Law firm Herbert Smith Freehills’ attorneys summarize recently proposed new Chinese laws involving drug and vaccine management. They report that the Chinese government has issued draft amendments to the Drug Administration Law and a draft Vaccine Administration Law for public comment. These are the most notable recent legislative initiatives on reforms to China’s drug evaluation and approval system following social concerns about the pharma sector. In this e-bulletin we highlight the key developments proposed and set out our observations on the regulatory trends in this field.

As was reported in Lexology:

Background

In October 2017, China’s Communist Party and the State Council issued Opinions on Deepening the Reform of Evaluation and Approval System and Encouraging Innovation on Drugs and Medical Devices which proposed several important reform measures to facilitate innovation in the pharma sector. On 23 October 2017, the former China Food and Drug Administration published draft amendments to the Drug Administration Law for public comment incorporating these reform proposals which included introducing record-filing management for clinical trial institutions, fully implementing a marketing authorisation holder system and emphasising the ongoing compliance of pharma companies. The legislative amendments now proposed, which were issued in November 2018, carry forward the main policies embodied in the 2017 amendments with more detailed implementation rules and more severe punishments for violations.

The other drivers behind the proposed amendments to the Drug Administration Law and the draft Vaccine Administration Law include the massive government restructuring carried out this year, including the establishment of three new regulatory bodies (State Drug Administration, State Administration for Medical Security Insurance and the National Health Commission) in place of the previous authorities, and various high-profile incidents in the pharma sector over the past few months (especially the recent vaccine scandal).

Key amendments to the Drug Administration Law

Fully implementing the marketing authorisation holder (MAH) system 

Under the existing Drug Administration Law, the drug approval number (an ID number for a specific drug that must be obtained before a drug can be manufactured and commercialised) can only be obtained by drug manufacturers. This means that independent research institutions are not responsible for (and can’t readily make profit from) drug production and sales. By comparison, the MAH system is a common system for drug administration in various countries. A MAH is a company, firm or non-profit organisation (which may or may not be a drug manufacturer) that has been granted a marketing authorisation to market a specific drug and is responsible for the performance of the drug over its lifetime.

In May 2016, China’s State Council issued a pilot plan for the MAH system in ten provinces or cities, namely Beijing, Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, and Sichuan. Pharmaceutical research institutions and individual researchers in these areas have been able to apply for and obtain drug approval numbers and, after obtaining approval, become MAHs. MAHs are required to comply with various obligations and must take legal responsibility for drug R&D, clinical trials, registration, production, marketing, monitoring and evaluation. 

The draft amendments to the Drug Administration Law will fully implement the MAH system based on knowledge accumulated from the pilot program. The draft amendments provide that anyone that obtains a drug registration certificate (equivalent to the current drug approval number) would become a MAH and must ensure the safety and effectiveness of the drug for its lifetime. A MAH may manufacture the drug by itself (with a valid drug production certificate) or entrust a certified drug manufacturer to produce the drug. A MAH can also be an overseas company or institution. 

Cancellation of GMP and GSP certification system

Under the existing Drug Administration Law, a drug manufacturer is required to conduct drug production in accordance with the Good Manufacturing Practice for Pharmaceutical Products (GMP) and must pass an inspection by the relevant authority to obtain a GMP certificate before commencing drug production. Similarly, a drug distributor must obtain a Good Supply Practice for Pharmaceutical Products (GSP) certificate before selling the drugs. However, in practice, the GMP/GSP certified enterprises often fall short of the relevant standards after obtaining the certificates. In 2017, 157 GMP certificates were revoked due to noncompliance. 

The draft legislative amendments therefore propose the cancellation of GMP and GSP certification systems and emphasise inspection of pharma enterprises’ ongoing compliance. 

Other key changes 

The other key proposed changes to the Drug Administration Law include: 

1. A filing process for clinical trial institutions will be implemented in place of the existing approval process.

2. The express permission currently required for clinical trial approvals will be changed to an implied permission system (where an application for conducting clinical trials will be deemed approved if no objection is raised by the relevant authority within the specified time limit).

3. A recall system for defective drugs will be introduced.

4. The penalties for violations will be significantly more severe than the corresponding provisions in the existing law with greater emphasis on individual liability, for example:

a. The fine for unlicensed manufacturing or distribution of drugs or the manufacturing or distribution of counterfeit drugs will be changed from 2-5 times the drug’s value to 5-30 times the drug’s value.

b. The responsible person (usually the legal representative or the person directly in charge) for producing or selling counterfeit or substandard drugs could be banned for life from engaging in drug production or distribution (compared to a 10-year ban under the current law). 

Highlights of the draft Vaccine Administration Law 

Vaccines, as biologics, require higher standards for production, transportation and storage than ordinary medicinal products, and often have a great impact on a large population. Therefore, the draft Vaccine Administration Law has been formulated as a special law under the Drug Administration Law. The draft Vaccine Administration Law generally echoes the draft amendments to the Drug Administration Law with stricter regulations. The highlights in the draft include: 

1. The MAH system is also adopted for vaccines but a vaccine MAH must be a vaccine manufacturer, i.e. a vaccine MAH must not entrust others to produce vaccines on its behalf.

2. In addition to the conditions for a MAH or drug manufacturer proposed in the draft amendments to the Drug Administration Law, a vaccine MAH or manufacturer must also meet certain standards set out in the draft Vaccine Administration Law.

3. A national traceability platform will be established to ensure that the entire process for producing, transporting, storing and using vaccines is traceable.

4. The clinical trials for vaccines must be expressly approved by the relevant authority (compared to the implied permission proposed for regular drug clinical trials) and infants and young children must not be subjects for clinical trials.

5. Each batch of vaccines must be inspected and approved by the relevant authority before sale.

6. Vaccine MAHs must purchase mandatory liability insurance.

Observations 

Given that the Chinese government has attached great importance to medical and health reforms in recent years and that the MAH pilot period was extended for one more year in November 2018, we expect that the amendment of the Drug Administration Law and the new Vaccine Administration Law may be finalised in the next year. If the key provisions of the draft legislative reform proposals are incorporated in the final laws, it is anticipated that the fully implemented MAH system will encourage initiatives in drug R&D and facilitate innovation. The cancellation of GMP and GSP certification systems and simplified regulatory procedures for clinical trials will accelerate the procedures before a drug comes on the market. Drug regulatory authorities will be able to impose more scrutiny on ongoing compliance of the pharma companies and the responsible persons which should lead to greater accountability and restore public confidence in the industry. 

Source: Lexology

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