The Life Sciences Law Review: China
China continues with drug and device regulatory reform. Since 2015, China has embarked on a reform effort to fully restructure its drug and medical device regime to promote innovation. This departs from the previous 10 years during which incomplete regulations, a smaller drug and device regulatory agency, and long wait times for approval of development and marketing applications made the launch of innovative drugs (i.e., drugs approved based on full data and/or approved first in China), particularly those that were imported, a difficult and multi-year process.
Beginning in earnest in 2017, and in particular 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 notification system for clinical trials, acceptance of foreign data, expansion of clinical trial sites, and a marketing authorisation holder system that permitted 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 Drug Administration Law (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 began to issue new implementing rules and guidance documents rapidly starting from August, a process that will continue throughout 2020 and the years to come.
At the time of this writing, many of these reforms are 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 only finished the implementing regulations for the 2014 regulation in 2018 as multiple new draft amendments for the RSAMD were appearing. 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 its 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 affiliated centres. The departments have responsibility for administration 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 Centre for Drug Evaluation (CDE) and the Centre for Drug Re-Evaluation (CDR). The CDE evaluates clinical trial and marketing authorisation applications, and approves subsequent amendments and renewals. The CDR includes the National Centre for Drug Adverse Event 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.
With an official headcount of 216 at the national level (not counting contract personnel),2 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 municipalities3 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 hiring4 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.5 The CMDE has similarly been adding reviewers but has fewer than the CDE.6 The increases in staff have been and will continue to be an important step in resolving delays.
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 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 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. 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 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 2019.7 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 has not finalised a comprehensive amendment since 2007, despite releasing drafts in 2014, 2016 and 2017, and three in 2019. China is expected to finalise a substantial revision of the DRR shortly to implement the DAL.
However, the NMPA has made changes to the policies reflected in the DRR via shorter regulatory documents. For example, it implemented the more recent reference product and MAH reforms through these documents. In October 2017, the NMPA issued a document entitled Adjustment of Several Matters Regarding the Registration of Imported Drugs (CFDA No. 35 of 2017) (Document 35). Document 35 removes certain restrictions on the development and registration of imported drugs that are in the DRR. These reforms may be incorporated into the DRR (or guidance documents) as the implementation of the DAL and process of regulatory reform progresses.
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 framework legislation for medical devices is a regulation (not a law) enacted by the State Council, namely the RSAMD.8 As with drugs, the NMPA has enacted a number of implementing rules covering registration, production and distribution.9 The State Council revised the RSAMD in 2014 and 2017, and another amendment is very possible in 2020.
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.10
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 is being incorporated into mainstream regulations with the drafts of the DRR.
Once determined to be a 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.11
Under the 2019 drafts of the DRR, drugs will still be classified into three types: traditional Chinese medicines and natural drugs, chemical drugs and 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.
In 2015 and 2016, pursuant to authorisations from the National People's Congress and the State Council, the NMPA restructured the registration categories for chemically synthesised drugs. These new categories were intended to reduce confusion about the registration process, integrate the new reference product system for generics and encourage innovation. The five categories under this system are:
- Category 1: innovative drugs. These drugs have an active ingredient that has a clear structure and is clinically valuable. The ingredient must be new to the world, not just new to China.
- Category 2: improved innovative drugs. These drugs have an improvement that is clinically valuable and new to the world, such as certain structural changes, dosage forms, routes of administration, strengths and indications.
- Category 3: generics with foreign reference products. This category is for generic drugs that use fully evaluated drugs (typically originator drugs) that are marketed abroad but not in China as their reference products.
- Category 4: generics with domestic reference products. The opposite of Category 3, this category is for generics that use fully evaluated drugs that are marketed in China as their reference products.
- Category 5: imported drugs already approved for marketing abroad. Following on from the separation between imported and domestic drugs described above, this category is either for original drugs that are already marketed abroad (5.1) or generic drugs marketed abroad (5.2). These drugs use the import licence pathway.12
Biologics have not undergone a similar reform, and at present under the 2007 DRR consist of 15 unwieldy and overlapping categories (e.g., one for monoclonal antibodies and one for biologics not marketed inside or outside of China). By means of a guidance document, China adopted a structure for biosimilars that was similar in certain respects to the guidance issued by the World Health Organization in terms of setting forth a method for a comparative evaluation typically against an innovative therapeutic biologic. That guidance defined biosimilars as those biologics that have demonstrated similarity to a reference product, and in 2019 China approved its first biosimilar under that framework.
Although not in force, the draft DRR now proposes even more simplified categories. For example, for chemically synthesised drugs, those categories are: (1) innovative drugs, (2) modified new chemical drugs, and (3) generic drugs. For biologics, they are (1) innovative biologics, (2) modified new biologics, and (3) a more mysterious category referred to as 'marketed biologics', which includes biosimilars but is otherwise unexplained. The 2019 draft DRRs eliminate the complex appendices and promise to replace them with more detailed guidance documents that the CDE will issue. The meaning and content of these categories remain unclear at present, including whether innovative drugs that are first approved in other countries can qualify as innovative drugs in China. Since 2016, that has not been the case.
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 '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:
(1) diagnosis, prevention, monitoring, treatment or mitigation of diseases; (2) diagnosis, monitoring, treatment or mitigation of injuries or the functional compensation thereof; (3) inspection, replacement, adjustment or support of the physical structures or physiological processes; (4) life support or sustaining; (5) pregnancy control; and (6) provision of information for medical or diagnostic purposes by inspecting the samples of human bodies.13
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.14
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.15 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 Institute For the Control of Pharmaceutical and Biological Products (NICPBP, formerly known as 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.16
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.17 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.18 The 2019 draft 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,19 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 a conditional approval programme, under which a foreign-approved drug for an orphan indication or a drug for preventing or treating life-threatening diseases can be approved based on early-stage data. 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.20
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, 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 practice under the new DAL is not yet clear), 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 three programmes: breakthrough approval, conditional approval, and 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.21 As discussed below, the NMPA has also recently adopted a filing system for bioequivalence studies for generic drugs that is less onerous than the CTA process.
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, that government-certified laboratories conduct quality testing to confirm conformity with the quality standards,22 and that the sponsor seeks 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 Innovation Opinion and 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,23 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.
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 draft DRR will permit various amendments which may require an approval, notification, or mention in an annual report depending on the degree to which the change affects safety or effectiveness. In the past, this shortcoming has led to applicants having to file an entirely new CTA when making changes to their approved CTA, even if those changes are not safety-related.
In some cases the DRR still specifies the following minimum numbers of study subjects for different phases, and the trial must have sufficient statistical power.24 The NMPA has been revising the application requirements for chemically synthesised drugs,25 but the following requirements for biologics remain on the books at least until the draft DRR is finalised.
|Phase I||Phase II||Phase III||Phase IV|
|Therapeutic biologic||20||100||300||Not specified|
|Preventive vaccine||20||300||500||Not specified|
A central difference between the imported and domestic approval pathways is the requirement of prior foreign approval for imported drugs, whereas no such foreign approval is required for domestically produced drugs. As of 2017, 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. In the event that the drug has not been approved elsewhere, an application for an imported drug can include submission of a CTA without proof of foreign approval. It is unclear whether this requirement will remain under the draft DRR.
Foreign manufacturers 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.26 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 has pledged to encourage domestic drug manufacturers to participate in these trials.27
In June 2018, the NMPA 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 a guideline and joining the trend of other agencies around the world in exploring this new area. It is currently unclear how real world evidence may be applied.
Clinical data are used to establish the safety and efficacy of medical devices that are registered for marketing in China.28 In general, manufacturers must submit clinical trial data to register Class II and Class III medical devices (including in vitro diagnostics).29 No clinical trial is required for Class I devices.30
The revised 2014 RSAMD broadened the exemptions from clinical trials for certain devices and for 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.31 To further define these categories, the NMPA issued multiple catalogues of exempt devices,32 ultimately issuing one unified catalogue in 2018 with an update in 2019,33 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.34 A proposed amendment to the RSAMD would remove the requirement for a clinical evaluation for Class II devices and potentially broaden the exemption 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 a catalogue of a subclass of high-risk Class III devices for which pre-approval of the clinical trial is required. This catalogue has not been updated since 2014 and includes eight different types of products that NMPA deems to pose higher risks to human bodies, such as nano orthopedic implants.35
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.36 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.37 The NMPA issued procedures to implement this provincial notification requirement in July 2015.38 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 2018.39 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.
Human genetic resources
Foreign companies that sponsor clinical trials in China and collect human biospecimens must apply for approval or notification to do so jointly with the Chinese clinical trial site (i.e., the hospital) from the Office of Human Genetic Resource Administration 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.40 In 2019, the State Council revised the HGR regulations. Among several other changes, the new regulations introduced a notification pathway if the study would be used to support marketing approval of the drug or device in China and if no samples associated with the study are exported outside of China. The amendment also introduced a data notification requirement under which the Chinese party must notify the Office of Human Genetic Resource Management and upload the data to be transferred prior to transferring data associated with the samples to a third party outside of the collaboration. The regulations on human genetic resources also include controversial provisions on the sharing of intellectual property, including patent rights to any invention related to the samples. The Office of Human Genetic Resource Administration 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.
In December 2019, the Ministry of Science and Technology issued a special notice where it required, among other things, all entities that had submitted HGR applications in 2018 conduct a self-inspection regarding their compliance with HGR regulations by early January 2020, and the agency is also arranging regular and random inspections of national and provincial science and technology agencies in 2020.41
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.42 In addition, Chinese drug regulations provide for the importation of unapproved drugs to satisfy urgent clinical needs or in the case of national emergencies. 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 treat a specific group of patients to prevent the spread of serious contagious disease.43
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.
vii Pre-market clearance
As discussed, the NMPA has different requirements for drugs depending on the registration category that they fall under. The registration categories are currently in flux, but this section addresses current requirements. These are likely to change in the coming years.
Imported drug application
If manufactured abroad and by a qualified foreign manufacturer, the application is for an imported drug. If approved abroad, typically the foreign manufacturer holding the relevant approval for the foreign regulatory health authority is the applicant before the NMPA and will be required to present a certificate of pharmaceutical product to show marketing abroad. 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 NICPBP for conformity with product specifications and quality standards. The draft DRR introduces requirements for inspections of development sites in some cases, as well as registration inspections, including manufacturing sites for certain types of drugs and for-cause inspections to verify application materials, including those related to suppliers.
The manufacturer (or now under the new DAL the MAH) must also appoint a local entity in China to act as the agent for the imported drug registration.44 Agents may be drug distribution entities that hold distribution licences, which allow them to book sales and promote the drug. Agents bear joint responsibility with the MAH and liability for quality, safety and other regulatory obligations and related violations.
New drug application
Domestic drugs and biologics submit new drug applications. For chemically synthesised drugs, a new drug is now considered to be one that is new to the world in the ways specified in registration Categories 1 and 2 described in Section II.iii. The DRR provide that all biologics must proceed through the new drug pathway.
For this pathway, the NMPA requires that a manufacturer obtains a drug manufacturing licence after a facility inspection demonstrating GMP compliance. Under the DAL, the manufacturing licence and the GMP certification has been merged.
Previously, domestic manufacturers would file a new drug application or a generic drug application. However, for domestically made products the only licence the NMPA issued was a manufacturing facility licence. Therefore, once the drug was approved the NMPA would issue a new drug certificate which would become linked to the site and, subsequently, an official drug approval number. A domestic drug would then be permitted to go on the market. All biologics, regardless of whether they were innovative or follow-on products, had to use the new drug application pathway, and any additional indications required a new drug application, although they would become part of the same licence. For imported drugs, there was a separate imported drug licence application that resulted in an imported drug licence being granted.
Going forward, the NMPA will receive registration applications for all drugs whether domestically made or imported. Once development is complete, an applicant will file a marketing authorisation application under one of the registration categories described above (innovative product, modified new product, or a follow-on (i.e., generic or biosimilar)). The draft DRR permits applications for first-time 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 is also implementing the equivalent of a master file system through which others can access the data underlying the APIs and packaging materials without obtaining the data itself. During the registration process there can also be a variety of registration inspections, including an inspection of the clinical data site, a manufacturing site inspection (separate from that for a manufacturing licence), potentially inspections of suppliers or other third parties, or other for-cause inspections if needed to verify application materials.
Generic drug application
With the exception of original 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 original product, but the NMPA will also permit an 'internationally recognised' generic product to serve as a reference product.45
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.46
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.47 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 NICPBP. 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.48
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. Under the current DRR, biologics for which there is a pre-existing national standard typically only need to conduct Phase III studies in China and for others, Phase I may be waived.49
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.50 As discussed, the new category under the draft 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,51 and by 2017, the NMPA touted reducing the backlog to only 4,000.52 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.53
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 provide for 150 business days for CDE review of new or imported drug applications (200 business day limit under the draft DRR), and 160 business days for CDE review of generic drug applications (200 business day limit under the draft DRR). In practice, the CDE's review often takes longer, although the draft DRR appears to set an overall cap and may improve timing. If the CDE needs additional information, it can issue a request to the applicant, and the review clock stops. The applicant will have four months to provide the additional information, and the CDE will have an additional 40 days to review the additional information. 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.
Priority review is available for certain drugs that treat serious or life-threatening conditions, including new drugs for the treatment of HIV, cancer or orphan diseases, and new drugs that treat unmet medical needs. The NMPA's new priority categories over the past three years include drugs that treat diseases prevalent among children and elderly people, drugs that are on national scientific research plans, foreign innovative drugs that transfer manufacturing to China, and drugs that are being developed simultaneously in the United States and Europe.54 Priority status facilitates applications by allowing the applicant better access to CDE reviewers for their marketing applications and in some cases for questions about their clinical trials. Publicly available information suggests that the fast-track mechanism has, in fact, shortened review times. The timelines for review for expedited programmes under the draft 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, 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.55
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 or route of administration. The applicant must be the company that holds the existing marketing or manufacturing authorisation. Under the draft DRR, there would be three pathways for changes, depending on the degree to which they affect the safety and effectiveness of the drug. Major changes would require affirmative agency approval before moving forward, but other changes with less impact would require only a notification or reporting in an annual report.
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.56 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.57 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.58
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.59
Non-patent intellectual property protection does not exist in China. There is no implemented regulatory or market exclusivity, no patent term restoration, and it lacks IPR enforcement mechanisms present in other markets such as patent linkage or early resolution of patent disputes through effective interlocutory relief in the form of injunctions. Until recently, there were patent certification and weak leakage mechanisms in some drug regulations, but the draft DRR removes those protections and, in any event, they have gone unenforced recently.
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 draft DRRs contain no mention of these measures, and the explanation to the draft DRRs essentially states that the government is putting those measures on hold for another time. 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,60 but has done nothing since.
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 early 2019, the National People's Congress issued a proposal for patent term extension as part of a proposed amendment to the Patent Law.61 Under this proposal, the State Council may decide to grant an additional five years of patent protection to compensate for delays in the review process for innovative drugs that are applying for marketing both in China and abroad. The extension can be up to five years on an invention patent, but in no event amount more than 14 years of protection post-marketing. It is not clear when this will be finalised.
China gives 20 years of patent protection. An applicant is required to provide information on patent status in China as part of its drug registration application. Although the regulations require 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.62 This provision is removed in the draft DRR with nothing equivalent in its place. Technically there are also provisions on the books that a follow-on applicant cannot file its registration application two years before the patent's expiry, but this is viewed as in conflict with the equivalent of a Bolar Exemption in the Patent Law, which permits development during the term of patent protection. Therefore, the NMPA does not implement these provisions rigorously, which is part of the reason why the patent linkage reforms set forth above are important.63
China does not have true regulatory marketing exclusivity. The DRR provide 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 is 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 monitoring period does not apply to generic drugs. During the monitoring period, the drug is under enhanced adverse event monitoring requirements, and the NMPA is not allowed to approve the clinical trial, manufacturing or importation of another domestic or imported drug in the same class for the same indication. If, however, the approved domestic drug is not manufactured within two years of approval, the NMPA can approve another domestic or imported drug application. The monitoring period does not provide complete exclusivity, however, because if the NMPA has approved the CTAs of other applicants for the same drug, those applications may proceed to registration. The draft DRR removes the provisions on the monitoring period leaving its continued enforcement in doubt.
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.64
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).65 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.66
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.67
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 recently 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
Drug and medical device manufacturers are obligated to establish systems to report and analyse adverse reactions and events and product complaints, and meet any conditions imposed as part of the product approval.68 In 2011, the NMPA issued detailed regulations on adverse reaction and event reporting for drugs and devices. The Measures on the Administration of Adverse Drug Reaction Reporting and Monitoring (2011) 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.69
For medical devices, the NMPA issued revised Measures on the Administration of Medical Device Adverse Event Monitoring and Re-evaluation in August 2018,70 and the ADR 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 their 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.71 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. Although the draft DRR does not cover adverse event reporting, the NMPA and CDE will likely soon develop implementation rules and guidance documents.
Transfer of licences
Transfer of licences may be more difficult to achieve in China than it may be in other countries. Part of the reason is that NMPA regulations give limited guidance on this issue and regulatory changes have created further uncertainty. Another reason at least for domestic products is because of the connection between the product permission and the manufacturing facility permissions. 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.
Previously, for domestically manufactured drugs, licences were issued to the specific manufacturer for the specific manufacturing site. As a result, any transfer required a transfer of ownership of the site because the two were bundled together. This was usually done via an equity acquisition of the holder of the two licences, because NMPA regulations had specifically prohibited any 'purchase and sale, rental, or other loan of the licences'. Under the pilot MAH system, the marketing authorisation was transferrable as it now is in the DAL.
For imported licences, the situation was somewhat different because there was no manufacturing licence. Thus, the licence was permitted to be transferred by a procedure to change the name of the holder, and the manufacturing site could be changed via a supplemental application to the licence.
These issues are somewhat different regarding devices. The facilities still require manufacturing licences but, in contrast to drugs, the NMPA also issues product licences for domestic devices. Therefore, 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.72
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.73
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 draft DRRs as follows:
In any of the following circumstances, a drug shall not be renewed [if]:
(1) the application for renewal is not made prior to the expiry date;
(2) the relevant requirements set by the NMPA when approved for marketing are not met;
(3) the Phase IV clinical trial or other conditional approval requirements are not completed as required;
(4) the adverse drug reaction monitoring is not conducted in accordance with regulations;
(5) there is uncertain therapeutic efficacy, safety and quality controllability upon evaluation by the applicant or NMPA;
(6) the drug approval documents shall be withdrawn in accordance with the provisions of the Drug Administration Law;
(7) the production conditions prescribed in the Drug Administration Law are not met;
(8) there are other circumstances not in conformity with relevant regulations.
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.74
Second, 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;75
- obtaining a licence through fraud, including the submission of false materials;76
- conducting a clinical trial without approval;77
- producing a drug with ingredients or packaging materials that have not been reviewed;78 or
- non-compliant labels.79
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.80
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.81 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 the PRC 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. 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.82 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.83
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.84 Under the revised DAL, contract manufacturers and MAHs must execute supply and quality agreements meeting the obligations of each. The NMPA will release guidance on these agreements and their content, which it will have the power to inspect. In addition, the DAL creates a class of separate obligations for CMOs: 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.
Import manufacturers 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. As the draft DRR now abolishes distinctions between imported and domestic products in many ways, the imported products may be subject to the manufacturing site inspections that are part of the registration inspection chapter.
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.85 Other rules have indicated that 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 2019,86 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 will be repealed when the new Advertisement Rule becomes 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 DAL also technically prohibits off-label promotion through its anti-counterfeiting provisions. 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.
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.87
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.88 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.89
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.
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.90 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.91 Additional testing at the border is required, except in the case of oncology drugs pursuant to a special policy by the State Council from 2018.92
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 drug93 and two types of device,94 which the NMPA has placed into the catalogue of drugs and devices subject to full NMPA supervision.95 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.96 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.97
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 storage 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.98 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.99
In 2018 and 2019, 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.100
Most insurance is through state plans. The government operates three basic insurance programmes: one for urban employees, one for urban non-state-employed residents and one for rural residents, covering nearly 90 per cent of the nation's population. Covered drugs for the urban plans are included in the National Reimbursement Drug List (NRDL), which has a total of 2,709 drugs in its most recent version, which the government revised in November 2019 and will update once a year. Newly approved drugs are eligible to be included in the NRDL of the next year, which will be effective from 1 January of the following year. For example, to be included in the NRDL of 2019, which will be effective from 1 January 2020, the drug must be approved prior to 31 December 2018.101
The National Healthcare Security Administration 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. Drug companies cannot apply to be included in the NRDL, although they will need to submit documents when their products are selected as candidates.102 The covered drugs for the rural plan may vary by province. In 2018, the State Council announced that it would fast-track inclusion of imported oncology drugs into reimbursement catalogues. Seventy drugs were newly added in 2019, through successful negotiation of an average price cut of 60.7 per cent by the National Healthcare Security Administration with the various drug companies.103
The NRDL is categorised into two lists. Drugs on List A are the National Essential Drug List 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 new National Healthcare Security Administration, as well as the Ministry of Human Resources and Social Security. 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.104 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.105
By contrast, the commercial insurance sector is smaller, but steadily developing.106 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.107
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.108 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.109 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.110 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.111 The applicant can appeal an ARO or ARC decision to the State Council, whose decision is final, without the availability of judicial review.
The draft DRR has proposed a new dispute resolution mechanism related to drug applications. When an applicant disagrees with the CDE's rejection of its application, the CDE will organise an expert committee within 50 business days to review the conclusions and make a recommendation. 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.112 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.113
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.114
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.115
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.116 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.
In December 2017, building upon the Innovation Opinion and other related policies, the NMPA issued proposed rules on medical representatives. These proposed 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. To date, the rules have not been finalised.
Special liability and compensation issues
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.
Transactional and competition issues
Since the Innovation Opinion China has gradually revised its framework laws and regulations for drugs and devices. The newly revised DAL and subsequent implementation proposals were the central developments in 2019, and that implementation will continue throughout 2020. A newly revised RSAMD is also expected in early 2020.
China also continued to expand its place internationally with respect to drug development. The NMPA joined the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH) in 2017 and was elected as a representative of its Management Committee of ICH in June 2018.117 The CDE continued with its programme to train reviewers and translate and adopt ICH guidance documents.
China continued to approve a number of innovative products, including over 50 innovative small molecule drugs and therapeutic biologics, slightly more than the US FDA approved the same year. Stakeholders can expect that China will continue to expand its policies to encourage innovation and to bring clinically needed drugs to China.
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.
3 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 2018 Annual Report on Drug Evaluation (CDE 2 July 2019), available at http://www.cde.org.cn/news.do?method=largeInfo&id=314886.
9 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.
10 Article 2 of the DAL. Translation provided by LexisNexis.
11 Article 38 of the DAL.
14 Article 4 of the RSAMD.
15 Article 16 of the RSAMD.
20 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.
21 See, e.g., Proposed Opinion Regarding Implementation of Priority Evaluation and Approval for Reduction of the Drug Registration Application Backlog (CFDA 2015), available at http://www.nmpa.gov.cn/WS04/CL2182/300070.html.
24 Appendixes 2 and 3 of the DRR.
26 Article 44 of the DRR.
27 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
28 Article 17 of the RSAMD.
32 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.
36 Article 18 of the RSAMD.
39 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 http://www.nmpa.gov.cn/WS04/CL2197/333486.html
40 Tentative Measures on the Management of Human Genetic Resources (State Council General Office 1998), available at http://www.most.gov.cn/bszn/new/rlyc/wjxz/200512/t20051226_55327.htm.
41 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 http://www.gov.cn/zhengce/zhengceku/2020-01/02/content_5466025.htm.
42 Article 76 of the DAL.
43 Article 36 of the DALIR.
44 Articles 84 to 95 of the DRR.
45 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.
46 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
48 Chapter 5 of the DRR.
49 Appendix 3 of the DRR.
53 2018 Annual Report on Drug Evaluation (CDE 2 July 2019), available at http://www.cde.org.cn/news.do?method=largeInfo&id=314886.
59 '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 http://www.phirda.com/artilce_18053.html?cId=1.
61 See the draft amendment of Patent Law at www.npc.gov.cn/npc/flcazqyj/2019-01/04/content_2070155.htm.
62 Article 18 of the DRR.
63 Article 19 of the DRR.
65 Article 48 of the Measures on Medical Device Registration.
68 See, e.g., Articles 41 to 44, 67 to 68, 121 and 169 of the DRR, and Article 47 of the RSAMD (requires manufacturer to establish device AE reporting system).
71 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.
72 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.
73 Article 18 of the Measures for the Supervision and Administration of Medical Device Manufacturing (CFDA 2017).
74 Article 55 of the Measures on Medical Device Registration.
75 Articles 116 and 117 of the DAL.
76 Article 123 of the DAL.
77 Article 125 of the DAL.
80 Article 51 of the RSAMD.
81 Article 64 of the RSAMD.
82 Article 10 of the Measures for the Supervision and Administration of Medical Device Manufacturing.
83 Article 67 of the RSAMD; Article 67 of the Measures on the Supervision and Administration of Medical Devices Manufacturing.
85 Interim Measures on Supervision of Internet Advertising (SAIC 2016), available at http://home.saic.gov.cn/fgs/zcfg/201612/t20161206_223031.html.
86 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.
88 Articles 29 to 31 of the RSAMD.
90 Article 66 of the DAL.
91 Regulations on the Administration of Drug Processing for Export (CFDA 2003), available at
92 Administrative Measures for the Inspection and Supervision of Imported Medical Devices (AQSIQ 2007), available at http://www.customs.gov.cn/customs/302249/302266/302267/2371299/index.html.
93 Gentamicin, atorvastatin, sildenafil, oseltamivir, cefoperazone, glycerine, heparin, artemisinin and traditional Chinese medicine in finished dosage form and indicated for erectile enhancement.
94 Glucose-testing strips and condoms.
96 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.
97 Article 141 of the Criminal Law of the People's Republic of China.
100 Circular Concerning Opinions on Advancing the Drug Pricing Reform (NDRC 2015), available at
101 Announcement of the National Healthcare Security Administration on Issuing the 2019 Work Plan for Adjustments to the National Catalog of Drugs Covered by the Medical Insurance (National Healthcare Security Administration 2019), available at http://www.nhsa.gov.cn/art/2019/4/17/art_37_1214.html.
103 Explanation on the 'Notice on Substitute of Negotiated Drugs in 2019 <National Essential Medical Insurance, Work Injury Insurance and Derivative Insurance Drugs Catalogue> Class B Scope', available at http://www.nhsa.gov.cn/art/2019/11/28/art_38_2056.html.
104 Circular of the General Office of the State Council on Issuing the Pilot Program for Conducting Centralized Drug Procurement and Use by the State (State Council 2019), available at http://www.nhsa.gov.cn/art/2019/1/17/art_37_482.html.
106 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.
107 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.
108 Administrative Reconsideration Law (NPC 2017), available at http://www.npc.gov.cn/npc/c30834/201709/ff2f2aadd940478999f6ef01d4daeeb7.shtml.
110 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.
111 Article 17-20 of the Administrative Reconsideration Measures of the CFDA.
112 Article 44 of the Administrative Litigation Law (NPC 2017), available at www.npc.gov.cn/npc/xinwen/2017-06/29/content_2024894.htm.
113 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.
115 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.
116 Administrative Measures on Accepting Donations for Public Welfare by Healthcare Entities (for Trial Implementation) (NHFPC 2015), available at http://www.nhc.gov.cn/caiwusi/s3573/201510/761f2a9e36f74c1e9f00849f8de61f49.shtml.