Investing in the "beauty economy"

张露戴静宇北京市竞天公诚律师事务所 2022-07-23

Authors: Zhang Lu / Dai Jingyu

(This article was first published on China Business Law Journal column "Life sciences & healthcare", authorised reprint)

Chinese authorities have started a crackdown on illegal medical cosmetic services, with a number of ministries and departments issuing a joint special plan of general rectification from June to December. While this heralds an era of tightened regulation for medical cosmetic companies, the sector remains an alluring one for investors keen to ride the wave of the “beauty economy”.

QUALIFICATIONS

First and foremost, it is important to understand that there is a world of difference between cosmetic hospitals and beauty salons. According to the Regulation of Medical Beauty Treatments, medical cosmetology refers to the repair and reconstruction of facial appearance or of various parts of the body through surgery, medicine, medical devices or other traumatic or invasive medical technologies. Life cosmetology, on the other hand, according to the National Medical Products Administration (NMPA), refers to non-invasive healthcare using cosmetics, health products and non-medical devices, such as skin and hair care, and massage. Cosmetic hospitals providing medical cosmetology services require a Medical Institution Practice Licence; beauty salons providing lifestyle cosmetology services require a Sanitary Permit for Public Places.

Cosmetic hospitals are only one type of cosmetic institution. According to the List of Reforms Related to Enterprise-Related Operation-Permitting Matters Established at Central Level (2021 National Version), since 1 July 2021, the permit entry management of clinics has been replaced nationwide with filing management. For the medical cosmetology industry, this marked the further relaxation of restrictions on individuals or organisations establishing cosmetic plastic surgery clinics and medical beauty clinics.

SERVICES

Under the Hierarchical Management of Medical Cosmetic Services, cosmetic surgeries are classified into four categories based on technical difficulty, probability of medical accident and degree of risk. Investors may refer to an institution’s practice licence for the medical subjects it may undertake, which helps understand its scope of service.

Unfortunately, finding out about every medical cosmetic item is not a simple matter of looking it up in the relevant laws and regulations, and investors often have to make up their own minds on whether the institution is operating outside of its permitted scope.

We suggest that investors become familiar with the specific procedures in order to determine if the instruments and devices involved have been properly registered and all the appropriate filings made;

And to determine if the procedures fall under physical or other traumatic or invasive cosmetic treatment using medicine, medical device or surgery, based on how the instruments and devices are actually used.

For example, the current popular "Thermagi" and "ThermoLift" are radiofrequency therapy in the category of invasive treatment projects of beauty Dermatology; "Fotona4d" uses a medical laser instrument, which belongs to laser therapy. If an institution uses such words as "laser treatment" to promote "Thermagi", but it does not have the Medical Institution Practice Licence or its diagnosis and treatment subjects do not include the department of beauty and dermatology, such circumstance shall consititute operation beyond the business scope, and the institution may be fined or have its Medical Institution Practice Licence revoked.

PRICING AND MARKETING

In terms of pricing, non-governmental medical institutions may adopt the market regulation price – in other words, independent pricing, while public medical institutions must file with the competent authority for price announcement. A medical cosmetic institution must publicly display its physicians, items and prices at its premise, so consumers can make a thorough price comparison.

It is worth noting that cosmetic marketing suffers from rampant price frauds such as “falsified original price” and “inconsistent fees”. Regulators nationwide have made many attempts to counter the problematic pricing of cosmetic services in recent years.

Medical cosmetology is simultaneously a type of medical treatment and consumer product. Medical cosmetic institutions may only publish advertisements after obtaining the Examination Certificate for Medical Advertisements. They are further prohibited from disguising advertisements under the form of news or features or committing any false publicity.

In line with the media trends, many medical cosmetic institutions have opted for live streaming and short video as new outlets, featuring influencer demonstrations of the whole procedure or real-time Q&A sessions with a doctor. For the most part, such programs are individual creations in name only and are in fact coordinated with the institutions with the ultimate goal of soliciting purchases and generating user traffic.

To enhance regulation and supervision in medical cosmetology advertisement, the State Administration for Market Regulation issued the Guidelines for the Enforcement of Medical Cosmetology Advertisement on 2 November. Depending on its exact content or form, such thinly veiled promotion may still be recognised by regulators as disguised advertisements. Novelty notwithstanding, institutions must always comply with advertising laws and regulations when promoting their products. This includes avoiding any advertisements promoting “appearance anxiety”, or disguised as healthcare public service announcements (PSA), interviews or news reports.

MEDICINE & MEDICAL DEVICES

Medicine and medical devices used during medical cosmetic treatment ar medical cosmetic products, which can only be operated by a qualified practising physician with relevant clinical experience in a qualified medical cosmetic institution. Other than the required qualifications, investors should also note whether the products used have been legally procured.

Medical cosmetic institutions should only purchase legally registered/file medicine and medical devices from companies with production andJane Zhang operating qualifications. They should also establish an internal inspection system for all incoming products and avoid buying anything of unknown origin or ingredients through online, social media or cross-border channels.

Taking the example of hyaluronic acid injection, a popular form of facial cosmetic treatment, investors may refer to the NMPA website to determine if the Registration Certificate for Medical Device, or the approval for domestic sale, have been obtained for the domestic or foreign brands of hyalu-ronic acid, respectively.

The medical cosmetic industry is at a critical juncture, with both intensified regulation and strong capital inflow looming. Lowering investment risks and ensuring compliance with the complex regulations are matters of high priority in joining medical cosmetic institutions with the capital market in a healthy and productive manner.

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