On 18 June 2012, the State Food and Drug Administration ("SFDA") issued new regulations entitled "Interim Working Procedure of Unannounced Inspections over Manufacturing Enterprises of Medical Devices" ("Procedure"). Being the first framework regulation governing unannounced inspections for medical device manufacturers, it will undoubtedly have an important impact on all companies producing medical devices.

History review

The first unannounced inspection regime started in 2006 but this only related to pharmaceutical manufacturers, and not companies producing medical devices. The SFDA published an unannounced inspection provision regarding good manufacturing practices ("GMP") for pharmaceutical products entitled "the Interim Provision on Unannounced Inspections over GMP of Pharmaceuticals" (the "Provision"), which came into effect on 24 April 2006.

Under the Provision, all pharmaceutical manufacturers in China have faced the possibility of an unexpected inspection by the department of SFDA, (usually the Centre for Certification of Drugs) in order to check whether their manufacturing process satisfies GMP requirements. The confidentiality of such inspections is strictly controlled and the target of any inspection is decided by the SFDA at national level. The local FDA is only given information about the inspection on the day before the inspection.

Although the Provision only applies to pharmaceutical manufacturers, in practice, the local FDA also conducts unannounced inspections on pharmaceutical trading companies. Local FDAs consider that as the procedure under the Provision has been implemented for several years and is well established, it can be applied also to pharmaceutical trading companies.

However, the regulations are not applicable to companies producing medical devices and so the local FDA is not obliged to conduct such inspections based on the Provision.

New Unannounced Inspections of Medical Device Manufacturers

The newly published Procedure relies on the "Measures for Supervision and Administration of Medical Device Production", effective as of 20 July 2004, and the "Interim Provision on the Daily Supervision Management of Medical Device Manufacturing", effective as of 19 January 2006. The implementing Procedure provides a legal basis for the conduct of inspections on medical device manufacturers and so we would now expect to see a rise in the number of these inspections that take place.

The above mentioned framework of legislative provisions broadly set out the circumstances under which the inspections shall be carried out. They also impose an "enterprise credit system", which is a series of files recording all of the supervision results conducted on manufacturers. This enterprise credit system is used as evidence to launch any unannounced inspection.

In fact, such Procedure had been the subject of discussion internally in SFDA for some time, aiming to standardise the inspection process in this area. Manufacturers of all types of medical devices may be subject to such inspections, including but not limited to sterile medical devices, implantable medical devices, and in vitro diagnostics.

1. Inspection team

The inspection team is usually fielded by the SFDA or provincial FDA and is made up of at least two officers. An expert team may be involved if necessary.

2. Inspected party

The following medical device manufacturers may be subject to an unannounced inspection under the Procedure:

a) An enterprise which is suspected of illegal actions;
b) An enterprise which has a serious product quality accident;
c) An enterprise whose products are proven to be of unfit quality in a spot check by the local FDA
d) An enterprise which lacks a quality management system;
e) An enterprise whose credit report shows that it does not have a history of good record keeping;
f) Other reasons may also be considered by the local FDA.

3. Inspection method

The inspection method includes three steps: (a) inspection preparation, (b) on-site inspection, and (c) measures to be taken according to the inspection result. Three inspection sheets need to be completed during the procedure. These sheets enable the medical device manufacturers to understand the exact reason(s) for any inspection and the concurrent results.

The three sheets include the information about the inspected party, the members of the inspection team and the reason and target of the inspection. The names of the inspection team members, all other participating persons as well as the authorities who have organised such inspections are recorded on these sheets. The inspected party is also requested to sign the sheets to acknowledge all the information of the inspection.

If any violation is found during the inspection, the inspection team can hand over the case directly to the local FDA in charge of this inspected party for them to pursue an administrative liability action.

During the inspection process, the inspected party may appeal, explain and/or correct the discovered issues immediately. Although these issues will still be recorded on the inspection sheet, the inspected party may reduce the risk that the inspection team directly refers them to the local FDA to investigate matters further.

4. Basis of such inspection

The inspection is mainly aimed to check whether a medical device manufacturer is complying with the underlying legislative Measures mentioned above, particularly for the purpose of eliminating the following issues:

  • products which fail to meet the national standards, industry standards or registered product standards;
  • companies operating outside the permitted scope in the manufacturing license;
  • companies operating below the required production standards;
  • violations of labeling and packaging requirements;
  • failure to set up a system of follow-up quality supervision and monitoring of adverse incidents;
  • violations of regulations with respect to advertising medical devices; and
  • enterprise manufacturing medical devices without having complied with registration formalities.

5. Consequence of the inspection

A final inspection report will be submitted to the FDA presiding over the unannounced inspection. During or after the inspection, the inspecting team may hand over the case to the local FDA for them to pursue the administrative liability sanction.

According to the framework legislation, this liability sanction may include a revocation of the business license, a monetary penalty up to five times the value of any illegal income or an order suspending business activities.

It is still unclear whether the SFDA or the provincial FDA will rely on these new provisions to inspect medical device trading enterprises in China also. According to the local practice of unannounced inspections for pharmaceutical companies, however, such a possibility should be anticipated . Some local FDA has orally confirmed with us that this does not seem likely for the time being, especially since the procedure has not yet been completely implemented at the same level as the regime for the inspection of pharmaceuticals.

Implication

If a company receives an adverse result from such an inspection, it will not only receive a punishment but its credit record with the authorities will also be affected. Once the credit record is affected, the enterprise risks receiving further inspections. All medical device companies must therefore pay serious attention to their compliance with the applicable rules to avoid the risk of being inspected. If a company is inspected, it is recommended to keep an internal record of that inspection so that it can maintain control and supervision over such inspection matters.

Any inspection records would also be useful evidence if the company is the subject of an acquisition. Being able to check whether or not a target company has been subject to an inspection, as well as its inspection record, will help to identify any potential problems in a target company.  

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 30/07/2012.