Highlights of New Rules on Medical Devices Regulation

Authors: Hanshuo ZHOU

             Licheng YANG

On March 18^th, 2021, the newly revised Regulations on Supervision and Administration of Medical Devices (《医疗器械监督管理条例》, “New Regulation”) has been officially publicized.  The New regulation will take effect from June 1 and replace the current Regulations on Supervision and Administration of Medical Devices effective since 2017 (“2017 Regulation”).  This article will briefly introduce several highlights of the New Regulation.

1

Registrant/Filing Applicant for Medical Device

Under the New Regulation, the holder of Medical Device Registration Certificate for Class-II and Class-III medical devices (“Registrant”) and the entity completing medical device record filing procedure for Class-I medical devices (“Filing Applicant”) could be research institution, which echoed the concept of Marketing Authorization Holder (“MAH”) in drug administration.  

Before 2017, only corporates with medical device production license could be the Registrant/Filing Applicant.  Many R&D companies and institutes with light assets are blocked from future commercial opportunities due to lack of capability in manufacture management.  In 2017, the MAH policy in medical devices has first been initiated in Shanghai Free Trade Zone which separated the product registration/record filing and the production qualification, and it subsequently expanded to over 20 cities in China.  After the implementation of the New Regulation, more research-driven entities nationwide will be motivated to participate in the development and commercialization of medical device products since the production process can be entrusted to third-party manufacturer, and such renovation will also bring in remarkable dynamics in medical device R&D.

However, the New Regulation has not clearly stipulated whether the cross-border Registrant/Filing Applicant may entrust production to domestic manufacturer.  The Plan for the Development of Innovative Regulatory of Drugs and Medical Devices in the Guangdong-Hong Kong-Macao Greater Bay Areas (《粤港澳大湾区药品医疗器械监管创新发展工作方案》,“GBA Plan”) jointly promulgated by eight ministers and authorities at national level of the Stata Council in November 2020 may be considered as a positive signal which enables Hong Kong and Macao Registrants to entrust manufacturers in the 9 cities of Guangdong province to produce medical devices.  For foreign medical device companies, they may engage cross-border entrusted manufacturer within the Greater Bay Area (“GBA”) if they have the qualification as the Registrant/Filing Applicant in Hong Kong and Macao S.A.R.  It is expected that competent authorities would further introduce more detailed rules in this regard.

2

Simplifying Administrative Approval Procedure and Encouraging Innovation

The New Regulation adopts the principle of streamlining governmental supervision and simplifies the administrative procedures and some of the pathways are as follow:

(1) The New Regulation redefines the requirements for clinical assessment and clinical trial and removes the list of medical devices exempted from clinical trial under 2017 Regulation (“Exemption List”).  For those innovative medical device products who fall out of the Exemption List but not feasible for clinical trial, the impediment for registration may be significantly reduced.

After the New Regulation is implemented, clinical trials are only required for those medical devices with insufficient clinical data to confirm the safety and effectiveness; other applicants of medical device registration/record filing may submit clinical assessment materials instead of going through clinical trials, even further be exempted from clinical assessment if the safety and effectiveness of products can be confirmed.

(2) The record filing procedure has been simplified: (i) For Filing Applicant who is also the manufacturer of the filed Class-I medical device , the filing of product and filing as manufacturer can be completed at the same time; (ii) For the operating enterprise of Class-II medical device, if the safety and effectiveness of the medical devices will not be impacted by circulation process, the filing requirement for operation will be exempted.  However, the scope of aforesaid Class-II medical devices remains unclear and therefore, may create difficulties when trying to confirm the qualification of a supplier of Class-II medical device claiming the implementation of such exemption; and (iii) For Registrant/Filing Applicant who sells the registered/filed medical device itself, the license/filing for operating is not necessary so long as the registrant/filing applicant complies with the requirements in the New Regulation (e.g. establishing and effectively implementing medical device operating quality control system).

(3) The applicants for the registration of Class-II and Class-III medical devices are allowed to submit self-examine report instead of the reports issued by professional institutions in order to complete registration examine process. As a result, the applicants may not have to wait in a long line to obtain the reports from the overworkloaded professional institutions.

After the New Regulation takes effect, applicants especially with strong capacity in examination and comprehensive quality control system will definitely pick up speed in registration.

(4) The approval timeline of provincial Medicine Products Administration (“MPA”) for the production license of Class-II and Class-III medical device has been shortened from 30 working days to 20 working days.

(5) Innovative medical devices that have not been approved in foreign jurisdictions could also be imported and registered in China. This means that innovative medical devices will come to Chinese market sooner and substantially benefit our people earlier.  Especially for those medical devices seeking for worldwide multiple market entrances, they may be allowed to commence application procedures in China and other jurisdictions simultaneously, which could significantly shorten the time period for registration and commercialization in China.

(6) Enterprises are encouraged to cooperate with universities, medical institutions and scientific research institutes in medical device R&D and innovation.  The government will provide supports on scientific project approval, funding, financing, bidding, medical insurance and other aspects.  In recent years, we have witnessed the prosperity of cooperation between research institutes and corporates, which incubated many medical devices successfully. However, the ownership of intellectual property,  allocation of beneficial rights among universities or institutes, scientists and enterprises often obsess the technology cooperation and transfer. Hopefully with more supportive polices coming up, the relevant issues could be gradually addressed.

In addition to the abovementioned changes and modifications, the New Regulation has also covered the content of some regional pilot policies previously only in force in limited pilot areas within China, such as Hainan Free Trade Port Bo’ao Hope City and the Greater Bay Areas.  For example, medical institutions may import limited number of medical devices approved for market in foreign jurisdictions while not registered in China after obtaining permission from NMPA or provincial governments for internal use only.  

Besides, in order to increase the availability of valuable medical devices for Chinese patients, the New Regulation also adopts some rules in drug administration such as the implied permission policy for clinical trials, conditional approval and emergency use of medical device in urgent clinical needs for rare disease and severe public health events, and the permit for applying certain medical device used for incurable fetal disease on patients with identical symptoms as early as the clinical trial stage.  

3

Whole-Process Quality Control and Stricter Liability

Although, under the New Regulation, the administrative procedures have been simplified to accelerate application, the overall supervision by authorities has been strengthened.  

Firstly, the New Regulation has set higher standards for the medical device Registrant/Filing Applicant to establish quality control and whole process quality control system, including without limitation:

(1) The Registrant/Filing Applicant shall enhance management and the ability of control throughout the lifecycle of medical device, such as R&D, manufacturing, operation, application.  As for the foreign Registrants/Filing Applicants, they shall appoint domestic enterprise to assist them in carrying out aforesaid obligations regarding quality control.  For any entity who fails to comply with the quality control system, the New Regulation not only provides for an increased penalty amount on the entity, and also imposes punishments on responsible individuals such as the confiscation of illegal gains, monetary penalty and prohibition from manufacturing and operating activities of medical device.

(2) The Center for Medical Device Evaluation (“CMDE”) of National Medical Products Administration (“NMPA”) may examine the quality control system of the applicant whenever CMDE deems necessary, while such requirement only applies to the imported medical device under the 2017 Regulation.

(3) The Registrant/Filing Applicant unable to manufacture the medical device may entrust third party manufacturer, provided that the entrusted manufacturer shall comply with applicable requirements regarding quality control system and the Registrant/Filing Applicant shall still be responsible for overall quality and safety of the product (the manufacturing of implantable medical devices with high risk shall not be entrusted to third party manufacturer). Besides, the Registrant, Filing Applicant and entrusted manufacturer shall conduct self-examination on the quality control system, and submit self-examination reports to competent authorities.

Secondly, compared with the 2017 Regulation, the New Regulation makes notable modifications on the chapter regarding legal liabilities.  As mentioned above, it increases the amount of monetary penalty, and in particular, the monetary penalty for non-compliance in the requirement of the quality and safety of medical device has been increased to up to 30 times of the products value.  The violating entity may also have their license revoked or their business suspended for a certain time period depending on the nature and consequences of their misconducts.  The New Regulation also imposes individual liabilities on the legal representative, principal, person in charge of the entity.  Individual may be subject to a maximum monetary penalty of 3 times of the income and banned from manufacturing and operating activities of medical device up to lifetime.

Moreover, the New Regulation establishes a retrospective regime for entities who submit forged documents and materials or have fraudulent actions in obtaining administrative approvals.  Any entities may be punished retrospectively and be subject to criminal responsibility if they are proven to have the aforesaid misconducts, whether or not obtaining relevant approvals.

With the stricter liability under New Regulation taking effect in June, market participants shall inspect their business activities prudently as requested by laws and supervisory bodies, and seek for professional legal advice from lawyers in a timely manner.

4

Launching of Laboratory Developed Tests Regime of Medical Device in China

Unlike the U.S. or any other jurisdictions, China has not yet enacted any laws or regulations on the Laboratory Developed Tests (“LDT”).  Currently, in order for any medical institution to conduct In Vitro Diagnostic (“IVD”) activities, it shall satisfy the following: (i) the institution shall obtain the License for Medical Institution (《医疗机构执业许可证》)；(ii) the clinical laboratory shall obtain PCR Laboratory Inspection Certificate (《临床基因扩增检验实验室验收合格证》, if applicable); (iii) the IVD reagent has obtained medical device registration, and (iv) the testing item has fallen into the List of Clinical Testing in Medical Institutions (《医疗机构临床检验项目目录》).  Also, due to the insufficiency of guidance from relevant laws and regulations, local enforcement varies, which hinders the development of clinical IVD business.

According to Article 53 of the New Regulation, qualified medical institutions are permitted to develop IVD reagent and use such self-developed reagent within institutions according to clinical needs, provided that there is no registered product of the same kind in the market within China.  The New Regulation bestows legality of LDT IVD reagent for the first time but still leaves room for further interpretation due to its limited content.  For example, what are the standards or requirements for qualified medical institutions? How to define the notion of “the same kind”? What kinds of “clinical needs” are acceptable? Will the LDT reagent be subject to further regulation after being developed?  The New Regulation also clarified that the NMPA will be in charge to formulate specific regulations on LTD together with the health authority of the State Council, and we anticipate it to respond to the above questions.

5

Online Sale of Medical Device

The New Regulation also provides for the regulatory requirements for the online sale of medical device. For any entity engages in the medical devices business, it is required to notify the competent MPA of the online business (except for Class-II medical devices exempted from filing for operating).  For the e-commerce platform operator, it is obligated to request all the sellers operating on the platform to register their real names, and it shall review the qualifications of the sellers and regulate the operating activities of the sellers. 

It is also noticeable that in recent years, many medical device enterprises have taken on digital promotion methods by having KOLs promoting their products in live stream, which may fall under the regime of medical device advertising.  According to the Guiding Opinions on Strengthening the Regulation of Live Streaming Marketing Activities (《关于加强网络直播营销活动监管的指导意见》) formulated by the State Administration for Market Regulation (“SAMR”) in November 2020, advertisements for medical devices shall be censored before release,  in compliance with registered instructions for use and shall not contain any false, exaggerated or misleading information.

6

Summary

Following the principles of risk management, whole-process control, scientific supervision and shared governance by the whole society, the New Regulation adapts to the development of medical device industry, absorbs valuable experiences from drug administration, previous guidelines and regional pilot policies, and lays a solid legal foundation for the future prosperity of medical device industry.  Jingtian & Gongcheng will closely monitor the updates and development of laws and regulations, and will share our views with our readers.  

Jingtian & Gongcheng’s Life Science and Healthcare Team has extensive legal and industrial experience in the field. Our lawyers have been focused on international and pharmaceutical legal practices over a dozen of years, with working experiences at international law firms and top-tier multinational healthcare companies, and many of them are qualified both in China and abroad.

We have advised clients on mergers and acquisitions, technology licensing, contracted manufacturing, co-promotion, business conduct and compliance, and daily operational issues related to pharmaceutical and medical devices companies. For more information, please contact Ms. Hanshuo ZHOU([e-mail], phone: [phone], mobile: [phone]).

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