (5) of the FCC). The followings are listed as “economic benefits”.
Premiums shall not include economic benefits that are deemed to be attached to the prescription drugs in light of normal business practices nor economic benefits that are deemed to be discounts or after-sales services in light of the normal business practices (Article 2, Paragraph (5) of the FCC).
Specific examples of the premiums or economic benefits that pharmaceutical companies may provide are listed as follows.
4) Operation and execution of the FCC
JFTC is a voluntary industry association that operates the FCC. JFTC engages in the following activities.
(ⅰ)Ensuring the compliance of the FCC by awareness-raising of member companies;
(ⅱ)Providing member companies consultation and guidance on the FCC;
(ⅲ)Investigating suspected violations by member companies and taking measures against such violations;
(ⅳ)Disseminating information on regulations of Premiums and Representations Act and fair trades.
As of January 1, 2021, JFTC has 224 member companies. The Board of Directors is established at the general meeting of member companies. In principle, the chairperson of the Federation of Pharmaceutical Manufac turersʼ Associations of JAPAN serves as the chairperson of JFTC, and the representatives from 5 industry associations JPMA, Japan Generic Medicines Association (“JGA”), Japan Direct Selling Pharmaceutical
Manufacturers Association (“JDSPA”), the Home Medicine Association of Japan (“HMAJ”), Japan Kampo Medicines Manufacturers Association (“JKMA”) ) are appointed as the vice chairpersons. The Board of Directors consists of 29 members. The JFTCʼs headquarters has the Steering Committee comprised from 56 companies, including 26 companies appointed as the permanent member, under which the Working Committee has been established, and an Operation Standards Groups have been formed to conduct research on the rules on fair competitions.
JFTC also has 8 branches throughout Japan. Each branch conducts activities such as supervision of the FCC compliance such as providing member companies consultations for the prevention of the violation or conducts investigations on suspected violations.
In order to prevent other member companies from implementing the same conducts as those determined by the Prior Consultation Committee as impossible under the FCC, to the extent not violating confidentiality, JFTC may notify the member companies “answers” to the past consultations as well as explain them in the JFTC News or the Consultation Case List, or report them at training meetings in each branch.
(3) Sanctions against violation
Investigation Committees at the headquarters or branches conduct investigations on suspected violations by member companies and take measures to remove such violations as well as prevent recurrence if violations are found. In principle, branches make dispute resolutions on the cases; however, the cases that may or should not be handled locally will be passed to the Investigation Committee at headquarters.
After the investigation, the measures shall be taken in accordance with the following criteria.
When penalty or an expulsion is posed to a company as a result of the investigation, a proposed measure shall be sent to the company. If the company would like to make an objection to the proposed measure, a written complaint may be filed with JFTC within 10 days after the deposition. If there is no objection to the proposed measure, the measure will be fixed.
JFTC shall provide the member companies with the opportunity to make additional rebuttal in the complaint and JFTC shall review the complaint to consider the measures taken.
Under the FCC, the objection procedures are limited to cases of penalty or expulsion. However, in actual practice, the objection procedures are granted to cases of warning or severe warning.
(4) Actual example of violation: MSD K.K. (“MSD”)
In practice, there have been no past cases of penalty, expulsion, or the request for measures. However, the reputation risk is serious when the violation is recognized and measures are taken by JFTC.
Example: MSD K.K. (“MSD”)
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