Regulatory Developments in the China Pharmaceutical and Medtech Sector in 2024, and the Outlook for 2025

Summary:

• As the sector makes the transition from creative limitation to genuine innovation
• Harmonisation was another key theme, in order to facilitate both "coming in" and "going out"
• 2024 was a year which saw a high number of innovative medical devices being approved, in fields including surgical robots and cardiopulmonary support systems
• There was also a key focus on anti-bribery and corruption in the healthcare and life science sector, with a number of major legislative developments and high-profile enforcement cases

The Chinese pharma sector is at a strategic tipping point of transforming from creative imitation to genuine innovation, with an  Aincreasing number of Chinese innovative pharmaceutical products making their way abroad. Numerous biopharma companies have been diving into the global markets through all kinds of business development deals, including licensing deals, Newco or JV set-ups, collaborative development, overseas CDMO, and international distribution network set-up. The rising trend of biopharmas originating in China going global is supported by Chinese regulatory reforms for fostering innovation and harmonizing Chinese regulatory requirements further into international practices.

Over the past year, the Chinese government, from the top down, has taken various concrete actions aimed at further cultivating the Chinese biopharma ecosystem. Among these actions, on December 30, 2024, the PRC State Council issued the Opinions on Comprehensively Deepening the Reform of Drug and Medical Device Regulation to Promote High-Quality Development (关于全面深化药品医疗器械监管改革促进医药产业高质量发展的意见) (the "2024 Opinions"). The 2024 Opinions outlined the direction of regulatory reforms for the next decade on top of the reform efforts made since 2015. For example, the 2024 Opinions envisioned that, by 2027, China's drug and medical device regulatory regime will be better shaped to boost innovation and high-quality development; and by 2035, the Chinese pharma industry will have more robust global competitiveness. To this end, the 2024 Opinions further call for:

●        The Chinese regulatory review and approval system to fully support China-originated pharmaceutical products with genuine innovation by further improving review efficiency, shortening review timelines, and accelerating the market launch for innovative products.

●        Further adopting and localizing international regulatory practices in China to support simultaneous global drug development, global submission and global market launch, and to explore and allow production of biologics through multiple sites (including cross-border production), to streamline import approval processes for drugs and medical devices, to promote export of drugs and medical devices and to merge China's pharma sector into the global supply chain.


1. Innovation Becomes the Way Out and a Core Driving Force for China's Pharma Sector

Before the release of the 2024 Opinions at the year end, the Chinese government had issued other reform initiatives and policies over the course of 2024, including, notably, the working plan released by the State Council in July 2024 supporting innovative drug development across the full value chain from drug approval and reimbursement to financing and funding (全链条支持创新药发展实施方案). Other regulatory reform actions taken throughout 2024 included:

“Both domestic and foreign IND applicants may apply for the pilot program as long as they have extensive experience in clinical development of innovative drugs and adequate capacity for risk control”

●        the Pilot Work Plan for Streamlining the IND Review and Approval Process for Innovative Drugs (优化创新药临床试验审评审批试点工作方案) announced by the National Medical Products Administration (“NMPA”) in July 2024, which further shortened the IND approval timeline to 30 working days for certain eligible Class I innovative drugs (except for cell and gene therapy products and vaccines). Both domestic and foreign IND applicants may apply for the pilot program as long as they have extensive experience in clinical development of innovative drugs and adequate capacity for risk control. For example, under this pilot program, it only took 21 days for the IND approval of MK-6204 (SKB535), an injection for the treatment of advanced solid tumors (compared with the typical IND approval timeline of around 50-55 working days).

●        In addition to IND approval, post-market approvals may also be accelerated with the release of the Pilot Work Plan for Streamlining the Review and Approval Process for Drug Supplementary Applications (优化药品补充申请审评审批程序改革试点工作方案) by the NMPA in February 2024. The pilot work plan aims to shorten the application review timeline by proactively providing tailored guidance to applicants before submission.

The regulatory reforms over the past decade have generated fruit in 2024. Over the course of the year, the NMPA approved 48 Class I innovative drugs, among which 40 were China-originated local innovative drugs, and many were developed globally and first approved in China. On the other end of the spectrum, “global innovative drugs” carry more weight in the PRC national reimbursement drug list (NRDL) inclusion. In 2024, 91 innovative drugs were included in the NRDL, 90 of which were newly launched within the past five years, and 38 were “global innovative drugs”.

"In 2024, "going global" continued to be a way out for many Chinese innovative drugs and the Newco model became even more popular in the past year”

2. Increasingly Harmonized Regulatory Practices to Facilitate "Coming In" and "Going Out"

In 2024, "going global" continued to be a way out for many Chinese innovative drugs and the Newco model became even more popular in the past year. The recent surge in going abroad was not only the result of a decade of accumulation in drug development, but also a witness to a decade of regulatory reform efforts in the pharma and medtech sectors. In June 2024, the NMPA was elected as a member of the ICH Management Committee for the third time. China has now adopted and implemented all ICH guidelines. Over the past year, the NMPA has taken, among others, the following regulatory measures to embracing and facilitating "Coming In" and "Going Out":

●        In October 2024, the NMPA, in an unprecedented move, unveiled the Pilot Work Plan for Production of Biologics Through Multiple Sites (生物制品分段生产试点工作方案) (the "Pilot Plan"), which was followed by implementing registration technical guidance for antibody-drug conjugates in November 2024 (抗体偶联药物分段生产试点注册申报技术要求). The industry has long called for a resilient supply chain for biologics through multiple manufacturing sites. The Pilot Plan now provides such flexibility to innovative biologics and biologics with urgent clinical needs, such as multi-valent vaccines, antibody biologics, antibody-drug conjugates, GLP-1 and insulin biologics. The experience gained under these pilot programs will pave the way for further opening-up in the future.

●        The NMPA released guidance on the Requirements for Submission Dossiers for Localization of Approved Overseas-Manufactured Drug Products (已上市境外生产药品转移至境内生产的药品上市注册申请申报资料要求) for chemical drugs, therapeutic biologics and vaccines in May, June, and October 2024 respectively, further specifying and streamlining the pathways and requirements for localized production of imported drugs.

●        In November 2024, the NMPA released the Tentative Provisions for the Administration of the Designation of a Domestic Responsible Person by Foreign Marketing Authorization Holders (国家药品监督管理局境外药品上市许可持有人指定境内责任人管理暂行规定) , which will take effect on July 1, 2025 (with an 8-month grace period to allow for labeling updates). It has been four years since the last draft of the legal agent rules in 2020, with substantial debates and considerations along the way. The 2024 final version introduces a concept of a “Responsible Person” for the local legal agent, emphasizing the joint liability between the responsible person and the foreign MAH. The Rules also clarify that an MAH must only designate one responsible person for each drug product, and a responsible person may accept designation by multiple MAHs for multiple drug products.

“Looking back at 2024, the NMPA approved 65 innovative medical devices, covering high-tech fields such as surgical robots and cardiopulmonary support systems”

3. The Basic Law for Medical Devices Takes Shape with the Upgrades of the Overall Medical Device Regulatory Regime

Looking back at 2024, the NMPA approved 65 innovative medical devices, covering high-tech fields such as surgical robots and cardiopulmonary support systems. Locally-manufactured medical devices are rapidly catching up and taking their places in the global market in some fields.

Against this backdrop, China’s medtech industry still lacks a fundamental law of top-level design. The unveiling of the first draft of the Medical Device Law (“MDL”, 医疗器械管理法) by NMPA in August 2024, would start a new era for medical device regulation in China. The draft MDL carries a few breakthrough highlights, including:

●        allowing medical device registrants to transfer their medical device registration certificates upon regulatory approval – this will be very welcome news for the industry if the draft comes into effect in its current form. Though the quasi-MAH system has been launched for medical devices with the release of the current Medical Device Regulation, registration certificates held by the registrants for their medical device products are hardly to be transferred directly, which has been a quite challenge in many assets deals and we had to assist clients in creating various alternative solutions.

●        further shortening clinical trial approval timeline for high-risk medical devices to 30 working days,

●        proposing the build-up of vigilance system for medical devices in China, for which a pilot program has been launched to prepare for the future national-wide rolling out, and

●        similarly to pharmaceutical products as mentioned above, introducing the concept of responsible persons for legal agents, who will also assume the joint liability with overseas registrants for the designated medical devices in China.

In addition to the highlights of the draft MDL, in 2024, the NMPA further released a couple of amended regulations and rules to upgrade the medical device regulatory framework, including:

●        In April 2024, the NMPA issued a notice to strengthen the regulation over CMO arrangements for medical devices (关于进一步加强医疗器械注册人委托生产监督管理的公告). With the implementation of the quasi-MAH system in recent years, all kinds of CMO arrangements (including cross-province arrangement among multiple sites) create potential challenges for risk and quality management. This notice addresses regulatory concerns by reinforcing the responsibilities of all parties involved in the CMO arrangements so as to mitigate the potential risks thereof.

●        In May 2024, the NMPA issued a notice on medical device classification and the notice on the implementation of the Classification Catalog for In Vitro Diagnostic Reagents (关于规范医疗器械产品分类界定工作的公告), which further clarify the classification standards and working procedures for medical device products.

●        In June 2024, the NMPA released the Measures for the Inspection of Medical Device Clinical Trial Institutions (医疗器械临床试验机构监督检查办法) and the ancillary inspection guidance of Key Points and Checklist for the Inspection of Medical Device Clinical Trial Institutions (医疗器械临床试验机构监督检查要点及判定原则), which provide clear compliance guidance for conducting medical device clinical trials and offering tools for future compliance inspections and enforcement.

●        In July 2024, the NMPA, together with the National Health Commission, worked out the Measures for Temporary Import and Use of Clinically Urgent Medical Devices by Medical Institutions (医疗机构临床急需医疗器械临时进口使用管理要求) providing a pathway for medical institutions to temporarily import and use Class II and III medical devices that are already marketed abroad but not yet approved in China so as to address urgent clinical needs.

●        In July 2024, the newly revised Medical Device Good Supply Practice (GSP, 医疗器械经营质量管理规范) came into effect, coupled with the ancillary working document: Medical Device GSP On-Site Inspection Guidelines (医疗器械经营质量管理规范现场检查指导原则). It has been 10 years since the last GSP in 2014. The new version of the GSP reflects the industry development and regulatory reforms over the past decade, including (i) emphasizing device registrant’s primary responsibility for device safety and quality, and risk management, and (ii) reflecting the up-to-date industry practices such as electronic traceability management, multi-warehouse management and automatic vending.

4. Compliance is the Bottom Line for Innovation

In 2024, the Chinese government continued to take great efforts to combat bribery and corruption in the healthcare and life science sector, as highlighted with a series of major legislative developments and high-profile enforcement cases. From regulatory perspective, it is worth noting that:

●        In August 2024, the Supreme People's Court issued its Interpretation on Several Issues Concerning the Application of the Law in the Trial of Dispute Cases Involving Punitive Damages for Foods and Pharmaceuticals (关于审理食品药品惩罚性赔偿纠纷案件适用法律若干问题的解释) , which clarify that knowingly selling or administrating counterfeit drugs would constitute fraud and is subject to punitive damages.

●        In light of the intensive anti-bribery task forces against improper academic promotion over the past one or two years, in November 2024, the NMPA published the amended Measures for the Administration of Medical Representatives (Draft for Comments) (医药代表管理办法 (征求意见稿)) . The draft emphasized the MAH’s primary responsibility for ensuring the compliant promotion through medical representatives. Instead of simply fulfilling the notification requirement with the NMPA system, the draft now requires MAHs to establish an effective system to ensure compliance by medical representatives during the whole process. More importantly, the draft requires MAHs to enter into labor contracts with their medical representatives directly, meaning that it would be challenging for MAHs to outsource medical representations employed by third parties such as the CSO.

●        On January 1, 2025, the PRC National Administration for Market Regulation finalized its first anti-commercial bribery compliance guidelines for life science and healthcare sector in China (the "Guidelines",医药企业防范商业贿赂风险合规指引), marking the first nationwide industry-specific compliance guidance released by a regulatory enforcement authority. The Guidelines provide concrete and actionable compliance guidance on nine high-risk business settings, namely, academic promotion, hospitality, consulting services, outsourcing services, discounts/allowances and commissions, donations/sponsorships/funding, free placement of medical equipment, clinical research and retail sales. The Guidelines are not legally binding but reflect current attitudes and enforcement practices of the authorities. As encouraged by the Guidelines, pharma and medtech companies are not only required to monitor and address the existing non-compliance factors, but more critically, to establish a long-term mechanism for timely identifying and preventing potential risk.

“2025 marks the final year of the Chinese government's "14th Five-Year Plan" ”

Looking Forward to 2025: Setting Sail on A New Journey

2025 marks the final year of the Chinese government's "14th Five-Year Plan". It is also the first year of the next ten-year regulatory reform under the 2024 Opinions to achieve the goal of empowering the Chinese life science industry with vibrant global competitiveness by 2035. As outlined in the 2024 Opinions, the regulatory reforms in the next few years will be focusing on full support for genuine innovation through optimized regulatory review and approval procedures, more opened-up policies, and deeper merger into the global market. It is inevitable that in the course of transitioning from "imitation" to "innovation", China-originated biopharmas will play an increasingly important role in the global market.