Key legal info on biosimilars & biologics in China. Prepared in association with Fangda Partners, one of China’s most prestigious and well-regarded law firms. This is an extract from The Pharma Legal Handbook: China, which can be purchased here for GBP 119.

 

1. Are biosimilar medicines considered the same as generic medicines in your country?

The basic principles of research and evaluation of biosimilar medicines are similar to that of generic medicines, but the regulation in practice is different. Biosimilar medicines are included in the category of biologics for the purpose of regulation.

 

2. Are all biologic medicines, including biosimilar medicines patentable in your country?

There is no specific legal restriction on the patentability of biologic medicines. As long as biologic medicines meet the requirements for a patent, they can be registered.

 

3. Is there a specific regulatory framework for the marketing authorization of biosimilar medicines in your country? If yes, what is the regulatory framework for the authorization of biosimilar medicines?

The NMPA promulgated the Technical Guidelines for Research and Development and Evaluation of Biosimilars in 2015. Generally, there is no specific regulatory framework for the marketing authorization of biosimilar medicines in China.

 

4. What kind of data package is needed to obtain approval for a biosimilar drug? Is this any different to the requirements for the original Biologics drug?

The research and development of a biosimilar drug is based on the similarity study between the biosimilar and original biologics drug, which supports the safety, effectiveness and quality control of the biosimilar drug.

In addition, in practice, the Centre for Drug Evaluation (hereinafter referred to as the “CDE”) of the NMPA suggests the sponsor collect the immunogenicity data of all subjects in all clinical studies (including human PK or PD studies). Reasonable sampling time and the follow-up period should be set according to the immunogenicity characteristics of different products. The duration of any treatment course, pharmacokinetic characteristics of preparations and the occurrence time of the humoral immune response should be taken into account. The CDE suggests the sponsor may discuss with CDE case by case. Attention should also be paid to any difference of immune response between biosimilar and the original biologics drug, and the causes of the difference and their impact on the effectiveness and safety should be analysed.

 

5. What are the requirements for the choice of the reference comparator product?

Please refer to Question 6.

 

6. Can the comparator product be sourced from another regulatory jurisdiction? If yes, what are the data needed to support this approach?

According to an academic paper written by a team of the CDE, the reference comparator product should be the original biologics drug which has obtained the PRC marketing authorization, and products from the same origin should try be used as the reference comparator product in each stage of research and development. For those that cannot be obtained in China through commercial channels, other appropriate channels can be considered, but bridging comparative studies of the reference comparator product from different sources are required, or comparable evidence between reference comparator products from different sources should be provided.

In addition, the original biologics drug which has been approved for import registration or clinical trials in China should be selected as the reference comparator product for clinical trials of biosimilars. Only after the consent of the CDE, can the original biologics drug from the place of origin which has not been approved be used for clinical trials. The reference comparator product selected for the comparative study of similarity in each stage of research and development should be the product from the same origin.

 

7. How are the prices of biosimilar medicines regulated? Is this any different to the requirements for the original Biologics drug?

There is no regulation on the pricing of biosimilar medicines in China and there is no difference from the requirements for the original biologics drug.

 

8. What is the reimbursement policy for biosimilar medicine? Is this any different to the requirements for the original Biologics drug?

Once the biosimilar medicines are included in Drug Catalogue (as defined in Question 7, Chapter: Orphan Drugs and Rare Diseases), the prices of biosimilar medicines can be reimbursed (mostly) and covered by national medical insurance.

This is not different from the requirements for the original Biologics drug.

 

9. Does biosimilar competition impact the reimbursement policy of the originator reference products?

No impact.

 

10. What is the legal framework for biosimilar medicines prescribing (clinical decision maker) and dispensing (pharmacy level, hospital or retail)? Is this any different to the requirements for the original Biologics drug?

There is no legal framework for prescribing and dispensing biosimilar medicines.

 

11. Is the system considering physician-led switching and/or pharmacy-level substitution (without involvement of the clinical decision maker)?

Physician-led switching applies.

 

12. What are the post – authorisation requirements (including pharmacovigilance, risk management plans, post-approval studies) for biosimilar medicines? Is this any different to the requirements for the original Biologics drug?

Currently, there are no such specific requirements for biosimilar medicines.

 

13. Are there specific policies and requirements in terms of biosimilar medicines labelling in the event of second medical use patents? Is this any different to the requirements for the original Biologics drug?

According to the academic paper written by a team of the CDE, the labelling of biosimilar medicines should not affect the clinical use and should be conducive to the safety monitoring after marketing.

In practice, at present, it is advisable to add such description in the header of the first page of the package insert as “The biosimilar medicine (XXX) refers to the biosimilar drug of the reference comparator product (XXX)”; to add the definition of “biosimilar medicine” at the bottom of the first page: “Biosimilar medicine means the data supporting the marketing authorization of this biological product has proved that this biological product is highly similar to the reference comparator product approved by the NMPA, and there is no difference in clinical significance. This package insert is consistent with that of the original biologic drug.”

The clinical trial data in the package insert of biosimilar medicines should reflect the effectiveness and safety, not the similarity. As to the use of names of biosimilar medicines in the package insert, it is necessary to differentiate from the name of reference comparator product, the name of similar drug and the generic name. When quoting the clinical research data of reference comparator product, it is advisable to use the generic name of the reference comparator product instead of the brand name.

 

14. Have there been any significant legal/judicial developments in relation to biosimilars in your country? (Including but not limited to IP, procurement, competition, misleading information campaign, access to reference comparator product)

The significant legal development is that in order to improve the accessibility of biosimilars to meet the needs of patents, more and more regulations and guidelines on research and development of biosimilars have been promulgated.

 

15. Are there proposals for reform or significant change to the legal, regulatory, procurement of biosimilars? If yes, when are they likely to come into force?

The draft of the Technical Guidelines for Similarity Evaluation and Indication Extrapolation of Biosimilar Drugs (生物类似药相似性评价和适应症外推技术指导原则) has been issued for comments. After the comment stage ends, the Guidelines are likely to be promulgated and come into force soon.

 

Also from this Legal Handbook

Want to know more about localization in China? Prepared in association with Fangda Partners, one of China’s most prestigious and well-regarded law firms. This is an extract from The Pharma Legal Handbook: China, which can be purchased here for GBP 119.

 

1. Are there any rules or regulations requiring and/or encouraging localization in your country? What is the legal framework defining these localization rules and policies?

Yes. The key regulations are the Pharmaceutical Administration Law (药品管理法) and the Regulations for the Implementation of the Drug Administration Law (药品管理法实施条例). There are several announcements or decisions regarding the tariffs and authorization of imported drugs such as the Decision of the NMPA on Matters concerning the Adjustment of the Registration Administration of Imported Drugs (国家食品药品监督管理总局关于调整进口药品注册管理有关事项的决定) (hereinafter referred to as the “Decision”) and the Announcement of the Customs Tariff Commission of the State Council on Reducing the Import Tariffs on Drugs (国务院关税税则委员会关于降低药品进口关税的公告) (hereinafter referred to as the “Tariff Announcement”).

 

2. Have there been any recent significant changes involving localization rules? If yes, when did they take place and what did they involve?

The NMPA has taken an open attitude towards localization and is encouraging the importation of drugs by simplifying clinical trial requirements and lowering tariffs.

 

3. Is the process of obtaining a marketing authorization impacted by localization policies in your country? If yes, how so (what are the incentives received or the requirements)?

Yes. According to the Decision, there are following simplified requirements:

• with respect to a foreign new chemical drug or a foreign innovative biological drug for therapeutic use on which an application for the clinical trial or an application for the market authorization has been filed, the requirements for obtaining the market authorization of the country or region of production at the place where the overseas pharmaceutical production business is located shall be cancelled.
• where a registration application has been accepted before the issuance of this Decision and the clinical trial requirement of imported drugs is exempted based on the international multi-centre clinical trial data, if the requirements of the Measures for the Administration Measures for Drug Registration (药品注册管理办法) and relevant regulations are complied with, the import of the drugs may be directly approved.

 

4. Is the pricing process for pharmaceutical products impacted by localization policies in your country? If yes, how so (what are the incentives received or the requirements)?

N/A

 

5. Is the reimbursement of pharmaceutical products impacted by localization policies in your country? If yes, how so (what are the incentives received or the requirements)?

Yes. In recent years, more and more imported drugs have been included in the Drug Catalogue (defined in Question 7 of Chapter: Orphan Drugs and Rare Diseases).

 

6. Is the access to public or public tenders of pharmaceutical products impacted by localization policies in your country? If yes, how so (what are the incentives received or the requirements)?

Yes, given that more imported drugs have been included in the Drug Catalogue, more citizens can afford imported drugs.

 

7. Are import tariffs, importation and/or exportation permits, trade and/or taxation of pharmaceutical products impacted by localization policies in your country ? If yes, how so?

Yes. For the purposes of reducing the burden of drug expenses on patients, especially cancer patients, and offering them more medication options, since May 1, 2018, the import tariffs on all common medications including anti-cancer drugs, alkaloid drugs with anti-cancer effects, and imported traditional Chinese medicines shall be cancelled, according to the Tariff Announcement.

 

8. Are there any other incentives or advantages offered by the current local localization rules in your country? If yes, what are they?

N/A

 

9. Are there discussions about the possibility of implementing localization policies in your country? If yes, what are the proposed reforms and when should they come into place?

N/A

Also from this Legal Handbook

An intro to the legal situation for orphan drugs and rare diseases in China. Prepared in association with Fangda Partners, one of China’s most prestigious and well-regarded law firms. This is an extract from The Pharma Legal Handbook: China, which can be purchased here for GBP 119.

 

1. What is the definition of Rare Diseases in your country?

As of now, there is no definition of Rare Diseases in China. The List of Rare Diseases (罕见病目录) promulgated by the National Health Commission, the Ministry of Science and Technology, the Ministry of Industry and Information Technology, the NMPA and the Bureau of Traditional Chinese Medicine in 2018, and the Guidelines for Diagnosis and Treatment of Rare Diseases (2019 version) (罕见病诊疗指南(2019年版)) promulgated by the National Health Commission set out various rare diseases. But the two documents aforementioned are both for reference only, and have no legal binding effect.

 

2. Does the designation of ‘Orphan Drug’ exist in your country? (Does it correspond with the definition of Rare Diseases?)

The designation of “Orphan Drug” does not exist in China. In practice, it is generally believed that Orphan Drug means Drug for Rare Diseases.

 

3. What is the regulatory framework for the authorization of an Orphan Drug? (Is this regulatory framework based on Rare Disease status or can it alternatively be based on Orphan Drug foreign status?)

The fundamental legislation for the authorization of Orphan Drugs is the Administration Measures for Drug Registration (药品注册管理办法) and some implementing rules, such as the Announcement on Optimizing the Review and Approval of Drug Registration ‭(关于优化药品注册审评审批有关事宜的公告) (hereinafter referred to as the “Announcement”) promulgated by the National Health Commission and the NMPA in 2018.

This regulatory framework is neither based on the Rare Disease status nor alternatively based on Orphan Drug foreign status. In general, all new drugs must go through four steps before being marketed: pre-clinical research, application for clinical trial, clinical trial and approval for drug registration and production.

 

4. Does your country have pro- visions for relaxed clinical trial/ scientific evidence requirements in respect of Orphan Drugs as compared to other drugs?

Yes. In the Announcement, it is provided that if the marketing authorization applicant of an imported drug considers that there is no ethnic difference as to the effectiveness of Orphan Drugs with foreign marketing authorization, such applicant can directly submit the clinical trial data obtained from abroad when applying for the PRC marketing authorization.

 

5. Is there an expedited pathway for Orphan Drugs?

Yes. When applying for PRC marketing authorization for an Orphan Drug, the applicant may apply for preferential evaluation and approval procedure: the time limit for evaluation of clinically urgently needed Orphan Drugs that have been marketed abroad but have not been marketed domestically is 70 days, much shorter than the 200-day time period required for general marketing authorization application.

 

6. Are foreign marketing authorizations recognized in your jurisdiction for Orphan Drugs? If yes, marketing authorizations from which countries are recognized?

Foreign marketing authorizations for Orphan Drugs are not recognized in China. But the applicant of an Orphan Drug with foreign marketing authorization can be entitled to the expedited application for PRC marketing authorization as described in Question 5 of this Exhibit.

 

7. Can Orphan Drugs be reimbursed? If so, is there a specific reimbursement procedure for Orphan Drugs?

Some Orphan Drugs listed in the Drug Catalogue of National Basic Medical Insurance, Industrial Injury insurance and Maternity Insurance (国家基本医疗保险、工伤保险和生育保险药品目录) (hereinafter referred to as the “Drug Catalogue”) by the National Medical Insurance Bureau, Ministry of Human resources and Social Security can mostly be reimbursed and covered by national medical insurance. There are no specific reimbursement procedures for Orphan Drugs.

 

8. How are the prices of Orphan Drugs regulated?

There is no regulation of the pricing of Orphan Drugs in China. Nonetheless, to enable more and more people with rare diseases to be able to have access to Orphan Drugs, the National Medical Insurance Bureau endeavours to negotiate and enter into agreement with PRC marketing authorization holders of the Orphan Drugs to help lower the price and to have the Orphan Drugs included in the Drug Catalogue. After the Orphan Drugs have been included in the Drug Catalogue, the prices of Orphan Drugs can be reimbursed (mostly) and covered by national medical insurance.

Although the inclusion in the Drug Catalogue will help to lower prices of Orphan Drugs, that also offers the opportunity for pharmaceutical companies to generate extra sales. That is the reason why some Orphan Drug pharmaceutical companies agree to include their Orphan Drug in the Drug Catalogue.

 

9. In case of reference price based on a basket of countries, what countries are included?

N/A.

 

10. Have there been any significant legal/judicial developments in relation to Orphan Drugs in your country?

We have seen more and more Orphan Drugs being included in the Drug Catalogue, making originally expensive drugs affordable to thousands of families. In addition, the expedited application for marketing authorization of foreign Orphan Drugs is now well established, which may lead to the marketing of more Orphan Drugs in China.

 

11. Are there proposals for reform or significant change to the regulation of Orphan Drugs? If yes, when are they likely to come into force?

In China, there is a proposal to pass an Orphan Drug Act similar to that of USA to incentivize pharmaceutical companies to develop Orphan Drugs. There is no specific timeline for the formulating and promulgation of PRC Orphan Drug Act.

Also from this Legal Handbook

Cannabinoid drugs, medicinal cannabis & opioid drugs in India – a comprehensive legal overview. Prepared in association with Fangda Partners, one of China’s most prestigious and well-regarded law firms. This is an extract from The Pharma Legal Handbook: China, which can be purchased here for GBP 119.

 

CANNABINOID DRUGS

1. Are Cannabinoid Drugs authorized in your country?

Cannabinoid Drugs are not authorized in China.

 

2. What are the regulatory authorities with jurisdiction over Cannabinoid Drugs?

N/A

 

3. Is there a specific regulatory framework for the authorization, pricing, and reimbursement of Cannabinoid Drugs?

N/A

 

4. Which are the cannabinoid drugs that have received market approval to date?

N/A

 

5. Who can prescribe Cannabinoid Drugs?

N/A

 

6. Is there a list of doctors authorized to prescribe Cannabinoid Drugs?

N/A

 

7. What approvals or notifications are required to prescribe Cannabinoid Drugs?

N/A

 

8. Which organizations are authorized to sell/distribute Cannabinoid Drugs available?

N/A

 

9. Is there a list of retailers/ distributors authorized to sell Cannabinoid Drugs?

N/A

 

10. Are there proposals for reform or significant change to the regulation of Cannabinoid Drugs?

N/A

 

11. When are they likely to come into force?

N/A

 

 

MEDICINAL CANNABIS

12. Is Medicinal Cannabis authorized in the country?

Medicinal Cannabis is not authorized in China.

 

13. What are the regulatory authorities with jurisdiction over Medicinal Cannabis?

N/A

 

14. What is the regulatory framework for the authorization, pricing, and reimbursement of Medicinal Cannabis?

N/A

 

15. How is the production and import of Medicinal Cannabis regulated and by which agencies/authorities?

N/A

 

16. What approval or notifications are necessary to produce or import Medicinal Cannabis?

N/A

 

17. What is the regulatory framework for the marketing and distribution of Medicinal Cannabis?

N/A

 

18. How can patients obtain Medicinal Cannabis?

N/A

 

19. Who can prescribe Medicinal Cannabis?

N/A

 

20. Is there a list of doctors authorized to prescribe Medicinal Cannabis?

N/A

 

21. What approvals or notifications are required to prescribe Medicinal Cannabis?

N/A

 

22. Where is Medicinal Cannabis available?

N/A

 

23. Is there a list of retailers authorized to sell Medicinal Cannabis?

N/A

 

24. Are there proposals for reform or significant change to the regulation of Medicinal Cannabis?

N/A

 

 

OPIOID DRUGS

25. Are Opioid Drugs authorized in your country?

Yes, quite a few Opioid Drugs have been authorized in China, such as Morphine, Remifentanil, Buprenorphine.

 

26. What are the regulatory authorities with jurisdiction over Opioid Drugs?

National Medical Products Administration (hereinafter referred to as “NMPA”).

 

27. Is there a specific regulatory framework for the authorization, pricing, and reimbursement of Opioid Drugs?

Currently, there is no specific regulatory framework for the authorization, pricing, and reimbursement of Opioid Drugs. But there is a special regulation named Regulation on the Administration of Narcotic Drugs and Psychotropic Drugs (麻醉药品和精神药品管理条例) promulgated in 2005, later modified in 2013 and 2016, which regulates the planting, clinical study, business, use, storage, and transportation of narcotic drugs (including Opioid Drugs) and psychotropic drugs.

 

28. Which are the Opioid drugs that have received market approval to date?

Quite a few Opioid Drugs have been authorized in China, such as morphine, Remifentanil, Buprenorphine.

 

29. Who can prescribe Opioid Drugs?

Practicing physicians.

 

30. Is there a list of doctors authorized to prescribe Opioid Drugs?

N/A

 

31. What approvals or notifications are required to prescribe Opioid Drugs?

The physicians are required to obtain the qualification for prescribing narcotic drugs and the psychotropic drugs of category I in order to prescribe Opioid Drugs.

 

32. Which organizations are authorized to sell/distribute Opioid Drugs available?

Only drug distribution companies with the specific approval for the distribution of narcotic drugs (including Opioid Drugs) and psychotropic drugs are authorized to distribute Opioid Drugs to medical institutions such as hospitals and clinics.  No Opioid Drugs can be sold through retail.

 

33. Is there a list of retailers/ distributors authorized to sell Opioid Drugs?

N/A

 

34. Are there proposals for reform or significant change to the regulation of Opioid Drugs?

N/A

 

35. When are they likely to come into force?

N/A

Also from this Legal Handbook

The key facts about regulatory reforms in Chinese pharma. Prepared in association with Fangda Partners, one of China’s most prestigious and well-regarded law firms. This is an extract from The Pharma Legal Handbook: China, which can be purchased here for GBP 119.

 

1. Are there proposals for reform or significant change to the healthcare system?

Reform of Medical Insurance Payments

To improve the cost-effectiveness of the current healthcare system, pilot policies of Diagnosis-Related Groups (“DRG”) payments have been implemented in 30 cities across the nation. All of them have passed the pre-assessment and entered the trial implementation phase. Pilot policies of Big Data Diagnosis-Intervention Packet (“DIP”) payments are to be implemented in 71 cities.

The DRG payment system is a payment management model under which patients will be assigned to different groups based on their disease diagnosis, and medical reimbursement will be calculated and paid according to the group standard.

The DIP payment system is a payment management model using big data to fine-tune the categorization of diagnosis and treatment pathways already established in the DRG system.

 

“One-Invoice” Policy

The “one-invoice” policy in the drug distribution has taken place on a trial and non-compulsory basis in a few regions in China. While the “two-invoice” policy which was initially launched nationwide in 2016 requires that the issuing of the drug manufacturer’s invoice to the distributor be directly followed by the distributor’s invoice to the end customer (i.e. the public hospitals), the “one-invoice” policy takes a step further by encouraging the drug manufacturer directly issue invoice to the end customer, aiming to increase the transparency in drug prices and eliminate excessive profit margins associated with multi-tiered distribution models.

To name a few local practices of the “one-invoice” policy:

• The government of Gaotai county, Gansu province issued the “Key Points of Implementation of Health Insurance Policies in 2021”, pointing out that it is necessary to continue improving the system of bidding and procurement of drugs and medical consumables, optimize the classification of drugs and medical consumables in procurement activities, gradually liberalize the delivery market, incentivize and support direct delivery by manufacturers or third parties designated by manufacturers, and promote delivery under the “one-invoice” policy, in order to reduce the prices of drugs and provide high-value medical products.
• The health committee of Pingdingshan, Henan province, issued the Notice on Further Strengthening the Management of the Distribution of Drugs and Consumables in Public Medical Institutions, stating that public medical institutions shall play a primary role in the market of drugs (or consumables) procurement and, subject to the principles of openness, fairness and impartiality, select those suppliers which can carry out the “one-invoice” policy and supply drugs and consumables directly to medical institutions in the city.
• The authority of Anhui province has also released a commentary, stating that reform is a process of breaking the inherent profit distribution pattern, mirroring the changes to drugs and consumables procurement. In terms of securing product supply, the authority has indicated that prices are reduced as far as possible but without compromising the quality. The winning bidder of any drug procurement contact must have the prime responsibility for quality and supply. Anyone in this market must move towards issuing one, rather than two, invoices, with the aim of reducing the costs of distribution. The winning bidder will either deliver the procured products or engage a third party with the required capability and good credit.
• The health insurance bureau of Quanzhou, Fujian province, is encouraging the use of one invoice when it comes to high-value medical consumables as well as ensuring better record keeping, stamping out dishonesty and taking greater control of contract performance. The bureau is also working towards synchronizing healthcare, healthcare insurance with the goal of optimizing the prices of medical services and putting in place measures that support the delivery of healthcare.

 

2. When are they likely to come into force?

Some of the reforms proposed by the Innovation Opinion have already come into force, for example:

• The establishment of a filing system for the clinical trial site (previously, all sites must go through a stringent approval process to host clinical trials).
• The establishment of a filing system for clinical trial application replacing the previous approval system. NMPA has 60 business days to conduct its review for new drug clinical trial applications, and then the application will be deemed approved if no objection or question is raised.
• Clinical data generated in foreign trials can be used to support a marketing authorization application in China.

Some of the proposed reforms are still pending and will be enforced when related implementing rules are promulgated, including the patent linkage and regulatory data protection system and the expansion of the MAH system.

 

Also from this Legal Handbook

An outline of the legal situation around patents and trademarks for pharmaceuticals in China. Prepared in association with Fangda Partners, one of China’s most prestigious and well-regarded law firms. This is an extract from The Pharma Legal Handbook: China, which can be purchased here for GBP 119.

 

1. What are the basic requirements to obtain patent and trademark protection?

Please refer to Question 3 below.

 

2. What agencies or bodies regulate patents and trademarks?

In China, patents are regulated by the China National Intellectual Property Administration (“CNIPA”) and trademarks are regulated by the China Trademark Office (“CTMO”).

The PRC Patent Law was amended in 2020 (the “2020 Patent Law”) and came in effect on June 1, 2021. The 2020 Patent Law outlined a mechanism which may be regarded as a patent linkage system for new drug applications in China. The implementation rules will be jointly formulated and enacted by NMPA and CNIPA.

 

3. What products, substances, and processes can be protected by patents or trademarks and what types cannot be protected?

PATENTS

Inventions (new technical solution proposed for the shape and structure of a product, or the combination thereof, which are suitable for practical applicability), utility models (new technical solution proposed for a product, a process or the improvement thereof) and designs (new designs of the shape, pattern, the combination thereof, or the combination of the colour with shape and pattern embodied in the entire or part of a product, which create an aesthetic feeling and are suitable for industrial application) may be protected as patents in China.

The term of patent is 20 years from the date on which the patent application has been filed with the CNIPA. The 2020 Patent Law provides a patent term extension for an invention in a new drug for up to five years, upon the request of the new drug applicant, to compensate for curtailment of patent term occasioned by NMPA regulatory approval procedures. But the total adjusted patent term for a new drug shall not exceed 14 years post-marketing.

An invention or a utility model patent that is patentable should meet the following requirements:

• Novelty, which means that an invention or a utility model is neither an existing technology nor disclosed in other patent applications filed in China prior to the date of application of such invention or utility, but published after the date of such application.
• Creativity, which means that an invention has prominent as well as substantive features and indicates remarkable advancements, or a utility model possesses substantive features and indicates certain advancements.
• Practical applicability, which means that an invention or a utility model may be used for manufacturing or be utilized, and may have a positive effect.

A design patent that is patentable should meet the following requirements

• Novelty, which means that a design does not fall under any existing design.
• Distinctiveness, which means that a design is distinctly different from any of the existing designs or a combination of such designs.
• No conflict with other rights, which means that a design should not conflict with the existing legal rights acquired by others.

The following will not be granted as patents:

• Scientific discoveries.
• Rules and methods for intellectual activities.
• Methods for the diagnosis or treatment of diseases.
• Animal and plant varieties.
• Methods for nuclear transformation and substances obtained by means of nuclear transformation.
• Designs that are mainly used for marking the pattern, colour or combination of these two elements.
• Inventions that violate applicable laws or social morality in China, or that harm public interests.
• Inventions that are accomplished based on genetic resources and the acquisition or use of which breaches related laws and regulations.

 

TRADEMARKS

Generally speaking, any sign capable of differentiating the commodities of a natural person, a legal person or any other organization from the commodities of others, including, but not limited to, words, graphics, letters, numerals, three-dimensional signs (shapes), combination of colours, and sounds, as well as a combination of the above elements, may be registered as a trademark.

Furthermore, a sign registered as a trademark should meet the following requirements:

• It should not be a mark that cannot be registered as a trademark (see below, the signs that cannot be used or registered as trademarks).
• It should be distinctive and easily distinguishable.
• It should not be identical or similar to a trademark that has been registered or preliminarily approved for use on the same or similar commodities.
• There must be no conflict with any prior rights enjoyed by a third party.

The following signs cannot be used or registered as trademarks:

• A sign identical with, or similar to, the state name, national flag, national emblem, national anthem, military flag, military emblem, military anthem, or medals of the People’s Republic of China or identical with the name or emblem of a central state organ, the name of specific location that is the domicile of a central state organ, or the name or design of its landmark building.
• A sign identical with, or similar to, the state name, national flag, national emblem, or military flag of a foreign country, except with the consent of the government of such foreign country.
• A sign identical with, or similar to, the name, flag, or emblem of an international intergovernmental organization, except with the consent of the organization or except where the chance of misleading the public is slim.
• A sign identical with, or similar to, an official sign or a hallmark indicating control or warranty, except otherwise authorized.
• A sign identical with, or similar to, the name, sigh or mark of the Red Cross or the Red Crescent.
• A sign with an indication of ethnic discrimination.
• A sign that is deceptive and is likely to cause public confusion in respect of the quality, other characteristics or place of production of relevant goods.
• A sign identical with the name of an administrative division at or above the county level and the name of a foreign place that is known to the public, unless any such name has other meanings or is an integral part of a collective or certification mark. If a trademark containing a place name has already been registered, the trademark shall remain valid.
• A sign that is detrimental to socialist morality and custom or has other adverse effects.
• The drug names listed in the state drug standards are the common names of the drugs. Where common names of drugs have been used, such names should not be used as trademarks for the drugs.

The following signs cannot be registered as trademarks:

• A sign only consisting of the generic name, design or model of the commodities concerned.
• A sign only directly representing the quality, primary raw materials, functions, intended uses, weight, quantity or other characteristics of the goods concerned.
• Other signs lacking distinctive features.
• A three-dimensional mark that is only a shape resulting from the nature of the goods, a shape of the goods required for achieving a technological result or a shape that adds substantial value to the goods.
• A trademark contains a geographical indication of goods and the goods are not from the region indicated therein, thus misleading the public. However, those having been registered in a bona fide manner may remain valid.

 

4. How can patents and trademarks be revoked?

PATENTS

Any organization or individual who believes that the granting of certain patent rights does not conform to the Patent Law may challenge the validity of a granted patent by filing an invalidation application with the Patent Re-examination Board of the CNIPA. A patent can be invalidated under the following circumstances:

• The novelty, creativity or practical applicability of the inventions or the utility models is not duly satisfied.
• The granted design falls under a certain existing design; or certain application has been filed for the same design by any organization or individual with the CNIPA prior to the date of application and such application is recorded in the patent documents announced after the date of application.
• Confidentiality examination related requirements for inventions or utility models made in China were not duly satisfied prior to applying for the patent outside China.
• The description of the patents does not support the claims.
• There was insufficient disclosure.
• Amendments to the patent application documents exceed the original scope.
• The independent claim neither outlines the technical solution of an invention or utility model nor states the essential technical features necessary for the solution of its technical problem.
• A divisional application goes beyond the scope of the disclosure contained in the initial application.
• Two or more patent rights are granted for the same invention.
• The patents fall under those that should not be granted as patents (see Question 3 for more details).

 

Patent disputes involving new drug applications

According to the 2020 Patent Law, during the process of the NMPA regulatory review of a new drug application, the applicant, the relevant patentee or any interested party can file a complaint for patent infringement with the local court or the CNIPA, requesting the court or the CNIPA to declare whether the patent related to the new drug candidate falls into the valid claims of other patents. The NMPA will take into account the outcomes of judicial or administrative proceedings in determining whether to approve a new drug application or not within a prescribed period.

 

TRADEMARK

A registered trademark may be revoked by the CTMO under the following circumstances:

• The registrant changes the registered trademark, the name or address of the registrant without authorization and does not make a correction within a specified time limit required by the local administration for industry and commerce.
• The registered trademark becomes the generic name of goods or it has not been in use for three consecutive years without any justification, and an entity or an individual applies to the CTMO for the cancellation of such registration.

Furthermore, a registered trademark may also be invalidated by filing a request with the Trademark Review and Adjudication Board of the CTMO under the following grounds:

• The registered trademark is one of those that cannot be used or registered as trademarks (see Chapter 6: Patents and Trademarks Question 60 for more details).
• The registered trademark was obtained through deception or by any other illicit means.
• The registered trademark lacks its distinctiveness.

 

5. Are foreign patents and trademarks recognized and under what circumstances?

PATENTS

Where, within 12 months from the date on which any applicant first filed in a foreign country an application for patenting an invention or utility model, or within six months from the date on which any applicant first filed in a foreign country an application for patenting a design, the applicant files in China an application for patenting the same, he may, in accordance with any agreement concluded between the foreign country and China, or in accordance with any international treaty to which both countries are a party, such as the Patent Cooperation Treaty and the Paris Convention for the Protection of Industrial Property, or on the basis of the principle of mutual recognition of the right to priority, enjoy the right to priority.

 

TRADEMARK

Where, within six months from the day when a trademark registration applicant firstly filed an application for registration of a trademark in a foreign country, it applies for registration in China of the same trademark to be used on identical goods, it may enjoy priority according to an agreement concluded between the foreign country and China or an international treaty acceded to by both countries such as the Paris Convention for the Protection of Industrial Property, or on the principle of mutual acknowledgement of the right of priority.

 

6. Are there any non-patent/trademark barriers to competition to protect medicines or devices?

The NMPA may provide for an administrative monitoring period of five years for new Category 1 drugs approved to be manufactured, starting from the date of approval, to continually monitor the safety of those new drugs. During the monitoring period of a new drug, the NMPA will not accept other applications for new drugs containing the same active ingredient. This works as an effective five-year exclusivity protection for Category 1 new drugs.

 

7. Are there restrictions on the types of medicines or devices that can be granted patent and trademark protection?

Except for certain general restrictions applicable to all patents or trademarks (see Question 3), there is no special restriction on any type of medicine or device that can be granted patent and trademark protection.

 

8. Must a patent or trademark license agreement with a foreign licensor be approved or accepted by any government or regulatory body?

License agreements do not require the government approval; however, it is mandatory to duly record such agreements before the CTMO or the CNIPA.

PATENTS

A licensing agreement for patent implementation executed between the licensor and the licensee must be filed with the CNIPA within three months from the date on which the contract comes into effect.

 

TRADEMARKS

For licensed use of a registered trademark, the licensor must file the record of the licensing of the trademark with the CTMO within the validity period of the licensing contract, and the licensing shall be gazetted by the CTMO. Non-filing of the licensing of a trademark will not be contested against a good faith third party.

 

Also from this Legal Handbook

A comprehensive guide to the legal implications around product liability in China. Prepared in association with Fangda Partners, one of China’s most prestigious and well-regarded law firms. This is an extract from The Pharma Legal Handbook: China, which can be purchased here for GBP 119.

 

1. What types of liability are recognized in your jurisdiction?

Violation of laws and regulations may result in civil liabilities, administrative penalties and criminal liabilities.

Civil liability can include:

1. Desistance from infringement;
2. Removal of obstacles;
3. Elimination of dangers;
4. Return of property;
5. Restoration to status quo ante;
6. Repair, reworking or replacement;
7. Resumption of performance;
8. Compensation for losses;
9. Payment for breach of contractual damages;
10. Elimination of adverse effects and rehabilitation of reputation; and
11. Extension of apology.

 

Administrative penalties include:

1. Warning;
2. Fine;
3. Forfeiture of illegal earnings and/or of illegal property;
4. Order to stop production and business;
5. Suspension or withdrawal of permits, suspension or withdrawal of licenses;
6. Administrative detention; and
7. Other administrative punishments as stipulated by law or administrative regulations.

 

Criminal liabilities consist of principal punishments and supplementary punishments.

Principal punishments include:

1. Mandatory control;
2. Criminal detention;
3. Fixed-term imprisonment;
4. Life imprisonment; and
5. Death penalty.

Supplementary punishments (which may also be applied independently) include:

1. Fines;
2. Deprivation of political rights; and
3. Confiscation of property.

 

2. How do these types of liabilities apply to the manufacturers of medicines and devices?

Pursuant to the Drug Administration Law and its implementing rules and the Medical Device Supervision and Administration Rules, non-compliance (depending upon the specific illegal activities) could be subject to different administrative penalties, including monetary penalty, confiscation of illegal gains, suspension of business activities, and revocation of marketing authorization and other permits and licenses. In the worst scenario, violation of drug and medical device legislations may result in criminal liabilities.

For example, a company that sells drugs without proper marketing authorizations may have all its illegal gains confiscated, be subject to an administrative fine of 2-5 times the value of the offending drug products, or criminal imprisonment if there is adverse impact on human health. A company that manufactures or sells devices without proper marketing authorizations may also be fined, have its illegal gains confiscated and have its actions suspended or debarred.

 

3. Does potential liability extend to the manufacturer only or could claims extend to corporate executives, employees, and representatives?

Claims could extend to corporate executives, employees, and representatives of a company. For example, a director or legal representative who breaches the fiduciary duty or duty of care may face civil, administrative or criminal liabilities.

Civil liabilities

A director or legal representative who breaches the duties may face the following civil liabilities: (i) if breach of the fiduciary duty, forfeiture by the company of any proceeds from the breach; and (ii) if breach of either fiduciary duty or duty of care, liability to compensate for losses suffered by the company as a result of the breach.

 

Administrative penalties

Directors falling within the regulated business sectors (e.g., banking, securities, insurance and other financial institutions) and legal representatives, in general, may face additional administrative penalties, such as fines and/or disqualification or prohibition from the market, for breach of the duties under the rules and regulations issued by the relevant regulators.

 

Criminal liabilities

If a director or legal representative’s own acts amount to a criminal offence (e.g. fraud), they will be penalized. If the company commits a criminal offence (e.g. fraud) and if the director or legal representative or any other employee is a person directly responsible for the company’s wrongdoing, then they will also be penalized. This will particularly be a concern if a director or legal representative serves at the senior management level, such as being the general manager, deputy manager or chief financial officer of the company.

 

4. How can a liability claim be brought?

Civil liability claims can be brought up by the aggrieved party as claimant in a civil court, or through arbitration if there is an arbitration clause in the underlying transaction documents.

Administrative investigations will be initiated by governmental authorities (such as the NMPA or NHC) if there is suspected non-compliance with relevant laws and regulations upon findings by the authority itself or as reported by third parties.

Where there is a violation of the criminal statute by a person, the criminal cases are brought up and prosecuted by the procuratorate against the defendant in a criminal court in the interest of protecting the public welfare.

 

5. What defences are available?

The following defenses are available for drug manufacturers:

• The medicinal products involved have not been put in the market by the manufacturer.
• The defect causing the damage did not exist at the time when the relevant product is put in circulation.
• The science and technology are at a level incapable of detecting the defect at the time the product was put in circulation.
• The statutory term of limitations for the action has expired.
• Jurisdiction objection.
• The medicinal products involved conform with regulatory and/or statutory requirements relating to the development, manufacturing, licensing, marketing and supply.
• No causation between the defect and personal injuries or property damages exists.

 

Also from this Legal Handbook

A legal intro to traditional medicines and OTC products in China. Prepared in association with Fangda Partners, one of China’s most prestigious and well-regarded law firms. This is an extract from The Pharma Legal Handbook: China, which can be purchased here for GBP 119.

 

1. What are the regulatory requirements for traditional, herbal, complementary, or alternative medicines and devices?

Traditional Chinese Medicine (“TCM”) is a system for diagnosis, prevention and treatment that has existed for thousands of years and is regulated by the Regulations on Protection of Varieties of TCM and other relevant regulations. The regulatory requirements for such medicines are as follows:

• Entry of foreign investment: foreign investors are prohibited from investing in the application of steaming, frying, simmering and calcining and other processing techniques for Chinese herbal medicines and the production of confidential prescription products of proprietary Chinese medicines.
• Classification: the protected varieties of TCM shall be classified into first-class and second-class. The varieties of Chinese medicine that meet one of the following conditions shall be eligible for an application for the first-class protection: (1) with curative effect on a particular disease; (2) artificial product from varieties of wild Chinese medicinal materials under the national first-class protection; or (3) applicable to the prevention of, and treatment for, a peculiar disease. The varieties of Chinese medicine that meet one of the following conditions shall be eligible for an application for the second-class protection: (1) the varieties that satisfy the provisions of first-class protection or the varieties with the first-class protection being lifted; (2) with remarkable curative effect on a particular disease; or (3) efficacious substances or special preparation extracted from natural pharmaceutical materials.
• Time limit of protection for varieties of TCM: for a variety of TCM under the first-class protection: 30 years, 20 years or 10 years; for a variety of TCM under the second-class protection: 7 years.

 

2. Can these traditional, herbal, complementary, or alternative products be advertised directly to the public?

Only those traditional, herbal, complementary, or alternative products that can be sold without a prescription may be advertised directly to the public.

 

3. What health, advertising, and marketing claims may be made for traditional, herbal, complementary, or alternative products?

Advertising of TCMs that do not need prescription follows the same rules as advertising of OTC medicines.

 

4. What are the regulatory requirements for over-the-counter (non-prescription) medications?

OTC drugs in China refer to the drugs which can be purchased or used by consumers without prescriptions from licensed doctors. The categorization of OTC drugs is subject to the approval of the NMPA.

OTC drugs are divided into Class A and Class B drugs. Drug stores can sell both classes directly to consumers, but general commercial stores such as supermarkets and convenience stores can only sell Class B OTC drugs. Class A OTC drugs must be sold by the pharmaceutical retail enterprise with practicing apothecaries or other pharmaceutical technical personnel whose qualifications have been certified according to applicable laws. Where there is no drug retail enterprise at town or country fairs in remote areas with poor communications, the local drug retail enterprise may, after obtaining approval from the local drug regulatory institution of the county (municipality) and being registered with the administrative department for industry and commerce, set up stores at the fairs to sell OTC drugs within the approved scope for drug distribution.

 

5. Are there any limitations on locations or channels through which OTC products may be sold?

Please refer to Question 4 above.

 

6. What health, advertising, and marketing claims may be made for OTC products?

The medical advertisements must contain the generic name, a statement of “Please purchase and use in accordance with the drug instructions or under the guidance of pharmacist”, its medical advertisement approval number and its manufacturing approval number. Meanwhile, a special label (OTC) for OTC drugs should be indicated in the advertisements for such non-prescription drugs.

 

7. Can OTC products be marketed or advertised directly to the public?

OTC products may be marketed or advertised to the general public directly upon the approval of the NMPA. Please refer to Questions 17 & 20 of the Marketing, Manufacturing, Packaging & Labeling, Advertising article.

 

8. What is the mechanism by which a prescription-only product can be converted to an OTC product?

The NMPA has the authority to revise and publish the list of OTC drugs. Alternatively, the marketing authorization holders can apply to the NMPA for the conversion between prescription drugs and OTC drugs.

 

9. What are the requirements for the importation of either traditional medicines or OTC products?

The requirements for the importation of either traditional medicines or OTC products are generally the same as that for chemical drugs or prescription drugs. All drugs imported into China should obtain an Imported Drug License from the NMPA.

 

Also from this Legal Handbook

A brief overview of the situation regarding marketing, manufacturing, packaging & labeling and advertising within Chinese pharma. Prepared in association with Fangda Partners, one of China’s most prestigious and well-regarded law firms. This is an extract from The Pharma Legal Handbook: China, which can be purchased here for GBP 119.

 

1. What is the authorization process for the marketing of new drugs, biologics, medical devices, over-the-counter medications, and other medicinal products?

Please refer to Questions 3 & 6 of the Regulatory, Pricing and Reimbursement article regarding the authorization of drugs and medical products.

 

2. What is the authorization process for the marketing of generic versions of these products?

Please refer to Question 6 of the Regulatory, Pricing and Reimbursement article regarding the authorization of generic drugs.

 

3. What are the typical fees for marketing approval?

Please refer to Question 4 of the Regulatory, Pricing and Reimbursement article regarding the fees for marketing approval of different products.

 

4. What is the period of authorization and the renewal process?

Please refer to Question 5 of the Regulatory, Pricing and Reimbursement article regarding the fees for marketing approval of different products.

 

5. What are the requirements, if any, for post-approval pharmacovigilance?

The key regulation for China’s ADR monitoring system is the Pharmacovigilance Quality Management Specifications. A marketing authorization holder (“MAH”) is required to report all serious ADRs they learn of to the competent ADR monitoring centre within 15 days and non-serious reactions within 30 days.

With regard to an overseas-marketed drug, in the event of a sale or use suspension or withdrawal of such drug from the market under the order of the foreign drug regulatory authorities for the reason of an adverse drug reaction, the relevant MAH shall notify the NMPA and adverse drug reaction monitoring centre of the applicable information within 24 hours as soon as it has been aware of the event.

 

6. Are foreign marketing authorizations recognized?

Foreign marketing authorizations are generally not recognized in China. All drugs and medical devices must be approved by the NMPA before they are able to be commercialized in China.

In certain pilot regions, such as Hainan province, foreign medical devices and the small number of medicines urgent for clinical use are allowed to be imported without obtaining marketing authorization from the NMPA and used in designated institutions for designated treatment purposes upon the permission from competent authorities.

The Greater Bay Area aims to establish a regulatory regime by 2022, which allows the medical institutions in the Greater Bay Area to have access to drugs and medical devices that have been granted marketing authorizations in Hong Kong and Macau.

 

7. Are parallel imports of medicines or devices allowed?

Current PRC laws contain no provisions that directly address the legality of parallel imports of medicines or devices. It is advisable for market participants to note the following rules in relation to parallel imports:

1. Patent. The PRC Patent Law is basically the only piece of PRC legislation that explicitly allows parallel import: Article 69.1 expressly states that any use, offer for sale, sale or import of patented products or products produced through patented process which have already been sold by the patent owner or licensee does not constitute patent infringement.
2. Trademark. In terms of trademark protection, PRC law does not explicitly address the issue of whether parallel import is allowed or not. Some court decisions have followed the principle of international exhaustion – that the first sale of the goods to a purchaser abroad exhausts the trademark right in China when certain conditions are satisfied (once the trademark rights are exhausted, the registered trademarks owner will no longer have the right to prevent the importation or distribution of the relevant goods); whilst other courts ruled that the first sale of the trademarked goods must occur within China.
3. Marketing authorization. Notwithstanding the ambiguity of parallel import under IP-related laws, it is certain that imported medicines or devices must have the necessary marketing authorizations.

Parallel import is not an urgent issue for the drug industry in China, because multinational corporations must participate in the tender process for supplying drugs to public hospitals (which account for a majority share in China’s drug market, especially for prescription drugs) through their national exclusive distributor in China, which effectively precludes any other parallel importers from supplying drugs to public hospitals. On the other hand, pharmaceutical companies can also rein in or prevent parallel importing by controlling the supply chain – for example, the agreements between a pharmaceutical company and its distributors may contain clauses on territorial limitations and non-competing obligations; importers in China may also request an exclusive distribution right and ask the drug or devices’ manufacturers to take actions to prevent parallel import.

 

8. What are the restrictions on marketing practices such as gifts, sponsorships, consultancy agreements, travel and entertainment, or other incentives for healthcare organizations and individual medical practitioners?

ADMINISTRATIVE PENALTY AND INDUSTRY PRACTICE

According to the PRC Anti-Unfair Competition Law, China’s major legislation on unfair competition acts and commercial bribery, commercial bribery is dishonest behaviour by which a person or an entity gives money or something valuable in order to secure a transaction opportunity or an advantage over other business competitors to the following persons: (i) employees of the counterparty to a transaction; (ii) any person who acts as an agent of the counterparty to a transaction; (iii) any person who has the power or influence on a transaction. The penalties for commercial bribery include a fine of up to RMB3 million, confiscation of illegal proceeds from corrupt transactions and the revocation of the business license.

Furthermore, the Code of Practice on the Promotion of Pharmaceutical Products issued by the R&D-based Pharmaceutical Association in China (RDPAC), which has been voluntarily adhered to by member pharmaceutical companies as the general baseline practices for drug promotion in China, specifically stipulates the following requirements:

• Healthcare professionals shall not generally be paid in cash and gifts for personal benefit.
• Sponsorship is only allowed for events with the purpose to provide scientific or educational information, which must be held at an appropriate venue that is conducive to such purpose.
• To engage healthcare professionals as consultants or to perform other services, a written agreement must be prepared in advance to specify the basis for payment, which shall be reasonable and in accordance with the fair market value.

 

CRIMINAL PENALTY

Bribing someone may also constitute a criminal offence (official bribery or commercial bribery).

Official bribery is the criminal offence of giving, accepting, soliciting or introducing a bribe to or by state functionaries. If the offeror is an individual and the recipient is a government-related entity, such as a government agency or state-owned enterprise, the threshold for prosecution is RMB100,000; if the offeror is a legal entity, the threshold for prosecution is RMB200,000 regardless of whether the recipient is an individual or not.

Commercial bribery includes giving a bribe and accepting a bribe. In this context, none of the parties involved is government-related. With respect to the crime of giving a bribe, the threshold for prosecution is RMB60,000, if the offeror is an individual, and RMB200,000, if the offeror is an entity. The threshold for prosecution of the crime of accepting a bribe is RMB60,000 regardless of whether the offeror is an individual or not. Accepting a bribe by a private-owned entity shall not constitute a criminal offense.

 

9. How is the manufacturing of medicines and devices regulated and by which agencies?

The manufacturing of medicines and devices is regulated by the NMPA and the manufacturing process should be conducted in conformity with China’s Good Manufacturing Practices (“GMP”).

 

10. Are local manufacturing requirements compatible with Good Manufacturing Practices (GMPs) as defined by the U.S. Food & Drug Administration and/or the European Medicines Agency?

Most of China’s current statutes of GMP for drugs are compatible with the GMP provisions of the United States but have their own characteristics as well. According to the Agreement between the Department of Health and Human Services of the United States of America and the State Food and Drug Administration of the People’s Republic of China on the Safety of Drugs and Medical Devices, entered into on December 11, 2007, the two countries agree to formulate details of collaboration on the establishment of internationally recognized standards in the form of work plans. These standards may include the ICH Guidelines, including ICH Q7A Good Manufacturing Practice Guideline for Active Pharmaceutical Ingredients.

 

11. What is the inspection regime for manufacturing facilities?

Regular inspection and spot checks may be conducted by the NMPA or its local counterparts during the whole drug manufacturing process, including: (i) set-up of new manufacturing site; (ii) NDA approval; and (iii) post-marketing manufacturing of drugs.

 

12. Are manufacturing facilities open for inspection by foreign inspectors or third-party inspectors as authorized by the FDA/EMA?

Yes. According to the Implementing Arrangement between the Food and Drug Administration of the Department of Health and Human Services of the United States of America and the China Food and Drug Administration of the People’s Republic of China regarding the Cooperate Mechanism of Regulatory Staff, the U.S. FDA may conduct inspections in China to assess the compliance with relevant U.S. requirements of facilities that are engaged in manufacturing, producing, processing, packing, testing, holding, transporting, or distributing any drug intended for export to the United States or its territories. In support of these inspections, the FDA may also collect and analyse product samples.

The U.S. FDA has a China office to conduct inspections at facilities that manufacture FDA-regulated goods.

 

13. What are the requirements for storage, packaging, and handling of medicines and devices and their constituent components?

Storage, packaging, and handling of medicines and devices must comply with the Good Supply Practice for Drugs and Good Supply Practice for Medical Devices, respectively, which set out the minimum standards for the quality management systems of drug and device distribution in China. For example, the Good Supply Practice for Drugs requires that a drug trading company should be equipped with a comprehensive computer information system, a warehouse with temperature and humidity auto-monitoring systems and qualified quality management personnel.

 

14. What information must be included in medicine and device labeling?

The label of a drug shall bear the name, ingredients, specifications, the manufacturing enterprise, approval number, product batch number, date of production, expiry date, suitability for symptoms or main function, methods of use, dosage, contraindications and side-effects.

Regarding medical devices, the label shall contain the following information:

• General name, type and specification of the medical device;
• Manufacturer’s name, domicile, production address and contact details;
• Number of technical requirements;
• Production date and service life or expiry date;
• Performance, main structure and scope of application of the product;
• Contraindications, precautions and other necessary warnings or prompts;
• Instruction or diagrammatic presentation for installation and use of the product;
• Maintenance and repair methods, as well as the special storage conditions and method;
• Other particulars that should be indicated in the technical requirements.

 

15. What additional information may be included in labeling and packaging?

For drugs requiring special storage, the requirements shall be marked on the label. For narcotic drugs, psychotropic substances, medicinal toxic drugs, radioactive pharmaceuticals, drugs for topical use, non-prescription drugs and other drugs having special marks specified by the NMPA, their special marks shall be printed on the drug labels. Additionally, with regard to the label on the package for transportation and storage, information such as packaging quantity, precautions for transportation or other marks may be included, when necessary.

Regarding Class II or III medical devices, the number of registration certificate as well as the name, address and contact details of the registrant are also required in the label. Also, the name, domicile and contact information of the agent shall be included on the labeling of the imported devices. In the case of contract manufacturing, the labeling shall include name, domicile, production address, the number of production permit or the number of record-filing certificate of the commissioned enterprise. Furthermore, if the device is radioactive, or if damage to or adverse effect on the environment might be caused during use of such device, warning signs or notes shall be included on the label.

 

16. What items may not be included in labeling and packaging?

For medicines, unregistered trademarks and other drug names unapproved by the NMPA shall not be used in the labels.

The label of a medical device may not contain the following particulars:

• Words assuring effect like “best effect”, “guaranteed cure”, “complete cure”, “root out disease”, “immediate effect” and “completely free of side effects”;
• Absolute expressions like “highest tech”, “most scientific”, “most advanced” and “best”;
• Rates of cure or effectiveness;
• Comparison with products of any other enterprise in terms of effectiveness and safety;
• Words of promise like “underwritten by insurance company” and “refund upon ineffectiveness”;
• Certification or recommendation in the name or image of any organization or individual;
• Misleading statement, to the effect that one has contracted a certain disease, or, without using the device, one will contract a certain disease or their conditions will worsen, and other information that is false, exaggerated or misleading; and
• Other information prohibited by laws and regulations.

 

17. What are the restrictions and requirements for the marketing and advertising of medicines and devices?

DRUGS

Drug advertisements shall be examined in accordance with relevant laws and regulations. A company seeking to advertise its drugs must apply for an approval number for each drug advertisement, which approval number is valid for one year. Over-the-counter (“OTC”) drugs can be advertised directly to the general public. Prescription drugs should be advertised in designated medical and pharmaceutical journals intended for healthcare professionals. Prescription drugs can be advertised only in NMPA-approved, professional medical publications. In respect of the content, a drug advertisement shall not contain any unscientific assertion or guarantee on effects and shall not be endorsed using the names of medical or pharmaceutical institutions, experts, scholars, physicians or patients.

 

DEVICES

A medical device advertisement shall also have an approval number. A medical device advertisement must contain the name of the approved device, the name of the device-manufacturing enterprise, the medical device registration certificate number and the advertisement approval number. A medical device advertisement is not allowed to contain any false, exaggerated or misleading content. Medical device advertisements should not target children, and no medical device advertisement may be published in child publications, channels, programs or columns.

 

18. Where can medicines and devices be sold or delivered? Can medicines and devices be sold or delivered via post?

Medicines and Class II and III medical devices can be sold in NMPA-approved or recorded drug stores, while the sales of Class I medical devices do not need approval from the NMPA.

Regulations on the delivery of drugs and devices via post are not clear; the market practice is that except for narcotic drugs and psychotropic drugs (which need special NMPA approval to be delivered via post), drugs and devices can be delivered by online stores to patients via post. Under current PRC laws, online drug stores must apply for a Drug Trading Permit (for retail sale) from the local branch of NMPA to be able to sell OTC drugs to individual customers, displaying or selling prescription drugs by online drug store is prohibited. Drug manufacturers and wholesalers cannot directly sell drugs to individual customers.

 

19. What are the restrictions and requirements for electronic marketing and advertising via email, by Internet, social media, and other channels?

Statutory requirements for drug advertising apply to marketing medicinal products on the internet as well. For instance, operators of internet websites posting drug advertisements are required to obtain the qualification for providing internet-based drug information services upon examination and approval by the NMPA. The drug-related information to be displayed on the internet must be scientific, accurate and comply with the relevant laws and regulations. The internet-based drug information must not contain any information concerning narcotic drugs, psychotropic drugs, medical toxic drugs, radiopharmaceuticals, addiction medications and preparations made by medical institutions.

 

20. May medicines and devices be advertised or sold directly to consumers?

Please refer to Question 17 above regarding drug and device advertisement regulatory system in China.

OTC drugs are divided into Class A and Class B drugs. Drug stores can sell both classes directly to the general public, but general commercial stores such as supermarkets and convenience stores can only sell Class B OTC drugs. Class A OTC drugs must be sold by the pharmaceutical retail enterprises with practicing apothecaries or other pharmaceutical technical personnel whose qualifications have been duly certified.

Class II and III medical devices can be sold in drug stores registered with local counterparts of the NMPA (approval for Class III medical devices and record-filing for Class II medical devices), while the sales of Class I medical devices do not need approval or record-filing with the NMPA or its local counterparts.

 

21. How is compliance monitored?

The NMPA has the right to conduct inspections and audit visits within China’s territory to assure all actors involved in the drug and device industry comply with all laws and regulations.

Subject to the internal cooperation, the NMPA may also conduct inspections overseas. For example, according to the Implementing Arrangement between the Food and Drug Administration of the Department of Health and Human Services of the United States of America and the China Food and Drug Administration of the People’s Republic of China regarding the Cooperate Mechanism of Regulatory Staff, the NMPA may conduct inspections in the United States to assess compliance with applicable Chinese requirements of facilities that are engaged in manufacturing, producing, processing, packing, testing, holding, transporting, or distributing any drug intended for export to China. In support of these inspections, the NMPA may also collect and analyze product samples.

 

22. What are the potential penalties for noncompliance?

Please refer to Question 9 of the Regulatory, Pricing and Reimbursement article.

 

Also from this Legal Handbook

The essential requirements for conducting preclinical and clinical trials in China. Prepared in association with Fangda Partners, one of China’s most prestigious and well-regarded law firms. This is an extract from The Pharma Legal Handbook: China, which can be purchased here for GBP 119.

 

1. Are clinical trials required to be conducted locally as a condition (stated or implicit) for marketing approval?

No. According to the Technical Guidelines Governing Acceptance of Drug Clinical Data from Foreign Studies issued by the NMPA on 20 July, 2018, and Technical Guidelines Governing Acceptance of Medical Device Clinical Data from Foreign Studies issued by NMPA on 20 January, 2018, NMPA will accept foreign clinical data if they meet certain technical and regulatory requirements.

 

2. How are clinical trials funded?

Most clinical trials are funded by pharmaceutical companies. Charity organizations and governmental institutions may also be the source of fund for some clinical trials.

 

3. What are the requirements for preclinical and clinical trial protocols? Who must approve the protocols?

DRUGS

If the data obtained from the preclinical study will be used for the application of drug marketing approval, such preclinical study must be conducted in accordance with the GLP, according to which the preclinical trial protocol should be approved by the project manager of the sponsor.

Clinical trials for drugs must be conducted in accordance with the GCP that sets forth the requirements for the preparation of a trial, protection of the participants in the trial, enactment of the trial protocol, roles and responsibilities of the primary investigator and sponsor, quality control and some other matters related to a clinical trial. The clinical trial protocols must be approved by the ethics committee of the study site.

 

MEDICAL DEVICE

Clinical trials for medical devices must be conducted in accordance with the GCP for Medical Devices, which sets out the requirements for the design, implementation and inspection of the clinical trial protocol, and collection, record, analysis and report of the trial data. The clinical trial protocol must be approved by the ethics committee of the trial site.

 

4. What are the requirements for consent by participants in clinical trials?

The trial site must obtain an informed consent from the trial subjects, which must include the following information: (1) purpose and process of the trial; (2) potential benefits and risks to the participant; (3) alternative treatment methods; and (4) rights and obligations of the participant. The informed consent form must be signed and dated by the investigator and the trial participant.

According to the latest China GCP for Drugs effective from July 1, 2020, the informed consent form and relevant materials provided to the trial participant shall contain following basic elements:

1. Overview of the clinical trial.
2. Purposes of the clinical trial.
3. The likelihood of receiving trial therapy treatment and random grouping.
4. Steps to be followed by the trial participant, including traumatic medical procedures.
5. Obligations of the trial participant.
6. Experimental elements of the clinical trials.
7. Risks or inconvenience that the trial participant is likely to subject to, especially when there is a risk of affecting the embryo, foetus or breastfed baby.
8. The anticipated benefits of the trial and the possibility of no benefits.
9. Alternative medication and therapies, and their important potential benefits and risks.
10. Compensation and treatment available for trial participants in the event of a trial-related damage.
11. Compensation available for trial participants.
12. The expected cost of participating in clinical trials for trial participants.
13. The trial participant’s participation is voluntary, and refusal to participate or discontinuation with the trial at any stage will involve no discrimination or retaliation, and the medical treatment and benefits that such trial participant is entitled to will not be compromised.
14. Without violating confidentiality obligations and applicable laws and regulations, inspectors, auditors, ethics committee and governmental officials of the drug regulatory authorities may examine the original medical records of trial participants, in order to verify the process and data of clinical trials.
15. The confidential treatment and non-public use of trial participants’ identification records. Even if clinical trial results are published, the trial participant’s identity information shall remain confidential.
16. In the event of any information that may affect the trial participant’s continued participation in the trial, the trial participants or their guardian shall be timely notified.
17. The investigators and ethics committee that trial participants can turn to and their contact information, in the event of any trial-related information or issues regarding the trial participant’s rights and benefits, or upon the occurrence of trial-related damages.
18. The circumstances and reasons why trial participants may be withdrawn from the trial.
19. The expected time period of the trial participant’s participation in the trial.
20. The estimated number of trial participant participating in the trial.

 

According to the current China GCP for Medical Devices effective from June 1, 2016, the informed consent form shall contain following basic elements:

1. Name and other basic information of the principal investigator.
2. Name of the clinical trial site.
3. Subject, purpose, methods and contents of the clinical trials.
4. Procedures and time periods of the clinical trials.
5. Source of funds for trials and potential conflict of interests.
6. Anticipated benefits and known or expected risks and adverse events that may happen to trial participants.
7. The alternative treatment available to trial participants and potential benefits and risks for the same.
8. The likelihood that the trial participants may be randomly assigned to any trial group, if needed.
9. The trial participant’s participation is voluntary, and refusal to participate or discontinuation with the trial at any stage will involve no discrimination or retaliation, and the medical treatment and benefits that such trial participant is entitled to will not be compromised.
10. The personal information of trial participants is kept confidential, but the ethics committee, NMPA and its local agencies, National Health Commission and its local agencies and sponsors of the trial may access such personal information to the extent necessary for carrying out their respective work, subject to prescribed procedures.
11. Trial participant’s entitlement to medical treatment and economic compensation in the event of trial related injury.
12. The trial participant may have access to information and materials that are related to him or her at any time during the trial.
13. (Free diagnosis and other relevant subsidies that the trial participant is entitled to during the trial.

 

5. May participants in clinical trials be compensated?

In addition to the injury-related compensation (please refer to Question 6, below), PRC laws do not specify whether the participants participating in the clinical trials are entitled to other payments. In practice, the travel expenses and loss of earnings of the participants may be reimbursed by the sponsors in some clinical trials.

 

6. How are participants in clinical trials protected and indemnified against any harm that arises as a result of participation in the trial?

According to the GCP for Drugs and the GCP for Medical Devices, the sponsor of a clinical trial must provide insurance for the trial participants and assume the treatment expenses and compensation that the participants may be entitled to in the event of the trial-related injuries or death.

The trial participant may also take legal action against the trial site (if there is malpractice of investigators or nurses) or the sponsors (if there is quality issue of drugs).

 

Also from this Legal Handbook

An intro to the regulatory, pricing and reimbursement scenario for pharmaceuticals in China. Prepared in association with Fangda Partners, one of China’s most prestigious and well-regarded law firms. This is an extract from The Pharma Legal Handbook: China, which can be purchased here for GBP 119.

 

1. What are the regulatory authorities with jurisdiction over drugs, biologicals, and medical devices in your country?

Several governmental agencies are responsible for the administration of drugs (including biologicals) and medical devices, including the following key players:

• The National Medical Product Administration (“NMPA”), formerly known as the China Food and Drug Administration, which is responsible for issuing marketing authorizations of drugs and medical devices and monitoring product quality.
• The National Health Commission (“NHC”), which is responsible for the overall guidance of healthcare reform, administering China’s Essential Drug List (“EDL”) and managing the drug tendering and procurement policies.
• The Ministry of Human Resources and Social Security (“MOHRSS”), the
  authority that takes the lead in formulating the National Drug Reimbursement List (“NRDL”).

 

2. What is the regulatory framework for the authorization, pricing, and reimbursement of drugs, biologicals, and medical devices?

DRUGS

Key Regulations

The fundamental pieces of legislation for the pharmaceutical industry are the Drug Administration Law and the Implementing Rules of Drug Administration Law. In addition, the NMPA has issued a wide range of other regulations and implementing measures to regulate the pharmaceutical industry.

 

Authorization

Steps to obtain the marketing authorization for drugs are mainly set out in the Drug Registration Administrative Measures. In general, all new drug candidates must go through four steps before being marketed: pre-clinical research, application for clinical trial of an investigational new drug, clinical trials and new drug application.

• Pre-clinical research of a drug candidate must be conducted in accordance with the Good Laboratory Practices (“GLP”).
• After completing the pre-clinical research, a clinical study sponsor must obtain approval for clinical trials from the NMPA’s Centre for Drug Evaluation (“CDE”) to conduct clinical trials on the investigational new drug. In July 2018, the NMPA promulgated a new rule that if an applicant for clinical trials does not receive any negative opinions from the CDE within 60 days after the date on which the application was accepted, the clinical trials may be initiated and conducted in accordance with the protocols previously submitted to the CDE in the application.
• After obtaining the approval of a clinical trial, the sponsor shall conduct the clinical trial at Good Clinical Practice (“GCP”) certified institutions. Clinical trials are divided into Phase I, Phase II, Phase III and Phase IV, of which Phase IV refers to post-marketing clinical trials.
• Upon completion of the Phase III clinical trial, the sponsor may submit a new drug application for approval to manufacture and launch such investigational new drug.

 

Pricing

• Terminal Units of Non-Public Hospitals
  The price of drugs was previously regulated under a scheme of maximum retail price (“MRP”) of drugs set by the government, which was abolished (except for narcotic and certain psychotropic drugs) in June 2015.
• Public Hospitals
  • Centralized Drug Procurement Program. Competitive bids shall be used to purchase medications and be carried out by local governmental authorities on a province-by-province basis under the central coordination of NHC. Public hospitals used to be allowed to mark-up drugs by around 15% above procurement prices. This policy has been replaced with the “zero-mark-up” (i.e., no-profit, the drug price that a hospital charges the patient should be the same as it pays to the drug suppliers) policy in July 2017.
  • Volume-Based Procurement. The National Healthcare Security Administration (“NHSA”) will directly negotiate with pharmaceutical companies about drug supply for public hospitals and strive to get favourable terms by insisting on bulk purchasing. The participant with the lowest tender price will be the bid winner. By securing the purchase price at the terminal end, the cost at each distribution phase upwards will be reduced, which ultimately leads to an end lower price.

 

Reimbursement

In terms of reimbursement for the cost of drugs, China’s medical insurance system was first adopted in 1998 and has now been gradually expanded to provide coverage for most of the population in China. Individual participants of the national medical insurance program and their employers (if any) are required to contribute to the medical insurance funds by paying an insurance premium monthly. Medical insurance program participants are eligible for full or partial reimbursement of the cost of medicines included in the NRDL, which contains over 2,000 Western and Chinese medicines that are divided into Class A and Class B drugs. Class A drugs typically include low-priced and clinically necessary drugs that can be fully reimbursed, and the Class B drug catalogue typically includes higher-priced or new drugs that generally require the patients to assume 10-40% of the drug’s total cost.

The latest NRDL issued in 2020 includes a total of 2,800 drug products, of which 1,264 are Western medicines and 1,315 are proprietary Chinese medicines. Two hundred and twenty-one (221) drug products are NHSA negotiation-based drugs which will be supplied at an agreed low price during the term of the applicable purchase agreement. Each province may formulate its own Provincial Drug Reimbursement List based on the NRDL and subject to certain restrictions and procedures, but it is likely that the provincial version of the Reimbursement Drug List may be abandoned in the future.

 

MEDICAL DEVICES

Key Regulations

The fundamental legislation for the medical devices industry is the Medical Device Supervision and Administration Regulations. A wide range of other regulations and implementing measures have been issued by the NMPA to guide the medical devices industry.

 

Authorization

Under the Medical Device Registration Administrative Measures, devices can be categorized into Class I, Class II and Class III devices. Class I devices are simple devices that are exempted from clinical trials and are administered through a record-filing system. Class II and Class III devices are more complex devices with medium or high risks, and their safety should be evidenced by clinical trials (unless being on the list of devices exempted from clinical trials) and the devices shall be registered with the NMPA before entering the market.

 

Pricing

There is no MRP scheme in the medical devices industry. Similar to the mark-up policy previously applicable to drugs, public hospitals are still allowed to charge a certain mark-up on the medical devices purchased by them (for example, a maximum of 5% mark-up is allowed in Shanghai, provided that the purchase price for a medical device exceeds RMB4,000 and the mark-up should not exceed RMB200).

 

Reimbursement

At the national level, there is a negative list that precludes certain devices (such as glasses and massage devices) from governmental reimbursement. Detailed reimbursement coverage and rates for medical devices are subject to local policies in each province.

 

3. What are the steps to obtain authorization to develop, test, and market a product?

Please refer to Question 2 above regarding the authorizations of drugs and medical products.

 

4. What are the approximate fees for each authorization?

The table below lists the government fees charged by the NMPA for each category of registration:

Category	Sub-category		Fee (RMB 10,000)
Domestic drug	New drug	Clinical trial approval	192.0
		Marketing authorization	432.0
	Generic drug	Marketing authorization (clinical trial is waived)	183.6
		Marketing authorization (clinical trial is required)	318.0
	Supplementary registration	Regular registration items	9.6
		Registration items requiring technical review	99.6
	Renewal application		Set by the provincial authority
Imported drug	New drug	Clinical trial approval	376.0
		Marketing authorization	593.9
	Generic drug	Marketing authorization (clinical trial is waived)	367.6
		Marketing authorization (clinical trial is required)	502.0
	Supplementary registration	Regular registration items	9.6
		Registration items requiring technical review	283.6
	Renewal application		227.2
Domestic devices	Class III	Marketing authorization	153.6
		Post-marketing amendment registration	50.4
		Renewal registration	40.8
Imported devices	Class II	Marketing authorization	210.9
		Post-marketing amendment registration	42.0
		Renewal registration	40.8
	Class III	Marketing authorization	308.8
		Post-marketing amendment registration	50.4
		Renewal registration	40.8

 

5. For how long are marketing authorizations/registrations valid? How are marketing authorizations/registrations renewed?

Marketing authorizations for drugs and medical devices are valid for a term of five years. The applicant must prepare and submit the renewal application documents to the provincial NMPA six months before the expiry of the marketing authorization. In addition to review of the application documents, the authority may determine that it wishes to conduct a technical review and on-site inspection when it deems necessary.

 

6. How does the authorization process differ between brand-name products and generic products? Are there differences for local manufacturers versus foreign-owned manufacturers?

In March 2016, the NMPA issued the Reform Plan for Registration Category of Chemical Drugs which reclassified drug applications as follows:

 

Category 1 drugs	New drugs that have not been marketed anywhere in the world.
Category 2 drugs	Improved new drugs that are not marketed anywhere in the world.
Category 3 drugs	Drugs that have equivalent quality and efficacy to the brand-name drugs have been marketed abroad but not yet in China.
Category 4 drugs	Drugs that have equivalent quality and efficacy to the brand-name drugs and have been marketed in China.
Category 5 drugs	Drugs that have already been marketed abroad, but are not yet approved in China.

 

In general, generic drugs follow similar registration pathways to brand-name drugs. The applicant needs to conduct bioequivalence (“BE”) tests for generic drugs to demonstrate conformity with the brand-name drugs. BE tests are administrated through the record-filing system, instead of the review and approval process applicable to new drugs. The BE applicant only needs to file a record on the Clinical Trial Management Public Platform designated by the NMPA and can start the clinical trial after obtaining the filing number. In addition, new drugs in Category 1 may be entitled to certain preferential policies that are not applicable to generic drugs, including fast-track approval treatment by the CDE, a monitoring period up to five years (during which the NMPA will not accept any applications for new drugs with the same active ingredient) and more flexible drug manufacturing technology transfer options.

Local drug manufacturers and foreign-owned drug manufacturers in China are subject to the same drug approval procedures.

 

7. How are combination products (drug + drug, drug + biologic, drug + device, biologic + device, drug + biologic + device) regulated?

“Drug (including biologics) + device” combination products must obtain marketing authorizations from the NMPA. For such combination products, if the drug plays a major function, the combination products should be registered as a drug; if the device plays a major function, the combination products should be registered as a medical device.

“Drug + drug” combination products can be commercialized in China market after clinical trials have been completed with satisfactory results and the combination therapy has been granted the marketing authorization.

 

8. How is compliance with regulation monitored and evaluated? Is the regulatory regime comparable with the U.S. Food and Drug Administration or the European Medicines Agency expectations and requirements?

The NMPA and its local counterparts have the jurisdiction to enforce the Drug Administration Law and its implementing rules, the Medical Device Supervision and Administration Rules, and other guidelines and regulations on drugs and medical devices.

In June 2017, China joined the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH) – an international organization founded by drug administrators of the U.S., EU and Japan to facilitate international collaboration in the pharmaceutical industry. Some of the ICH technical guidelines have already been used as the basis of NMPA regulations.

 

9. What is the potential range of penalties for noncompliance?

Pursuant to the Drug Administration Law and its implementing rules and the Medical Device Supervision and Administration Rules, non-compliance (depending upon the specific illegal activities) could be subject to different administrative penalties, including monetary fines, confiscation of illegal gains, suspension of business activities, and revocation of marketing authorization and other permits and licenses. In the worst scenario, violation of drug and medical device legislations may result in criminal liabilities.

 

10. Is there a national healthcare system? If so, how is it administered and funded?

HEALTHCARE SYSTEM REFORM

The PRC government has promulgated several healthcare reform policies and regulations to ameliorate and improve the country’s healthcare system. On March 17, 2009, the Central Committee of the PRC Communist Party and the State Council jointly issued the Guidelines on Strengthening the Reform of Healthcare System. On December 27, 2016, the State Council issued the Notice on the Issuance of the 13th Five-year Plan on Strengthening the Reform of Healthcare System. On April 25, 2017, the General Office of the State Council issued the Main Tasks of Healthcare System Reform in 2017. On November 29, 2019, the State Council Leading Group for Deepening the Reform of the Medical and Health Systems, a task force of the State Council, issued the Notice on Several Policies and Measures to Further Deepen the Reform of the Medical and Health System with the Centralized Procurement and Use of Drugs as A Breakthrough (the “Notice”). The Notice pointed out that in order to enhance the interplay of healthcare, medical insurance and pharmaceuticals systems, magnify the synergy of the reforms and resolve the problems involving the general public’s accessibility to good medical services, measures and policies covering 15 aspects shall be adopted, as follows:

1. Deepening the reform of state-led centralized procurement and use of drugs;
2. Establishing a national public drug procurement market and a multiparty interlocked procurement market structure;
3. Improving the quality of drugs;
4. Ensuring stability of drug supply;
5. Shortening the payment periods of public medical insurance;
6. Promoting the establishment of a nationwide unified and open market for drug manufacturing and distribution;
7. Promoting synergic reformative measures, such as the adoption of a dynamic pricing strategy price for medical services;
8. Reviewing the salary structure for healthcare staff in public medical institutions for their benefit;
9. Strengthening the supervision of good medical prescription practices in healthcare institutions;
10. Enhancing the implementation of uniformed medical insurance compensation standards for drugs;
11. Improving medical insurance payment methods;
12. Ameliorating the regulatory framework of medical insurance funds;
13. Promoting the refined management of medical services;
14. Improving the nationwide drug price monitoring system;
15. Accelerating the informatization construction of the healthcare system.

 

HOSPITALS

China’s hospital system consists of both public and private medical institutions and insurance programs. Public hospitals are owned by the government and funded by out-of-pocket payments by patients, governmental subsidies and various governmental insurance schemes (including Urban Employee Basic Medical Insurance (UEBMI) and Urban and Rural Resident Basic Medical Insurance (URRBMI), both of which managed by the MHRSS).

Private hospitals are controlled and operated by private entities and are mainly funded by out-of-pocket payments by patients and commercial insurance schemes (governmental insurance coverage for private hospitals has been quite low).

 

REIMBURSEMENT

Please refer to Questions 2 & 13 regarding the medical reimbursement system in China.

 

ESSENTIAL DRUG LIST

In 2009, the Chinese government launched the National Essential Drug List System, which aims to promote essential medicines sold to patients at fair prices and to ensure that the general public in China has equal access to the drugs contained in the National Essential Drug List. The Ministry of Health promulgated the first National Essential Drug List on August 18, 2009 and the latest version was revised and released on October 25, 2018, which includes a total of 685 drugs.

A new version of the Essential Drug List is being discussed and is expected to be released in 2021.

 

 

11. How does the government (or public) healthcare system function with private sector healthcare?

Because of governmental insurance coverage and pricing regime, the public hospitals are of a “non-profit” nature and serve most Chinese patients. Private hospitals can be established either for profit or non-profit, and private hospitals for profit are usually established to attract patients with higher income or with commercial insurance coverage. According to statistics issued by the NHC, as of November 2020, there are 35,000 public and private hospitals across the nation, of which 12,000 are public hospitals and 23,000 are private hospitals. Compared to the statistics by November 2019, there are six fewer public hospitals, while there are 1,146 more private hospitals; the total number of hospital visits over a period from January 2020 to November 2020 is 2.98 billion, a decline of 12.5% compared to that over a period from January 2019 to November 2019, of which public hospitals had 2.51 billion visits, with a year-on-year decrease of 13%, and private hospitals had 0.47 billion visits, with a year-on-year decrease of 9.4%.

 

12. Are prices of drugs and devices regulated and, if so, how?

Please refer to Question 2 above regarding the regulation of the price of drugs and device products.

 

13. How are drugs and devices used by patients paid for? What roles do public and private payers play?

At private hospitals, drugs and devices are mainly paid out of pocket by patients or covered by commercial insurance (to the extent available).

At public hospitals, most medical expenditures can be covered by UEBMI or URRBMI (subject to certain exceptions and ceilings) and the patients need to pay out of pocket for the remaining expenditures. For example, the quantity of coverage, reimbursement rates and reimbursement ceiling under URRBMI and UEBMI in Shanghai are as follows:

Urban and Rural Resident Basic Medical Insurance

Out-patient and Emergency Services

• Deductibles: If the annual cumulative medical costs of an insured person meet the deductible amount, a certain percentage of the excessive costs will be covered by the medical insurance, and the remaining costs shall be borne by the insured individually.
• Deductible Amount: RMB300 for people aged 60 years or above, the severely disabled, elementary and middle school students, children and infants; RMB500 for people aged 18 years and above and under 60 years.
• Reimbursement Rates: 70% of covered claims incurred at out-patient and emergency departments of community healthcare centres or primary hospitals; 60% of covered claims incurred at out-patient and emergency departments of secondary hospitals; 50% of covered claims incurred at out-patient and emergency departments of secondary hospitals.

 

In-patient Services

• Deductibles. If the medical costs of the insured person meet the deductible amount, a certain percentage of the excessive costs will be covered by the medical insurance, and the remaining costs shall be borne individually.
• Deductible Amount: RMB50 for primary hospitals; RMB100 for secondary hospitals; RMB300 for tertiary hospitals.
• Reimbursement Rates:
  For people aged 60 years or above, and the severely disabled: 90% of the covered claims incurred at community healthcare centers or at primary hospitals; 80% of the covered claims incurred at secondary hospitals; 70% of the covered claims incurred at tertiary hospitals.
  For people aged under 60 years: 80% of the covered claims incurred at community healthcare centers or at primary hospitals; 75% of the covered claims incurred at secondary hospitals; 60% of the covered claims incurred at tertiary hospitals.

Insurance Scheme	Annual Contributions	Approximate Coverage Levels for Medical Services and Drugs	Annual Coverage Ceilings
URRBMI	Varies by region, for example: Shanghai · Individual: US$ 16-54 (RMB 110-370) (depending on age)	Varies by region, for example: Shanghai · Inpatient: 60%-90% (depending on age and hospital level) · Outpatient: 50%-70% (depending on age and hospital level)	Varies by region, for example: Shanghai · No coverage ceiling
UEBMI	Varies by region, for example: Shanghai 11.5% of employee wages: 9.5% from payroll tax on employers and 2% employee contribution	Varies by region, for example: Shanghai · Inpatient: 85%-92% (depending on age and working status) · Outpatient: 50%-90% (depending on age and working status)	Varies by region, for example: Shanghai · No coverage ceiling

 

14. Who dispenses drugs and devices to patients and how are those dispensers compensated?

Drugs and devices are dispensed by hospitals or retail drug stores. Dispensers are compensated through UEBMI and URRBMI.

 

15. What are the professional and legal responsibilities of those who dispense drugs and devices? What role do they play in providing patient care, information, and safety?

Hospitals and drug stores must purchase drugs and devices from qualified manufacturers or distributors, and comply with other legal requirements on acceptance, storage, transport, distribution and dispensing of drugs or device products.

Hospitals and drug stores should monitor and report adverse drug reactions (ADR) to the NMPA within a statutory time period, and take corresponding remediation actions (such as recall of products) to ensure the patient safety.

 

Also from this Legal Handbook

On March 30, 2020, the State Administration for Market Regulation (SAMR) enacted the Amended Drug Registration Regulation (DRR) as part of its efforts to strengthen and streamline its regulation of the pharmaceutical industry. The DRR seeks, on the one hand, to further confirm a series of changes made in drug evaluation and approval in recent years, and, on the other, to implement in full a series of processes proposed in the Drug Administration Law (DAL), including who is authorized to market drugs (“marketing authorization holder”), implied licensing for clinical trials, priority evaluation of drugs, and management of changes after drugs are launched on the market, clearly specifying requirements for procedures for drug registration and rights and obligations of all people, in order to form a comprehensive system for the management of drug registration. The DRR will take effect on July 1, 2020.

 

As one of the basic principles of drug administration expressly proposed in the DAL, risk administration is now part and parcel of the DRR. Risk management specifies risk minimization through a process of risk identification, assessment and control.

 

I. Strengthening Risk Management of Clinical Research and Ensuring Drug Safety 

1. Development Safety Update Report (DSUR)

DRR aims to set up comprehensive information reporting on safety risks in clinical research by establishing the Development Safety Update Report system (DSUR system), to ensure the quality of clinical trials and the control of corresponding risks.

Article 28 of the DRR provides that the sponsor of a clinical trial (Sponsor) shall, on a regular basis, submit via the website of the Center for Drug Evaluation of the NMPA (CDE) safety update reports (SUR) during the development of any drug. These reports must be submitted once a year no later than within two months of each anniversary of the approval of the application for the drug clinical trial. CDE has the discretion to require the Sponsor to adjust the reporting period depending on the outcome of the review.

In addition, DRR obliges the Sponsor to report any suspicious and unexpected serious adverse reactions and any other information pointing up potential serious safety risks to the CDE in a “timely manner”. This is distinct from the information provided to DSUR, in order to ensure that regulators are made aware of the severity of safety risks and can strengthen any risk controls that may be needed. Where the clinical trial program, consent form, investigator’s brochure, or anything else, needs adjustment, the applicant of the clinical trial may be asked to suspend or terminate the clinical trial to ensure the safety of those people taking part in the trial, if that is considered necessary.

 

2. Management of Changes During Clinical Trials

Clinical research is a key stage of drug development. During clinical trials, changes in pharmacology and clinical protocols will inevitably occur as the Sponsor obtains greater knowledge about the drug. This can also lead to adjustments and improvements in how the drug moves from clinical trial to manufacturing.

Article 29 of the DRR stipulates that during a clinical trial, if there are any changes to the trial, or if there are non-clinical or pharmaceutical changes, or where new information of discoveries come to light, the Sponsor must carry out an assessment of the impact of those changes on the safety of those taking part in the trial. If a Sponsor’s assessment is that the safety of the individuals will not be adversely affected, the Sponsor may continue to implement the trial and report accordingly in the SURs. Where the Sponsor assesses that the risks to the safety of those participating in the trial have increased, it must submit a supplementary application.

 

3. Four Accelerated Approval Pathways

The DRR implements changes to the country’s accelerated approval channels, as per the earlier draft DRR and guidelines released by the CDE in November 2019. According to the DDR, four accelerated approval channels would be established:

1. a new breakthrough therapy designation (BTD), which are to be used during drug clinical trials;
2. conditional approvals for urgently needed drugs based on surrogate outcomes and end points or other clinical datasets;
3. priority reviews covering market approval filings; and
4. special review for drugs needed for major public health

The timeline for prioritized marketing review would be reduced to 130 working days, and to 70 for urgently clinically needed drugs and rare disease products not yet available in China.

 

II. Strengthening Risk Management post-Marketing 

1. Marketing Authorization Holder (MAH)

Within the DRR, there has been set up the marketing authorization holder (MAH) system. This stipulates that those applying to register new drugs must be an enterprise or a drug development institution with corresponding legal responsibilities. Foreign applicants must designate a corporate legal representative in China to handle any drug registration or related matters.

China is ramping up its controls of drug development, registration, and post-market supervision; imposing more stringent safety rules on both clinical and non-clinical drug research institutions; integrating registration licenses; and clarifying inspection procedures and follow-up processing. The central government will hold businesses to account, specify obligations for drug development, registration, and production, and clarify the division of powers and responsibilities related to supervision and inspection. The authorities will also review penalties imposed for transgressions and crackdown on data fraud and other illegal activities.

 

2. Classification of Changes in Drug Production

Article 79 of the DAL stipulates that changes in the drug production process shall be subject to classification according to the degree of risk and impact. The DRR uses the classification of Classes I, II and III (which have been in use since 2008), which also apply to the management of any changes. All changes are classified, whether these changes cover examination and approval, are in connection with record filing, relate to the risk profile of the drug, or affect the safety, effectiveness and quality controllability.

According to Articles 78 to Article 80 of the DRR, significant changes in the production process, changes in key contents of instructions, and the transfer of drug marketing authorization by MAH holders are generally identified as high risks, in which case the MAH will need to submit a supplementary application for approval. For any moderate change in the production process, change in package labels, drug repackaging and any other circumstances with moderate degree of risk and impact, the MAH will need to file those changes to the CDE or the competent provincial authority. Any minor changes in the production process, entailing low risk to safety, effectiveness and quality, need only be reported in the MAH’s annual report.

 

3. Conditional Approval for New Drugs

In order to encourage the research and development of new drugs for which there is high clinical demand and to accelerate the marketing of drugs where there is urgent clinical need, the applicant may apply for conditional approval. These will be those drugs used to treat serious life-threatening diseases where there is, as yet, no effective treatment, or drugs and vaccines urgently needed for public health purposes, provided the clinical research data show their curative effects and predict clinical value. The applicant must satisfy the risk management requirements set out in both the DAL and the DRR in order to receive conditional approval for new drugs.

With respect to drugs that have been granted conditional approval, MAHs will need to continue to adopt continuing risk management processes even after the drugs are marketed, clinical trials are completed and research finished within specified time limits, and to submit a supplementary application for approval, pursuant to Article 66 of the DRR. Post-marketing risk management measures, usually in the form of risk management plans, shall contain information on how to identify known risks and potential risks in how the drugs are clinically working, and put forward plans for pharmacovigilance activities that minimize risk, aggregate all drug safety risk information and include measures to reduce risks using information analysis and evaluation.

Further refinements were made to the conditional approval system, with the release by DCE on April 30th of a draft proposal (Draft Proposal) setting out further review and approval procedures, covering detailed procedures, specific requirements, application scope and qualification criteria. According to the Draft Proposal, the special review and approval process is applied to:

1. drugs that treat diseases which are seriously life-threatening and where there is no effective treatment and for which clinical studies confirm the efficacy and forecast the clinical value of the drugs;
2. drugs urgently needed for public health, where their efficacy has been proved in clinical trials; and
3. vaccines needed for a major public health emergency, or urgently needed by the National Health Commission, where the benefits are considered to outweigh

If the applicant plans to file for a conditional approval, a class II meeting1 application shall be submitted to the CDE and written opinions shall be obtained before the filing. If the drug is already classed as a BTD drug, a class I2 meeting will satisfy.

If the early meeting with CDE and subsequent evaluation confirm the eligibility for a conditional market approval filing, the applicant may file simultaneously alongside new drug registration application. The drug registration certificate is then issued, along with such post-marketing clinical trial or study requirements including the due date.

Also from this Legal Handbook

Fangda Partners’ Josh Shin gives an overview of recent regulatory upgrades affecting the Chinese pharmaceutical industry.

 

On August 26, 2019, China enacted the Amended Drug Administration Law as part of its efforts to strengthen and streamline its regulation of the pharmaceutical industry. The amended law seeks to address prominent problems in the pharmaceutical industry, such as counterfeit drugs, substandard drugs and high drug prices. To address these problems and to accomplish other goals, the Amended Drug Administration Law will place strict supervisory standards and measures over the entire pharmaceutical industry, including R&D, manufacturing, sales, and end-use and management of drugs. The Amended Drug Administration Law will take effect on December 1, 2019.

 

1. The new law makes it easier to bring new drugs to market under the market authorization holder (MAH) system

The Amended Drug Administration Law will modernize the pharmaceutical market by introducing a nationwide MAH-based drug approval system. The new system will make it easier for drug developers to bring new drugs to market. At the same time, it will increase their responsibility to ensure the safety of those drugs.

This MAH-based drug approval system will focus drug licensing on marketing approvals, as opposed to the current system’s production approvals. The aim is to encourage the development of innovative drugs by allowing drug researchers, research institutes and biotech companies with innovative technologies to market drugs by outsourcing production instead of requiring in-house manufacturing (which means substantial investment) as is currently required to bring a new drug to market.

While the new MAH system will make it easier to receive approvals to bring new drugs to market, the system will also place new requirements on MAHs. They will now be responsible for the safety, effectiveness, and quality of a drug across its entire life cycle. They will need to establish a quality assurance system over the whole drug development and production process, covering all aspects of preclinical research, clinical trials, production and distribution, post-marketing research, adverse reaction monitoring and reporting. Moreover, the MAH must be able to provide patient compensation for defective drugs. Meanwhile, for an overseas MAH, a domestic corporate legal person must be designated to fulfill the MAH’s obligations and assume joint and several liability with the MAH. However, it remains to be seen how the scope of such joint liability will be defined, especially when the domestic corporate legal person is not in the distribution chain of the relevant drugs.

Finally, the Amended Drug Administration Law sets out several measures supporting the introduction of an MAH-based approval system, in particular requiring medical institutions and drug license holders, manufacturers and distributors to establish drug tracking systems capable of reporting to the governmental authorities. China’s National Medical Products Administration (NMPA) will issue technical guidance with more details as well as establishing a dedicated collaboration platform to enable the government to develop a unified drug tracking system and standardized drug specifications.

 

2. Ease of restrictions on the import of small quantities of unapproved pharmaceuticals

The Amended Drug Administration Law will ease the restrictions on importing and selling drugs lacking approval from China’s NMPA. This means that drugs legally marketable overseas but lacking NMPA approval in China may be imported for personal use in small quantities. Further regulations will be required to define the amount of drugs any one individual may import.

China currently classifies any drug unapproved by the NMPA as a counterfeit drug, which means that drugs legally marketable overseas but unapproved in China cannot be imported or sold in China. China has strictly enforced this prohibition with prison sentences of up to three years and stiffer penalties if the imported drug resulted in death.

However, under the Amended Drug Administration Law, these drugs will no longer be classified as counterfeit drugs. Therefore, authorities might reduce the penalty or exempt importer from prosecution or reduce punishments in cases involving the importation of a small amount of a drug that has been legally marketed abroad.

The amendment does not mean that China is ready to relax rules on importing generic drugs. Anyone who wants to import generic drugs for profit-making purposes still must follow Chinese laws to register and receive approval in advance. As such, businesses are not allowed to import drugs without approval, and legal risks still exist for distributors who buy drugs abroad. A company that imports these drugs without approval may still have its business permit revoked and be fined up to 30 times the value of the imported drugs.

China has a huge appetite for these overseas-approved but domestically-unapproved drugs since Chinese patients suffering from serious diseases are barred from using effective drugs readily available in overseas markets. Not surprisingly, many patients seek to buy these drugs from overseas, often through black market dealers, who expose themselves to legal risks for selling counterfeit drugs. The decision no longer to classify unapproved drugs as counterfeit drugs and allow their import and sale without legal liability if the drugs are imported for personal use is good news for anyone who can benefit from access to cheap life-saving drugs from abroad, which likely follows from public and media’s high attention on efforts to import inexpensive generic drugs.

 

3. Whether the compulsory GMP and GSP certification procedures would be scrapped by the country is still in doubt

The Amended Drug Administration Law reaffirms the previously announced repeal of the compulsory certification procedures for Good Manufacturing Practice (GMP) and Good Supply Practice (GSP). To simplify administrative procedures and shift the focus in monitoring from a one-time prior approval system for every five years to a continuous post-administration product quality supervision system, Article 50 of the Amended Drug Administration Law repeals compulsory GMP and GSP certification and no longer requires drug manufacturers and distributors to be GMP and GSP certified every five years for their drug quality and safety supervision systems.

However, one month after the promulgation of the Amended Drug Administration Law, China’s authorities are apparently having second thoughts when it comes to the management GMP and GSP certifications. In a draft proposal named Existing Certifications to be Retained in the Drug Regulatory System released by the NMPA in the middle of September, both GMP and GSP certifications are presented. Specifically, GMP is required for the drug registration, outsourcing production approval and in other instances., with GSP necessary for the wholesale, retail and purchase of anesthetics drugs. That means, these two certifications will still play an important role in the administrative handling of drugs in the country.

Regardless of the uncertainty over the abolition of the GMP and GSP certifications, regulations on drug manufacturing and distribution will not be loosened in terms of drug quality and safety. The Amended Drug Administration Law calls for greater ongoing oversight from regulators over pharmaceutical companies and the individuals within those companies in charge. Thus, drug manufacturers and distributors must still comply with strict manufacturing and distribution requirements.

Under the Circular on Building a Team of Professional and Specialized Pharmaceutical Drug Inspectors issued on July 18, 2019, qualified inspectors will conduct compliance and risk analysis inspections at medical research and production facilities to ensure products, including drugs, cosmetics and medical equipment, are developed and produced in compliance with the law. Meanwhile, the NMPA and provincial level drug administration departments are expected within the next three years to establish a specialized drug inspection system staffed mostly with full-time professional inspectors and some part-time inspectors in a support function. The specialized drug inspection system would provide national and provincial inspection teams to conduct regular and unscheduled onsite inspections to medical research and production facilities.

In conclusion, under the Amended Drug Administration Law and relevant laws and regulations, NMPA and its provincial counterparts are mandated to strengthen their surveillance of drug manufacturers and distributors.

 

4. Door left unlocked for online sale of prescription drugs

Although the previous draft of the Amended Drug Administration Law released for public consultation explicitly provided that MAHs and drug distributors may not sell prescription drugs through third-party online platforms, the Amended Drug Administration Law, as enacted, does not contain this express prohibition. Nevertheless, it does tighten overall supervision of online drug sales. Specifically, the Amended Drug Administration Law prohibits online sales of vaccines, blood products, anesthetics, psychoactive and radioactive drugs, highly toxic medicines and other drugs under special administration. More detailed implementation rules are expected to govern the online sale of prescription drugs.

 

5. The new law strengthens penalties for counterfeit and substandard drugs

The Amended Drug Administration Law intends to offer consumers and patients greater protection by increasing penalties on producers of counterfeit and substandard drugs.

Both the lower and upper limits on penalties for enterprises will be increased. For instance, enterprises that produce or distribute counterfeit drugs may be fined from 15 to 30 times their illegal gains, as opposed to the current fine of two to five times their illegal gains. The potential fines for manufacturing or distributing substandard drugs, have increased from one to three times their illegal gains to 10 to 20 times their illegal gains with a minimum fine of RMB 1,000,000 (about US$140,000). Heavier punishments may also apply for those enterprises that produce or sell counterfeit or substandard drugs taken by pregnant women or children. Finally, any enterprise that produces or sells counterfeit or substandard drugs may be fined and ordered to suspend operations, or even have its business license revoked.

The Amended Drug Administration Law also states that individuals may face legal liability for their involvement in producing or selling counterfeit drugs. Legal representatives, people in charge, those directly responsible, and others can face penalties, including monetary fines and debarment. These individuals may be barred from engaging in drug manufacturing and distribution for five years or may be barred for life and detained by the competent public security authority for not less than five days but not more than 15 days in serious circumstances.

The Amended Drug Administration also seeks to protect patients and consumers by ensuring that drug administration departments are properly exercising their supervisory duties. These departments will face heavy punishments for dereliction of duty when handling counterfeit or substandard drug cases.

The Amended Drug Administration Law provides a perfect opportunity to cement the progress made so far and to introduce new expectations for compliance through the product life cycle. However, the corresponding implementing rules remain to be developed to push forward these reform initiatives to benefit patients and those in the industry.

Innovation and compliance are two important shared goals of the government and pharmaceutical industry. With the constantly changing competitive landscape and fast-advancing medical technology, the pharmaceutical industry, as well as the regulators, must collaborate to find the most appropriate balance for risks and benefits.

The promulgation of the Amended Drug Administration Law specifies the nature of the Healthy China Initiative, which aims to overhaul and transform the healthcare industry, prompting companies to provide better products and services for people. In addition to the Amended Drug Administration Law, in recent years, China has said it will not impose import tariffs on anticancer drugs, it has accelerated the examination and approval process for new drugs, and built an all-process drug tracing system. These efforts have shown the country’s dedication to guarantee the safety and reliability at every stage of drug production, sales and use.