Chapter 19: Common Breaches and Legal Risks
Hello to everyone currently engaged in, or planning to engage in, the pharmaceutical business in Hong Kong! I am Drew Tang from RGYS. In the preceding chapters, we discussed in detail the application procedures and licence-holding requirements for various pharmaceutical licences. However, RGYS may assist with document preparation and project coordination within the written scope of services; personnel qualifications, statutory roles and professional judgements are to be verified and assumed by the respective responsible parties, while approval is determined independently by the competent authority. In day-to-day operations, any oversight may breach Hong Kong's strict pharmaceutical regulations and lead to serious legal consequences. In this chapter, RGYS may assist with document preparation and project coordination within the written scope of services; personnel qualifications, statutory roles and professional judgements are to be verified and assumed by the respective responsible parties, while approval is determined independently by the competent authority. We will provide an in-depth analysis of common breaches, potential legal risks and how to establish an effective risk prevention system to ensure the long-term stability of your business.
1. Serious legal consequences of operating without a licence
In Hong Kong, operating a pharmaceutical business without a licence is one of the most serious types of unlawful conduct. The Drug Office, Department of Health, and the police take a “zero tolerance” approach to such conduct, and those found doing so may face severe criminal prosecution. Many investors may take a chance, believing that they will not be caught if they conduct a “soft launch” or operate on a small scale, but this is extremely dangerous.
Under section 29 of the Pharmacy and Poisons Ordinance (Cap. 138), any person who sells or distributes any poison or medicine without the relevant licence commits an offence. On a first conviction, the maximum penalty is a fine of HKD 100,000 and imprisonment for 2 years. Please note that “poisons” here do not mean poisons in the traditional sense, but refer to regulated medicines listed in the Schedules to the Pharmacy and Poisons Regulations. This means that selling even common over-the-counter medicines, such as cold medicines containing Part I poisons, without a licence constitutes a criminal offence.
Drew Tang’s reminder: do not break the law
In cases I have handled, a client began selling some health supplements and medicated oils while the shop was being fitted out and the licence application was pending. Department of Health staff conducting a covert test purchase caught them in the act. The application was ultimately refused, and the Person-in-Charge was prosecuted and left with a criminal record, causing irreparable damage to their future business reputation. I must therefore stress that no form of medicine sales may take place before the formal licence is obtained.
2. Common types of breaches and corresponding penalties
For pharmacies, drug stores or wholesalers that have successfully obtained licences, compliance risks in day-to-day operations should not be overlooked. Breaching any licence condition may also result in disciplinary action by the Pharmacy and Poisons Board (PPB), or even criminal prosecution. These conditions cover many areas, including premises management, medicine storage, record-keeping and staffing. I have summarised below common breaches, together with their corresponding legal bases and penalties, as a reminder to all.
For example, the storage of medicines is a top regulatory priority. All medicines must be stored in a cool, dry place away from direct sunlight. Medicines requiring refrigeration (such as insulin and certain vaccines) must be kept in a pharmaceutical refrigerator equipped with temperature monitoring and alarm functions. I have seen a pharmacy lose an entire batch of vaccines when the refrigerator lost power overnight. It suffered substantial financial losses and was also warned by the PPB for breaching storage conditions. Another common problem is incomplete records. In particular, sales of prescription medicines and dangerous drugs must be recorded in detail as required by law and retained for at least two years for inspection at any time.
| Types of non-compliance | Specific description | Relevant legislation / licence conditions | Possible penalties |
|---|---|---|---|
| Improper storage conditions | Medicines stored at temperatures other than those required; medicines stored together with non-medicinal items (such as food or miscellaneous goods). | Pharmacy and Poisons Regulations; specific conditions of Wholesale Dealer Licence / Pharmacy Licence | PPB disciplinary action (warning or reprimand); if the medicine deteriorates as a result, the person may be charged with selling a medicine unfit for human use. |
| Incomplete sales/inventory records | Failure to accurately record details of the purchase and sale of Part I poisons and dangerous drugs (such as dates, quantities, prescribing doctors and purchaser information). | Cap. 138A; Dangerous Drugs Ordinance (Cap. 134) | Maximum fine of HKD$50,000 and imprisonment for 1 year; disciplinary action by the PPB. |
| Failure to employ a registered pharmacist as required | The “Authorised Seller of Poisons (ASP)” (pharmacy) has no registered pharmacist on site to supervise the sale of medicines during business hours. | Section 19 of Cap. 138 | Maximum fine of HKD$100,000 and imprisonment for 2 years; the licence may be suspended temporarily or revoked. |
| Illegal sale of antibiotics | Selling antibiotics listed in the Antibiotics Ordinance (Cap. 137) without a doctor’s prescription. | Section 3 of Cap. 137 | Maximum fine of HKD$30,000 and imprisonment for 1 year. |
| Improper handling of prescriptions | Failure to check prescriptions in accordance with the prescription drug regulations, cancel prescriptions after dispensing, or prevent repeat dispensing of non-designated medicines. | Cap. 138A | PPB disciplinary action; criminal prosecution may be brought in serious cases. |
III. Disciplinary proceedings and compliance risk prevention
When inspectors from the Drug Office, Department of Health discover suspected non-compliance during an inspection, they investigate and gather evidence, then submit a report to the Pharmacy and Poisons Board (PPB). The Disciplinary Committee under the PPB is responsible for conducting hearings for licence holders. Depending on the severity of the breach, the Disciplinary Committee may impose a range of disciplinary measures.
These disciplinary measures include issuing a written warning to the licensee; public reprimand; ordering the licensee to rectify breaches within a specified period; suspending the licence temporarily (for up to 2 years); and even revoking the licence permanently. Once a licence is revoked, the persons concerned will be unable to apply again for a period of time, which is a devastating blow to the business. During disciplinary hearings, licensees have the right to present their defence and engage legal representatives. As for me, Drew Tang, and the RGYS team, RGYS may assist with document preparation and project coordination within the written scope of services; personnel qualifications, statutory roles and professional judgements are to be verified and assumed by the respective responsible parties, while approval is determined independently by the competent authority.
Under section 9 of the Pharmacy and Poisons Ordinance, the Pharmacy and Poisons Board Disciplinary Committee has the power to “inquire into and take disciplinary action in respect of the professional misconduct of any registered pharmacist, Listed Seller of Poisons or Authorised Seller of Poisons, or any wholesaler who contravenes this Ordinance or any licence condition”.
So, how can these compliance risks be effectively prevented? I have summarised the following “Drew Tang recommendations”:
Compliance advice from Drew Tang
- Establish Standard Operating Procedures (SOPs): Prepare clear written SOPs for every stage of pharmaceutical operations, including procurement, receipt, storage, stocktaking, sales and record-keeping, and provide systematic training to all staff to ensure that everyone understands and follows them strictly.
- Regular internal audits: Do not wait until the Department of Health carries out an inspection to discover problems. Conduct a comprehensive internal compliance audit at least once every quarter, simulating an official inspection to identify potential risks proactively and address them.
- Pay attention to personnel management: Ensure that the pharmacists and employees you engage maintain high standards of professional conduct. For key roles, such as personnel responsible for managing dangerous drugs, conduct background checks and provide ongoing compliance training.
- Seek professional support: Pharmaceutical regulations are complex and continually evolving. Working with professional compliance consultants such as Rengangyongsheng (Hong Kong) Limited can help you keep up with the latest regulatory developments, review your operating model regularly and provide professional solutions when regulatory issues arise.
In summary, compliance is the lifeline of pharmaceutical businesses in Hong Kong. Operators must remain vigilant and embed compliance into the fabric of their corporate culture. This is not only a matter of respecting the law, but also a responsibility to protect public health. If you have any questions about compliance, please feel free to contact me. Drew Tang will be pleased to help.