BEIJING – China has finally written all its drug-related reforms into law, as it passed the amendment of its drug administration law in late August, the amendment to take effect on Dec. 1. Those moves carry one goal: to bring more and better drugs into the Chinese market as quickly as possible.

Since 2015, China has been proposing and trying out various measures to realize that goal, such as offering priority review for much-needed drugs, introducing a 60-day default review time for IND approval, and establishing the marketing authorization holder (MAH) system that allows companies without their own manufacturing facilities to file for new drug launches.

Now those measures have been written into the country's drug administration law, along with heavier punishments for noncompliance. It marks the second overhaul of China's drug regulatory regime since 2001.

The revised law comes with 51 new articles and four new chapters. The most important change is the nationwide adoption of the MAH system, according to Nick Beckett, managing partner of law firm CMS.

"The MAH regime will significantly reshape the Chinese pharmaceutical industry in a variety of ways," he told BioWorld.

In the past, China only allowed drug manufacturers, and not drug research institutions, to bring drugs to market within the country, as the government believed that drug manufacturers that were equipped with established real estate and production factories were best placed to cover any liability that arose as a result of the products that they produced.

The MAH system was first introduced as a pilot program in 10 provinces, under which drug research institutions could register drugs and become MAHs. They could bring the drugs to market by establishing agreements with third-party manufacturers and distributors to assist them in manufacturing and distributing their products. Now the system has been adopted nationwide under the revised law.

Everyone can specialize

For pharmaceutical companies, especially the innovation-driven ones, the MAH system allows them to focus on their drug research without worrying about their manufacturing capability.

"This is expected to significantly increase research institutions' enthusiasm for R&D and therefore improve innovation within China's pharmaceutical industry," said Beckett.

John C. Balzano, a partner in Covington & Burling LLP's food and drug practice group, agreed. "This creates much-needed flexibility for research-based companies to develop products and bring them to market," Balzano told BioWorld.

Another advantage of the MAH system is that licenses can officially be transferred. Previously, the license holders had to use makeshift pathways to transfer their licenses to other entities. Balzano said the new practice may increase flexibility for making deals.

He added that the MAH system also allows for contract manufacturing at one or more locations and may ultimately create more centralized manufacturing and distribution of drugs.

"China appears to want to have research-based companies be able to bring their products to the market and a strong biotech sector. It seems to want to have a more professional manufacturing sector to make things more consolidated," he added.

As a result, lawyers have said they expect to see the integration of the contract manufacturing organization (CMO) and contract sales organization (CSO) industries.

"There will be a rapid development in the CMO and CSO industry," Beckett explained. "An increase in professional and large-size CMOs and CSOs are expected to appear and smaller and lesser-quality CMOs and CSOs will find it more difficult to remain competitive."

Ensuring accessibility

China is also working to increase the accessibility of drugs. Authorities can grant clinical trial approval within 60 working days by default and allow conditional marketing approvals for drugs to treat life-threatening diseases and for drugs urgently needed for public health reasons by analyzing existing clinical trial data. And regulators can grant priority review to new drugs for treating infectious and rare diseases.

The law also encourages more foreign novel drugs to be filed for approval in the country by including foreign drug research institutions in its MAH system.

Furthermore, active ingredients, excipients, packaging materials and containers making direct contact with a drug can be approved during the marketing application.

"Such measures are expected to ensure that the drug registration process becomes more efficient," said Beckett.

Strong penalties for safety breaches

The Chinese government's policies also place an emphasis on the quality and safety of the drugs, said Covington & Burling's Balzano.

The revised law requires the establishment of a drug traceability system to ensure all information is accurate as well as a pharmacovigilance system to monitor and address adverse drug reactions, while clarifying which drugs cannot be sold online.

It also strengthens the drug postmarketing management obligations and requires the MAHs to be held accountable along with manufacturers and distributors, as a new chapter of the law focusing on MAHs specifies.

Punishment for noncompliance is also harsher. The fine for manufacturing and distributing unapproved drugs has been changed from two times to five times the value of the affected product to 15 to 30 times.

That means foreign MAHs must be more careful when choosing partners. They must find a reliable agent in China to ensure compliance. If found violating the regulations, they could face a hefty fine and even restrictions on exporting to and registering their drugs in China.

Easing import restriction

Balzano also mentioned expanded access programs that are allowed under the revised drug law.

"Local authorities can approve one-time importation of drugs not approved in China," he said. Those drugs are also allowed in a small quantities for personal use.

Chinese cancer patients, for example, had been bringing home generics from India that are much cheaper in order to alleviate their financial burden, but those activities were cracked down upon by Chinese officials who declared those drugs to be "fake medicine" since they were unapproved in the country.

The new law has stopped calling those drugs that are sold legally overseas "fake medicine" and allows them to be imported to China in small amounts. The India-based Council for Healthcare and Pharma has welcomed the move.

"We hope the initial reforms to open up the Chinese market by Dec. 1, 2019, for generics in small batches will be further deepened to allow for larger imports," president of the council, Gurpreet Sandhu, said.

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