China Solicits Comments on Good Supply Practices for Medical Devices

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McDermott Will & Emery has a strategic alliance with MWE China Law Offices, a separate law firm based in Shanghai. This China Law Alert was authored by MWE China Law Offices lawyers John Huang, Molly Qin and Chris Mou, and McDermott lawyer Byron Kalogerou.

The China Food and Drug Administration recently published a draft regulation setting minimum standards for medical device distribution. The regulation sets forth requirements for procurement, delivery acceptance, storage, sales, transportation and after-sales services. Medical device distributors should review their current practices and evaluate their management systems for compliance.

The China Food and Drug Administration (CFDA) recently published a draft regulation, Good Supply Practices for Medical Devices (Draft GSP), for public comment. If and when enacted, this will be the first-ever regulation issued by the CFDA on minimum standards for medical device distribution, as well as on requirements for procurement, delivery acceptance, storage, sales, transportation and after-sales services of the same.

The Draft GSP applies to all medical devices, i.e., Class I, II & III, and is designed to strengthen quality management and regulate the operation activities of medical devices, to promote development of the medical devices industry and to meet the needs of medical devices supervision.

Background of the Draft GSP

In recent years, the development of China’s medical industry and increased demand for medical devices has led to a corresponding growth in the medical device industry. By the end of 2012, more than 177,000 Medical Device Manufacturing Enterprise licenses (Licenses) had been issued to Chinese enterprises. While there are statutory requirements regarding the establishment and licensing of a medical device company, there are currently no such requirements governing the operations of such enterprises once the Licenses have been issued. This has resulted in a large incidence of non-compliance with local Food and Drug Administration (FDA) standards and rules, such as failure to store and transport medical devices in accordance with those standards or rules; termination of leases to manufacturing, office and/or warehouse spaces required for the issuance of Licenses after receipt of the same (in an attempt to lower costs); and failure to maintain complete records—or any records at all—in respect to the sales and inspections of medical devices, leading to difficulties in tracing devices that may be the potential subjects of a recall.

In response, the CFDA formulated the Draft GSP to ensure the safety and efficacy of medical devices placed in public circulation. The Draft GSP provides explicit requirements regarding the organization and responsibility of the medical devices company, personnel and training, and facilities and equipment standards at these medical devices companies, as well as clear provisions on the purchase, acceptance, inspection, inventory, storage, examination, sale, tracking, transportation and after-sales service during the corporate existence of the company.

Contents of the Draft GSP

The Draft GSP consists of 63 articles organized under eight chapters. The Draft GSP reflects the latest management standards in the medical devices distribution industry internationally, including those set out in the International Organization for Standardization (ISO) standard 13485 2003, which specifies quality management system requirements for medical device organizations, as stipulated by ISO /Technical Committee (TC) 210 Quality management and corresponding aspects for medical devices, and ISO 9001 requirements for quality management system certification, as set forth by ISO/TC 176 Quality management and quality assurance.

Management of the Supply Chain

The Draft GSP covers all steps along the supply chain to eliminate areas in which the CFDA and local FDAs currently do not have oversight. The Draft GSP covers the purchase, inspection and acceptance, storage, transportation and after-sales service of medical devices all the way from manufacturing to their sale to the ultimate consumer, as well as third-party logistics such as storage and transportation.

Quality Control

The Draft GSP imposes responsibilities with respect to quality control on both the person in charge of the medical device enterprise and the person in charge of quality. It clarifies the purpose of the quality management system within the medical device enterprise, so as to ensure effective quality supervision and management. It also states that the person in charge of the enterprise is liable for the overall quality of the medical devices, while the person in charge of quality shall be responsible for quality management of the medical devices, and shall have veto rights regarding medical device quality management issues within the enterprise.

Strengthening Quality Management Systems

The Draft GSP requires medical device enterprises to implement and strengthen a comprehensive quality management system. In particular, it requires enterprises to establish their management systems in respect to organization, quality management documentation, staffing, hardware deployment, process execution and risk prevention.

Storage and Transportation

Currently, a major challenge to quality control in China’s medical device distribution chain is the storage and transportation of medical devices at the appropriate temperature and humidity. The Draft GSP sets out comprehensive requirements for the storage and transportation management of such medical devices, so as to greatly enhance the level of medical devices management.

Distribution of Medical Devices

At present, there is extensive use of information technology (IT) across many industries in China. However, the application of IT in medical device distribution is still in its infancy. One of the objectives of the Draft GSP is to automate the quality control process and tracking of medical devices. It therefore stipulates specific requirements for IT applications in medical device distribution management. In particular, enterprises engaged in the sale, purchase and distribution of Class III medical devices are required to establish a computer information management system, while third-party logistics providers to the medical device industry are required to provide the entrusting party and CFDA authorities with real-time responses to internet inquiries.

Issues to Note Regarding the Draft GSP

Additional Requirements

The majority of medical device enterprises in China are currently small- and medium-sized with limited resources. As such, the Draft GSP imposes no requirements on the number of quality management personnel. Instead, it imposes requirements for the qualifications of key personnel within the organization, including those in quality management, inspection and acceptance. With respect to the size of business premises and warehouses, requirements vary by region (typically according to the internal rules set by the local FDA), and therefore the Draft GSP does not set out specific requirements.

Information Management Systems

To strengthen the information management capabilities of enterprises, and to improve their management standards, the Draft GSP states in Article 34 that enterprises engaged in the sale, purchase and distribution of Class III medical devices must establish their computer information management system. This requirement does not apply to Class I and Class II medical device enterprises as most of them are generally small in size and lack the resources to implement a computer information management system. However, the Draft GSP encourages these small enterprises to learn how to establish computer information management systems that meet the quality management requirements from Class III medical device enterprises.

If you have any questions or would like more information, please contact one of the authors, MWE China Law Offices or your regular McDermott Will & Emery lawyer.