China has been endeavoring to make comprehensive and fundamental regulatory reform of drug and medical device, in particular in the drug and medical device registration system. On October 8, 2017, the General Office of the Communist Party of China Central Committee and General Office of the State Council jointly issued the Opinions on Deepening the Reform of the Review and Approval System and Inspiring Innovation of Drugs and Medical Devices (the "Opinions"). The Opinions totally includes 36 clauses, which almost have covered all the important regulatory matters relating to drugs and medical devices, in particular in the drugs and medical devices registration system. The Opinions involves clinical trial management, IP protection, acceleration of review and approval of drugs and medical devices, support of generic drugs and the traditional Chinese medicine (the "TCM"), Marketing Authorization Holder (the "MAH") system, reassessment of launched injections and medical devices, compliance of drug promotion, and GCP/GMP/GSP etc.
Actually, the State Council has seriously kicked off the comprehensive regulatory reform of drugs and medical devices earlier. In August 2015, the State Council issued the Opinions on the Reform of Review and Approval System for Drugs and Medical Devices. Then, in order to solve the problem of serious backlog of pharmaceutical and medical devices registration, a variety of policies promoting drugs and medical devices registration has been introduced in succession, with the pilot work of Marketing Authorization Holder (the "MAH") system, quality and efficacy consistency evaluation of generic drugs, self-inspection and checking of clinical trial data, and adjustment of medical device classification, etc. implemented successively. In addition, a batch of innovative and clinically imperative drugs and medical devices has been approved for marketing with priority.
Following the above efforts, the China Food and Drug Administration (the "CFDA") issued Policies Concerning the Protection of the Rights and Interests of Innovators for Encouraging Innovation in Drugs and Medical Devices (draft for public comments, No. 55, 2017) (the "Policy No. 55"). The Policy No. 55 mainly involved strengthening intellectual property protection for innovators which was also officially adopted by the Opinions.
Following the issuance of the Opinions, the CFDA held a press conference on the next day of the issuance of the Opinions. Based on the press release, the Opinions' main objectives are (1) inspiring innovation of drugs and medical devices; and (2) improving availability of drugs and medical devices. Particularly the Opinions mainly touch upon the five key areas (1) strengthening intellectual property protection for innovators; (2) improving clinical trial management; (3) accelerating registration approval of drugs and medical devices; (4) promoting production of generic drugs; and (5) advancing lifecycle management of drugs and medical devices. For international companies, the Opinions should also have addressed many of their key concerns, such as intellectual property protection, validity of overseas clinical trial data, and lengthy registration approval process.
This article will provide analysis of the opportunity, challenge and implication of these key areas.
Strengthen intellectual property protection for innovators
The milestones for strengthening intellectual property protection for innovators are to introduce patent linkage system and patent term extension system. In addition, the Opinions also tries to broaden protection of innovator's data.
- Patent linkage system
The Opinions generally provides that the applicant shall describe the relevant patents and their status when the applicant filed the applications, and the applicant shall also notify relevant patentees of the application. If there is a dispute over the patents at issue, the patentee and applicant may seek to the court's involvement to resolve the patent disputes, but the process of drugs and medical device shall not be stayed. If no valid judgment or ruling is rendered within a certain period, the CFDA can approve the marketing of the drugs or devices.
We suppose the Opinions just reaffirms the patent linkage system provided in the above mentioned Policy No. 55. The Policy No. 55 provides more detailed guidelines on China's version of patent linkage system.
Compared with the current legal schemes, the Policy No. 55 has made significant progress on the patent linkage system. The Policy No. 55 provides a cause of action to sue prior to market entry based on the act of seeking marketing approval other than waiting a generic drug to be on the market in order to constitute infringement under the current laws. Furthermore the laws might explicitly distinguish between the generation of data for marketing approval (a non-infringing act) from submitting that data for the marketing approval and subsequently entering the market (a potentially infringing act), thereby allowing patent holders to initiate patent infringement actions based on submitting data for marketing approval and providing an avenue to prevent infringing drug products from entering the market.
However, to fully implement the Policy No. 55, a number of laws or regulations and judicial practices need to be changed. For example, the 2008 China patent law needs to be revised that marketing approval application for generic drug products covered by innovator's patents may constitute infringement. In addition, it is also unclear what courts may have jurisdiction over such matters.
Comparing with the Drug Price Competition and Patent Term Restoration Act of 1984 in the US, also known as the Hatch-Waxman Act, the patent holder in China who receives a notice under scenario I only has 20 days to file a lawsuit, which is much shorter than 45 days prescribed in the Hatch-Waxman Act. Generally speaking, preparing a patent infringement case particularly in the pharmaceutical area is complicated and time consuming. Thus the 20-day case preparation period might be a challenge for innovators particularly for international big organizations which would usually involve complex and lengthy internal decision-making process for initiating a patent infringement lawsuit.
Under the Policy No. 55, the CFDA may set an approval-withholding period up to 24 months if the patent holder of relevant drug patent files a patent infringement action with a court, during which period, the technical review of any drug already under review will not stop. However, in view of the heavy workload of Chinese courts, it might be a challenge for Chinese courts to make final decisions on determination of the patent infringement within 24 months in pharmaceutical area particularly if a party is foreigner. According to the above regulations, if the court fails to find the infringement within the 24-month approval-withholding period, the CFDA can approve the drug marketing. However there is a practical risk for this scenario. If the court eventually finds the infringement but renders the judgment far beyond the 24-month approval-withholding period, how will the CFDA deal with the approved generic drug marketing particularly where the generic manufacturers have significantly launched the drugs?
In addition, different from the US patent linkage system, the Policy No. 55 does not involve patent validity issue. In China, the court does not have the jurisdiction to determine the validity of patent at issue in a patent infringement case. The validity of patent at issue should be subject to the decision of the Patent Re-examination Board of State Intellectual Property Office (the "PRB"), which is available to be appealed to the courts. Thus there might be such scenario where the court finds infringement and the CFDA denies the drug marketing within the 24-month approval-withholding period, but the patent at issue is eventually invalidated, how will the CFDA deal with such problem?
Therefore, it appears that there are still some pending issues to be further clarified in relation to the 24-month approval-withholding period. Both the innovators and generic manufacturers should concern the uncertainties arising from these pending issues because they might much affect their businesses.
However, it is certain that the Opinions and the Policy No. 55 would have significant implications on both the innovators and generic manufacturers. For generic manufacturers, they should attach importance to the patent coverage in relation to the generic drug products while making their business decisions to avoid possible risk of patent infringement. The Policy No. 55 still might lack a sound mechanism to make the innovators be timely, completely and accurately notified of the pending market approval applications for the generic drug products, the innovators should actively and regularly monitor the information regarding the pending market approval application for the generic drug products and proactively take advantage of the patent linkage system.
- Patent term extension system
The Opinions seeks to implement the pilot work of patent term compensation system for part of new drugs. It provides that the patent term may be extended for proper time if marketing approval is delayed by the review and approval process and clinical trial. It's the first time to introduce patent term extension system in China. So far, there are no details on what new drugs and what kind of delay would apply to patent extension in the Opinions or other documents. The range of term compensation is not clear either.
We suppose the CFDA and SIPO will work together to amend patent law and pharmaceutical management laws to clarify these issues. Thus currently it's hard to say whether the contemplated patent term extension system would play significant roles for innovators in practice.
- Data exclusivity
The Opinions provides that the drug registration applicants are entitled to data exclusivity when filing the drug registration application with CFDA. The data would be restricted to clinical trial data and other data developed by applicants of innovative drugs, drugs for rare diseases, pediatric drugs, innovative therapeutic biologics, and applicants for generic drugs that succeeded in patent challenges. The data protection scope has much been broadened comparing with the previous regulations. Under the Implementing Regulations of the Drug Administration Law, only a developer of a new drug which contains a new chemical entity (the "NCE") is entitled to data exclusivity.
The CFDA will not approve the same kind of drug registration application by other applicants during the data protection period unless those other applicants develop the data by themselves or obtain consent from the owner of such data. The Opinions provides that the data protection period starts from the date the drug is approved for marketing, but the protection term is not specified. Under the Implementing Regulations of the Drug Administration Law, a developer of a new drug containing a new chemical entity is entitled to six years of data protection starting from the date of marketing approval. It's to be seen whether the data protection term would be unified as that of the NCE or vary depending on the different data.
Besides strengthening intellectual property protection for drug innovators, the Opinions also provide the dynamic adjustment system of the medical insurance catalog in order to support the clinical application of innovative drugs. For excellent new drugs, they can be timely added in the medical insurance catalog to benefit patients.
Improve clinical trial management
The Opinions seeks to simplify the clinical trial process and shorten the timeline. Under the Opinions, there will be the below significant improvements on the clinical trial management.
- Qualification of clinical trial institutions
License regime for clinical trial institutions is cancelled. Recording regime rather than license regime will be applied to qualification for clinical trial institutions. This will significantly increase the number of institutions available to conduct clinical trials. The current clinical trial institutions that already have qualified clinical trial conditions do not require approval and they only need to register with the CFDA's specified website. Currently there are only around 600 qualified clinical trial institutions in China. However, there is still a big gap between this amount and the actually needed one.
In terms of conditions for the potential new clinical trial institutions, the Opinions provides that principal investigator of clinical trials should have senior professional titles and have participated in 3 or more clinical trials. The Opinions further provides that applicant for clinical trials may engage third-party to assess whether the clinical trial institutions have qualified clinical trial conditions. Actually, these provisions of the Opinions will inevitably cause concerns over the efficacy of the proposed recording regime. There may be the concerns (1) besides the requirements on the principal investigator, whether there are other requirements; (2) whether third party's assessment is compulsory; (3) the qualification for the third party; and (4) the difference between the third party's assessment and the previous license regime. The Opinions states that the CFDA and the NHFPC will issue regulations on the management of clinical trial institutions. Hopefully, these concerns can be removed out.
In addition, the clinical trial institutions will not be restricted to hospitals anymore. Besides hospitals, medical research institutes and medical universities are also encouraged to conduct clinical trial. Furthermore, the Opinions also encourages private sectors to establish clinical trial institutions. Foreign institutions and enterprises are also allowed to involve the investment in establishing clinical trial institutions. These measures will certainly increase the amount of potential clinical trial institutions. However, whether there is limit on percentage of private ownership and foreign capital is still not clear.
To change the stigma that clinical trial is a difficult and high-risk investment, there will be increased support to clinical trial institutions to increase the enthusiasm of clinical researchers. The incentive mechanism on performance assessment will be improved to ensure the competitive salary level of clinical trial researchers. The clinicians will be encouraged to participate in medical device technology innovation activities and will be promoted as other clinicians.
- Avoid repeated review
The Opinions has provided one of the most significant improvements to international drug and medical device manufacturers, i.e. data from overseas multi-center clinical trials can be used for applications in China if the data meets the relevant standards in China. However, the applicant of clinical trials shall provide data on ethnicity differences if the drugs or medical devices have never been launched in China. This will significantly lower the costs and reduce the timeline for clinical trials in China for imported drugs or medical devices. To strengthen the supervision and inspection of clinical trials, the CFDA does not only accept, but can also send inspectors to overseas clinical trial institutions for on-site inspection. Through establishing the inspection mechanism of the overseas clinical trials, CFDA would gradually increase the inspection threshold of foreign clinical trials to ensure that the foreign clinical trial data is accurate.
The Opinions also provides that once the ethics committee of the lead investigation site completes its ethics review for a clinical trial, no review by other clinical institutions is necessary. This can shorten the timeline and avoid repeated work.
- Optimize clinical trial process
Under the Opinions, clinical trial samples could be tested by the applicant itself or a third party testing lab entrusted by the applicant, rather than being required to go through testing by government accredited testing labs as before. In addition, the Opinions provides implied license on clinical trial schemes to make the CFDA improve their work efficiency. The scheme of clinical trial application will be deemed to be approved and the applicant may proceed with the trials if the CFDA fails to raise any issues or reject the application within a certain period after a clinical trial application is filed. But the Opinions does not specify the period. The Opinions also provides new flexibility on clinical trial requirements in relation to drugs and medical devices used to treat life-threatening diseases.
Accelerate registration approval of drugs and medical devices
To accelerate the registration approval of drugs and medical devices, besides the above mentioned improvement in clinical trial management, the Opinions also specially provides fast-track approval process for new drugs and devices in urgent clinical need and rare diseases. The new drugs or medical devices in urgent clinical need can be approved for marketing with conditions if the data in early or mid-stage trials shows its clinical value. The drugs or devices for rare diseases can be approved for marketing with conditions if they has been approved for marketing outside of China. In addition, new drugs and medical devices in urgent clinical need which are major national science and technology projects and sponsored by key national development plans, as well as those recognized by the relevant departments and with clinical trials conducted in national clinical research centers will be given priority in the registration approval process.
However, the registration application for injections will be strictly controlled. Some time ago, there were frequent incidents of injections and the drug regulation system's frequent involvement with injections. Thus those incidents well lay the groundwork for the Opinions to raise the threshold for injections registration approval. The Opinions provides that pharmaceutical injections registration approval to be stringent and reassessment of existing injections to be conducted, which clearly signals that injections will not be the first choice for treatment. In order to reduce the using risk, injection dosage form will not be encouraged if clinical needs can be met by oral preparation and other dosage forms.
Promote production of generic drugs
Under the Opinions and the press release of the CFDA, innovation of drugs and production of generic drugs are almost equally important in China. The meaning of innovation also includes producing high quality generic drugs which are consistent with the efficacy and quality of the innovative drugs.
China has gone through times when drugs were in extremely shortage. But the modern pharmaceutical industry started late and the manufacturing technology of pharmaceutical has been remaining relatively low. For many years, the government has adopted a series of measures to improve the quality of drugs, such as subjecting to unified state approval all drugs which only required approval by the local authorities, raising the drug standards from local to national, raising the level of GMP certification, and promoting the consistency assessment of the quality and curative effect of generic and innovative drugs.
Thus the Opinions still clearly points out support of generic drug production. China still has a gap with many developed western countries in drug innovation due to the late start of modern pharmaceuticals of China. Thus China still needs to vigorously support generic drug production for Chinese patients to enjoy the same treatment with patients of developed countries in a more convenient and more affordable manner. The Chinese government hopes to reduce drug prices and meet supply of corresponding drugs. They want to throw off heavily relying on imported drugs. In view of the current situation, generic drugs will still be an important part of China's drugs for a long period to come. Currently the main challenge for this is still technology. It's still difficult to guarantee the efficacy and quality consistency of most generic drugs with innovative drugs in China.
Advance lifecycle management of drugs and medical devices
China started to implement a pilot program on Marketing Authorization Holder (MAH) System in ten provinces in 2015. The Opinions states that the MAH system shall be advanced to implement throughout China as soon as possible and the Drug Administration Law of the People's Republic of China will be amended accordingly. Under the Opinions, a research and development institution or its employee can be a MAH.
The MAH will be fully responsible for the liabilities regarding the drug during the lifecycle which includes preclinical research, clinical trials, manufacturing, quality control of raw material, distribution, and reporting of adverse drug reactions. The parties authorized by the MAH to conduct relevant work, including research and production, will bear liabilities according to law and the relevant contracts. Thus it's essential to prepare a well-designed contract between the MAH and the authorized parties. In addition, the MAH will also be required to establish a system to directly report adverse drug events and adverse drug reactions.
The Opinions also imposes requirements for reassessment for both injections and medical devices. For approved injections, in view of the difficulty, the reassessment process will aim to be completed within 5 to 10 years.
In addition, the Opinions imposes stringent compliance requirements on the conduct of pharmaceutical representatives. Pharmaceutical representatives are only allowed to take part in academic promotion of the drugs but are not allowed to participate in the sale of drugs. The MAH shall publicize the list of pharmaceutical representatives and record on the specified website by the CFDA. The academic promotion events by pharmaceutical representatives shall also be publicly conducted and recorded on the specified website by the CFDA.
The Opinions is the first policy guidelines on comprehensive reform of regulation of drugs and medical devices issued by the Communist Party of China Central Committee. The Opinions is a welcome breakthrough to the developing regulation of pharmaceutical and medical devices in China. It incorporates components of the recent pilot programs and policy pronouncements and is a significant step in China's reform efforts. It also introduces some new significant regimes into the current regulatory system in China, but it also remains a few important pending issues to be clarified.
So far the Opinions has just provided some general frameworks. In order to make these regulatory reforms really work in practice, most of them need to be adopted by amending the relevant laws and regulations. Also, relevant implementing regulations need to be issued. Thus it is hard to predict whether the Opinions will bring fundamental regulatory reform of drug and medical device in near future. Amendments to laws and regulations are often time-consuming in China. In particular, the Opinions involves amendments to various laws and regulations such as pharmaceutical administration law, patent law, pharmaceutical registration regulation as well as other laws and regulations. The Opinions also involves the cooperation and coordination of a variety of government bodies which include food and drug supervision departments, development and reform departments, science and technology departments, industrial and information technology departments, financial departments, human resources and social security departments, health and family planning departments, intellectual property departments, and departments of TCM management. It's a systematic and relatively complicated project. Thus it is much too early to tell how effective a tool the Opinions will be for the purpose of reform to encourage and protect innovation in the pharmaceutical industry as stated in it as China has been endeavoring to carry out the regulatory reform in pharmaceutical industry, but it appears that the reform did not go so smoothly.
In summary, the Opinions is certainly a very important step for the regulatory development of drugs and medical devices in China. We also can expect it will be adopted into various amended laws and regulations and well implemented but we think it may take some time to fully complete such reform step by step.
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