A recent criminal judgment from the Gao'an People's Court in Jiangxi Province has drawn widespread attention from the pharmaceutical and capital markets. The ruling revealed a bribery case involving medical representatives who facilitated drug sales through kickback payments, with bribery amounts totaling nearly 2 million yuan, involving over 30 doctors across two hospitals, and related drug sales exceeding 10 million yuan. This case has thrust Jiangxi Baishen Pharmaceutical Co., Ltd. ("Baishen Pharmaceutical"), which once pursued an IPO before voluntarily withdrawing, back into the public spotlight.
**Kickbacks Based on Prescription Volume: Bribery Timeline Highly Overlaps with Baishen's IPO Process**
According to the judgment, the main defendant Huang Mouyun began overseeing sales of Baishen Pharmaceutical's product "Baishen Granules" at a hospital in Gao'an City from late 2018. To boost sales volume, following instructions from his supervisor Lei Mougen, Huang promised doctors kickbacks equivalent to 10%-15% of prescription amounts. All kickbacks were paid in cash, delivered in envelopes to doctors, involving over 30 medical professionals.
By the time of the case's discovery, Huang Mouyun had paid a total of over 1.92 million yuan in kickbacks to doctors, personally profiting approximately 250,000 yuan. The court determined that Huang's actions constituted bribery of non-state personnel, ultimately sentencing him to three years imprisonment with three years probation and a fine of 50,000 yuan.
Notably, the timeframe of these bribery activities (late 2018 to 2024) highly coincided with Baishen Pharmaceutical's pursuit of A-share listing. The company submitted its prospectus in July 2022, planning to list on the Shenzhen Stock Exchange main board, but voluntarily withdrew its materials in September 2023, bringing its listing journey to an abrupt halt.
According to its prospectus, the company's sales expenses remained persistently high from 2019-2022, totaling over 900 million yuan. "Market and academic promotion fees" represented an extremely high proportion, totaling nearly 800 million yuan over three years, with "academic promotion conferences" alone accounting for 421 million yuan. The frequency of conferences far exceeded industry peers, triggering repeated inquiries from the exchange.
During Baishen Pharmaceutical's IPO review process, the Shenzhen Stock Exchange had already raised sharp questions about the authenticity and reasonableness of its sales expenses. Records show that many of the company's promotion service providers exhibited obvious anomalies. For example, Anhui Xiada was established in June 2020 and immediately became Baishen's largest promotion service provider that same year, with its registered address located in a township in Anhui's Huangshan area before being dissolved in July 2022. Shandong Juqian was established in June 2020 and became the third-largest promotion service provider that year. Hainan Kangjia was established in July 2020, began cooperation the same year, and was dissolved in January 2022. Jiangxi Yurao was established in November 2019, began cooperating with Baishen in 2020, and became highly dependent on Baishen for revenue.
These companies commonly exhibited characteristics of remote registration locations, immediate cooperation upon establishment, and dissolution after cooperation ended, clearly inconsistent with normal market logic, raising suspicions about potential benefit transfers and irregular operations.
**Medical Anti-Corruption Maintains High Pressure: Sales Compliance Becomes IPO Red Line**
The kickback behaviors mentioned in the judgment, while deemed individual actions, inevitably raise questions about whether Baishen Pharmaceutical's expensive sales system systematically relied on cash-incentivized sales. Data shows that from 2020-2022, Baishen Pharmaceutical's sales expense ratio consistently exceeded 50%, while R&D expenses totaled only 53 million yuan over three years, less than 6% of sales expenses.
In recent years, anti-corruption efforts in the medical field have intensified, and sales expense compliance has become the most sensitive review aspect for pharmaceutical companies during IPO and refinancing processes. Multiple pharmaceutical companies seeking listing have had their reviews terminated due to questionable authenticity of promotion expenses and commercial bribery risks.
While Baishen Pharmaceutical was not deemed guilty of corporate bribery in this judgment, the anomalies in its promotion model and the individual case disclosed in the judgment sufficiently demonstrate significant deficiencies in its internal controls and compliance management.
Although the Huang Mouyun case has been adjudicated, the unspoken rules of pharmaceutical sales it reflects are far from eradicated. Whether Baishen Pharmaceutical or other pharmaceutical companies relying on high-cost promotion strategies, all should reassess their sales and compliance systems. In today's normalized medical anti-corruption environment, relying solely on cash-incentivized sales can no longer pave the way to capital markets. Only by returning to product fundamentals, increasing R&D investment, and establishing transparent sales mechanisms can pharmaceutical companies achieve sustainable development.