A pharmaceutical company planning to list has been implicated in a commercial bribery scandal amid an industry-wide anti-corruption campaign. On March 24, China's National Healthcare Security Administration disclosed details of a case involving sales representative Zhang Ximeng, who offered bribes totaling 365,000 yuan to medical staff at Shanhaiguan People's Hospital in Qinhuangdao City between August 2013 and July 2023 to promote Compound Huangbai Lotion.
The bribes included 156,900 yuan paid to the head of the obstetrics and gynecology department for drug recommendations, 25,000 yuan to the outpatient pharmacy director for prescription data, and 183,000 yuan to two dermatologists to increase prescriptions. In November 2024, Zhang was sentenced to one year in prison, suspended for 18 months, and fined 20,000 yuan for bribery offenses.
Although the company was not explicitly named in the report, regulatory records indicate that the only approved version of Compound Huangbai Lotion in China is produced by Shandong Hanfang Pharmaceutical Co., Ltd., which is currently in a critical phase of its Hong Kong IPO application. The product's approval number matches that disclosed in court documents, confirming Hanfang Pharmaceutical's involvement.
The timing is particularly sensitive, as Hanfang submitted its IPO prospectus on February 25, just one month before the bribery case was made public. According to the filing, Compound Huangbai Lotion accounted for 99.8%, 99.8%, and 99.7% of the company's total revenue in 2023, 2024, and the first three quarters of 2025, respectively, making it virtually the sole source of income. This overlap between the product involved in the scandal and the company's core revenue stream has raised serious concerns about the legality of its sales practices.
Financial data further highlight potential risks in Hanfang's sales model. Sales and marketing expenses reached 510 million yuan, 480 million yuan, and 420 million yuan in the same periods, accounting for 48.7%, 48.6%, and 52.3% of total revenue. The company attributed these high costs to third-party promoters engaged for market research and academic conferences but provided limited details.
Under tightened regulations banning kickbacks and improper benefits in drug sales, such high marketing spending has drawn scrutiny. Hanfang’s reliance on third-party promoters falls into a regulatory gray area. Moreover, the company's overdependence on a single product amplifies compliance risks. Although the drug is under national secondary protection until July 2030, its revenue fell 5.8% year-on-year in 2024, with net profit dropping 16.03%. If penalized with inclusion in a medical insurance dishonesty list, Hanfang could face sales restrictions or delisting, potentially halting operations.
The bribery case adds to existing challenges for Hanfang's IPO bid. The company reported weak short-term liquidity, with a current ratio of 1.2 and a quick ratio of 1.0 as of the first three quarters of 2025, while cash reserves fell 45.4% after dividend payouts totaling 200 million yuan in 2024 and 2025. The firm is family-controlled, with brothers Qin Wenji and Qin Yinji, aged 70 and 63, holding 90% and 10% of shares, respectively. R&D progress remains slow, with no significant new products beyond traditional formulas like Angong Niuhuang Wan and Wuji Baifeng Wan.
The outcome of the bribery case will be critical. Authorities have initiated a credit evaluation under pricing and procurement rules, where penalties for serious dishonesty can include nationwide sales bans. Industry analysts note that compliance is now a decisive factor for IPO approval. For Hanfang, clarifying its connection to the case and strengthening internal controls are urgent priorities. Long-term sustainability will require moving away from high-risk sales practices and focusing on clinical value—a fundamental expectation for pharmaceutical firms seeking listing in today's regulated environment.