The second amendment to the Drug Administrative Law was approved by the Standing Committee of the National People’s Congress on 26 August 2019, and will take effect from 1 December 2019. This is the first set of major changes to the law since its last amendment in 2001.
The amended law consolidates trial measures and orders issued by the State Council and the National Medical Products Administration of China (NMPA, formerly known as the China Food and Drug Administration, or CFDA) in the past four years, including in particular the introduction of a system of drug lifecycle management centred around market authorization holders, and expedited drug review process. The amended law also provides harsher penalties for drug safety violations.
While drug approval has always been a requirement, it is the first time that the term “market authorization holder” (MAH) is explicitly used under the Drug Administrative Law in China. Article 30 provides that MAH refers to enterprises or drug R&D institutions that have obtained drug registration certificates. Core to the amended law, an MAH is required to manage the full lifecycle of drugs, including R&D (non-clinical and clinical processes), manufacturing and supply, post-marketing study, adverse effect monitoring and annual reporting, etc. For a foreign MAH, the relevant responsibilities should be carried out by its designated onshore entity in China.
In the past, there was a strong connection between drug manufacturing and drug approval (now market authorization). Under the amended law, the holding of market authorization can be separated from actual manufacturing activities. An MAH can engage third parties for drug manufacturing and sale, though it is obligated to conduct periodical audits of the third parties’ quality management system in order to ensure drug safety.
The amended law also extends the scope of MAH to all enterprises, as opposed to drug R&D institutions only. Individuals cannot be an MAH, likely out of concern that they may lack the necessary resources to bear the responsibilities for drug safety.
Expedited drug review
Previously, the review and approval of clinical trial applications were lengthy, taking six to 18 months in practice. Article 19 of the amended law confirms the negative notification system for clinical trial approvals. Consistent with order No. 50 , after the Centre for Drug Evaluation (CDE) accepts an application for clinical trials, the application is deemed to have been approved if no negative comments are received within 60 days. After completing the required trials, the applicant can apply for marketing authorization and become an MAH. For drugs urgently needed for public health and drugs treating a life-threatening disease for which there is no other effective treatment, conditional approval can be granted based on existing clinical trial data suggesting effectiveness.
Online prescription drugs
Article 61 of the amended law provides that an MAH and drug suppliers can sell drugs through online channels, provided they satisfy other requirements generally applicable to drug suppliers. This provision does not distinguish between prescription and over-the-counter drugs. According to members of the legislative committee, the initial proposal was to prohibit the online sale of prescription drugs. Having balanced the interests of various parties, the committee finally decided to leave open the possibility of online sale of prescription drugs for further regulations by the NMPA.
Compared to the previous law, the amended law has imposed much harsher penalties. The fine is significantly increased at up to 30 times, versus five times the illegal turnover. The amended law also assumes a minimum turnover of RMB100,000 (US$14,000) if the amount is lower, meaning that if one is found liable for the manufacturing or sale of fake drugs, the minimum amount of fine issued would be RMB1.5 million (being 15 times RMB100,000). Further, the amended law introduces a blacklist period for serious violations, prohibiting the relevant manufacturer/seller from re-entering/importing into the market for the next 10 years and responsible individuals can be permanently barred from the pharmaceutical industry.
Similar penalties are provided for the manufacturing and import of unapproved drugs. That said, article 124 of the amended law provides a potential exemption of liabilities for the small-scale parallel import of drugs. Under this provision, the penalties can be reduced or even exempted if a small amount of drugs that have been legally marketed overseas are imported into China without authorization, and the circumstances are relatively minor.
On implementing the amended law, the NMPA in late September 2019 published three draft measures for public consultation on drug registration, drug manufacturing, and drug supply, respectively. Drug good manufacturing practice certification and drug good supply practice certifications are no longer required. The authorities will instead conduct the necessary review when examining applications for drug manufacturing and supply permits
Despite anticipation by the industry, issues such as updated mechanisms for patent linkage and data exclusivity are not addressed in the draft implementing measures. The NMPA noted that these require further consideration.
The nationwide implementation of the MAH mechanism and the allowed transfer of market authorization present key improvements over the previous regulatory regime. The various measures adopted under the amended law to speed up drug approval are also welcome changes to the current framework. However, harsher penalties are imposed for drug safety violations in post-marketing activities. Overall, and in line with the central government’s shift from extensive pre-market regulatory security to post-market vigilance by enterprises, the amended law seeks to expedite market entry while tightening post-marketing scrutiny for drug safety.
Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by emailing Danian Zhang at [email protected].