Proposed Chinese drug regulation could reform regulation

The Chinese government’s past efforts to reform the regulatory framework for its pharmaceutical industry can be traced back to the 2015 Opinions on the Reform of the Drug and Medical Device Evaluation and Approval System ) (2015 opinion) and 2017 opinion on deepening the reform of the evaluation and approval system and encouraging innovation of medicines and medical devices (关于深化审评审批制度改革鼓励药品医疗器械创新的意见). To codify these new regimes and measures, the Medicines Administration Act and its Regulations (2019 Regulations) were respectively amended in 2019.

With the government implementing more reform initiatives,1 the National Medical Products Administration (NMPA) issued new draft regulations on May 9, 2022 (中华人民共和国药品管理法实施条例(修订草案征求意见稿)) (draft regulation), which will add a total of 101 new articles to the latest version of the law. The Council of State is reviewing all comments submitted while awaiting the exact timeline for finalizing the draft regulations. Although the proposed regulations primarily incorporate several important principles and newly published measures from previous years, pharmaceutical companies could be significantly impacted once the proposed regulations are officially enacted. This would bring a comprehensive set of rules covering the entire life cycle of pharmaceutical products, as well as some modifications to some current practices and the consolidation of many rules applying at different levels of regulatory paradigms.

NMPA seeks to encourage innovation

1. Look for a real “new” drug

The 2019 implementing regulations define “new drug” as a “new to China” drug, but such a definition does not exist in the draft regulations. The 2015 Opinions have already interpreted “new medicine” as “global new medicine” (unregistered and sold inside and outside China), a stricter interpretation. The NMPA’s Chemical Drug Registration Reform from 2016 adopted this stricter definition. That the proposed Regulations remove the definition may signal the adoption of this strict interpretation of “new drug”.

This change would not only affect drug registration, but also other pharmaceutical lifecycle management practices, for example, qualification for a period of exclusivity (see below) and patent term extension in under patent law (which compensates the Marketing Authorization Holder (MAH) for loss of patent term due to the review and approval of the Marketing Authorization market, with a maximum extension of five years).

2. Continue to promote pharmaceutical innovation focused on clinical value

Since the publication of the 2019 implementing regulations, several policy documents including the Guiding Principles for Clinical Research and Development of Clinical Value-Based Antitumor Drugs , call for or best-in-class research and discourage duplicate investment in the development of multiple types of cancer drugs. Funding and IPO plans for affected life sciences companies have been delayed due to concerns about the impacts of these policies. The proposed regulations emphasize the same vision, indicating that the regulator can continue to promote clinical value-based standards for all therapeutic products.

In addition, the draft regulations state that the government will support the discovery and development of innovative medicines by applying different policy tools in government-supported research projects, funding, procurement, payment standards and insurance. medical, among others. Given the government’s aggressive stance on volume-based procurement and price negotiation in recent years, it may provide more incentives to address pharmaceutical companies’ concerns about their investment in the development of innovative therapeutics.

3. Strengthen regulatory data protection and market exclusivity

Since 2002, the Implementing Regulation contains data protection measures. An exclusive right to the data was granted to the manufacturer/seller of a registered drug containing new chemicals, prohibiting others from unauthorized use of this data, and for six years the NMPA did not approve the requests from others for the use of this data (unless this data was obtained independently). Further, the NMPA may not disclose such data except in the public interest or to prevent improper commercial use.

In 2018, the NMPA published a Draft Implementation Measures for Drug Test Data Protection (for Interim Implementation) (药品试验数据保护实施办法(试行)). This draft proposed to grant a six-year exclusivity period for new drugs, rare disease drugs (first approved in China) and pediatric drugs (first approved in China) and a 12-year exclusivity for biological products for therapeutic use. The bill was never adopted as official legislation.

According to the draft regulations, regulatory data protection is granted to “certain medicinal products approved for marketing”, the scope of which is not defined. The official text may provide a clearer scope.

For rare disease drugs and qualified pediatric drugs, the proposed regulations grant a period of exclusivity during which applications from generic manufacturers will not be approved. New pediatric medicines will enjoy a market exclusivity period of up to 12 months, and new medicines for rare diseases will enjoy a market exclusivity period of up to seven years. The proposed regulations provide the longest period of exclusivity only for these two types of drugs; The NMPA can explain how it will determine the specific period of exclusivity for a specific drug. Incidentally, the first generic successfully challenging a patented drug will be granted a market exclusivity period of 12 months (a fixed term).

As the definition of ‘new drug’ has been set to cover only ‘world’s first drugs’, market exclusivity is available for ‘real’ innovative drugs, forcing pharmaceutical companies to decide whether to launch the product in China first.

4. Consolidate and integrate previous reform documents

With more reform policies introduced after the promulgation of the 2019 Regulations, the draft Regulations incorporate these reform achievements, for example, the link to patents.2 Establishment of breakthrough treatment designation, conditional approval and priority review; objection to the conclusions of the registration of medicinal products; encouraging mutual recognition of the results of ethical review; and acceptance of foreign clinical trial data are all newly published measures in the regime, and all are reiterated and stipulated by the proposed regulations. All of these policies should allow pharmaceutical companies to develop and launch their products in China.

On the other hand, there are obstacles or uncertainties that can have a negative impact on pharmaceutical companies:


Create additional compliance burden to assign IND and NDA approval

According to the draft regulations, changing the sponsor of an investigational new drug (IND) requires approval from the Center for Drug Evaluation (CDE), and the CDE can reissue clinical trial approval if necessary. This may contradict the industry’s longstanding practice of contractual assignment, followed by updating information on the clinical trial’s online platform. Since the CDE may conduct a thorough review of the qualification of the new sponsor, more paperwork and a longer delay could occur. Additionally, granting NDA approval to the other company now requires the inclusion of all formulations of the affected drug product.


Navigating cross-border activities under the new MAH regime

The NMPA does not generally approve cross-border arrangements (i.e. the manufacturer and MAH must be located simultaneously in China or outside of China), although having the MAH and its CMO in different jurisdictions makes more commercial sense. The draft regulation proposes to maintain the prohibition of cross-border agreements at the clinical stage and registration, but to remain silent on the commercial stage. More clarification on this issue is needed from the NMPA. If a cross-border manufacturing agreement is permitted, this change would be welcome.

However, as long as the drug is marketed in China, all overseas R&D or manufacturing must comply with Chinese laws, regulations, rules, standards and specifications, according to the draft regulations. Although China has incorporated a series of International Council for Harmonization rules in recent years, this extraterritoriality clause may create additional compliance obligations for foreign pharmaceutical companies. This requirement may require non-Chinese bio-company licensors to work more closely with their Chinese licensees to ensure that all compliance obligations are met.

Innovation in life sciences is a driving force of the Chinese economy. On May 10, China’s National Development and Reform Commission released the 14th five-year plan for the organic industry, marking a plan dedicated to this economic pillar. China will continue to shape its regulatory regimes as well as its pricing system to boost the competitiveness of its pharmaceutical industry. Meanwhile, foreign companies can benefit from China’s focus on innovation, but can also face unique challenges given local needs. Therefore, corporate headquarters will likely continue to focus on early alignment with Chinese business units regarding China strategy in the coming years.

1 See our June 2021 WG review: China on the Move: An Improving Regulatory Landscape with New Challenges Ahead – Genomics and National Security.

2 The patent nexus is seen as China’s determination to promote innovation and was first introduced by the Patent Law in 2020 and elaborated further in the Early Resolution Mechanism Implementation Measures Drug Patent Litigation (for the Implementation of Trials, 2021, 药品专利纠纷早期解决机制实施办法(试行)), Provisions of the Supreme People’s Court on Several Issues Concerning Law Enforcement in the Trial of Civil Disputes Related to Patent Rights of Medicines Subject of Application for Registration (2021,用法律若干问题的规定) and the Measures for Administrative Rulings under the Medicine Patent Expedited Dispute Mechanism (2021, 药品专利纠纷早期解决机制行政裁决办法).

©2022 Greenberg Traurig, LLP. All rights reserved. National Law Review, Volume XII, Number 193