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EYE ON CHINA
China proposes major changes to pharmaceutical regulations
By Katherine Wang, Ropes & Gray life sciences partner

On 20 April 2019, the Chinese government submitted a second draft of the Drug Administration Law of the People's Republic of China (Second Draft for Deliberation) (DAL) to the Standing Committee of the National People’s Congress of China (NPC) for deliberation.

Compared with the previous draft amendments to the DAL, the second draft contains some noteworthy additions.

  1. The draft states the principle that pharmaceutical innovation should be based on clinical value. New drug research and development should focus on new therapeutic mechanisms, address multiple targets, or involve interventions that systemically affect biological functions.
  2. The MAH system will be implemented equally for domestic and imported drugs. Subject to approval by the National Medical Products Administration (NMPA), MAHs will be allowed to transfer their marketing authorisations.
  3. MAHs and retail pharmacies will be able to establish an online presence on third party portals registered with local drug administrations. Online sales of prescription drugs, however, will continue to be restricted.

Most importantly, penalties for violations will be significantly increased. For example, the first draft of the DAL proposed administrative fines for selling counterfeit drugs up to 10 times the sales value of the affected products, while the second draft of the DAL increases the fines up to 15 to 30 times. Victims of counterfeit drugs will also be entitled to punitive damages. Likewise, China legal agents of foreign MAHs will also be subject to administrative fines ranging from 100,000-200,000 RMB if found to be in violation of the DAL.

Certain policies proposed in the second draft have triggered fierce discussions among NPC members, including the complete ban on the online distribution of prescription drugs.

The industry also has questions about the second draft’s unexplained removal of provisions on GMP/GSP certification, which has been mandated on drug manufacturers and distributors for nearly 20 years in China.

Lastly, regulatory data protection and patent linkage is not mentioned in the second draft. As a result, it is unclear whether these two important mechanisms will be addressed in the Implementing Regulations of the DAL or Drug Registration Rules.

The DAL and the VAL are fundamental to pharmaceutical companies’ operations in China. While the proposed draft codifies many reform initiatives that accelerate market access of innovative drugs, it also signals aggressive post-approval enforcement and severe sanctions.

It is advised that pharmaceutical manufacturers and distributors closely monitor the progress or this legislation and carefully review their operations in China to ensure compliance with the new regulations.

Source: Ropes & Gray

Click here for the complete issue.

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