Along with the rapid development of the healthcare and pharmaceutical industry, various key policies have been published recently. This article will sort out China’s key regulations and policies in 2015 related to drugs from three aspects - drug prices, drug evaluations, and drug procurements.
I. Drug Pricing: Pricing Reform has been Promoted
On April 24, 2015, the 14th Session of the Standing Committee of the Twelfth National People's Congress adopted the decision to amend the Pharmaceutical Administration Law of the People’s Republic of China. The amendment not only simplified the procedures for the registration, modification, and cancellation of the drug manufacturing license and drug distribution license at the administration for industry and commerce, but also removed the price restrictions for most drugs to pave the way for the marketization of drug prices.
On May 4, 2015, the National Development and Reform Commission (NDRC) published an announcement on issuing the Opinions on Promoting Drug Pricing Reform (Fa Gai Jia Ge  No. 904), which requires the removal of government pricing controls for most drugs (with the exception of narcotics and type I psychotropic drugs) from June 1, 2015. The government no longer administrates the drugs by fixing maximum retail prices. Instead, the prices of drugs will be formulated by the market through different means according to the principle of administration by classification.
Drug pricing reform is beneficial for the market to play its adjustment role, thus establishing a more scientific and reasonable drug price formulation mechanism to promote optimization of resource allocation in the healthcare and pharmaceutical industry.
II. Drug Evaluation: Reform of the Evaluation and Approval System
The State Council published the Opinion on Reforming the Evaluation and Approval System for Drugs and Medical Devices (Guo Fa  No.44, “Document No.44”) on August 9, 2015. Document No.44 aims to improve the approval standard of the drugs newly entering into the market, to promote the quality consistency assessment of generic drugs, to encourage research and create new drugs, to solve the overstock of registration applications, to improve the transparency of approval, and to adjust fee policies. The improvement of the quality and standards of drugs and medical devices can advance the efficiency of approval, avoid vicious competition, and promote drug manufacturers to innovate.
1. Self-Checking and Inspection of Clinical Trial Data
The China Food and Drug Administration (CFDA) published an announcement on conducting self-checking and inspection of the clinical trial data of drugs (Year 2015 No. 117) on July 22, 2015. The CFDA decided to conduct inspections on the clinical trial data of drugs, including those whose manufacturing applications have been filed and imported drugs whose registration applications are waiting for review and approval. The CFDA expresses that the applicants who actively withdraw problematic registration applications may be exempted from punishment. As of December 28, the CFDA published 6 announcements to show that 248 drug manufacturers withdrew registration applications. Such withdrawal involves more than 700 types of drugs. In addition, 9 clinical trial institutions were filed for investigation and 23 drug registrations were revoked.
The self-checking and inspection of clinical trial data demonstrate the CFDA’s determination of performing the State Council’s four strictest requirements, namely the strictest standards, oversight, punishments, and accountability. The problems exposed so far reflected that not all clinical trials comply with norms. Falsification even exists. The self-checking and inspection sounds the alarm for the manufacturers, brings changes to the industry, and improves the quality standard. It is beneficial for the public in terms of drug safety.
2. The Drug Market Authorization Holder Mechanism Pilot Program
The current drug approval number mechanism ties a drug’s market authorization with the manufacturer’s manufacturing license. A drug’s ownership can only belong to a drug manufacturing enterprise. Such a system is not consistent with general international practice and is adverse to encouraging researchers, including companies and individuals, to innovate.
The China Food and Drug Administration (CFDA) published a pilot plan for the drug market authorization holder mechanism (draft for comment) on November 6, 2015 to allow qualified drug research and development institutions, research personnel, or drug manufacturers to apply for drug market authorization and obtain such authorization documents and bear the relevant legal liabilities. The draft for comment specifies that the drug market authorization holder (Holder) owns the property right and the right of manufacturing, discharging, and sale of the product with market authorization. The holder may, after performing the compensation liability, request recovery from the corresponding entity for the damages made to others due to drug defects. The holder must bear the corresponding legal liabilities regarding research and development, application, manufacturing, distribution, and use of the drug under Chinese laws and regulations. According to the draft for comment, the pilot program began on December 1, 2015 and will last for three years and the pilot area covers 10 provinces and cities such as Beijing, Tianjin, Shanghai, and Hebei.
Under the drug market authorization holder mechanism, market authorization is independent from the manufacturing license. The holder may choose to entrust the manufacturing of the product to qualified manufacturers. This is beneficial to encouraging the researchers and developers of new drugs, to promoting innovation, and to propelling the transformation of drug manufacturers. However, since the scope of the Holder is enlarged and a Holder must take great responsibilities, professionals ask whether requiring a Holder to provide a guarantee will refine the Holder’s capability of bearing liabilities. In addition, another topic that triggered discussion is whether China’s drug market authorization holder mechanism will, like those of some other countries, allow entrusted manufacturing at different locations.
3. The Definition of ‘New Drugs’ has been Modified
According to Document No. 44, the definition of ‘new drug’ is adjusted from “drugs that are never sold within China” to “drugs that are not sold within and out of China”. The CFDA published the plan regarding the reform of the registration classification of chemical drugs (draft for comment) on November 6, 2016, which defines ‘new drugs’ as “drugs that are not sold within and out of China” and divides ‘new drugs’ into two categories, innovative drugs and improved new drugs. Generic drugs are divided into three categories, namely drugs that are sold overseas but not in China, drugs sold in China, and drugs sold overseas that apply to enter into China’s market.
The CFDA’s new definition of ‘new drug’ aims to encourage innovation. However, such new definition causes strong reactions from manufacturers in the market. Foreign drug manufacturers consider that such new definition does not comply with international common practices and does not help ensure the quality of drugs. Yet the domestic enterprises that research and develop innovative drugs deem the new definition of ‘new drug’ as encouragement for developing drugs that have international patents according to international standards. No matter what, it is predictable that foreign and domestic drug manufacturers will adjust their research and development strategies accordingly once the formal version of the ‘new drug’ definition comes out.
4. Conduct the Consistency Evaluation for the Quality and Curative Effect of Generic Drugs
The CFDA published the Opinion on Conducting the Consistency Evaluation for the Quality and Curative Effect of Generic Drugs (draft for comment) on November 18, 2015. Such document further specifies the acceleration of the quality consistency evaluation of generic drugs mentioned by Document No. 44, especially with respect to the evaluation objects and time limit. For oral solid preparations of chemical drugs in the 2012 national essential drug catalog which were approved before October 1, 2007, the consistency evaluation must be finished by the end of 2018 or the drug approval number will be cancelled.
The CFDA published the Announcement on Implementing Record Filing Administration on the Bioequivalence Experiments of Chemical Drugs on December 2, 2015. The announcement requires that from December 1, 2015, the bioequivalence experiments of chemical drugs (BE) will be administrated through record-filing, instead of review and approval. Such a change will shorten the period of obtaining the permit for conducting BE thus improving the efficiency and quality of drug evaluation.
III. Bidding and Procurement of Drugs: The Centralized Procurement Mechanism of Drugs for Public Hospitals is Refined
On February 28, 2015, the General Office of the State Council distributed the Guiding Opinions on Improving the Centralized Purchasing of Drugs for Public Hospitals (Guo Ban Fa  No. 7, “Document No.7”). On June 19, the National Health and Family Planning Commission published the Notification of Implementing and Refining the Centralized Procurement of Drugs for Public Hospitals (Guo Wei Yao Zheng Fa  No. 70, “Document No.70”). Document No.7 states clearly that it must adhere to the online centralized drug procurement at the provincial level (including provinces, autonomous regions, or the municipalities), implement the principles of one platform, cooperation with higher and lower levels, openness and transparency, procurement by category, and take measures such as inviting manufacturers for bids, combining bidding and procurement, linking the quantity with the price, using the two-envelope method, and monitoring the whole process, so as to strengthen the comprehensive supervision of the whole process of drug procurement. Document No.70 further implements and refines Document No.7, which put forward the specific requirements of using the two-envelope method, the management of drug price settling, the supply and distribution of drugs, and construction of procurement platforms.
Centralized procurement of drugs is one of the important steps to deepen healthcare reform. It is beneficial to get rid of the phenomena of hospital operations depending on drug sales, to strike down corruption in drug purchases and sales, and to ensure drug quality and safety.
Editor’s note: This article was first published on Chinalawinght.com