China Enacted New Drug Administration Law

By: Yongbin Ge, Jianping Dong, Kaidi Yu

On August 26 of 2019, at the closing meeting of a five-day bimonthly session of the National People's Congress (NPC) Standing Committee, China's top legislature voted to pass the new Drug Administration Law (the “DAL”) as part of the country's efforts to ensure drug safety and meet people's health demands, aiming to address prominent problems of the pharmaceutical industry, including research and development, manufacturing, sales, use and management of drugs .

1. Highlights of the New Drug Administration Law

The DAL is the second systematic amendment made to the Drug Administration Law promulgated in 1984 after first major amendment made in 2001, incorporating and reflecting material contents in the reform of drugs field in recent years. The major highlights are:

• Redefining “drugs” to include “Traditional Chinese Medicine, chemical drugs and biological products, etc.”;

• Exempting unlicensed import of small amount foreign marketed drugs from “counterfeit drugs”;

• No longer requiring GMP and GSP;

• Introducing MAH mechanism and imposing liabilities on MAH for monitoring the full cycle of drug development and commercialization;

• Accelerating approval procedures for drugs of severe diseases, children’s drugs and orphan drugs;

• Shifting approval of clinical trials from “express” to “acquiescent”;

• Simplifying bioequivalence test to filing for record only;

• Lifting the restriction of online selling of prescription drugs;

• Imposing tougher penalty for violation of DAL and other medical regulations.

2. Introduction of Marketing Authorization Holder Mechanism

Under current law, drug approval number, an ID number for a specific drug to be manufactured and commercialized, is only granted to drug manufacturers other than independent biotech companies or research institutions. Under the new MAH mechanism, drug registration certificate, a license for marketing and selling drugs, may be granted to a drug research and development institution or a production enterprise that owns technology.

It is required that a MAH shall establish a quality assurance system and be responsible for the whole process and all aspects of non-clinical research, clinical trials, production and operation, post-marketing research, adverse reaction monitoring (PV), reporting and handling of drugs. A foreign MAH must appoint a PRC legal entity to perform the obligations of the MAH and to assume joint and several liability on its behalf.

For post-marketing liabilities, MAH shall be capable of assessing and verifying the safety, effectiveness and quality of drugs on market. It is a mandatory obligation for MAHs to take initiative to carry out and report the production and sales of drugs, post-marketing research, risk management, etc. to the drug regulatory authorities in accordance with regulations.

3. Traceability of Drugs

The DAL stipulates that a drug traceability system shall be established to ensure the quality and safety of drug production and management, prevent counterfeit drugs and inferior drugs from entering into market, strengthen drug risk control as well as implement accurate recall. MAH, drug pharma, drug wholesaler and retailer and medical service provider shall establish a drug traceability system to achieve data exchange and sharing. Both collaborative and monitoring platforms should be established to enable relevant regulators to access a unified traceability system, similar to that under the vaccine management law.

4. Simplification and Facilitation of New Drug Evaluation

It has been a long-term goal for the Chinese authority to address drug shortage and lower drug price. One of the guiding principles of the DAL is to encourage research and development of new drugs, especially drugs of life-threatening diseases, new drugs for rare diseases and children's drugs. The following measures will be taken in support of such goal:

• The management of clinical trials will be optimized. Previous approval of clinical trial institutions is substituted by filing for records. The application for clinical trials is switched from “express” approval to “acquiescent” approval. Only filing for record is requested for bioequivalence test.

• The mechanism of “comprehensive evaluation and approval” is established. When evaluating and approving new drugs, preparations, chemical raw materials, excipients, packaging materials and containers will be evaluated and approved together. Furthermore, drug quality standards, production process, label and instructions will also be evaluated and approved as a whole.

• Priority evaluation and approval will be granted to new drugs on demand, new drugs of major infectious diseases, rare diseases as well as children's drugs.

• Conditional approval is available to drugs that are needed for treatment of life-threatening diseases and for public health provided that they have been proved to be effective and valuable to proceed in clinical trials.

• A transparent and smooth communication channel is to be set up for information exchange between new drug applicant and evaluator thanks to a newly established expert consultation system and elevation of evaluation efficiency.

5. Accessibility of Pre-Market Drugs or Therapy to Patients

It is a general rule that drugs will not be available to patients prior to completion of clinical trials in order to ensure the safety of patients. However, such rule may deprive the patients from trying drugs that are tested effective absent of completion of clinical trials.

The DAL will make pre-marketed drugs to patients suffering from life-threatening diseases provided that the drugs are ethical, and informed consent is given by such patients.

6. GMP and GSP Authentication no longer Prerequisite

The DAL no longer requires drug manufacturer to hold the certificate of GMP or distributor to possess the certificate of GSP. Absence of compulsory authentication of GMP and GSP will not lead to loosened regulations on drug manufacturing and distribution. On the contrary, drug manufacturing enterprises and distributors shall still comply with stringent requirement for practices. Scrutiny from regulators may be imposed on pharma companies and the persons in charge.

7. Stringent Liabilities

The DAL significantly lofts penalties in the following aspects:

• Criminal liability will be imposed on severe violators.

• For illegal activities such as unlicensed drug production and operation, production and sale of counterfeit drugs, the total amount of fines is increased from two to five times the value of the goods to fifteen to thirty times. The fine for the production and sale of inferior drugs is also increased from one to three times the value of the goods to ten to twenty times.

• An individual who sells counterfeit and inferior drugs may be subject to lifelong ban from drug related operation, and an enterprise whose license is suspended for the production and sale of counterfeit drugs shall not be allowed for application of a new license within ten years.

• For an enterprise severely violating the law, its legal representative, the person in charge and other responsible personnel may also be punished.

8. Other Takeaways

• Exemption of unlicensed import of small amount foreign marketed drugs from “counterfeit drugs”

The DAL makes it clear that unlicensed import of drugs approved in their home market are no longer deemed as counterfeit drugs. Although such import of foreign-approved drugs is still under strict supervision by regulators and any illegal drug import will be subject to legal liabilities, for those who import a small amount of foreign-approved drugs without an approval, punishment may be alleviated; if no personal injury or delays in treatment are caused, punishment may be exempted.

A drug is defined by the DAL as counterfeit drug if: the ingredients contained in the drug are inconsistent with the national drug standard; a non-drug is counterfeited as a drug or one kind of drug is counterfeited as another kind; the indications labeled on a drug are outside the prescribed range.

A drug is inferior if it falls within one of the following scenarios: the density of drug component does not comply with the national drug standard; contaminated drug; the expiry date of drug is not specified or is forged; the product batch number of drug is not specified or is forged; expired drugs; drugs with unapproved preservatives and excipients; other drugs that do not meet drug standards.

• Possibility of online selling of prescription drugs

Prescription drugs may be sold online if the seller is in possession of required licenses and the online selling platform is supported by medical service providers to verify the authenticity of prescriptions submitted to it. A couple of prescription drugs are explicitly excluded from online sales, such as vaccines, blood products, narcotic drugs, psychotropic drugs, medical toxic drugs, radioactive drugs, pharmaceutical precursor chemicals, etc.

• Requirement to meet GLP and GCP

Development of drug shall follow non-clinical research quality management standard (GLP) and drug clinical trial quality management standard (GCP) and the whole process of drug development shall meet statutory requirements.

• Emergency Plan for Drug Safety Incidents

Regulators at or above county level shall formulate an emergency plan for drug safety incidents; MAHs, pharma, drug wholesaler and retailers as well as medical service providers shall set up their own emergency plan for drug safety incidents and organize training and emergency drills.

9. Further Implementation Rules to be Expected

The DAL is a substantial change to the present regulatory regime of drug management which may have profound influence on Chinese pharmaceutical market. A comprehensive and accurate understanding of the DAL will become key to a pharmaceutical company’s success in the coming periods of time. More detailed implementation rules are expected to be promulgated for enforcement.

The End

About the Author

Yongbin Ge

Shanghai Office

Partner

Jianping Dong

Shanghai Office 

Non-equity Partner

Kaidi Yu 

Shanghai Office

Associate 

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