Summary of Key Points
Around the May Day holiday in 2026, the "strictest new policies" against medical corruption (the judicial interpretations from the Supreme People's Court and the Supreme People's Procuratorate, along with management regulations for pharmaceutical representatives issued by seven departments) caused a complete halt in the pharmaceutical promotion industry (CSOs). Hospital sales shares plummeted by 20-30%, and some products saw a 50% decline in sales. A large number of CSO owners, especially those who had already accumulated significant wealth, liquidated their businesses and withdrew from the market, while smaller agencies tried to wait and see. This situation reflects a twenty-year journey for the CSO industry from "wild growth" to being targeted by strict policies. The industry has evolved from being seen as the scapegoat for "cash-based sales" in its early days, to becoming "money-making machines" under the two-invoice system, only to have its profit margins slashed by centralized procurement and DRG (Disease-Related Grouping) initiatives. With these new policies, few companies that do not comply with the regulations will survive; only those that transform will be able to thrive.
Detailed Analysis
Why is the pharmaceutical promotion industry "collapsing" now? — The May Day new policies were the catalyst
In May and June of this year, the pharmaceutical sector suddenly became quiet: pharmaceutical representatives took holidays, agencies went on trips, and direct-sales companies held meetings without conducting any actual business. This was due to the release of the "Interpretation on Bribery" (effective on May 1) by the Supreme People's Court and the Supreme People's Procuratorate on April 10, along with the management regulations for pharmaceutical representatives issued by seven departments on May 8. These two policies formed a comprehensive crackdown:
- Lowered threshold for bribery: Doctors and pharmaceutical representatives who accept 30,000 yuan in bribes are now subject to criminal prosecution (previously, the threshold was 60,000 yuan). For example, if a pharmaceutical representative earns an annual income of 200,000 yuan, according to industry practices, they would need to give out 200,000-800,000 yuan in bribes, which easily exceeds the new threshold. Doctors who receive a few thousand yuan in kickbacks per month could face criminal charges within just a few months.
- Bosses cannot escape responsibility: In the past, problems could be shifted to lower-level employees; now, if a company commits bribery, the company's board members, general managers, and sales directors all bear criminal responsibility. This directly targets the bosses' concerns: those with money fear imprisonment and choose to liquidate their businesses, while smaller agencies without significant profits can only try to avoid the consequences.
As a result, the entire market came to a standstill, with hospital sales shares dropping by 20-30% on average, and some products experiencing a 50% decrease in sales.
What are CSOs? How did they emerge? — From scapegoats to money-making machines
CSO stands for "Contract Sales Organization," which essentially acts as an outsourced company that helps pharmaceutical companies sell their products. Their emergence and development were driven by both policy changes and market forces:
- Early stage: Wild growth of the "large-package model": Before 2010, pharmaceutical companies lacked the ability to sell drugs directly and granted provincial or regional sales rights to individual contractors. These contractors used "cash-based sales" to gain access to hospitals, taking on all the associated risks.
- 2013: The GSK incident led to a shift towards compliance: After the foreign company GSK was fined for commercial bribery, pharmaceutical companies began outsourcing their sales to CSOs, as this allowed them to shift responsibility in case of issues. CSOs became the scapegoats for any problems that arose.
- 2017: The two-invoice system caused a boom for CSOs: This policy limited the number of invoices that could be issued from manufacturers to hospitals to two, cutting middleman profits. Pharmaceutical companies faced two challenges: they had to pay high taxes on inflated profits recorded in their accounts and could no longer privately transfer bribes to doctors. As a result, tens of thousands of new CSOs emerged nationwide, helping companies "wash" their money through fees for consulting or research services.
By this time, there were two main types of CSOs: financial (which only issued invoices and had no employees, making money from invoice transactions) and channel-based (former provincial sales representatives who continued to manage both accounting and hospital relationships).
Previous regulations already made life difficult for CSOs — Centralized procurement and DRG cut into profits
The benefits of the two-invoice system did not last long before stricter regulation was implemented:
- Targeted monitoring: In 2018, the state began monitoring drugs with unclear efficacy and high bribery rates, leading to a sharp decline in sales for these products, which severely affected CSOs that relied on them.
- Centralized procurement: The state, as the "superbuyer," negotiated prices directly with pharmaceutical companies. For example, a drug that cost 10 yuan at the factory could be sold to hospitals for only 5 yuan after centralized procurement, eliminating the 90 yuan in profit margins. By 2025, 80% of common and generic drugs were included in these procurement programs, pushing CSO profits down to below 10%.
- DRG/DIP: Hospitals were encouraged to use drugs more efficiently, as they were charged based on the type of treatment. Doctors avoided prescribing expensive or unnecessary drugs, further limiting CSOs' opportunities for sales.
Many CSOs resorted to tactics such as conducting fake market research (using fake hospital and data) to quickly make money, but this came with significant risks: if caught, their contracts would be deemed invalid, and they would face heavy penalties.
Why are these new policies a "fatal blow"? — They cut off all possible loopholes
Previous regulatory measures could still be avoided, but the new policies create an absolute barrier:
- The low bribery threshold: Even a small amount of money (30,000 yuan) can lead to criminal charges for doctors within a few months.
- Collective responsibility for corporate actions: In the past, problems could be blamed on employees or CSOs; now, company executives (board members and general managers) are held accountable. This means that wealthy owners who have already made substantial profits often choose to liquidate their businesses, while smaller agencies must adapt by reducing activities such as canceling meetings, avoiding hospital visits, and reassigning representatives to non-revenue-generating roles.
The future of CSOs: Transformation or extinction — Compliance is the only way forward
With these new policies, the CSO industry will undergo a major reshuffle. Only two types of companies will survive:
- Those focusing on genuine academic promotion: They rely on the efficacy and expertise of their drugs to convince doctors, rather than on bribery. This requires specialized teams—for example, hiring recent graduates from medical schools with salaries of 15,000-20,000 yuan per year, which smaller CSOs cannot afford.
- Those expanding into external markets: They may target self-funded or specialty drugs not covered by centralized procurement, or work in DTP pharmacies (directly selling to patients) and chronic disease management services. These areas are less regulated and still offer some opportunities.
Smaller agencies and financial-based CSOs will either face regulation or be forced out of the market. In the long run, the pharmaceutical industry must shift from emphasizing sales to focusing on product efficacy. Only when companies invest in research and development to create truly valuable drugs will CSOs continue to play a meaningful role.
In summary, this news report illustrates the painful transition of China's pharmaceutical industry from "cash-based sales" to more compliant and innovative practices. The new policies are not aimed at destroying the industry but at guiding it towards greater integrity. For patients, this may result in fewer expensive, ineffective drugs and more cost-effective, effective treatments in the future.