Life Sciences & Healthcare: China developments 2017 and predictions 2018 2017-2018
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Overview You may be reflecting on what your business can expect to face this year, both in terms of opportunities and challenges in China, particularly as 2017 saw many significant developments for the Life Sciences & Healthcare sector. For example, the Chinese version of the Orange Book and the new drug distribution regime were both launched as well as the CFDA joining the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use. In this guide, we have taken a look back at the top 10 developments of 2017 and also looked ahead to 2018 with our top 10 predictions for you and your business operating in China. During the course of the year, we will be closely monitoring these ongoing developments and predictions, and providing you with regular updates on them through our free ealert service, Law-Now, and also WeChat CMSAsia. For now, we hope you find our reflections and predictions of interest and help to your business, as you continue to plan for the year ahead. If you would like to discuss any of the developments with us, please do let me know. Nick Beckett Managing Partner, Beijing Office and Global Co-Head of CMS Life Sciences & Healthcare Sector Group T +86 10 8527 0287 M +86 186 1842 8030 E nick.beckett@cms-cmno.com Follow us on WeChat and LinkedIn to keep up-to-date on the latest legal developments, events and news from CMS. 3
Top 10 developments 1. CFDA joined ICH: In June 2017, China Food and Drug Administration (CFDA) joined the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use). This is considered a significant milestone for CFDA as they undergo internationalisation. 2. Registration: Since May 2016, a pilot Drug Marketing Authorisation Holder (MAH) System has been implemented in 10 pilot areas. Based on the responses received during 2016 and 2017, the Chinese government has decided to expand the MAH regime nationwide and also apply this regime in relation to medical devices. 3. Distribution: Dual Invoicing System could be the most significant policy which changed the drug distribution industry fundamentally in 2017. It requires a invoice to be issued by the drug manufacturer to distributor and another invoice to be issued by the distributor to medical institution. By the end of 2017, most provinces and areas have formally implemented the regime. 4. Cybersecurity: The PRC Cybersecurity Law took effect from 1 June 2017. Due to the information protection requirements contained in the new law, M-health devices that collect information within China are significantly affected. The CFDA has issued the Technical Guiding Principles for the Cybersecurity Registration of Medical Devices and the Draft Technical Guiding Principles for the Registration of Mobile Medical Device which set out the necessary cybersecurity requirements during the registration of medical devices with information technologies. 5. Patent protection: The Chinese version of the US Orange Book was announced on 29 December 2017. It takes the form of a website. MAHs are required to disclose patent information related to their drugs on the website. This is the first step of establishing a Chinese patent linkage regime which will bring additional protection for drug patentees. 4 Life Sciences & Healthcare: China developments 2017 and predictions 2018
6. Clinical Trials: A new recording regime for clinical trial sites has been established. Clinical trial sites that have already qualified clinical trial conditions do not require approval provided that they are registered with the CFDA s designated website. This simplified qualification process allows more medical institutions to be able to provide clinical trial services and eases the drug and medical device registration process. 7. Administration: The Chinese government paid great attention to noncompliance in the life sciences industry and has set serious punishments for both business entities and individuals. The Supreme People s Court has clarified the relevant criminal offences and their corresponding liabilities. In particular, the Ministry of Public Security has clarified how liabilities will be implemented on the individuals who are responsible for the non-compliance. 8. E-commerce: CFDA has taken notice of the compliance risks within the quick developing e-commerce business in the life sciences industry and as a result has amended several related regulations, including the Provisions Concerning Drug Information Services on the Internet. CFDA has also issued specific new regulations on the online medical device distribution and online food services. 9. Food: False promotion of food, especially health food, has been a big problem in China. CFDA has cooperated with several authorities to conduct investigation and take specific measures against the false promotion of foods, in particular the making of false statements in advertisements and labels. 10. Drug price: Drug pricing is always an issue that the Chinese government aims to solve. On 16 November 2017, the National Development and Reform Commission issued the Guidelines on Pricing Behaviour in relation to Drugs that are in Short Supply and Active Pharmaceuticals Ingredients. There are also some significant anti-trust cases on drug price in the life sciences industry in 2017. 5
Our top 10 predictions 1. Patent protection: The Chinese government has decided to establish a patent linkage regime for drug registration. Although the detailed regime is still being drafted, according to the limited information disclosed, the Chinese patent linkage regime could be very similar with the corresponding regime in the US. The relevant laws and regulations regarding drug registration and patent are expected to be amended to be consistent with this new regime. 2. Data protection: The data protection regime has been provided in theory by the CFDA for years but it still lacks concrete practical measures. According to a significant policy, CFDA will implement the data protection regime into practice. The new regime may provide additional protection for certain qualified drugs. Imported drugs should be registered in China as soon as possible to ensure a longer data protection period. 3. Food: The Chinese government is tightening the administrative regime on food, with focus given to special food such as health food and infant food. Following the implementation of the registration requirements for infant dairy formula products, the CFDA is seeking comments on a new regime which requires infant formula food manufacturers to record their products with local FDAs before the production of the products. It is likely that more regulations will be issued to fully regulate the whole lifecycle of the products. 4. Patent Term Compensation: A patent term extension regime is expected to be piloted. The patent term compensation pilot regime may apply to certain selected new drugs where market launch has been delayed due to the lengthy process of clinical trial, review and approval. CFDA is currently working on the design of the regime but it remains unclear when the details of such regime will be published. 5. Clinical Trial: Overseas clinical trial data will be accepted in the drug registration process in order to shorten the registration period of imported drugs. The Centre for Drug Evaluation of CFDA has issued the Technical Requirements for Accepting Overseas Clinical Trial Data (Draft for Comments) which sets out the qualification requirements for overseas clinical trial data to be accepted. It is expected that an effective version of the draft may be issued soon. 6 Life Sciences & Healthcare: China developments 2017 and predictions 2018
6. Anti-bribery: China continues to crackdown on bribery in the life sciences sector. In December 2017, the CFDA and the National Health and Family Planning Commission (NHFPC) issued the Administrative Measures for the Registration and Record-filing of Pharmaceutical Representatives for public comments. This regulation clearly prohibits the medical representatives from conducting any sales activities, or to be involved in any bribery activities, or to sponsor the internal department of medical institution or personals directly, etc. The authorities have noticed the bribery issues in business practice and are determined to solve such issues. 7. Distribution: The Chinese government believes that the Dual Invoicing System has the potential to simplify the drug distribution process. The Invoicing System is currently compulsory for public hospitals. It may be possible that if the Chinese government finds such regime to reduce the drug prices and resolve tax issues, the Dual Invoicing System may be expanded to include other private medical institutions. 8. Drug price: The Chinese government has been using anti-trust and bribery investigations as a way to resolve drug pricing issues for many years. The new Anti-Unfair Competition Law has come into effect on 1 January 2018, this suggests that more anti-trust tools may be used in the life sciences sector by the Chinese government to reduce drug prices. 9. E-commerce: In addition to the announced administration regime on online medical devices and food services, the CFDA also issued the Administration on the Measures for the Supervision and Administration of Selling Drugs Online for public comments. It is expected that the CFDA will provide more rules to regulate the e-commerce business in the sector. 10. Administration: In 2017, the CFDA issued hundreds of regulations and rules specific to the sector. The influx of new regulations indicates the CFDA s ambition to improve the current administrative regime. It is possible that the CFDA may further regulate areas which are currently untouched to establish a perfect regulatory regime for all the aspects of the sector. 7
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