SHANGHAI – Pick an issue or an industry, China's complex problems can seem intractable with much-touted reforms dismally ineffectual. But with the power of China's top-down decision-making, there are times when the government sets a new course and far-reaching change follows swiftly if not necessarily smoothly. Over the summer, the State Council's edicts to the CFDA to fix the regulatory system by speeding up drug review times and getting better quality innovative drugs on the market looks set to have a dramatic effect on China's pharmaceutical sector.

State Council Circular number 44, follow-on reforms and announcements were the hot topics at the recent DIA Drug Discovery and Innovation Conference with many drug developers conjecturing how the sweeping proposed changes will actually be implemented.

Some practical concerns aside, the overall sentiment is optimistic. There are clear signs that China is moving closer to international regulatory practice with a better system for getting quality drugs on the market.

A selection of the reforms is laid out below. The changes will become official in the upcoming drug registration regulations expected by the end of the year or early in 2016. New overarching drug legislation is expected in two years.

New drugs get a new definition

The existing drug classification system will be scrapped in favor of a more simplified one, boiled down to two main categories: new drugs and generic drugs. In a significant departure from the past, new drugs will be defined as new drugs not marketed anywhere in the world with subcategories for innovative and improved new drugs.

It remains unclear what this will mean for originators, in particular multinational companies with innovative drugs already on the market elsewhere, but backlogged or not able to get trial approval in China.

Joseph Cho, R&D-based Pharmaceutical Association Committee (RDPAC) chairman, told BioWorld Asia while the proposed reforms were 99 percent good overall, there were questions about the how the new drug definition would play out. There are concerns that originators may fall under the generic category and be subject to slower processing times. However, Cho said authorities are working to put in place a transition period. This leaves open the possibility that some drugs will be grandfathered if they meet important unmet medical needs.

The definition of generics will also shift dramatically with a new requirement for bioequivalency: Generics will be redefined as "drugs having equivalent quality and efficacy with the originator's drugs."

The pressure to show bioequivalency for the first time has many of China's approximately 4,700 pharma firms in a scramble to figure out how they can demonstrate quality consistency. The expectation is that there will be significant industry consolidation with the proposed rule changes forcing out those players who fail to meet the new standards. The extra testing requirements will also make the cost of developing generics more expensive and less profitable.

This and other pressures placed on generics makers is expected to help reduce the number of generics applications filed with the CFDA, and free up reviewer time to concentrate on new drug applications.

China moves to Market Authorization Holder System

China may also dispense with its system for granting marketing approval to the manufacturer. The circular announced a pilot study to test the globally recognized Market Authorization Holder (MAH) system that permits the use of contract manufacturing organizations (CMO). The MAH pilot will apply to new drugs only.

China's old rules, which were designed to control generics makers, have been ill suited to the needs of biotechs and novel drug developers – many of which have been pouring precious capital into building their own biologics plants in order to comply with the rules on the books.

Calling it revolutionary, Cho said "the MAH allows restructuring of the entire pharmaceutical industry in China."

It may also enable a new breed of drug developers to come out of the woodwork. "If you are a researcher, a university professor – it opens up the whole thing. . . . It will be much more flexible," said Cho.

If the MAH system is adopted, that could bring more bad news for generics makers, but is an encouragement to foreign companies to drop the imported drug pathway and work with local companies to manufacture locally. The imported drug pathway will still be an option, but the CFDA fees will shoot up dramatically, to cover their on-site inspections of manufacturing facilities outside of China.

A 30-day filing review system

The upcoming reform that occupied the most airtime during the meeting was the introduction of a new system for authorizing first-in-human (FIH) studies in China. The current approval system for drugs has been notoriously slow, taking companies 18-24 months to gain approval from the CFDA. As a way to get started, many China companies have had to go to Australia first to collect clinical trial data. It was said by some that these lengthy delays are what prompted the State Council to intervene and put the extra pressure on the CFDA to make changes to the system.

Circular number 44 proposes a CTA review system familiar to biotechs in the U.S. – where an automatic approval is granted after 30 days unless sponsors have heard otherwise. This would immediately remove a significant bottleneck that has stymied the industry for years.

However, opening the floodgates is not a simple matter. While, the Centre for Drug Evaluation (CDE) has hired scores of new reviewers, it is widely believed they are mostly fresh university graduates lacking translational experience to review and assess innovative FIH study applications. There are concerns the whole ecosystem may be ill-prepared to handle a surge in innovative drug studies. One participant particularly called out the need to professionalize hospital ethics boards, a pivot to innovative drugs will require an enormous amount of training and preparation.

During the panel discussion, Cho pointed to the relative inexperience of the new reviewers to evaluate new drugs. He also mentioned that RDPAC, along with the CFDA and CDE, had set up a training site at Peking University to focus on getting the reviewers up to speed. Industry will also have to do its part, by ensuring better communication with reviewers and top-quality data are supplied in the filing.

Special review system for innovative drugs

An accelerated review system will be established for drugs that combat AIDS, cancer, major infectious diseases, rare diseases and those prioritized as a major National Science and Technology Project or as a part of a Key National Development Plan.

Innovative drugs, pediatric drugs, or those with significant therapeutic advantages of innovative drugs, that transfer manufacturing to China, can also fall under this green channel review. Drugs that take a special review channel need to keep prices within the realm of comparable market countries.

MRCT problem solved

In order to increase China's participation in global clinical trials, parallel clinical studies will be encouraged for new drugs (those not yet marketed in other countries) and innovative drugs, with a focus on clinical value and protection of study subjects.

In the DIA panel, Cho said the multiregion clinical trials problem is now solved. (See BioWorld Today, Dec. 12, 2014, and Sept. 3, 2014.)

However, there are many concerns that the system is not quite ready to take on an influx of global trials. More training is needed to prepare hospitals and principal investigators in order to increase capacity and quality.