By Amy Yin, Tina Guo, Mao Rong, and Liu Yang, Reed Smith
As China’s National Medical Products Administration (NMPA) moves closer to finalizing its 2018 draft Amendments to the Regulations on the Supervision and Administration of Medical Devices, medical device companies should be aware of the significant impact these changes will have on the global medical device market. The draft amendment is expected to be promulgated later this year.
As background, on Oct. 1, 2017, the Central Office of the Communist Party of China and the Office of the State Council issued Opinions on Deepening the Reform of the Review and Approval System and Encouraging Innovation in the Pharmaceutical and Medical Device Industries (the 2017 Opinions). On Oct.31, 2017, the NMPA (formerly the China Food and Drug Administration) formulated and published for public comment a draft amendment to the Regulations on the Supervision and Administration of Medical Devices. On June 25, 2018, a revised draft amendment was opened for public comments through July 24, 2018 (the 2018 Draft Amendment)
The following major changes will significantly impact the global medical device industry:
- An Improved Market Authorization Holder (MAH) Mechanism
Prior to the 2018 Draft Amendment, the term “MAH” was adopted and used in 2016’s Notice of the General Office of the State Council on the Pilot Plan of the Drug Market Authorization Holder System. But, the 2018 Draft Amendment clarifies the definition of MAH as an entity that obtains a medical device filing receipt from the local counterpart of NMPA, or a registration certificate from the NMPA, authorizing the sale of the medical device on the market.
The 2018 Draft Amendment also adds specific provisions concerning MAHs’ rights and obligations. For instance, MAHs may manufacture or sell their products, or entrust others to do the same; MAHs must ensure that their quality systems operate effectively and their products satisfy the relevant requirements; MAHs must submit annual self-inspection reports to the relevant regulatory authority; MAHs must establish an adverse event monitoring system for their medical devices and assume responsibility for the recall of defective products.
Additionally, the 2018 Draft Amendment imposes detailed obligations on foreign MAHs’ agents in China.
- Creation Of A Unique Device Identification (UDI) System
The 2018 Draft Amendment provides for a unique device identification (UDI) system to be set up by the NMPA. The UDI system is a set of alphanumeric codes that serves to enhance the monitoring of medical devices. Earlier this year, the former CFDA published a draft (open for public comments), Rules for the UDI System for Medical Devices (the Draft UDI Rules); On Aug. 22, 2018, the former CFDA announced and updated draft and solicited a second round of UDI feedback, slated to end Sept. 21, 2018.
The UDI system comprises three elements: (i) an alphanumeric UDI code on the medical device or its packaging to identify the registrant, product model, serial number, production batch number, production date, expiry date, etc.; (ii) a UDI carrier in the form of a linear bar code, 2D bar code, or RFID tag; and (iii) a UDI database available for public research.
The MAH will be responsible for UDI database maintenance, including uploading, maintaining, and updating relevant data relating to medical device products.
- A Reformed Clinical Trial Management System
Pursuant to the 2018 Draft Amendment, “clinical evaluation of medical devices” refers to a process where an applicant — by making reference to medical literature, clinical history and data, records of clinical trials, etc. — verifies whether a medical device satisfies the relevant clinical uses and requirements.
The 2018 Draft Amendment clarifies that, when filing a Category I medical device, a clinical evaluation is not required. With some exceptions, registering a Category II medical device does not require a clinical evaluation, either. When registering a Category III medical device, a clinical evaluation is required unless the device has a proven record of safety. For the purpose of making clinical evaluations, and subject to initial or to-be-implemented rules imposed by the 2018 Draft Amendment, it is understood that the 2018 Draft Amendment indicates that data from foreign clinical studies may be reviewed and accepted, except when evaluating devices that involve very high risks or are used to support or maintain life (the 2018 Draft Amendment states that local clinical trials, in China, are required to evaluate high-risk medical devices).
This would be one of the most noteworthy changes introduced by the 2018 Draft Amendment, and it would save considerable time for imported, low- or moderate-risk medical devices entering the Chinese market.
- Optimized Review And Approval Procedures
Under current regulations, an application for registration of a Category II medical device must be submitted to the local NMPA counterpart at the provincial level. Pursuant to the 2018 Draft Amendment, this authority will be transferred to the NMPA, which may authorize other qualified regulatory authorities to review applications and process approvals. This centralized review and approval process is intended to standardize the criteria for registration, as well as promote a fair and transparent approval system.
In addition, the 2018 Draft Amendment prioritizes medical devices used to treat rare diseases, as well as innovative medical devices. For example, in the case of innovative medical devices imported into China, the 2018 Draft Amendment no longer requires the market entry approval certificates from their countries of origin.
Further, as introduced in the 2017 Opinions, the 2018 Draft Amendment provides a pathway for conditional approval of medical devices used to treat rare and/or life-threatening diseases where no effective treatment exists. In such cases, the NMPA may grant conditional approval, specifying in the medical device registration certificate the term of the certificate and any other notable requirements.
- Overhauled Post-Approval Regulatory Requirements
- Distributors of Category II medical devices may be exempt from filings with regulatory authorities — if the devices’ safety and effectiveness can be ensured through regular supervision by the authority.
- The import and distribution of used medical devices are explicitly prohibited.
- Pre-approval of commercials advertising medical devices is no longer required. Market supervision authority (i.e., the State Administration for Market Regulation and its local counterparts) must be responsible for monitoring, inspecting, and investigating such commercials.
- In cases of serious noncompliance, personal liabilities (including monetary fines and banning entry into the medical device industry) may be imposed on the legal representative, the quality manager, and other person(s) in charge of the R&D activities, production, and operation of the relevant MAH, or on the manufacturer or distributor.
Global Medical Device Market Implications
Once approved by the State Council, the 2018 Draft Amendment will have a positive impact on both the development of the Chinese healthcare system and innovations in the country’s medical device sector.
- Currently, only an organization with a manufacturing capability can be a MAH. But, the 2018 Draft Amendment removes this requirement, meaning R&D organizations and academic research institutions might also be classed as MAHs without needing to possess any manufacturing facilities. This will encourage more R&D-focused companies to seek regulatory approval for their medical device products.
- As the NMPA shifts its focus from pre-approval control to post-approval management, it is expected that registration and filing procedures will be accelerated in practice and, therefore, advanced medical devices may enter the market without significant delays caused by the prolonged approval process.
- Following the revision of the legal liabilities under the 2018 Draft Amendment, both companies and individuals face stiffer penalties for illegal acts — including significant fines, permanent prohibition from the Chinese market, and imprisonment. Thus, medical device companies will need to place more emphasis on their quality management and internal control systems to comply with the new requirements.
About The Authors
Amy Yin, Liu Yang, and Tina Guo are based in Reed Smith’s Shanghai office. Mao Rong is based in Reed Smith’s Beijing office.
Amy Yin is a Partner in the Corporate group and represents clients in foreign direct investments, mergers and acquisitions, corporate restructuring, compliance matters, employment issues and general corporate matters.
Mao Rong is Counsel and represents clients on cross-border mergers, acquisitions, and corporate transactions in China, Europe and the United States.
Liu Yang is an associate in the Corporate group and advises clients in the U.S. and Europe on foreign investments and various corporate matters, ranging from transactions to technology licensing to labor and employment matters.
Tina Guo is a legal consultant, focusing her practice on foreign direct investment, mergers and acquisitions, labor issues and other general corporate matters.