China Overhauls Regulation on the Medical Device Industry
The Chinese Central Government recently adopted material amendments to the Regulation on the Supervision and Administration of Medical Devices, which will bring significant changes for medical device companies operating in China.
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 David Dai, Teresa Lou and Bryan Fu.
On 31 March 2014, the State Council of the Chinese Central Government unveiled a revised Regulation on the Supervision and Administration of Medical Devices (Revised Regulation). The Revised Regulation will come into effect on 1 June 2014 and replace the previous Regulation on the Supervision and Administration of Medical Devices issued by the Chinese government in 2000 (Original Regulation). As a result of the rapid growth of the Chinese medical devices industry, the Original Regulation is no longer effective in addressing issues in the industry.
The Revised Regulation is the first significant legislation issued by the Chinese Government in 14 years aimed at overhauling the regulatory framework governing the industry in order to keep up with the fast-changing medical devices industry and to enhance the protection of public health. The Revised Regulation therefore contains overarching changes that will affect all market players throughout the medical device lifecycle, from product approval through distribution and use. The main changes in the Revised Regulation are as follows.
Liberalisation in Product Approval & Registration
Consistent with the goal of China’s 12th Five-Year Plan to foster innovation and encourage the development of domestic intellectual property by Chinese companies, the Revised Regulation introduces a number of new policies directed at optimizing and streamlining the review and approval process for marketing medical devices, thus lessening the burden of companies seeking pre-marketing approvals for their medical devices.
The Original Regulation required that registration certificates be obtained from the China Food and Drug Administration (CFDA) or its local offices for all medical devices—regardless of whether it was a Class I, Class II or Class III product—before the devices could be marketed in China. Under the Revised Regulation, no registration certificate is required for Class I medical devices, whether they are imported or manufactured in China. Instead a filing with CFDA or its local offices will suffice.
The Revised Regulation also provides that if the changes to registered medical devices within Class II and Class III are not substantial, and do not affect the safety and effectiveness of such products, the changes only need to be filed with CFDA. In addition, the prior requirement for registration change approval under the Original Regulation is no longer necessary.
The Revised Regulation further eliminates the clinical trial approval required under the Original Regulation for medical devices falling within Class II, and only requires a filing of the clinical trial with CFDA authorities. Clinical trials can also be exempted for medical devices falling within Class II and Class III in certain circumstances where the safety and effectiveness of the products can be demonstrated by other measures such as non-clinical evaluation or data from clinical trials of similar types of medical devices. CFDA will publish and maintain a list of medical devices exempted from clinical trials.
Improved Supervision on Production
For medical devices falling within Class II and Class III, CFDA no longer requires a company to obtain a production permit (Production Permit) before it can apply for a product registration certificate. Instead, the Revised Regulation requires a company to submit the product registration certificate when applying for the Production Permit of such a product. This reform may relieve the financial pressure on medical device companies as they can apply for a product registration certificate before they need to invest funds to build the production facilities to obtain the Production Permit.
For medical devices falling within Class I, the Revised Regulation allows manufacturers to file for record at the city level (i.e., cities with districts) rather than at the provincial level under the Original Regulation. The Revised Regulation iterates the requirement that medical device enterprises must implement and strengthen a comprehensive quality management system. In addition, self-audit reports on the implementation of such a system are required to be filed with local CFDA authorities on a regular basis.
The Revised Regulation also sets out a detailed list of items that must be included in the user manual and on the labels of medical devices. The list had previously been set out in rules issued by CFDA in 2004 governing user manual, labeling and packaging.
Under the Revised Regulation, an entrusted production (similar to OEM) is not allowed for high-risk medical devices designed for implantation in the body. The detailed list of such devices will be promulgated by CFDA in the future.
Reformed Regulation in Distribution and Use
The Original Regulation required companies distributing Class I medical devices to file for record with CFDA authorities, and companies distributing Class II medical devices to obtain a license from CFDA. The Revised Regulation removes the filing requirement for Class I medical device distributors and only requires Class II medical device distributors to file with CFDA at the municipal level.
The Original Regulation contained only a few simple provisions setting forth the use of medical devices. The Revised Regulation places more obligations on medical institutions using medical devices. Such obligations cover all aspects of use of the medical device including storage, records of purchase, personnel training, and maintenance and use records for large medical devices that have long shelf lives.
The medical institutions using medical devices shall establish policies for purchase, inspection and recording of such purchase and inspection. Companies engaged in wholesaling Class II and III medical devices and companies retailing Class III medical devices must establish sale recording policies.
The Revised Regulation enhances post-marketing supervision by enacting provisions to establish mechanisms for adverse event monitoring, re-evaluating registered products and product recalls. Such provisions aim to effectively identify problematic medical devices in the market and provide statutory remedies to stop the manufacturing, sales, distribution and use of unsafe medical devices in the market.
While the Original Regulation was silent about the above mechanisms, the State Administration of Food and Drugs (the predecessor of CFDA) and the Ministry of Health (MOH) issued joint pilot regulations on adverse event monitoring and re-evaluating medical devices in 2008. In addition, MOH also issued the Provisional Administrative Measures on the Recall of Defective Medical Devices in 2011. The Revised Regulation officially endorses the above mechanisms and further stresses the interactions between these three mechanisms. For example, CFDA’s provincial office may re-evaluate any defective medical devices identified by the adverse monitoring system, and as an additional remedy institute a mandatory product recall for such defective medical device products.
The Revised Regulation further strengthens CFDA’s ability to conduct routine supervision over all players in this industry, and focus its monitoring on the manufacturing, quality management and operational conditions of manufacturers and distributors. Meanwhile, the Revised Regulation expressly authorises CFDA authorities to exercise the following statutory powers:
Carry out on-site random sampling and inspection
Review, copy, attach and seize contracts, invoices, accounts and other related documents relevant to their ability to conduct inspections
Seize or attach products that are not consistent with statutory requirements, problematic raw materials, auxiliary materials, and tools and equipment used in unlawful productions
Shut down production or operation premises carrying out non-compliant activities
In addition, the Revised Regulation further specifies the administrative sanctions corresponding to the statutory obligations imposed therein. New administrative sanctions have been enacted to target various violations, and even heavier sanctions have been included to target material violations. For example, administrative penalties up to 20 times the value of the products manufactured may be imposed on medical devices produced without proper permits. Moreover, the manufacturer and its persons-in-charge will be barred from applying for any new licenses or permits in this industry for five years in “severe circumstances”, and may be subject to criminal sanctions if such violation constitutes criminal offenses.
The changes made in the Revised Regulation demonstrate the Chinese Central Government’s new efforts to upgrade and maintain a comprehensive and effective regulatory framework for the medical devices industry in China. On the same day the Revised Regulation was released, CFDA sought public comments on a number of related draft rules covering medical device registration and filing, manufacturing and distribution. Moreover, CFDA has also published over the past months various draft rules governing products classification, inspection criteria for GMP (Good Manufacturing Practice), GSP (Good Supply Practice) for distributors and amendments for a number of product categories. It is anticipated that the official promulgation of these rules will facilitate the enforcement of the Revised Regulation.
Medical device companies doing business in China should keep a close watch on the development of the draft rules and the actual enforcement of the Revised Regulation because the changes will have significant implications on their operations in China.