China Foreign Investment – Expert Q&A Series – China Revised Drug Administration Law

Introduction

The revised version of the PRC Drug Administration Law (the Revised Drug Administration Law) was approved by the Standing Committee of the PRC National People’s Congress on 26 August 2019 and will come into effect on December 1, 2019.

The Revised Drug Administration Law not only incorporates many reform measures that have been introduced by various administrative notices in the past few years, but also includes a few new rules to respond to market demand and address social problems.

Here is a brief summary of some key highlights of the Revised Drug Administration Law that are notable to foreign investors.

Adoption of a nationwide MAH system

The drug marketing authorization holder (药品上市许可持有人) (MAH), defined as the enterprise or R&D institution that holds the Chinese registration certificate of a particular drug, can be either a foreign entity or a Chinese entity. If the MAH is a foreign entity, it is required to designate a Chinese enterprise to perform its obligations in China and shall bear several joint liabilities for these activities. The drug marketing authorisation is transferable by the MAH to another qualified enterprise, subject to the approval of the drug administration authority..

The MAH can manufacture or trade the registered drug in China by itself or through an authorised thirty party, provided that the MAH (including its legal representative and key responsible personnel) bear the ultimate lability throughout the lifecycle of the drug, including the non-clinical research, clinical trial, manufacturing and operation, post-marketing research and adverse reaction monitoring, reporting and treatment..

The MAH system was first introduced on a trial basis in a few provinces and municipalities in 2015 and will be rolled out nationwide after the Revised Drug Administration Law comes into effect.

Simplification of the review and approval procedures

Institutions conducting clinical trials for new drugs will no longer be subject to any approval. A filing with the drug administration authority will suffice.

The drug administration authority will be required to make a decision as to whether or not to approve the clinical trial application within sixty business days of accepting the application. Failure to notify the applicant of the result within this time period will be deemed as approval of the application by the drug administration authority.

Under the associated review and approval system, the new drug itself and its chemical substances, excipients and immediate packaging materials and containers can be consolidated into a single review and approval procedure rather than being separated in individual review and approval procedures.

Permission of online sale of non-regulated prescription drugs

It seems that online sale of non-regulated prescription drugs will be permitted. The Revised Drug Administration Law only prohibits online sale of drugs that are subject to special regulation such as vaccines, blood products, narcotics, psychotropic drugs, medical toxic drugs, radioactive drugs and pharmaceutical precursor chemicals. This implies that online sale of non-regulated prescription drugs is not prohibited. It is expected that the drug administration authority and the health authority will jointly issue administrative rules in respect of online sale of prescription drugs shortly.

Adjustment of scope of fake drugs

The Revised Drug Administration Law narrows down the scope of fake drugs. Although as a general principle, import of drugs without approval is prohibited, a drug that has been legally marketed overseas but has not been approved to be marketed on the China market may no longer be simply treated as a fake drug.

Permission of certain non-standard procedures for the benefits of patients

The Revised Drug Administration Law allows certain non-standard procedures for the benefit of patients. Where a new drug that is still at the clinical trial stage may effectively control a disease that is seriously detrimental to life and where there is no currently effective treatment, it can be used to treat patients not participating in the clinical trial, as long as ethical rules are complied with and the applicable review and consent procedures are followed.

Importing of small amounts of drugs that are urgent for clinical use in China will only require approval by the provincial drug administration authority.

For any unapproved import of small amounts of drugs that have been legally marketed overseas, to the extent that the breach is not severe, the penalty can be reduced or even waived under the Revised Drug Administrative Law.

The following drugs will have priority in the normal drug review and approval procedures: any drug for children, any drug that is in shortage and in an urgent clinical need and any new drug that is to be used for prevention or treatment of material contagious diseases or rare diseases.

Cancellation of the GMP and GSP certifications

Drug manufacturers and distributors will no longer be required to pass the certification procedure of good manufacturing practices (GMP) and good supply practices (GSP), which used to be a separate administrative procedure, before commencement of their business, though the relevant GMP and GSP rules are still applicable to the manufacturing and distribution activities.

Establishment of a drug tracing system

In order to ensure the quality of drugs and prevent fake drugs and substandard drugs from entering the market, it is required that the drug administration authority should establish uniform standards and norms for tracing drugs, enhance the exchange of tracing information and achieve the traceability of drugs. Each of the MAHs, drug manufacturing enterprises, drug operational enterprises and medical institutions is also required to establish its own drug tracing system, share tracing information and ensure the traceability of drugs.

Enhancement of the penalties for drug related violations

The penalties for drug-related violations will be greatly enhanced. Compared with the current regime, the monetary fines will be significantly higher, e.g., fines for production of fake drugs can be 15-30 times of the value of the fake products, dramatically higher than previous 2-5 times.

The types of penalties will also be extended to include the confiscation of illegal income, monetary fines, ordering suspension of business, revocation of permits, suspension of acceptance of new permit applications for a certain period of time, occupation prohibition order and administrative detainment. Those penalties will be imposed not only on any entity violating the law, but also on the persons who are directly in charge of the violating entity or directly responsible for the violation to the extent applicable.

For any further questions relating to the Revised Drug Administration Law, please contact Wang Yi and Tony Zhong of Norton Rose Fulbright, Beijing and Shanghai Offices.