China's top legislature, the Standing Committee of National
People's Congress, recently approved the amendments (the
"Amendments") to the Drug Administration Law.
The Amendments, effective as of April 24, 2015, cover the following
major changes to the original Drug Administration Law:
Removing price control over drug products
Article 55 of the previous Drug Administration Law
stated that drug manufacturers, drug distributors and medical
institutions must abide by the government pricing mechanism where
the drug price was mandated or guided by the government. In
addition, drug manufacturing companies should provide the
government pricing authorities with genuine information with
respect to the costs for drug production and distribution.
The Amendments eliminated Article 55 of the original Drug
Administration Law, which is believed to be a prelude to the
upcoming drug pricing reform. China's pricing authority,
the National Development and Reform Commission, is reportedly set
to abandon its control over drug prices later this year. Drug
prices will be determined through market competition (such as
tendering or negotiation with local medical insurance authorities)
in lieu of fixed price caps.
Streamlining the licensing process for drug
Article 7 and Article 14 of the previous Drug Administration
Law required a drug manufacturer or a drug distributor to
obtain a Drug Manufacturing License or a Drug Distribution License
as a pre-approval for incorporation. Drug companies could not
obtain their business licenses from the State Administration for
Industry and Commerce or its local counterparts ("AIC")
before successfully obtaining the operational permits.
The Amendments removed the pre-approval requirement in order to
simplify the business administration process for drug companies.
Going forward, a drug manufacturers or distributors will be able to
obtain business licenses before obtaining a Drug Manufacturing
License or a Drug Distribution License.
Relatedly, the Amendments also deleted Article 100 of the
previous Drug Administration Law in connection with
revocation of operational permits. In the event that a drug
company's Drug Manufacturing License or Drug Distribution
License is revoked, the CFDA will no longer inform the AIC to amend
the business license of or de-register the drug company.
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guide to the subject matter. Specialist advice should be sought
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