What is the Response to Administrative Penalties for Violations of the 'Japanese Pharmaceutical and Medical Device Act'? Explanation Including Examples

Under the Japanese Pharmaceutical Affairs Law, administrative measures such as business improvement orders and revocation of manufacturing and sales approval for pharmaceutical manufacturers and sellers have been stipulated for some time. However, with the amendment in the first year of Reiwa (2019), new systems such as a surcharge system were introduced.

In this article, we will discuss the government’s response to violations of the Japanese Pharmaceutical Affairs Law and provide explanations on specific cases, while also touching on the new systems.

Two Types of Administrative Measures and Their Implementation in the Japanese Pharmaceutical and Medical Device Act

The Japanese Pharmaceutical and Medical Device Act aims to improve public health by implementing necessary regulations and measures to ensure the quality, efficacy, and safety of pharmaceuticals and prevent the occurrence and spread of health hazards (Article 1 of the Japanese Pharmaceutical and Medical Device Act).

These measures can be broadly divided into two categories: ① acts by the administration that create rights and obligations for private individuals as a result of the law, and ② means to ensure the fulfillment of obligations imposed by the acts in ①.

Acts by the Administration that Create Legal Rights and Obligations for Private Individuals

These acts can be further classified into “directive acts” that command private individuals to act or refrain from acting, “constitutive acts” that establish a legal status for private individuals, and “determinative acts” that determine legal relationships concerning private individuals.

(Source: Materials from the 3rd Meeting of the Pharmaceutical and Medical Device System Subcommittee on June 7, 2018 (Heisei 30))

In the Japanese Pharmaceutical and Medical Device Act, directive acts include orders for improvement of quality and safety management methods (Article 72, Paragraph 1 of the Japanese Pharmaceutical and Medical Device Act), orders to cease violations (Article 72-5, Paragraph 1 of the Japanese Pharmaceutical and Medical Device Act), and business suspension orders (Article 72, Paragraph 1 and Article 75, Paragraph 1 of the Japanese Pharmaceutical and Medical Device Act), among others.

In particular, the range of violations subject to measures such as orders to cease violations (Article 72-5 of the Japanese Pharmaceutical and Medical Device Act) was expanded by the amendment in 2019 (Reiwa 1).

For more information on the 2019 (Reiwa 1) amendment to the Japanese Pharmaceutical and Medical Device Act, including the measure orders, please refer to the following article.

Related Article: Contents of the 2019 (Reiwa 1) Amendment to the Japanese Pharmaceutical and Medical Device Act – The Role of Pharmacies and Pharmacists, and the Administrative Monetary Penalty System

As for constitutive acts, the Act stipulates the approval of business regulations for registered certification bodies (Article 23-10, Paragraph 1 of the Japanese Pharmaceutical and Medical Device Act) and the cancellation of manufacturing and sales business licenses (Article 75, Paragraph 1 of the Japanese Pharmaceutical and Medical Device Act), among others.

Means to Ensure the Fulfillment of Obligations Imposed on Private Individuals

In the aforementioned acts, even if an order for improvement of quality and safety management methods is issued to a manufacturer or seller of pharmaceuticals, the quality and safety management methods will not be improved unless the manufacturer or seller actually takes action to improve. Therefore, the obligation is not fulfilled just by issuing the order.

Therefore, the law stipulates methods for the administration to compel private individuals to fulfill their obligations and sanctions for violations of obligations, as means to ensure the fulfillment of obligations by private individuals.

In the Japanese Pharmaceutical and Medical Device Act, penalties such as imprisonment and fines (Article 83-6 and below of the Japanese Pharmaceutical and Medical Device Act), surcharges (Article 91 of the Japanese Pharmaceutical and Medical Device Act), etc., have been established. The administrative monetary penalty system (Article 75-5-2 of the Japanese Pharmaceutical and Medical Device Act), newly established by the 2019 (Reiwa 1) amendment, is also positioned as a sanction for violations of obligations.

What is the Surcharge System under the Japanese Pharmaceutical Affairs Law?

A surcharge is a financial burden imposed on violators. Similar financial burdens include “fines”, but fines are a type of criminal punishment stipulated in the Japanese Penal Code, and if imposed, it results in a criminal record. On the other hand, surcharges are positioned as administrative penalties, and the fact that a payment order has been received does not result in a criminal record.

One of the reasons for the introduction of the surcharge system was that the maximum fine stipulated from the past was set at 2 million yen, which is a small amount compared to the sales generated by acts that violated the Japanese Pharmaceutical Affairs Law.

There were criticisms of this system, such as it being insufficient as a deterrent against violations, and that it should confiscate unjust profits. Therefore, under the surcharge system, 4.5% of the sales generated by the violation is set as the amount of the surcharge, and a financial burden is imposed according to the violation.

Also, there is no upper limit set for the amount of the surcharge. Therefore, companies that sell pharmaceuticals and other products through illegal advertising such as false and exaggerated advertisements may face a significant financial burden. Therefore, when advertising pharmaceuticals and other products, it is necessary to pay close attention to ensure that there is no violation of legal regulations.

For more detailed information on how to calculate surcharges, please refer to the following article.

Related article: What is the Surcharge System under the Japanese Pharmaceutical Affairs Law? Explanation of Targeted Acts and Cases Where Reductions are Granted

Examples of Administrative Penalties for Violations of the Japanese Pharmaceuticals and Medical Devices Act

When a company violates the Japanese Pharmaceuticals and Medical Devices Act, administrative penalties are imposed, and press releases are issued by the Ministry of Health, Labour and Welfare. Below are some examples of administrative penalties imposed on companies.

Case 1: Pfizer Inc.

In September 2015, Pfizer Inc. was issued a business improvement order (Article 72-4, Paragraph 1 of the Japanese Pharmaceuticals and Medical Devices Act).

Manufacturers and sellers of pharmaceuticals are required to report any symptoms suspected to be side effects to the Minister of Health, Labour and Welfare within a certain period (Article 68-10 of the Japanese Pharmaceuticals and Medical Devices Act, and Article 228-20 of the Enforcement Regulations of the same Act). In this case, Pfizer Inc. was found to have failed to report 212 cases of side effects from 11 types of drugs, including anticancer drugs, that it manufactures and sells, within the required period.

This case involved a situation where the person in charge of medical information who was aware of the side effects did not report to the safety management department. As a result, the business improvement order included revising the safety management procedures, providing education and training to employees, and submitting improvement plans for corrective measures and recurrence prevention.

Reference: Administrative penalties for violations of the Pharmaceuticals and Medical Devices Act | Ministry of Health, Labour and Welfare

Case 2: Kansai Medico Co., Ltd.

In March 2017, Kansai Medico Co., Ltd. was issued a business improvement order (Article 72-4, Paragraph 1 of the Japanese Pharmaceuticals and Medical Devices Act) and a business suspension order (Article 75, Paragraph 1 of the same Act) by Nara Prefecture and Nara City.

This case involved the dispensing of counterfeit “Harvoni combination tablets,” a treatment for hepatitis C, at a pharmacy, which were then distributed to patients.

The store that purchased the counterfeit product was issued a business suspension order and an order to change the manager (Article 73 of the Japanese Pharmaceuticals and Medical Devices Act) for reasons such as purchasing and storing counterfeit products for the purpose of selling and granting them to other stores (violation of Article 55, Paragraph 2 of the same Act), not having the manager manage the purchase and distribution of pharmaceuticals (violation of Article 7, Paragraph 2 of the same Act), and not having the manager conduct tests and inspections of pharmaceuticals at the purchasing stage despite the absence of boxes and accompanying documents (violation of Article 9, Paragraph 1 of the same Act).

In addition, two stores that had been given counterfeit products from the purchasing store were issued business improvement orders regarding the management system for pharmaceuticals and the supervision system of the pharmacy opener.

Reference: Response to the counterfeit “Harvoni® combination tablets” for hepatitis C treatment found in the prefecture (5th report) (Press release material of Nara Prefecture)

Reference: Response to the counterfeit “Harvoni® combination tablets” for hepatitis C treatment found in the prefecture (6th report) (Press release material of Nara Prefecture)

Measures to Avoid Violating the Japanese Pharmaceutical and Medical Device Act

As we have discussed so far, if you violate the Japanese Pharmaceutical and Medical Device Act, you may face administrative penalties. Furthermore, the fact of your company’s violation and the details of the administrative penalties may become public knowledge. This could result in not only financial burdens but also the potential loss of your company’s credibility.

So, what measures should be taken to avoid violating the Japanese Pharmaceutical and Medical Device Act?

Establishing Company Guidelines

One measure is to establish company guidelines. It is necessary to understand what actions constitute a violation of the Japanese Pharmaceutical and Medical Device Act by checking the provisions and various guidelines and notifications issued by the Ministry of Health, Labour and Welfare. However, understanding the necessary information from these sources can be laborious.

Therefore, by sharing within the company guidelines on how to conduct business in areas where there may be a risk of violating the Japanese Pharmaceutical and Medical Device Act, you can raise awareness of potential violations among each employee.

Especially for advertisements of pharmaceuticals and other products, not only the manufacturing and sales companies but also the advertising agencies need to be careful not to violate the Japanese Pharmaceutical and Medical Device Act. If you can communicate the points to be careful about to your business partners, the risk of violating the Japanese Pharmaceutical and Medical Device Act will be further reduced.

Consulting with a Lawyer

When establishing guidelines, if you are unsure about the selection of information to refer to, or whether the established guidelines are sufficient, it is important to consult with a lawyer who is familiar with the Japanese Pharmaceutical and Medical Device Act. Although it is difficult to definitively judge whether an action falls under the regulations of the Japanese Pharmaceutical and Medical Device Act, you can expect advice from a legal perspective unique to lawyers based on past experiences.

Conclusion: Consult a Lawyer for Legal Checks on the Japanese Pharmaceuticals and Medical Devices Act

Whether a certain action violates the Japanese Pharmaceuticals and Medical Devices Act can be clearly determined by some companies, but there are also cases where it is difficult to judge, as it could be seen as either legal or illegal depending on the perspective. If you are concerned that the business operations you are currently conducting or planning to conduct in the future may conflict with the Japanese Pharmaceuticals and Medical Devices Act, please consult a lawyer.

Legal checks and suggestions for rewriting expressions related to the Japanese Pharmaceuticals and Medical Devices Act and other laws are highly specialized areas. Monolith Law Office has formed a legal team specializing in the Japanese Pharmaceuticals and Medical Devices Act, and we handle article checks for a variety of products, from supplements to pharmaceuticals.

Measures Provided by Our Firm

Monolith Law Office is a legal office with extensive experience in both IT, particularly the internet, and law. We provide services such as legal checks of articles and landing pages, creation of guidelines, and sampling checks for various entities including media operators, review site operators, advertising agencies, direct-to-consumer (D2C) businesses such as supplements, cosmetic manufacturers, clinics, and ASP businesses. Details are provided in the article below.

Areas of expertise at Monolith Law Office: Article and Landing Page Checks for Pharmaceutical and Medical Device Law, etc.