China: Analysis of the revisions in the Drug Administration Law of PRC

Last Updated: 6 May 2015
Article by Huang Jianwen

On April 24, 2015, the newly amended Drug Administration Law of PRC ("Drug Administration Law") was passed by the 14th session of the Standing Committee of the National People's Congress and took effect on the day of promulgation. Previously the Drug Administration Law was amended twice, respectively in 2001 and 2013.

The 2015 revision amends or deletes Article 7, 14, 55, 89, and 100. The three highlights of the new Drug Administration Law are as follows:

  1. Cancellation of the "drug license before business license" system for establishing drug manufacturing or distribution enterprises

The 2015 revision deleted the stipulation in the previous Drug Administration Law that one must hold a Drug Manufacture License ("DML") or Drug Distribution License ("DDL") for the registration with the administrative department for industry and commerce ("AIC"). This repealed the prior approval requirement to establish drug manufacturing and distribution enterprises. The previous system of obtaining a "drug license prior to business license" has been converted to a "business license prior to drug license" system. Under the previous system, drug manufacturing and distribution enterprises had to first apply for and obtain the DML or DDL before initiating the registration proceedings with the AIC to obtain the business license. With the 2015 revision, the new system for establishing drug manufacturing and distribution enterprises conforms to the procedures for establishing general enterprises, which has simplified the process.

Obtaining a DML or DDL is no longer a precondition for AIC registration. Therefore, Article 100 was deleted to keep consistency with the 2015 revision. It stated "Where a D or Drug Distribution License is revoked in accordance with this Law, the drug regulatory department shall notify the AIC to alter or cancel the registration."

  1. Removal of the fixed pricing and guided pricing mechanisms

Under the new Drug Administration Law, Article 55 was deleted, thus the government has decided to stop directly fixing and guiding drug prices. This was a significant change to the old regime. According to the previous Drugs Administration Law and the current Pricing Law of the PRC and Regulations for the Implementation of the Drug Administration Law of the PRC, there were three ways drugs are priced: (1) the government fixed prices, (2) the government guided prices, or (3) the market regulated prices. Now the drug prices are just directly regulated by the market. For drugs listed in the Catalogue of Drugs for National Basic Medical Insurance and drugs not listed in the catalogue but monopolistically manufactured and distributed, their prices were fixed or guided by the government; while the prices of other drugs were regulated by the market. There were more than 2,700 types of drugs priced by the government, occupying 23% shares of the Chinese drug market.

The 2015 revision on drug pricing changed the government planned pricing model to a market pricing model. When purchasing these drugs, medical institutions can now autonomously negotiate the purchase price with drug enterprises. This change also reflects the reform ideas in the Plan of Promoting the Drug Price Reform Program (Draft for Public Opinion) issued by the National Development and Reform Commission, stating "remove government pricing, [and] make the actual transaction price of drugs decided by market competition through controlling medical fees by health insurance and purchasing by invitation to bid."

  1. Market-adjusted price must still comply with related laws and regulations

In the 2015 revision, Article 89 (stating "Violations of Article 55, 56, 57 of this Law concerning the price control of drugs shall be punished according to the Pricing Law of PRC") was renumbered as Article 88, and substantively, the provision was revised to reflect the deletion of Article 55 and 57. Along with the deletion of Article 55 (prices are fixed or guided by the government), Article 57 ("Drug manufacturing and distribution enterprises, and medical institutions shall provide the competent authority of pricing with information such as the actual purchasing and selling prices and quantities of the drugs") was also deleted. Therefore, Article 88 now only refers to violations of Article 56 as punishable according to the Pricing Law.

While the government no longer directly fixes or guides prices, the price of drugs will still be under the control of the government through Article 88. The prices must still comply with the regulations concerning the control on prices of drugs prescribed by the competent authority under the State Council. In addition, the drug price must be fixed in conformity with the principles of fairness, rationality, honesty, and good faith. In addition, the price of a drug must correspond to the quality of the drug. If a drug manufacturer or distributor violates these principles, seek excessive profits, or conduct price gouging, they will still be subject to administrative penalties.

When the China Food and Drug Administration solicited public comments on revising the Drug Administration Law, professionals in the pharmaceutical industry raised issues with the drug market's imperfect supervision and credit system, the unclear legal liability, inadequate punishment, and the bundled management of the Marketing Authorizations and DML. These issues remain unsolved by the 2015 revision. The five amendments to the Drug Administration Law, however, demonstrate a greater role of the market, guidance for the development of medical and pharmaceutical economics, and a transform of the government's thoughts on supervision. Such revision indicates the direction of the future reform of the healthcare and pharmaceutical industries in China and should be praised.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Sheppard Mullin Richter & Hampton
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Sheppard Mullin Richter & Hampton
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions