The Life Sciences Law Review: China
China continues with drug and device regulatory reform. Over the last year, it has established a considerable body of implementing regulations to support its newly revised Drug Administration Law (DAL) and continues reform in the device area too. While the covid-19 pandemic has influenced certain drug and device regulatory policies in certain respects, 2020 saw China stay the course of drug and medical device regulatory reform initiated approximately three years earlier.
Beginning in earnest in 2017, and deepening with the issuance of the Opinion on Deepening the Reform of the Review and Approval System and Encouraging the Innovation of Drugs and Medical Devices (Innovation Opinion) (No. 42 of 2017), the central government established a reform plan to create a true research-based, innovative industry for drugs and devices. These reforms included a quicker notification mechanism for approving clinical trials, acceptance of foreign data, expansion of the number of eligible clinical trial sites, and a marketing authorisation holder system that permits smaller companies with research (but no manufacturing) capability to hold and reap the benefits of product approvals. As will be discussed herein, the prior system tied one product licence to a specific manufacturing facility and made contract manufacturing and supply chain diversification difficult.
Since the Innovation Opinion, China has been implementing many of the changes in its policy blueprint for innovation via regulatory fiat or pilot programmes, as opposed to principled amendments to its laws and regulations. For example, in 2015, the legislature and the chief drug and device regulator, the National Medical Products Administration (NMPA), worked to implement a pilot marketing authorisation holder programme (MAH Pilot) in 10 provinces and municipalities. A similar device MAH programme was adopted on a limited scale and expanded to 21 provinces and municipalities in August 2019. In 2019, the National People's Congress passed the first full-scale revision of its DAL since 2001. At the same time, it issued its first specialised statute governing various aspects of the life cycle of vaccine products, the Vaccine Administration Law (VAL), prompted by a scandal related to the manufacturing of vaccines that emerged during the summer of 2018. On that basis, the NMPA and its Centre for Drug Evaluation (CDE) have issued a number of implementation rules and guidelines including in the areas of drug registration and manufacturing, as well as a number of draft rules in the areas of pharmacovigilance, vaccine manufacturing and distribution, and marketing authorisation amendment.
At the time of writing, many of these reforms are still ongoing for drugs, so the text below combines the existing reforms and legislation completed to date with the elements of the current system that remain, noting when possible (and credible) how existing draft proposals could change that.
For devices, the evolution is more complete in some ways. Although the Regulation for Supervision and Administration of Medical Devices (RSAMD) has not yet been amended since the Innovation Opinion in late 2017, the State Council and NMPA restructured that regulation more recently with a full revision in 2014 and a minor revision in early 2017. The NMPA was still finalising implementing regulations for the 2014 regulation in 2018 as multiple new draft amendments for the RSAMD were appearing. The State Council approved an amendment to the RSAMD on 21 December 2020, but the final text has not yet been released as of the time of this writing.2 Therefore, in some respects, such as with their more detailed good clinical practice and well-developed adverse event reporting and monitoring regulations, device regulations are further ahead of drugs. The sections below explore the device changes since 2014 with notes as to when the pending drafts of the RSAMD could particularly change the system.
The regulatory regime
i Regulatory agencies and their jurisdiction
As of the full government reorganisation in March 2018, the NMPA is now the primary pharmaceutical and medical devices regulatory agency in China. It is a subordinate bureau of the State Administration for Market Regulation (SAMR), a super-ministry that covers company registration, product and consumer protection regulation, advertising, antitrust, standardisation and intellectual property, among other areas. Previously, since 2013, the China Food and Drug Administration – a stand-alone ministry – regulated this area, but the reorganisation reshaped it into a smaller, specialised product regulator under SAMR. The reorganisation also removed food from the NMPA's jurisdiction.
The NMPA enjoys power over most aspects of pre-market approval and a substantial part of post-marketing activities. Under the current arrangement, the NMPA is organised into departments and it has affiliated centres covering different regulated products and specialised areas. The departments have responsibility for, inter alia, administration of product registrations and enforcement functions, while the affiliated centres are responsible for scientific review and recommending product approval decisions for the departments to adopt and implement.
For drugs, the primary departments include the Department for Drug Registration, which is subdivided into departments for research and development, traditional Chinese medicine, chemically synthesised drugs and biological products, and the Department for Drug Supervision, which is subdivided by the type of manufacturing that each subdivision supervises (e.g., chemically synthesised, biologic) and a subdivision in charge of pharmacovigilance activities. The affiliated centres include the CDE and the Centre for Drug Re-Evaluation (CDR), which is also the National Centre for Adverse Drug Reaction Monitoring. The CDE evaluates clinical trial and marketing authorisation applications and approves subsequent amendments and renewals. The CDR includes the National Centre for Drug Adverse Reaction Monitoring, which is also responsible for device adverse event monitoring.
The NMPA similarly has registration and supervision departments for medical devices. The registration department is subdivided by whether the devices use electrical power or not, as well as including a subdivision for supervising research and development. The supervision subdivision is divided into divisions responsible for regulating manufacturing, distribution, and monitoring and evaluation. The Centre for Medical Device Evaluation (CMDE) is the affiliated centre responsible for organising the technical evaluation of medical devices. The CDR also articulates policy for medical device post-market surveillance and evaluates adverse event reports from manufacturers and hospitals.
With an official headcount of 216 at the national level (not counting contract personnel or those in the affiliated centres),3 the NMPA relies on provincial counterparts, which are merging with local administrations for industry and commerce to become 'market supervision bureaus', and similar device and drug regulatory authorities in the municipalities4 to carry out various activities, including accepting applications, conducting on-site checks and inspections, collecting samples, and issuing manufacturing and distribution licences. These provincial agencies receive their budget and their personnel allocation from the provincial governments, and they can vary in terms of capacity. State-accredited laboratories and clinical trial sites (e.g., in state-owned hospitals) also play a role in drug and device regulation in China.
China has worked since 2015 to provide the affiliated centres (CDE and CMDE) with more reviewers. Real numbers are difficult to determine, but the NMPA's announcement on the CDE's hiring5 and the CDE's annual reports indicate that it continues to add reviewers, and that the number of personnel has grown to around 800, from 60 to 70 a few years ago.6 The CMDE has similarly been adding reviewers but likely has fewer than the CDE.7 The increases in staff have been and will continue to be an important step in resolving delays. In December 2020, the NMPA established four new regional affiliated centres in Shanghai and Shenzhen, i.e., Yangtze River Delta Regional Centre for Drug Evaluation and Inspection, Yangtze River Delta Regional Centre for Device Evaluation and Inspection, China Great Bay Area Regional Centre for Drug Evaluation and Inspection, and China Great Bay Area Regional Centre for Device Evaluation and Inspection.8 It is not clear how the drug/device approval authority will be divided among these CDE/CMDE and regional centres.
Although the NMPA is the primary agency for pre-approval, other government agencies also play important roles in the pharmaceutical regulatory framework. Many of these other agencies that had some hand in regulating drugs and devices have also changed names or merged with other agencies. For example, a division previously under the National Development and Reform Commission (NDRC) that is now within the SAMR has a key role in articulating drug and device pricing policy. The SAMR has a significant role in enforcing advertising and promotion and other consumer protection and fair competition and antimonopoly laws that intersect with the drug and device industries. The China National Intellectual Property Administration (CNIPA) grants drug patents, and it is playing an important role in the establishment of the patent linkage system. The National Health Commission (NHC, formerly the National Health and Family Planning Commission (NHFPC)) oversees all aspects of the medical profession and hospitals (which include NMPA-accredited clinical trial sites for drugs and devices) and plays a part in determining the essential drugs that may be reimbursed under China's state insurance plans. The National Healthcare Security Administration also plays a part in setting the reimbursable drugs for these insurance plans, and organising the centralised procurement of drugs and medical consumables. For imported drugs, the China Customs Administration is involved in product-quality inspections and customs clearance. This sharing of responsibility creates a complex system in many respects.
ii Primary statutes and regulations
Unlike in the United States, there is not one law covering foods, drugs, devices and cosmetics. There is a separate law or an administrative regulation governing each of these areas. The primary statute regulating drugs (including biologics) is the DAL, which was enacted by the national legislative body, the National People's Congress, in 1984 and then substantially amended in 2001 and 2019.9 Small amendments were made to the DAL in 2013 and 2015 to support what China considered to be more pressing regulatory reforms, such as drug pricing. The State Council has enacted one general set of implementing rules for the DAL, referred to as the DAL Implementing Regulations (DALIR), which were last amended in 2019, before the passage of the DAL. The latest DAL amendment is potentially game changing in that the MAH of all drugs approved for marketing authorisation will be primarily responsible for development, quality and safety and effectiveness monitoring and reporting over the course of its life cycle with contract manufacturers and distributors sharing various responsibilities.
The NMPA administers several agency rules under the DAL and the Regulations for Implementation of the DAL to govern various activities, such as development, registration, manufacturing and marketing of drugs. These include good practice on manufacturing, distribution, clinical development and laboratory work. The core regulations governing clinical trials and small molecule drug and biologic registration are the Drug Registration Regulations (DRR), for which the NMPA finalised a substantial amendment in 2020.
The CDE also issues its own rules and guidance documents related to drug development and registration, priority pathways and supplemental applications. It has issued many proposed rules and guidance documents to implement the 2019 DAL. The CDE has also translated a number of International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH) guidelines, which it has adopted in some areas, although it still supplements requirements with its own rules.
The framework legislation for medical devices is a regulation (not a law) enacted by the State Council, namely the RSAMD.10 As with drugs, the NMPA has enacted a number of implementing rules covering registration, production and distribution.11 The State Council revised the RSAMD in 2014 and 2017, and a recent amendment was passed in December 2020, but the final text has not been released as of the time of this writing.
Reform of the NMPA's rules and guidelines on various aspects of medical devices and drugs continues on a regular basis. As the NMPA ventures into new and more cutting-edge areas, it continues to release a number of specialised guidance documents, including those governing digital health, artificial intelligence and cybersecurity.
The general structure and classification of drugs is governed by the DAL. The newly revised DAL defines 'drugs' broadly as:
any substance used for preventing, treating and diagnosing human diseases as well as purposely regulating human physiological functions with specified indications or functions, usage and dosage, including traditional Chinese medicines . . . chemical drugs and biological products.12
The VAL includes a definition of vaccine and the NMPA's registration guidelines include a definition of therapeutic biologic. As will be discussed below, the NMPA does recognise some category overlap. When products may be considered drug and device combination products, the NMPA and a combination of experts from either the CDE, CMDE or both will make a decision as to whether to regulate the product as a drug or as a device. This concept of combination products has been incorporated into the DRR.
Once determined to be a certain type of drug, the regulatory requirements applicable to a product will be determined by its pathway and its features. Previously, the location of manufacturing determined the primary pathways, with different requirements for domestically manufactured drugs or imported drugs. The revised DAL now leaves the distinctions between domestic and imported pathways in doubt as all products will receive a marketing authorisation and there is no 'imported drug licence' provision as existed in the prior DAL.13
Under the DRR, drugs are classified into three broad categories: (1) traditional Chinese medicines and natural drugs; (2) chemical drugs; and (3) biological drugs. Within each classification, drugs are again placed into registration categories. These registration categories determine the non-clinical and clinical data and other requirements necessary for registration. Instead of including the registration categories in the DRR itself as before, the NMPA released separate registration guidelines for biologics, small molecule drugs and IVDs regulated as drugs. The categories are based on the approval status of the drug in China and abroad and the data package on which it is approved, i.e., full data or follow-on. For example:
Small molecule drugs14
- Category 1: Innovative drugs that have not been marketed inside or outside of China.
- Category 2: Drugs with improvements (i.e., to dosage form, formulation process, route of administration and indication) that have not been marketed inside or outside of China. Category 2 contains a number of different subcategories for different types of improvements, which further refine the requirements.
- Category 3: Generics for which the originator drug is marketed abroad but not in China.
- Category 4: Generics for which the originator drug is marketed in China.
- Category 5: Drugs that are marketed abroad but not in China (category 5.1 is for originator overseas drugs and drugs with improvements and 5.2 is for generics).
- Category 1: Innovative biological products that are not marketed inside or outside of China.
- Category 2: Improved biological products with improvements related to safety, effectiveness or quality and clear clinical advantages that are based on biologics marketed inside or outside of China. There are also a number of subcategories related to the different approvals for this category.
- Category 3: Biological products marketed domestically or overseas:
- 3.1: Products manufactured and marketed overseas, applying for domestic registration.
- 3.2: Products marketed overseas but not in China and applying for domestic marketing and manufacturing.
- 3.3: Biosimilars.
- 3.4: Other biological products.
Certain types of drugs may also be subject to separate and heightened requirements and require additional special permissions. The most prominent example is now vaccines, which are subject to various requirements under the 2019 Vaccine Administration Law, but other examples are blood products, 'narcotic drugs' and 'psychotropic drugs', which are subject to, among other restrictions, stringent limits on research, manufacturing and distribution depending on their active ingredients and further classification.
Medical devices are also defined via regulation and then further sub-classified. The RSAMD defines 'medical devices' broadly as:
the instruments, equipment, appliances, in vitro diagnostic reagents and calibrators, materials and other similar or related articles directly or indirectly used with human bodies, including the computing software required. Their effectiveness is primarily achieved by physical or other similar means and not by pharmacological, immunological or metabolic means, although it may be assisted in its function by such means, the purpose of which is to achieve the following objectives:
- diagnosis, prevention, monitoring, treatment or mitigation of diseases;
- diagnosis, monitoring, treatment or mitigation of injuries or the functional compensation thereof;
- inspection, replacement, adjustment or support of the physical structures or physiological processes;
- life support or sustaining;
- pregnancy control; and
- provision of information for medical or diagnostic purposes by inspecting the samples of human bodies.16
The RSAMD then defines three classes of medical devices:
Class I medical devices means medical devices with low risks, and those for which safety and effectiveness can be ensured through routine administration; Class II medical devices means medical devices with moderate risks, which must be strictly controlled and administered to ensure their safety and effectiveness; Class III medical devices means medical devices with relatively high risks, which must be strictly controlled and administered through special measures to ensure their safety and effectiveness.17
The NMPA and its relevant divisions have discretion to determine what constitutes a medical device and what class it fits into. Every device in the 200-page Medical Device Classification Catalogue released in August 2017 is a device, however, and the NMPA does not exercise enforcement discretion to treat them otherwise.
Applicants for a device registration may make their own determination as to classification and then submit their application to the NMPA or they can treat their device as a Class III and ask the NMPA to make adjustments.18 They can make that determination with reference to the Classification Catalogue and general rules and principles of classification. The NMPA also oversees an online platform, run by the National Institutes for Food and Drug Control (NIFDC), through which manufacturers can submit applications for a predetermination of device classification.
The current RSAMD and the Administrative Measures on Medical Device Registration classify a medical device as either a domestic device or an imported device, depending on whether the finished device is manufactured inside or outside of China. If it is an imported device, the NMPA reviews and approves a registration application for Class II and Class III devices. Class I imported devices go through a notification system, which the NMPA also administers. For domestic devices, the review and the reviewing authority depend on the classification. Class I device manufacturers must notify municipal authorities before marketing their products; a provincial-level device regulatory authority approves Class II medical device registration applications; and the NMPA reviews and approves Class III medical device registration applications.19
Most in vitro diagnostic reagents are considered medical devices. The NMPA maintains a separate body of regulations for devices that meet this definition, including different rules on development, registration, and licence amendment and renewal. The primary NMPA rule for IVDs is the Measures on the Registration of In Vitro Diagnostic Reagents (IVD Measures), which set out a similar classification and registration scheme for IVDs. Under the IVD Measures, IVDs are defined as:
In vitro diagnostic reagents managed as medical devices refer to reagents, reagent kits, calibrators, quality control products and other products for in vitro testing of human samples used in the process of predicting, preventing, diagnosing, monitoring the treatment of, and observing the prognosis of disease and evaluating a state of health. They can be used alone or in combination with other devices, appliances, equipment or systems.
In vitro diagnostic reagents for blood screening and radionuclide indicators are not considered device-type IVDs and are regulated as drugs. The IVD Measures also divide IVDs into three classes (I, II, III), III being the highest risk and I being the lowest.
The NMPA issued a notice in 2009 on review of drug and device combination products.20 If the primary mode of action of a product is medicinal, the CDE will review it as a drug, or lead a joint and parallel review by both the CDE and the CMDE. If the primary mode of action of a product is not medicinal, the CMDE will review it as a device, or lead a joint and parallel review by the CMDE and CDE. One example of a product that the NMPA may treat as a combination product is a tissue-engineered product, which may be considered a medical device that would also have to meet certain requirements particular to the development of a biological product.21 The newly revised DRR reinforces this framework, and notes that where a drug-device combination product has been approved as a drug, subsequent products will also be approved. It also makes it clear that the CMDE must review device data for drug-dominant combination products prior to the NMPA conducting a final review for approval.
iv Non-clinical studies
Both drugs and devices require various non-clinical and clinical testing to support marketing. Non-clinical studies for drugs must comply with the NMPA Drug Good Laboratory Practice Regulations,22 and must be conducted by institutions and laboratories that have been certified by the NMPA. The NMPA also accredits laboratories that conduct pretrial type testing for Class II and III devices.
v Clinical studies and data
Under the regulations, the default requirement for a permission to market a drug or Class II or III device in China is to conduct a clinical trial. As we explain below, the NMPA will permit some flexibility in this arrangement in certain cases. Some devices are exempt from clinical trials based on existing data and the safety record of predicate devices, and drug applicants can apply for an exemption from all or part of the clinical trial requirement based on existing data. For both drugs and devices, the NMPA has adopted a more structured mechanism to accept foreign data to support marketing applications in China.
The revised DAL and device proposals also include conditional approval programmes. Under the DRR, drugs that treat life-threatening diseases that have no effective treatment, drugs that are urgently needed for the public health, and vaccines that are urgently needed for public health emergencies or otherwise deemed to be needed by the NHC can be eligible for conditional approval. Early-stage clinical data should be able to demonstrate the effectiveness and clinical value of the drug. In October 2018, the NMPA and NHC implemented an earlier variant of this programme when they jointly issued procedures under which a drug designated by the CDE and approved in the United States, EU or Japan can receive approval in China conditioned on a post-market study and risk mitigation plan on a special expedited basis.23
Before a clinical drug trial can be initiated in China, the sponsor must submit a clinical trial application (CTA) to the NMPA (specifically to the CDE), which the CDE must approve. Under the revised DAL and DRR, China has implemented an 'implicit approval system' in which the applicant submits a dossier or materials and then may begin the trial according to its protocol if the CDE has not objected within 60 business days of the date of filing. There is a separate system of notifications for bioequivalence studies to support generic drugs.
Currently, for new drug trials, the NMPA will permit an umbrella review of all three phases of a trial following a pre-CTA meeting. Also, an expedited review is potentially available pursuant to four programmes: breakthrough approval, conditional approval, priority review and special approval. These programmes accelerate approval for marketing based on various criteria, including the severity or rare nature of the illness and the clinical need for the drug. These programmes build upon various earlier expedited programmes that the NMPA has run to reduce the timeline for approval.24
The NMPA requires that investigational drugs (regardless of the imported or domestic pathway) be manufactured at good manufacturing practice (GMP) facilities and comply with GMP standards,25 and the NMPA may require in certain cases that government-certified laboratories conduct quality testing to confirm conformity with the quality standards at the clinical trial stage. The sponsor must also seek review and approval of the clinical trial by a qualified ethics committee. Ethics committee approval must take place before CTAs are submitted to the NMPA. If the institution has one, another approval by a clinical trial management committee may be required.
Clinical trials can be conducted only at institutions that have been inspected and accredited by the NMPA with departments that have been certified for that type of clinical investigation. Under the newly revised DAL, this certification process has now changed from a pre-approval to a filing. Clinical trials in China are governed by pharmaceutical good clinical practice (GCP) regulations,26 which follow similar GCP regulations in other countries in some respects. The GCP regulations and the DRR set out sponsor and investigator obligations, including for serious adverse events. The NMPA, or ethics committee, can hold or terminate a study for safety reasons. The sponsor of a clinical trial is defined as the applicant for the clinical trial application, meaning that this will be an ex-China entity if the drug is made outside of China. Ex-China sponsors appoint an agent and typically a local sponsor to assist with running the clinical trial.
Once a clinical trial protocol is approved by the NMPA, historically information associated with it (including the protocol) can be difficult to amend, even for small changes, but the DRR permits various amendments that may require an approval or mention in an annual report depending on whether the change affects the safety of subjects. Amendment of the sponsor on the CTA remains a difficult area, because although the DRR vaguely notes that sponsor changes are possible, it does not create an application process around that change. Therefore, while the NMPA will accept a sponsor change, it may be challenging to obtain recognition of that change from the agency.
Drug clinical trials intended to support registration must comply with drug good clinical practice regulations, which were revised in 2020, and various other ICH and CDE guidelines. In 2019 and 2020, the CDE issued a number of guidelines generally applicable to the running of clinical trials, including those on reports of suspected unexpected serious adverse drug reactions, development safety update reports and clinical data monitoring committees.27
With the new DRR, the NMPA has largely abolished the minimum case requirements for clinical trials for both small molecule drugs and biological products. The NMPA and CDE have released guidelines on various types of drugs that provide guidance on the clinical data needed to support marketing applications. For example, in October 2020, the NMPA released a set of requirements for clinical trials of drugs that are marketed abroad, but not yet in China.28
Whereas previously prior foreign approval was required for imported drugs, that requirement has been abolished. No proof of foreign approval is required at the clinical trial stage, although proof of the approval for an overseas clinical trial is required in the case of vaccines.29 If the drug has been approved abroad, China's drug regulations generally require submission of proof of approval in the form of a certificate of pharmaceutical product prior to submitting the CTA for an imported drug. The NMPA still generally maintains the rule that the holder of the foreign approval submitted with the application in China must be the same of the China applicant and that an applicant for a drug made outside of China must be outside of China. The DAL and DRR do not expressly require this, so perhaps there is potential for practice to evolve.
To satisfy the requirement for a clinical study, applicants can choose to apply for permission to conduct part of an international multi-centre trial (IMCT), and China has lifted the restriction that an applicant must show that it has begun Phase II or the drug has been approved abroad, except for vaccines intended to be used for minors for which Phase I data abroad must be submitted with the CTA.30 Once the IMCT is complete, the applicant can apply directly for marketing approval.
China further embraced the idea of multi-centre clinical trials by adopting special guidance on these types of trials in early 2015 and articulating rules on how to power the site in China and harmonise the design with the rest of the world, and has pledged to encourage domestic drug manufacturers to participate in these trials.31
The NMPA has released guidance on the acceptance of foreign data, including early stage data, to support marketing applications in China. The data must be generated according to China's requirements including related to design and human subject protection, and proper attention must be given to whether there are concerns about ethnic differences in the subject population abroad that could be meaningful for China. The NMPA has also taken steps to permit acceptance of real-world evidence, releasing various guidelines, with the latest one being on paediatric studies in August 2020, 32 and joining the trend of other agencies around the world in exploring this new area. The NMPA has accepted real-world evidence studies to support approval, including meeting the obligations of conditional approvals.
Clinical data are used to establish the safety and efficacy of medical devices that are registered for marketing in China.33 In general, applicants for medical device registrations must submit clinical trial data to register Class II and Class III medical devices (including in vitro diagnostics).34 No clinical trial is required for Class I devices.35
The revised 2014 RSAMD broadened the exemptions from clinical trials for certain devices and IVDs. The exemptions for devices include: (1) devices for which there is an identical type of device on the market with a well-established safety record following many years of clinical use; (2) devices that can be evaluated effectively through non-clinical data; and (3) devices that can be evaluated through pre-existing data on the same types of devices.36 To further define these categories, the NMPA issued and continually amended a catalogue of clinical trial exempt devices,3738 and guidance on how to determine whether a device falls under one of these broad exemptions. Exemptions similar to (1) and (2) also exist under the revised IVD regulations.39 A proposed amendment to the RSAMD would remove the requirement for a clinical evaluation for Class II devices and potentially broaden the exemptions for Class III devices to cover those that present a lesser degree of risk.
Clinical trials of Class II and most Class III medical devices do not require NMPA approval. However, the NMPA has issued and recently updated a catalogue of a subclass of high-risk Class III devices for which pre-approval of the clinical trial is required. This catalogue includes six different types of products that the NMPA deems to pose higher risks to human bodies, such as artificial heart valves and endovascular stents.40
All trials for both medical devices and IVDs must take place at hospitals and other healthcare institutions that the NMPA has accredited to conduct device trials.41 As with drugs, in 2017, the State Council amended the RSAMD to permit hospitals to qualify as clinical trial sites after completing a filing process.
While no pre-approval from the NMPA is required (unless the device is designated as a high-risk Class III device), all medical device clinical trials must be approved by the institution's ethics committee and notified to the provincial-level government where the clinical trial sponsor is located.42 The NMPA issued procedures to implement this provincial notification requirement in July 2015.43 In addition, under the revised RSAMD, device trials must comply with medical device GCPs. The NMPA issued new GCPs for medical device trials to support registration with the NMPA in 2016 and new GCP inspection principles in 2018.44 These GCPs added to the provisions on informed consent (including those on consent from children and others who lack the capacity to consent), requirements for agreements between sponsors and the site, and the coordination of multi-site trials. The GCPs set forth a set of reporting requirements for adverse events that occur during the trial. In vitro diagnostics are subject to a separate set of GCPs for their trials.
Like with drugs, the NMPA has always permitted stakeholders to rely on foreign-generated data to support applications in China. However, in 2018, the NMPA issued guidance on the acceptance of foreign data to support device registration applications. The guidance focuses on design, human subject protections and attention to ethnic differences. In 2020, the NMPA issued guidelines on real-world evidence for medical devices, articulating the agency's expectations for certain types of observational studies to support device registration.45
Biosecurity and human genetic resources
An increasingly important area of regulation and one to watch for the next few years is biosecurity law and regulation, which includes human genetic resource (HGR) regulation. All clinical research must follow procedures for approval set forth in the Human Genetic Resource Regulations (HGR Regulations), which were updated in 2019.
Pursuant to the HGR Regulations, foreign companies or companies in China that are actually controlled by a foreign party (e.g., have some form of foreign investment or ex-Mainland China investor) that sponsor clinical trials in China and need to utilise human biospecimens (HGR Materials) or data associated by human biospecimens (HGR Information) must apply for approval or notification to do so jointly with Chinese parties (e.g., a hospital) from the Office of Human Genetic Resource Administration (OHGRA) within the Ministry of Science and Technology. This approval or notification is required regardless of whether the foreign company is conducting genetic tests and covers any sample that contains human DNA.46 All foreign collaborators must be listed on the HGR application, including Clinical Research Organisations (CROs) and central laboratories, and the foreign collaborators must also list any 'other entities' that will be involved in the trial and need to receive HGR Information or samples, e.g., data analytics firms or waste management companies.
Although there is a notification pathway if (1) the study would be used to support marketing approval of the drug or device in China, (2) no samples associated with the study are exported outside of China, and (3) sample analysis is done within the laboratory of or engaged by the trial site, that pathway is rarely used because the conditions are difficult to meet.
There are also separate approval processes for the biobanking, HGR material exportation, and transfer of HGR information to foreign parties. The data transfer mechanism to send data to non-collaborators is a two-step process under which the Chinese party must upload the data to be transferred prior to transferring data associated with the samples to a third party outside of the collaboration. In the second step, the Chinese party files a form with the transferee's information, a risk assessment of their data security system, and a list of the data transferred. If the transferee was not listed as an 'other entity' in the original application process, the collaborators will need to submit an amendment to the original dossier prior to the two-step process.
The regulations on human genetic resources also include controversial provisions on the sharing of intellectual property, including patent rights to any invention arising out of the collaboration. The parties may agree on how to handle other IP arising out of the collaboration or share it equally by default. The OHGRA reviews the agreements associated with a clinical trial to determine whether these requirements have been met and has significant discretion to delay or reject an application. The OHGRA has adjusted this process by fiat over time increasingly insisting on division of other IP jointly.
The OHGRA has fairly vigorously enforced the HGR Regulations subjecting several foreign companies to fines and debarment from conducting further clinical studies in China for several months. The OHGRA now regularly requires that companies submit self-inspection reports to attest to companies or non-compliance with HGR approval requirements,47 and the local science and technology authorities increasingly conduct site inspections to review HGR compliance documentation related to past and ongoing studies. The OHGRA has the power to impose over a million US dollars in fines and permanent debarment in serious cases. As of 2020, China's legislature was considering adding specific HGR-related criminal violations to its Criminal Law.
In 2020, China's legislature enacted a Biosecurity Law, which covers a variety of areas, from the protection against bioterrorism and public health threats, such as infection diseases, and protection of human, animal and plant resources. The Biosecurity Law does not become effective until April 2021, and its provisions on HGR are fairly similar to the current regime. Its passage does emphasise the importance of this area in China's landscape and indicates that increasingly stringent measures may continue in the next year.
vi Named-patient and compassionate use procedures
Under the DAL, China has committed to create an expanded access pathway under which a company sponsor can apply for permission for an expanded access treatment programme for patients with life-threatening illnesses that otherwise cannot qualify for the trial. In addition, the DAL permits provincial governments to approve one-time imports of drugs that are urgently needed, a power that used to belong to the NMPA and was rarely used. Implementing regulations and guidelines associated with these new programmes do not exist yet.
Currently, the NMPA permits limited drug compounding by medical institutions for use on their own patients, sometimes without having to receive NMPA clinical trial approval or marketing authorisation.48
In the absence of a finalised compassionate use pathway, the Bo'ao medical tourism zone in Hainan Province has emerged as a place that provides earlier access to unapproved drugs and medical devices. Medical institutions can assess patients for a treatment plan in the zone and apply for importation of unapproved medicines and medical devices. Recently Bo'ao obtained approval to make those decisions for itself instead of obtaining NMPA approval. The drugs or devices are then imported specially into Hainan for this purpose and used there. This has become a fairly efficient process for obtaining access to unapproved medicines on an expedited basis.
In addition, Chinese drug regulations issued in 2005 provide for the importation of unapproved drugs to satisfy urgent clinical needs or in the case of national emergencies. The DRR also contains a section on this procedure, which is referred to as 'special approval'. The urgent clinical need standard is a significant one, which is difficult for individual patients to meet, but may be used rather more commonly when the drug is necessary to prevent the spread of serious contagious disease, such as was the case in the covid-19 pandemic.49 An analogous regulation exists for medical device emergency approvals. The NMPA applied the special approval for both drugs and medical devices during the covid-19 pandemic to approve drugs and devices for a limited period of time, in some cases conditioning full approval for a five-year licence on the completion of a study. The NMPA approved over 49 covid-indicated IVDs and a covid vaccine in this manner.50
vii Pre-market clearance
As discussed, the NMPA has different requirements for drugs depending on the registration category that they fall under, but under the new DAL and DRR it has abolished the distinction between imported registrations and domestic registrations.
All drugs now receive a marketing authorisation. This means that there are no longer imported drug licences and for domestic drugs, there is no longer only a drug approval number linked to a domestically licensed facility. Once development is complete, the applicant submits an application for a marketing authorisation. If the drug is made outside of China, this will be the foreign enterprise submitting the application. The foreign applicant will designate a domestic MAH Agent that has a sufficient quality system, personnel and resources to assist it with meeting regulatory obligations in China. The MAH Agent can be held jointly liable with the MAH for all MAH obligations. As discussed above, if approved abroad, the applicant will need to present a certificate of pharmaceutical product (CPP) to show marketing abroad. The name of the applicant must be the same as the holder of the CPP. If the drug for import is not yet approved abroad, the NMPA can approve the imported drug as a Category 1 innovative drug (see above) and no foreign approval is required.
In addition, the foreign manufacturer must submit drug samples from three batches to be tested by the NIFDC for conformity with product specifications and quality standards. The DRR introduces requirements for verification inspections of registration materials, including at development and manufacturing sites for certain types of drugs.
The DRR permits applications for first-time active pharmaceutical ingredients (APIs) and packaging (previously separate from the product application) to be filed and reviewed together, including underlying data for these new APIs and materials. The NMPA has implemented a platform through which API, new excipient, packaging supporting material can be registered (analogous in some respects to a masterfile system) through which others can reference the APIs, excipients, and packaging materials without submitting the data itself.
Generic drug application
With the exception of originator drugs manufactured abroad, drugs that are not new to the world are generic drugs and go through an abbreviated process through which they establish therapeutic and quality equivalence to a reference product marketed in China or abroad. Equivalence is established either through a bioequivalence study, an in vitro study, if the drug qualifies for an exemption, or a clinical trial to show efficacy in some cases. In most cases, the reference product will be an originator product, but the NMPA will also permit an 'internationally recognised' generic product to serve as a reference product.51 The NMPA and CDE have released regulations on the selection of a reference product in the following order of priority for small molecule drugs: an originator drug that is marketed in China, a foreign originator drug that is made in China or there has been a technology transfer to China, and last an originator drug that has not been imported to China.52
Generics on the market that are on the Essential Drug List (2012 version) for reimbursement in healthcare institutions and in solid oral forms were required to demonstrate equivalence to reference products by the end of 2018. All other fixed oral dosage form generics can freely determine when they will demonstrate equivalence, but the first generic manufacturer to seek such approval will get three years of exclusivity during which equivalence applications for other generics of the same type will not be accepted.53
The NMPA has developed and implemented a new set of guidelines for demonstrating bioequivalence. Under this new system, bioequivalence studies may begin after the applicant has notified the NMPA through an electronic platform.54 The CDE review of a generic drug application proceeds in parallel with manufacturing site inspection and collection of drug samples by the provincial drug regulatory authority, as well as drug quality testing by the NIFDC. If results are satisfactory, the NMPA will approve the application and issue a drug approval number to the applicant, which should already have obtained a drug manufacturing facility permit.55
The pathway for biosimilars is somewhat different; that is to say, biologics for which there is an existing standard may be brought on the market.
The CDE's guidance document on biosimilars (2015), intended to strengthen the methods for research and development of similar biologic products and their stepwise characterisation and comparison to reference originator products, including a quality comparison, and non-clinical and clinical evaluations. This guidance also includes some provisions on labelling and pharmacovigilance.56 As discussed, the new category under the revised DRR of 'marketed biologics', including biosimilars, does not yet play a clear role in this system.
In 2015, the NMPA began examining what had become a huge application backlog for both drugs and devices. The agency had tens of thousands of applications pending, with thousands more being filed each year. The State Council and the NMPA committed to significantly reducing this backlog by the end of 2018. The CDE's annual report, released on 3 March 2016, indicated that the drug backlog had been reduced from approximately 22,000 to 17,000 applications, which is a reduction of around 22 per cent,57 and by 2017, the NMPA touted reducing the backlog to only 4,000.58 The NMPA also committed to increasing the speed of the reviews and the criteria for review and approval by adding review personnel and creating review guidelines. By 2019, the NMPA claimed that the backlog had all but disappeared.59
With these reforms still progressing, the total time for review, site inspection, drug sample testing and final approval of an imported drug licence, a new drug application or a generic drug application is in flux, but it can still take one to two years. Most of this time continues to be occupied by the CDE review process. The DRR provides for review of marketing applications in 200 business days and the same for review of generic drug applications. In practice, the CDE's review can take longer. If the CDE needs additional information, it can issue a request to the applicant, and the review clock stops. Requests for additional information are common in all applications, and sometimes repeated, although the CDE is required to avoid repeated requests. Reviewers may meet with the applicant upon request and the NMPA has implemented a new set of meeting guidelines that permit more structured and frequent interactions when issues arise in the development or the registration process.
The DRR sets forth several expedited programs, breakthrough designation, conditional approval, priority review and approval and special approval.60 Each of these programmes have different qualifying criteria and procedures for application. Unlike prior documents, the DRR sets shortened timelines for some of these programs. For example, review for priority review drugs is 130 business days instead of 200. Publicly available information suggests that the fast-track mechanisms such as these have, in fact, shortened review times. The timelines for review for expedited programmes under the DRR range from 70 to 130 business days.
Under both the revised and prior DAL, the registration for a drug is valid for five years. Six months before expiry of the registration, the applicant must submit a renewal application to the NMPA if it is an imported drug or to the local provincial drug regulatory authority if it is a domestic drug. Renewal applications generally do not require new clinical data but do include a review of safety, including adverse drug reaction information, though new testing or data from the required Phase IV study may be a condition of renewal (as discussed above, the NMPA can set conditions as part of the new conditional approval expedited programme). The relevant regulatory authority must complete the review and either approve or deny the application within six months of accepting the filing. If the renewal application is not approved, drugs manufactured after expiry of the existing marketing or manufacturing authorisation may not be marketed in China. The NMPA has now transferred the decision-making power relating to renewal applications for imported drugs to the CDE.61
Supplemental drug application
Certain post-approval changes to a drug, whether imported or domestic, require NMPA approval of a supplemental drug application. Certain changes may require a new drug application, such as a new indication, route of administration, or change of a marketing authorisation holder. The applicant must be the company that holds the existing marketing or manufacturing authorisation. Depending on the degree to which the change affects the safety and effectiveness of the drug, certain changes may not require approval and may only require a record-filing or a mention in the annual report. For example, moderate alternations to the manufacturing process and changes to the labels on the drug packaging may be done by record-filing with provincial drug authorities. Minor changes to the manufacturing process may only be notified in an annual report.62
Some form of pre-market review and approval is required for domestic production or importation of all three classes of medical devices. Domestic and imported Class I devices must be notified to either the municipal food and drug regulatory authority where the manufacturer is located or the NMPA, if manufactured abroad, before being placed on the market. Once the applicant submits the notification, the authorities will make an 'on-the-spot' determination to issue a notification certificate, provided that the materials are complete.
As noted above, domestically manufactured Class II devices must be reviewed and approved by a provincial-level device regulatory authority. Class III medical devices, as well as Class II and III imported medical devices, must be approved at NMPA level. For imported devices, the applicant must appoint a regulatory agent in China.
For all Class II and III devices, government-certified laboratories first verify conformity with the device's 'technical requirements', which the applicant must formulate in advance, and applicable standards through testing. This testing is often referred to as registration testing or type testing. For Class I devices, the applicant may submit its own internal test results. While self-biocompatibility testing has been available for some time, it is not clear whether the revision to the RSAMD will do that more broadly.
The statutory time frame for agency decisions on the different types of devices depends on the class of the device and the type of technical review required. For Class I devices, either the municipal device regulatory authority or the NMPA (if an imported device) will make an immediate determination of the completeness of materials and, if complete, accept the notification.63 In the case of a Class II or III device, the relevant agency will make a determination as to whether the application is complete and appropriately filed (i.e., the agency has jurisdiction). Within three business days of acceptance of the application, the materials are sent on to a technical review institution, which under normal circumstances has 60 business days to complete its review. If outside expert help is required or the institution decides that it needs to conduct an inspection of the applicant's quality management systems, then the time may be extended beyond the 60 business days. Similarly, the technical review institution may make a one-time request for any supplementary materials required. It then has another 60 business days from the time of receipt of those materials to make its decision. Once the technical review is complete, the NMPA has 20 business days to make a decision.
The NMPA already gives priority to innovative devices (described below) and, in 2016, as part of its effort to reduce delays and focus its resources on key areas, it issued new procedures on priority review for devices associated with national scientific initiatives, those with orphan indications, those that treat children or elderly people, and other devices that serve urgent clinical needs.64 Those accepted to these pathways get priority access to CMDE reviewers regarding the design of their application. Similar conditional approval procedures are available for devices that treat orphan indications or meet urgent clinical needs.
After approval, a medical device registration certificate is issued that is valid for five years. Like with drugs, six months before the expiry of the five-year period, the manufacturer must submit a medical device renewal application. If the renewal application is not approved by the time the licence expires, the application will be deemed approved.
Changes to certain elements of the registration require amendments or updates. The type of amendment and the length of review depends on whether it is a 'licensing matter' or a 'registration matter'. Licensing matters include the non-proprietary product name, its model, its specifications, its structure, its composition, its scope of use (indications), its technical requirements and the foreign site of a manufacturer. Registration matters include the name of the applicant, the name of the agent and their addresses. In the case of a domestic manufacturer, the address of the manufacturing site is also a registration item. For registration items, the original licensing agency will issue a revised licence in 10 business days. Licensing items require another technical review before a modified registration certificate will be issued.65
viii Regulatory incentives
Chinese regulation is designed, in some respects, to encourage innovation and development and manufacturing of products for which there is a particular clinical need and value through expedited pre-market approval pathways. By contrast, effective post-approval regulatory incentives are weaker and their implementation is incomplete. China has established a system of patent protection for drugs and devices, although recent statistics show that the invalidation rate for those patents is fairly high.66
Under the Innovation Opinion, China committed to implement new incentive systems, including regulatory data protection, patent linkage and patent term extension. The remainder of this section describes the existing system, and the progress that the NMPA and other agencies have made on the other reforms. Similar commitments have now been made in the US–China Phase One Trade Deal.
The promised reforms have slowed significantly since 2017. The new DAL and the DRR contain no mention of these measures. Before this slowdown the following progress was made: under regulatory data protection, innovative drugs (undefined term), innovative therapeutic biologics, orphan drugs, paediatric drugs, and drugs that have achieved a successful patent challenge would receive a certain period of protection for their original undisclosed clinical test data. This would prohibit follow-ons from using that data to apply for marketing permission. As described below, in April 2018, the NMPA released a draft regulatory data protection regulation,67 but has done nothing since.
Considerably more progress has been made in the area of patent linkage. Pursuant to the Innovation Opinion and documents that preceded it, patent linkage will describe a system for resolving patent disputes before the approval of a potentially infringing drug. An applicant would prepare a statement of relevant patents. The applicant would need to give the holder of a relevant patent notice of its application, permitting the holder to file a suit within a certain period of time. During that suit or for a certain period, the NMPA would continue its review, but would not issue its approval. To date, no real progress been made in developing a linkage system.
In 2020, China amended the Patent Law to establish a cause of action to resolve patent disputes on pharmaceutical products prior to marketing. The new Article 76 of the Patent Law permits a lawsuit in the people's courts by the patent or other rights holder of to determine whether the drug that is the subject of the follow-on marketing application falls within the technical plan of patent on the approved drug. The Patent Law leaves it to NMPA to suspend approval of the follow-on product during the pendency of the litigation. Article 76 also allows the follow-on applicant and the patent holder to apply for administrative adjudication but does not clearly tie that to the drug approval process.
Much of the details of the patent linkage system have yet to be decided. However, the NMPA and CNIPA released a joint rule on the mechanics of linkage.68 That draft rule creates a rough system for listing relevant patents on the NMPA's website. Follow-on applicants must file one of four certifications with respect to relevant patents, the fourth being that the relevant patent is invalid or not infringed. The fouth certification triggers a window during which patent or right holder may bring suit, and if suit is timely filed, that event triggers a nine-month stay in the case of small molecule drugs. During the stay, the NMPA will not approve the follow-on drug for marketing. The proposal for biologics is different. Biologics patents may be listed and the subject of certifications at the time of follow-on marketing applications, but it is not clear that the stay applies for biologics. Rather, if the patent holder is successful in litigation, the NMPA may deem that the product cannot be marketed, but the method of preventing marketing is not clear. The Supreme People's Court has also released a draft judicial interpretation that sets forth rules on venue and evidence in Article 76 litigation. Neither of these rules have been finalised.
China gives 20 years of invention patent protection. An applicant is required to provide information on patent status in China as part of its drug registration application. Although the prior version of the DRR required that if there are relevant third-party patents in force, the applicant must make a declaration of non-infringement, this does not result in patent enforcement because the innovator is given no notice of the declaration and the NMPA does not allow potential patent infringement to halt regulatory approval.69 This provision is removed in the revised DRR with nothing equivalent in its place. The revised Patent Law also provides for patent term restoration for delays in the marketing approval of new drugs. The drug may be awarded up to five years, but the overall extension may not exceed 14 years.
China does not have true regulatory marketing exclusivity. The prior version of the DRR provided that the NMPA can set a 'new-drug monitoring period' of up to five years when it approves the manufacturing of a domestic drug that is first in its class. The monitoring period was not available for imported drugs and, within the revised chemical drug registration categories, the monitoring period only applies to innovative new drugs and improved new drugs, which means it only applies if the drug (or its innovation) is new to the world. The new DRR removes the provisions on the monitoring period leaving its continued enforcement in doubt, leaving only a vague mention of it in the DALIR.
Proposed regulatory data protection
China issued a draft regulation on regulatory data protection (RDP), which has not yet been finalised. Under this regulation, RDP would run from the time of approval and prevent the NMPA from approving marketing applications from other applicants for the same type of drug that rely on the data of the protected drug, unless there is consent.70
The RDP draft proposed to grant six years of RDP for innovative small molecule drugs and 12 years for therapeutic biologics for which there were trials in China. However, full terms would be further limited to drugs for which the marketing applications are submitted in China before or simultaneously with those in other countries. Applications submitted later in China than in the rest of the world would only receive between one to five years of data protection, and applications relying on foreign data would receive only one-quarter or half of the degree of protection depending on whether they submitted supplementary 'China clinical trial data'.
The regulations for the registration of medical devices do not require patent certification or contain provisions on data or market exclusivity, and they are not covered by the aforementioned reforms. The revised Measures on Medical Device Registration in 2014 expressly state that any patent disputes will be handled under the relevant laws (i.e., the Patent Law).71 There are procedures for expedited review and approval of medical devices when there is a public health emergency and the same kind of device is not marketed in China, or is marketed but is in short supply. Medical devices undergoing expedited procedures also benefit from assistance from the NMPA during development and registration.72
As discussed above, the NMPA has also created an expedited pathway for review of applications for 'innovative devices' in 2014 and amended it in November 2018. To qualify as an innovative device:
- the patent for the technology must be held in China;
- the application for innovative device is within five years after the date of patent authorisation, or if the patent is not granted yet, the National Intellectual Property Administration should issue a research report showing that the core technology has innovation and creativity;
- the primary work on the product's design and use mechanisms must have been the first of its kind in China;
- its safety or functionality must be a fundamental improvement over comparable technology;
- it must be leading technology internationally;
- the device must have clear clinical value;
- preliminary research must be complete, traceable and there must be a basic product model; and
- the data must be complete and traceable.73
The innovative device pathway does not entitle applicants to marketing exclusivity, however. It provides the applicant with priority in terms of access to communication with the NMPA regarding its application and the ability to hold a licence without a manufacturing facility. As noted above, the NMPA has released procedures on additional priority pathways, which are based on more on clinical needs and not other IP-related criteria. Conditional approval is also available for certain devices.
ix Post-approval controls
Post-market safety data reporting
Drug and medical device manufacturers are obligated to establish systems to report and analyse adverse drug reactions (for drugs) and adverse events (for devices), and meet any conditions imposed as part of the product approval.74 In 2011, the NMPA issued detailed regulations on adverse reaction and event reporting for drugs. The Measures on the Administration of Adverse Drug Reaction Reporting and Monitoring require drug regulatory authorities at national, provincial and municipal levels to set up adverse event collection systems, and impose reporting and monitoring obligations on not only the drug manufacturer, but also drug distributors and healthcare organisations. Specific reporting time frames and follow-up actions are set out for handling individual cases, clusters of cases, periodic accumulative reporting, enhanced monitoring and imported drug reporting.75 As part of the implementation of the DAL, the NMPA issued a draft rule on pharmacovigilance in the model of a GxP rule, i.e. Good Pharmacovigilance Practices.76 This draft sets forth requirements for internal personnel, procedures, safety reporting and risk identification, evaluation and control post-market, as well as record keeping. It also sets forth requirements for interventional and non-interventional post-market studies and for clinical studies generally.
For medical devices, the NMPA issued revised Measures on the Administration of Medical Device Adverse Event Monitoring and Re-evaluation in August 2018,77 and the CDR Centre subsequently issued multiple guidance documents for comment shortly thereafter.
The reporting obligations under the new regulations remain similar (albeit with different timelines for reporting), serious adverse events and group adverse events. However, the new regulations also introduced a category of innovative medical device events. For 'innovative devices' (a term that is not yet clearly defined, but may mean those devices that have not yet been approved anywhere in the world), licence holders are required to report all adverse events for the first five years of the device licence. The new regulation also requires biannual reports of events for innovative devices.
The new regulations also include various other new individual and periodic reporting obligations. Some of these require reporting in a matter of hours after becoming aware of the event. For example, they require yearly risk assessments for devices. If there is a group event, it must be reported within 12 hours and each individual event must be reported within 24 hours of awareness. If a licence holder takes action to control a device event abroad (e.g., recall, market withdrawal, re-labelling), they are expected to notify the NMPA of an action plan for devices in China within 24 hours. These and other new, more intense requirements colour this new regulation, which went into effect on 1 January 2019.
The licence holders are obligated and the NMPA has the authority to order recalls of drugs and medical devices because of serious adverse reactions or events or other safety issues.78 Under new device recall regulations released in 2017, the NMPA can order a mandatory device recall for both safety and non-safety related issues, including if the device presents a risk of unreasonable harm, does not meet mandatory national standards or its own technical requirements (i.e., specifications), or violates good manufacturing or distribution practices in a way that causes unreasonable harm. This and other similar triggers have expanded the scope of recallable products.
Manufacturers and distributors also have different obligations, in varying circumstances, to cooperate with, report on or implement recalls. For example, for medical devices, the manufacturer is required to conduct an investigation and evaluation of adverse event and other safety-related information to determine whether they reveal a 'defect'. The manufacturer must also classify the recall into one of three classes – the first class being the highest risk and the third being the lowest. The class will determine reporting obligations and timelines. If a manufacturer does not conduct a recall voluntarily, the NMPA may order one if it disagrees with the manufacturer. The manufacturer must report on the progress of the recall and its final results.
The new DAL stresses various aspects of post-market surveillance on the part of the obligations of MAHs, contract manufacturers and distributors. The DAL promises a more stringent regime for reporting and evaluating adverse drug reactions, and pulling products off the market for which there are serious reactions. MAHs are also required to develop post-market risk mitigation plans and file annual safety reports. The NMPA released a draft rule on drug annual reporting in late 2020, but has not yet finalised it.79
Transfer of licences
Transfer of licences may be more difficult to achieve in China than it may be in other countries. Although difficult in the past, the revised DAL now expressly states that the transfer of marketing authorisation is permitted, provided it is approved by the NMPA and the transferee agrees to assume obligations for safety, effectiveness and quality. The DRR also provides a marketing authorisation can be transferred between two entities after the NMPA has approved it. The NMPA issued a draft regulation on post-market changes to marketing authorisations that covers this type of amendment and indicates that transfer between ex-China entities also requires that the ex-China transferee hold an approval from the relevant foreign regulatory authority.80
An analogous transfer pathway exists for devices. For both imported and domestic devices, the NMPA has permitted the Class II and Class III device product licences to transfer between entities using an application to amend the name of the applicant on the licence. For Class I devices, the new applicant is likely to submit a new filing, which could be accomplished relatively quickly. The applicant may have to make other changes to items on the licence, such as the registration agent and the manufacturing site, through product licence amendment procedures, depending on the details of the deal.81
There are more specific provisions on the transfer of device manufacturing licences. Under the revisions to the Device Manufacturing Regulations, the manufacturing licence travels with the entity. If the entity survives a merger or split, then the licence need only be modified. If the original entity is dissolved, then the licence will not be transferred and any new entity must apply for a new licence.82
Suspension or revocation of approvals
The NMPA has broad authority over licences, their approval, their renewal every five years and their cancellation on the basis of safety concerns or fraud. This discretion extends not only to product licences but also to facility licences, accreditations and clinical trial approvals. For example, the NMPA has a number of grounds for revoking or refusing to renew a product licence under the current and DRRs as follows:
In any of the following circumstances, a drug shall not be renewed [if]:
- the application for renewal is not made prior to the expiry date;
- the MAH fails to fulfill the responsibility of continually investigating the quality, efficacy and adverse reactions of the drug within the validity period of the drug registration certificate;
- the research work set forth in the drug approval certificate and that required by the NMPA fail to be completed within the specified time limit, without reasonable grounds;
- there is uncertain therapeutic efficacy, or serious adverse reaction or the drug is harmful to human health due to other reasons upon post-marketing evaluation;
- there are other circumstances not in conformity with relevant regulations.83
For devices, a renewal will not be granted if: (1) the filing of the application is not timely; (2) compulsory standards for the medical device have been revised and the device fails to meet the new standards; and (3) specific conditions related to medical devices needed for treating rare diseases or for public health emergencies are not met.84
There are several types of non-compliance that can trigger licence suspension or revocation in China. For example, the revised DAL provides for the revocation of drug approval licences on various grounds, including:
- production or sale of counterfeit or substandard drugs;85
- obtaining a licence through fraud, including the submission of false materials;86
- conducting a clinical trial without approval;87
- producing a drug with ingredients or packaging materials that have not been reviewed;88 or
- non-compliant labels.89
The RSAMD provides for the re-evaluation and potential revocation of medical device licences when:
- new developments in science and technology raise questions about the safety and effectiveness of the device;
- adverse event reporting raises questions about the safety and effectiveness and indicates that there is a defect; and
- any other circumstances that the NMPA determines warrant a re-evaluation.90
These grounds are echoed in the new adverse event reporting regulation for the devices discussed above. The revised RSAMD provides that obtaining a licence via fraudulent or corrupt means is a basis for revocation of the licence.91 Other activities that constitute impermissible marketing of devices or marketing of devices known to be unsafe or not in compliance with standards may result in fines, seizures, disgorgement and, in certain circumstances, blacklisting from the industry.
In September 2017, the Supreme People's Court issued an interpretation as to certain provisions of Chinese criminal law to apply them to circumstances in which a drug or medical device application is procured by making fraudulent misrepresentations or using fabricated data, which was formally adopted in the Criminal Law in the latest amendment in late December 2020.92 This allows for the criminalisation of data integrity violations that are the result of intentional misconduct.
x Manufacturing controls
As discussed above, drugs and Class II and III device manufacturing facilities located in China must hold a manufacturing licence, and observe drug or device GMP. Class I device facilities submit a notification to local food and drug regulatory authorities before proceeding with production.
Upon completion of the facility construction, the facilities must obtain a manufacturing licence and pass GMP inspection before they can be issued a drug or medical device manufacturing licence.
Class II and Class III device facilities must be verified as device GMP-compliant before a local authority will issue a manufacturing licence. This requires a compliance inspection.93 If any manufacturer is found to be non-compliant with the rules, and does not correct the violation, it can be fined or shut down.94
Contract manufacturers must be similarly GMP-compliant and hold the requisite manufacturing licence. In some circumstances in which the NMPA has determined that the products present heightened risk, such as in the case of psychotropic drugs or narcotic drugs, the agency will not permit contract manufacturing.95 Vaccines makers must have their own manufacturing capacity and contract manufacturing is only permitted upon special approval from NMPA.96 Under the revised DAL, contract manufacturers and MAHs must execute supply and quality agreements, meeting the obligations of each. The NMPA has released guidance and templates on these agreements and their content, which it will have the power to inspect.97 In addition, the DAL creates a class of separate obligations for contract manufacture organisations: establishment of a quality system, implementation of quality control and release procedures, supplier verification, traceability, storage, product labeling, adverse drug reaction monitoring and reporting and recall implementation.
Ex-China manufacturers that supply drugs to China are also required to comply with GMPs for drugs or devices, as the case may be. The NMPA monitors compliance with all facilities that support the products that it licenses through inspections. Inspections may be for cause and announced or unannounced. In some cases, the regularity of inspections is risk-based. For example, for device manufacturers, the NMPA and its local counterparts set a risk level that determines the number of inspections during a specific period. The NMPA also conducts inspections of facilities abroad for compliance with China drug and device GMPs, although it is not entirely clear what determines the need for these inspections. The NMPA finalised new regulations on overseas inspections for drug and device manufacturers in late 2018.
xi Advertising and promotion
The NMPA must pre-approve all drug advertising and prohibits any direct-to-consumer advertising of prescription drugs. The term 'advertising' is broadly defined under the general Advertisement Law and can include any published media that directly or indirectly introduces the product (or service). As a result of amendments to the Advertisement Law in 2015 and the interim regulation on internet advertising in 2016, the legislature has made it clear that the definition of advertisement includes websites, mass emails and postings on microblogs and other social media sites.98 Other rules have indicated various media and promotional activities as examples, including product samples. Therefore, there is ample authority on which agencies can enforce against sponsors. Promotion or advertising of a drug before NMPA approval is prohibited, although some limited scientific exchange may be permissible.
The SAMR issued an agency-level advertising rule covering all drugs, medical devices, health foods and foods for special medical purposes (new Advertisement Rule) in December 2019,99 which replaced but adopted the principles of the drug-specific advertisement requirements and prohibitions previously provided in a number of laws and regulations, including the Measures for Review of Drug Advertisement (the Advertisement Measures) and the Standards for Drug Advertisement Review and Release (the Advertisement Standards), both of which were repealed when the new Advertisement Rule became effective in March 2020.
The provincial drug regulatory authority where the advertiser is located must review and approve all drug advertisement materials. Article 2 of the new Advertisement Rule provides that advertisements of prescription drugs can only run in NMPA and NHC-approved medical journals (of which there are over 500). The prohibition on consumer advertising of prescription-only drugs also prevents many indirect advertising activities, such as sending journals or reprints to the public, or any other means of advertising to the public.
Upon approval, drug advertisements are given an approval number, which appears on the advertisement. Advertisement approval is valid consistent with the shorter of the validity period of the product registration/filing or manufacturing licence, or for two years if there is no validity period for the product registration/filing or manufacturing licence. Upon the approval's expiry, or if any change is needed to an approved and unexpired advertisement piece, a new advertisement application must be filed and new advertisement approval should be obtained. The NMPA has posted on its website all advertisements that have been approved and those against which there has been enforcement.
China prohibits advertising outside the content of the approved scope of use of the product in the registration documents and label or package insert (off-label promotion). The prohibition against off-label advertising is set out in Article 6 of the Advertisement Standards and Article 5 of the new Advertisement Rule: 'The drug advertisement relating to the indications or the primary therapeutic functions . . . must not exceed the scope of the drug instructions.' The Anti-Unfair Competition Law (AUCL) contains prohibitions on false or misleading promotion that have been used to limit or penalise off-label conduct.
Some penalties for an unapproved advertisement include hefty fines in the hundreds of thousands of dollars, immediate revocation of the advertisement approval, and rejection of any advertisement application for the subject drug for one year. Heavier penalties would apply in the event that an illegal advertisement expands the scope of the indications or primary therapeutic function, exaggerates efficacy or seriously deceives and misleads consumers. Heavier penalties include the provincial authority suspending the sale of the subject drug within the province that has jurisdiction, and ordering the drug company to run corrections regarding the advertising concerned. Criminal penalties may be available in extreme cases.
The term 'promotion' is not defined under Chinese law. Any activity related to a drug is promotional, if, objectively, the intent is promotional as the term is commonly understood (i.e., where it is intended to further the acceptance and sale of the drug). This includes a broad array of product launch activities and associated materials. China has other laws that govern promotion and require that it be generally truthful and non-misleading. As discussed, these include the AUCL and the Law for the Protection of the Rights and Interests of Consumers (Consumer Protection Law). The AUCL is often a basis for enforcement by the new Market Supervision Bureaus, which have been combined with the drug regulatory authorities and investigate promotional violations, including violations of off-label promotion. There is no clear distinction between what constitutes promotion under these laws and what constitutes advertising under the Advertisement Law, even though the AUCL does appear to indicate that there is a distinction.
As noted above, scientific information exchange, including exchange of off-label information, may be viewed as non-promotional with somewhat less risk when conducted appropriately, because the intent is to advance science and medicine through the exchange of scientific information between medical professionals, rather than to further the acceptance or sale of a drug.
In 2020, the NMPA issued a final rule on medical representatives, who are able to engage in a quasi-promotional form of scientific information exchange referred to as academic promotion. These medical representatives are permitted to establish plans for promotion, communicate information about drugs to medical staff, assist medical personnel in the rational use of drugs (i.e., understanding their use), and collect feedback on the drugs. They are not allowed to engage in drug sales, such as collecting payment, or processing purchases and bills of sale. Medical representatives must be authorised by power of attorney or labour contract with the marketing authorisation holder to conduct their activities and must be filed with the NMPA.100
Device advertisements also require pre-approval. Regulation of advertising and promotion of medical devices is similar to that for drugs, as described above. The rules for advertising and promotion of medical devices are set out in several regulations, such as the RSAMD, the Measures on the Examination of Medical Device Advertisements (2009) and the Standards on the Examination and Release of Medical Device Advertisements (2009), both of which, like the drug standards, will be repealed as a result of the new Advertisement Rule in March 2020. Device promotion is also subject to the AUCL and the Consumer Protection Law. A recent proposal to amend the RSAMD would eliminate the device advertisement approval requirement, but has not yet been finalised.
xii Distributors and wholesalers
China requires a company to have a licence to engage in the retail or wholesale distribution of drugs that are manufactured by other companies. No distribution licence or other permission is required for a drug MAH or drug or device manufacturer to distribute the products that it manufactures for itself, provided that it is not for retail and specified distribution conditions are met. Both drug and device distributors must meet respective sets of good supply practices.101
The system of device distribution licences also exists for Class III medical devices. Distributors of Class II devices no longer need a licence, but those distributors must submit a notification to their local municipal governments – a recent proposed amendment to the RSAMD would eliminate even this notification requirement. In either case, the entity must certify that it has appropriate premises, storage conditions and quality management systems, and personnel for its scope of operation.102 Class I device distributors do not require any licence or filing. Under proposed legislation, distribution of certain Class II devices (which include many everyday items, such as condoms) may no longer require a filing.
In 2017, China released a policy for drugs called the Two Invoice System. The aim is to curb corruption in the drug supply chains, and the system limits those supply chains to two invoices. In other words, once the product leaves the manufacturer or the manufacturer's agent, there may be only two invoices, one from the manufacturer to the distributor and one from the distributor to the end-user hospital. Those in the supply chain are required to check the invoices, and failure to observe the policy can result in blacklisting from important procurement processes or loss of distribution credentials. There are some limited exceptions to this system, such as for transfers between entities in the same corporate group or to exclusive distributors, or under some provincial rules, registration agents. Certain provinces have expanded the system to devices. In November 2019, the Leadership Group for Deepening the Medical and Health System Reform of the State Council issued a notice that further encourages some pilot provinces to implement a One Invoice System from 2020, which means there will only be one invoice from the manufacturer to the medical insurance administration agency for certain drugs that fall into the scope of the centralised procurement programme, which is discussed below.103
Vaccines have a special system of distribution. They may only be sold between the manufacturer and the county level Centre for Disease Prevention and Control (CDC). In the case of an imported vaccine, the ex-China MAH must appoint a general distributor in China to act in its place and sell the vaccine to the CDC.104
xiii Prescription status
The NMPA classifies drugs as prescription drugs or over-the-counter (OTC) drugs, and requires the NMPA's review and pre-approval for both. For the purposes of distribution and sale, the NMPA further classifies OTC drugs into Type A or B, where Type A drugs can be sold only by pharmacies or distributors that have received drug wholesale or retail distribution licences, and Type B drugs can be sold at most retail outlets, such as convenience or grocery stores, if approved by provincial governments. The NHC regulates prescribing behaviour for physicians, including a requirement that physicians use the non-proprietary names of drugs. The NMPA has not set up prescription or non-prescription classifications for medical devices, but pursuant to their approvals, some devices may only be sold to and used in medical institutions. There is no prescription status for devices, but some of them can only be sold inside user entities (i.e., hospitals).
xiv Imports and exports
In addition to the product licences for imported drugs and devices, there can be a variety of additional requirements and formalities at the ports. For example, special import or export permits are required for certain narcotic or psychotropic substances.105 Drugs that are imported for processing and re-export may not require NMPA pre-approval; only provincial drug regulatory authority notification is required for such products provided they will not be sold or used in China.106 Additional testing at the border is required, except in the case of oncology drugs pursuant to a special policy by the State Council from 2018.107
Under the revised DAL, importation of unapproved drugs has been removed from the definition of counterfeit drugs. Later provisions reduce penalties for the importation of small amounts of unapproved drugs. This was seen by many as providing flexibility for individuals to import low-cost generics for personal use from other countries.
The NMPA generally does not impose the same requirements for exporting drugs or devices and relies instead on the regulatory oversight of the country of destination. Manufacturers of exported drugs and certain devices must still obtain a manufacturing licence and comply with good manufacturing practices and standards. There are exceptions for nine types of drug108 and two types of device,109 which the NMPA has placed into the catalogue of drugs and devices subject to full NMPA supervision.110 In addition, special export permits are required for exporting some narcotics or psychotropic substances. In most cases, drug and device manufacturers must also submit a filing to their local government before export.111 Certificates of free sale for foreign import authorities may be available from provincial governments, provided that the China manufacturer meets the relevant requirements.
xv Controlled substances
China exercises heightened control over narcotic and psychotropic drugs. The State Council promulgated the Rules on the Administration of Narcotics and Psychotropics, which provide separate rules on these products. The NMPA, the Ministry of Public Security, and the National Health Commission recently jointly issued the revised Catalogue of Narcotics and the revised Catalogue of Psychotropics. Special heightened control is exercised by several government agencies regarding the growing of plants from which narcotics or psychotropics are extracted, and the clinical trialling, manufacturing, transportation and distribution of narcotics and psychotropics. For example, government agencies set the total amount of narcotics and psychotropics needed annually, and the NMPA then sets the annual production plan based on the current supply and stockpile. The NMPA and the department of agriculture jointly set the annual growing plan. Special permits are given only to limited entities to study, produce and distribute narcotic and psychotropic drugs.
Overall, the enforcement environment has become stricter. New legislation has raised penalties significantly and the NMPA and the local MPAs have come to expect significantly more sophisticated regulatory compliance systems and activities from drug and device manufacturers. The NMPA has also introduced provisions into regulations that make enforcement easier, such as requiring strict compliance and demanding recalls for non-compliance with thousands of mandatory standards.
Enforcement against violations of drug or medical device requirements is undertaken by the drug regulatory authorities at national, provincial and lower local levels, with cooperation from other government agencies such as the SAMR, NHC and the public security bureau (China's police force) at all levels of government. Routine and for-cause inspections and investigation of complaints by competitors and individual consumers are the primary means of detecting actual or suspected violations, and complaints from competitors are often the triggers for for-cause inspections. The NMPA has also adopted comprehensive regulations on unannounced inspections for drug and device manufacturers.
The focus of inspections can include many compliance requirements and activities, such as those targeting good practice (laboratory, clinical, manufacturing, storage), data integrity, conflicts of interest, bribery, violative advertisement and off-label promotion. The penalties include revocation of licences and certificates, which can be imposed (see Section II.vii) on post-approval controls in many more situations than in the United States. Other penalties include administrative fines, seizure of products, disgorgement of profits and blacklisting of companies and individuals. Monetary penalties are increasingly high. Criminal liability can be imposed for many violations, and disbarment from engaging in drug or device work is possible. Production or distribution of counterfeit medicines as defined by the DAL may be subject to life in prison or the death penalty if the violation causes death or especially serious harm.112
Increasingly, the NMPA has been requiring manufacturers, distributors and clinical trial sponsors to conduct self-evaluations into good practice compliance and report on the results to the NMPA. For example, in mid-2016, all holders of device distribution licences were required to take stock of compliance with device distribution regulations and good supply practice (GSP) over a two-year period and report back to the NMPA on any non-compliances and plans for remediation. Failure to comply risked the holder's distribution licence.113 The NMPA required similar self-evaluation for drug clinical trials in 2015 and has continued rigorous self-evaluation and trial inspection requirements to the present. Holders of CTAs are required to review for compliance with GCP. The original self-evaluation resulted in the withdrawal of nearly 80 per cent of the trial approvals for non-compliance.114
In 2019 and 2020, the NMPA also issued notices reinforcing its ability under various drug, device and cosmetic regulations to enforce fines and debarment sanctions against individuals. In a growing trend, legislation, including recent drafts of the RSAMD and the revised DAL, has included provisions against responsible individuals in addition to increased fines for entities. This included holding individuals accountable for falsification of clinical data as discussed above. Both the revised DAL and the proposed drafts of the RSAMD include greater penalties against individuals, such as lifetime debarment for serious violations.
Pricing and reimbursement
China has recently begun to reform its system for drug pricing. Specifically, it has abolished the 'maximum retail price' for drugs, and is now implementing a plan to permit those prices to be set more by the market and by reimbursement standards negotiated more openly by stakeholders. Specifically, for drugs that are reimbursed on China's state insurance plans (discussed below), the price will be determined by reimbursement rates. For patented drugs produced exclusively by one manufacturer, the price will be set through transparent negotiations between the manufacturer, government and healthcare industry representatives. Prices will still be set or guided by the government for certain types of drugs, such as narcotic drugs and psychotropic drugs. For all other drugs, however, the prices may be freely set by the manufacturers, provided that they accurately reflect costs.115
Most insurance is through state plans. China abandoned its universal care system in the 1980s and 1990s, with coverage in the countryside at only 14.8 percent in 1988.116 China established three government-run insurance plans that it developed for urban residents, urban sector employees, and rural residents. The goal was to ensure universal coverage for the entire population. The resident plans were merged in 2016 into the Urban and Rural Resident Basic Medical Insurance, leaving only two plans. Covered drugs for these plans are included in the National Reimbursement Drug List (NRDL), which has a total of 2,800 drugs in its most recent version, which the government revised in December 2020 and will update once a year.
The National Healthcare Security Administration (NHSA) makes the decision to include a drug in the NRDL. In doing so, it will seek public comment, organise an expert review, select the drugs and vote on inclusion. It will then negotiate with drug companies for partial candidate products. From 2020, drug companies are required to apply to have their products, which meet certain conditions set forth by the NHSA, included in the NRDL.117 A total of 119 drugs were newly added in 2020, through successful negotiation of an average price cut of 50.64 per cent by the NHSA with the various drug companies.118
The NRDL is categorised into two lists. Drugs on List A are the essential drugs and are fully reimbursable in any province. Drugs on List B are only partially reimbursable under various insurance schemes at provincial level. Reimbursement rates for the drugs on the NRDL are determined by government agencies based on various factors, including cost of production, clinical need, and supply and demand. Pricing and reimbursement decisions are now taken primarily by the NHSA.
The process for admission to the NRDL has traditionally lacked clear rules and application procedures. In 2020, the NHSA finalised a rule that set forth the procedure, materials and considerations that NHSA follows in determining the entry of drugs to the NRDL.119 Under this rule, certain types of drugs, e.g., healthcare drugs and drugs that are mainly used to enhance sexual function, treat hair loss, lose weight, beautify the features, quit smoking and alcohol or otherwise, are explicitly excluded from the NRDL, and certain drugs will be directly removed from the NRDL, such as drugs whose approval certificates have been withdrawn, revoked or cancelled by drug regulatory authorities. In principle, no more OTC drugs will be added to the NRDL.120
In early 2019, for the purpose of reducing drug prices, the State Council started a pilot programme in four municipalities and seven cities that requires centralised procurement through a bidding or negotiation process of certain selected drugs for which the generic drugs have proven their therapeutic and quality equivalence to corresponding reference products.121 The winning product, normally the one with the lowest price offered, will take 60 to 70 per cent of the volume of such type of product purchased by state-owned hospitals for the following year. The pilot programme continued to evolve and was later expanded to the entire country with the winning products taking 50 to 80 per cent of the market share in state-owned hospitals (depending on how many products won the bidding). Although currently this centralised procurement programme does not apply to new drugs with valid patents, Wuhan is conducting a pilot programme to expand it to those drugs as well.122
By contrast, the commercial insurance sector is smaller, but steadily developing.123 For example, the government has been trying to promote critical disease insurance for individuals who have exceeded their coverage level under the state plans. Individuals with qualifying diseases that obtained critical disease coverage would be eligible for 50 per cent reimbursement under those plans. The government has encouraged the commercial insurance sector to play a strong role in providing this type of coverage.124
A pricing system also exists for medical devices, but its features may differ depending on the locality. In some localities, the government will set a maximum retail price for devices. The manufacturer reports information about its costs to the government and is then permitted a certain mark-up that is set by the government.
As with drugs, coverage by the national plans and reimbursement rates for medical devices are set by a combination of central and local government agencies. Medical institutions (i.e., hospitals and clinics) acquire devices through restricted procurement processes.
Administrative and judicial remedies
Administrative and judicial remedies are available in China to appeal agency decisions and redress illegal government practices. Administrative regulations are rarely challenged in the courts for alleged defects in the underlying authority or rule-making procedures because China's Administrative Litigation Law prohibits 'abstract' challenges of this sort to the validity of administrative rules. Most efforts to formally challenge the NMPA focus on challenging concrete NMPA administrative decisions instead. Processes are available for both administrative reconsideration and judicial review of administrative decisions, but it may be difficult to win controversial cases in court in the absence of a clear violation by the agency of laws, regulations or its own rules.
i Administrative reconsideration
When an applicant is not satisfied with a government agency's decision, the applicant may file an administrative reconsideration request for review by either the government agency itself or its supervising ministry or department within 60 days.125 To file an administrative reconsideration request challenging a NMPA decision, the applicant must have legal standing to do so. The complaint must name the respondent and the specific decision the applicant is challenging.126 Permissible grounds for reconsideration are:
- the agency's fact-finding on major issues is incorrect and evidence is inadequate to support the decision made;
- the law was erroneously applied;
- the agency violated relevant statutory procedures;
- the agency exceeded its authority or abused its power; or
- the decision was obviously inappropriate.
A special division within the NMPA is responsible for handling administrative reconsideration requests (the Administrative Reconsideration Office (ARO)) to challenge decisions made by the NPMA itself or its local offices. For complex cases and cases involving a challenge to underlying laws or regulations, the Administrative Reconsideration Committee (ARC), which consists of the commissioner and deputy commissioners of the NMPA and ranks higher than the ARO, will hear the case.
The ARO or ARC will examine the request and decide within five days whether it meets the requirements for reconsideration.127 If so, it will be accepted for review and the ARO or ARC is obliged to render a decision within 60 days. If the situation is complicated, the time for review may be extended by a maximum of 30 days. The ARO or ARC may affirm the administrative decision, or overturn it and remand the matter to the government agency with instructions to take either a specific or an alternative administrative act. The decisions made by the ARO and ARC are legally effective upon the signature of the head of the NMPA.128 The applicant can appeal an ARO or ARC decision to the State Council, whose decision is final, without the availability of judicial review.
The DRR contains a new dispute resolution mechanism related to drug applications. When an applicant disagrees with the CDE's rejection of its application, it may submit its opinion within 15 business days of the rejection. The CDE will evaluate the applicant's opinion and provide a decision. If the applicant still disagrees with CDE's comprehensive evaluation conclusion, the CDE will organise an expert committee within 50 business days to review the conclusions and make a final decision.129 If at any time during the registration period the applicant believes that a decision has not been objective or impartial, the applicant can file a complaint to the entity involved or its acceptance and complaint centre, which will handle that complaint according to internal procedures. Applicants have access to standard administrative reconsideration and litigation procedures thereafter.
ii Judicial lawsuit
If an applicant decides not to appeal the ARO or ARC's decision to the State Council, it may bring a judicial lawsuit in the People's Court against the ARO.130 If the People's Court finds that any of the following conditions are met, then the administrative act must be annulled or partially annulled, or the defendant must be ordered to take another alternative administrative act:
- the major evidence was inadequate;
- the administrative agency erroneously applied the law or regulations;
- the administrative act violated legal procedures;
- the administrative act exceeded authority;
- administrative power was abused; or
- the administrative act was obviously inappropriate.131
Financial relationships with prescribers and payers
China has enacted laws and regulations to prohibit bribery, kickbacks or other inappropriate financial relationships or sponsorship. The revised DAL still contains these provisions, and penalties for violations could include revocation of the drug or medical device approvals, civil fines and criminal penalties. In addition, the SAMR administers the Anti-Unfair Competition Law and regulations against commercial bribery. Bribery cases may also be handled through the criminal justice system. Scrutiny of these activities has grown substantially in the past few years since the government launched anti-bribery investigations of foreign drug manufacturers.
The fallout from those investigations has resulted in much more significant scrutiny of the relationships between drug companies and healthcare providers by regulators in China. The NHC issued a policy of 'Nine Prohibitions' (or bad acts in the healthcare system) that would be the focus of government scrutiny and enforcement resources, as well as blacklisting rules meant to curb ethical abuses in the healthcare sector. The Nine Prohibitions are:
- no linkage between healthcare provider incomes and profits from drug sales or medical services;
- no rebates for prescribing medicine or referrals for services or drugs;
- no overcharging of patients;
- no acceptance of illegal donations;
- no illegal advertisements or promotion of drugs, devices, food or other products by medical institutions or healthcare providers;
- no collation of statistics for commercial purposes or personal gain by healthcare providers;
- no private buying or selling of drugs, devices or other equipment by healthcare providers;
- no acceptance of kickbacks or commissions from healthcare companies or engagement in entertainment activities provided by those companies; and
- no solicitation or acceptance of financial benefits from patients.132
In late 2013, nine agencies, including the NHC and NMPA, issued a joint opinion (a blueprint of sorts) intended to create higher standards for ethical conduct by physicians and other hospital personnel in their dealings with the drug industry. The opinion also mentioned higher standards for safety for medical devices but singled out corruption associated with drugs as the primary target.
Scrutiny in this area continues to be very significant and regulatory reform is continuing. In late 2014, the NHC issued measures on clinical research projects at medical and other health institutions, which, among other things, called for stronger clinical research and ethics committee management of these projects, and guidelines for financial management intended to prohibit payments directly to investigators.133
To further control improper incentives given by the drug industry to Chinese hospitals, in 2015, the NHC released regulations further circumscribing donations to healthcare institutions, emphasising that all such donations must have an acceptable charitable purpose and that charities (all donations must flow through approved charities) must conduct a thorough review of the donor and the plan for the donation itself.134 Anti-corruption investigations and physician kickbacks continue to be significant issues in China.
As discussed above, the NMPA and other agencies have been taking measures to curb corruption in other ways. These include the Two Invoice System, discussed above, aimed at reducing corruption by slimming down distribution chains. There are also new measures on medical representatives, which require a separation between medical affairs representatives and salespeople, and a registration system that makes that separation more visible.
In 2017 and 2019, China revised the AUCL, and the 2017 revision contains a new and arguably expanded concept of what constitutes commercial bribery and increased penalties. This adds another tool to combat corruption in this space.
As discussed above, in 2020, building upon the Innovation Opinion and other related policies, the NMPA issued a final rule on medical representatives. These rules were an effort to separate sales from what the NMPA called 'academic promotion'. This appears to have been intended to reduce corruption and illegal forms of promotion in medical institutions.
Special liability or compensation systems
Compensation can rely on provisions specifically on drugs and devices in the Tort Liability Law, and perhaps on provisions in other laws, such as the Consumer Protection Law, the Product Quality Law and the Regulations on Medical Disputes. The Regulations are currently under revision. For example, a draft amendment of the Consumer Protection Law was released in 2016 and the Product Quality Law has just been amended in December 2018. Compensation is available when the product is defective or not made in accordance with compulsory national standards. Drugs or medical devices can still cause injuries in the absence of product defects or medical malpractice, but no special strict liability has been set up for compensation under such circumstances.
The newly revised DAL adopts a principle of joint liability common to other areas of Chinese law under which a patient can bring suit against the MAH, the manufacturer, the distributor or the hospital and those entities must accept responsibility and defend the suit regardless of fault. They can later be indemnified by the true responsible party.
Since the Innovation Opinion, China has gradually revised its framework laws and regulations for drugs and devices. The newly revised DAL and DRR and subsequent implementation proposals were the central developments in 2019 and 2020, and that implementation will continue throughout 2021, including rules on pharmacovigilance, drug recalls, drug labels, and the role of the MAH Agent with regard to the MAH. With the amendment of the Patent Law, which will become effective in June 2021, a patent linkage system, although not finalised, may become more realistic. A newly revised RSAMD could spur various changes to device implementing regulations in the new year. We expect that the implementation of the Biosecurity Law will continue to spur stringent enforcement in that human genetic resource area.
1 John Balzano is a partner and Aaron Gu is an associate at Covington & Burling LLP. This chapter is based on the 'China' chapter in previous editions of The Life Sciences Law Review, which was authored by John Balzano and Andrew Shaoyu Chen.
4 While varying from year to year, the local drug agencies and affiliated organisations at provinces and municipalities have a total approximate headcount of 80,000 (direct and affiliated).
5 The NMPA's announcement on CDE's hiring in 2020 indicates that the CDE plans to recruit 29 more staff in 2020, including 22 reviewers. See www.nmpa.gov.cn/zwgk/rshxx/zhshdwgl/20200416130101973.html.
6 2019 Annual Report on Drug Evaluation (CDE 30 July 2020), available at www.cde.org.cn/news.do?method=largeInfo&id=68f4ec5a567a9c9a.
11 These regulations cover in vitro diagnostic reagents (IVDs), but IVDs are regulated separately under a specialised set of implementing regulations. Throughout this chapter, references to medical devices refer to non-IVD devices, unless otherwise indicated.
12 Article 2 of the DAL. Translation provided by LexisNexis.
13 Article 38 of the DAL.
17 Article 4 of the RSAMD.
18 Article 16 of the RSAMD.
23 Announcement of the National Medical Products Administration and the National Health Commission on Matters Concerning the Evaluation, Examination and Approval of Foreign New Drugs Urgently Needed in Clinical Treatment (NMPA and NHC 2018, available at www.nmpa.gov.cn/WS04/CL2050/331475.html).
24 See, e.g., Proposed Opinion Regarding Implementation of Priority Evaluation and Approval for Reduction of the Drug Registration Application Backlog (CFDA 2015), available at www.nmpa.gov.cn/WS04/CL2182/300070.html.
25 Articles 8 and 44 of the Pharmaceutical Good Clinical Practice Regulations (NMPA and NHC 2020), available at www.gov.cn/zhengce/zhengceku/2020-04/28/content_5507145.htm.
28 Clinical Technical Requirements on The Drugs Marketed Abroad but Not in China (NMPA 2020), available at www.nmpa.gov.cn/xxgk/ggtg/qtggtg/20201016145016178.html.
29 Guidelines on the Acceptance and Examination of Registration of Biological Products, available at www.cde.org.cn/news.do?method=largeInfo&id=3aa9f3d2b7cd3df1.
30 Article 44 of the DRR (2007 version); Guidelines on the Acceptance and Examination of Registration of Biological Products, available at www.cde.org.cn/news.do?method=largeInfo&id=3aa9f3d2b7cd3df1.
31 See Guidance on Drug International Multicenter Clinical Trials (For Trial Implementation) (CFDA 2015), available at www.nmpa.gov.cn/WS04/CL2182/299999.html; Notice to Seek Comments on the Policies to Expedite the Reduction of Drug Registration Application Backlog (CFDA 2015), available at www.nmpa.gov.cn/WS04/CL2182/300070.html.
33 Article 17 of the RSAMD.
37 Notice on Issuing the Catalogue of Class II Medical Devices that are Exempted from Conducting Clinical Trials (CFDA 2014), available at www.nmpa.gov.cn/WS04/CL2183/322060.html; Notice on Issuing the Catalogue of Class III Medical Devices that are Exempted from Conducting Clinical Trials (CFDA 2014), available at www.nmpa.gov.cn/WS04/CL2138/299982.html.
40 Notice on Issuing the Catalogue of Class III Medical Devices that are Required to Conduct Clinical Trials (NMPA 2020), available at www.nmpa.gov.cn/directory/web/nmpa/ylqx/ylqxggtg/ylqxqtgg/20200918103742111.html.
41 Article 18 of the RSAMD.
44 Good Clinical Practices for Medical Device Clinical Trials (CFDA No. 25 2016), available at www.nmpa.gov.cn/WS04/CL2186/300685.html; The Inspection Items and Judgement Principles for Clinical Trials for Medical Devices available at www.nmpa.gov.cn/WS04/CL2197/333486.html
45 Technical Guidelines For Clinical Evaluation Of Medical Devices Using Real World Data (NMPA 2020), available at www.nmpa.gov.cn/xxgk/ggtg/qtggtg/20201126090030150.html.
46 Tentative Measures on the Management of Human Genetic Resources (State Council General Office 1998), available at www.most.gov.cn/bszn/new/rlyc/wjxz/200512/t20051226_55327.htm.
47 Notice of the General Office of the Ministry of Science and Technology on Carrying out Special Inspections on the Administrative License Administration of Human Genetic Resources, available at www.gov.cn/zhengce/zhengceku/2020-01/02/content_5466025.htm.
48 Article 76 of the DAL.
49 Article 36 of the DALIR.
51 Opinion on Developing Therapeutic and Quality Equivalence Evaluation for Generic Drugs (State Council General Office No. 8 of 2016), available at www.gov.cn/zhengce/content/2016-03/05/content_5049364.htm.
52 Procedure for Section and Determination of Reference Product for Chemical Generics (NMPA 2019), available at www.nmpa.gov.cn/xxgk/ggtg/qtggtg/20190328162401710.html.
53 Notice on Several Matters Related to the State Council General Office's Option on Demonstrating Therapeutic and Quality Equivalence of Generic Drugs (CFDA No. 106 of 26 May 2016), available at www.nmpa.gov.cn/WS04/CL2182/300168.html.
55 Article 39 of the DRR.
62 Article 80 of the DRR.
66 'Over 75% Patents are Invalidated? New Drug Research and Development is Afraid to Fall into the Paradox of Chine Style Innovation', Zhouhuang Lu, China Intellectual Property Magazine, Issue 137, available at www.phirda.com/artilce_18053.html?cId=1.
69 Article 18 of the DRR (2007 version).
71 Article 48 of the Measures on Medical Device Registration.
74 See, e.g., Articles 28 to 30, 76, 83 and 84 of the DRR, and Article 47 of the RSAMD (requires manufacturer to establish device adverse event reporting system).
78 The Measures on the Administration of Drug Recalls were promulgated in 2007, and the Measures on the Administration of Medical Device Recalls (Interim) were promulgated in 2011 and amended in 2017.
81 Articles 49 to 50 of the Measures on Medical Device Registration; Article 15 of the Measures for the Supervision and Administration of Medical Device Manufacturing (CFDA 2017), available at www.nmpa.gov.cn/WS04/CL2186/300702.html. For imported devices, a change of a manufacturing address abroad is a more complex process that requires the submission of more information and a longer timeline.
82 Article 18 of the Measures for the Supervision and Administration of Medical Device Manufacturing (CFDA 2017).
83 Article 84 of the DRR.
84 Article 55 of the Measures on Medical Device Registration.
85 Articles 116 and 117 of the DAL.
86 Article 123 of the DAL.
87 Article 125 of the DAL.
90 Article 51 of the RSAMD.
91 Article 64 of the RSAMD.
92 11th Amendment to the Criminal Law (NPCSC 2020), available at www.npc.gov.cn/npc/c30834/202012/850abff47854495e9871997bf64803b6.shtml.
93 Article 10 of the Measures for the Supervision and Administration of Medical Device Manufacturing.
94 Article 67 of the RSAMD; Article 67 of the Measures on the Supervision and Administration of Medical Devices Manufacturing.
96 Article 22 of the VAL.
99 Interim Measures on the Review and Administration of Advertisements of Drugs, Medical Devices, Dietary Supplements and Foods for Special Medical Purposes (SAMR 2019), available at http://gkml.samr.gov.cn/nsjg/fgs/201912/t20191227_309564.html.
100 Medical Representative Record-Filing Management Regulation (Trial Provisions) (NMPA 2020), available at www.nmpa.gov.cn/xxgk/ggtg/qtggtg/20200930163955170.html.
102 Articles 29 to 31 of the RSAMD.
104 Chapter 4 of the VAL.
105 Article 66 of the DAL.
106 Regulations on the Administration of Drug Processing for Export (CFDA 2003), available at www.mofcom.gov.cn/aarticle/bg/200310/20031000140122.html.
107 Administrative Measures for the Inspection and Supervision of Imported Medical Devices (AQSIQ 2007), available at www.customs.gov.cn/customs/302249/302266/302267/2371299/index.html.
108 Gentamicin, atorvastatin, sildenafil, oseltamivir, cefoperazone, glycerine, heparin, artemisinin and traditional Chinese medicine in finished dosage form and indicated for erectile enhancement.
109 Glucose-testing strips and condoms.
111 Article 3 of the Administrative Regulations on Filings for Contract Manufactured Drugs for Foreign Enterprises (CFDA 2005), available at www.nmpa.gov.cn/WS04/CL2196/323528.html; Article 70 of the Measures on the Supervision and Administration of Medical Devices Manufacturing.
112 Article 141 of the Criminal Law of the People's Republic of China.
113 Notice on Regulating Distribution Activities in Medical Device Circulation (CFDA No. 112 of 7 June 2016), available at www.nmpa.gov.cn/ylqx/ylqxggtg/ylqxqtgg/20160607180201128.html.
115 Circular Concerning Opinions on Advancing the Drug Pricing Reform (NDRC 2015), available at www.ndrc.gov.cn/zcfb/zcfbtz/201505/t20150505_690664.html.
116 1988 Economic and Social Development Statistics (Nat'l Bureau of Statistics 2002), available at www.stats.gov.cn/tjsj/tjgb/ndtjgb/qgndtjgb/index_1.html.
121 Circular of the General Office of the State Council on Issuing the Pilot Program for Conducting Centralised Drug Procurement and Use by the State (State Council 2019), available at www.nhsa.gov.cn/art/2019/1/17/art_37_482.html.
123 Several Opinions on Accelerating the Development of the Modern Insurance Service Industry (State Council 2014), available at www.gov.cn/zhengce/content/2014-08/13/content_8977.htm.
124 Opinions on the Full Implementation of the Critical Disease Insurance Program for Urban and Rural Residents (State Council 2015), available at www.gov.cn/zhengce/content/2015-08/02/content_10041.htm.
125 Administrative Reconsideration Law (NPC 2017), available at www.npc.gov.cn/npc/c30834/201709/ff2f2aadd940478999f6ef01d4daeeb7.shtml.
127 Article 17 of the Administrative Reconsideration Law; see also Article 48 of the Regulations on the Implementation of the Administrative Reconsideration Law (State Council 2007), available at www.gov.cn/zhengce/content/2008-03/28/content_1717.htm.
128 Article 17-20 of the Administrative Reconsideration Measures of the CFDA.
129 Article 90 of the DRR.
130 Article 44 of the Administrative Litigation Law (NPC 2017), available at www.npc.gov.cn/npc/xinwen/2017-06/29/content_2024894.htm.
131 Article 70 of the Administrative Litigation Law; see also Article 6 of the Provisions of the Supreme People's Court on Several Issues Concerning the Hearing of Administrative Cases of International Trade (SPC 2002), available at http://dcj.mofcom.gov.cn/article/zcfb/cp/200504/20050400079036.shtml. Similar interpretations can be found in Provisions of the Supreme People's Court on Several Issues Concerning the Application of Laws in the Hearing of Anti-Dumping Administrative Cases (SPC 2002), available at http://dcj.mofcom.gov.cn/article/zcfb/cq/200504/20050400059794.shtml, and Provisions of the Supreme People's Court on Several Issues Concerning the Application of Laws in the Hearing of Countervailing Administrative Cases (SPC 2002), available at http://dcj.mofcom.gov.cn/article/zcfb/cn/200504/20050400072112.shtml.
133 Administrative Measures on the Development of Clinical Research Projects at Medical Health Institutions (NHFPC 2014), available at www.nhfpc.gov.cn/yzygj/s3593g/201410/9bd03858c3aa41ed8aed17467645fb68.shtml.
134 Administrative Measures on Accepting Donations for Public Welfare by Healthcare Entities (for Trial Implementation) (NHFPC 2015), available at www.nhc.gov.cn/caiwusi/s3573/201510/761f2a9e36f74c1e9f00849f8de61f49.shtml.